Annual Report
2013/14At the heart of power electronics

LEM | Annual Report 2013/14

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Sewing Machine/Embroidery Machine
Industrial sewing/embroidery machines
are at the leading edge of the technology
always providing improvements for fast
dynamic responding (execution quickness), sewing with high accuracy andgenerating high-quality final products.
Full servo control allows for such speed,
precision and innovation.
A sewing/embroidery machine is formed of multiple heads (3)located above a working table (7). A needle in each head issliding up and down to reach a hook at a lower part vertically
opposite to the needle. One servo drive (1) controls the motor(5) which is providing the main axis (4) rotation to the needles.
The accuracy and the speed of the table movements, as wellas the correct, accurate and regulated rotation speed of themain axis for the needles are directly linked to the currents
provided to the motor through a servo drive.

HLSR 10-P

The working table (7) is moving in horizontal X and Y directions
thanks to linear motors (6) controlled by two position servo
drives (1). These three servo drives realize the full control ofthe sewing machine. Current transducers (A) are used in each
servo drive to measure two of its three phase output AC currents. Their accuracy, high performance, high temperatureworking environment, low temperature drift contribute to avery stable, quick, reactive, reliable and precise system.

4

7

3

5

2
6
6
A

A

1

1
2
3
4
5
6
7

LEM | Annual Report 2013/14

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HLSR 10-P
Servo drives
Control unit
Head
Main axis
Motor
Linear motors
Working tableTable of Contents
LEM at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8Business Report .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

LEM's Core Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16

Corporate Governance Report . . . . . . . . . . . . . . . . . . . . . . . .

17Compensation Report .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25

Financial Review .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

LEM Group
Consolidated Financial Statements .. . . . . . . . . . . . . . . . . . . 33

LEM Holding SA
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Information for Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

72

Group Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

74

Reporting Period 1 April 2013 to 31 March 2014

LEM | Annual Report 2013/14

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LEM | Annual Report 2013/14

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Formula 1 Energy Recovery System
In the interest of reducing fuel consumption by up to 35%, the FIA has imposed
significant changes to the F1 cars for the2014 season. Changes include aerodynamic limitations, new tires, and new
gearbox designs, along with new engine
specifications and a revised energy
recovery system (ERS) to replace the
KERS system of previous years.
Engine specifications impose a smaller, 440 kW turbocharged
engine combined with an ERS capable of providing an additional 120 kW of power for over 30 seconds per lap. The ERS
uses two distinct energy sources to provide the extra power:
kinetic energy from braking, and thermal energy from theexhaust gases. In the first case, energy from deceleration of
the car is converted into electricity via an electric generator(MGU-K). In the second case, heat energy is extracted fromthe engine exhaust gases via a turbocharger, and also converted into electric energy (MGU-H). The electricity from boththese sources is then fed into a battery and controlled by the
ERS control unit. The ERS provides about 30% of the total
engine power, making it a critical element of the car's perfor-

HC5 FWmance.
LEM's HC5 FW family of automotive current transducers measure the electric currents generated by each source, and allow
the control unit to make the best decision of how and whereto direct the available power.

4
2
3
6

5
7

A

1

A
1
2
3
4
5
6
7

LEM | Annual Report 2013/14

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HC5 FW
Pedals(accelerator, break)
Turbocharger
MGU-K
MGU-H
Battery
ERS brakepressure valve
Engine control unit

LEM at a Glance
LEM – At the heart of power electronics
LEM is a focused manufacturer and a global market leader. Its core products, transducers for measuring electrical parameters like current and voltage, are used in a broad range of applications. Although these devices are not visible to theoutside world, they are vital for application functionality and the benefits provided to the end users. Starting with products
for locomotives in the seventies, LEM expanded into a vast area of industrial applications, including variable speed drives
for motors and power 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
like microturbines and wind and solar power generation. Additional opportunities have been developed in the Automotive
market, such as battery management and start/stop applications for conventional cars and electrical motor controls,
battery pack management and embedded chargers for green cars. This evolution underscores the company's exceptional
skills in adapting to rapidly changing 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 heart of many
power electronics applications. LEM's strategy is to increase its technology leadership, efficiency and production flexibility. At the same time, LEM is committed to maintaining customer focus and operational excellence by running cost-effective and service-oriented production platforms. Profitable growth is a key objective.
Worldwide presence
LEM is a global organization with production plants in Beijing (China), Geneva (Switzerland), Machida (Japan) and in Sofia(Bulgaria). The company has sales offices close to its main clients' locations and offers seamless service around the globe.

LEM Holding SA, Fribourg,
Switzerland
Production Centers (PDCs)
Beijing, China
Geneva, Switzerland
Tokyo, Japan
Sofia, Bulgaria
Adaptation Centers
Milwaukee, USA
Tver, Russia

Sales Offices
Geneva, Switzerland
Frankfurt, Germany
Vienna, Austria
Brussels, Belgium
Kgs. Lyngby, Denmark
Paris, France
Padova, Italy
Skelmersdale, UK
Tver, Russia
Beijing, Shanghai, Shenzhen, Xian, Hefei, China
Tokyo, Japan
Pune, India
Seoul, South Korea
Milwaukee, Columbus, Amherst,
Los Angeles, USA
Agents/Distributors

LEM | Annual Report 2013/14

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Key figures 2009/10 to 2013/14
In CHF millions, %2009/102010/112011/122012/13*2013/14

Orders received

216.6

336.9

182.9

230.6

246.4

Book-to-bill ratio
Sales

1.17
185.5

1.14
296.2

0.77
236.3

0.98
235.0

1.00
245.6

Gross profit

80.4

126.3

96.5

98.6

115.4

In % of sales

43.4%

42.6%

40.8%

41.9%

47.0%

Operational EBIT

25.8

60.4

34.2

40.8

55.7

In % of sales

13.9%

20.4%

14.5%

17.4%

22.7%

Net profit for the year
EPS basic (CHF)
Dividend per share (CHF)

10.5
9.20
20.00

39.6
34.69
40.00

28.5
25.11
25.00

32.4
28.48
30.00

45.6
40.09
40.00**

Operating cash flow
Investing cash flow

26.3
(13.3)

30.0
(9.4)

46.7
(9.1)

46.2
(10.4)

40.6(8.7)

In CHF millions, %31.3.1031.3.1131.3.1231.3.1331.3.14

Net financial assets/(liabilities)
Shareholders' equity
Equity ratio (in % assets)

29.8
83.4
62.9%

26.6
96.9
59.8%

18.1
79.6
60.0%

27.6
84.0
61.9%

24.6
94.2
65.1%

Market capitalization
Employees (FTEs)

391.0
1'018

655.5
1'316

563.7
1'136

671.5
1'137

801.4
1'241

* Restatement following IAS 19R application (pensions)** Proposal of the Board of Directors to the Ordinary Shareholders' Meeting on 26 June 2014

Sales per segment

Regional sales breakdown

In CHF millions

In CHF millions

300

300

250

250

104.1

200

200

43.0
272.7

150
100

150
208.3

200.0

100

90.4

103.2

27.3

46.5

45.1

98.1

97.4

12/13

13/14

149.1
50

50
0

42.1

211.1

170.8

84.3

62.7

14.7

23.5

28.0

35.0

34.6

09/10

10/11

11/12

12/13

13/14

Industry segment
Automotive segment

110.0

95.5

0
09/10

10/11

11/12

Asia and Rest of the World
North America
EuropeLEM | Annual Report 2013/14

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Foreword
Dear Shareholders,
We are pleased to present LEM's 2013/14 results. LEM delivered strong results in a volatile environment and reachedmajor operational milestones in shaping the company's future. We are able to report record highs for some key performance indicators, including EBIT margin and net profit for the year.
While achieving strong financial results, we continued to invest in the company's growth. Like last year, we launched eight
new products and invested in new proprietary core building blocks of technology that will strengthen our unique productportfolio and accelerate the development of new products. We established our new site in Sofia, Bulgaria, in order todiversify LEM's cost-competitive production and to increase capacity near our European customers. At the same time,
we improved the natural hedge of our operations by better matching currencies of sales and cost.
Attractive yet competitive markets
We started the year with two strong quarters continuing the positive sales trend of the previous year. In Q3 we recorded a seasonal
decrease comparable to previous years and a rebound of sales in Q4.
In the second half of 2013/14, we saw signs of economic recovery with divergent regional developments. Nevertheless, the economic environment has remained fragile. In our Industry customers' businesses we have generally seen low growth. In the Automotive market, global production rose by 4% to 87 million vehicles in 2013.
The trends of the past years remained unchanged: our markets were exposed to constant price and competitive pressures; customers kept low stock levels and issued orders with very short lead times. This demands high flexibility from us. We remain alert.
Investment for the future
Our strategic initiatives are on track. We further developed our operational excellence in the areas of quality and productivity. With our record level of product launches, we remain the most innovative actor in our market. The new products
not only allow us to maintain our margin target despite constant price pressure, they also support our mission to maintainor even extend our market share in the Industry businesses and to penetrate new Automotive markets. Through our newsite in Bulgaria, we have increased capacity at globally competitive conditions. Our new Bulgarian site operated at ourhigh group standards in terms of quality and productivity, only eight months after the launch decision. Following our
2012/13 worldwide employee survey, we invested in specific management trainings, targeted to support our middle managers group-wide in dealing with the fast changing and increasingly demanding work place.
In the financial year 2014/15 we will ramp up production in Sofia. To manage cost, we will increase the share of production and sourcing in cost-competitive countries. We will execute on our product road map by launching a high numberof new products to support our growth and continued market leadership.
High level of profitability
Sales reached CHF 245.6 million, an increase of 4.5% compared with the previous year and in line with our expectations.
The Industry segment contributed to the growth while sales in the Automotive segment remained slightly below last year's
level. At constant exchange rates, Group sales increased by 7.1%. Bookings amounted to CHF 246.4 million, an increaseof 6.9% compared with the previous year. The full year book-to-bill ratio reached 1.0, compared with 0.98 for the previous year. EBIT reached CHF 55.7 million, compared with CHF 40.8 million in the previous year. This resulted in an EBIT
margin of 22.7%, a new record for LEM. Net profit for the year amounted to CHF 45.6 million, the highest ever.
Dividend proposal to the annual shareholders' meeting
The confidence in our financial strength and our outlook allow us to apply our attractive dividend policy, which aims to
distribute significantly more than 50% of the consolidated net profit to the shareholders. As a result, the Board of Directors will propose to the annual shareholders' meeting on 26 June 2014 the payment of an ordinary dividend of CHF 40
per share, an increase of CHF 10 per share compared to the previous year. The payment corresponds to a payout ratioof 99.8%.

LEM | Annual Report 2013/14

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Corporate Governance changes
The ordinance of the Swiss Federal Council “Against Excessive Compensation in Public Corporations” implements the
key elements of the “Minder Initiative,” a constitutional amendment approved by the Swiss voters in 2013. The ordinanceapplies to all publicly listed Swiss companies and came into effect on 1 January 2014, subject to transitional provisions.
LEM will be fully compliant with the new regulation by implementing pragmatic solutions, which consider your interest asa shareholder.
Our lean Board of Directors and management structure have proven successful and reflect that LEM is a medium-sizedcompany. To be globally competitive also in the future we want to remain an attractive employer for senior executives aswell as for all employees.
The Board of Directors has developed a proposal encompassing several changes to LEM's Articles of Incorporation inorder to meet the requirements of this ordinance. This proposal is submitted to the shareholders for approval at the forthcoming annual shareholders' meeting on 26 June 2014 in Fribourg, Switzerland. The proposal as well as documents
explaining the changes in detail are available on our website.
Thank youWe thank all our employees. Their professional commitment and hard work are the foundation for LEM's lasting success.
Our thanks also go out to our customers for their trust in our products and services as well as to our shareholders fortheir sustained financial commitment.

Andreas Hürlimann
Chairman of the Board of Directors

François Gabella
Chief Executive Officer

LEM | Annual Report 2013/14

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Business Report
At the start of the year, the economic environment was fragile but stabilized in the second half of 2013/14. Global activity
picked up and the financial conditions in advanced economies have eased. Despite slowing growth in China, businessactivity remained robust there. We observe continued relocation of several of our target industries from Europe and North
America to China. Economic recovery in the U.S. continued slowly. The regional differences had a direct impact on our
performance. Our sales grew strongest in China while the other major regions remained stable. The devaluation of theJapanese yen negatively impacted our sales growth in Japan. Still, we look back on a robust sales performance in financial year 2013/14.
In this challenging environment we continued to leverage our competitive strengths. We are the most innovative actor in
our industry with investments of CHF 14.4 million in R&D and the launch of eight new products. Recently launched products have seen promising market acceptance. In some product segments, our product range is unique. Thanks to strict
cost controls and the ongoing shift of manufacturing to low-cost sites, we were able to increase our operating margins.
We have increased and diversified our cost-competitive production capacities through the launch of our new site in Sofia.
Sales growth and productivity increase
In financial year 2013/14, sales totaled CHF 245.6 million, representing an increase of 4.5% or CHF 10.7 million comparedwith the previous year. Exchange rate fluctuations, mainly the depreciation of the U.S. dollar and the Japanese yen, hada negative impact. At constant exchange rates, Group sales increased by 7.1%.
Key figures 2013/14
In CHF millions

Orders received
Sales
Book-to-bill
EBIT
Net profit

Q1

Q2

Q3

Q4

Total

65.1
61.8
1.05
13.3
9.8

59.3
65.1
0.91
17.0
14.8

58.7
57.6
1.02
11.9
8.6

63.5
61.1
1.04
13.6
12.5

246.4
245.6
1.00
55.7
45.6

China extended its position as the single biggest market for LEM with the highest growth rate of all countries. Comparedwith financial year 2012/13, sales in China increased by 32% and represented 23% of total sales, up from 18%. The otherregions stagnated, with sales in Europe decreasing by 1%, in North America by 3% and in Asia excluding China by 2%. The
share of total sales in Europe decreased from 42 to 40% and the share of total sales in North America decreased from 20
to 18%.
Orders received increased by 6.9% to CHF 246.4 million in financial year 2013/14. For the full year, the book-to-bill ratio was 1.0.
In financial year 2013/14, we improved the gross margin from 41.9 to 47.0%. Our ongoing focus on raw material sourcing,internal productivity and shift of production to low-cost sites allowed us to more than compensate current price pressures.
Sales, general and administrative spending (SG&A) increased by 5.2% to CHF 45.4 million. SG&A as a percentage of sales
remained stable at 18.5%. Research & development expenses (R&D) decreased by 1.9% to CHF 14.4 million. R&D as a percentage of sales decreased slightly to 5.9%, still above the long term average of 5.5% of sales.
EBIT increased from CHF 40.8 million by 36.5% to CHF 55.7 million in financial year 2013/14. Our EBIT margin in financial
year 2013/14 was at 22.7%, up from 17.4% on the previous year and above the company's EBIT margin target range of 15
to 20%. This record EBIT margin was attained including the ramp up cost of CHF 2 million for the new site in Sofia. Net profit
for the year was CHF 45.6 million (+40.9%).
Our balance sheet remains strong. As per 31 March 2014, total assets increased to CHF 144.7 million. Shareholders' equity
increased to CHF 94.2 million, representing an equity ratio of 65.1% (61.9% as at 31 March 2013).
Investments in fixed assets were at CHF 7.3 million. The launch of the new site in Sofia only required facility investments
since production lines were transferred to the new site. Cash flow from operating activities in financial year 2013/14 was
CHF 40.6 million (-12.1%) and free cash flow was CHF 31.9 million (-11.0%).

LEM | Annual Report 2013/14

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Industry segment
Strong growth in China and the improving economic situation towards the end of financial year 2013/14 were the driving
forces behind the Industry segment's performance. Sales increased by 5.6% to CHF 211.1 million in financial year 2013/14.
At constant exchange rates, sales increased by 7.9%. China was the biggest single country representing 23% of Industry
sales and grew by 34% while sales in Asia excluding China grew by 2%. Sales in Europe and North America decreased by
1% and 5% respectively. Europe remained the most important region, accounting for 45% of sales, followed by Asia with
41% of sales. North America accounted for 13% of total sales in financial year 2013/14. The EBIT margin reached a record
24.1% compared to 18.2% in the previous year. The strong improvement was the result of efficiency gains in production,
volume leverage, a favorable product mix and the faster-than-expected ramp up of recently launched products.
Global activity strengthened in the second half of the year, driven by a recovery in the advanced economies. Activity in theemerging markets slowed. The trends of the past years in our markets continued well into financial year 2013/14: we observed
the continuation of the transfer of certain target industries, mainly solar and medical applications, from North America andEurope to Asia as well as an ongoing consolidation with fewer and stronger players. There is little change in our competitive
landscape with the number of direct competitors remaining stable and market size growing with global GDP.
Overcapacity in the transducer market continued to keep the competitive pressure high. In this context, we have continuously and systematically increased our market share by expanding our existing customer base and simultaneously developing adjacent businesses in order to extend our addressable market. Again this year we have launched a series of new products, which will allow us to extend our technological lead. In our sales organization we are focusing on productivity bytraining our Chinese sales team. In addition, we have set up representation in Korea.
Sales in the drives & welding business increased by 10% compared to the previous year. Market growth in China facilitatedthe results. However, Europe and North America also contributed to sales performance. LEM's market share remained stable.
The renewable energies & power supplies business benefitted from strong investments in renewable energies in China.
Business in Europe and North America is constantly decreasing due to the decreasing solar installations in these regions
and to the relocation of the solar industry to China. Wind and uninterrupted power supplies (UPS) applications performed
strongly. Total sales increased by 6% compared to the previous year. We won some major projects in smart grid applications, where we expect to increasingly benefit in the coming years.
Sales in the traction business decreased by 1%. Contract wins for new projects in India, the energy-metering application in
Europe and good sales performance in China nearly compensated the slowing performance in Europe due to stagnating rail
investments there.
Sales in the high precision business decreased by 10% compared with last year. The medical applications slowed down,even taking new medical projects in Europe and North America into account. The test & measurement applications haverecorded decreasing investments towards the end of the financial year.
In financial year 2014/15, we intend to increase marketing activity globally in order to win additional market share in existing
applications and target emerging applications such as smart grid. We will continue to launch new, innovative products. The
smooth transfer of production lines to our new site in Sofia will be our main challenge.

LEM | Annual Report 2013/14

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Automotive segment
Sales in the Automotive segment reached CHF 34.6 million in financial year 2013/14, a decrease of 1.2% compared tothe previous year. At constant exchange rate, sales grew by 2.9%. The disappointing performance is the result of belowexpectations growth in the green cars market, delayed launches of new platforms and slow growth of vehicle productionin Europe and North America. Segment sales in North America were stable (+0%) while China grew by 17%. Sales in
Europe grew by 3%. Our regional split remained largely unchanged. North America was the most important region for us
with a share of 52%. Asia accounted for 39% and Europe for 9% of total sales. Similar to the Industry segment, China isbecoming increasingly important, representing 20% of sales. EBIT reached CHF 4.8 million in financial year 2013/14, anincrease of 9.7% compared to the previous year. The EBIT margin was 14.0% compared to 12.7% in financial year 2012/13.
The automotive industry set another production volume record in 2013. Globally, 87.3 million vehicles have been produced
in 2013, reflecting an increase of 3.6% compared with 2012. However, growth pattern varied between the major regions.
Activity was flat in Europe (-0.3%), decreasing in Japan (-3.1%) and growing in North America (+4.3%). Output in Chinagrew by 14.8% to over 22 million vehicles. Production of green cars stagnated as they are still more expensive than conventional cars. We are observing that large car manufacturers have given high priority to investments in efficiency increases
for conventional cars, i.e. internal combustion engine optimization, and downsizing. This includes investment in sophisticated start/stop-applications. For the foreseeable future, conventional cars will remain the dominant technology, while
hybrid vehicles are expected to be the first alternative.
In financial year 2013/14, we developed our sales organization by increasing sales and technical support resources in our
main markets. This will allow us to improve relationships with customers during the development and production phaseof new platforms. In R&D we set the focus on developing smaller products that are easier to implement while reducing
total cost for our customers.
In the conventional cars business, our sales grew by 4% compared with financial year 2012/13. We achieved this result
thanks to solid demand for our battery management solution. The start/stop application was stable. We recorded growthin the U.S., China and Japan.
The green cars business suffered from the general weak trend in this market segment. In financial year 2013/14, our sales
decreased by 19% compared with the previous year. We were disappointed by the trend in North America, but recorded
considerable growth with hybrid applications in Europe.
In financial year 2014/15, we will increase investments in market presence and R&D. We are convinced that the green
cars business has great potential for LEM and remains a priority for the company.

LEM | Annual Report 2013/14

12Strategy implementation
We regularly run market surveys that allow us to better gauge customer needs, and identify new markets and technologies. These findings support us in implementing our key strategic initiatives. In this reporting year we conducted a worldwide technology survey to identify and validate promising new technologies for the next innovation cycle:– – Increase technological leadership

We continue to renew our product portfolio to offer increased performance, new functions and reduced cost for ourcustomers. At the same time, we design products for the most efficient assembly at our sites. Miniaturization and standardization are the core trends in product development. Our goal is to reduce the complexity of product design, supply
chain and manufacturing.
In financial year 2013/14, we developed a new ASIC as a building block for future products that will allow for more efficient product development going forward. We have launched eight new products, six for industry applications and twofor automotive applications. For smart grid applications, we have launched the TOP 90-S, a split-core current sensor
for easy mounting, and the RT 500, a product using Rogowski coil measurement technology with high external field
immunity. The RT 500 will provide accurate measurement for activities such as billing services while the TOP 90-S istargeted to be used in industrial smart grid management applications. The new ITL1200 is a high-precision transducer
for a new generation of MRI (Magnetic Resonance Imaging) devices, measuring higher currents at constant performance.
The new HO xx-P for industrial applications offers new functions and a large hole for cable, PCB-mounting design andcontactless measurement. The DVL Voltage has a robust design for harsh environments in traction applications. It offers
new technology for digital isolation and improved sensitivity to magnetic fields. The customer-specific transducer HFWS
125 is very small for the current being measured. It communicates through the microcontroller and the serial interface.
For green cars applications, we launched the HC5FW, an open loop transducer for inverters, starter generators andconverters, offering improved performance at lower price. The open loop transducer DHAB V2 offers cost-efficientmanagement of lithium batteries for electric and hybrid vehicles.
We are developing our network of partnerships with universities, research institutes and associations. We became amember of Electrosuisse in order to participate in international standard setting and started collaborating with the European Center for Power Electronics, which will define a European power electronics “R&D road map to 2025.”
Going forward we will keep up the high pace of product launches. To this end, we intend to increase resources and our
R&D spend, and increase investments in machinery and tooling.
– – Increase efficiency of operations

In October 2013 we inaugurated our fourth production site in Sofia, Bulgaria. This is a major milestone for us. The site
not only diversifies our cost-competitive production capacities but will also facilitate a major part of LEM's future growth.
This European site will allow us to transfer production at an earlier phase than before, and to build up complementaryindustrialization and development competencies near our Swiss headquarter.
After the first six months of operations, we are very pleased that the ramp up of production is on track and that we haveobtained delivery approvals from customers for the new site. Product quality, productivity and service level are on parwith all other sites.
– – Increase production flexibility

Our customers' preference for short-term orders remained a key challenge. We have achieved a high level of flexibility
as evidenced by our high service level to customers. Compared to financial year 2012/13 we have further improved ourOTD (on time delivery) ratios. The introduction of a new forecasting system will allow further progress. With our differentiated approach in the supply chain model, we are able to accommodate the specific characteristics of individual
customers.

LEM | Annual Report 2013/14

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Responsibility
Like every year, we have renewed ISO 9000, ISO 14001 and ISO TS certifications for our production sites. For the firsttime, LEM Bulgaria was part of the certification renewal process. In financial year 2013/14, we introduced a new Code of
Conduct that is applicable group wide. We will also ask our business partners and suppliers to comply with these standards.
In financial year 2013/14, we made investments to reduce our ecological footprint. We replaced company cars with hybrid
or electric vehicles whenever possible. We installed a water recycling system in Geneva for water used in the coolingsystem for thermal tests, reducing water consumption by 80%. In China we replaced the traditional incandescent lighting
system with new LED or fluorescent lights, reducing electricity consumption by 8%. In Sofia we leased a building withsolar panels on the roof with a capacity of 330 kW. Today the solar installation covers the plant's entire electricity needs.
When in full operation, the solar installation is expected to cover about one third of the electricity consumption. In addition we improved the insulation of the building.
Employee engagement
Based on the last year's survey, we designed tailor-made training programs for members of middle management. Our
focus was to support middle management in coping with the increasingly challenging pace of change in a global organization like ours. Otherwise our training initiatives focused on specific skills in technologies, materials and processes.
Throughout the year we received employee feedback on motivation and satisfaction levels. We found that the three main
reasons to work for LEM are work content, work climate and performance recognition.
As at 31 March 2014 LEM counted 1'241 employees (FTEs) with 25 nationalities in 16 countries. The share of women/men
was 51%/49% compared with 53%/48% one year ago. Diversity and equality are key elements of our corporate culture.
Outlook
The economic perspective have improved. We expect a modest pick up in Europe and North America while performancein China should remain robust. We believe that we are well positioned to capitalize on an improving economic environment in our Industry segment. Our new products will provide additional tailwind. Still, competition remains fierce withovercapacities and price pressure prevalent in most market segments. The Automotive segment is expected to resume
growth, backed by growing global vehicle production and market share gains in the green cars business.

LEM | Annual Report 2013/14

14

Roller Coaster
Modern roller coasters use less and lesstraditional chain lift. The ride is maintainedby gravity.
The initial acceleration energy is provided via one or several linear
motors, catapults, or other mechanisms replacing hydraulic or
pneumatic power. These latest technologies create faster andmore action-packed rides.
From departure, the train (1) is moved slowly by drive tires (2) withinverters (3) along the line to the acceleration area where linear
motors (4) are used. In case of linear motors (4) the propulsion of
the carts along the track at various stages is managed using electromagnetic fields (electromagnets) that require high currents.

LF 1005-S

A linear motor has unrolled stator (fixed part) and rotor (movingpart). The stator of the motor is the train track (some sections)and the rotor is basically the cart. The current is provided tothe motor, which propels the carts (1). This method contributes
to a better control of overall ride performance and to reach highspeed in a short time.
These electrical linear motors enable the various torques andaccelerations in time and duration. The motors are controlled
by electrical drives (5) via the currents supplied. The current
transducers (A) give the feedback to the control loop in orderto ensure the right accelerations independently of the load andfriction of the train.

1

2

4
3

5

A

A
1
2
3
4
5

LF 1005-S
Train/cart
Drive tire
Inverter for drive tireLinear motor
Inverter for linear motor &control unit
LEM | Annual Report 2013/14

15

LEM's Core Values
It is vital for all of LEM to share common values and working principles. All employees understand what LEM wants toachieve 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 thespirit and intent of everything we do at 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 thedesire to provide best quality service to our customers. We aim to listen to, anticipate and respond to our customers'
needs. For this reason, we collaborate closely with our customers and form true relationships. We target “customer
delight”.
We operate with integrity
Basic ethical behavior and integrity in business relationships determine the essence of all our actions. As a company andas individuals, we do the right things right and never compromise our values and principles. We honor our agreements
and are honest in our communications.
Our relationships with co-workers, customers, suppliers, partners and the investor community are based on openness
and fairness.
We value teamwork
LEM forms a worldwide community. Close collaboration and networking across functions, departments and cultures iscritical for the success of the company. To cooperate, we need to be open and honest and willing to share and trust eachother. 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 skill, and accomplishments are recognized.
Teamwork is more than just working together, it is bringing out the best of everyone's strengths.
We commit
We set our goals high because we know we can reach them. We honor these goals as promises to our customers, ourshareholders 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, processes and results, we are dedicated to making them better. We aim forthe highest standards of quality for our customers. By approaching our daily work with a passion for perfection, avoiding
incidents by managing the risks of our activities, taking initiatives and a desire to learn and share that learning with colleagues, we all can make a difference.
We lead innovation
Innovation is the cornerstone of our success and our future depends on it. Innovation will ensure that we have attractive
products for our markets, and a steady supply of new technologies, products, applications and customers. We aim to be
the leaders in our industry and not the followers.

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Corporate Governance Report
The following information complies with the Corporate Governance Directive of the SIX Swiss Exchange (SIX) and the disclosurerules of the Swiss Code of Obligations. In order to enhance the clarity of this chapter, reference is made to other parts of theAnnual Report and our website (www.lem.com). Key elements are contained in the Articles of Incorporation revised 28 June 2012.
1 Group structure and shareholders
Group structure
LEM Holding SA is domiciled at Avenue Beauregard 1, CH-1700 Fribourg. LEM's registered shares are listed on the main
segment of the SIX Swiss Exchange (LEHN, security no. 2 242 762; ISIN 0022427626). On 31 March 2014, the market
capitalization was CHF 801 million.
LEM Group is structured into the Industry Segment and the Automotive Segment. Appropriate segment reporting pursuant to IFRS is contained in note 3 of the notes to the consolidated financial statements. All companies in LEM Group are
listed under “Scope of consolidation” in note 25 of the consolidated financial statements, with their respective company
names, registered offices, share capitals and the relevant percentages of shares held. There are no other listed companies in the scope of consolidation.
Significant shareholders
On 31 March 2014, the following shareholders held 3% or more of the share capital and voting rights:
In number of shares/options,per cent of shareholding

31.3.2014
Options

31.3.2013
Options
PositionIn %SharesWerner O. Weber and Ueli
403'500 100'000
503'500
44.2%
Wampfler, in Zollikon/Wollerau,
Switzerland, through WEMACO
Invest AG and Swisa Holding AG,
in Zug/Cham, Switzerland
141'581
N/N
141'581
12.4%
Ruth Wertheimer, in Kfar, Israel,through 7-Industries Holding B.V.,
in Amsterdam, Netherlands
Montanaro Asset Management
85'608N/N
85'608
7.5%
Ltd, in London, United Kingdom
Sarasin Investmentfonds AG,
80'979N/N
80'9797.1%
in Basel, Switzerland
Erwin Studer and Joraem de
94'000 (100'000)(6'000)(0.5%)
Chavonay, in Zollikon/Zug,
Switzerland
Amerprise Financial Inc., in
N/A
N/N
N/A
<3%
Minneapolis, USA, throughThreadneedle Asset Management
Ltd, in London, United Kingdom
Total shareholders < 3%
334'332N/N
334'332 29.3%
Total
1'140'000
0 1'140'000 100.0%

398'500

50'000448'000

39.3%

144'581

N/N

144'581

12.7%

69'071

N/N

69'071

6.1%

90'320N/N

101'0447.9%

97'000N/N

89'500

4.1%

38'216

N/N

56'777

3.4%

SharesPosition302'8121'140'000

In %

N/N
302'812 26.6%
0 1'140'000 100.0%

N/N = none notified; N/A = not applicable

Mr. Werner O. Weber and Mr. Ueli Wampfler have notified the company of the acquisition of 50'000 options from Erwin
Studer and Joraem de Chavonay on 27 June 2012 and of another 50'000 options from the same issuer on 27 November
2013. No other shareholder has notified any options to the company.
Cross-shareholdings
LEM has no cross-shareholdings with other joint-stock companies.
2 Capital structure
Capital and shares
The nominal value of the share capital of LEM Holding SA is CHF 570'000, which is divided into 1'140'000 fully paid-up
registered shares with a par value of CHF 0.50 each. There are no shares with preferred voting rights. All shareholders
are entitled to the same dividends.
There are no restrictions on the transfer of shares. In order to be registered in the share register, each shareholder shalldeclare that he holds the shares for his own account.
On 31 March 2014, LEM Holding SA held 1'084 treasury shares.

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17

Authorized and conditional capital
There is no authorized or conditional capital, nor are there any profit-sharing certificates or participation in certificates orany convertible bonds outstanding.
3 The Board of Directors
Election, terms of office and cross-involvement
The Board of Directors is comprised of at 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' meeting on 27 June 2013, Ilan Cohen, Andreas Hürlimann, Peter Rutishauser and Ueli Wampfler were reelected as members of the Board of Directors. Norbert Hess was newly elected as member of the Board of Directors. Andreas Hürlimann was named as Chairman of the Board; Peter Rutishauser maintained the Vice Chairmanship. All
members of the Board are nonexecutive and have at no time been part of the executive management of LEM. Furthermore,they have no significant business connections with LEM Group.
The Board of Directors was comprised of the following members as of 31 March 2014:
Andreas Hürlimann

Position Chairman of the Board of Directors, Chairman of the Strategy Committee, Member of theNomination & Compensation Committee

Nationality Swiss

Entry 2011

Born in 1964

Professional background
Since 2011, Independent board professional and entrepreneur
2005 – 2010, Managing Director, Spencer Stuart, Zürich
1999 – 2005, Global Director of Industry Practices and Member of the Executive Board,
Arthur D. Little Inc., London and Paris
1990 – 1999, International Marketing and Sales Management roles with Siemens Schweiz AG,
ABB Kraftwerke AG and Oerlikon Aerospace Inc., Zürich, Baden, Montreal
Other notable activities– –None
Education M. Sc. Electrical Engineering, ETH Zürich

Peter Rutishauser

Position Vice Chairman of the Board of Directors, Chairman of the Nomination & Compensation
Committee, Member of the Strategy Committee

Nationality Swiss

Entry 2003

Born in 1956

Professional background
Since 1989, Independent entrepreneur, member of the board and ­s hareholder of several mid-sizedcompanies
Other notable activities– –Delegate of the Board of Directors, Equatis AG, Zürich
– –Member of the Board of Directors, Pavatex AG, Fribourg
Education Dr. sc. nat., ETH/Lic. oec., HSG

Ilan Cohen

Position Member of the Board of Directors, Member of the Strategy Committee

Nationality Israeli

Entry 2010

Born in 1956

Professional background
Since 2010, President, Servotronix Motion System Ltd. and Servotronix Motion Control Ltd., Israel
2008 – 2009, General Manager, Kollmorgen Industrial & Commercial Engineered Solutions Ltd.
­( Danaher Group)
1997 – 2008, President and CEO, Kollmorgen Servotronix Ltd.
1987, Founder, Servotronix Ltd.
1983 – 1990, Associate professor, University of Tel Aviv, Israel
Other notable activities– –Board member, Servotronix Motion Control Ltd., Israel– –Chairman, Negba network of houses of hope for children at risk, Israel
Education
Ph. D. Control System, Ecole Polytechnique de Bruxelles, Belgium
MSEE, CALTECH Pasadena, USA
M. Sc. and BSEE Electro-mechanical engineer, Ecole Polytechnique de Bruxelles, Belgium

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Norbert Hess

Position Member of the Board of Directors, Member of the Audit & Risk Committee

Nationality German

Entry 2013

Born in 1960

Professional background
Since 2012, COO, EPCOS AG, Munich, Germany
2005 – 2012, Head of Ceramic Components Division, EPCOS OHG, Deutschlandsberg, Austria
1999 – 2005, Head of Surge Arresters Business Division, EPCOS AG, Berlin, Germany
1987 – 1999, Business, marketing and R&D roles at Siemens AG, Berlin/Erlangen, Germany
Other notable activities– –None
Education
Ph.D., Technical University of Berlin, Germany
M. Sc. Mat. Eng., Technical University of Berlin, Germany

Ueli Wampfler

Position Member of the Board of Directors, Chairman of the Audit & Risk Committee

Nationality Swiss

Entry 2007

Born in 1950

Professional background
Since 2004, Founder and Senior Partner, Wampfler & Partner AG, Zürich
1998 – 2004, Director, STG Schweizerische Treuhandgesellschaft, Zürich
1974 – 1998, STG Coopers & Lybrand, Zürich (Partner since 1991)
Other notable activities– –Chairman of the Board of Directors, Swisa Holding AG, Cham (Swisa Group); Mercedes-Benz Auto­mobil AG, Schlieren; Merbag Immobilien AG, Schlieren; Remi Finanz- und Verwaltungs AG, St. Gallen– –Member of the Board of Directors, Caspar Finanz AG, Zug (Traco Power Group); Merbag Holding AG,
Cham; Rebew AG, Zürich
Education Lic. oec., University of Zürich/Certified auditor

Internal organizational structure
The Board of Directors meets as often as necessary, but five to six annual meetings are planned in advance. In the completed financial year, five full-day meetings, one half-day meeting and three conference calls were held. The meetings
usually take place at the company's seat in Fribourg. The Chairman, after consultation with the CEO and the Chairmenof the committees, determines the agenda for the Board meetings. The members of the Board of Directors can ask for
additional items to be included on the agenda. The Board members receive supporting documents beforehand, allowing
for a comprehensive preparation of the meeting. As a rule the CEO attends the meetings of the Board of Directors without
having a right to vote, and for most of the agenda items the CFO also attends. Depending on the topics, other membersof Executive Management participate in the meetings in order to respond to specific questions. Decisions can be takenby the Board if at least half of the Directors are present, and a simple majority of them is sufficient. In the event of tie, theChairman has the casting vote. Minutes of the meetings including decisions taken are prepared by the outside Secretaryof 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 and effectiveness of the teamwork as well as its
interaction with the management of the company on a regular basis. Regular feedback sessions at the end of a meetingprovide valuable inputs for the continuous improvement of the Board'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 thefollowing areas:– – review and approval of the strategy, business plan, annual business objectives and budget for the LEM Group;– – approval of creation/closing of any subsidiary and purchase/sale of any interest in any company or entry into any merger
or joint venture agreement;– – appointment/dismissal of the Executive Management;– – monitoring the ethical and legal behavior of LEM;
– – review of human resources management, including co-worker satisfaction and management development and legal,
intellectual property, social and environmental aspects.

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Information and control systems of the Board of Directors vis-à-vis Management
The Board of Directors ensures that it receives sufficient information from the Management to perform its supervisory
duty and to make the necessary decisions.
The Board of Directors obtains the information required to perform its duties through several means:– – the Board of Directors receives monthly and quarterly reports on the current 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;– – the Committees meet at regular intervals and exchange detailed information with the Management;– – the Board receives detailed information to each agenda item one week before the Board meeting;– – each Executive Manager joins at least one Board session in any given year.
Business risk management
In compliance with article 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 and strategic – including the external business environment, compliance and reputational aspects.
The Executive Management conducts an annual risk analysis. The results and consecutive 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 to 15 main hazards is set up. In a second step, each hazard is assessed by a multiplication of probability withfrequency. Step two results in a risk map which visualizes LEM's potential risk environment. In step three an action planis put in place to manage the risks. The hazards thereafter are revalued a second time, taking into consideration the actionplans. In step four the action plan is validated and thereafter monitored on a monthly basis (step five).
Internal control system
In compliance with article 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 each key risk, key controls have been defined and responsibilities assigned to assure effective compliance anddocumentation of the key controls. The process has been presented to and approved by the Audit & Risk 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. Based on the input of the process owners the CFO preparesan annual report on the internal control system which is presented to and discussed with the Audit & Risk Committee.
Committees
Three standing committees support the Board of Directors. They are comprised of two nonexecutive members of theBoard of Directors. They meet whenever necessary but at least twice a year.
– – The primary objective of the Audit & Risk Committee (ARC) is to provide the Board of Directors with effective support
in financial matters, in particular the selection and supervision of the external auditor, assessment of the effectiveness,compliance and clarity of the Group financial reporting and the assessment and preparation of the financial reports tothe shareholders. Furthermore, it reviews critical accounting policies, financial control mechanisms and compliancewith corresponding 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 ARC prepares proposals to be decided by the Board of Directors. In the completed financial year four half-day meetings were held.
– – The Nomination & Compensation Committee (NCC) deals with succession, recruitment and compensation of the membersof the Board of Directors and the Executive Management. It ensures and monitors the personnel development plan and adequate succession planning for the middle and top management. It reviews and updates the performance-based compensation
system for the Executive Management. The NCC prepares proposals to be decided by the Board of Directors. In the completed
financial year one full-day meeting and seven half-day meetings were held. Additionally, two telephone conferences were held.
– – The primary objective of the Strategy Committee (SC) is to assist the Board of Directors in fulfilling its duties with respect
to determining the company's strategy and the appropriate means to pursue it, including LEM's organizational setup.
As strategic work and its successful implementation is based upon coordinated and interlocking activities between
management and the Board, the SC ensures close collaboration with the CEO and the Executive Management. The SC
prepares proposals to be decided by the Board of Directors. The Board of Directors may also decide to delegate members of the SC to assist in steering longer-term strategic initiatives by joining the project steering committee. In thecompleted financial year three half-day meetings and three telephone conferences were held.
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4 Executive Management
The Executive Management was comprised of the following members as of 31 March 2014:
François Gabella

Function CEO LEM Group

Nationality Swiss

With LEM since 2010

Born in 1958

Previous companies and positions– –2006 – 2010, CEO, Tesa SA– –2002 – 2006, SVP, Areva– –1996 – 2002, Business Area Manager, ABB Power Transformers
Education M. Sc. Microtechnics EPFL, MBA IMD

Julius Renk

Function CFO

Nationality German

With LEM since 2009

Born in 1970

Previous companies and positions– –2006 – 2009, CFO, AB Enzymes GmbH
– –2000 – 2006, CFO, IP France SA (RTL Group)
Education Lic. oec. HSG, CEMS Master in International Management

Luc Colombel

Function Vice President, Automotive

Nationality FrenchWith LEM since 1996

Born in 1959

Previous functions– –2005 – 2009, Vice President, Automotive and Traction– –2004 – 2005, Vice President, Traction– –1996 – 2004, Business Development Manager Auto
Previous companies and positions– –1988 – 1996, Strategic Development and Sales Manager, Arcelor Group
Education Engineer ESIGELEC

Hans-Dieter Huber

Function Vice President, Industry

Nationality German

With LEM since 1995

Born in 1959

Previous functions– –2000 – 2004, Business Development Manager– –1995 – 2000, Sales & Marketing Manager Industry LEM Germany
Previous companies and positions– –1986 – 1995, R&D Team Manager, ABB Drives Germany
Education Graduate Electrical Engineer, Berufsakademie Mannheim

Jean-Marc Peccoux

Function Vice President, R&D and IP

Nationality FrenchWith LEM since 2001

Born in 1966

Previous functions– –2004 – 2010, Corporate Quality Manager LEM Group– –2003 – 2004, Quality Manager & Purchasing Manager Geneva site
– –2001 – 2003, Quality Manager Geneva site
Previous companies and positions– –1995 – 2001, Quality Director and R&D Program Manager Valeo– –1991 – 1995, R&D Project Manager, Schlumberger– –1990 – 1991, Software Engineer, BEL Group
Education Engineer, Arts & Métiers Paris Tech, Master of Economics Besançon University

Simon Siggen

Function Vice President, Operations

Nationality Swiss

With LEM since 2002

Born in 1967

Previous functions
2002 – 2005, Operations Manager Geneva site
Previous companies and positions– –Business Segment Director, Leclanché
Education Engineer EPFL, Master in Logistics EPFL

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None of the members of the Executive Management have other activities in governing or supervisory bodies, any official functions or political posts nor any permanent management functions for important Swiss and foreign interest groups.
Management contracts
There are no management contracts with companies or individuals outside LEM Group.
5 Compensation and shareholdings
Please refer to the section “Compensation Report” following on page 25.
6 Shareholders' participation rights
The rules on shareholders' participation rights are outlined in the Articles of Incorporation. The rules for the conveningof shareholders' meetings, the participation rights and the majority rules for decisions are all following 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 the share register
There are no limitations on voting rights for shareholders who are entered into the shareholders' register with voting rights.
Anyone purchasing registered shares is registered by the Board of Directors in the share register on request as a shareholder with voting rights, provided he expressly declares that the shares have been bought and will be held for his own
account.
Each shareholder may be represented by the independent representative or by a third party who need not be a shareholder
of LEM Holding SA.
Statutory quorums
The Articles of Incorporation contain no deviation from the applicable law.
Convocation of the general meeting of shareholders
Shareholders registered are convened to shareholders' meetings by ordinary mail and by publication in the Swiss Official
Gazette of Commerce at least 20 days prior to the day of the meeting. Any shareholder who is registered as a shareholder,on the day determined by the Board of Directors, has the right to attend and vote at the shareholders' meeting.
AgendaAccording to Article 12 of the Articles of Incorporation, one or several shareholders who collectively hold 10% of the sharecapital can call for a shareholders' meeting and submit matters to be placed on the agenda.
Dividend policy
LEM targets a payout ratio significantly above 50% of the consolidated net profit for the year, to be proposed by the Boardof Directors to the shareholders' meeting.
7 Change of control and defensive measures
Opting-out clause
In June 2010, the shareholders introduced an opting-out clause according to article 32 of the Federal Act on Stock
Exchanges and Securities Trading (SESTA) in the Articles of Incorporation of the company. This clause releases any shareholder from the obligation to submit a public takeover offer to all shareholders as soon as his participation in LEM exceeds
331/3% of the voting rights. The Swiss Takeover Board has decided on 22 September 2011 that a passing of the 331/3%
threshold by the shareholder group Weber & Wampfler would not trigger the obligation for a public takeover offer.

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22

Clauses of changes of control
There is no particular clause in the Articles of Incorporation for changes of control. If dismissed in the case of a changeof control of the company, one member of the Executive Management will receive additional severance payments equal
to 6 months remuneration.
8 Auditors
The duration of the auditors' mandate is one year. Ernst & Young have been auditing LEM since the financial year 2005/06,
with Arthur Bergmann bearing the responsibility for the audit since 2013/14.
Ernst & Young charged the following fees for professional services rendered for the 12-month period ending 31 March 2014:
Type of service
In CHF thousands

2013/14

Audit services
Tax services
Total

319
10
329

Evaluation and control of the auditors is done by the ARC which makes recommendations to the Board of Directors. In
particular, the ARC evaluates the performance, fees, and independence of the 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 ARC in the presence of the external auditors.
During 2013/14 Ernst & Young attended two regular ARC meetings.

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23

9 Information policy
LEM informs its shareholders on the business status and its results on a quarterly basis. After the first six months, a halfyear report is published. This report, as well as the Annual Report, is distributed to all shareholders inscribed in the shareregister and made publicly available on its website www.lem.com. Once a year, LEM holds a presentation for the media
and financial analysts. Internal processes assure that price-sensitive facts are published without delay in accordance withthe ad hoc publicity rules of the SIX Swiss Exchange.
At www.lem.com, detailed information is available, e.g., the Articles of Incorporation, interim and annual reports, investor
presentations, press releases as well as the financial calendar.
Contact for investors and media:
Julius Renk, CFO
Chemin des Aulx 8CH-1228 Plan-les-Ouates
or send an e-mail toinvestor@lem.com
phone: +41 22 706 12 50
10 Key changes expected in 2014
The Ordinance against Excessive Compensation with respect to Listed Stock Corporations was published on 20 November 2013. The Ordinance entered into force on 1 January 2014, subject to transitional provisions, and applies until the
Swiss Federal Parliament legislates. LEM implements the requirements in accordance with the timeline specified in the
Ordinance and will comply earlier than required where practical.

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24

Compensation Report
The future of LEM depends on our ability to attract, develop and retain talented people. Among the many measures we
use to achieve this ambition are competitive remuneration policies for our Executive Management. Our compensation
policies are based on performance and LEM's emphasis on creating value for its shareholders. To this end, our compensation policies are designed to be aligned with shareholders' interest.
In brief:– – Core principles
	LEM's compensation policies are based on performance and the creation of long-term value for shareholders. The
compensation policies are approved by the Board of Directors upon recommendation by the Nomination & Compensation Committee (NCC) and reviewed on an annual basis. All fixed and variable compensation is paid in cash.
– – Compensation of the Board of Directors
	The compensation of the Board of Directors consists exclusively of a fixed fee paid in cash. There is no additional variable compensation. The total compensation for the Chairman and the members of the Board of Directors depends on
the amount of responsibility and all work related to the Board of Directors membership such as Committee activity.
– – Compensation of the Executive Management
	In order to encourage and reward results that contribute to the sustainable long-term success of LEM, the total compensation of the Executive Management consists of three elements: base salary, bonus according to the LEM incentive
system (LIS) and nonwage compensation. The target-setting process for the LIS is carried out on an annual basis andincludes quantitative and qualitative performance criteria, such as financial results of LEM.
– – Changes to the compensation policies
	In 2013/14 we have formally adjusted the policies in order to increase understandability and enhance communication
with Management and employees.
	At the next ordinary shareholders' meeting, shareholders will be asked to approve proposed changes to the Articles ofIncorporation in order to comply with the “Ordinance against Excessive Compensation in Public Corporations.” Theproposal is available on our website, as well as documents explaining the changes in detail.
1 Board of Directors
1.1 General principles for compensation of nonexecutive Directors
Compensation for the Board of Directors is approved by the Board of Directors upon recommendation by the NCC. The
remuneration of the Board of Directors is a fixed cash payment and is reviewed on an annual basis. The remunerationcompensates for the personal responsibility and exposure as a nonexecutive member of the Board of Directors and all
work related to the Board of Directors membership. There is neither an additional variable compensation nor any participation in an equity-based compensation plan. Each member of the Board of Directors shall be a shareholder of LEM.
The number of shares to be acquired on the market within a period of three years after joining the Board of Directors shallreach a value of approximately three annual fixed compensations. Trading with LEM shares has to respect LEM's disclosure and insider-trading policy.
1.2 Remuneration of nonexecutive Directors
The Board of Directors has decided to adopt a remuneration scheme with a fixed fee paid in cash in the amount of CHF
200'000 for the Chairman, CHF 100'000 for the Vice Chairman and CHF 80'000 for each member. Committee activity
will be compensated with CHF 40'000 for the Committee's chairman and with CHF 20'000 for its members.
In 2013/14, additional fees totaling CHF 30'000 were awarded to Andreas Hürlimann (CHF 15'000) and to Peter Rutishauser(CHF 15'000) for additional efforts of the NCC with regard to the implementation of the requirements of the “Ordinanceagainst Excessive Compensation in Public Corporations.”
2013/14
In CHF thousands

Annual salary

Additional fees

260
160
100
100
120
740

15
15
0
0
0
30

Andreas Hürlimann 1, 6, 7
Peter Rutishauser 2, 5, 8
Ilan Cohen 8
Norbert Hess 4
Ueli Wampfler 3
Total

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25

2012/13
In CHF thousands

Annual salary

Additional fees

200
100
80
100
150
110
740

0
20
95
0
15
0
130

Felix Bagdasarjanz
Ilan Cohen 4
Andreas Hürlimann
Anton Lauber 6Peter Rutishauser 2, 5
Ueli Wampfler 3
Total
1

Chairman of the Board
Vice Chairman of the Board
3
Chairman of the Audit & Risk Committee
4
Member of the Audit & Risk Committee
5
Chairman of the Nomination & Compensation Committee
6
Member of the Nomination & Compensation Committee
7
Chairman of the Strategy Committee
8
Member of the Strategy Committee
12Compensation of former members
In financial year 2013/14, no compensation was paid to former members of the Board of Directors.
1.3 Shareholdings of nonexecutive Directors
31.3.201431.3.2013

Number ofshares held

Number ofoptions held

Board of Directors
Andreas Hürlimann

724

Peter Rutishauser
Ilan Cohen
Norbert Hess
Ueli Wampfler
Felix Bagdasarjanz
Anton Lauber
Total

2'606
140
0
30'500
N/A
N/A
33'970In number of shares/options

Number ofshares held

Number ofoptions held

0

505

0

0
0
0
30'000
N/A
N/A
30'000

2'606
140
N/A
28'000
1'736
424
33'411

0
0
N/A
10'0000
0
10'000

Ueli Wampfler has acquired 30'000 options on LEM shares from the shareholder group Studer/Chavonay.

LEM | Annual Report 2013/14

26

2 Executive Management
2.1 General principles for compensation of Executive Management
Remunerations for the Executive Management are approved by the Board of Directors upon recommendation by the CEO
and the NCC. The remuneration of the CEO is proposed by the Chairman for approval by the Board of Directors. The
remuneration of the Executive Management is reviewed on an annual basis. The total annual compensation is part of the
manager's contract.
The total compensation for the Executive Management consists of three elements:
1. Base salary
2. Bonus according to the LEM Incentive System (LIS)	LIS part 1: short-term bonus related to the individual's function and responsibility
	LIS part 2: long-term bonus related to the financial performance of LEM Group
3. Nonwage compensation
Total compensation shall be in line with the market for comparable industrial companies taking into account the various
remuneration levels in each different function. The ratios between salary, variable compensation and nonwage compensation shall reflect sectorial and functional market practice. Benchmarking is carried out periodically.
2.1.1 Base salary of Executive Management
Base salaries are fixed amounts of cash paid monthly.
2.1.2 Bonus of Executive Management
LEM Incentive System
The target-setting process for the LEM Incentive System (LIS) is part of the LEM performance management and is carriedout on an annual basis. All bonus payments are made in cash and after the finalization of the respective year-end closing
based on the annual accounts and the personal performance review. Objectives and performance evaluation are preparedby the Chairman of the Board of Directors for the CEO, by the Audit & Risk Committee (ARC) for the CFO and by the NCC
for other Executive Managers. The final approval is given by the Board of Directors.
LIS part 1: short-term bonus related to the individual's function and responsibility
The maximum value of the annual short-term bonus related to LIS part 1 amounts to 35% of the base salary for the Executive Management, 30% for the CFO and 60% for the CEO.
The number of objectives has to be large enough to allow the manager to reach a fair level of bonus rewarding his results evenunder changed business conditions. Since the degree of achievement of set objectives has to be evaluated at the end of theperiod, a clear understanding of the metrics to be applied has to be established at the time of target setting and kept constantfor the whole period. For every criterion, the curve between minimum and maximum bonus level has to be defined. Ambitious
but achievable objectives shall be set as target, at which 80% of the respective maximum amount shall be attributed.
In order to guarantee consistency of the target-setting process within LEM group, the key objectives for the financial year
will be defined by the CEO together with Executive Management at the beginning of each business year.
LIS part 2: long-term bonus related to the financial performance of LEM group
The LIS part 2 is an annual bonus long-term which is based on the performance of LEM evaluated over a period of threeconsecutive years. The performance criterion is the cumulated economic value added (EVA) achieved over these threefinancial years. The definition of the EVA objective takes place at the beginning of year one and the evaluation of the performance at the end of year three. Once the forward-looking EVA objective is defined, the EVA objective remains unchanged
over the period of three years. Every year, the new three years objective for the cumulated EVA is defined and kept
unchanged over the respective three years period. The payout takes place every year based on the comparison between
the EVA objective defined three years before and the performance achieved at the end of the three years period.
The new forward-looking EVA objective is approved annually by the Board of Directors based on a proposal by the NCC
and following the annual closing. The proposal of the new objective has to be presented in the context of the historicalperformance and the respective three-year financial plan of LEM.
The maximum value of the annual long-term bonus related to LIS part 2 amounts to 25% of the base salary for the Executive Management, 20% for the CFO and 40% for the CEO.
The calculation of the LIS part 2 shows a 34% attribution for financial year 2013/14. Given LEM's record performance infinancial year 2013/14, the Board of Directors increased the amount and awarded a discretionary 44% to Management,
bringing the total LIS part II attribution to 88%.
LEM | Annual Report 2013/14

27

2.1.3 Nonwage compensation of Executive Management
Nonwage compensation includes in particular pension plans (retirement benefits). LEM has a policy to limit nonwage compensation to what may be required for the job holder as a work instrument to fulfill his/her function according to generally
accepted local usages.
Executive Management benefits from the Swiss pension plan, a defined contribution plan that provides retirement benefits
and risk insurance for death and disability. Under IFRS, this plan is considered as a defined benefit plan. The insured salaryis based on LPP Swiss law and is without limitation on the amount. The pension fund is funded by contributions from thecompany and the insured employees. The average contribution ratio is 43% by the employee and 57% by the company.
2.2 Remuneration of Executive Management
2013/14
In CHF thousands

François Gabella, CEO
Executive Management (excl. CEO)
Total Executive Management

Annual salarycompen-sation

Annual bonus
compensation 1

Company's
contribution topension fundTotal­c ompen­s ation

480
1'257
1'737

414
697
1'110

59
113
173

953
2'067
3'020

Annual salarycompen-sation

Annual bonus
compensation 1

Company's
contribution topension fundTotal­c ompen­s ation

450
1'248
1'698

329
583
912

49
112
161

828
1'943
2'770

2012/13
In CHF thousands

François Gabella, CEO
Executive Management (excl. CEO)
Total Executive Management
1 

The annual bonus compensation is shown with the accrual for the performance of the corresponding year, to be paid out in the following year. All other elements are shown as paid out.

Compensation of former members
In financial year 2013/14, no compensation was paid to former members of the Executive Management.
2.3 Shareholdings of Executive Management
Executive Management

31.3.2014

In number of shares/options

François Gabella, CEO
Julius Renk, CFO
Luc Colombel, Vice President, Automotive
Hans-Dieter Huber, Vice President, Industry
Jean-Marc Peccoux, Vice President, R&D and IP
Simon Siggen, Vice President, Operations
Total
As per 10 April 2014, the CEO holds 400 shares of LEM Holding SA.

LEM | Annual Report 2013/14

28

31.3.2013

Number ofshares held

Number ofoptions
heldNumber ofshares held

Number ofoptions
held

150
140
2'100
1'265
1'500
1'100
6'255

0
0
0
0
0
0
0

360
40
2'100
1'265
1'500
1'100
6'365

0
0
0
0
0
0
0

Hybrid Loader
A hybrid loader boosts fuel economy by
up to 25% and increases the system
performance.
The special internal combustion engine (1) drives an AC generator (2) and hydraulic pumps for the bucket moves. The
generator converts the engine's mechanical energy into electrical energy, which is converted by the inverter (drive) (3) tosupply the electrical motor (4) to drive the transmission (5)and the wheels. The drive also inverts the main battery voltage into an AC voltage applied to the electrical motor andmanages the electrical motor consumption based on theoperator requirements. The energy may come either from thegenerator or the battery.

HTFS 800-P

The hybrid electric drive recaptures energy when the operator lets off the accelerator. This reduces the load to theengine reducing fuel consumption at the same time. In addition, this technology is less than half as loud as a conventional loader, both inside and outside the cab.
In the regenerative front end, the motor generates energy,
which is converted to a DC voltage necessary to charge thebattery cells (6).
The currents are measured with current transducers (A) tocontrol the inverter. The accuracy of the current measurements allows to maximize the motor torque and overall motor
efficiency. The transducers also enable the control system tosense overcurrent situations signaling a potential defect.

6
A

1

2

3
5
4

A
1
2
3
4
5
6

LEM | Annual Report 2013/14

29

HTFS 800-P
Diesel engine
Generator
InverterElectrical motor
Transmission
BatteryFinancial Review
Highlights– – At CHF 45.6 million, LEM shows the best net profit for the year in its history (18.6% of sales)– – All-time high operational profitability at 22.7% on 245.6 million sales– – Low tax rate of 16.0%– – Strong free cash flow of CHF 31.9 million– – Increase in inventories of CHF 4.9 million to facilitate on-time deliveries– – Proposed dividend pay-out of CHF 45.6 million, corresponding to 99.8% of net earnings for 2013/14

In CHF thousands, %2009/102010/112011/12*2012/13**2013/14

Sales
Sales growth LEM Group
Sales growth Industry
Sales growth Automotive

185'512(5.7%)(6.1%)(1.0%)

296'203
59.7%
59.7%
59.8%

236'334(20.2%)(23.6%)
19.1%

234'953(0.6%)(4.0%)
24.8%

245'638
4.5%
5.5%(1.2%)

Gross margin
Gross margin in % of sales

80'43643.4%

126'299
42.6%

92'29939.1%

98'55741.9%

115'371
47.0%

Sales, General and Administration expense
SG&A in % of sales(43'088)(23.2%)(51'855)(17.5%)(44'716)(18.9%)(43'008)(18.3%)(45'202)(18.4%)

R&D expense
R&D in % of sales(11'542)(6.2%)(14'031)(4.7%)(13'412)(5.7%)(14'722)(6.3%)(14'441)(5.9%)

Operational EBIT
Operational EBIT growth
Operational EBIT in % of sales
Operational EBIT as % of sales Industry
Operational EBIT as % of sales Automotive

25'806(11.7%)
13.9%
15.7%(6.9%)

60'413134.1%
20.4%
21.1%
12.0%

34'171(43.4%)
14.5%
14.3%
15.4%

40'828
19.5%
17.4%
18.2%
12.6%

55'728
36.5%
22.7%
24.1%
14.0%

Additional stock option plan costs/income(8'285)(5'426)

315

0

0

EBIT
Financial result
Income tax
Effective tax rate

17'521(1'355)(5'635)(34.9%)

54'987(4'622)(10'722)(21.3%)

34'486(1'962)(4'037)(12.4%)

40'828(1'514)(6'914)(17.6%)

55'728(1'379)(8'709)(16.0%)Net profit for the year
Net profit growth
Net profit in % of sales

10'532(56.0%)
5.7%

39'643276.4%
13.4%

28'487(28.1%)
12.1%

32'40013.7%
13.8%

45'641
40.9%
18.6%*	Restatement after changes in classifications from 2011/12 on. The 2011/12 restatement lowered gross margin as percentage of sales by (1.8%pt),
decreased SG&A as percentage of sales by 2.0%pt and increased R&D as percentage of sales by (-0.2%pt).
**	Restatement following IAS19R application (pensions).

Sales
LEM's sales increased by 4.5% to CHF 245.6 million in financial year 2013/14. At constant exchange rates, sales increasedby 7.1%. The unfavorable currency impact stems from the depreciation of the Japanese yen and the U.S. dollar against
the Swiss franc, on a yearly average.
Operational profitability
The gross margin increased 5.1 percentage points to 47.0%. The main reasons for this development are continued operating savings in cost of goods sold. In financial year 2012/13 the gross margin included a restructuring charge of CHF 1.8
million linked to the relocation of production lines to Bulgaria. Most of the provision has been used in financial year 2013/14(CHF 1.3 million); the outstanding amount in the balance sheet of CHF 0.5 million is expected to be used in financial year
2014/15.
Our pension fund has decided to decrease the pension conversion ratio in the future, generating a positive one-off impact
of CHF 1.3 million on EBIT.
The EBIT margin was at an all-time high at 22.7%. We achieved this result thanks to a strong market position, continued
operational excellence and low-cost manufacturing.
LEM | Annual Report 2013/14

30

Net sales

Gross margin

300

130

275

120

250

110

225

100

In CHF millions% of sales

50%

44%

41%

50

100

40

75

38%

20

25

30%

40
30

25%

20

30

50

35%

50

60

125

40%

% of sales

60

70

150

70

47%

80

175

20%

10

10
0

0

09/10

10/11

11/12

12/13

13/14

9%
8%

12

7%
6%

9

6

0%

0
11/12

12/13

In CHF millions

35%% of sales

20%
18%

35
30
25
20

10
5
0
11/12

12/13

13/14

60

30%

% of sales

35%

30%

45
25%

40

25%

40
35

20%

20%

30
25

25

15%

20

15%

20
15

15
10%

10

10%

10
5

5
5%

0
10/11

11/12

12/13

5%

0
09/10

13/14

10/11

11/12

12/13

Net financial assets

Equity and equity ratio

40

100

25

60

12%

20

50

4%

0

60%

70

50%
40%

40

15

5

70%

80

14%

10

80%

% of assets

90

30

6%

13/14

In CHF millions

35

8%

13/14

50

16%

10%

15

12/13

55

In CHF millions

40

11/12

In CHF millions% of sales

09/10

Net earnings

10/11

EBIT

45

13/14

15%
09/10

50

30

0

13/14

55

35

1%

10/11

12/13

60

4%

2%

3

65

5%

3%

09/10

11/12

In CHF millions% of sales

10/11

10/11

Operational EBIT

In CHF millions

09/10

35%
09/10

R&D expenses

45

In CHF millions

90

200

15

Operating expenses (incl. R&D exp.)

In CHF millions

30%

30

20%

20

10%

10

0%

0
09/10

10/11

11/12

12/13

13/14

09/10

10/11

LEM | Annual Report 2013/14

31

11/12

12/13

13/14

Taxes
LEM has taken the strategic decision not to increase its R&D activities at LEM China. As a consequence LEM considers
that it will not fulfill the conditions for the High and New Technology Enterprise (HNTE) status in 2014. This has generated
a negative impact of (0.6) percentage points (for one quarter of the financial year) on the expected tax rate. On the other
hand, this has generated a one-off positive impact of 2.9 percentage points through a revaluation of the deferred tax
assets. Even taking into account these last developments in China, LEM recorded a substantial reduction of the effective
tax rate over the last five years.
Net profit for the year
Net profit for the year was CHF 45.6 million, 40.9% higher than last year. Net profit represented 18.6% of sales, an alltime high for LEM. This even outperforms the financial year 2010/11 when sales amounted to CHF 296.2 million and net
profit for the year was CHF 39.6 million.

In CHF thousands, %31.3.201031.3.2011

31.3.2012*

31.3.2013**

31.3.2014

Balance Sheet analysis
Net working capital
Fixed assets
Noncurrent liabilities
Net operating assets
Net cash/(debt)
EquityEquity ratio
DSO – Days of Sales Outstanding
DIO – Days of Inventory Outstanding
DPO – Days of Payables Outstanding

23'99835'719(6'092)53'62429'75483'379
62.9%
75
76
76

39'39137'508(6'599)70'30026'61396'913
59.8%
66
73
59

29'07337'683(5'316)61'440
18'12179'561
60.0%
58
67
41

23'18336'771(3'534)56'42027'62984'049
61.9%
60
63
41

38'70737'803(6'887)
69'622
24'581
94'203
65.1%
65
80
49

*	Restatement after changes in classifications from 2011/12 on**	Restatement following IAS 19R application (pensions).

Balance sheet
In financial year 2013/14, LEM has increased its net working capital by CHF 15.5 million from a somehow overoptimized
2012/13 net working capital of CHF 23.2 million to a more sustainable CHF 38.7 million. The development can mainly be
explained by the increase of inventories by CHF 4.9 million in order to be able to better react to short-term demand andthe income tax payable decrease of CHF 4.7 million.
Net financial assets (cash minus financial liabilities) decreased from CHF 27.6 million to CHF 24.6 million. On 31 March
2014, LEM had no interest-bearing financial liabilities.
The balance sheet has further strengthened and presents an equity ratio of 65.1% (prior year 61.9%).
Cash flow
Free cash flow of CHF 31.9 million slightly decreased compared to prior year (CHF 35.8 million), given the net working
capital developments.
Dividend
The proposed dividend of CHF 40 per share compares to an earnings per share of CHF 40.09 and represents a payout
ratio of 99.8%. It is CHF 10 higher than last year and expresses the confidence in LEM's financial strength.

LEM | Annual Report 2013/14

32

LEM Group
Consolidated Financial Statements

Consolidated Statement of Financial Position . . . . . . . . 35
Consolidated Income Statement . . . . . . . . . . . . . . . . . . . . . . 36
Consolidated Statement of ­C omprehensive Income. . .

37

Consolidated Statement of Changes in Equity .. . . . . . . .

37

Consolidated Cash Flow Statement . . . . . . . . . . . . . . . . . . . 38
Notes to the Consolidated Financial Statements . . . . . 39
Auditor's Report .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

LEM | Annual Report 2013/14

33

LEM | Annual Report 2013/14

34

Consolidated Statement of
Financial Position
AssetsIn CHF thousands

Current assets
Cash and cash equivalents
Accounts receivable
Inventories
Income tax receivable
Other current assets
Total current assets
Noncurrent assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Other noncurrent assets
Total noncurrent assets

Notes

31.3.201431.3.2013*

01.4.2012*

24'581
48'29028'495802
4'704
106'872

27'62943'08023'619
1'264
3'521
99'11321'12142'14026'605
2'009
2'956
94'831

4'103
25'180
5'755
2'765
37'803

3'828
25'373
5'900
1'669
36'771

3'696
24'173
6'657
495
35'021

144'675

135'884

129'852

Notes

31.3.201431.3.2013*

01.4.2012*10

19'483
16'133
6'579
1'070

17'03814'900
11'3193'668

319
43'584

1'377
48'301

17'86314'855
8'244
3'043
3'000
632
47'637

2'886
3'607
394
6'887

1'250
1'671
613
3'534

457
3'614
1'644
5'715

50'47151'83553'352

570
(745)
9'298
85'081
94'203570(765)
12'25071'99384'049570(1'984)
11'42566'48976'500

144'675

135'884

129'852

4
5
6, 21

18
7
8
9, 21

Total assets
Liabilities and equity
In CHF thousands

Current liabilities
Accounts payable
Accrued expenses
Income tax payable
Current provisions
Current financial liabilities
Other current liabilities
Total current liabilities
Noncurrent liabilities
Noncurrent provisions
Deferred tax liabilities
Other noncurrent liabilities
Total noncurrent liabilities

11
24
12

11
18
12, 21

Total liabilities
EquityShare capital
Treasury shares
Reserves
Retained earnings
Total equity
Total liabilities and equity

13
13
13

* Restatement following IAS 19R application (pensions)

LEM | Annual Report 2013/14

35

Consolidated Income Statement
April to March
In CHF thousands

Notes

2013/14245'638

234'953

Cost of goods sold
Gross margin14(130'267)
115'371(136'396)
98'557

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

14
14
14

(24'526)(20'881)(14'441)(64)
270
55'728(22'389)(20'762)(14'722)(153)
296
40'828Financial expense
Financial income
Exchange effect

15
16
17

(121)
133
(1'390)(126)
96(1'484)54'35039'314(8'709)(6'914)45'64132'400

40.09

28.48

Sales

Profit before taxes
Income taxes

18

Net profit for the year

2012/13** Restatement following IAS 19R application (pensions)

The results of both years are derived from continuing operations.
Earnings per share, in CHF
Basic & diluted earnings per share

19

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

LEM | Annual Report 2013/14

36

Consolidated Statement of­Comprehensive Income
April to March
In CHF thousands

Notes

2013/142012/13*45'64132'400(2'933)(2'933)

2'045
2'045

1'886
(421)
1'465

(147)
145
(2)

Other comprehensive income/(loss) for the period, net of tax(1'468)2'042

Total comprehensive income for the period
Attributable to shareholders

44'17344'17334'44234'442

Net profit for the period recognized in the income statement
Other comprehensive income to be reclassified to profit andloss in subsequent periods
Currency translation difference
Total other comprehensive income to be reclassified to
profit and loss in subsequent periods
Other comprehensive income not to be reclassified to
profit and loss in subsequent periods
Remeasurement gains/(losses) on defined benefit plans
Income tax
Total other comprehensive income not to be reclassified to
profit and loss in subsequent periods

21
18* Restatement following IAS 19R application (pensions)

Consolidated Statement of
Changes in Equity
Attributable to shareholders
In CHF thousands

1 April 2012
IAS 19R adjustment
1 April 2012*
Net profit of the year
Other comprehensive income/(loss)
Total comprehensive income
Dividends paid
Movement in treasury shares
31 March 2013 / 1 April 2013*
Net profit of the year
Other comprehensive income/(loss)
Total comprehensive income
Dividends paid
Movement in treasury shares
31 March 2014

Notes

Share
­c apital

TreasurysharesCapitalreserve

Translation
reserve570(1'984)13'927(2'502)570(1'984)13'927(2'502)

2.2

13, 21

2'045
2'045

13
570

1'219
(765)

(1'219)12'70813, 21(457)(2'933)(2'933)

13
13
570

19
(745)

(19)
12'688(3'390)Retainedearnings

Total
equity69'550 79'561(3'061) (3'061)
66'489 76'500
32'400 32'400
(2)
2'042
32'398 34'442(28'374) (28'374)
1'480
1'480
71'993 84'049
45'641 45'641
1'465(1'468)47'10644'173(34'157) (34'157)
138
138
85'081 94'203* Restatement following IAS 19R application (pensions)

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

LEM | Annual Report 2013/14

37

Consolidated Cash Flow Statement
April to March
In CHF thousands

Notes

2013/142012/13*54'35039'31414(1'591)
7'523
0
220
179
287
30
(44)
(11'684)
49'283(5'264)(8'156)
4'733(8'687)
40'596

26
1'302
7'664
374
189
1'203
8
52
(53)
(5'638)44'441
4'199(296)(2'153)
1'750
46'191

7
8(7'275)(1'538)77(8'735)(7'180)(764)(2'466)(10'410)

13
13

138
(34'157)(34'019)

1'480(28'374)(3'000)(29'894)

Change in cash and cash equivalents(2'158)5'887

Cash and cash equivalents at the beginning of the period
Exchange effect on cash and cash equivalents
Cash and cash equivalents at the end of the period

27'629(890)
24'581

21'121621
27'629Cash flow from operating activities
Profit before taxes
Adjustment for noncash items and taxes paid
– – Net financial result– – Derivative financial instruments revaluation– – Depreciation and amortization– – Impairment loss
– – Gain/loss on disposal of fixed assets– – Increase (+)/decrease (-) of provisions and allowances– – Movement in pension
Interest received
Interest paid
Taxes paid
Cash flow before changes in net working capital
Change in inventory
Change in accounts receivable and other current assets
Change in payables and other current liabilities
Cash flow from changes in net working capital
Cash flow from operating activities
Cash flow from investing activities
Investment in fixed assets
Investment in intangible assets
Increase (-)/decrease (+) in other assets
Cash flow from investing activities
Cash flow from financing activities
Treasury shares acquired (-)/divested (+)
Dividends paid to the shareholders of LEM Holding SA
Increase (+)/decrease (-) in financial liabilities
Cash flow from financing activities* Restatement following IAS 19R application (pensions)

LEM | Annual Report 2013/14

38

Notes to the Consolidated
Financial Statements
1 General information
LEM Group (the Group) is a market leader in providing innovative and high-quality solutions for measuring electricalparameters. Its core products – current and voltage transducers – are used in a broad range of applications in drives &welding, renewable energies and power supplies, traction, high-precision, conventional and green cars businesses. The
Group has operations in thirteen countries and employs 1'241 people per 31 March 2014. The parent company of LEM
Group is LEM Holding SA (the Company), which is a limited company incorporated in Switzerland.
The financial year ends on 31 March (the year). The registered office is as follows: Avenue Beauregard 1, CH-1700 Fribourg. The Company has been listed on the SIX Swiss Exchange since 1986.
The Board of Directors approved the consolidated financial statements on 16 May 2014.
2 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 the International Accounting Standards Board (IASB)
and comply with Swiss law.
The consolidated financial statements have been prepared using the historical cost convention except that, as discussed
in the accounting policies below, certain items like derivatives are recorded at fair value.
The financial information is presented in thousands of CHF. The totals are calculated with the original unit amounts, which
could lead to rounding differences. These differences in thousands of units are not changed in order to keep the accuracyof the original data.
2.2 Adoption of new and revised International Financial Reporting Standards and Interpretations
New standards in 2013/14
In 2013/14, LEM Group introduced the following revised standards and interpretations:Standard or­i nterpretation

IAS 1
IAS 19IAS 27
IAS 28
IAS 36IFRS 7IFRS 10IFRS 11IFRS 12IFRS 13IFRIC 20
Amendments

Title

Effective date

ImpactPresentation of Items of Other Comprehensive Income –Amendments
Employee Benefits – Revised
Separate Financial Statements – Revised
Investments in Associates and Joint Ventures – Revised
Impairment of Assets – Recoverable Amount Disclosuresfor Non-Financial Assets – Amendments to IAS 36
Disclosures – Offsetting Financial Assets and Financial
Liabilities – Amendments
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Fair Value Measurement
Stripping Costs in the Production Phase ofa Surface Mine
Annual Improvements to IFRS – 2009-2011 Cycle

1 July 2012

Immaterial

1 January 2013
1 January 2013
1 January 2013
1 January 2014

See below
N/A
N/A
Immaterial

1 January 2013

Immaterial

1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013

Immaterial
N/A
N/A
Immaterial
N/A

1 January 2013

Immaterial

Impact of IAS 19 Revised
The adoption of IAS 19R – Employee benefits (revised) had significant impacts on LEM Group consolidated financial
statements:– – Elimination of the corridor approach: the recognition of actuarial gains and losses are recognized immediately in othercomprehensive income.
– – Calculation of pension costs: the net interest on the net defined benefit liability (asset) replaces the actual return on plan
assets from one side and the calculation of the interest expense on defined benefit obligation on the other side. It is
now presented in the financial result instead of included in the operating profit.
– – Risk sharing: the increased employee contributions based on the age of the employees are now taken into account in
the defined benefit obligation calculation.
This adoption led to the restatement of prior periods according to IAS 8.
The new principles are detailed in note 2.15.

LEM | Annual Report 2013/14

39

The impacts on the set of consolidated financial statements are the following:
Consolidated Income Statement for the year ended 31 March 2013
In CHF thousands

FY 2012/13
RecordedPensionadjustments

FY 2012/13
Restated

Cost of goods sold
Sales expense
Administration expense
Research & development expense
Operating profit
Financial expenses
Profit before taxes
Income taxes
Net profit for the year
Basic and diluted earnings per share(136'309)(22'355)(20'720)(14'676)
41'036(101)
39'547(6'931)32'616
28.67

(86)
(34)
(42)
(45)
(208)
(25)
(233)
17
(216)
(0.19)(136'396)(22'389)(20'762)(14'722)40'828(126)
39'314(6'914)32'40028.48

Consolidated Statement of Comprehensive Income for the year ended 31 March 2013
In CHF thousands

FY 2012/13
RecordedPensionadjustments

FY 2012/13
Restated

32'6160
0
2'045
34'661

(216)
(147)
145
0
(217)

32'400
(147)
145
2'045
34'44231.3.2012
Published

Pensionadjustments

1.4.2012
Restated

3'368
3'485

(2'873)
211

495
3'696

642
4'217

1'002
(603)

1'644
3'614

69'550(3'061)

66'48931.3.2013
Published

Pensionadjustments

31.3.2013
Restated

5'924(4'255)

1'669

2'647

(976)

1'671

75'272(3'279)71'993

FY 2012/13
RecordedPensionadjustments

FY 2012/13
Restated

79'56132'616
2'045
34'66187'328(3'061)
(216)
(2)
(217)
(3'278)76'50032'400
2'042
34'44284'049Net profit for the year
Remeasurements employee benefits
Taxes on other comprehensive income
Currency translation difference
Total comprehensive income for the year

Consolidated Statement of Financial Position as at 1 April 2012
In CHF thousands

AssetsOther noncurrent assets\Pension assets – Noncurrent
Deferred tax assets
Liabilities
Other noncurrent liabilities\Pension liabilities
Deferred tax liabilities
EquityRetained earnings

Consolidated Statement of Financial Position as at 31 March 2013
In CHF thousands

AssetsOther noncurrent assets\Pension assets – Noncurrent
Liabilities
Deferred tax liabilities
EquityRetained earnings

Consolidated Statement of Changes in Equity at 31 March 2013
In CHF thousands

1 April 2012
Net profit of the period
Other comprehensive income
Total comprehensive income
31 March 2013

LEM | Annual Report 2013/14

40

Consolidated Cash Flow Statement at 31 March 2013
In CHF thousands

Profit before taxes
Adjustment for non-cash items and taxes paid
Cash flow from operating activities

FY 2012/13
RecordedPensionadjustments

FY 2012/13
Restated

39'547
4'894
46'191

(233)
233
0

39'314
5'126
46'191

Impact of IAS 36 early adoption
The Group has adopted before the effective date the amendment to IAS 36 – Impairment of Assets. This did not result inany changes in the disclosure.
Future standards
LEM Group will adopt the following revised standards and interpretations in the future:
Standard or­i nterpretation

IAS 19IAS 32
IAS 39IFRS 9Amendments
to IFRS 7
and IFRS 9
Amendments to
IFRS 10, IFRS 12
and IAS 27
IFRS 14IFRIC 21
Amendments
Amendments

Title

Effective date

Employee Benefits – Amendments (Defined Benefit Plans:
Employee Contributions)
Offsetting Financial Assets and Financial Liabilities – Amendments
Novation of Derivatives and Continuation of Hedge Accounting –Amendments to IAS 39
Financial Instruments – Classification and Measurement

1 July 2014
1 January 2014
1 January 2014

Mandatory Effective Date and Transition Disclosures

Not before
January 2017
1 January 2015

Investment Entities

1 January 2014

Regulatory Deferral Accounts
LeviesAnnual Improvements to IFRS – 2010-2012 Cycle
Annual Improvements to IFRS – 2011-2013 Cycle

1 January 2016
1 January 2014
1 July 2014
1 July 2014

The Group will implement the relevant new standards when they become effective, i.e., for annual periods beginning on
or after the effective date stated above. The impact from applying above standards and interpretations has not been
evaluated but is expected to have no material effects on the capital, financial position, income or cash flow situation of
LEM.
2.3 Summary of critical accounting estimates and judgments
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions
that affect the reported amounts of revenues, expenses, assets, liabilities and related disclosures at the date of the financial statements. These estimates are based on management's best knowledge of current events and actions that the Groupmay undertake in the future. However, actual results could differ from those estimates. The key assumptions concerning
the future and other key sources of estimation uncertainty at the reporting date are discussed below.
Impairment of goodwill, other intangible assets and property, plant and equipment
The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy. The
recoverable amounts of cash-generating units have been determined based on value-in-use calculations. Other intangible
assets and property, plant and equipment are assessed according to the same rules. These calculations require the use 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 specific criteria 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 basedon assumptions.

LEM | Annual Report 2013/14

41

Income and other taxes
The Group operates in multiple jurisdictions with complex legal and tax regulatory environments. Some of these positions
are inherently uncertain and include those relating to transfer pricing matters and the interpretation of income tax laws
applied to complex transactions. The Group periodically reassesses its tax positions. Changes to the financial statement
recognition, measurement, and disclosure of tax positions are based on management's best judgment given any changes
in the facts, circumstances, information available and applicable tax laws.
Employee benefits
The standard requires that certain assumptions are made in order to determine the amount to be recorded for retirement
benefit obligations and pension plan assets, in particular for defined benefit plans. These are mainly actuarial assumptions
such as expected salary increase, employee turnover and discount rates. Substantial changes in the assumed development of any of these variables may significantly change LEM Group's retirement benefit obligation and pension plan assets.
Valuation of deferred tax assets
The carrying amount of deferred tax assets is reviewed on each balance sheet date and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
2.4 Basis of consolidation
The consolidated financial statements are comprised of LEM Holding SA and of its subsidiaries.
Subsidiaries
Subsidiaries are those entities over whose the Group has the control. Control is when the Group is exposed, or has rights,
to variable returns from its involvement with subsidiary and has the ability to affect those returns through its power overthe subsidiary to direct the relevant activities.
Business combinations are accounted for using the acquisition method. Companies that are acquired or sold during thefinancial year are included in the Group financial statements up to the date of transfer of control. The costs of purchasing
a company are determined as the sum of the fair value of the assets that are to be paid to the seller and the obligations
that are entered into, or acquired, on the date of purchase. Identifiable acquired assets, liabilities and contingent liabilities
are recognized at their fair value as of the date of their acquisition. The Group's share of the purchase price that exceeds
the fair value of the identifiable net assets is recognized as goodwill. The Group's share of the fair value of the identifiable
net assets that exceeds the purchase price is shown as gain on bargain purchase on the income statement.
Intragroup assets and liabilities as well as income and expenses are set off against each other.
Also intragroup unrealized profits on inventories and fixed assets are eliminated.
Associates
Investments in associated undertakings are accounted for using the equity method. These are undertakings over which
the Group exercises significant influence, but which it does not control.
No associated undertakings exist as per 31 March 2014 and 31 March 2013.
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 the currency of the primary economic environment in which they
operate.
Foreign currency translation
All assets and liabilities in the balance sheets of subsidiaries that are denominated in the respective 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 average exchange rate for the year. The resulting translation differences are recognized in other comprehensive income. When a company is sold, the cumulative translation differences recognized in other comprehensive
income are transferred to the income statement.
The following table summarizes the principal exchange rates that have been used in the translation process.

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42

Currency

Income statement of
2013/14
Average rate in CHF

Income statement of
2012/13
Average rate in CHF

Balance sheet
31.3.2014
Year-end rate in CHF

Balance sheet
31.3.2013
Year-end rate in CHF

BGN
CNY
DKK
EUR
GBP
JPY
RUB
USD

0.629
0.149
0.165
1.230
1.458
0.0092
0.028
0.918

0.626
0.149
0.162
1.210
1.486
0.0114
0.030
0.940

0.623
0.143
0.163
1.219
1.474
0.0086
0.025
0.885

0.621
0.151
0.163
1.216
1.442
0.0101
0.031
0.949

Foreign currency transactions
Foreign currency transactions are translated at the market rate prevailing at that time. The monetary assets and liabilities
are translated at the year-end rates while nonmonetary assets are translated at historical rates. Gains and losses arisingfrom the transactions as well as from the translation of monetary assets and liabilities in foreign currencies are recorded
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 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, cash at bank and cash at postal accounts and bank deposits withan original maturity of three months or less from the date of acquisition, that are readily convertible to known amounts ofcash, net of cash overdrafts at sight.
2.7 Inventories
Inventories are stated at the lower of cost or net realizable value. The first-in, first-out (FIFO) method is applied. The costof finished goods and work in process comprise raw materials, direct labor costs and other costs that can be directly allocated, such as production overhead expenditures. Financing costs are not included in inventories. Provisions are established when:– – there is an objective indication that the Group will not be able to sell the goods in due time;– – the goods are damaged, in excess or obsolete;– – the net realizable value is below cost.
2.8 Property, plant and equipment
Property, plant and equipment is stated at cost of acquisition or construction, less depreciation and any impairment. Depreciation is calculated on a linear basis on the following estimated useful life:
Land

nil

Buildings
Machinery and equipment
Tools and moulds
VehiclesIT equipment

20 –40 years
5–8 years
2–5 years
3–5 years
3–5 years

Repairs and renewals are charged to the income statement when the expense is incurred. Subsequent expenditure on an
item of property, plant and equipment is capitalized only when it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can be measured reliably.
2.9 Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net assets of
the acquired subsidiary at the date of acquisition. Goodwill on acquisitions is reported in the balance sheet as an intangible asset and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include
the carrying amount of goodwill relating to the entity sold.

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43

Research & development
Research costs are written off as incurred. An intangible asset arising from development should be recognized if, and only
if the Group can demonstrate the following:– – the technical feasibility of completing the intangible asset;– – Group intention to complete the intangible asset;– – ability to use or sell the intangible asset, the intangible asset will generate probable future economic benefits;– – the availability of adequate technical, financial and other resources to complete the development; and– – ability to measure the expenditure attributable to the intangible asset during its development reliably.
Such development costs are capitalized and written off over the life of the product or process.
Other intangible assets
Other intangible assets with definite useful lives are carried at cost less amortization and any impairment.
Expenditure on computer software, acquired patents, trademarks and licenses is capitalized and amortized using thestraight-line method over their useful lives, not exceeding five years.
2.10 Impairment of tangible fixed assets and ­i ntangible assets
Assets that are subject to depreciation and amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amountby which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's
fair value less cost to sell and value in use.
For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash-flows (cash-generating unit).
The value in use is calculated based on the estimated future cash-flows expected to result from the use of the asset andeventual disposal, discounted using an appropriate noncurrent interest rate.
Goodwill is tested for impairment annually (at 31 March) and when circumstances indicate that the carrying value may be
impaired. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Impairment losses relating to goodwill cannot be reversed in future years.
2.11 Financial assets
Financial assets comprise cash, receivables, accrued income, marketable securities and derivative financial instruments.
Initial recognition and measurement
At initial recognition, financial assets are designated into two categories, financial assets at fair value through profit andloss and loans and receivables.
Financial assets are initially recognized at fair value plus, in the case of a financial asset not at fair value through profit
and loss, directly attributable transaction costs.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification:– – financial assets at fair value through profit and loss (refer to note 2.12);– – loans and receivables which are non derivative financial assets with fixed or determinable payments that are not quoted
in an active market. Loans and receivables are subsequently measured at amortized cost using the effective interest
rate method, less impairment.
Accounts receivable are carried at original invoice amount less an allowance made for doubtful accounts based on areview of all outstanding amounts at the year-end. Allowances for doubtful accounts are established when there is anobjective indication that the Group will not be able to collect the amounts due. Allowances for doubtful accounts are written off when identified.
Other receivables are measured at amortised cost. The Group assesses at each reporting date whether there is any objective evidence that an asset or group of assets is impaired. Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant difficulties, default or delinquency in interest or principal payments.
The amount of the loss is measured as the difference between the assets' carrying amount and the present value of estimated future cash flows.

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44

2.12 Derivative financial instruments
The Group uses derivative financial instruments to hedge foreign exchange risks of forecasted transactions. Derivative
financial instruments can comprise forward exchange contracts and option-based structures.
Derivative financial instruments are initially measured at fair value and subsequently at fair value through profit and loss.
Any gains and losses arising from changes in fair value on derivatives are taken directly to the income statement whichmeans that the Group does not apply hedge accounting.
Derivative financial instruments are shown as part of other current assets and other current liabilities. In case the maturity
is more than one year, derivative financial instruments are recognized under other noncurrent assets or other noncurrent
liabilities.
2.13 Financial liabilities
Financial liabilities comprise bank loans, payables, accrued expenses and derivative financial instruments at the end of
the period.
All financial liabilities are recognised initially at fair value and, in the case of loans and payables, net of directly attributable transaction costs.
Financial liabilities that are due within 12 months after the balance sheet date are classified as current liabilities unlessthe Group has an unconditional right to defer settlement of the liability until more than 12 months after the balance sheet
date.
2.14 Leases
In the years under review LEM Group does not hold any finance lease.
Rentals payable under operating leases are charged to the income statement on a straight line basis over the lease term.
2.15 Employee benefits
The Swiss subsidiaries provide a defined benefit plan for employees; the other subsidiaries provide defined contributionplans. In both cases the charges are included in the related periods in the personnel expenses of the various functions
where the employees are located.
Defined benefit plan
The defined benefit obligation is determined annually by a qualified independent actuary. The obligation and costs of pension benefits are determined using the projected unit credit method. Service costs are part of personnel expenses andconsist of current service costs, past service costs and gains/losses from plan settlements. Past service costs are recognized at the earlier of the date when the plan amendment occurs, or when restructuring costs are recognized. They
include plan amendment and curtailment. Gains or losses on settlement of pension benefits are recognized when thesettlement occurs. Net interest is recorded in the financial result and is determined by applying the discount rate to thenet defined benefit liability/asset that exists at the beginning of the year. Actuarial gains and losses resulting from changes
in actuarial assumptions and experience adjustments are recorded in other comprehensive income as remeasurementsof employee benefits. The return on plan assets (excluding interest based on the discount rate) and any change in theeffect of an asset ceiling are also recorded in this line. In accordance with IFRIC 14, any assets resulting from surpluses
in defined benefit plans are limited to the value of the maximum future savings from reduced contributions.
Defined contribution plan
The subsidiaries abroad sponsor defined contribution plans based on local practices and regulations.
LEM Incentive System
The LEM Incentive System (LIS) consists of a part 1, which is related to the individual's and LEM Group annual performance, and a part 2, which is related to the long-term performance of LEM Group. The LIS part 2 is an annual bonus
which is based on the Economic Value Added (EVA) performance of LEM evaluated over the three previous fiscal years.
Both elements are cash settled and the bonus payments are made in the first quarter of the following fiscal year. The estimated payments are accrued for per year-end.
2.16 Provisions and contingent liabilities
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it isprobable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of theamount of the obligation.

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45

Warranty and customer claims
The Group recognizes the estimated liability to replace products still under warranty at the balance sheet date. This position is calculated based on past history of the level of repairs and replacements. Additional specific provisions are booked
when required.
Litigations and consumption taxes
The Group recognizes the estimated country and entity-specific risks relating to litigations with former personnel or direct
and indirect taxation.
Restructuring
A constructive obligation to restructure arises only when an entity has 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 compensatedfor terminating their services;– – the expenditures that will be undertaken; and– – when the plan will be implemented;
and raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or
announcing its main features to those affected by it.
Contingent liabilities
Contingent liabilities arise from past events where the outcome depends on future events. As the probability either cannot be measured reliably or the probability for a subsequent outflow lies below 50%, contingent liabilities are not recognized in the balance sheet but are described in the notes.
2.17 Share capital
LEM Holding SA has only ordinary registered shares. Dividends on ordinary shares are recognized in equity in the period
in which they are declared.
Treasury shares
Own equity instruments which are reacquired (treasury shares) are recognized at cost and deducted from equity. Neither
gain nor loss is recognized in the income statement on the purchase, sale, issue or cancellation of the Group's own equity
instruments. Any difference between the carrying amount and the consideration is recognized in retained earnings.
2.18 Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue canbe reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.
Revenue from the sale of products comprises all revenues that are derived from sales of products to third parties after
deduction of price rebates and value-added tax. Revenues from the sale of products are recognized when the significant
risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the products.
2.19 Income taxes and deferred taxation
Income taxes
Income taxes comprise all current and deferred income 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 recognized directly in shareholders' equity or in other comprehensive income.
Deferred taxation
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax baseof assets and liabilities and their carrying amounts in the financial statements. Deferred taxes are determined using tax
rates that apply, or have been substantially enacted, on the balance sheet date in the countries where the Group is active.
Tax losses carried forward are recognized as deferred tax assets to the extent that it is probable that tax profit will beavailable in the future against which the tax losses carried forward can be utilized. Deferred tax assets and liabilities areoffset against each other if the corresponding income taxes arise by the same tax authority and a legally enforceable rightfor offsetting exists.

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46

3 Segment information
Business segment information
Industry
In CHF thousands

Income statement
Sales
EBITDA
Operating profit
Net financial expenses
Taxes
Net profit for the year
Depreciation and amortization:
Tangible assets
Intangible assets
Impairment loss
Total
Balance sheet
Segment assets
Unallocated assets
Of which cash and cash equivalents
Of which other unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Of which income tax payable
Of which deferred withholding tax
liabilities
Of which other unallocated liabilities
Total liabilities

Automotive

LEM Group

2013/142012/13*2013/142012/13*2013/142012/13*211'065
57'05250'888

199'967
43'20636'41434'573
6'200
4'840

34'986
5'660
4'414

245'638
63'25255'728(1'379)(8'709)45'641

234'953
48'86640'828(1'514)(6'914)32'400

4'931
1'233
0
6'164

5'209
1'329
254
6'792

1'320
39
0
1'360

1'121
5
120
1'246

6'251
1'272
0
7'523

6'330
1'334
374
8'038

87'80680'430

14'39313'00687'80680'430

14'39313'006102'199
42'47524'581
17'894
144'675

93'43542'44827'62914'819135'884

24'73224'808

3'700

3'608

28'43222'039
6'579
2'723

28'416
23'41911'3191'703

24'73224'808

3'700

3'608

12'73750'471

10'39751'835

5'667
1'322
6'989

4'459
764
5'223

1'607
216
1'824

2'722
0
2'722

7'275
1'538
8'813

7'180
764
7'944

Capital expenditures:
Tangible assets
Intangible assets
Total assets* Restatement following IAS 19R application (pensions).

For management purposes, LEM Group is organized into two operating segments, Industry and Automotive. The Industry 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 forapplications in automotive markets.
Non-allocated assets correspond to cash, noncurrent financial receivables as well as deferred tax assets. Non-allocatedliabilities comprise bank borrowings, income tax payable and deferred tax liabilities.
Transactions between the subsidiaries and/or business segments are conducted at arm's length.
Geographical information
China

USA

Germany

Japan

Italy

Switzerland

Rest of the world

LEM Group

In CHF thousands

2013/14 2012 /13 2013/14 2012 /13 2013/14 2012 /13 2013/14 2012 /13 2013/14 2012 /13 2013/14 2012/13* 2013/14 2012 /13 2013/14 2012/13*

Sales

56'42842'763

Noncurrent assets**

11'804

12'34542'97344'31735'66236'04424'81324'092

4'445

4'725

13'790

14'964

3'519

4'253

68'45211'65313'7433'032

68'520 245'638 234'953
460

30'93531'274* Restatement following IAS 19R application (pensions).
** Non current assets according to IFRS 8 requirements (property, plant and equipment and intangible assets).

Sales are reported as per place of transaction. As a consequence of China's economic growth and LEM's share in thismarket, China has become the Group's most important sales territory.

LEM | Annual Report 2013/14

47

4 Accounts receivable
In CHF thousands

31.3.201431.3.2013

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

45'373(1'314)44'0594'232
48'29039'790(1'066)38'7244'356
43'080

In CHF thousands

2013/142012/13

Opening position

1'066

1'711

Additions charged/(reversals credited) to income statement
Amounts written off
Foreign exchange effect
Total

392
(101)
(43)
1'314

(560)
(107)
22
1'066

Movements of allowance for doubtful accounts

Aging analysis of accounts receivable
In CHF thousands

Not due<30 days

31–90 days

91–180 days

>180 days

Total

508
(115)
5
398

792
(800)
18
10

39'790(1'066)
4'356
43'080

2'074
(433)
810
2'451

965
(637)
94
422

45'373(1'314)4'232
48'29031 March 2013
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total

30'117

5'758

3'985
34'102

73
5'831

2'616
(151)
275
2'740

31 March 2014
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total

32'5110
2'345
34'856

6'092
(0)
414
6'507

3'730
(244)
568
4'055

The increase in receivables is mainly linked to the increase in sales, the days of sales outstanding ratio remains fairly
stable compared to the year 2012/13.
The allowance for doubtful accounts is computed as a percentage of aged balances plus an assessment of individual
recoverability. In 2013/14, no receivables have been individually impaired.
5 Inventories
In CHF thousands

31.3.201431.3.2013

Raw materialWork in progress
Finished goods and goods for resale
Total

12'185
1'451
14'85928'49510'931
1'374
11'31423'619The increase in inventories is related to the Group's intention to increase stock in order to facilitate on-time deliveries.
Above total inventories include provisions of CHF 2'934 thousand (2012/13 CHF 4'082 thousand).

LEM | Annual Report 2013/14

48

6 Other current assets
In CHF thousands

31.3.201431.3.2013

530
1'386
455
2'278
55
4'704

490
1'135
0
1'887
10
3'521

Land and buildings

Machinery andequipment

Total

Net book value 1 April 2012
Foreign exchange effectInvestment
Disposal
Impairment gain / (loss)
Depreciation charge for the year
Net book value 31 March 2013

197
(12)
0
0
0
(19)
165

23'976
926
7'180
(189)
(374)
(6'311)
25'20924'173
914
7'180
(189)
(374)
(6'330)25'373

At cost of acquisition
Accumulated depreciation
Net book value 31 March 2013

409
(244)
165

74'280(49'072)
25'20974'689(49'315)
25'373

Net book value 1 April 2013
Foreign exchange effectInvestment
Disposal
Depreciation charge for the year
Net book value 31 March 2014

165
(23)

(15)
126

25'209
(1'151)
7'275(42)(6'236)25'05425'373(1'174)
7'275(42)(6'251)
25'180At cost of acquisition
Accumulated depreciation
Net book value 31 March 2014

348
(222)
126

77'782(52'728)
25'05478'130(52'950)
25'180

Advances to suppliers
Prepayments and accrued income
Derivative financial instruments
Pension current assets
Other current assets
Total
For further information on derivative financial instruments, see note 24.
7 Property, plant and equipment
In CHF thousands

LEM | Annual Report 2013/14

49

8 Intangible assets
In CHF thousands

Goodwill

Patents

Other intangible assets

Total

Net book value 1 April 2012
Foreign exchange effectInvestment
Other movements
Amortization charge for the year
Net book value 31 March 2013

3'568
(186)
0
(32)
0
3'350

2'312
0
0
0
(992)
1'320

777
0
764
32
(343)
1'230

6'657
(186)
764
0
(1'335)5'900

At cost of acquisition
Accumulated amortization
Net book value 31 March 2013

5'064
(1'714)
3'350

4'950
(3'630)
1'320

4'963
(3'733)
1'230

14'977(9'077)
5'900

Net book value 1 April 2013
Foreign exchange effectInvestment
DisposalAmortization charge for the year
Net book value 31 March 2014

3'350
(214)
0
0
0
3'136

1'320
0
0
0
(990)
330

1'230
(20)
1'538
(178)
(282)
2'289

5'900
(234)
1'538
(178)
(1'272)
5'755

At cost of acquisition
Accumulated amortization
Net book value 31 March 2014

4'784
(1'648)
3'136

4'950
(4'620)330

5'657(3'368)2'289

15'391(9'636)
5'755

The increase in the intangible assets is mainly explained by the capitalization of costs related to the implementation of a
new ERP.
The entire goodwill of 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 Industry segment. The recoverable amount has been determined based onvalue-in-use calculations. These calculations use cash flow projections of five years based on financial business plans
and budgets approved by management. The projections include assumptions concerning revenue growth and expected
operating costs. Revenue growth is projected at 1% and operating costs were estimated based on the experience ofmanagement. The pretax discount rate used within these cash flow calculations is 9.0% (2012/13 10.5%) and is basedon the weighted average cost of capital of a peer group. The carrying value of the cash-generating unit including goodwill
was compared to the value in use and no impairment was found for the year ended 31 March 2014.
9 Other noncurrent assets
In CHF thousands

31.3.201431.3.2013*

2'139
626
2'765

931
738
1'669

In CHF thousands

31.3.201431.3.2013

Total accounts payable – trade
Other payables
Total

17'470
2'013
19'483

15'172
1'865
17'038Pension noncurrent assets
Other noncurrent assets
Total* Restatement following IAS 19R application (pensions).

10 Accounts payable

The increase in payables is mainly linked to the higher activity, the days of payables outstanding ratio remains fairly stablecompared to the year 2012/13.

LEM | Annual Report 2013/14

50

11 Provisions
Warranty andcustomer claims

Litigations andconsumption taxes

Balance 1 April 2012
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effectBalance 31 March 2013
Of which current
Of which noncurrent

3'047
1'035
(292)
(853)
150
3'087

N/S

Balance 1 April 2013
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effect
Other movements
Balance 31 March 2014
Of which current
Of which noncurrent

3'087
1'434
(1'663)
(259)
(75)
(55)
2'468

In CHF thousands

Restructuring

Total

453
1'930
(80)
(372)
(101)
1'830

3'500
2'965
(372)
(1'225)
49
4'917
3'668
1'250

1'830
538
(438)
(1'256)
(96)

4'917
2'841
(2'101)(1'520)
(179)
0
3'957
1'070
2'886

868
(5)
(9)
55
910

579

Warranty and customer claims
Provisions for warranty and customer claims cover expected warranty claims which are not covered by insurances. The
provisions have been estimated based on past experience and the risk assessment of management. The warranty provision is expected to be used over the next five years.
Litigations and consumption taxes
Despite the care that LEM applies in the separation process with personnel, such separation may result in legal conflicts.
The Group will defend its case and management estimates the reasonable risk to be provided for.
The Company operates in multiple jurisdictions with complex legal and tax regulatory environments. In the frame of thecontinuous improvement of its processes and systems, LEM has started a review of the consumption taxes in several
countries. It has appeared that some LEM's subsidiaries may not have been fully compliant with their local consumption
tax regulations. As a consequence, LEM has estimated consumption tax provisions according to management best judgment. Some of these positions are inherently uncertain and include the interpretation of local regulations applied to complex transactions.
Transfer of activity
During 2012/13, LEM had announced the launch of a new production plant in Sofia, Bulgaria. As a continuation of a strategy initiated in 2004, LEM continues to relocate production lines from the plants in Machida, Japan, and Geneva, Switzerland, to low-cost countries. Over the next years, the operations in Japan will be significantly reduced and concentrateon the local Japanese market. In Switzerland, the operations will be progressively reduced and focused on high-complexity/high-precision products for worldwide markets. In parallel, LEM's site in Switzerland will be reinforced with continued investment in R&D and marketing.
A CHF 1'930 thousand provision had been charged to the income statement at 31.3.2013 in relation with the abovementioned relocations of activity. After foreign exchange effect, the provision position amounted to CHF 1'830 thousandat 31.3.2013.
During 2013/14, LEM transferred a part of the production lines from Geneva, Switzerland, and from Machida, Japan, to
Sofia, Bulgaria, and used most of the before-mentioned provisions. The provision position amounts to CHF 579 thousandat 31.3.2014.

LEM | Annual Report 2013/14

51

12 Other liabilities
In CHF thousands

Post-employment benefit plans
Derivative financial instruments
Other liabilities
Total
Of which current
Of which noncurrent

31.3.201431.3.2013

370
0
342
712
319
394

456
1'115
419
1'991
1'377
613

For further information on derivative financial instruments, see note 24.
13 Equity
Share capital
The nominal share capital of CHF 570'000 comprises 1'140'000 registered shares, each with a nominal value of
CHF 0.50. There is neither authorized nor conditional share capital outstanding.
Investments in shares of LEM Holding SA held by the Group are classified as treasury shares and are accounted forat historical cost. Treasury shares are not entitled to dividends.
Movement of treasury shares
In number of shares, in CHF

Number of shares

Average purchasepriceTotal in CHF
thousands

Balance 1 April 2012
Movement
Balance 31 March 2013
Ordinary dividend per share
Extraordinary dividend per share

4'588(3'272)
1'316
30.00
0.00

432.39372.63581.00

1'984(1'219)765

Balance 1 April 2013
Movement
Balance 31 March 2014
Ordinary dividend per share
Extraordinary dividend per share

1'316
(232)
1'084
40.00
0.00

581.0083.96
687.38

765
(19)
745

Per 31.3.2013, the Group held 1'316 remaining treasury shares. During the year 2013/14, LEM divested 232 treasury
shares for a total amount of CHF 163 thousand, in the frame of its market-making contract (2012/13 market-making acquisition of 147 shares for CHF 87 thousand, minus sales of 3'419 shares from LEM's own account for CHF 1'619 thousand).
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 2014. The expected payout for dividends amounts to CHF 45'557 thousand.

LEM | Annual Report 2013/14

52

14 Staff cost
In CHF thousands

2013/142012/13*

Production
Sales
Administration
Research & development
Total(22'455)(15'246)(10'926)(9'811)(58'438)(23'469)(14'946)(11'029)(9'837)(59'281)

Salaries and wages
Other personnel costs
Temporary employee costs
Total(40'712)(15'519)(2'207)(58'438)(41'036)(15'105)(3'139)(59'281)

In full-time equivalents (FTEs)

31.3.201431.3.2013

Permanent employees
Temporary employees
Apprentices
Total

1'144
86
12
1'241

1'038
87
12
1'137

* Restatement following IAS 19R application (pensions).

Number of employees at the end of the financial year

Despite the increase in employees of 9.1% between 31.3.2013 and 31.3.2014, the staff cost remained fairly stable as a consequence of LEM Group's strategy to relocate of production lines from Machida, Japan, and Geneva, Switzerland, to low-costs
countries. Staff cost in Switzerland in 2013/14 have also been impacted by IAS 19 calculation for a positive amount of CHF 1'246
thousand (income). The reduction of pension cost is mainly linked to the change in the pension conversion ratio.
Other personnel costs comprise the expenses for defined contribution plans of CHF 258 thousand (2012/13 CHF 298 thousand).
See accounting policies 2.15 Employee benefits, 2.16 Provisions and contingent liabilities.
15 Financial expense
In CHF thousands

31.3.201431.3.2013*

(44)
(77)
(121)

(78)
(48)
(126)

31.3.201431.3.2013

133
133

96
96

In CHF thousands

31.3.201431.3.2013

Exchange gains/(losses)
Fair value revaluation on derivatives
Gains/(losses) on derivative 1
Total(1'922)
1'591(1'060)(1'390)148(1'302)(330)(1'484)

Interest expenses
Other financial expenses
Total* Restatement following IAS 19R application (pensions).

16 Financial income
In CHF thousands

Interest income on cash
Total
17 Exchange effect1

Position includes cost of derivative hedging

The exchange effect is mainly driven by JPY, USD and CNY devaluation in 2012/13 and 2013/14.

LEM | Annual Report 2013/14

53

18 Income taxes, deferred tax assets and liabilities
The Group operates in multiple jurisdictions with complex legal and tax regulatory environments. In certain of these jurisdictions, the Group has taken income tax positions that management believes are supportable and are intended to withstand challenge by tax authorities. Some of these positions are inherently uncertain and include those relating to transfer
pricing matters and the interpretation of income tax laws applied to complex transactions. The Company periodicallyreassesses its tax positions. Changes to the financial statement recognition, measurement, and disclosure of tax positions are based on management's best judgment given any changes in the facts, circumstances, information available
and applicable tax laws. Considering all available information and the history of resolving income tax uncertainties, theGroup believes that the ultimate resolution of such matters will not have a material effect on its financial statements.
Differences between the final tax outcome and the amounts that were initially recorded impact the income and deferredtaxes in the period in which such determinations are made. The Group calculates its expected average tax rate as aweighted average of the tax rates in the tax jurisdictions in which the Group operates.
LEM has taken the decision to repatriate all available dividends from its subsidiaries in the foreseeable future. Unrecoverable
withholding taxes are considered part of the expected tax rate. Deferred income tax liabilities have been established for unrecoverable withholding taxes that would be payable on the unremitted earnings of foreign subsidiaries. Given that the new treaty
between China and Switzerland reducing the withholding tax rate from 10% to 5% has not yet been formally enacted, the Group
has taken the applicable rate at the end of the fiscal year 2013/14 of 10% to estimate the deferred tax liabilities.
Following its qualification as High/New Technology Enterprise (HNTE) in China, LEM China enjoyed reduced income tax
rates from 2011 to 2013. As per 31.3.2014, the confirmation for 2012 and 2013 is still under consideration by the Chinese
tax authorities. On the basis of the existing documentation, management considers that the chance of obtaining the confirmation for 2012 and 2013 is significantly higher than the risk of losing the HNTE status.
Following the strategic decision to not further increase the R&D expenses in LEM China, the Group considers that LEM
China will not fulfill the conditions for the HNTE status in 2014. LEM China has therefore been reported with the standard
25% tax rate for the period starting 1 January 2014.
In CHF thousands

2013/142012/13*

Current income taxes
Deferred taxes relating to the origination and reversal of temporary differences
Deferred tax income resulting from changes in tax rates
Adjustment recognized in the period for current tax of prior year
Total

(7'795)(2'581)
1'568
100(8'709)(8'958)
1'863
0181(6'914)* Restatement following IAS 19R application (pensions).

The tax (expense)/income relating to components of other comprehensive income amount to CHF (421) thousand for theyear 2013/14 (CHF 145 thousand in 2012/13).
The Group's effective tax rate differs from the Group's average expected tax rate as follows:In %2013/142012/13*

Group's average expected income tax rate
Group's average expected ­w ithholding tax rate
Group's average expected tax rate

16.8
2.0
18.8

15.5
2.3
17.8

Tax effect of– – permanent differences– – effect of changes in tax rates on deferred taxes– – adjustment in respect of previous periods' income tax– – recognition of previously unrecorded tax losses– – other differences
Group's effective tax rate

0.1
(2.9)
(0.1)
0.0
0.1
16.0

0.2
0.1
(0.4)
0.0
(0.2)
17.5

* Restatement following IAS 19R application (pensions).

The increase in the expected tax rate is mainly due to the change in LEM China's tax rate as mentioned above. This change
has had a positive impact on the effective tax rate of 2.9% linked to the revaluation of the deferred tax assets position
from 15% to 25% which can explain the decrease in effective tax rate compared to 2012/13.

LEM | Annual Report 2013/14

54

Deferred tax assets and liabilities
Deferred taxes have been calculated on the following balance sheet positions:
In CHF thousands

31.3.201431.3.2013*

Assets– – Accounts receivable– – Inventories– – Property, plant and equipment– – Intangible assets– – Other financial assets– – Other assets

2'069
(118)
636
1'838
797
(1'062)
(22)

2'573
(278)
1'157
1'172
1'043
(749)
228

Liabilities– – Provisions– – Others– – Withholding tax on dividends
Total(1'573)443
707(2'723)
496

(416)
641
646
(1'703)
2'157

The balance sheet contains the following:– – Deferred tax assets– – Deferred tax liabilities
Net assets / (liabilities)

4'103

3'828

(3'607)496(1'671)
2'157

2013/142012/13*45'64132'4001'140'000
1'140'000
1'438
1'138'562

1'140'000
1'140'000
2'520
1'137'480

40.09

28.48

* Restatement following IAS 19R application (pensions).			

There were no unrecorded losses carried forward at 31.3.2014 nor at 31.3.2013.
19 Earnings per share

Basic and diluted earnings per share
Net profit for the year attributable to LEM shareholders – in CHF thousands
Ordinary number of shares at the beginning of the year
Weighted average number of ordinary shares
Weighted average number of treasury shares
Weighted average number of shares outstanding
Earnings per share – basic and diluted in CHF* Restatement following IAS 19R application (pensions).

20 Related parties
Related parties are the Board of Directors and the Executive 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 for the Executive
Management includes base salary, a performance-related bonus (LIS), bonus and post-employment benefits. In 2012/13
and 2013/14, no termination benefits have been paid. The base salary is the employee's compensation before deductionof the employee's social security contributions. Bonus payments are effected in cash.

LEM | Annual Report 2013/14

55

Compensation of the Board of Directors
In CHF thousands

2013/142012/13

Base salary
Additional fees
Total

(740)
(30)
(770)

(740)
(130)
(870)

In CHF thousands

2013/142012/13

Base salary
Bonus
Post-employment benefits
Total(1'737)(1'110)(173)(3'020)(1'698)(912)(161)(2'770)Compensation of the Executive Management

For details on the compensation of the Board of Directors and of the Executive Management, please refer to note 11 in
the notes to the financial statements of LEM Holding SA. Also, see accounting policies 2.15 Employee benefits and note
2.16 Provisions and contingent liabilities.
21 Retirement benefit obligations
The Group operates a defined contribution plan for all its employees in Switzerland with a collective foundation.
This foundation is a separate legal entity which is not part of the Group. It is managed by a board having equal representation of employees and employers of the affiliated companies. It is supervised by the supervisory authority and complies
with the requirements of Swiss pension law. According to Swiss law, the pension plan is considered as a defined contribution plan whereas it is considered as a defined benefit plan under IAS 19 due to the various benefit guarantees includedin the laws.
The plan is funded by contributions from both employer and employees.
The plan participants are insured against the financial consequences of retirement, disability and death. The retirement
benefit is based on a notional individual savings account converted at retirement into a pension.
The assets of the foundation are invested into a diversified portfolio. Death in service and disability benefits are insured
with an insurance company. The pension plan does not expose the affiliated companies to any additional unusual risks.
During 2013/14, the conversion rate of the savings account into pension at retirement was changed. No curtailments or
settlements occurred in 2013/14.
The subsidiaries abroad sponsor defined contribution plans based on local practices and regulations.
In CHF thousands

31.3.201431.3.2013*

Fair value of plan assets at year-end
Defined benefit obligations at year-end
Funded status (net assets/(liabilities) in the balance sheet)

37'17332'755
4'417

35'71132'893
2'818

In CHF thousands

31.3.201431.3.2013*

Current service cost
Past service (income)Net interest (income) / cost
Total pension expenses recorded in consolidated income statement

2'207(1'329)
(56)
821

1'826
0
25
1'851

* Restatement following IAS 19R application (pensions).

LEM expects to contribute CHF 2'114 thousand to its defined benefit plan in 2014/15.
21.1 Cost of defined benefit plans
Cost of defined benefit plans* Restatement following IAS 19R application (pensions).

Costs related to the pension plan were charged to the different functional departments based on salary costs.
In 2013/14, the past service cost is coming from the change in the conversion rate.

LEM | Annual Report 2013/14

56

21.2 Remeasurements of employee benefits
Remeasurements of employee benefits
In CHF thousands

31.3.201431.3.2013*

Experience adjustments on defined benefit obligation
Return on plan assets excluding interest
Total remeasurements recorded in other comprehensive income

1'259(3'145)(1'886)

1'027
(879)
147

In CHF thousands

31.3.201431.3.2013*

Fair value of plan assets per beginning of year
Return on plan assets excluding interest income
Interest income on plan assets
Employer's contribution
Employees' contribution
Benefits paid
Settlement of pensioners

35'711
3'145
714
534
1'582
(4'514)0

32'329
879
808
5'818
1'333
(1'645)(3'812)

Fair value of plan assets per end of year

37'17335'711

In CHF thousands

31.3.201431.3.2013*

Defined benefit obligation per beginning of year
Current service cost
Employees' contributions
Interest costExperience adjustments on obligation
Benefits paid
Plan amendment
Settlement of pensioners

32'893
2'207
1'582
658
1'259
(4'514)(1'329)033'331
1'826
1'333
833
1'027
(1'645)0(3'812)

Defined benefit obligation per end of year

32'75532'893* Restatement following IAS 19R application (pensions).

21.3 Change in fair value of plan assets
Changes in the fair value of plan assets* Restatement following IAS 19R application (pensions).

21.4 Change in present value of defined benefit obligation
Changes in present value of defined benefit obligation* Restatement following IAS 19R application (pensions).

The weighted average duration of the Defined Benefit Obligation (DBO) at the end of the current fiscal year is 21 years.
21.5 Asset allocation of investments
Major categories of plan assets as a percentage of the fair value of total plan assets
In %Equity securities
Debt securities
Real estate
Cash and other investments

Long-term target

2013/142012/13

30.0%
36.0%
20.0%
14.0%

34.1%
32.0%
19.1%
14.8%

34.0%
30.0%
23.0%
13.0%

100.0%

100.0%

100.0%

Strategic pension plan allocations are determined by the objective to achieve a return on investment, which, together
with the contribution 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 is allowed.
Cash as well as most equity and debt securities have a quoted market price in an active market. Other assets including
real estate and other investments do not have a quoted market price.

LEM | Annual Report 2013/14

57

21.6 Actuarial assumptions
The principal actuarial assumptions used in the actuarial calculations include:In %2013/142012/13

Discount rate
Salary increases

2.00%
1.50%

2.00%
1.50%

The present value of the defined benefit obligation is determined annually by independent actuaries using the projected
unit credit method. Actuarial assumptions are required for this purpose.
Sensitivities of significant actuarial assumptions
The sensitivity analysis is based on reasonable possible changes as of the end of the year 2013/14. Each change in asignificant assumption was analyzed separately as part of the test.
The sensitivity of the DBO to changes in the main actuarial assumptions is as follows:
DBO increase/DBO (decrease) – In CHF thousands

2013/14

Discount rate
Increase by 0.25%
Decrease by 0.25%
Salary increase rate
Increase by 0.25%
Decrease by 0.25%(1'673)
1'802
146
(146)

22 Operating lease commitments
Minimal lease payments are payable as follows:
In CHF thousands

31.3.201431.3.2013

Within one year
Between one and five years
Beyond five years
Total

3'906
14'960
3'866
22'732

4'565
20'016
3'010
27'591

In 2013/14 lease expenses amounted to CHF 5'061 thousand (2012/13 CHF 5'141 thousand).
Lease agreements exist for the business facilities used by the Group companies.
The agreements are classified as operating leases.
The leases have varying terms and renewal rights between one and fifteen years.
23 Contingent liabilities
The Group is from time to time impacted by changing political, legislative, fiscal and regulatory environments, including
those relating to environmental protection. The frequency and effects on future operations and earnings are unpredictable and are only partly covered by insurances.
For the year 2012/13 and 2013/14, there is no contingent liability from a consolidated point of view.

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58

24 Financial risk management objectives and policies
The group classifies its financial assets and liabilities into the following categories as per IFRS 7:
Financial assets
In CHF thousands

Cash and cash equivalents
Accounts receivable
Derivative financial instruments –current
Other current financial assets
Derivative financial instruments –noncurrent
Other noncurrent financial assets
Total
Financial liabilities
In CHF thousands

Accounts payable
Accrued expenses
Derivative financial instruments –current
Other current financial liabilities
Derivative financial instruments –noncurrent
Other noncurrent financial liabilities
Total

31.3.2014
Fair value

31.3.2013
Fair value

Loans andreceivables

24'581
48'29027'62943'080

X
X

455
55

0
10

X

21
605
74'0070738
71'456X

31.3.2014
Fair value

31.3.2013
Fair value

Loans andreceivables

19'483
16'13317'03814'900

X
X

0
27

932
33

X

0
394
36'037153
460
33'515

At fair value throughprofit and loss

XX

At fair value throughprofit and loss

X

X
X

The management assessed that fair value level of cash and cash equivalents, accounts receivables, other current andnoncurrent assets, accounts payables, accrued expenses and other current and noncurrent liabilities that are not measured at fair value approximate their carrying amounts in view of their short-term nature and are consequently not separately disclosed.
The Group enters into derivative transactions such as currency risk reversal and forward contracts to hedge the USD and
EUR risks.
The purpose of these currency hedges is to manage the currency risks arising from the Group's operations.
It is the Group's policy that no derivatives for speculative purposes shall be entered into.
The main risks arising from the Group's financial instruments are foreign currency risks and credit risks, whereas the others are of minor or no impact.
The Board of Directors reviews and agrees policies for managing each of those risks.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly(i.e., as prices) or indirectly (i.e., derived from prices).
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
The Group's financial assets at fair value amount to CHF 476 thousand per 31.3.2014 (financial liabilities of CHF 1'115
thousand per 31.3.2013), all classified under level 2.
During the two last reporting periods, there were no transfers between Level 1 and Level 2 fair value measurements, andno transfers into and out of Level 3 fair value measurements.

LEM | Annual Report 2013/14

59

Foreign currency risk
The Group operates globally and is exposed to various foreign exchange risks primarily to the USD, EUR, JPY, CNY and GBP.
The Group seeks to reduce those risks by optimizing its natural hedging (cash inflows and outflows in a specific currency
should be in balance as far as possible).
The Group's policy states that 100% of LEM's net exposure for the main currencies EUR and USD is to be hedged on arolling 12-month basis for EUR and in the coming 18 months for USD.
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 of the sensitivity analysis
for currency risk below.
Sensitivity analysis for currency risk
The sensitivity analysis is performed per 31.3.2014 with a 5% change in the USD, EUR, JPY, CNY and GBP with all othervariables held constant of the Group's profit before tax (due to the changes in the fair value of the monetary assets andliabilities) and the Group's equity.
The sensitivity analysis performed for the financial year shows an impact of CHF ±496 thousand for a ±5% EUR ratechange (CHF ±420 thousand per 31.3.2013), of CHF ±538 thousand for a ±5% USD rate change (CHF ±665 thousand
per 31.3.2013) and of CHF ±541 thousand for a ±5% CNY rate change (CHF ±291 thousand per 31.3.2013). For othercurrencies, there is no significant impact. There is no significant impact on the Group's equity.
Credit risk
Credit risk is the risk that a financial loss occurs if a counterparty is unable or unwilling to fulfill its contractual payment
obligation.
The Group trades with recognized and creditworthy parties. The accounts receivable are monitored on a monthly basis.
It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures.
In case of a deterioration of the credit history, advance payments are required.
The Group's exposure to bad debts is not significant. The maximum exposure is the carrying amount as disclosed in note 4.
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 operates a cash-pooling agreement in which cash targets are set for all the subsidiaries. Cash surplus/shortages are balanced in intercompany loans on a monthly basis.
Group capital requirements are managed centrally by corporate finance. In case liquidity is required a bank loan 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 ofborrowings reflected in the financial statements.
Financial liabilities
In CHF thousands

Accounts payable
Accrued expenses
Derivative financial instruments – current
Other current financial liabilities
Derivative financial instruments –noncurrent
Other noncurrent financial liabilities
Total

LEM | Annual Report 2013/14

60

31.3.2014
Fair valueLess than
one yearOver oneyear

31.3.2013
Fair valueLess than
one year

19'483
16'1330
27
0

19'483
16'13300

27

017'03814'900932
33
153

17'03814'900932
33394
36'037035'643

394
394

460
33'515

Over oneyear

153

32'902460
613

Interest rate risk
The Group's exposure to the risk of changes in market interest rates with the current financial leverage is very low.
Per 31.3.2014, there is no bank loan.
Capital management
The primary objective of the Group's capital management is to ensure that it maintains a healthy and stable equity ratio
in order to secure the confidence of shareholders and investors, creditors and other market players and to strengthen the
future development of the Group's business activities.
The Group manages its capital structure and makes adjustments to it, in light of changes in the economic conditions.
LEM targets a pay-out ratio significantly above 50% of the consolidated net profit for the year.
However, it may diverge from this policy due to economic prospects or on the grounds of planned future investment
activities.

25 Scope of consolidation
Full consolidation

Country

Currency

Share capital

Ownership

EuropeLEM Belgium sprl-bvba
LEM Deutschland GmbHLEM France SARLLEM Holding SA
LEM International SA
LEM Intellectual Property SA
LEM Switzerland SA
LEM Bulgaria EOOD
LEM Russia Ltd
LEM Management Services SARL

Belgium
Germany
FranceSwitzerland
Switzerland
Switzerland
Switzerland
Bulgaria
RussiaSwitzerland

EUR
EUR
EUR
CHF
CHF
CHF
CHF
BGN
RUB
CHF

60'00075'000
120'000
570'000
100'000
300'000
1'000'000
1'971'830
6'600'000
20'000

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

North America
LEM USA Inc.

USA

USD

150'000

100%

Asia
LEM Electronics (China) Co. Ltd
LEM Japan KK

China
Japan

CNY
JPY

53'153'194
16'000'000

100%
100%

26 Changes in scope of consolidation
In 2012/13, LEM had launched a project aiming to simplify the structure of its European agency companies and to saveadministrative cost. LEM had already converted some of its European entities into branches of a European head office:– – On 1 December 2012, LEM Denmark was created as a branch of LEM Deutschland GmbH. The former company incorporated as LEM Danfysik A/S was liquidated per 8 April 2013.
– – On 1 January 2013, LEM UK was created as a branch of LEM Deutschland GmbH. The former company incorporated
as LEM UK Ltd was liquidated per 15 May 2013.
– – On 1 January 2013, LEM Italy Srl was merged into LEM Deutschland GmbH.
On 1 March 2013, the Group registered a new production plant in Sofia, Bulgaria. The goal of LEM Bulgaria is to diversify
LEM's low-cost production and increase production capacity close to its European customers. At the same time, LEM
improves the natural hedge of its operations by better matching currencies of sales and cost. The new plant, which isestablished in a leased property in Sofia, occupies 4'500 square meters of floor space. LEM has started the production
in October 2013. End of March 2014, LEM Bulgaria number of employees is in line with the plan.
27 -Events after the balance sheet date
There were no events subsequent to the balance sheet date that require adjustment to or disclosure in the financial statements.

LEM | Annual Report 2013/14

61

Auditor's Report
Report of the statutory auditor on the consolidated financial statements
As statutory auditor, we have audited the accompanying consolidated financial statements of LEM Holding SA, which
comprise the statement of financial position, income statement, cash flow statement, statement of comprehensive income,statement of changes in equity and notes (pages 35 to 61), for the year ended 31 March 2014.
Board of Directors' responsibility
The Board of Directors is responsible for the preparation of these consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation 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 and making accounting estimates that are reasonable inthe 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. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from 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 the auditor's judgment, including the assessment 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 of the consolidated
financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting 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.
OpinionIn our opinion, the consolidated financial statements for the year ended 31 March 2014 give a true and fair view of thefinancial position, the results of operations and the cash flows in accordance with IFRS and comply with Swiss law.
Report on Other Legal Requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 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 the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.

Lancy, 23 May 2014

Arthur Bergmann
Licensed audit expert(Auditor in charge)

LEM | Annual Report 2013/14

Laurent Bludzien
Licensed audit expert

62

LEM Holding SA
Financial Statements

Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Income Statement .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Notes to the Financial Statements .. . . . . . . . . . . . . . . . . . . .

67

Proposed Appropriation of Available Earnings . . . . . . . .

70

Auditor's Report .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71

LEM | Annual Report 2013/14

63

LEM | Annual Report 2013/14

64

Balance Sheet(before distribution of earnings)

AssetsIn CHF thousands

Notes

31.3.201431.3.201312'10724'436745
685
37'973

9'725
42'143765
133
52'76645'02445'02453'69853'69882'997

106'464Notes

31.3.201431.3.20131

14'715
1'499
16'21433'5093'488
36'997

0

153

16'21437'150570
285
745
33'55731'62566'783570
285
765
22'46845'22769'31582'997

106'464

Current assets
Cash and cash equivalents
Group current assets
Treasury shares
Other current assets
Total current assets
Noncurrent assets
Investments in subsidiaries
Total noncurrent assets

1
2

3

Total assets
Liabilities and Equity
In CHF thousands

Current liabilities
Group current liabilities
Other current liabilities
Total current liabilities
Other noncurrent liabilities
Total liabilities
EquityShare capital
General reserve
Reserve for treasury shares
Retained earnings
Net profit for the year
Total equity
Total liabilities and equity

4
2

LEM | Annual Report 2013/14

65

Income Statement

IncomeIn CHF thousands

Notes

2013/142012/1331'285
814
2'215
4'984
39'29745'612
825
492
4'947
51'876Notes

2013/142012/133
5(1'373)(2'843)(361)(3'191)(7'767)0(4'429)(385)(1'420)(6'234)31'53045'64296
31'625(415)
45'227

Financial income from Group dividend payments
Interest income from Group loans
Other financial income
Other Group income
Total income
ExpenseIn CHF thousands

Loss on investments in subsidiaries
Office, administration and personnel expense
Financial expense
Foreign exchange loss
Total expense
Profit before taxes
Income taxes
Net profit for the year

LEM | Annual Report 2013/14

666

Notes to the Financial Statements
Principles for the establishment of the financial statements
The accompanying financial statements have been prepared in accordance with the requirements of the Swiss Code ofObligations. Regarding the inclusion of LEM Holding SA in the consolidated financial statements, the accounting andreporting principles described in the notes to the consolidated financial statements apply.
1 Group current assets and liabilities
In CHF thousands

31.3.201431.3.2013

Current intercompany loans receivable
Intercompany accounts receivable
Total

23'939497
24'43634'8097'334
42'143Current intercompany loans payable
Intercompany accounts payable
Total

14'62194
14'71533'370138
33'509The current intercompany loans receivable has decreased, mainly linked to an ameliorated invoicing process in LEM Switzerland which resulted in smaller financing needs from LEM Holding SA.
The current intercompany loans payable has decreased, mainly due to a capital reduction at LEM Intellectual Property.
2 Treasury shares

Value 1.4.2012
ChangeValue 31.3.2013
ChangeValue 31.3.2014

Number of shares

Price pershare in CHF

Value in CHF
thousands

4'588(3'272)
1'316
(232)
1'084

432.39372.62581.0083.94
687.38

1'984(1'219)
765
(19)
745

Per 31 March 2012, LEM Holding held 4'588 treasury shares. In the beginning of the year 2012/13, 3'419 treasury shares
on LEM Holding's own account were sold for a total amount of CHF 1'619 thousand.
During the year 2012/13, LEM acquired 147 own shares for a total amount of CHF 87 thousand in the frame of its marketmaking contract.
The movements in treasury shares during 2012/13 caused an impact of CHF 1'219 thousand in retained earnings, of which
CHF 1'442 thousand through LEM Holding's own account and CHF -223 thousand through market-making activities.
During the year 2013/14, LEM divested 232 own shares for a total amount of CHF 163 thousand in the frame of its market-making
contract.
The movements in treasury shares during 2013/14 caused an impact of CHF -19 thousand in retained earnings throughmarket-making activities.
Subsidiaries of LEM Holding SA did not own any shares of LEM Holding SA.
Treasury shares are valued at lower of cost or market value.
3 Investments in subsidiaries
In CHF thousands

31.3.201431.3.2013

Historical costTotal

45'02445'02453'69853'698The decrease in investments in subsidiaries is mainly linked to a capital decrease in LEM Intellectual Property.
Refer also to note 25 Scope of consolidation of the consolidated financial statements.
4 Share capital
Number of shares

Opening capital 1.4.2013
Change of capital
Closing capital 31.3.2014

Par Value pershare in CHF

Capital in CHF
thousands

0.50

570
0
570

1'140'00001'140'000
LEM | Annual Report 2013/14

0.50
67

5 Office, administration and personnel expense
In CHF thousands

Office and administration expense
Board member fees
Consulting fees
Withholding taxes on paid dividend repatriation
Other withholding taxes not recoverable
Total

2013/142012/13(1'731)
(770)
(108)
(99)
(135)
(2'843)(1'826)(870)(59)(1561)(113)(4'429)2013/142012/13

(192)
288
96

(395)
(20)
(415)

6 Income taxes
In CHF thousands

Current taxes
Adjustments of tax provisions of previous periods
Total

7 Important shareholders according to article 663c of the Swiss Code of Obligations
The following shareholders held 3% or more of the share capital and voting rights on 31 March 2014:31.3.2014
All positions per 31.3.2014

Shares

Options

Position

In %Werner O. Weber and Ueli Wampfler, in Zollikon/Wollerau, Switzerland,through WEMACO Invest AG and Swisa Holding AG, in Zug/Cham,
Switzerland
Ruth Wertheimer, in Kfar, Israel, through 7-Industries Holding B.V.,
in Amsterdam, Netherlands
Montanaro Asset Management Ltd, London, United Kingdom
Sarasin Investmentfonds AG, in Basel, Switzerland
Erwin Studer and Joraem de Chavonay, in Zollikon/Zug, Switzerland
Amerprise Financial Inc., in Minneapolis, USA, through Threadneedle
Asset Management Ltd, in London, United Kingdom
Shareholders < 3%
Total

403'500

100'000

503'500

44.2%

141'581

N/N

141'581

12.4%

85'60880'97994'000
N/A

N/N
N/N(100'000)
N/N

85'60880'979(6'000)
N/A

7.5%
7.1%
(0.5%)<3%

334'332
1'140'000

N/N
0334'332
1'140'000

29.3%
100.0%

N/N = none notified; N/A = not applicable

8 Guarantees in favor of third parties on behalf of subsidiaries
In CHF thousands

Amount of guarantees issued

31.3.201431.3.2013

1'811

1'832

9 Remuneration of Board of Directors and Executive Management
9.1 Compensation of active members of the Board of Directors
The members of the Board of Directors do not participate in bonus schemes, nor pension funds. The annual salary compensation is therefore equal to the total compensation.
2013/14
In CHF thousands

Andreas Hürlimann
Peter Rutishauser 2, 5, 8
Ilan Cohen 8
Norbert Hess 4
Ueli Wampfler 3
Total

1, 6, 7

LEM | Annual Report 2013/14

68

Annual salary

Additional fees

260
160
100
100
120
740

15
15
0
0
0
30

2012/13
In CHF thousands

Annual salary

Additional fees

200
150
100
80
100
110
740

0
15
20
95
0
0
130

Felix Bagdasarjanz
Peter Rutishauser 2, 5Ilan Cohen 4
Andreas Hürlimann
Anton Lauber 6
Ueli Wampfler 3
Total
1

Chairman of the Board
Vice Chairman of the Board
3
Chairman of the Audit & Risk Committee
4
Member of the Audit & Risk Committee

Chairman of the Nomination & Compensation Committee
Member of the Nomination & Compensation Committee
7
Chairman of the Strategy Committee
8
Member of the Strategy Committee

1

5

2

6

9.2 Compensation to active members of the Executive Management of the LEM Group
2013/14
In CHF thousands

François Gabella, CEO
Executive Management (excl. CEO)
Total compensation to Executive
Management
2012/13
In CHF thousands

François Gabella, CEO
Executive Management (excl. CEO)
Total compensation to Executive
Management

Annual salarycompensation

Annual bonus
compensation 1

Company's contribution to pension fundTotalcompensation

480
1'257
1'737

414
687
1'110

59
113
172

953
2'067
3'020

Annual salarycompensation

Annual bonus
compensation 1

Company's contribution to pension fundTotalcompensation

450
1'248
1'698

329
583
912

49
112
161

828
1'943
2'770

CEO François Gabella was the Executive Management member with the highest total compensation in 2012/13 and in
2013/14.
The annual bonus compensation is shown with the corresponding accrual for the performance of the current year, to be paid out in the following year. Allother elements are shown as paid out.

1

9.3 Shareholdings
Board of Directors

31.3.201431.3.2013

In number of shares/options

Number ofshares held

Number ofoptions held

Number ofshares held

Number ofoptions held

Andreas Hürlimann
Peter Rutishauser
Ilan Cohen
Norbert Hess
Ueli Wampfler
Felix Bagdasarjanz
Anton Lauber
Total

724
2'606
140
0
30'500
N/A
N/A
33'970000030'000
N/A
N/A
30'000

505
2'606
140
N/A
28'000
1'736
424
33'4110
0
0
N/A
10'0000
0
10'000

LEM | Annual Report 2013/14

69

Executive Management

31.3.2014

In number of shares/options

François Gabella, CEO
Julius Renk, CFO
Luc Colombel, VP, Automotive
Hans-Dieter Huber, VP, Industry
Jean-Marc Peccoux, VP, R&D and IP
Simon Siggen, VP, Operations
Total

31.3.2013

Number ofshares held

Number ofoptions held

Number ofshares held

Number ofoptions held

150
140
2'100
1'265
1'500
1'100
6'255

0
0
0
0
0
0
0

360
40
2'100
1'265
1'500
1'100
6'365

0
0
0
0
0
0
0

As per 10 April 2014, the CEO holds 400 shares of LEM Holding SA.
10 Business risk management
The Group has a risk management system in place which allows for the prompt identification and analysis of risks as wellas the initiation of an action plan.
In accordance with Article 663b of the Swiss Code of Obligations, a risk management report was prepared for the financial
year 2013/14.
The Executive Management of the Group assesses the business risks within its standardized analysis procedure.
The Board of Directors of LEM Holding SA took note of the risk management report and approved both the procedure andthe content thereof.
The organization, principles and reporting of risk management are described in detail in the Corporate Governancesection 3 in this Annual Report.

Proposed Appropriation of
Available Earnings
Appropriation of available earnings
In CHF thousands

31.3.201431.3.2013

Balance brought forward from previous year
Variation of treasury shares
Net profit for the year
Total available earnings

33'53820
31'62565'18321'2491'219
45'227
67'695

Proposal of the Board of Directors:
Ordinary dividend 1
Balance to be carried forward(45'557)
19'626(34'157)
33'5381

Excluding dividends on own shares held by LEM Holding SA.

		The Board of Directors proposes the distribution of an ordinary dividend of CHF 40 per share. Net of 35% withholding
tax, this is an ordinary cash dividend of CHF 26 per share.
The proposed appropriation of available earnings is made in compliance with article 671 of the Code of Obligations.

LEM | Annual Report 2013/14

70

Auditor's Report
Report of the statutory auditor on the financial statements
As statutory auditor, we have audited the accompanying financial statements of LEM Holding SA, which comprise thebalance sheet, income statement and notes (pages 65 to 70), for the year ended 31 March 2014.
Board of Directors' responsibility
The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirementsof 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 from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate
accounting policies and making accounting estimates that are reasonable in the circumstances.
Auditor's responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit inaccordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the 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 of the financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control system. An audit also includes evaluating the appropriateness of the accounting
policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of thefinancial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
OpinionIn our opinion, the financial statements for the year ended 31 March 2014 comply with Swiss law and the company'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) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal
control system exists, which has been designed for the preparation of financial statements according to the instructionsof the Board of Directors.
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.
Lancy, 23 May 2014
Ernst & Young Ltd

Arthur Bergmann
Licensed audit expert(Auditor in charge)

Laurent Bludzien
Licensed audit expert

LEM | Annual Report 2013/14

71

Information for Investors
Number of registered shareholders

31.3.201431.3.2013

574
67
7
7
655

567
75
6
6
654

31.3.201431.3.2013

52.0
31.6
3.5
0.1
12.8
100.0

49.2
32.0
3.6
0.1
15.1
100.0

1-499
500-4'999
5'000-49'999
50'000 and more
Total

Shareholders by category
In %Institutional shareholders
Private individuals
LEM employees, managers and board
Treasury shares
Non-registered shares
Total
Share information
SymbolListingNominal value
ISIN
Swiss Security Number (Valor)

LEHN
SIX Swiss Exchange
CHF 0.50
CH0022427626
2'242'762

Share price development LEM Holding SA (LEHN) compared to SPI
800

CHF

700
600
500
400
300
200

LEHN

100

SPI

0
1.4.091.10.09

1.4.101.10.10Source: Datastream

LEM | Annual Report 2013/14

72

1.4.11

1.10.111.4.12

1.10.121.4.13

1.10.131.4.14

Share information
In CHF

Number of sharesYear high 1
Year low 1
Year end 1
Average daily trading ­v olume (shares) 1
Earnings per share
Ordinary dividend per share 2
Market capitalization as per 31 March (In CHF millions)
12

2013/142012/13

1'140'000
712
547
703
369
40.09
40
801

1'140'000
604
451
589
493
28.67
30
671

Source: SIX
Proposal of the Board of Directors to the Ordinary Shareholders' Meeting

Financial calendar of the financial year
1 April 2014 to 31 March 2015
26 June 2014
1 July 2014
4 July 201412 August 2014
13 November 201417 February 2015
4 June 2015
25 June 2015
30 June 2015
3 July 2015

Ordinary Shareholders' Meeting
Université de Fribourg, bd. de Pérolles
Dividend ex-date
Dividend payment date
First quarter results 2014/15
Half-year results 2014/15
Third quarter results 2014/15
Year-end results 2014/15
Ordinary Shareholders' Meeting
Dividend ex-date
Dividend payment dateContact
Julius Renk (CFO)
Phone +41 22 706 12 50
E-mail investor@lem.com

LEM | Annual Report 2013/14

73

Group Subsidiaries
LEM is a global player with production plants and development centers in Beijing (China), Geneva (Switzerland), Machida (Japan)
and Sofia (Bulgaria). The company has sales offices at all its clients' locations and offers seamless service around the globe.
For a complete list of subsidiaries, offices and representatives, refer to www.lem.com > Contact > Sales Locator
EuropeLEM Holding SA
Avenue Beauregard 1
CH-1700 Fribourg> Julius Renk

LEM Deutschland GmbH, Succursale Italia
Via V. Bellini, 7I-35030 Selvazzano Dentro, PD> Tiziano Rossato

LEM Intellectual Property SA
Avenue Beauregard 1
CH-1700 Fribourg> Jean-Marc Peccoux

LEM Deutschland GmbH, UK branchWest Lancs Investment Centre
UK-Skelmersdale WN8 9TG> Brian Carter

LEM International SA
Chemin des Aulx 8
P.O. Box 35
CH-1228 Plan-les-Ouates> Julius Renk

LEM Bulgaria EOOD
Iliensko Shose 8
BG-1220 Sofia> Boryan Borisov
LEM (Russia), LLC
Starickoe Shosse 15
RU-170040 Tver
> Pavel Sobol

LEM Switzerland SA
Chemin des Aulx 8
P.O. Box 35
CH-1228 Plan-les-Ouates> Simon Siggen
LEM Management Services Sàrl
Chemin des Aulx 8
P.O. Box 35
CH-1228 Plan-les-Ouates> Martin Hoffmann

Asia
LEM Electronics (China) Co. Ltd
28 Linhe Street, Shunyi District
CN-101300 Beijing> Zonghui Zhang
LEM Japan KK
2-1-2 Nakamachi
JP-Machida, 194-0021 Tokyo> Hiroaki Mizoguchi

LEM Deutschland GmbH
Frankfurter Straße 74
D-64521 Groß-Gerau> Hartmut Graffert
LEM Deutschland GmbH, Austria branch
Concorde Business Park 2/F/6
A-2320 Schwechat> Thomas Burda

LEM Management Services Sàrl – India Branch
Level 2, Connaught Place
Bund Garden Road
IN-411 001 Pune
> Sudhir Khandekar

LEM Belgium sprl-bvba
Egelantierlaan 2
B-1851 Humbeek> Yves Declerck

LEM Management Services Sàrl, Korea branch
D-Cube 15F, Gyeongin-Ro 662
KR-152-706 Guro-Gu, Seoul> Steve BaeLEM Deutschland GmbH Denmark,Filial AF LEM Deutschland GmbH
Christian X's Alle 168
DK-2800 Kgs. Lyngby> Klaus Corell-Kramer
LEM France Sàrl,
Avenue Galois 15
F-92340 Bourg-la-Reine> Yves Declerck
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74

North America
LEM U.S.A., Inc.
11665 West Bradley Road
USA-Milwaukee, WI 53224> John Marino

Imprint© LEM Holding SA, Fribourg
Concept and text
LEM
Gregor Communications, Zurich
DesignTGG Hafen Senn Stieger, St. Gallen
Images, Illustrations
LEM
Aurélien Bergot/Pedro Neto, Whitebalance Studio
Enol Chen, Enol StudioJasmin Viertl
Printing
Cavelti, Gossau

LEM Holding SA
Avenue Beauregard 1
CH-1700 Fribourg
Phone +41 26 460 10 30
Fax +41 26 460 10 39
www.lem.com
LEM | Annual Report 2013/14

76