LEM Annual Report 2008/09
Postal address
LEM Holding SA
P.O. BOX 785
CH – 1212 Grand-Lancy 1
Visitors’ address
LEM Holding SA
8, chemin des Aulx
CH – 1228 Plan-les-Ouates
Phone +41 22 706 11 11
Fax+41 22 794 94 78
www.lem.com

Annual Report
2008/09
At the heart of power electronics

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LEM Holding SA, Geneva
Phone +41 22 706 11 11
Fax+41 22 794 94 78
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Annual Report 2008/09
Period 1 April 2008 to 31 March 20092

LEM at a glance22

4

Foreword

23	Consolidated balance

6

At the heart of…

8

Business report

10

Values and Principles

11

Corporate Governance18	Financial results –LEM Group
sheet

24	Consolidated income

statement

49

LEM Holding SA

50

Balance sheet

51

Income statement

52

Statement of equity

25	Consolidated cash flow

53	Notes to the financial

26	Consolidated statements

58

Auditor’s report

59

Information for investors

60

Group subsidiaries

statementof changes in equity

Summary and comment
27

Accounting policies

31	Notes to the consolidated

financial statements

48

Auditor’s reportstatements

LEM AT A GLANCE

LEM – At the heart ofpower electronics
LEM is a focused manufacturer and a
global market leader. Its core products,
transducers for measuring electricalparameters like current and voltage, areused in a broad range of applications.
Although these devices are not visible
to the outside world, they are vital for
application functionality and the benefits provided to the end users. Startingwith products for locomotives in theseventies, LEM expanded into a vast
area of industrial applications, including
variable speed drives for motors andpower supplies for industrial applications. Today, LEM’s current and voltage
transducers are also used in AC/DC

converters, uninterrupted power supply
systems for computers as well as in
new innovative energy applications likemicro-turbines and wind and solar
power generation. In addition, newopportunities have been developed in
the automotive market for battery management and electrical motor controls
for steering and braking systems. Thisevolution underscores the company’s
exceptional skills in adapting to rapidlychanging industrial trends, such as
miniaturization, higher performance levels and a greater degree of application,
integration and complexity.
LEM has the strongest brand recognition in its markets. Its products – commonly called “LEMs” – are at the heartof many power electronics applications.

 roduction Centers (PDCs)
P
Geneva, Switzerland
Beijing, China
Tokyo, Japan daptation CentersA
Milwaukee, USA
Tver, Russia

2

LEM’s strategy is to exploit the intrinsic
strengths of its core business anddevelop opportunities in new markets
with new applications. At the sametime, LEM is committed to maintaining
customer focus and operational excellence by running cost-effective andservice-oriented production platforms.
Profitable growth is a key objective.

Worldwide presence
LEM is a global organization with production plants in Geneva (Switzerland),Machida (Japan) and Beijing (China).
The company has sales offices close to
its main clients’ locations and offers
seamless service around the globe.

 ales Offices
S
Geneva, Switzerland
Milwaukee, Columbus OH, Amherst NH,
Arvada CO, Los Angeles CA, USA
Tver, Moscow, St Petersburg, Russia
Beijing, Shanghai, Shenzhen, China
Tokyo, Japan
Braine-le-Comte, Belgium
Frankfurt, Germany
Paris, France
Skelmersdale, UK
Padova, Italy
Vienna, Austria
Barcelona, Spain
Mumbai, India
Agents/Distributors

Key figures 2008/09
In CHF Millions

2006/07

2007/08

2008/09

Sales
Operational EBIT
EBIT
In % of sales
Net profit for the year

184.5
25.5
25.5
13.8%
15.6

203.0
34.9
30.6
15.1%
21.9

196.8
29.2
33.8
17.2%
23.9

Shareholder’s equity
Net financial assets
Market capitalization (per 31.3.)

64.9
12.2
311.4

71.2
23.7
310.5

83.5
27.9
172.4

Sales over 5 years per segment
200

Regional sales breakdown 2008/09

Asia
26%

CHF Millions

175

Rest of the World
2%

150
125
100
75
50
25

❚ Industrial Segment

0❚ Automotive Segment
04/05

05/06

06/07

07/08

08/09

North America

Europe16%

56%

Share price development LEHN Holding SA compared to SPI
400

CHF

350
300
250
200
150
100
50

LEHN

0

SPI

30/03/07 30/05/07 30/07/07 30/09/07 30/10/07 30/01/08 30/03/08 30/05/08 30/07/08 30/09/08 30/11/08 30/01/09 30/03/09

3

Foreword

Dear Shareholders,
Going back one year, we expected thepositive growth trend to continue, butalso spoke of the need to be cautious
as we did see some clouds on the horizon. As you all know by now, during theyear 2008/09 the global industry was
hit by the sudden and dramatic economic crisis. After half a year of substantial growth we were faced with adeep recession in our main market
Industry.

A zoom-in on the four
quarters
The year 2008/09 started with twoquarters of record results, with sales of
CHF 55.5 million each and operational
EBIT of about CHF 10 million. This gave
us reason to be pleased.
Then around summer time, we started
to see the impact of what was tobecome a global recession. In November 2008, we announced restructuring
measures and managed to rapidly
decrease our capacity by reducing ourglobal manufacturing headcount where
needed and by introducing short-timeworking plans. In addition, we reduced
our overhead cost and implemented
severe cost reductions. We could see

Felix Bagdasarjanz
Chairman of theBoard of Directors

4that this early and proactive recession
management has paid off. In our third
quarter, we still achieved a sales level of
CHF 45.1 million (operational EBIT was
CHF 4.1 million).
The fourth quarter was the first one infull recession; our operational EBIT was
CHF 3.7 million, on sales of CHF 40.7
million, or a return on sales of 9.1%.
We managed to surpass our outlook
given the third quarter results of salesof over CHF 190 million and a positive
operational EBIT in Q4. We closed theyear with sales of CHF 196.8 million, adrop of 3.1% compared to the previous
year. Operational EBIT for the year was
CHF 29.2 million, a drop of 16%.
The net profit for the year was CHF
23.9 million, 9.2% higher than last year,
primarily due to the lower share priceand thus the reversal of provisions forthe stock option plans (SOP).

Continued focus on new
business opportunities
LEM’s strategy has proven particularly
beneficial in a difficult economic environment. With its core technologies andproducts LEM is active in multiple markets, which are not equally susceptible

Paul Van Iseghem
President & CEO

to the economic cycles, making it evenmore robust in times of deep recession.
We feel reassured in our strategy oforganic growth aiming at expanding theworldwide leadership in our industry.

Q2, due to the market slowdown andthe recession, we have reduced it by
CHF 20 million for the year end and areback to a low risk situation.

LEM is active in two traditional markets:
Industry and Traction. Industry was significantly impacted by the recession;
however the Traction market benefitted
from the global infrastructure investment programs and also from somenew product and new application initiatives. The new markets, Energy & Automation (E&A) and Automotive, also
grew at different paces. The Energy &Automation market has shown a goodlevel of growth, but we have seen asevere reduction in our Automotive
business.

Proposals to the Annual
Shareholder’s Meeting

LEM is keeping the momentum in its
business development. In the past year
we have created LEM India for astronger regional development. We
have established several VAR’s (value
added resellers) who will build a newsales channel to fuel the growth of our
E&A components. We have also developed a very strong design-in portfolio
for the new hybrid and electrical vehicles worldwide.

Recession Management
We started to lower our cost and toadapt the structure of LEM to thesmaller business volume early on.
The recession put the priority on thesize and the risk of working capital,
especially the areas of accounts receivable and inventories. After an initial
increase of CHF 12 million in both after

Felix Bagdasarjanz
Chairman of theBoard of Directors

Last year we were able to pay out an
ordinary dividend of CHF 7.00 and an
extraordinary dividend of CHF 4.00 per
share to our shareholders.
It is our policy to return 25% to 50% of
the net profit for the year to the shareholders. In view of the good financial
result and the solid balance sheet of
LEM, the Board of Directors will propose the payment of a dividend of CHF
10.00 per share.

Thanks
LEM has entered the new businessyear with a stronger balance sheet thanever. Despite the uncertain outlook on
the duration of the economic crisis we
remain confident that the company iswell prepared to face the challenges
and prove its strength.
We would like to thank our shareholders for their continued faith in us.
Thanks of course to our customers fortheir trust in our products, competence
and service. We would also like to thankour management and employees
worldwide who reacted early and without hesitation to the drastic changes inthe business environment. They have
kept LEM’s momentum in quality, service and productivity.

Paul Van Iseghem
President & CEO

5

at the heart of…

Precision Measurements
High performance electric motor drives
for machine tools, servo drives for semiconductor wafer production or highly
accurate robots – these are good examples of power electronic applications
that are constantly looking for better
performance at a low cost.
To enable these applications with a better performance, the current measurement must be made with the highest
accuracy – a small, very precise andreliable transducer. LEM responded tothis by introducing the CAS, CASR and
CKSR family of current transducers. The
CAS is based on a new technology, a
special form of the Fluxgate technology.
Although very new, the CAS has alreadyfound other interesting applications outside our main market of the electricmotor drives, one of them in the area ofCAS

6photovoltaics, which has become thefastest growing market in the world of
power electronics.
This decentralized energy generation
has to be transformed when it isuploaded to the grid. The mains gridprovides a sinusoidal AC current andvoltage, however the solar panel generates DC currents and voltages. Inverters are used to convert the DC output
from the photovoltaic to be compatible
with the grid and to fulfill the necessary
standards to feed in to the grid. In particular, the injection of the DC elements
needs to be reduced to a minimum andhence precise and highly reliable transducers, such as LEM’s new CAS, CASR,
and CKSR series, are required. One
transducer can fulfill the function of current control to the grid while limiting the
DC injection below the regulatory limits.

EM4T

Wi-LEM

DV

Energy Metering
In today’s challenging times energy
conservation and cost reductions arehigh on the agenda. The old principle,“measure in order to manage”, is stillvalid. LEM has been playing a role in
the field of energy metering for quite
some time. Our early products weredeveloped for the traction market. The
liberalization and privatization of the railway has progressed a lot and with it theneed to measure and bill the energy
consumption. Our Energy Meter for
Traction EM4T has been very successful over the past years.
In this last year we launched a new voltage transducer, very compact andhighly insulating. The DV is a class 1
compatible DC voltage transducer.
Used with the EM4T, which is able tomeasure the AC but also the DC energy
to be compliant with all railway networks in Europe, LEM will be able toprovide a complete range of components compatible with the new standards for the traction market. The DV isClass 1 certified, that means it isapproved for billing purposes – just likethe EM4T – in the traction market. The
DV can take the energy that is suppliedby the overhead network, which can beas high as 3000 V, measure it andtransform this signal into a very low
voltage that is proportional to the original supply. This is needed for control ofthe motor and also to monitor andcheck the input voltage. The DV has
been specially designed for the railway
environment and responds to the technology evolution in today’s trains. The
DV is also compatible with the traction
substation standard, which is a newarea of expansion for LEM.
LEM also addressed the secondary
energy metering market, and in its pursuit to add more functionality in its
transducer components, decided to
combine the metering function with awireless communication. Wi-LEM, theWireless Local Energy Meter is a set ofcomponents that measure the energy
consumption and transmit this to a central computer via a wireless network. In
addition, it is also very easy to installsince it uses a split core clamp-on

transducer and causes no disruption ofservice during the installation. Its main
field of application is the monitoring ofenergy consumption in existing buildings, without the billing function.
A good example of current Wi-LEM
installations can be found in Frenchsupermarket chains. Here Wi-LEM
metering is installed in each supermarket. There are different measuring
points – for the heating and air-conditioning, the refrigeration system for thefood, the lighting, etc. – so that eacharea of consumption can be monitored.
All the data from the various supermarkets is collected in a central computerat the company’s headquarters. The
data is analyzed for different purposes,
like equipment efficiency, HVAC or lighting system optimization and peakdemand reduction. Benchmarks are set
using the values of the supermarket
with the lowest energy consumption.
Our customer tells us that millions ofEuros can be saved this way. It also
looks great for the environmental reputation of the supermarkets.

7

Business Report

A challenging year –2 record quarters, 2 poor
quarters

The Industrial Segment –each market is impacted
differently

In the Foreword, we presented the“Zoom-in on the four quarters”, an
exceptional sequence of 2 record quarters, followed by a brief transition andthen record low quarters.

Sales in the Industrial Segment reached
CHF 181.9 million, a decrease of 0.5%
to the previous year. At constantex­c hange rates, sales growth would
have been 2.9%. The Operational EBIT
decreased to CHF 31.1 million, down by
13.2%.

The recession has hit us most in the
traditional Industry market as well as in
the Automotive market. In contrast, theTraction market as well as the new
Energy and Automation (E&A) markets
have grown substantially.

The results – exceeding
our Outlook, despite thesevere economic crisis

In the traditional Industry market, sales
declined by 6.5%. We have seen asevere downturn of business in all our
major applications as from the third
quarter. The areas of wind energy,
welding and power supplies have seen
the most significant drop.

Operational EBIT was CHF 29.2 million,
down 16.3% from last year.

Earlier we had commenced several
programs aimed at increasing our market share in focused areas. We
launched several new products andintroduced a new technology. We alsochanged some of our sales structures
in USA and Japan focusing on more
direct sales.

EBIT, after accounting for the Stock
Option Plans, was CHF 33.8 million –an increase of 10.7%.

For the Industry market, we currently
believe that the market has bottomedout, though at a very low basis.

Net Earnings amounted to CHF 23.9
million – an improvement of 9.2% compared to the previous year.

Sales in the Traction market grew by
20.2% and were not impacted by therecession. The significant increase insales was fuelled by the various infrastructure investment programs in developed and developing countries. Thereis a strong requirement to make moretrains, refurbish existing ones, improve
the infrastructure and allow for morecross-border traffic and metering theenergy consumption on board.

Sales reached CHF 196.8 million, which
is a decrease of 3.1% from last year.

Return on Sales (ROS) was 12.2%
compared to last year’s 10.8%.
Operational EBIT in Q4, which is ameasure of the company performancein the middle of this crisis, was CHF 3.7
million on sales of CHF 40.7 million.
The balance sheet remains healthy withan equity ratio of 72% (PY 61%).
The efficient cash management has
allowed increasing the net financial
assets (cash – financial liabilities) from
CHF 23.7 million to CHF 27.9 million.

8

The launch of a new very compact andhighly insulated voltage transducer
allows us to offer a complete range ofcomponents compatible with the newstandards for the global traction market.
We expect the Traction market to perform well going forward. LEM has outperformed in this market.

The Energy & Automation market wasless impacted by the economic crisis.
The continued focus in this area of
business is showing results. Sales haveincreased by 35.9% – still coming froma small base.
Growth is driven by two value addedtransducer families:• W i-LEM, the Wireless Local Energy
Meter to measure the secondary
electricity consumption, is now
installed and performing well in major
reference accounts: supermarkets,
television studios and in factories.
•S entinel, which monitors industrial
standby battery systems, is also
installed and has proven performances in satellite television networks
and different telecom providers.
We are further concentrating our efforts
to develop the VAR (value added reseller) sales channel. Several partners are
now working successfully with us
around the world.
Overall, growth in the Industrial Segment was 1.5% for Europe, followedby North America at –0.8% and Asiawith –3.3%. Of course this reflects theimportant currency effects of the year.
Sales in the BRIC countries (Brazil,
Russia, India and China) declined by
0.8%.

Automotive Segment –highest impact of therecession
This past year has been very difficult for
the Automotive Segment. With most of
our sales coming from North America
and Japan, we have seen a decrease of
26.5%. Sales amounted to CHF 14.9
million. Operational EBIT was – CHF 1.9
million. At constant exchange rates,s a le s grow th would have b e e n–25.4%.

The bulk of the production is now madein our plant in Beijing; still the decreased
volumes induced these losses.
In this past year we have been concentrating our efforts in two main areas ofbusiness development. The first area isthe battery management in sedans andhybrid electric vehicles now with standard transducers. This is a successful
extension of the prior focus on SUVs forthis application.

Operational highlights
LEM has continued to reach top quality
levels across all its plants, having a unified “made by LEM” quality performance. This year both the Geneva andBeijing production sites have been
awarded with the IRIS certification, theInternational Railway Industry Standard,
which is a globally recognized standard
for the railway industry. We were proud
to be amongst the first companies toachieve this certification.

The second area of our attention is the
motor controls for hybrid and electricvehicles. LEM has reached a very highdesign-in rate worldwide. However, thequestion is if and when the mass production of these vehicles will start. We
remain convinced that power electronics in cars will soon accelerate. Despite
the crisis, we are expecting the beginning of the increase, based on thedesign-ins of new car platforms, in the
new fiscal year.

We have continued to invest in our production capability and the transfer ofkey products to our factory in Beijing,
China. We have also nearly completed
a new leased building, which will go into
operation during the month of July2009.

Recession Management– capacity and costmanagement

Despite the decreasing markets, andthanks to its strong profitability and balance sheet, LEM continued its investments in the future.

Due to the nature of our business, LEM
tends to be in the early part of the business cycle. We experienced the first
impact of what was to become the global recession just after summer 2008.
This allowed us to take the necessary
measures to adapt our capacities to thelower production very early. In November we announced a global reductionof our headcount by 10%, and in February we introduced short time working
programs for our production sites in
Geneva and Japan. We also worked on
reducing our cost base especially in thearea of external and indirect costs tolower the break-even point.

R&D efforts remain at a high 5.5% ofsales with a special focus on rapidly
bringing new products to the market.
We continue to work closely with ourcustomers, to be able to anticipate theirneeds for the future and be able to offer
the transducers they need to build
applications of tomorrow. Two major
products were launched last year: theDV, allowing a complete offer of components compatible with the newstandards for the global Traction market,
and the CAS, CASR, CKSR family,
strengthening our position in high performance applications for the Industry
market. We are certain that both products complement our portfolio, and havebeen seeing the first sales comethrough early on.

At the same time the business development had to continue.
We have opened a LEM sales office inIndia and strengthened the Energy &Automation sales and engineering
teams.

Investment in the future:
innovation and capital
investments

Outlook: difficult toanticipate the year
The present recession challenges our
growth strategy as we are experiencing
a slowdown in our most importantIndustry market. At the same time wehave a very weak situation in the Automotive Segment. We also see a temporary deceleration in the areas of energy
savings and renewable energy.
Nevertheless, after a deeper study ofthe market evolution, we firmly believein our strategic direction. The strategic
drivers for our business remain intact:• t he need for more energy and thedemand for more renewable energy,• the need for reliable energy and formore controls and standby battery
management,• the need for better energy efficiencies, increasing the demand for the
more efficient motor controls,• t he need for more mobility (public
transport and automotive) with a shift
to more energy friendly solutions.
Our fast and firm reaction to the recession will enable us to be stronger coming out of this downturn. We also trustthat our multi-market and global reach
will be clearly beneficial to us, to makea fast recovery as soon as the market
allows.
We maintain our clear focus on cost
reduction and the operational priorities.
At the same time, the financial strengthof LEM will allow us to continue to build
up new markets and applications andto continue to invest in the developmentof promising new business.
At this time, mid May 2009, we believethat the market downturn has bottomed
out. However, we can not judge thetiming and the extent of the upturn.

The Capex increased to CHF 9.1 million
from CHF 6.5 million last year. This ismainly due to investments in new production machines to suppor t our
growth in China.

9

Values and Principles

LEM’s core values andprinciples
It is vital for all of LEM to share common
values and working principles. All
employees understand what LEM wants
to achieve so that everyone works
together for the same purpose.
These values link all LEM employees
together and make us a team. They are
the common beliefs we share. They are
the spirit and intent of everything we doat LEM.
There are six core values, each one
guiding us throughout all our activities.
• We are customer driven• We operate with integrity• We value teamwork• We commit• We strive for excellence• We lead innovation
We are customer driven
We succeed by exceeding our customer expectations with a “yes customer” attitude. All our activities are
driven by the desire to provide best
quality service to our customers. We
aim to listen to, anticipate and respondto our customers’ needs. For this reason, we collaborate closely with ourcustomers and form true relationships.
We target “customer delight”.

10

We operate with integrity
Basic ethical behavior and integrity inbusiness relationships determine theessence of all our actions. As a company and as individuals, we do the rightthings right and never compromise ourvalues and principles. We honor ouragreements and are honest in our communications.
Our relationships with co-workers, customers, suppliers, partners and theinvestor community are based on openness and fairness.
We value teamwork
LEM forms a worldwide community.
Close collaboration and networking
across functions, departments and cultures is critical for the success of thecompany. To cooperate, we need to beopen and honest and willing to shareand trust each other. Accountability is a
key factor to our success. We are committed to a workplace where individuals
are treated fairly and with respect,
where all employees have the opportunity to expand their skills and accomplishments are recognized. Teamwork
is more than just working together, it isbringing out the best of everyone’s
strengths.

We commit
We set our goals high because weknow we can reach them. We honor
these goals as promises to our customers, our shareholders and ourselves.
Our continued success depends on
keeping our promises and taking
responsibility for all our actions. Success is measured by the results we
produce in customer satisfaction, sales,
profitability, value creation to our shareholders and the scope of opportunities
we provide for our employees.
We strive for excellence
No matter how good our products,
services, process and results, we arededicated to making them better. We
aim for the highest standards of quality
for our customers. By approaching ourdaily work with a passion for perfection,
avoiding incidents by managing therisks of our activities, taking initiatives
and a desire to learn and share thatlearning with colleagues, we all canmake a difference.
We lead innovation
Innovation is the cornerstone of our
success and our future depends on it.
Innovation will ensure that we haveattractive products for our markets, anda steady supply of new technologies,
products, applications and customers.
We aim to be the leaders in our industry
and not the followers.

Corporate Governance

The following information complies with
the Corporate Governance Directive of
the SIX Swiss Exchange (SIX) and thedisclosure rules of the Swiss Code ofObligations. In order to enhance theclarity of this chapter, reference is madeto other parts of the annual report andour website (www.lem.com). Key elements are contained in the Articles ofIncorporation revised October 1 2007.

1 Group structure andshareholders
Group structure
LEM Holding SA is domiciled at 8,
Chemin des Aulx in CH-1228 Plan-lesOuates, Geneva. LEM’s registeredshares are listed on the main segment of
the SIX Swiss Exchange (LEHN, security no. 2 242 762; ISIN 0022427626).
On March 31 2009, the market capitalization was CHF 172.4 million.
The LEM Group is structured into theIndustrial Segment and the Automotive
Segment. Appropriate segment reporting pursuant to IFRS is contained on
page 31 of the notes to the consolidated financial statements. All companies in the LEM Group are listed under“scope of consolidation” on page 47,
where the company names, registeredoffices, share capitals and the relevant
percentages of shares held are indicated. There are no other listed companies in the scope of consolidation.
Significant shareholders
On 31 March 2009, the following shareholders held 3% or more of the sharecapital and voting rights:

There are no known shareholder agreements between individual shareholders.
Cross-shareholdings
LEM has no interlocking shareholding
with other joint-stock companies.

2 Capital structure
Capital and shares
The nominal value of the share capitalof LEM Holding SA is CHF 575’000,
which is divided into 1’150’000 fully
paid-up registered shares with a parvalue of CHF 0.50 each. There are noshares with preferred voting rights. All
shareholders are entitled to the same
dividends.
Detailed information about the capital
movements in the last three years isshown in LEM Holding statutor yaccounts on page 52.
There are no restrictions on the transferof shares. In order to be registered in
the share register, each shareholder
shall declare that he holds the sharesfor his own account.
On 31 March 2009, LEM Holding SA
held 12’400 treasury shares and 30’000
options on own shares.
Authorized and conditional capital
There is no authorized or conditional
capital, nor are there any profit sharing
certificates or participation in certificates or any convertible bonds outstanding.

Shareholder
WEMACO Invest AG, in Zug and Werner O.Weber, in Zollikon, Switzerland
27.4%
Threadneedle Asset Management Holding Ltd, in London, United Kingdom 10.5%
Sarasin Investmentfonds AG, in Basel, Switzerland
9.9%
Joraem de Chavonay SA, in Zug, Switzerland
5.2%
Impax Asset Management Ltd, United Kingdom
4.5%
Erwin Studer, in Zollikerberg, Switzerland
3.7%

Information on the performance shareplan and the stock option plans is provided below under Section 5, “Compensations and shareholdings”, under
the Note ”Stock options plans and Performance share plan” on page 40 andin the notes to the LEM Statutory
Accounts on page 56.

3 The Board of Directors
Election, terms of office and crossinvolvement
The Board of Directors is comprised ofat least three members who are individually elected at the ordinary shareholders’ meeting for a mandate of one year,
which is renewable up to an age limit of
70. The Board constitutes itself and the
Chairman is nominated by the Board.
At the ordinary shareholders’ meetingon 27 June 2008, Friedrich Fahrni
decided not to stand for re-election.
The other members, Felix Bagdasarjanz, Peter Rutishauser, Anton Lauberand Ueli Wampfler, were re-elected.
Felix Bagdasarjanz maintained the
Chairmanship. All of the members of
the Board are non-executive and haveat no time been part of the executive
management of LEM. Furthermore,they have no significant business connections with the LEM Group.
Internal organizational structure
The Board of Directors meets as often
as necessary, but five to six annual
meetings are planned in advance. In thecompleted financial year, six full-day,
one half-day and five half-day preparatory meetings were held. Additionally,
several ad hoc conference calls took
place during the year. The meetings
usually take place at the company’s
headquarters. The Chairman, after consultation with the CEO, determines theagenda for the Board meetings. The
members of the Board of Directors can
ask for additional items to be included.
The Board members receive supporting documents beforehand which

11

CORPORATE GOVERNANCE

Members of the Board of Directors
Education, professional background and other notable activities.
(Absence of information on other notable activities indicates that there are none of relevance.)

CH Nationality
Born – 1945
Chairman
Entry – 2002
Member NCC

CH Nationality
Born – 1951
Member
Entry – 1999
Chairman NCC

Felix Bagdasarjanz

Peter Rutishauser

Education
Dr. of Electrical Engineering, ETH Zurich

Education
Dr. sc. nat., ETH
lic. oec., HSG

Professional background
Since 2002, Independent business consultant
1999– 2002, CEO of ESEC and Member of the
Executive Board of Unaxis
1997–1999, Member of the Executive Board of
ABB Switzerland
1992–1997, Managing Director ABB Drives AG/
ABB Industrie AG
Other notable activities
Member of the Board of Schneeberger Holding
AG, Roggwil, BE
Head of expert team (engineering sciences),
Federal Office for Professional Education andTechnology, The Innovation Promotion Agency,
KTI/CTI

CH Nationality
Born – 1956
Member
Entry – 2003
Chairman AC

Other notable activities
Delegate of the Board of Directors of Equatis
AG and of Trisport AG,
Member of the Board of Directors of Glatz AG,
Pavatex AG and WUPA Holding AG

Anton Lauber

Ueli Wampfler

EducationFederal Proficiency Certificate as a Mechanic
Certified Machinery Engineer,
Technical University Brugg-WindischPost-graduate studies in Management
University of Applied Sciences, Lucerne
University of St. Gallen: Program for
top managers in SMEs
IMD: Program Leading the Family Business

Education
Lic. oec., University of Zurich
Certified auditor

Professional background
Since 2009, President Division Components
Schurter Group
1998– 2009, Member of the Board of Directorsof Schurter Holding AG and other groupcompanies
1993–1998 Chairman of the Managementof Schurter AG, Lucerne, CEO and Delegateof the Board of Directors, Member of the
Schurter-Group Management
1989–1993 Technical Director Schurter AG,
LucerneUp to 1988, Managing Director Generatorenfabrik ABB, Switzerland
Other notable activities
Chairman of ITZ (Innovation-Transfer Central
Switzerland)Member of IAQ – International Academy
for Audit
Member of the Board of Directors of Beutler
Nova AG, Gettnau
Member of the Board of Directors of Bossard
Holding AG, Zug

AC = Audit Committee
NCC = Nomination and Compensation Committee

12

Professional background
Since 1989, independent businessman

CH Nationality
Born – 1950
Member
Entry – 2007
Member AC

Professional background
Since 2004, Founder and Senior partnerof Wampfler & Partner AG, Zurich
1998– 2004, Director STG Schweizerische
Treuhandgesellschaft, Zurich
1974–1998, STG Coopers & Lybrand, Zurich(partner since 1991)
As of 1986, entrepreneurial activities with own
company-group (Swisa Holding AG
and PH Partner Holding AG)
Other notable activities
Member of the Board of Directors of Merbag
Holding AG, Zug; Mercedes-Benz Automobil
AG, Schlieren, and Merbag Immobilien AG,
Schlieren
Member of the Board of Directors of Caspar
Finanz AG, Zug (Traco Power Group)
Member of the Board of Directors of OFRAG
Vertriebsgesellschaft, Lupfig
Member of the Board of Directorsof Fuchs-Movesa AG, Lupfig
Member of the Board of Directorsof Rebew AG, Zürich

allows a good preparation of the meeting. As a rule the CEO (and for most of
the agenda items also the CFO) attend
the meetings of the Board of Directors
without having a right to vote. Depending on the issues, other members ofSenior Management participate in themeetings in order to respond to specificquestions. Decisions can be taken by
the Board if at least half of the Directors
are present, and a simple majority ofthem is sufficient. In the event of deadlock, the Chairman has the casting
vote. Minutes of the meetings, including
decisions taken, are prepared by theoutside Secretary of the Board and distributed to the members of the Board,
the CEO and the CFO.
The Board of Directors reflects, in its
working procedures, the efficiency andeffectiveness of the teamwork as wellas its interaction with the managementof the company on a regular basis.
Regular feedback-sessions at the endof a meeting provide valuable input forthe continuous improvement of theBoard’s coherence and leadership.
Definition of areas of responsibility
The Board of Directors delegates the
management of the company to the
CEO to the fullest extent permitted by
the Swiss Code of Obligations. The
Board of Directors reviews and assesses
at least on an annual basis and takes
decisions in the following areas:• Review and approval of the strategy,
business plan, annual business objectives and budget for the LEM Group.
• A pproval of creation/closing of any
subsidiary and purchase/sale of any
interest in any company or entry into
any merger or joint venture agreement.
• A ppointing/dismissing of the Senior
Management.
• M onitoring the ethical and legal
behavior of LEM.
• Reviewing of human resources management, especially co-worker satisfaction and management development and legal, intellectual property,social & environmental aspects.

Information and control systemsof the Board of Directors vis-à-vis
Management
The Board of Directors ensures that it
receives sufficient information from the
Senior Management to perform its
supervisory duty and to make the necessary decisions.
The Board of Directors obtains theinformation required to perform its
duties through several means:• T he Board of Directors receives
monthly and quarterly reports on thecurrent development of the business.
• Informal meetings and teleconferences are held as required between
the Chairman and the CEO as well as
between the Chairman and individual
members of the Board.
• T he Committees meet at regularintervals and exchange detailed information with the Management.
• The Board receives detailed information to each agenda item one week
before the board meeting.
• At least once a year a session is heldin the Board meeting including all
Senior Managers.
Business risk management
In compliance with Art. 663b of the
Swiss code of Obligations, LEM is using
a standardized procedure to analyze its
business risks. LEM’s risk management
covers all types of risk: financial, operational, strategic – up to the externalbusiness environment, compliance andreputational aspects.
The Senior Management conducts anannual risk analysis. The results andconsecutive action plans are thereafter
presented to and formally approved by
the Board of Directors.
The risk management approach follows
five steps: In a first step, potential hazards are evaluated and a consensual
list with 10–15 main hazards is set up.
In a second step, each hazard isassessed by a multiplication of probability with frequency. Step two results ina risk exposure which visualizes LEMs
potential risk environment. In step three
an action plan is put in place to reduce

the risks. The hazards thereafter are
revalued a second time, taking into
consideration the action plans. In step
four the action plan is validated andthereafter monitored on a continuous
basis (step five).
Internal control system
In compliance with Art. 728 a/b of the
Swiss Code of Obligations, LEM has
put in place an internal control system.
Starting from the material positions in
the financial result of the annual report,
the important underlying processes
and process owners have been identified. For each process, key risks that
could lead to errors in the financial
reporting have been identified. For eachkey risk, key controls have been definedand responsible persons to assure
effective compliance and documentation of the key controls. The process
has been presented to and approvedby the Audit Committee.
Looking forward, the process owners
will perform an annual process review
whereby identified weaknesses shall be
continuously improved and key risks
and controls shall be updated. Basedon the input of the process owners the
CFO prepares an annual report on theinternal control system which is presented to and discussed with the Audit
Committee.
Committees
Two standing committees support theBoard of Directors. They are comprisedof two non-executive and independent
members of the Board of Directors.
They meet whenever necessary but atleast twice a year.
• T he primary objective of the Audit
Committee (AC) is to provide theBoard of Directors with effective support in financial matters, in particular
the selection and supervision of theexternal auditor, assessment of theeffectiveness, compliance and clarityof the Group financial reporting andthe assessment and preparation of13

CORPORATE GOVERNANCE

the financial reports to the shareholders. Furthermore, it reviews criticalaccounting policies, financial control
mechanisms and compliance withcorresponding laws and regulations
as well as the development and continuous improvement of the internal
control system. If required, the external Group auditors are invited to participate at the meeting. The ACprepares proposals to be decided by
the Board of Directors. In the completed financial year three half-day
meetings were held.
•T he Nomination and Compensation
Committee (NCC) deals with succession, recruitment and compensation of the members of the Board of
Directors and the Senior Management. It ensures and monitors the
personnel development plan andadequate succession planning for the
middle and top management. It
reviews and updates the performancebased compensation system for the
Senior Management. The NCC prepares proposals to be decided by the
Board of Directors. In the completed
financial year two half-day meetingsand several conference calls wereheld.

4 Senior Management
None of the members of the Senior
Management have other activities ingoverning or supervisory bodies, any
official functions or political posts nor
any permanent management functions
for important Swiss and foreign interest
groups.

14

Management contracts
There are no management contracts
with companies or individuals outside
the LEM Group.

For more details on financial compensation, see note 18 “Stock option plans
and Performance share plan” on page
40 and the notes of LEM Holding Statutory Accounts on page 55.

5 Compensation andshareholdings

Senior Management
General principles
Remunerations for the Senior Management are approved by the Board of
Directors based on recommendations
by the CEO and the Nomination &Compensation Committee. The remuneration of the CEO is proposed to theBoard of Directors by the Chairman anddecided in a private meeting of theBoard.

Board of Directors
General principles
Remunerations for the Board of Directors are approved by the Board of
Directors based on recommendations
by the Nomination & Compensation
Committee (NCC).
The remuneration of the Board of Directors is reviewed on an annual basis.
The Board of Directors has adopted a
remuneration scheme with a fixed fee
paid in cash in the amount of CHF
120’000 for the Chairman and CHF
60’000 for a member. Committee activity will be compensated with CHF
30’000 for the Committee’s chairman
and with CHF 20’000 for its members.
There will be no additional variable
compensation nor any participation in
an equity based compensation plan.
The members of the Board of Directors
are requested to hold for their own
account a minimum of 1’000 shares.
Compensation of former members
In financial year 2008/09, a compensation of TCHF 15 was paid to one former
member of the Board of Directors forthe last period of his term between April
and June 2009.

The remuneration of the Senior Management is reviewed on an annual basis.
The total compensation for the Senior
Management consists of a base salary,
performance related bonus (LEM Incentive system) and performance relatedshares (LEM Performance share plan).
LEM Incentive system• Performance according to personal
objectives (cap = 10% of annual basesalary).
• Team individual business performance to consolidated actual EBIT versus budget (cap = 15% of annual
base salary, CEO 0%).
• B usiness performance LEM to consolidated actual EBIT versus previous
year (cap = 10% of annual base salary, CEO 65%).
The bonus payments are made in thefirst quarter of the new fiscal year basedon the annual accounts and the personal performance review, conductedby the direct superior and approved by
the next level superior.

Members of the Senior Management
The Senior Management was comprised of the following members on 31 March 2009:

Paul Van Iseghem

Ageeth Walti

Nationality: Belgian
Education: PhD, UCLA
Born – 1946
Function: President & CEO LEM Group
With LEM since 2000
Previous functions: President LEM components
Previous companies and positions:
ITT CANNON,
Vice President Engineering & Operations

Nationality: Swiss
Education: MBA
Born – 1967
Function: CFO
With LEM since 2006
Previous companies and positions:
Financial positions with Industrieholding Cham,
PWC, UnileverHans-Dieter Huber

Luc Colombel

Nationality: German
Education: Cert. Eng. (BA)
Born – 1959
Function: Vice President, Industry
With LEM since 1995
Previous functions:
Business Development manager
Previous companies and positions:
ABB, Division Manager

Nationality: French
Education: Engineer
Born – 1959
Function: Vice President,
Automotive and Traction
With LEM since 1996
Previous functions:
Business Development Manager
Previous companies and positions:
Arcelor Group, Strategic Development andSales Manager

Simon Siggen

Eric Favre

Nationality: Swiss
Education: Engineer EPFL
Master in Logistics
Born – 1967
Function: Vice President, Operations
With LEM since 2002
Previous functions:Operations Manager
Previous companies and positions:Leclanché, Business segment Director

Nationality: Swiss
PhD, EPFL
Born – 1962
Function: Vice President, R&D
With LEM since 2000
Previous functions: Technology Manager
Previous companies and positions:
ETEL Aerospace, Director Aerospace division

15

CORPORATE GOVERNANCE

LEM Performance share plan
On 27 June 2008, the Board of Directors decided to initiate a Performance
Share Plan (PSP) for members of the
management, whereby the number ofshares vested will depend on theachievement of certain targets during
the vesting period. The targets were
determined by an Economic Value
Added (EVA) model which is expected
to reflect the market growth of LEM.

During May 2009, the Board of Directors decided not to issue any further
equity based compensation plans.
Instead, the LEM incentive system will
be extended and a part of the bonus
payment for the Senior Management
will in future depend on the Group performance achieved over a period of
three years and based on an EVA
objective set by the Board of Directors
at the beginning of the period.

The plan has been established in favorof 30 members of management. 8’360
shares (payout multiple m =1) were
granted in total and allocated based on
the position of the manager. The vesting period has a duration of three years.
In order to compensate for the transitional reduction in the equity based
compensation going from a backward
looking stock option plan to a forward
looking share plan, the Board of Directors decided to vest a minimum numberof 4’180 shares (payout multiple m=0.5)
if the performance of LEM for the three
years period from 2008/09 to 2010/11
is less or equal to a cumulated operational EVA of CHF 55 million. The maximum number of shares vested will be
double the value of the number of shares
granted, i.e. 16’720 shares (payout multiple m=2). The corresponding performance has to be a cumulated operational
EVA of CHF 85 million. Linear interpolation will be applied in between.

For more information on the performance share plan and previous stock
option plans (SOP) see note 18. “Stock
option plans and Performance shareplan (PSP)” on page 40 and the notesof LEM Holding Statutory Accounts on
page 57.

If an employee leaves LEM for reasons
other than retirement, disability ordeath, the participant will generally forfeit unvested shares.
The PSP expenses will be recorded in
the income statement straight-line overthe 3 years vesting period. The expense
is adjusted at every reporting datebased on the expected number ofshares that the participants will receiveat the end.
As of 31 March 2009, based on a payout multiple m = 0.5, the company
accrued a provision of CHF 423 which
was charged to the income statement.

16

Compensation of former members
In financial year 2008/09, no compensation was paid to a former member of
the Senior Management.
Pensions and Healthcare Plans
Pension benefits at LEM are designed
to provide and contribute to a reasonable level of retirement income reflecting
the number of years of service with
LEM and also to help in the case of disability or death.
As a general policy, the level of pension
benefits provided to employees iscountry-specific and is influenced by
local market practice and regulations.
The pension and healthcare benefits inthe main countries where LEM operates
are described in more detail below.
LEM in Switzerland
The LEM pension plan operates adefined benefit plan that provides retirement benefits and risk insurance fordeath and disability. The insured salaryis based on LPP Swiss law and is without limitation on the amount. The pension fund is funded by contributions
from the company and the insured
employees. The average contribution
for the employee is 40% and 60% for
the company. You can find more information in the notes under retirement
benefit obligations.

LEM does not provide healthcare benefits to its employees in Switzerland.
LEM in China
The pension plan is a government plan.
Both company and employee pay acertain percentage of a fixed amountfor the insurance each month.
The healthcare plan it is both government and company funded.
LEM in Japan
Only the government plan prevails.
The labor insurance (injury or disease
regarding work) and health insurance isfor all employees.
The regular employees are included in
the pension programs. There is a special pension fund for Directors.
LEM in Germany
In addition to the legally required pension and health insurances, the company pays into an insurance pension
plan for employees.

6 Shareholders’participation rights
The rules on Shareholders’ participation rights are outlined in the Articles ofIncorporation. The rules for the convening of shareholders’ meetings, the participation rights and the majority rules
for decisions all follow the Swiss law.
The complete articles of Incorporation
can be downloaded from the Investor
Relations pages on the internet pagewww.lem.com.
Voting rights and representation
restrictions and inscription in theshare register
There are no limitations on voting rights
for shareholders who are entered into
the shareholders’ register with voting
rights. Anyone purchasing registeredshares is registered by the Board of

Directors in the share register onrequest as a shareholder with voting
rights, provided he expressly declaresthat the shares have been bought andwill be held for his own account.
Each shareholder may be represented
by the representative of the Company,by the independent representative, orby a third party who need not be ashareholder of LEM Holding SA.
Statutory quorums
The Articles of Incorporation contain no
deviation from the applicable law.
Convocation of the ordinary shareholders’ meeting
Shareholders registered are convened
to shareholders’ meetings by ordinary
mail and by publication in the Swissgazette of commerce at least 20 days
prior to the day of the meeting. Any
shareholder who, on the day determinedby the Board of Directors, is registeredas a shareholder has the right to attend
and vote at the shareholders’ meeting.
AgendaAccording to Article 10 of the Articles ofIncorporation, one or several shareholders who collectively hold 10% of
the share capital can call for a shareholder’s meeting and submit matters to
be placed on the agenda.
Dividend policy
The aim is to pay out 25–50% of the net
profit in the form of dividends, to be
decided by the Board of Directors.

7 Change of control anddefensive measures

Clauses of changes of control
There is no particular clause in the Articles of Incorporation for changes ofcontrol. If dismissed in the case ofa change of control of the company,
three members of the Senior Management will receive additional severance
payments equal to six months remuneration.

8 Auditors

The auditors report on the results of
their audits both orally and in writing.
Financial statements as well as management letters are discussed in the
Audit Committee in presence of theexternal auditors.
D ur ing 20 0 8 / 0 9 Er nst & Youngattended three regular Audit Committee
meetings.

9 Information policy

The Group auditors Ernst & Young Ltd,
Geneva were appointed in 2005 initiating their mandate with the financial year
2005/06. The responsible partner since2005 is Hans Isler.
Ernst & Young charged the following
fees for professional services rendered
for the 12 month period ending March
31, 2009:
Type of service

2008/09

Audit services
Tax services
Other services
Total

In TCHF
253
468
206
927

Other services include due diligence
services and consulting services related
to the internal control project and otherprojects.
Evaluation and control of audit services
are done by the Audit Committee whichmakes recommendations to the Boardof Directors. In particular, the Audit
Committee evaluates the performance,
fees, and independence of the auditors.

LEM informs its shareholders on thebusiness status and its results on aquarterly basis. After the first six
months a half-year report is published.
This report, as well as the annual
report, is distributed to all shareholders
inscribed in the share register andmade publicly available on its website(www.lem.com). Once a year, LEM
holds a presentation for the media andfinancial analysts. Internal processes
ensure that price-sensitive facts are
published without delay in accordancewith the ad hoc publicity rules of the
SIX Swiss Exchange.
At www.lem.com, detailed information(e.g., the Articles of Incorporation,interim and annual reports, investor
presentations, as well as important
dates) is available.
Contact for investors and media:
Heinz Stübi, Interim-CFO,
8 chemin des Aulx,
CH-1228 Plan-les-Ouates,or send an e-mail to investor@lem.com(phone: +41 22 706 12 30).

Duty to make an offer
In accordance with Art. 32 of the Swiss
Federal Act on Stock Exchanges andSecurities Trading (SESTA), any shareholder who exceeds 33.3% of the control of the company has to make apublic offer for all outstanding shares.
The Articles of Incorporation of thecompany do not provide for any exceptions to this rule.

17

financial results

SalesOperating expenses

LEM sales decreased by 3.1% to CHF
196.8 million in 2008/09. There was anunfavorable foreign currency impact of
2.6% in 2008/09. At constant exchange
rates the sales decrease would havebeen 0.5%. The favorable effect of the
JPY was compensated by the unfavorable EUR and to a lower extent the
USD development during the year.

The operating expenses (includingR&D) of CHF 56.8 million stayed in linewith the previous year (CHF 56.7 million). As a percentage of sales the ratio
increased from 27.9% to 28.9%.

Gross margin
The gross margin decreased by 1.4
percentage points to 43.7%. The main
reason for this lower sales volume is theunderutilization of the fixed costs.

The cost reduction programs initiated in
November 2008 started to show effectin Q4 2008/09.
The R&D expenses, which are part ofthe operating expenses, decreased by
2.5% in 2008/09 to CHF 10.8 million(2007/08 CHF 11.1 million). The sales
ratio remains at 5.5%.
The valuation of the provisions for stock
option plans (SOP) at the share price of
CHF 150 on 31.3.2009 (31.3.2008 CHF

270) led to a release of provision below
operational EBIT of CHF 4.6 million. In
2007/08, following the change of thestock option plans from equity settled
to cash settled, this part increased by
CHF 4.3 million.
Based on today’s option valuation
parameters, the following simulations
can be drawn related to the share pricedevelopment:• A share price of CHF 200 would haveincreased the provision by CHF 2.0
million.
• A share price of CHF 250 would haveincreased the provision by CHF 4.4
million.

April to March
2008/09
TCHF

2007/08
TCHF

Sales
Cost of goods sold
Gross margin

196’813(110’788)
86’025203’033(111’444)
91’588

Sales expense
Administration expense
Research & development expense
Other expense
Other income
Operational EBIT
Additional SOP costs/income(22’925)(23’183)(10’820)(111)
232
29’2194’622(23’676)(22’367)(11’103)(31)493
34’904(4’332)

EBIT

33’84130’572

(516)
318
(792)

(965)
287
(735)

Profit before taxes

32’85129’159

Income taxes(8’926)(7’248)Net profit for the year

23’92521’911

Financial expense
Financial income
Foreign exchange effect19

Financial Results

Net sales

Gross margin

200

100

CHF Millions

Operating expense (incl. R&D exp.)

CHF Millions

N % of Sales

45%

70
125

40%

50

75

40

35%

30%

20
25

25%

0
04/05

05/06

06/07

07/08

08/09

20%
04/05

R&D expense

05/06

06/07

07/08

N % of Sales

12%

40

CHF Millions

6%
6

40%

50

35%

30%

30
20

25%

0

20%
04/05

N % of Sales

40
30%

35

9

70

05/06

06/07

07/08

08/09

EBIT

12
9%

45%

80

08/09

Operational EBIT

CHF Millions

CHF Millions

N % of Sales
30%

35

30

25%

30

25%

25

20%

25

20%

20

15%

20

15%

15

15

10%

10%
3%

10

10

3

5%

5
0

0%
04/05

05/06

06/07

07/08

25

CHF Millions

0%

0

08/09

04/05

Net profit for the year

05/06

06/07

07/08

14%

40

12%

35

5%

5

0%

0

08/09

Net financial assets

N % of Sales

50%

10

10

0

N % of Sales

40

30

50

CHF Millions

60

60

100

100
90

80

150

15

50%

90

175

04/05

05/06

06/07

07/08

08/09

Equity & Equity ratio

CHF Millions

100

CHF Millions

N % of Assets

90

20

80%
70%

80
10%

30

60%
70

25

15

50

20
6%

10

40%

40

15
4%

50%

60

8%

30%

30
10

20%

5

20

0
04/05

05/06

06/07

07/08

2%

5

0%

0

08/09

All the figures reflect continuing operations only.
Figures 2007/08 after restatement IFRIC 14.

20

10%

10
0
05/06

06/07

07/08

08/09

0%
05/06

06/07

07/08

08/09

Operational EBIT
(previously pro forma
EBIT) and EBIT
The operational EBIT (before SOP
revaluation) decreased by 16.3% to
CHF 29.2 million (PY CHF 34.9 million).
Taking into account the SOP revaluations in 2007/08 and 2008/09, the EBIT
increased by 10.7% from CHF 30.6 million to CHF 33.8 million.

Financial expenses

Balance sheet
As part of the recession management,
priority was set on optimizing the working capital, e.g. reducing the accounts
receivable and inventory levels. The
actions led to an improved working
capital (trade accounts receivable +inventory – trade accounts payable) as% sales from 21.2% to 20.6%.
The efficient cash management has
increased the net financial assets (cash– financial liabilities) from CHF 23.7 million to CHF 27.9 million. On 31 March
2009, the interest bearing financial liabilities amounted to CHF 0.1 million.

The financial expenses decreased from
CHF 1.4 million to CHF 1.0 million in
2008/09.

The balance sheet remains healthy withan equity ratio of 72% (2007/08 61%).

Taxes

Cash flow

The tax rate increased from 24.9% to27.2% in 20 08 / 09. The average
expected tax rate of 25.0% in 2008/09
increased due to a tax provision related
to withholding taxes for planned dividend repatriation.

The improved working capital ratio wasreflected in a favorable change in net
working capital of CHF 3.7 million.
Together with lower cash payments forthe exercise of stock option plans, thisled to a free cash flow of CHF 21.9 million (2007/08 CHF 17.6 million).

Net profit for the year
The net profit for the year increased by
9.2% compared to 2007/08 resulting in
CHF 23.9 million, driven by the reversalof provision for the SOP.

21

LEM Group23	Consolidated balance sheet
24	Consolidated income statement
25	Consolidated cash flow statement
26	Consolidated statements of changes in equity
27 Accounting policies
31	Notes to the consolidated financial statements
48 Auditor’s reportCONSOLIDATED BALANCE SHEET

AssetsCurrent assets
Cash and cash equivalents
Accounts receivable
Other current assets
Inventories
Total current assets
Non-current assets
Deferred tax assets
Other non-current assets
Property, plant and equipment
Intangible assets
Total non-current assets

Notes

31.03.2009
TCHF

31.03.20081
TCHF

27’95131’920
2’834
23’72886’43325’78741’1692’051
22’411
91’4180
1’522
23’571
4’685
29’778165
1’496
18’450
4’429
24’540116’211

115’958

Notes

31.03.2009
TCHF

31.03.20081
TCHF

7

12’614
290
6’406
6’247
3’151
93
28’801

17’034
650
9’639
4’798
3’416
2’087
37’624

2’012
113
1’793
3’918

5’395
77
1’653
7’125

32’71944’749575(5’627)22’91965’43083’297
195
83’492575
016’20054’23371’008201
71’209116’211

115’958

1
2
3

15
4, 19
5
6

Total assets

Liabilities and equity
Current liabilities
Accounts payable
Other current liabilities
Accrued expense and deferred income
Current income tax payable
Current provisions
Current financial liabilities
Total current liabilities
Non-current liabilities
Non-current provisions
Other non-current liabilities
Deferred tax liabilities
Total non-current liabilities

8
22

8
15

Total liabilities
EquityShare capital
Treasury shares and derivative instruments on treasury shares
Reserves
Retained earnings
Equity attributable to equity holders of the parent company
Minority interests
Total equity

9
9

10

Total liabilities and equity

The accompanying notes are an integral part of the consolidated financial statements.
1

Retrospective adjustment due to application of IFRIC 14, see Accounting policies 2.2

23

Consolidated Income statement

April to March
Notes

Sales
Cost of goods sold
Gross margin

11

2008/09
TCHF

2007/081
TCHF

196’813(110’788)
86’025203’033(111’445)
91’588

Sales expense
Administration expense
Research & development expense
Other expense
Other income
Operating profit

11
11
11

(22’822)(18’748)(10’735)(111)
232
33’841(24’276)(26’058)(11’232)(31)581
30’572Financial expense
Financial income
Foreign exchange effect

12
13
14

(516)
318
(792)

(965)
287
(735)

32’85129’159(8’926)(7’248)Net profit for the year

23’92521’911Attributable to:Equity holders of the parent company
Minority interests
Net profit for the year

23’84679
23’92521’82883
21’911

20.9
20.8

18.6
18.6

Profit before taxes
Income taxes

15

The results of both years are derived from continuing operations.
Earnings per share
Basic earnings per share
Diluted earnings per share

16
16

The accompanying notes are an integral part of the consolidated financial statements.
1

Retrospective adjustment due to application of IFRIC 14, see Accounting policies 2.2

24

Consolidated Cash Flow Statement

April to March
2008/09
TCHF

2007/081
TCHF

CASH FLOW FROM OPERATING ACTIVITIESNet profit for the year
Adjustment for non-cash items– Current income taxes– Net financial result– Derivative financial instruments revaluation– Divestment of companies– Fair value charges for share-based payments– Depreciation and amortisation– Increase (+) in provisions and deferred taxes– Other non-cash adjustments 1
Interest received
Interest paid
Taxes paid
Expense for cash settlement / Share-based payments paid
Cash flow before changes in net working capital
Change in inventories
Change accounts receivable and other current assets
Change in accounts payable and other current liabilities
Cash flow from changes in net working capital
Cash flow from operating activities

23’92521’911

8’632
198
(148)
22
(3’234)
4’991
469
0
318
(516)
(7’165)(206)
27’286708
10’881(7’938)3’651
30’937

6’723
678
146
0
5’332
4’490
252
(219)
287
(965)
(6’763)(5’471)26’401891(3’845)675(2’279)24’122

CASH FLOW FROM INVESTING ACTIVITIESInvestment in fixed assets
Disposal of fixed assets and intangible assets
Investment in intangible assets
Increase in other assets
Cash flow from investing activities(8’864)
66
(242)
(12)
(9’052)(6’018)
99
(463)
(125)
(6’507)

CASH FLOW FROM FINANCING ACTIVITIESTreasury shares acquired
Derivative instruments on own shares acquired
Dividends paid to the shareholders of LEM Holding SA
Dividends paid to minorities
Increase (+) in financial liabilities
Decrease (–) in financial liabilities
Cash flow from financing activities(3’875)(1’752)(12’650)(42)0(2’126)(20’445)00(5’175)(38)
28(5’346)(10’531)

Change in cash and cash equivalents

1’440

7’084

Cash and cash equivalents at the beginning of the period
Foreign exchange effectCash and cash equivalents at the end of the period

25’787724
27’951

19’798(1’094)25’787

1

Retrospective adjustment due to application of IFRIC 14, see Accounting policies 2.2

25

CONSOLIDATED STATEMENTS OF
CHANGES IN EQUITY

Attributable to equity holder of the company
SharecapitalTCHF
1 April 2007 1
Changes in capital
Dividends paid
Dividends paid to minority interests
Net profit for the year
Foreign currency translation
Unrealized gain on derivatives designatedas cash flow hedges
IAS 19 / IFRIC 14
Stock option plan
Treasury shares

600
(25)

31 March 2008 1
Thereof gains & losses recognizeddirectly in equity

575

Capital Reserve Treasury
reserve for treas.
sharesshares
19’00925

7’820(7’820)Fair
value
reserveStockoptionplan

Trans- Retained
lation earnings
reserve

0

1’429

2’099

42’440Minority
interest

Total
equity178

65’7550(5’175)(38)
21’692(5’101)(5’175)21’609(5’079)

(38)
83
(22)

146

146
219
(6’288)0219(4’859)(1’429)(7’820)

7’820

19’034

0

0

146

0

(2’980)54’234201

71’210

0

0

0

0

146

0

(5’079)(4’859)(22)(9’814)

1 April 2008 1
Dividends paid
Dividends paid to minority interests
Net profit for the year
Foreign currency translation
Unrealized gain on derivatives designatedas cash flow hedges
Performance share plan
Treasury shares
Derivative instruments on treasury shares575

19’034

0

0

146

0

(2’980)54’234(12’650)201

71’210(12’650)(42)
23’9256’401

31 March 2009
Thereof gains & losses recognizeddirectly in equity

23’846
6’444

(42)
79
(43)

(148)

(148)
423
(3’875)(1’752)423(5’627)

5’627(3’875)(1’752)575

13’407

5’627(5’627)

(2)

423

3’464

65’430195

83’492

0

0

0

0

(148)

0

6’444

0

(43)

6’253

The amount available for dividend distribution is based on LEM Holding SA’s shareholders’ equity determined in accordancewith the legal provisions of the Swiss Code of Obligations.
1

Retrospective adjustment due to application of IFRIC 14, see Accounting policies 2.2

26

ACCOUNTING POLICIES

1 General information
The LEM Group (the Group) is a market leader
in providing innovative and high quality solutions for measuring electrical parameters. Its
core products – current and voltage transducers – are used in a broad range of applicationsin industrial, traction, energy and automotive
markets. The Group has operations in 10 countries and employs around 900 people. The
parent company of the LEM Group is LEM
Holding SA (the Company), which is a limited
liability company incorporated in Switzerland.
The financial year ends on 31 March. The registered office is as follows: 8, chemin des Aulx;
C H -1228 Pl a n-l e s- O u ate s / G e n eva. T h e
Company has been listed on the SIX Swiss
Exchange since 1986.
The Board of Directors approved the consolidated financial statements on 15 May 2009.

2 Summary of significant
accounting principles
2.1 Basis of preparation
The consolidated financial statements of LEM
Group have been prepared in accordance with
the International Financial and Reporting Standards (IFRS) and interpretations published by theInternational Accounting Standards Board(IASB) and comply with Swiss law.
The consolidated financial statements havebeen prepared using the historical cost convention except that, as discussed in the accounting
policies below, certain items like derivatives arerecorded at fair value.
2.2 Adoption of new and revised International Financial Reporting Standards andInterpretations
In 2008/09, LEM Group introduced the following revised standards and interpretations:Standard Description		
IFRIC 11
Group and treasury
share transactions
IFRIC 12Service concession
arrangements
IFRIC 14The limit on adefined benefit asset
minimum funding
requirements andtheir interaction

Impact on
LEM Group
None
None

See below

Restatement IFRIC 14
Impact of the introduction of IFRIC on theGroup’s consolidated balance sheet andincome statement.

Balance Sheet
TCHF

01.04.07

31.03.08

Other assets (before restatement)
Restatement IFRIC 14
Other assets (restated)

73
1’092
1’165

130
1’366
1’496

Deferred tax liabilities (before restatement)
Restatement IFRIC 14
Deferred tax liabilities (restated)

1’607
218
1’825

1’380
273
1’653

Total effect on the retained earnings
Retained earnings (before restatement)
Restatement IFRIC 14
Retained earnings (restated)

41’565874
42’43953’140
1’093
54’233

Income Statement
TCHF

2007/08

Administration expense (before restatement)
Restatement IFRIC 14
Administration expense (restated)

26’332(274)
26’058Deferred tax (before restatement)
Restatement IFRIC 14
Deferred tax (restated)

470
55
525

Net profit for the year (before restatement)
Restatement IFRIC 14
Net profit for the year (restated)

21’692219
21’911

Basic/diluted earnings per share (before restatement)
Basic/diluted earnings per share (restated)

18.4
18.6

LEM Group will adopt the following revised standards and interpretations in the future:
Standard orinterpretation
IAS 1 revised
IAS 23 revised
IAS 27 revised
IAS 32 / IAS 1
amended

Title

Effective datePresentation of financial instruments
1 January 2009
Borrowing cost – amendment
1 January 2009
Consolidated and separate financial statement
1 July 2009
Financial instruments: Presentation /Presentation of financial statements: Puttable financial
instruments and obligations arising on liquidation
1 January 2009
IAS 39 / IFRS 7
Financial instruments: Recognition and measurement /amendedFinancial instruments: Disclosures
1 January 2009
IAS 39Financial instruments: Recognition and measurement:
Eligible hedged items
1 July 2009IFRS 1 / IAS 27
First time adaption of international financial reporting standards /Consolidated and separate financial statements
1 January 2009IFRS 2 amended Share-based payments – vesting conditions and cancellations 1 January 2009IFRS 3 revised
Business combinations – revised
1 July 2009IFRS 8Operating segments
1 January 2009
IFRIC 13
Customer loyalty programs
1 July 2008
IFRIC 15
Agreements for the construction of real estate
1 January 2009
IFRIC 16
Hedges of a net investment in a foreign operation
1 October 2009
IFRIC 17
Distribution of non-cash assets to owners
1 July 2009
Amendments
Annual improvement project1 January 2009IFRS		
(unless otherwise
		
stipulated)
The Group will implement the relevant new standards when they become effective. The impact fromapplying above standards and interpretations has not been evaluated but is expected to have nomaterial effects on the capital, financial, income or cash flow situation of LEM.

27

ACCOUNTING POLICIES

2.3 Summary of critical accounting estimates and judgments
The preparation of financial statements in conformity with IFRS requires management tomake estimates and assumptions that affectthe reported amounts of revenues, expenses,
assets, liabilities and related disclosures at thedate of the financial statements. These estimates are based on management’s best knowledge of current events and actions that theGroup may undertake in the future. However,actual results could differ from those estimates.
The most important sources of uncertainty aredescribed below.
Impairment of goodwill and property, plant andequipment
The Group tests annually whether goodwill has
suffered any impairment in accordance with theaccounting policy. The recoverable amounts ofcash generating units have been determinedbased on value-in-use-calculations. Property,
plant and equipment is assessed according to
the same rules. These calculations require theuse of estimates in particular to the expected
growth of sales, discount rates and development of raw material prices.
Provisions
Provisions are recognized only if the specificcriteria under IFRS are met. Provisions represent presumed obligations arising from past
events and are recognized only if their amount
can be estimated reliably. Nevertheless, provisions are based on assumptions.
Income and other taxes
LEM Group is subject to income taxes innumerous jurisdictions. Judgment is required indetermining the worldwide provision for income
taxes. There are many transactions for which
the ultimate tax determination is uncertain in
the ordinary course of business.
Employee benefits
The standard requires that certain assumptions
are made in order to determine the amount tobe recorded for retirement benefit obligations
and pension plan assets, in particular for
defined benefit plans. These are mainly actuarial assumptions such as expected inflation
rates, employee turnover, expected return onplan assets and discount rates. Substantialchanges in the assumed development of any ofthese variables may significantly change LEM
Group’s retirement benefit obligation andpension plan assets.
2.4 Basis of consolidation
The consolidated financial statements are comprised of LEM Holding SA and of its subsidiaries.
Subsidiaries
Subsidiaries, which are those entities overwhich the Group has the power to exercise
control over the operations, which is normallythe case when it owns more than one half of thevoting rights, are consolidated.

28

Acquisitions are accounted for using thepurchase method. Companies that are acquiredor sold during the financial year are included in
the Group financial statements up to the date oftransfer of control. The costs of purchasing acompany are determined as the sum of the fairvalue of the assets that are to be paid to theseller and the obligations that are entered into,or acquired, on the date of purchase, plus thecost that can be directly allocated. Identifiableacquired assets, liabilities and contingent liabilities are recognized at their present value as ofthe date of their acquisition. The Group’s shareof the purchase price that exceeds the fair valueof the identifiable net assets is recognized as
goodwill.
Intra-group assets and liabilities as well as
income and expenses are set off against eachother.
Also Intra-group intermediate profits on inventories and fixed assets are eliminated.
Associates
Investments in associated undertakings areaccounted for using the equity method. These
are undertakings over which the Group exercises significant influence, but which it does notcontrol.
No associated undertakings exist as per 31
March 2009, and 31 March 2008.
Joint ventures
In jointly controlled entities the method of proportionate consolidation is applied.
No jointly controlled entities exist as per 31
March 2009, and 31 March 2008.
2.5 Foreign currencies
Functional and presentation currency
The consolidated financial statements are presented in Swiss francs as the presentation
currency. The subsidiaries use local currencies
as their functional currency, which is thecurrency of the primary economic environment
in which they operate.
Foreign currency translation
All assets and liabilities in the balance sheets ofsubsidiaries that are denominated in therespective functional currencies are translated
into Swiss francs at the year-end exchange
rate. Items in the income statement and cash
flow statement are translated at the averageexchange rate for the year. The resulting translation differences are recognized in sharehold-Foreign currency translation
Currency
Income statement
2008/09
Average rate
In CHF
EUR
1.562
GBP
1.885
JPY
0.011
USD
1.102
RUB
0.041
CNY
0.161

ers’ equity. When a company is sold, thecumulative translation differences recognized inshareholders’ equity are transferred to theincome statement.
The table below summarizes the principal
exchange rates that have been used in thetranslation process.
Foreign currency transactions
Foreign currency transactions by subsidiaries
are translated at the market rate prevailing at
the time. The monetary assets and liabilities aretranslated at the year-end rates while non-monetary assets are translated at historical rates.
Gains and losses arising from the transactions
as well as from the translation of monetary
assets and liabilities in foreign currencies arerecorded as income or expenses in the income
statement (except from translation differences
arising from a monetary item that forms part of
the Group’s net investment in a foreign operation, which are included in shareholders’equity).
2.6 Segment information
LEM Group’s primary reporting segment isbusiness segments and the secondary reporting format is geographical. The definition ofbusiness and geographical segments of theGroup is based on the managerial and organizational structure of the Group as well as on thefinancial reporting system.
LEM Group’s business segments are Industrial
and Automotive. The Industrial segment
develops, manufactures and sells electronic
components called transducers for the measurement of current and voltage of various
industrial applications. The Automotive segment
develops, manufactures and sells transducers
for applications in automotive markets. Non-allocated assets correspond to cash, long-term
financial receivables as well as deferred tax
assets. Non-allocated liabilities comprise bankborrowings, income tax payable and provisions
for deferred taxes.
LEM Group’s geographical segments are
Europe, North America, Asia and Rest of world.
Transactions between the business segments
are conducted at arm’s length.
2.7 Cash and cash equivalents
Cash and cash equivalents comprise cash on
hand, cash at bank and cash at postal accounts
and bank deposits with an original maturity ofIncome statement
2007/08
Average rate
In CHF
1.64
2.33
0.0102
1.16
0.046
0.156

Balance sheet
31.03.2009
Year-end rate
In CHF
1.517
1.633
0.0118
1.149
0.034
0.168

Balance sheet
31.03.2008
Year-end rate
In CHF
1.57
1.99
0.01
1.00
0.042
0.142

three months or less from the date of acquisition, that are readily convertible to known
amounts of cash. This definition is also used forthe cash flow statement.
2.8 Accounts receivable
Accounts receivable are carried at original
invoice amount less an allowance made for
doubtful accounts based on a review of all outstanding amounts at the year-end. Allowances
for doubtful accounts are established when
there is an objective indication that the Groupwill not be able to collect the amounts due.
Allowances for doubtful accounts are written off
when identified.
2.9 Inventories
Inventories are stated at the lower of cost or net
realizable value. The first-in, first-out (FIFO)
method is applied. The cost of finished goods
and work in process comprise raw materials,
direct labor costs and other costs that can bedirectly allocated, such as production overhead
expenditures. Financing costs are not included
in inventories. Provision for write downs are
established when there is an objective indication that the Group will not be able to sell the
goods in due time.
2.10 Derivative financial instruments
Derivative financial instruments are initially recognized at cost and are subsequently re-measured at their fair value. With the exception ofderivative financial instruments that qualify forhedge accounting, changes in the fair value ofderivative financial instruments are recognizedin the income statement. Derivative financial
instruments are shown as part of other current
assets and other current liabilities. In case thematurity is more than one year, derivative financial instruments are recognized under othernon-current assets or other non-current liabilities.
For a derivative financial instrument to be recognized as a qualified hedging transaction,certain requirements regarding documentation,
probability of occurrence, effectiveness andreliability of measurement, both of the hedging
instrument and of the hedged underlying transaction, must be fulfilled. In case of qualified
hedging transactions of future cash flows (cashflow hedge), the hedging instrument is recognized at fair value. Of the change in fair value ofthe hedging instrument, the part that is effective
for the hedging transaction is recognized inshareholders’ equity and the remaining ineffective part is recognized in the income statementin the financial result. When the hedging transaction is maturing, the cumulative gains andlosses previously recognized in shareholders’equity are included in the income statement of
the period.
The Group uses derivative financial instruments
to hedge foreign exchange risks of forecasted
transactions (cash flow hedging) and applies
hedge accounting. Derivative financial instruments can comprise of forward exchange contracts and option based structures.

2.11 Property, plant and equipment
Property, plant and equipment is stated at costof acquisition or construction, less depreciation
and any impairment. Depreciation is calculatedon the linear basis on the following estimateduseful life:Land
nil
Buildings
20–40 years
Machinery & Equipment
5–8 years
Tools & Moulds
2–5 years
Vehicles
3–5 years
IT equipment
3–5 years
Repairs and renewals are charged to the income
statement when the expense is incurred. Subsequent expenditure on an item of tangible
fixed assets is capitalized at cost only when it isprobable that future economic benefits associated with the item will flow to the Group and thecost of the item can be measured reliably.

The value in use is calculated based on the estimated future cash flows expected to result fromthe use of the asset and eventual disposal, discounted using an appropriate non-current
interest rate. In the financial year under review
no impairment has been recognized.

2.12 Intangible assets
Goodwill
Goodwill represents the excess of the cost ofan acquisition over the fair value of the Group’s
share of the net assets of the acquired subsidiary/associated undertaking at the date ofacquisition. Goodwill on acquisitions is reported
in the balance sheet as an intangible asset andcarried at cost less accumulated impairment
losses. Goodwill is tested annually for impairment. Gains and losses on the disposal of anentity include the carrying amount of goodwill
relating to the entity sold.

2.15 Financial assets
Financial assets can comprise of marketabledebt securities with a fixed duration, marketablesecurities, derivative financial instruments andloans. In the periods under review LEM Group
has no marketable and equity securities, nor
any loans and long-term receivables in its
books.

Research and development
Research costs are written off as incurred.
Development costs are capitalized as intangible
assets only, if the specific criteria in IAS-38 aremet. Such development costs are capitalized
and written off over the life of the product orprocess.
In the financial years under review, no development costs have been capitalized.
Other intangible assets
Other intangible assets with definite useful lives
are carried at costs less amortization and any
impairment.
Expenditure on computer software, acquired
patents, trademarks and licenses is capitalized
and amortized using the straight-line method
over their useful lives.
2.13 Impairment of fixed assets andintangible assets
Assets that are subject to depreciation andamortization are reviewed for impairment
whenever events or changes in circumstancesindicate that the carrying amount may not berecoverable. An impairment loss is recognized
for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s
fair value less costs to sell and value in use.
For the purpose of assessing impairment,
assets are grouped at the lowest levels forwhich there are separately identifiable cashflows (cash generating unit).

2.14 Assets held for sale
LEM Group’s assets are reclassified as held forsale when a sale within one year is highly
probable and the assets are available for immediate sale in their present condition.
Tangible and intangible assets held for sale are
re-evaluated at the lower of fair value less costto sell or the carrying amounts at the date theymeet the held for sale criteria. Any resulting
impairment loss is recognized in the income
statement. In the two years under review there
were no assets held for sale in LEM Group.

2.16 Leases
Assets acquired under long-term finance leases
are capitalized as part of the fixed assets anddepreciated over the shorter of the estimateduseful life of the asset and the lease term.
Rentals payable under operating leases arecharged to the income statement as incurred.
2.17 Financial liabilities
Financial liabilities comprise of bank loans andare recognized initially as the proceeds
received, net of transaction costs incurred. In
subsequent periods, bank loans are stated atamortized cost using the effective interest rate
method with any difference between proceeds(net of transaction) and the redemption value
being recognized in the income statement over
the terms of the borrowing.
Financial liabilities that are due within 12 months
after the balance sheet date are classified as
current liabilities unless the Group has anun­c onditional right to defer settlement of theliability until more than 12 months after thebalance sheet date.
2.18 Employee benefits
The Swiss subsidiaries provide a defined benefit
plan for employees; the other subsidiaries
provide defined contribution plans. In bothcases the charges are included in the related
periods in the personnel expenses of thevarious functions where the employees arelocated.
Defined benefit plan
A qualified independent actuary values thefunds on an annual basis. The obligation andcosts of pension benefits are determined using
the projected unit credit method. Past service
costs are recognized on a straight-line basis
over the average period until the amended

29

ACCOUNTING POLICIES

benefit becomes vested. Gains or losses on the
curtailment or settlement of pension benefits
are recognized when the curtailment or settlement occurs. Actuarial gains or losses areamortized based on the expected averageremaining working time of the participating
employees, but only to the extent that the net
cumulative unrecognized amounts exceed 10%of the greater of the present value of the defined
benefit obligation and the fair value of plan
assets at the end of the previous year. In
accordance with IFRIC 14, any assets resulting
from surpluses in defined benefit plans arelimited to the value of the maximum futuresavings from reduced contributions. Liabilities
are fully provisioned.
Defined contribution plan
The subsidiaries abroad sponsor defined contribution plans based on local practices andregulations.
Other non-current employee benefits
Other non-current employee benefits include
long-service leave or sabbatical leave, medical
aid, jubilee or long-service benefits and, if they
are not payable wholly within 12 months after
the year end, bonuses and deferred compensation. All actuarial gains and losses are recognized immediately in the income statement, nocorridor approach is applied. LEM Group has
not booked any other non-current employment
benefits in the years under review.
Equity compensation plan
LEM Group operates several stock option plans
and a share based plan.
Stock options are granted to the Board of
Directors and managers. The option plans arecash settled and the fair value of the options islinked to the share price development. Basedon the share price at each quarter end the fairvalue of the options – based on the “Hull-White”
option model – is calculated by an independent
specialist. Based on these fair values the provision is adjusted.
The Performance Share Plan (PSP) is granted
to managers and is equity settled. The fair valueof the PSP granted to the employees is estimated at the grant date. The amounts arecharged to the income statement over the
relevant vesting period and adjusted to reflect
actual and expected levels of vesting.
2.19 Provisions and contingent liabilities
Provisions are recognized when the Group has
a present legal or constructive obligation as aresult of past events and it is probable that an
outflow of resources will be required to settle
the obligation.
Claims and litigations
The Group recognizes the estimated liability toreplace products still under warranty at thebalance sheet date. This position is calculated
based on past history of the level of repairs andreplacements. Additional specific provisions arebooked when required.

30

Employee and termination benefits
These obligations are covered by a provision in
the balance sheet according to the legal
requirements of certain countries.
Stock option plans
The stock option plans are cash settled. The
total amount expensed for the options not yet
exercised is determined by reference of the fairvalue of the instruments granted at each closing
period. The quarterly fair value calculations are
performed by a third party applying the ’Hull &White’ model based on the LEM share price atthe period end. The pro rata provision is calculated based on the fair value and the estimateof the number of options that are expected to
become exercisable and LEM recognizes theimpact in the income statement.
Restructuring
A restructuring obligation is only recorded,
when there is a detailed formal plan for the
restructuring identifying at least:– the business or part of a business concerned;– the principal locations affected; the location,function, and approximate number of employees who will be compensated for terminating
their services;– the expenditures that will be undertaken; and–w
 hen the plan will be implemented; and–h as raised a valid expectation in those affectedthat it will carry out the restructuring bystarting to implement that plan or announcing
its main features to those affected by it.
Contingent liabilities
Contingent liabilities arise from conditions orsituations where the outcome depends on
future events. As the probability either cannot
be measured reliably or the probability for asubsequent outflow lies below 50%, contingent
liabilities are not recognized in the balance
sheet but are described in the notes.
2.20 Share capital
LEM Holding SA has only ordinary registeredshares. Dividends on ordinary shares are recognized in equity in the period in which they are
declared.
When LEM Holding SA or its subsidiaries
purchase its own shares, the consideration paid
including any attributable transaction costs andtaxes is deducted from shareholders’ equity astreasury shares (own shares) until they are cancelled. Where such shares are subsequently
sold or reissued, any consideration received isincluded in shareholders’ equity.
2.21 Minority interests
Minority interests represent the portion of profit
or loss and net assets not held by the Groupand are presented separately in the consolidated statement of income and within equity inthe consolidated balance sheet.
2.22 Revenue recognition
Revenue from the sale of products comprises
all revenues that are derived from sales of
products to third parties after deduction ofprice rebates and value added tax. Revenues
from the sale of products are recognized in theincome statement as soon as the products
have been shipped and the associated benefits
and risks have been transferred to the purchaser.
2.23 Income taxes and deferred taxation
Income taxes
Income taxes comprise all current and deferredincome taxes, including the withholding tax
payable on profit distributions within the Group.
Income taxes are recognized in the consolidated income statement except for income
taxes on transactions that are recognizeddirectly in shareholders’ equity.
Deferred taxation
Deferred income tax is provided in full, using
the liability method, on temporary differences
arising between the tax base of assets and liabilities and their carrying amounts in the financial statements. The principal temporar ydifferences arise from trade receivables, inventories, depreciation on tangible assets and tax
losses carried forward. Deferred taxes are
determined using tax rates that apply, or havebeen announced, on the balance sheet date in
the countries where the Group is active. Tax
losses carried forward are recognized asdeferred tax assets to the extent that it isprobable that tax profit will be available in the
future against which the tax losses carriedforward can be utilized. Deferred tax assets andliabilities are offset against each other if the corresponding income taxes arise by the same tax
authority and a legally enforceable right for offsetting exists.

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

Segment information
Primary reporting format – by business segment
Industrial
2008/09
2007/08 1

TCHF
Income Statement
Sales
EBITDA
Operating profit
Net financial expense
Taxes
Net profit for the year

Automotive
2008/09
2007/08 1

LEM Group
2008/09
2007/08 1

181’931
39’22735’296

182’788
35’74032’03714’882(396)(1’455)20’245(678)(1’465)

196’81338’83133’841(990)(8’926)23’925203’033
35’06230’572(1’413)(7’248)21’911

Depreciation and amortisation:
Tangible assets
Intangible assets
Total

3’623
308
3’931

3’391
314
3’705

1’031
28
1’059

756
29
785

4’654
336
4’990

4’147
343
4’490

Significant non cash items
Provision for share based payments

2’439

5’412

272

738

2’711

6’150

78’32379’039

8’416

9’249

78’32379’039

8’416

9’249

86’73929’472116’21188’28827’670115’958
36’231
8’518
44’749

6’018
463
6’481

Balance Sheet
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities

23’37434’209

1’166

2’022

23’37434’209

1’166

2’022

24’540
8’179
32’719

Capital expenditure:
Tangible assets
Intangible assets
Total

7’006
242
7’248

3’269
440
3’709

1’858
0
1’858

2’749
23
2’772

8’864
242
9’106

Secondary reporting format – by geographical segment
EuropeNorth
America
TCHF
08/09 07/08 1 08/09 07/08 1

08/09

Sales by location of customers

Asia
07/08 1109’198 107’736

31’88837’421

51’890 53’367

3’837

32’210 29’682

0

0

0
0
0

0
0
0

Segment assets
by location of assets
Unallocated assets
Total assets

49’130 52’639

5’399

5’967

49’130 52’639

5’399

5’967 32’210 29’682

Capital expenditure
Tangible assets
Intangible assets
Total

6’624
239
6’863

1

Rest ofthe World
08/09 07/08 1

4’664
456
5’120

17
0
17

25
0
25

2’223
3
2’226

1’329
7
1’336

LEM Group
08/09

07/08 1

4’509 196’813 203’033

86’739 88’288
29’472 27’670
116’211 115’958

8’864
242
9’106

6’018
463
6’481

Retrospective adjustment due to application of IFRIC 14, see Accounting policies 2.2

31

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

1. Accounts receivable

31.03.2009
TCHF

31.03.2008
TCHF

28’516(1’716)26’800
5’120
31’92037’132(1’928)35’204
5’965
41’1692008/09
TCHF

2007/08
TCHF

1’928
92
(375)
71
1’716

1’602
405
(15)
(64)
1’928

> 180 days
TCHF

Total
TCHF

Accounts receivable – trade
Allowance for doubtful accounts
Total accounts receivable – trade
Other receivables
Total

Movements of allowance for doubtful accounts
Additions charged to income statement
Amounts written off
Foreign exchange effect
Total

Aging analysis of accounts receivable
not due
TCHF< 30 days
TCHF

31–90 days 91–180 days
TCHF
TCHF

31 March 2009
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total

16’7420
4’001
20’743

5’946
0
968
6’914

4’051
(124)
108
4’035

349
(164)
6
191

1’428
(1’428)37
37

28’516(1’716)
5’120
31’92031 March 2008
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total

20’010
0
4’863
24’873

8’900
0
935
9’835

5’791
(178)
113
5’726

663
(186)
11
488

1’768
(1’564)43247

37’132(1’928)
5’965
41’1692. Other current assets

31.03.2009
TCHF

31.03.2008
TCHF

Advances to suppliers
Prepayments and accrued income
Derivative financial instruments
Total

1’473
1’363
(2)
2’834

817
1’013
221
2’051

31.03.2009
TCHF

31.03.2008
TCHF

13’460
1’395
8’873
23’728

10’8132’463
9’135
22’411

For further information on derivative financial instruments, see note 22

3. Inventories
Raw materialWork in progress
Finished goods and goods for resale
Total

Above total inventories include provisions for write-downs of TCHF 2’283 (2007/08 TCHF 1’760).

32

4. Other non-current assets

31.03.2009
TCHF

31.03.2008 1
TCHF

1’366
156
1’522

1’366
130
1’496

Land and
Buildings

Machinery andEquipment

Total

Net book value 1 April 2008
Foreign exchange effectChange in scope of consolidation
Investment
Disposal
Depreciation charge for the year
Net book value 31 March 2009

310
54
0
0
0
(13)
351

18’140
929
(6)
8’864
(66)
(4’641)
23’22018’450
983
(6)
8’864
(66)
(4’654)23’571

At cost of acquisition
Accumulated depreciation
Net book value 31 March 2009

476
(125)
351

60’928(37’708)
23’22061’404(37’833)
23’571

Net book value 1 April 2007
Foreign exchange effectInvestment
Disposal
Depreciation charge for the year
Net book value 31 March 2008

325
(10)
6
0
(11)
310

16’742
(388)
6’012
(90)
(4’136)18’14017’067
(398)
6’018
(90)
(4’147)
18’450At cost of acquisition
Accumulated depreciation
Net book value 31 March 2008

405
(95)
310

50’673(32’533)
18’14051’078(32’628)
18’450Pension asset
Other non-current assets
Total
1

Retrospective adjustment due to application of IFRIC 14, see Accounting policies 2.2

5. Property, plant and equipment
TCHF

33

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

6. Intangible assets
Goodwill

Other intangible
AssetsTotal

Net book value 1 April 2008
Foreign exchange effectInvestment
Amortization charge for the year
Net book value 31 March 2009

3’419
298
0
0
3’717

1’010
53
242
(337)
968

4’429
351
242
(337)
4’685

At cost of acquisition
Accumulated amortization
Net book value 31 March 2009

3’717
0
3’717

3’401
(2’433)968

7’118(2’433)
4’685

Net book value 1 April 2007
Foreign exchange effectInvestment
DisposalAmortization charge for the year
Net book value 31 March 2008

3’469
(50)
0
0
0
3’419

908
(9)
463
(9)
(343)
1’010

4’377
(59)
463
(9)
(343)
4’429

At cost of acquisition
Accumulated amortization
Net book value 31 March 2008

3’419
0
3’419

3’121
(2’111)
1’010

6’540
(2’111)
4’429

TCHF

The entire goodwill of the LEM Group is from the acquisition of NANA in 2000/01 and is allocated to the cash generating unit
LEM Japan KK. The goodwill relates to the industrial business segment. The recoverable amount has been determined basedon value in use calculations. These calculations use cash flow projections of 5 years based on financial business plans andbudgets approved by management. The projections include assumptions concerning revenue growth and expected operating
costs. Revenue growth is projected with 2% and operating costs were estimated based on the experience of management. The
discount rate used within these cash flow calculations is 8% (2007/08 8%) and is based on the estimated weighted internal rateof return of the cash generating unit, which reflects best the specific risks related to LEM. The carrying value of the goodwill wascompared to the value in use and no impairment was found for the year ended 31 March 2009.

7. Accounts payable
Accounts payable – trade
Other payables
Total

31.03.2009
TCHF

31.03.2008
TCHF

11’2891’325
12’61415’8191’215
17’034Aging analysis of accounts payable< 60 days
TCHF

61–180 days
TCHF

> 180 days
TCHF

Total
TCHF

31 March 2009
Accounts payable – trade
Other payables
Total

10’890
1’301
12’191

399
7
406

0
17
17

11’2891’325
12’61431 March 2008
Accounts payable – trade
Other payables
Total

15’006
1’156
16’162

608
10
618

205
49
254

15’8191’215
17’03434

8. Provisions
Employee andtermination benefits
TCHF

Claims andlitigations
TCHF

Stock option
plans
TCHF

Restructuring

Total

TCHF

TCHF

Balance 1 April 2008
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effectBalance 31 March 2009
Of which current
Of which non-current

1’656
47
(200)
(12)
43
1’534

1’005
1’467
(1’011)
(303)
1
1’159

6’150
0
(3’706)
(156)
0
2’288

0
380
(50)
(149)
1
182

8’810
1’894
(5’123)
(464)
47
5’163
3’151
2’012

Balance 1 April 2007
Additional provisions
Unused amounts reversed
Utilized during the year
Reclassified from Equity
Foreign exchange effectBalance 31 March 2008
Of which current
Of which non-current

1’564
1’024
(508)
(389)
0
(35)
1’656

1’339
536
(105)
(753)
0
(12)
1’005

0
5’332
0
0
818
0
6’150

0
0
0
0
0
0
0

2’903
6’892
(613)
(1’142)
818
(47)
8’811
3’416
5’395

Employee and termination benefits
Employee and termination benefits contain obligations which are required in certain countries.
Claims and litigations
Provisions for claims and litigations cover expected warranty claims which are not covered by insurances. The provisions havebeen estimated based on past experience and the risk assessment of management.
Stock option plans
See accounting policies 2.18 Employee benefits, 2.19 Provisions and contingent liabilities and note 18.
The timing of the cash outflows are not contractually fixed and therefore uncertain. The split between current and non-current isbased on best estimate of management.

9. Equity
Share capital
There is no authorized or conditional share capital outstanding. The nominal share capital of TCHF 575 comprises of 1’150’000
registered shares, each with a nominal value of CHF 0.50. Treasury shares are not entitled to dividends.
On 4 July 2008, 12’400 shares of LEM Holding SA were purchased at a share price of CHF 312.50. Investments in shares of
LEM Holding SA held by the Group are classified as treasury shares and are accounted for at historical cost. The ordinary shareholders’ meeting held on 27 June 2007, approved to cancel 50’000 shares, effective 27 September 2007.

35

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

Movement of treasury shares
Number of shares

Average price
CHF

Total
TCHF

0
12’40012’40010.00

0312.50312.50

0
3’875
3’875

Balance 1 April 2008
Movement
Balance 31 March 2009
Ordinary dividend per share (in CHF)

The dividend to be paid will be proposed by the Board of Directors to the shareholders of the Group at the ordinary shareholders’ meeting 26 June 2009.
Balance 1 April 2007
Cancellation
Balance 31 March 2008
Ordinary dividend per share (in CHF)
Extraordinary dividend per share (in CHF)

10. Minority Interests
Total

50’000(50’000)
0
7.00
4.00

156.40156.400

7’820(7’820)031.03.2009
TCHF

31.03.2008
TCHF

195

201

The amount represents the minority interest of 10% in TVLEM, held by local management. There were no changes in minority
interest in the current financial year.

11. Staff cost

2008/09
TCHF

2007/08 1
TCHF

Production
Sales
Administration
Research and development
Change in provision for stock option plans and performance share plan
Total

(17’701)(12’550)(9’883)(7’024)
3’234(43’924)(18’807)(13’334)(10’500)(7’462)(5’332)(55’435)

2008/09
TCHF

2007/08 1
TCHF(35’853)(8’612)(2’693)
3’234(43’924)(35’037)(11’029)(4’037)(5’332)(55’435)

Salaries and wages
Other personnel costs
Temporary employee costs
Change in provision for stock option plans and performance share plan
Total

Employee benefit plan costs comprise the expenses for defined contribution plans of TCHF 648 (2007/08 TCHF 649). See
accounting policies 2.18 Employee benefits, 2.19 Provisions and contingent liabilities and note 18.
1

Retrospective adjustment due to application of IFRIC 14, see Accounting policies 2.2

3631.03.2009
FTE

31.03.2008
FTE

871
26
12
909

924
61
11
996

2008/09
TCHF

2007/08
TCHF

(404)
(22)
(90)
(516)

(822)
0
(143)
(965)

2008/09
TCHF

2007/08
TCHF

318
318

287
287

2008/09
TCHF

2007/08
TCHF

(849)
(75)
132
(792)

(830)
16
79
(735)

15. Income taxes, deferred tax assets and liabilities

2008/09
TCHF

2007/08 1
TCHF

Current income taxes
Deferred income taxes
Total(8’632)(294)(8’926)(6’723)(525)(7’248)

Number of employees at the end of the financial year
Full time employees
Temporary employees
Apprentices
Total

12. Financial expense
Interest expense
Divestment LEM Malaysia
Other financial expense
Total

13. Financial income
Interest income on cash
Total

14. Foreign exchange effectExchange losses
Fair value revaluation on derivatives
Gains and losses on derivatives 1
Total
position includes cost of derivative hedging

1

Since the Group operates globally, it is liable for income taxes in various tax jurisdictions. Judgment is required in determining
the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Differences between the final tax outcome and the amounts that were initially
recorded impact the income and deferred taxes in the period in which such determinations are made.
The Group calculates its expected average tax rate as a weighted average of the tax rates in the tax jurisdictions in which theGroup operates. The Group’s effective tax rate differs from the Group’s average expected tax rate as follows:1

Retrospective adjustment due to application of IFRIC 14, see Accounting policies 2.2

37

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

Group’s average expected tax rate
Tax effect of– expense not deductible for tax purposes– restatement IFRIC 14– reduced taxes– non-recoverable withholding tax– adjustment in respect of previous periods income tax– consideration of tax losses carried forward
Group’s effective tax rate

2008/09%

2007/08 1
%

24.98

28.22

0.06
0.00
(1.82)
4.69(0.74)
0.00
27.17

0.11
(0.04)(1.40)
0.00(1.90)(0.13)
24.86

The increased tax rate of 4.69% is related to withholding taxes for planned dividend repatriations. Deferred income tax liabilities
have not been established for withholding and other taxes that would be payable on the unremitted earnings of certain foreignsubsidiaries, as such amounts are currently regarded as permanently reinvested.
31.03.2009
TCHF

31.03.2008 1
TCHF

Deferred tax assets and liabilities
Current assets– Accounts receivable– Inventories– Others
Non-current assets– Property, plant and equipment and other financial assets– Intangible assets
Liabilities– Provisions– Others
Total

(351)
(222)
(497)
368
(935)
(327)
(608)
(507)
(273)
(234)
(1’793)

(677)
(337)
(478)
138
(1’139)
(455)
(684)
328
(83)
411
(1’488)The balance sheet contains the following
Deferred tax assets
Deferred tax liabilities
Net liabilities

0(1’793)(1’793)165(1’653)(1’488)31.03.2009
TCHF

31.03.2008
TCHF

0
0
905
905

0
0
961
961

Unused tax loss carry forwards not recognized		in the balance sheet expire– in the next 10 years– until 2020
– without date of expiration
Total
In 2007/08 tax losses not recognized in the balance sheet have been used in LEM Holding Inc.
1

Retrospective adjustment due to application of IFRIC 14, see Accounting policies 2.2

38

16. Earnings per share
Basic earnings per share
Net profit for the year (TCHF)
Ordinary number of shares at the beginning of the year
Weighted average number of treasury shares
Weighted average number of shares outstanding
Earnings per share – basic (CHF)

2008/09

2007/08 1

23’84621’828

1’150’000
9’173
1’140’827

1’200’000
25’0001’175’000

20.90

18.58

Diluted earnings per share
The employee stock option plans are cash settled and the new performance share plan is funded with treasury shares. There is
no authorized or conditional capital outstanding.
Net profit for the year (TCHF)
Weighted average number of shares outstanding
Performance share plan
Adjusted weighted average number of shares outstanding
Earnings per share – diluted (CHF)1

23’84621’8281’140’827
4’180
1’145’007

1’175’000
0
1’175’000

20.83

18.58

Retrospective adjustment due to application of IFRIC 14, see Accounting policies 2.2

17. Related parties
Related parties are the Board of Directors and the Senior Managers as defined in the Corporate Governance guidelines. The
compensation to the Board of Directors is paid as a fixed fee in cash. The compensation of Senior Managers includes basesalary, bonus, post employment benefits, performance shares (2008/09) and stock options (2007/08). The base salary is theemployees compensation before deduction of employees social security contributions. The bonus is paid in cash.

2008/09
TCHF

2007/08
TCHF

(415)
332
(83)
0

(427)
(378)
(805)
3’939

(1’330)
(103)
(155)
1’525
(63)
3’400

(1’305)(455)(152)(2’675)(4’587)
10’500Compensation of the Board of Directors
Base salary
Change in provision for stock option plans
Total
Number of granted stock options
Compensation of the Senior Management
Base salary
Bonus
Post employment benefits
Change in provision for stock option plans and performance share plan
Total
Number of granted stock options and performance shares in financial year (m=1)

See accounting policies 2.18 Employee benefits, 2.19 Provisions and contingent liabilities and note 18.
Additional fees and compensations
One member of the Board of Directors received additional fees, amounting to more than half of his normal compensation(2008/09 TCHF 50; 2007/08 TCHF 0).

39

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

18. Stock option plans, performance share plan
2008/09

Grant Date

NumberNumberNumberNumberNumberExerciseof optionsof optionsof optionsof optionsof options

priceoutstanding

issuedcancelled

exercised

outstanding

in CHFin CHF01.04.2008

Fair value

Fair value

Exercise

Exercise

at grant 31.03.2009

periodperiodfrom

until
31.03.2015

in CHF31.03.2009

SOP 4

01.04.2005

14’825

0

0

(812)

14’013

77.18

24.86

74.42

01.04.2007

SOP 5

01.04.2006

29’7500(1’000)028’750139.80

47.69

34.62

01.04.2009

31.03.2011

SOP 6

01.04.2007

25’8820(2’438)0

23’444240.52

64.92

15.95

01.04.2010

31.03.2012

Total

70’4570(3’438)(812)

66’207
Fair value

Fair value

Exercise

Exercise

at grant 31.03.2008

periodperiod2007/08

Grant Date

NumberNumberNumberNumberNumberExerciseof optionsof optionsof optionsof optionsof options

priceoutstanding

issuedcancelled

exercised

outstanding

in CHFin CHFin CHF

from

until

01.04.2007

31.03.2008

SOP 3

31.03.2005

2’628

0

0

(2’628)

0

77.18

24.86

192.8201.04.2007

31.03.2015

SOP 4

01.04.2005

36’8090

0(21’984)

14’825

77.18

24.86

192.8201.04.2007

31.03.2015

SOP 5

01.04.2006

29’75000029’750139.8047.69

132.6101.04.2009

31.03.2011

SOP 6

01.04.2007

026’820(938)

025’882240.52

64.92

76.65

01.04.2010

31.03.2012

Total

69’187

26’820(938)(24’612)70’457SOP 4
In April 2005, the Board of Directors issued the stock option plan SOP 4 for the management team and the Board of Directors.
The plan was equity settled but has been changed to cash settled as of 31 December 2007. This plan gives the right to cash thecounter value of one share at the predetermined strike price (option price). The strike price corresponds to the LEM share priceon 31 March 2005. The number of stock options granted depended on the excess of net earnings above a minimum return on
equity (ROE). The vesting period is two years. The details of the contractual terms of the option plan can be seen in the table
above. Due to the share split in September 2005, the number of options granted under SOP 4 was adjusted by the factor of
4.8135. During the financial year 2008/09 812 options were exercised. 14’013 shares related to SOP 4 are currently still exercisable. The average share price for the exercised options was CHF 330.32.
SOP 5
In April 2006, the Board of Directors issued the stock option plan SOP 5 for the management team and the Board of Directors.
The plan was equity settled but has been changed to cash settled as of 31 December 2007. Each plan gives the right to cash
the counter value of one share at the predetermined exercise price, which corresponds to the average share price of the fourth
quarter 2005/06. The number of stock options granted depends on the performance of the LEM share price compared to the
SIX Index for Small and Mid Cap Companies in Switzerland for the financial year 2005/06. The vesting period is three years. The
details of the contractual terms of the option plan can be seen in the table above.
SOP 6
In April 2007, the Board of Directors issued the stock option plan SOP 6 for the management team and the Board of Directors.
The plan was equity settled but has been changed to cash settled as of 31 December 2007. Each plan gives the right to cash
the counter value of one share at the predetermined exercise price, which corresponds to the average share price of the fourth
quarter 2006/07. The number of stock options granted depends on the performance of the LEM share price compared to the
SIX Index for Small and Mid Cap Companies in Switzerland for the financial year 2006/07. The vesting period is three years. The
details of the contractual terms of the option plan can be seen in the table above.
The calculation with the “Hull-White” model uses the following parameters:
Parameters at grant
In %
SOP 6
SOP 5
SOP 3/4

Parameters 31.03.2009
SOP 6
SOP 5
SOP 3/4

Expected volatility(based on historical volatility over last 5 years):
Risk free interest rate:
Dividend yield:

39.28
1.11
1.60

40

28.98
2.51
2.90

39.11
2.51
2.35

36.24
2.54
2.35

39.28
0.77
1.60

39.80
1.96
1.60

Performance share plan (PSP)On 27 June 2008, the Board of Directors decided to initiate a Performance Share Plan for members of the management,
whereby the number of shares granted will depend on the achievement of certain targets during a vesting period. The targets
are determined by an Economic Value Added (EVA) model, which is expected to reflect the market growth of LEM. At the sametime, the Board of Directors approved an initial plan in favor of 30 members of management with a 3 years vesting period and forwhich the multiple for the eventual payout may vary between m=0.5 and m=2.0. The PSP expenses will be recorded in theincome statement straight-line over the 3 years vesting period. The expense is adjusted at every reporting date based on the
expected number of shares that the participants will receive at the end.
Terms of PSP
At grant
1.0
8’360
3 years
27 June 2008
303.50m (multiple)
Number of shares expected to be issued
Vesting period
Allocated to recipients
Fair value per unit (CHF)

31.03.2009
0.5
4’180

149.90

As of March 31, based on a pay-out multiple (m=0.5) and on the number of recipients, the company accrued a provision of
CHF 423 which was charged to the income statement.
In view of disposing of the necessary shares potentially required under the PSP program, LEM has purchased 12’400 own
shares at a share price of CHF 312.50 and call options on own shares as follows:
Terms of options
Transaction date
20.09.2008
20.09.2008

Number of options
15’000
15’000Strike price360
390

Premium paid
61.7
55.1

Exercise period
01.03.2011–30.04.2013
01.03.2012–30.04.2013

The call options which were acquired are intended to be gross settled and they are therefore treated as equity instruments.
During May 2009, the Board of Directors decided not to issue further equity based compensation plans.

19. Retirement benefit obligations
The Group operates a defined benefit plan for all its employees in Switzerland. The benefits are primarily based on years of service and level of compensation in accordance with local regulations and practices. The following table provides a reconciliation of
the changes in the net benefit obligation.
Net benefit expense
Costs related to the pension plan were charged to the different functional departments based on salary costs.
31.03.2009
TCHF

31.03.2008 1
TCHF

Current service cost
Interest cost
Expected return on plan assets
Employee contributions
Immediate recognition of loss due to IAS 19 § 58A
Net benefit expense

2’398
939
(1’226)(1’283)
885
1’713

2’625
812
(1’224)(1’199)0
1’014

Changes in defined benefit obligation
Defined benefit obligation 1 April 2008
Interest cost
Current service cost
Benefits paid
Actuarial (gains)/losses on obligation
Defined benefit obligation 31 March 2009

26’840939
2’398(1’586)(47)
28’544

1

Retrospective adjustment due to application of IFRIC 14, see Accounting policies 2.2

41

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

Defined benefit obligation 1 April 2007
Interest cost
Current service cost
Benefits paid
Actuarial (gains)/losses on obligation
Defined benefit obligation 31 March 200827’066812
2’625(2’674)(989)
26’840Changes in the fair value of plan assets
Fair value of plan assets 1 April 2008
Expected return
Contribution by employer and employee
Benefit paid
Actuarial gains/(losses) on plan asset
Fair value of plan assets 31 March 200927’250
1’226
2’996(1’586)(6’705)23’181

Fair value of plan assets 1 April 2007
Expected return
Contribution by employer and employee
Benefit paid
Actuarial gains/(losses) on plan asset
Fair value of plan assets 31 March 2008

27’2021’224
2’802(2’674)(1’304)27’250LEM expects to contribute TCHF 1’648 to its defined benefit plan in 2009/10.

Present value of funded obligations
Fair value of plan assets
Funded status
Unrecognized net actuarial losses
Pension asset (–)

31.03.2009
TCHF

31.03.2008 1
TCHF

28’544(23’181)
5’363(6’729)(1’366)

26’840(27’250)
(410)
(956)
(1’366)

Actual return on plan assets for 2008/09 was TCHF –5’479 (2007/08 TCHF –81)

Comparison of amounts
Plan assets
Defined benefit obligations
Funded status
Actuarial gains/(losses) on plan asset
Experience adjustment (gains)/
losses on obligation

31.03.2009
TCHF

31.03.2008
TCHF

31.03.2007
TCHF

31.03.2006
TCHF

31.03.2005
TCHF

23’181
28’544(5’363)(6’705)27’25026’840410(1’304)27’20227’066136(170)

25’40424’332
1’072(407)

22’391
23’335
(944)

(649)

(1’300)

786

2’413

Strategic pension plan allocations are determined by the objective to achieve a return on investment, which, together with thecontribution paid, is sufficient to maintain reasonable control over the various funding risks of the plans. Estimated returns on
assets are determined based on the asset allocation and are reviewed periodically. A temporary deviation from policy targets isallowed.
1

Retrospective adjustment due to application of IFRIC 14, see Accounting policies 2.242Major categories of plan assets as a percentageof the fair value of total plan assets

Long-term target%

2008/09%

2007/08
%

40
50
5
5
100

32
52
4
12
100

31
57
4
8
100

2008/09%

2007/08
%

3.0
1.5
0.0

3.5
1.5
0.0

6.5
3.5
2.5

6.5
3.5
2.5

31.03.2009
TCHF

31.03.2008
TCHF

3’645
21’01525’60550’265

3’901
19’67828’78352’362EquityBonds
Real estate
Cash and other investments

The principal actuarial assumptions used in the actuarial calculations include:

Discount rate
Expected rate of increase in salaries
Expected rate of pension increases
Expected rate of return on plan assets– Equities– Bonds– Other investments

20. Operating lease commitments
Minimal lease payments are payable as follows:
Within one year
Between one and five years
Beyond five years
Total

Prior year figure was restated (Previously reported: TCHF 43’032). In 2008/09 lease expenses amounted to TCHF 3’913(2007/08 TCHF 3’907). Lease agreements exist for the business facilities used by the Group companies, the agreements areclassified as operating leases. The leases have varying terms and renewal rights between one and fifteen years. 2007/08 a newten year lease contract was signed for new factory facilities in China.

21. Contingent liabilities
Total guarantees for credits of subsidiaries
Total guarantees to third parties
Total

31.03.2009
TCHF

31.03.2008
TCHF

465
1’958
2’423

1’742
1’846
3’588

On 31 March 2009, the Group has no contingent assets. Contingent liabilities include bank guarantees on various matters, nomaterial liability is expected to occur in the ordinary course of business. The Group is from time to time impacted by changing
political, legislative, fiscal and regulatory environments, including those relating to environmental protection. The frequency andeffects on future operations and earnings are unpredictable and are only partly covered by insurances.

43

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

22. Financial risk management objectives and policies
The Group’s principal financial liabilities, other than derivatives, comprise bank loans, accrued expenses, current income tax
payable, provisions and accounts payable. The main purpose of these financial liabilities is to raise cash for the Group’s operations. The Group has various financial assets such as cash and current assets, which arise from its operations.
The Group enters into derivative transactions such as currency risk reversal contracts to hedge the USD and EUR risk. The purpose of these currency hedges is to manage the currency risks arising from the Group’s operations. It is the Group’s policy thatno derivatives for speculative purposes shall be entered into.
The main risks arising from Group’s financial instruments are foreign currency risks and credit risks, whereas the others are ofminor or no impact. The Board of Directors reviews and agrees policies for managing each of those risks.
Foreign currency risk
The Group operates globally and is exposed to various foreign exchange risks primarily to the USD, EUR, GBP and JPY. The
Group seeks to reduce those risks by optimizing its natural hedging (cash inflows and outflows in a specific currency should bein balance as far as possible). The Group’s policy stipulates that about 50% of LEM’s net exposure is to be hedged on a rolling
6-9 months basis. It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged
items, and therefore to maximize the hedge effectiveness.
Currency risks also arise from translation differences that are not hedged by the Group when preparing the consolidated financial statements in CHF. The foreign exchange translation is excluded from the calculation below.
Foreign exchange risk table
The following table demonstrates the sensitivity to a 5% change in the USD, EUR, GBP and JPY with all other variables held
constant of the Group’s profit before tax (due to the changes in the fair value of the monetary assets and liabilities) and theGroup’s equity. The sensitivity analysis is based on the Group’s financial instruments held in each currency at each balance
sheet date. There is no impact on the Group’s equity. The hedging instrument already covering March 2009 have been taken
into consideration to reduce the currency exposure in the table shown below.
Increase / decreasein currency rate

Effect on profit before tax
2008/09
2007/08
TCHF
TCHF

USD
EUR
JPY
GBP
Total

+5%
+5%
+5%
+5%

99
1’076
(2)
46
1’219

494
828
(40)
27
1’309

USD
EUR
JPY
GBP
Total

(5%)
(5%)
(5%)
(5%)

(99)
(1’076)2(46)(1’219)

(494)
(828)
40
(27)
(1’309)44

Credit risk
The Group trades with recognized and creditworthy parties. The accounts receivable balances are monitored on a monthly basis.
It’s the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In case ofa deterioration of the credit history, advance payments are required. The Group’s exposure to bad debts is not significant, themaximum exposure is the carrying amount as disclosed in note 1. There are no significant concentrations of risk within the Group.
With respect to credit risk arising from the other financial assets in the Group, which comprises cash and cash equivalents,
other current assets and certain derivative instruments, the Group’s exposure to credit risks arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these positions.
Liquidity risk
The Group monitors its risk to a shortage of funds using a monthly treasury forecast. This forecast considers the maturity of bothits financial investments and financial assets (e.g., accounts receivable and other financial assets) and projected cash flows fromoperations. Capital requirements by subsidiaries are managed centrally by corporate finance. In case liquidity is required a bankloan is either done centrally and passed on as an intercompany loan, or given directly by the bank to the subsidiary with a reduction of the Group’s total credit line. The total leverage of the Group is low, the financial liabilities mature in less than one year
based on the carrying value of borrowings reflected in the financial statements.
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates with the current financial leverage is low. Currently, all financial liabilities are short-term and are kept at variable interest rates.
Interest rate risk table
The table below demonstrates the sensitivity to a reasonable possible change in interest rates of 100 basis points, with all othervariables held constant, of the Group’s profit before tax. The calculations are based on the Group’s financial liabilities held at
each balance sheet date. The impact on the Group’s equity is irrelevant.
Increase/ decreasein basis points

Effect on profit before tax
2008/09
2007/08
TCHF
TCHF

CHF
USD
JPY
Total

100
100
100

(1)
0
0
(1)

0
(10)
(10)
(20)

CHF
USD
JPY
Total

(100)
(100)
(100)

1
0
0
1

0
10
10
20

Financial instruments: Interest bearing financial liabilities and derivative financial instruments
The table below is a comparison by category of carrying amounts, maturity profiles and fair values of all of the Group’s financial
liabilities and derivative financial instruments.
Financial liabilities

LEM Holding SA
Beijing LEM Electronics Co. Ltd
LEM Japan KK
Total
Of which current
Of which non-current

Currency

NominalamountFixed /
variable

TCHF
TUSD
TJPY

93
0
0

variableInterest
rate

Maturitydaily

Net carrying amount
31.03.2009 31.03.2008
TCHF
TCHF
93
0
0
93
93
0

0
1’087
1’000
2’087
2’087
0

45

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

In 2006/07, LEM renegotiated credit lines with four Swiss Banks. The uncommitted credit lines have a maximum amount of CHF
70 million. The interest rate is composed of the LIBOR interest rate for the respective period and an interest surplus, which is
linked to a debt ratio. The credit lines are subject to fulfillment of periodically calculated financial performance indicators (covenants). On 31 March 2009, all covenants were attained. For the variable interest loans the fair value equals approximately the
carrying amount.
Maturity profile of derivative financial instruments and interest bearing financial liabilities 1
31.03.2009

Contract value becomes due:in less thanin 3 to 12
3 months
months
TCHF
TCHF
TCHF

Contract
values
TCHF

Carrying
amountTCHF

Fair values

Financial assets
Derivative financial assets
Total

8’021

(2)
(2)

(2)
(2)

5’723
5’723

2’298
2’298

8’021
8’021

Financial liabilities
Current financial liabilities
Total

93

93
93

93
93

93
93

0
0

93
93

Contract
values
TCHF

Carrying
amountTCHF

Fair values

Financial assets
Derivative financial assets
Total

9’840

221
221

221
221

4’920
4’920

4’920
4’920

9’840
9’840

Financial liabilities
Current financial liabilities
Total

2’087

2’087
2’087

2’087
2’087

2’087
2’087

0
0

2’087
2’087

31.03.2008

Contract value becomes due:in less thanin 3 to 12
3 months
months
TCHF
TCHF
TCHF

Total
TCHF

Total
TCHF

Derivative financial assets on 31 March 2009: The fair value of borrowings has been calculated by discounting the expected
future cash flows at prevailing interest rates. The fair value of the derivatives was provided externally using the Black & Scholesmodel. In order to hedge the EUR and USD risk, LEM entered into a EUR/CHF and USD/CHF Risk reversal. A Risk reversal
option strategy is defined as a combination of buying a EUR or USD put at the lower end and selling a EUR or USD call at theupper end. This gives LEM a hedge at the lower end and gives the opportunity to profit until the EUR/CHF or USD/CHF reaches
the upper end. LEM has put the documentation in place in order to apply hedge accounting. As a result the time value is recognized in the income statement, and the intrinsic value is booked to equity.
The following open hedging contracts are held:
Volume
USD/CHF
500’000
USD/CHF
500’000
EUR/CHF
500’000

Start date
23.04.2009
15.02.2009
15.04.2009

Maturity date
24.09.2009
15.07.2009
15.06.2009

Expiries
6 monthly maturities
6 monthly maturities
3 monthly maturities

Capital management
The primary objective of the Groups capital management is to ensure that it maintains a healthy and stable equity ratio in order
to secure confidence of shareholders and investors, creditors and other market players and to strengthen the future development of the Groups business activities. The Group manages its capital structure and makes adjustments to it, in light of changes
in the economic conditions. The Board of Directors strives to achieve a pay-out ratio between 25-50%. However, it may diverge
from this policy due to economic prospects or on the grounds of planned future investment activities.
1

Does not include derivatives on own shares, see note 18. Stock option plans, performance share plan.

46

23. Scope of consolidation
Full consolidation

Country

Currency

Share Capital

Participation

EuropeLEM Belgium sprl-bvba
LEM Deutschland GmbHLEM France Sàrl
LEM Holding SA
LEM International SA
LEM Italia Srl
LEM SALEM UK Ltd
TVELEM Ltd
LEM Management Services Sarl

Belgium
Germany
FranceSwitzerland
Switzerland
Italy
Switzerland
Great Britain
RussiaSwitzerland

EUR
EUR
EUR
CHF
CHF
EUR
CHF
GBP
RUB
CHF

60’00075’000240’000
575’000
100’000
25’0008’500’000
2
200’000
20’000

100%
100%
100%
100%
100%
100%
100%
100%
90%
100%

North America
LEM Holding Inc.
LEM USA Inc.

USA
USA

USD
USD

50
150’000

100%
100%

Asia
Beijing LEM Electronics Co. Ltd
LEM Japan KK

China
Japan

CNY
JPY

36’723’000
16’000’000

100%
100%

LEM Management Services Sarl was created on 16 June 2008, with a share capital of TCHF 20 in order to found the Branch inIndia, which was incorporated on 25 August 2008. During the year, an investment in kind to Beijing LEM Electronics Co. Ltd wascontributed and transferred into equity (share capital 31.3.2008 CNY 32’092’000). LEM Malasia sdn Bhd was liquidated on
25 September 2008.

24. Events after the balance sheet date
There were no events subsequent to the balance sheet day that require adjustment to or disclosure in the financial statements.

47

AUDITOR’S REPORT

Report of the statutory auditor to the ordinary
shareholders meeting of LEM Holding SA
As statutory auditor, we have audited
the consolidated financial statements(balance sheet, statement of income,statement of changes in equity, statement of cash flow and notes on pages
31–47) of LEM Holding SA for the year
ended 31 March 2009.
Board of Directors’ responsibility
The Board of Directors is responsible
for the preparation and fair presentationof the consolidated financial statementsin accordance with International Financial Reporting Standards (IFRS) and therequirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control
system relevant to the preparation andfair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error. The Board of Directors is further
responsible for selecting and applying
appropriate accounting policies andmaking accounting estimates that arereasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit. We
conducted our audit in accordance with
Swiss law, Swiss Auditing Standards
and International Standards on Auditing(ISA). Those standards require that weplan and perform the audit to obtainreasonable assurance whether the consolidated financial statements are freefrom material misstatement.

An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the
consolidated financial statements. The
procedures selected depend on theauditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or
error. In making those risk assessments,
the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of theconsolidated financial statements inorder to design audit procedures thatare appropriate in the circumstances,
but not for the purpose of expressing
an opinion on the effectiveness of theentity’s internal control system. An audit
also includes evaluating the appro­
priateness of the accounting policies
used and the reasonableness ofaccounting estimates made, as well as
evaluating the overall presentation of
the consolidated financial statements.
We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our audit
opinion.

In accordance with article 728a paragraph 1 item 3 CO and Swiss AuditingStandard 890, we confirm that an internal control system exists, which has
been designed for the preparation of
consolidated financial statements
according to the instructions of theBoard of Directors.
We recommend that the consolidated
financial statements submitted to you
be approved.
Geneva, 15 May 2009
Ernst & Young Ltd

OpinionIn our opinion, the consolidated financial statements for the year ended 31
March 2009, give a true and fair view ofthe financial position, the results ofoperations and the cash flows inaccordance with IFRS and comply with
Swiss law.

Hans Isler(in charge of the audit)

48

Report on other legal requirements
We confirm that we meet the legal
requirements on licensing according to
the Auditor Oversight Act (AOA) andindependence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our
independence.

Fredi Widmann

LEM Holding SA

50 Balance sheet
51 Income statement
52 Statement of equity
53	Notes to the financial statements
58 Auditor’s reportBalance Sheet of LEM Holding SA(before distribution of earnings)

AssetsCurrent assets
Cash and cash equivalents
Treasury shares
Derivative instruments on treasury shares
Other current assets
Group current assets
Total current assets
Non-current assets
Investments in subsidiaries
Intangible assets
Total non-current assets

Notes

2
2
5

4

Total assets

Liabilities and Equity
Current liabilities
Current financial liabilities
Other current liabilities
Group current liabilities
Total current liabilities

Notes

5

Non-current liabilities
Non-current liabilities
Total non-current liabilities

EquityShare capital
General reserve
Reserve for treasury shares and derivative instruments on own shares
Retained earnings
Net profit for the year
Total equity
Total liabilities and equity

50

1
2

31.03.2009
TCHF

31.03.2008
TCHF

9’597
1’859
308
91
9’473
21’328

6’653
0
0
392
25’05632’10149’994
1
49’99549’331
17
49’34871’32381’44931.03.2009
TCHF

31.03.2008
TCHF

4
4’083
7’425
11’5120
1’097
27’70928’806

669
669

6’770
6’770

575
24’044
5’627
2’977
25’91959’142575
29’671
0
8’218
7’409
45’87371’32381’449Income statement of
LEM Holding SA

IncomeNotes

Financial income from Group dividend payments
Interest income from Group loans
Other financial income
Other Group income
Foreign exchange gain
Total income

Expense
Office, administration and personnel expense
Financial expense
Foreign exchange effectTotal expense
Profit before taxes
Income taxes
Net profit for the year

6

7

2008/09
TCHF

2007/08
TCHF

29’218
283
38
3’077
436
33’052

6’471
34
430
2’861
1’972
11’768

2008/09
TCHF

2007/08
TCHF(1’836)(4’061)(477)(6’374)(3’089)(753)(137)(3’979)26’678(759)
25’919

7’789
(380)
7’409

51

Statement of Equity of
LEM Holding SA

SharecapitalGeneralstatutory
reserve

Reservefor Treasury
sharesRetainedearnings

Total

1 April 2006
Dividends
Reserve for treasury shares
Net profit for the year600

37’4850

14’344(11’725)(7’820)

7’820
10’77452’429(11’725)0
10’77431 March 2007600

29’665

7’820

13’39351’4781 April 2007
Dividends
Capital reduction
Reserve for treasury shares
OthersNet profit for the year600

29’665

7’820

13’393(5’175)

7’409

51’478(5’175)(25)(7’820)6
7’409

31 March 2008575

29’6710

15’62745’873

1 April 2008
575
Dividends
Reserve for treasury shares
Reserve for derivative instruments on own shares
Net profit for the year

29’6710

15’627(12’650)(3’875)(1’752)

3’875
1’752
25’91945’873(12’650)00
25’91931 March 200924’04428’89659’142

TCHF

52

(25)
(7’820)
6

575

5’627

Notes to the financial statements of
LEM Holding SA

Principles for the establishment of the financial statements
The accompanying financial statements have been prepared in accordance with the requirements of the Swiss Code of Obligations. Regarding the inclusion of LEM Holding SA in the consolidated financial statements, the accounting and reporting principles described in the notes to the consolidated financial statements apply.

1. Share capital

Opening capital 01.04.2008
Closing capital 31.03.2009

SharesPar value
per share

TCHF

1’150’000
1’150’000

0.50
0.50

575
575

2. Treasury shares and derivative instruments on own shares
Treasury shares LEM Holding AG

SharesPrice per share

TCHF

Value 01.04.2008
ChangeValue 31.03.2009

012’40012’4000.00
312.50312.50

0
3’875
3’875

Value 01.04.2007
ChangeValue 31.03.2008

50’000(50’000)
0

156.40156.40
0.00

7’820(7’820)0

On 4 July 2008, 12’400 shares of LEM Holding SA were purchased at a share price of CHF 312.50. On 27 September 2007,
50’000 shares were cancelled following approval by the shareholders at the ordinary shareholders’ meeting on 27 June 2007.
Subsidiaries of LEM Holding SA did not own any shares of LEM Holding SA.
Derivative instruments on treasury shares
On 30 September 2008, LEM has purchased 30’000 call options on LEM shares at a premium of TCHF 1’752.
Treasury shares and derivative instruments on own shares are valued at lower of cost or market value.

3. Proposal for appropriation of retained earnings
Balance brought forward from previous year
Net income for the year
Total available earnings
Dividends 1
Carried forward to new period
131.03.2009
TCHF

31.03.2008
TCHF

2’977
25’91928’896(11’376)
17’520

8’218
7’409
15’627(12’650)
2’977

Excluding dividends on own shares held by LEM Holding SA.

The Board of Directors proposes the distribution of an ordinary dividend of CHF 10 per share, which is net of 35% withholding
tax a cash dividend of CHF 6.50 per share.

53

Notes to the financial statements of
LEM Holding SA

4. Investments in subsidiaries

31.03.2009
TCHF

31.03.2008
TCHF

49’99449’99449’33149’33131.03.2009
TCHF

31.03.2008
TCHF

Current inter-company loans receivable
Inter-company accounts receivable
Total

366
9’107
9’473

14’676
10’38025’056

Current inter-company loans payable
Inter-company accounts payable
Total

3’615
3’810
7’425

26’851858
27’7092008/09
TCHF

2007/08
TCHF(1’753)(415)
0332(1’836)(1’203)
(427)
(983)
(476)
(3’089)2008/09
TCHF

2007/08
TCHF

(40)
529
(1’248)
(759)

(380)
0
0
(380)

Historical cost
Total
See also note 23 of the consolidated financial statements.

5. Group current assets and liabilities

6. Office, administration and personnel expense
Office and administration expense
Board member fees
Expenses for stock option plans exercised
Change in provision for stock option plans
Total

7. Income taxes
Current taxes
Release of unused tax provisions of previous periods
Withholding taxes on planned dividend repatriation
Total

54

8. Important shareholders according to art. 663c of the Swiss company law
31.03.2009

Shareholder with ownership above 3%:
WEMACO Invest AG, in Zug
and Werner O.Weber, in Zollikon,
Switzerland
Threadneedle AssetManagement Holding Ltd,in London, United Kingdom
Sarasin Investmentfonds AG, in Basel,
Switzerland
Joraem de Chavonay SA, in Zug,
Switzerland
Impax Asset Management Ltd,
United Kingdom
Erwin Studer, in Zollikerberg,
Switzerland
POWE Capital management Ltd.

31.03.2008

Sharesin %Sharesin %315’000

27.4%

240’000

20.9%

120’750

10.5%

120’750

10.5%

113’850

9.9%

119’399

10.4%

60’000

5.2%

38’0003.3%

51’701

4.5%

0

0.0%

42’000
0

3.7%
0.0%

42’00038’406

3.7%
3.3%

31.03.2009
TCHF

31.03.2008
TCHF

8’703

12’018

9. Guarantees in favor of third parties on behalf of subsidiaries

Amount of guarantees issued

10. Remuneration of Board of Directors and Senior Management
10.1 Compensation of active members of the Board of Directors
Annual salary

Annual bonus

Company’s

NumberCash value

Total

compensationcompensation

contribution toof optionsof options

compensation

2008/09

TCHF

TCHF

pension fundFelix Bagdasarjanz 2, 3
Friedrich Fahrni 1
Anton Lauber 4Peter Rutishauser 6
Ueli Wampfler 5
Total

140
15
90
90
80
415

–
–
–
–
–
–

–
–
–
–
–
–

TCHF

–
–
–
–
–
–

–
–
–
–
–
–

140
15
90
90
80
415

One member of the Board of Directors received additional fees, amounting to more than half of his normal compensation(2008/09 TCHF 50; 2007/08 TCHF 0).
pro rata compensation for term ending June 2008
Chairman of the Board
3
Member of the Nomination & Compensation committee
4
Chairman of the Nomination & Compensation committee
5
Member of the Audit committee
6
Chairman of the Audit Committee
1255

Notes to the financial statements of
LEM Holding SA

Annual salary

Annual bonus

Company’s

NumberCash value

Total

compensationcompensation

contribution toof optionsof options

compensation

2007/08

TCHF

TCHF

pension fundFelix Bagdasarjanz 2, 3
Friedrich Fahrni 4
Anton Lauber 5Peter Rutishauser 6
Ueli Wampfler 3
Total

133
79
73
82
60
427

–
–
–
–
–
–

–
–
–
–
–
–

TCHF 1

1’125
938
938
938
–
3’939

50
42
42
42
–
176

183
121
115
124
60
603

10.2 Compensation to active members of the Senior Management of the LEM Group
Annual salary

Annual bonus

Company’s

Number ofCash value of

Total

compensationcompensation

contribution toshares granted

shares TCHF

compensation

TCHF

TCHF

pension fund(m=1)(m=1) 7

155

3’400

1’032

2008/09
Total compensation to Senior Management

TCHF

1’330

103

Annual salary

Annual bonus

Company’s

Number ofCash value

Total

compensationcompensation

contribution to

optionsof options

compensation

TCHF

TCHF

pension fund2007/08
Total compensation to Senior Management

2’620

TCHF 1

TCHF

1’305

455

152

10’500469

2’381

Compensation package for highest-paid member of the Senior Management:
Annual salary

Annual bonus

Company’s

Number ofCash value of

Total

compensationcompensation

contribution toshares granted

shares TCHF

compensation

TCHF

TCHF

pension fund(m=1)(m=1) 7

81

1’200

364

2008/09
Paul Van Iseghem CEO

TCHF

406

26

Annual salary

Annual bonus

Company’s

Number ofCash value

Total

compensationcompensation

contribution to

optionsof options

compensation

TCHF

TCHF

pension fund2007/08
Paul Van Iseghem CEO

877

TCHF 1

TCHF

414

191

80

3’750

167

852

The cash value of the options has been calculated using the fiscal value of the options at grant. For more information on performance share plan andstock option plans, see note 18. Stock option plans and performance share plan.
Chairman of the Board
3
Member of the Nomination & Compensation committee
4
Chairman of the Nomination & Compensation committee
5
Member of the Audit committee
6
Chairman of the Audit Committee
7 
The cash value of the shares has been calculated taking the share price at grant (CHF 303.5) and a multiple m=1. See also note 18 Stock option plans,performance share plan.
1 

2

56

10.3 Shareholdings
Number ofshares31.03.2009
Number ofoptions

Number of
PSP granted

1’400
500
2’300
11’225n.a.
15’425

2’375
1’938
1’938
0
0
6’251

0
0
0
0
0
0

Number ofshares31.03.2009
Number ofoptions

Number of
PSP granted

1’638
65
160
0
850
0
2’713

14’525
0
5’128
4’700
2’625
2’625
29’603

1’200
0
600
600
500
500
3’400

Board of Directors
Felix Bagdasarjanz 1, 2
Anton Lauber 3Peter Rutishauser 4
Ueli Wampfler 5Friedrich Fahrni
Total

Senior Management
Paul Van Iseghem 6
Ageeth Walti 7
Hans-Dieter Huber 8
Luc Colombel 9
Simon Siggen 10
Eric Favre 11
Total

Chairman of the Board
Member of the Nomination & Compensation committee
3
Chairman of the Nomination and compensation committee
4
Chairman of the Audit Committee
5
Member of the Audit committee
12

31.03.2008
Number of
Number ofsharesoptions

1’400
300
2’000
3’000
7’300
14’000

2’375
1’938
1’938
0
1’938
8’189

31.03.2008
Number of
Number ofsharesoptions

1’164
65
160
0
450
0
1’839

14’525
1’500
5’128
4’700
2’625
2’625
31’103President & CEO LEM Group
CFO
Vice-President Industry
9
Vice-President Automotive & Traction
10
Vice-President Operations
11
Vice-President Technology
67
8

11. Risk management
In accordance with Article 663b of the Swiss Code of obligations, a risk management report was prepared for the financial year
2008/09. The Senior Management of the Group assesses the business risks within its standardized analysis procedure. The
Group has a risk management system in place which allows for the prompt identification and analysis of risks as well as the initiation of an action plan. The Board of Directors of LEM Holding SA took note of the risk management report and approved boththe procedure and the content thereof. The organization, principles and reporting of risk management are described in detail in
the Corporate Governance section 3 in this annual report.

57

AUDITOR’S REPORT

Report of the statutory auditor on thefinancial statements
As statutory auditors, we have audited
the financial statements (balance sheet,statement of income, and notes on
pages 53–57) of LEM Holding SA forthe year ended 31 March 2009.
Board of Directors’ responsibility
The Board of Directors is responsible
for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s
articles of incorporation. This responsibility includes designing, implementing
and maintaining an internal control system relevant to the preparation of financial statements that are free frommaterial misstatement, whether due tofraud or error. The Board of Directors isfurther responsible for selecting andapplying appropriate accounting policies and making accounting estimatesthat are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements basedon our audit. We conducted our audit inaccordance with Swiss law and Swiss
Auditing Standards. Those standards
require that we plan and perform theaudit to obtain reasonable assurance
whether the financial statements arefree from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in thefinancial statements. The procedures

selected depend on the auditor’s judgment, including the assessment of therisks of material misstatement of thefinancial statements, whether due tofraud or error. In making those risk
assessments, the auditor considers theinternal control system relevant to theentity’s preparation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the entity’s internal control
system.

In accordance with article 728a paragraph 1 item 3 CO and Swiss AuditingStandard 890, we confirm that an internal control system exists, which has
been designed for the preparation offinancial statements according to the
instructions of the Board of Directors.

An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness ofaccounting estimates made, as well as
evaluating the overall presentation of
the financial statements. We believe thatthe audit evidence we have obtained issufficient and appropriate to provide abasis for our audit opinion.

Geneva, 15 May 2009
Ernst & Young Ltd

OpinionIn our opinion, the financial statements
for the year which ended 31 March
2009, comply with Swiss law and thecompany’s articles of incorporation.
Report on other legal requirements
We confirm that we meet the legal
requirements on licensing according to
the Auditor Oversight Act (AOA) andindependence (Art. 728 Code of Obligations (CO) and Art. 11 AOA) and that
there are no circumstances incompatible with our independence.

Hans Isler(in charge of the audit)

58

We further confirm that the proposed
appropriation of available earnings
complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements
submitted to you be approved

Fredi Widmann

Information FOR INVESTORS

Number of registered shareholders
0–499
500–4’999
5’000–49’999
50’000 and more
Total

31.03.2009
326
63
14
5
408

31.03.2008
348
55
13
3
419

Shareholders by categoryin%Institutional Shareholders
Private Individuals
LEM employees, managers and board
Treasury shares
Non-registered shares
Total

31.03.2009
47.3
32.9
1.7
1.3
16.8
100.0

31.03.2008
38.6
31.5
1.5
0.0
28.4
100.0

Share price data
SymbolListingNominal value
ISIN
Swiss Security Number (Valor)
In CHF
Number of sharesYear high 1
Year low1
Year end 1
Average daily trading volume (shares)1
Earnings per share
Ordinary dividend per share 2
Extraordinary dividend per share 2
Market capitalization as per 31 March(in CHF Millions)Share information
LEHN
SWX
CHF 0.50
CH0022427626
2’242’762
FY 2008/09
1’150’000
341
120
150
913
20.90
10.00
0.00
172

FY 2007/08
1’150’000
368
225
270
1316
18.60
7.00
4.00
311

Financial calendar: The financial year runs from 1 April to 31 March.
26 June 2009
Ordinary Shareholders’ Meeting
Geneva Business Center, Petit Lancy
6 August 2009First quarter results 2009/10
5 November 2009
Half-year results 2009/10
9 February 2010
Nine months results 2009/10
3 June 2010
Year-end results 2009/10
25 June 2010
Ordinary Shareholders’ Meeting
Contact:
Heinz Stübi (Interim CFO)
Tel: +41 22 706 1230
e-mail: hst@ lem.com
1
2

Source Bloomberg
Proposal of the BoD to the Shareholders’ Meeting

59

Group Subsidiaries

LEM is a global player with production plants and development centers in Geneva(Switzerland), Beijing (China) and Machida (Japan) as well as adaptation centers in
Russia and USA. The company has sales offices at all its clients’ locations andoffers seamless service around the globe.
For a complete list of subsidiaries, offices and representatives, refer towww.lem.com > Contact > Sales Locator

Beijing LEM Electronics. Co. Ltd
No. 1, Standard Factory Buildings
Sector B, Airport Industrial Area
CN-101300 Beijing> Jean Hinden
LEM Belgium sprl-bvba
Route de Petit-Roeulx 95
B-7090 Braine-le-Comte> Paul Leens
LEM Deutschland GmbH
Frankfurter Strasse 74
D-64521 Gross-Gerau> Martin Hoffmann
LEM France Sàrl
15, avenue Galois
F-92340 Bourg-la-Reine> Paul Leens
LEM Holding SA
Chemin des Aulx 8CH-1228 Plan-les-Ouates/Genève> Paul Van Iseghem
LEM International SA
Chemin des Aulx 8CH-1228 Plan-les-Ouates/Genève> Paul Van Iseghem
LEM Italia Srl
Via V. Bellini 7
I-35030 Selvazzano Dentro, PD> Paul Leens
LEM Management Services Sàrl
Chemin des Aulx 8CH-1228 Plan-les-Ouates/Genève> Paul Van Iseghem

60

LEM India(branch of LEM Management
Services Sarl)
Level 4, Dynasty Business Park
“A” Wing, Andheri-Kurla Road
Andheri (East)
IN-400059 Mumbai> Martin Hoffmann
LEM SA
Chemin des Aulx 8CH-1228 Plan-les-Ouates/Genève> Jean Hinden
LEM UK Ltd
West Lancs Investment Centre
Maple View
White Moss Business Park
UK-Skelmersdale WN8 9TG,
Lancashire> Paul Leens
LEM Holding USA Inc.
11665 W. Bradley Road
USA – Milwaukee - Wisconsin 53224> Paul Van Iseghem
LEM USA Inc.
11665 W. Bradley Road
USA – Milwaukee - Wisconsin 53224> Kimbel A. Nap
LEM Japan K.K.
2-1-2 Nakamachi, Machida
JP-194-0021 Tokyo> Hiroaki Mizoguchi
TVELEM
P.O. Box 18
Marshal Budionny St. 11
RU-170023 Tver
> Alexander SemenovImpressum
Publication No. CH 29000 E(06.09 - 2.6 HRG)
LEM Holding SA, Geneva
Phone +41 22 706 11 11
Fax+41 22 794 94 78
Concept, Text, Graphic Design
and Product Photos
LEM
McCann Erickson
GenevaPhotosLEM
Frank Mentha
GenevaProduction and Prepress
K Genevaa Division of McCann Erickson
GenevaPhotolitho
Denz Lith-Art
Bern
Printing
Hertig+Co. AG
Lyss

LEM Annual Report 2008/09
Postal address
LEM Holding SA
P.O. BOX 785
CH – 1212 Grand-Lancy 1
Visitors’ address
LEM Holding SA
8, chemin des Aulx
CH – 1228 Plan-les-Ouates
Phone +41 22 706 11 11
Fax+41 22 794 94 78
www.lem.com

Annual Report
2008/09
At the heart of power electronics