Annual Report
2012/13
At the heart of power electronics

LEM | Annual Report 2012/13

1

Elevator
Elevators are generally powered byelectric motors that either drive traction
cables or counterweight systems like ahoist.
Machine room-less elevators are designed so that most of
the components fit within the shaft containing the elevatorcar. A small cabinet houses the elevator controller and the
motors.
The motor (2) is controlled by an inverter and a controller (3).
As soon as someone pushes a button to request the elevator,
the controller gives the necessary signals to the inverter. It
then moves the motor in the right direction and lets it stop
exactly at the right position to the floor ground independentof the weight in the elevator car. The current transducers takecare that the motor is powered with the correct current.

22

Elevator doors protect riders from falling into the shaft. The
most common configuration is to have two panels that meetin the middle and slide open laterally. The doors are controlled by a control unit (1) that integrates the motors of thesliding doors and the protection of the riders. The current
transducer measures the current in the motors for two purposes: to run the panels smoothly and to discover if something (e.g., a finger, a leg) obstructs the doors in which casethe closing would be stopped.

LTS

LA 150-P

A
B
1
2
3

LTS
LA 150-P
Door control unit
Motor
Controller

LEM | Annual Report 2011/12
2012/13

1
2

3
B

1

A

Table of Contents
LEM at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

10

LEM’s Core Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

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

15

Compensation Report .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Financial Review .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

28

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

31

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

59

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

70Group Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71

Reporting Period 1 April 2012 to 31 March 2013

LEM | Annual Report 2012/13

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LEM | Annual Report 2012/13

4

Start-stop systems for cars
Over the past few years, an increasing
number of new car models are available
with a system that automatically shuts
off the engine while stopped in traffic,
and restarts it as soon as the driver
engages a gear or presses the accelerator.
These so-called start-stop systems reduce the amount of timethe engine spends idling, thereby lowering fuel consumption,and gas emissions. To function safely and efficiently, thesestart-stop systems need a careful measurement of the electricenergy available.

CAB

HAB

Battery management
The current sensors (HAB, CAB) allow the battery management system to decide if enough energy is available in thebattery to operate the accessories (such as air-conditioning,headlights, and radio) while the engine is off, and still haveample charge left to restart the engine.
“Power-control unit” and “starter-generator” ­management
The “power-control unit” will instruct the “starter-generator”
to restart the engine or recharge the battery, as needed, andcurrent sensors (HC5, HAH3) used in the converters andinverter modules allow it to operate smoothly, improving thedriver experience while helping the environment.

HC5

HAH3

B
A

B
1
5

2

C

D
A

3

B
4

C
D
1
2
3

4
5

LEM | Annual Report 2011/12

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LEM | Annual Report 2012/13

5

CAB
HAB
HC5
HAH3
Battery
Power-control unit
Internal combustion
engineStarter-generator
Rectifier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 electricalparameters like current and voltage, are used in a broad
range of applications. Although these devices are not visible
to the outside world, they are vital for application functionality and the benefits provided to the end users. Starting withproducts 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 micro-turbines and wind and solar power
generation. In addition, new opportunities have been developed in the automotive market such as battery management
for conventional cars and electrical motor controls, AC/DC
converters, DC/DC inverters, battery pack management andchargers for green cars. This evolution underscores the company’s exceptional skills in adapting to rapidly changing

industrial trends, such as miniaturization, higher performancelevels and a greater degree of application, integration andcomplexity.
LEM has the strongest brand recognition in its markets. Its
products – commonly called “LEMs” – are at the heart ofmany power electronics applications. LEM’s strategy is toincrease 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) and Machida (Japan) and,as from October 2013, in Sofia (Bulgaria). The company has
sales offices close to its main clients’ locations and offers
seamless service around the globe.

Production Centers (PDCs)
Beijing, China
Geneva, Switzerland
Tokyo, Japan
Sofia, Bulgaria (from October 2013)
Adaptation Centers
Milwaukee, USA
Tver, Russia

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

LEM | Annual Report 2012/13

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Key figures 2008/09 to 2012/13
In CHF millions

2008/09

2009/102010/112011/122012/13

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

196.8
29.2
14.8%
23.9

185.5
25.8
13.9%
10.5

296.2
60.4
20.4%
39.6

236.3
34.2
14.5%
28.5

235.0
41.0
17.5%
32.6

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

83.5
71.8%
27.9

83.4
62.9%
29.8

96.9
59.8%
26.6

79.6
60.0%
18.1

87.3
62.4%
27.6

Operating cash flow
Investing cash flow

30.9
(9.1)

26.3
(13.3)

30.0
(9.4)

46.7
(9.1)

46.2
(10.4)

Market capitalization (per 31 March)
Employees (FTEs)

172.4
909

391.0
1'018

655.5
1'316

563.7
1'136

671.5
1'137

Sales over 5 years per segment

Regional sales breakdown

In CHF
CHFmillions
millionsIn

Total
CHF 296.2 million

300

300

275

275

250

250

225

225

200

200

175

175

150

150

125

125

100

100

75

75

50

50

25

25

0

Total
CHF 236.3 million

Total
CHF 235.0 million

35%
15%

36%

50%

18%

38%
20%

46%

42%

0
08/09

09/10

10/11

11/12

12/13

2010/11

Industry Segment
Automotive Segment

2011/122012/13

Asia and Rest of the World
North America
EuropeShare price development LEM Holding SA (Lehn) compared to SPI
CHF

700

600

500

400

300

200

LEHN

100

SPI

0
1.4.0818.11.08

8.7.0925.2.10

15.10.10

4.6.1122.1.1210.9.1230.4.13

Source: Bloomberg

LEM | Annual Report 2012/13

7Foreword
Dear Shareholders,
For us like for our customers last year was challenging. Still, financial year 2012/13 was the secondbest year in the company’s history. LEM sustained its solid performance demonstrating its resiliencein a difficult economic climate. Compared to financial year 2011/12, we managed to increase margins
with flat sales.
We started the year with a strong quarter and with hopes for an economic recovery. But soon theaggravating sovereign debt crisis as well as slowing economies in Europe resulted in a depressedsales development, mainly in the Industry segment. The Automotive segment achieved record sales
thanks to new products and projects.
Our success factors
We strengthened the company through further progress in implementing our key strategic initiatives andprepared the ground for future success. With a strong presence in the major industrial markets in Europe,
Asia and North America, we are the only player in our market operating a large and international sales force.
What is more, our sales force is capable of supporting our customers with engineering expertise on theirapplications. As a result of increasing investment in R&D, we launched eight new products and applied foreleven new patents in financial year 2012/13 – a new record in LEM history. We run an efficient production
platform while maintaining the highest quality standards in our industry. With the decision to start production
in Bulgaria, we will diversify and increase our low-cost production capacity and at the same time ameliorate
our natural foreign currency hedge. Our on-time delivery index reached all-time highs, demonstrating an
improvement in responsiveness to our customers. Our recent customer survey shows that this progress ishighly appreciated.
Customer satisfaction, innovation and efficiency will remain top priority for LEM going forward.
Improved operating margin
Bookings and sales recovered in the first half of 2012/13 but slowed in Q3 and stabilized in Q4. Sales
reached CHF 235.0 million, a decrease of 0.6% compared to the previous year. At constant exchange
rates, sales decreased 3.7%. Bookings amounted to CHF 230.6 million, an increase of 26.1% compared to the previous year resulting in a book-to-bill ratio of 0.98.
Operational EBIT reached CHF 41.0 million compared to CHF 34.2 million in the previous year. This
result was achieved despite restructuring charges of CHF 1.9 million due to the planned relocationof production lines from Switzerland and Japan to Bulgaria. The EBIT margin of 17.5% was within thetarget range of 15 to 20%. Net profit amounted to CHF 32.6 million.
Changes in the Board of Directors
Felix Bagdasarjanz, member of the Board of Directors of LEM Holding SA since 2002 and Chairman
since 2004, announced his resignation from the Board of Directors on the date of the annual shareholders’ meeting on 27 June 2013. The Board of Directors decided that, subject to re-election at theupcoming annual shareholders’ meeting, Andreas Hürlimann be nominated as new Chairman of theBoard. Anton Lauber, member of the Board of Directors since 2004, has resigned and will not standfor re-election.
Felix Bagdasarjanz leaves LEM having laid the foundations for future success. Under his Chairmanship, the Board has focused on successful execution of transformational projects delivering prosperous
outcomes for shareholders, employees and customers. Board and management thank Felix Bagdasarjanz for his leadership over the past eleven years and wish him all the best for the next phase of
his life. Anton Lauber has dedicated his valuable experience at board and executive managementlevel transferring to LEM the spirit for continuous improvement towards operational excellence. The
Board and management gratefully acknowledge his important contributions and leadership and wish
him all the best for the future.

LEM | Annual Report 2012/13

8

The Board of Directors proposes to elect Dr. Norbert Hess (Dr.-Ing. TU Berlin) as a new member.
German national, Mr. Hess is Member of the Executive Committee and Chief Operations Officer at
EPCOS AG. Based on his engineering and management career of more than 25 years with Siemens
AG and EPCOS AG, Mr. Hess will contribute to the company and the board a breadth of professional
experience in material & technology, operations and business management in the electrical components field. He also has developed deep insights into customer segments such as automotive, industry,
energy and telecoms.
Dividend proposal to the annual shareholders’ meeting
The increased dividend proposal of CHF 30 that the Board of Directors will submit to the 2013 annual
shareholders’ meeting is a sign of trust in the company’s ability to continue generating strong cash
flows in the future. The proposal follows LEM’s dividend policy to distribute significantly more than
50% of its consolidated net profit to shareholders and corresponds to a payout ratio of 105%.
ThanksThere is great energy to be found at LEM. Our employee survey revealed that team spirit and empower­
ment are the key pillars of engagement in the company. We owe our employees special thanks, for
LEM’s success is only possible through their commitment. Our thanks also go to our customers fortheir trust in our products and services as well as to our shareholders for their long-term investment
and trust in the promising future of our company.

Felix Bagdasarjanz
Chairman of the Board of Directors

François Gabella
Chief Executive Officer

LEM | Annual Report 2012/13

9

Business ReportAugmented efficiency
Financial year 2012/13 was almost a recurrence of the previous year. We started the year well but were soon remindedthat the sovereign debt crisis in Europe would take time tobe resolved and that sluggish economies in North America
and China would affect our business. Since Q3 of 2012/13,
orders and sales have stabilized – a trend that we expect tocontinue into the near future.
Overall, sales were at the same level as in financial year
2011/12, yet our efforts to increase efficiency and flexibility
have delivered the expected result. Despite severe pricepressure, margins have improved thanks to consistent cost
control, productivity increases and the continued shift of
production to low-cost countries. We improved our delivery
reliability, even with shorter lead times requested by ourcustomers, a strength that was highly rated in our recent
customer survey. We continued strengthening LEM throughregular product launches, investments in the manufacturingbase and close cooperation with suppliers. In October 2013,
we will start production in our new low-cost manufacturingsite in Sofia, Bulgaria.
Stable sales – strong balance sheet
In financial year 2012/13, sales amounted to CHF 235.0 million, representing a decrease of 0.6% or CHF 1.4 million
compared to the previous year. The exchange rate fluctuation had a positive impact. At constant exchange rates,
sales decreased 3.7%.
Key figures 2012/13
In CHF millions

Orders received
Sales
Book-to-bill
Operational EBIT
Net profit

Q1

Q2

Q3

Q4

Total

60.7
63.1
0.96
11.4
10.7

59.8
61.1
0.98
12.5
9.8

51.4
55.0
0.93
10.6
8.1

58.7
55.8
1.05
6.6
3.9

230.6
235.0
0.98
41.0
32.6

At a regional level, North America (+10.5%) and Asia (+9.4%)
reported strong increases in sales, while Europe was negatively affected through the economic environment and experienced a decrease in sales (-10.8%). These dynamics illustrate the increasing importance of Asia for LEM. The shareof Asia increased from 34% to 37% of total sales, while at thesame time the share of sales in Europe fell from 46% to 42%.
Orders received increased 26.1% to CHF 230.6 million in
financial year 2012/13. For the full year, the book-to-bill ratio
was 0.98. In Q4 of 2012/13, the book-to-bill ratio improved
to 1.05, confirming market stabilization.
In financial year 2012/13 we improved the gross margin from
39.1% to 42.0%. The improvement was the result of continued
cost savings through improved production processes, more
effective capacity management as well as rationalization
benefits after the relocation of production from Denmark to
Switzerland. We more than compensated the ongoing priceerosion in our markets.
LEM | Annual Report 2012/13

10

Sales, general and administrative spending (SG&A) was
reduced by 4.1% to CHF 43.1 million. SG&A as a percentage
of sales decreased from 19.0% in financial year 2011/12 to
18.3% in financial year 2012/13.
The research and development expense (R&D) increased
by 9.4% to CHF 14.7 million. R&D as a percentage of sales
increased to 6.2% in financial year 2012/13 after 5.7% in
the year before.
Even including a restructuring charge of CHF 1.9 million
linked to the relocation of production to Bulgaria recorded
in Q4 of 2012/13, operational EBIT increased to CHF 41.0
million, compared to CHF 34.2 million in financial year
2011/12. LEM’s operational EBIT margin was 17.5%, within
the company’s target range of 15 to 20% and 3.0 percentage points higher than in the previous year.
The Group tax rate increased to 17.5% from 12.4% in theprevious year as the reversal of prior years’ charges did not
repeat in financial year 2012/13. Net profit for the year was
CHF 32.6 million (+14.5%).
Our balance sheet remains solid. As at 31 March 2013, total
assets increased to CHF 139.9 million mainly due to a higher
cash position. Shareholders’ equity increased to CHF 87.3
million, representing an equity ratio of 62.4% (60.0% as at
31 March 2012).
Industry segment
In financial year 2012/13, the Industry segment performed
well in a volatile economic environment. Sales reachedCHF 200.0 million, a decrease of 4.0% compared to financial
year 2011/12. The decline is fully attributable to the difficult
economic climate in Europe with a decrease of sales of 11%,
while business in Asia and North America performed well withgrowth rates of 6% and 3%, respectively. Still, Europe was
our most important region, accounting for 48% of sales, followed by Asia with 36% and North America with 14%. China
was the biggest single market for LEM. At constant exchange
rates, sales decreased 6.6%. Despite constant price pressure, we increased our operational EBIT margin to 18.3%
from 14.4% in financial year 2011/12. The improvement was
the result of strict cost control, the relocation of productionlines to China, improvements in the supply chain and theconcentration of the high-precision production in Geneva.
In the past few years, we have observed a radical change inthe structure of international industrial competition, with
China emerging as the new leader. While Europe’s industrial
production decreased and the USA’s and Japan’s stagnated,
China’s industrial output was 76% above the level from five
years ago. In the course of 2012, the eurozone slid into a
recession while the other regions were stable or growing.
Several of our customers’ industries shifted their production
to China, not least the renewable energies businesses.

Overcapacities and constant price pressure remain a permanent issue in our markets. In this challenging environment
we maintained, and in some markets increased, our market
share. We have launched several new products, some ofthem already showing market interest. In addition, we
enlarged our business activities with new cost-effective
products allowing us to tap new markets.
Sales in the drives & welding business decreased 12% compared to last year. We saw weaker demand in all major markets except China, with Europe witnessing the strongest
impact. In the second half of financial year 2012/13, werecorded stabilization in Europe and North America.
The renewable energies & power supplies business wasaffected through the consolidation in the solar and windmarkets. Sales increased 7% compared to last year. Strong­
est growth was in Japan, China and the US, while sales in
Europe declined. In the solar business, we observe
increased demand for large power installations. Performance in the wind business is constrained due to unresolved grid connection issues.
The traction business remained stable compared to financial
year 2011/12. Demand in Europe and Japan is still weak following limited government investment in infrastructure.
Sales in the high-precision business decreased 4% compared to last year as a consequence of weak demand inEurope and Asia. Still, our market share increased after wewon new clients and projects.
We will continue with the introduction of new, innovative pro­ducts. Our ambition is to win additional projects in new applications such as smart grid. Also, maintaining high production
flexibility will remain a key priority in financial year 2013/14.
Automotive segment
The Automotive segment achieved sales growth of 24.8%,
the third consecutive year with high double-digit growth, toreach sales of CHF 35.0 million in financial year 2012/13. At
constant exchange rates, sales grew by 18.0%. The conventional cars business was the growth driver behind this newrecord result. North America remained the most important
market for us with 51% of sales, but Asia, particularly China,
is becoming increasingly important for LEM with a share ofsales of 17% for China alone and 40% for Asia including
China. Growth rates were strongest in China (+54%), USA(+29%) and Japan (+21%). With 8% of sales, Europe remained
a relatively small market for LEM. Operational EBIT reached
CHF 4.4 million, an increase of 5.8% compared to financial
year 2011/12. The operational EBIT margin was 12.7%, compared to 15.0% in the previous year. The lower operational
EBIT margin is the consequence of higher competitive pressure as well as increased investment in R&D and marketing.

2012 was a year of records for the global automotive industry. For the first time in history, over 80 million vehicles were
produced in a single year. While the European automotive
industry suffered from weakness in the economy, US vehicle
production rose 19.3% in 2012, making it the best year for
the industry since 2007. Also, Asian car markets thrived.
Today, one out of four vehicles produced in the world comesfrom China. Global vehicle sales slowed in first quarter ofcalendar year 2013 due to ongoing weakness in Europe andslowing economies in Asia.
In order to seize growth opportunities, we have reinforced
our international sales force. Thanks to increased investment in R&D, we have launched several new products forhybrid cars and for start-stop applications for conventionalcars. Both products offer new functionalities and higher precision at a lower application cost. We see more and morecurrent measurement applications in cars, resulting in
growth potential for LEM. On the other hand, we expect
intensifying competition in this growing market.
In the conventional cars business, we have seen an increasing interest in our start-stop application. We recorded strong
growth in our battery management application. Overall, themarket grew faster than expected and our sales increased
by 33%.
The green cars market was burdened by high vehicle prices.
Hybrid cars had some success, but electric cars still did not
perform well. Many green cars projects have been delayedor even cancelled in the course of the last year. In financial
year 2012/13, the green cars business decreased by 4%compared to the previous year.
In financial year 2013/14, we will continue to invest in innovation and in developing our sales force in USA, Japan and
China. Despite market correction in the green cars business,
we see growth potential for LEM.
Strategy implementation
Thanks to our close contacts with our customers, we follow
the challenges posed by the changes in the global energy
supply and the changing needs of our industrial and automotive customers.
Our key strategic initiatives:_ _ We increase our technological leadership

We innovate to make our customers more successful. In
financial year 2012/13, we launched eight new products
and secured eleven new patents, which makes it the mosteffective innovation year in our history. We launched a new
open-loop-based product for industrial applications, HO,
which uses our new ASIC generation. It delivers higher
precision, offers new functionalities like overcurrent detection and stand-by mode, and is programmable. The new
HLSR offers new design with higher accuracy at lower

LEM | Annual Report 2012/13

11

cost. The product aims at drives and solar markets and,thanks to its low cost, is targeted to opening new applications in new markets. The product generated high interest,
and production was ramped up swiftly. The new LA130150 is based on proven closed-loop hall technology andoffers higher precision at a lower cost than older products.
In collaboration with a key customer, we developed a new
voltage transducer for the traction market, DVL, offering
improved performance based on new digital technology.
The HFWS 63 has been designed for smart-grid-management applications. In the Automotive segment, welaunched three new products: CAB measures the state of
the charge in hybrid vehicles; HAH3 DR is a customerspecific transducer that allows communication with amicrocontroller and has a serial interface; and HC20 is anew, more cost-effective product for battery monitoring.
Going forward, we continue the renewal of our productrange with a strong focus on optimized cost, higher accuracy and new functions. Defining the coming technology
trends is our main challenge. To this end, we partner withour customers and also with leading technical universities
and institutions in Switzerland, France, Germany and USA
on advanced technologies projects.

laws and regulations. We adhere to the Ten Principles of theUnited Nations Global Compact. We implement and annuallyreview ISO 14001 environmental management systems. Ourtransducers contribute to optimizing energy consumption
worldwide.
We protect the safety of employees with regular trainings
and continuous improvements in infrastructure.
Customer satisfaction

In 2012 LEM conducted a customer satisfaction survey that
included clients from all territories in which LEM is active.
The survey found that customers rate LEM as highly today
as in a similar study conducted in 2009. Our customers
most valued our focus on their demands and requests aswell as the fact that we are easy to work with. Our trustworthiness and our professionalism in solving issues were additionally listed as LEM’s strengths. We are proud that thereliability, performance and quality of our products received
even higher ratings than in 2009. Furthermore, our clients
confirmed that LEM is a company they appreciate working
with and that they perceive us as the global leader in providing transducers to measure electrical parameters.
Employee engagement_ _ We increase the efficiency of our operations

In summer 2012, we centralized the high-precision production in Geneva, Switzerland. This grouping of production reduced our fixed cost and allowed for improvementsin the supply chain. As a continuation of our strategy initiated in 2004, we continue to relocate production lines
from the plants in Machida, Japan, and Geneva, Switzerland, to low-cost countries. To this end, we have decided
to establish a new production site in Sofia, Bulgaria, where
we intend to invest CHF 2 million and plan a ramp-up of
production as from October 2013. The new plant will allow
additional efficiency gains and reduce foreign currency
exposure while being located close to our important European market.

In 2012 we also conducted a global survey to assess LEM’s
employee engagement for the company, managerial andteam effectiveness, work conditions as well as quality andcustomer focus. About two-thirds of all LEM employees participated. The study showed that employee engagement isglobally stable compared to the previous study. Team spirit
and empowerment remain the two key pillars of engagement
at LEM. Around nine out of ten employees are proud to workfor LEM. According to the survey, there have been important
improvements in the working environment. Workload isslightly higher but with limited impact on perceived stress.
The study revealed the employees’ wish for improvements
in internal communications.
Invest in a motivated workforce_ _ We increase the flexibility of our production

Given the persistent volatility in our markets, we continuously work on the improvement of our processes. In financial year 2012/13, we made major progress in cycle management and customer service. Our reliability improved
to all-time high levels of on-time delivery ratios. Our sales
and operations planning process (S&OP) again proved to
be valuable.
Responsibility

We act responsibly and in accordance with our values. We
stipulate rules for our employees that are applicable acrossthe Group. We expect our suppliers to align their actions
with internationally recognized principles. Our own standards
are aligned to such principles and fulfill or exceed existing

LEM | Annual Report 2012/13

12LEM’s culture thrives on achievement, innovation and the ability
to drive change in a truly global organization. The broad diversity of nationalities and cultures across LEM is a great asset,
which not only drives our competitiveness but also brings us
closer to our customers around the world.
Outlook

The economic climate remains volatile and the competitiveenvironment fierce. In our Industry segment we expect a
progressive restart of sales in North America and Asia andthe demand in Europe to remain weak. The Automotive segment is expected to deliver continuous growth. Thanks toour strategic initiatives, we expect operating margins toremain within our target range of 15 to 20%.

Container gantry craneContainer cranes consist of a supporting
framework that can traverse the lengthof a quay, and a moving platform called a
spreader (5).

LF 1005

The crane is driven by an operator who sits in a cabin (4) suspended from the trolley. The cabin runs all control and security functions of the crane and translates the operator moves
into the correct and smooth movements of the motors.
The crane can be moved on rails over the ground surface
driven by normally four motors (1). The motors must be controlled by an inverter and a control unit (4) to assure synchronal operation. The trolley (3) runs along rails that are locatedon top or sides of the boom and girder. The movement is donewith two motors located on the trolley. The drive and control
unit for the trolley and the hoist is also located in the cabinet.
Once the spreader locks onto a container, the container islifted and moved. The lift of the container is done normally by
one axis with a very sophisticated rope system and driven by
one motor (2).
Current transducers are used in all motor inverters to satisfy
all requirements for safe and accurate movements.

A

4
3
2

5
1
1

A
1
2
3
4
5

LF 1005
Ground surface move motors
Hoist motor
Trolley motor
Inverter and control cabinet
SpreaderLEM | Annual Report 2011/12

3

1

1

LEM | Annual Report 2012/13

13

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 usa team. They are the common beliefs we share. They are
the spirit 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 witha “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.

LEM | Annual Report 2012/13

14

We value teamwork
LEM forms a worldwide community. Close collaboration andnetworking across functions, departments and cultures iscritical for the success of the company. To cooperate, weneed to be open and honest and willing to share and trust
each other. Accountability is a key factor to our success.
We are committed to a workplace where individuals aretreated fairly and with respect, where all employees havethe 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 successdepends 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 andresults, 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 tobe the leaders in our industry and not the followers.

Corporate Governance Report
The following information complies with the Corporate
Gover­n ance Directive of the SIX Swiss Exchange (SIX) andthe disclosure rules of the Swiss Code of Obligations. In
order to enhance the clarity of this chapter, reference ismade to other parts of the Annual 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 was domiciled at Chemin des Aulx 8 in
CH-1228 Plan-les-Ouates, Geneva, and has moved its seaton 2 April 2013 to 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 2013, the market capitalization
was CHF 671 million.
LEM Group is structured into the Industry Segment and theAutomotive Segment. Appropriate segment reporting pursuant to IFRS is contained in note 3 of the notes to the consolidated financial statements. All companies in LEM Groupare listed under “Scope of consolidation” in note 26 of theconsolidated financial statements, with their respective
company names, registered offices, share capitals and therelevant percentages of shares held. There are no otherlisted companies in the scope of consolidation.

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. No othershareholder 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 paidup 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 2013, LEM Holding SA held 1’316 treasury
shares.
Authorized and conditional capital
There is no authorized or conditional capital, nor are there
any profit sharing certificates or participation in certificatesor any convertible bonds outstanding.

Significant shareholders
On 31 March 2013, the following shareholders held 3% ormore of the share capital and voting rights:
In number of shares/options,per cent of shareholding

31 March 2013
Shares

Options

Werner O. Weber and Ueli Wampfler, 398'000 50'000
in Zollikon/Wollerau, Switzerland,through WEMACO Invest AG and
Swisa Holding AG, in Zug/Cham,
Switzerland
Ruth Wertheimer, in Kfar, Israel,
144'581
N/Nthrough 7-Industries Holding B.V., in
Amsterdam, Netherlands
Sarasin Investmentfonds AG, in Basel,
90'320N/N
Switzerland
Montanaro Asset Management Ltd,
69'071
N/N
in London, United Kingdom
Erwin Studer and Joraem de Chavonay,
97'000 (50'000)
in Zollikon/Zug, Switzerland
Amerprise Financial Inc., in Minne38'216
N/N
apolis, USA, through Threadneedle
Asset Management Ltd, in London,
United Kingdom
Impax Asset Management Ltd––

31 March 2012
In %Shares

Options448'000 39.30%

382'500

N/N

382'500 33.60%

144'581

12.70%

144'581

N/N

144'581

12.70%

90'320

7.90%

101'044N/N

101'044

8.90%

69'071

6.10%

55'251

N/N

55'251

4.80%

47'000

4.10%

89'500N/N

89'500

7.90%

38'216

3.40%

56'777

N/N

56'777

5.00%

–

<3%

35'400N/N

35'400

3.10%

Position

N/N = none notified

LEM | Annual Report 2012/13

15

Position

In %Information on the Performance Share Plan and the stock
option plans is provided in the Compensation Report, under
the section “2.1.4 Discontinued plans” on page 25 and in thenote 21 to the consolidated financial statements on page 51.
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.

Felix Bagdasarjanz

At the ordinary shareholders’ meeting on 28 June 2012,
Felix Bagdasarjanz, Ilan Cohen, Andreas Hürlimann, Anton
Lauber, Peter Rutishauser and Ueli Wampfler were re-elected
as members of the Board of Directors. Felix Bagdasarjanz
maintained the Chairmanship and Peter Rutishauser the Vice
Chairmanship. All members of the Board are non-executive
and have at no time been part of the executive managementof LEM. Furthermore, they have no significant businessconnections with LEM Group.
The Board of Directors was comprised of the following members
as of 31 March 2013:

Position Chairman of the Board of Directors

Nationality Swiss

Entry 2002

Born in 1945

Professional background
Since 2002, Independent business consultant
1999 – 2002, CEO, ESEC and Member of the Executive Board, Unaxis
1997 – 1999, Member of the Executive Board, ABB Switzerland
1992 – 1997, Managing Director, ABB Drives AG/ABB Industrie AG
Other notable activities_ _None
Education Dr. of Electrical Engineering, ETH Zürich

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

Ilan Cohen
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_ _Founder, Cleantech Incubator and Engineering School, IDC University, 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

Andreas Hürlimann

Position Member of the Board of Directors

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

LEM | Annual Report 2012/13

16

Anton Lauber

Position Member of the Board of Directors, Member of the Nomination & Compensation Committee

Nationality Swiss

Entry 2004

Born in 1951

Professional background
Since 2012, Independent board professional
2008 – 2011, Delegate of the Board of Directors, Schurter AG, Lucerne,
and President Division C­ omponents, Schurter Group, Lucerne
1993 – 2008, CEO and Delegate of the Board of Directors, Schurter AG, Lucerne
1988 – 1992, Technical Director, Schurter AG, Lucerne
1985 – 1988, Managing Director, Generatorenfabrik ABB AG, Baden
1980 – 1984, Head of Production, Power Plants ABB AG, Baden
Other notable activities_ _Chairman of the Board of Directors, Voegtlin Meyer AG, Brugg;
Hightech Zentrum Aargau AG, Brugg_ _Vice Chairman of the Board of Directors, Bossard Holding AG, Zug_ _Member of the Board of Directors, CTC Analytics AG, Zwingen; Landert Motoren AG, Bülach;
Fr. Sauter AG, Basel_ _President of the Council, Hochschule Lucerne / University of Applied Sciences and Arts
Education
Graduated Machinery Engineer, Technical University Brugg-WindischPostgraduate diplomas at University of Applied Sciences, Lucerne, andUniversity of St. Gallen in Business Administration

Peter Rutishauser

Position Vice President of the Board of Directors, Chairman of the Nomination & Compensation 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

Ueli Wampfler

Position Member of the Board of Directors, Chairman of the Audit 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_ _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 thecompleted financial year, three full-day meetings and four
half-day meetings were held. The meetings usually takeplace at the company’s headquarters. The Chairman, after
consultation with the CEO, determines the agenda for the
Board meetings. The members of the Board of Directors
can ask for additional items to be included. The Board members receive supporting documents beforehand, allowing
for a good 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 issues, other membersof Executive Management participate in the meetings inorder to respond to specific questions. Decisions can betaken by the Board if at least half of the Directors are present, and a simple majority of them is sufficient. In the eventof deadlock, the Chairman has the casting vote. Minutes ofthe meetings including decisions taken are prepared by theoutside Secretary of the Board and distributed to the members of the Board, the CEO and the CFO.
The Board of Directors reflects, in its working procedures,the efficiency and effectiveness of the teamwork as well as
its interaction with the management of the company on aregular basis. Regular feedback sessions at the end of ameeting provide valuable inputs for the continuous improvement of the Board’s coherence and leadership.

LEM | Annual Report 2012/13

17

Definition of areas of responsibility
The Board of Directors delegates the management of thecompany to the CEO to the fullest extent permitted by the
Swiss Code of Obligations. The Board of Directors reviews
and assesses at least on an annual basis and takes decisions in the following areas:_ _ Review and approval of the strategy, business plan, annual
business objectives and budget for the LEM Group.
_ _ 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.
_ _ Appointing/dismissing of the Executive Management.
_ _ Monitoring the ethical and legal behavior of LEM.
_ _ Reviewing of human resources management, including
co-worker satisfaction and management development
and legal, intellectual property, social and environmental
aspects.

after are revalued a second time, taking into consideration
the action plans. In step four the action plan is validated andthereafter monitored on a monthly basis (step five).

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 toperform 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 theBoard.
_ _ The Committees meet at regular intervals and exchangedetailed information with the Management.
_ _ The Board receives detailed information to each agenda
item one week before the board meeting.
_ _ At least once a year a session is held in the Board meeting including all Executive Managers.

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
prepares an annual report on the internal control system which
is presented to and discussed with the Audit Committee.

Business risk management
In compliance with Art 663b of the Swiss Code of Obligations, LEM is using a standardized procedure to analyze its
business risks. LEM’s risk management covers all types ofrisk: financial, operational and strategic – including theexternal 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 firststep, potential hazards are evaluated and a consensual list
with 10 to 15 main hazards is set up. In a second step, eachhazard 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
plan is put in place to manage the risks. The hazards there-

LEM | Annual Report 2012/13

18

Internal control system
In compliance with Art 728 a/b of the Swiss Code of Obligations, LEM has put in place an internal control system.
Starting from the material positions in the financial result of
the Annual Report, the important underlying processes andprocess owners have been identified. For each process, key
risks that could lead to errors in the financial reporting havebeen identified. For each key risk, key controls have been
defined and responsibilities assigned to assure effective
compliance and documentation of the key controls. The
process has been presented to and approved by the Audit
Committee.

Committees
Two standing committees support the Board of Directors.
They are comprised of two non-executive members of theBoard of Directors. They meet whenever necessary but atleast twice a year.
_ _ The primary objective of the Audit Committee (AC) is toprovide the Board of Directors with effective support infinancial 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 to the shareholders. Furthermore, it reviews critical accounting policies, financial control mechanisms andcompliance with corresponding laws and regulations aswell as the development and continuous improvement of
the internal control system. If required, the external Groupauditors are invited to participate at the meeting. The ACprepares proposals to be decided by the Board of Directors. In the completed financial year three half-day meetings were held.
_ _ The Nomination & Compensation Committee (NCC)
deals with succession, recruitment and compensation of
the members of the Board of Directors and the Executive
Management. It ensures and monitors the personnel
development plan and adequate succession planning forthe middle and top management. It reviews and updates
the performance-based compensation system for the
Executive Management. The NCC prepares proposals tobe decided by the Board of Directors. In the completed
financial year five half-day meetings were held. Additionally, six telephone conferences were held.

4 Executive Management
The Executive Management was comprised of the following members as of 31 March 2013:
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 Vice President, 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 M. Sc. ENSAM, 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

LEM | Annual Report 2012/13

19

None of the members of the Executive Management haveother activities in governing or supervisory bodies, any official
functions or political posts nor any permanent management
functions for important Swiss and foreign interest groups.

Dividend policy
LEM targets a payout ratio significantly above 50% of theconsolidated net profit for the year, to be proposed by the
Board of Directors to the shareholders’ meeting.

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

7 Change of control and defensive measures
Opting-out clause

5 Compensation and shareholdings
Please refer to the section “Compensation Report” on page 22.
6 Shareholders’ participation rights
The rules on shareholders’ participation rights are outlinedin 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 andinscription 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 registeredby 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 representativeof the Company, by the independent representative, or by athird party who need not be a shareholder of LEM Holding SA.
Statutory quorums
The Articles of Incorporation contain no deviation from theapplicable 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 themeeting. Any shareholder who, on the day determined by the
Board of Directors, is registered as a shareholder has the rightto attend and vote at the shareholders’ meeting.
AgendaAccording to Article 10 of the Articles of Incorporation, one
or several shareholders who collectively hold 10% of theshare capital can call for a shareholders’ meeting and submit
matters to be placed on the agenda.

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 ofIncorporation of the company. This clause releases any
shareholder from the obligation to submit a public takeoveroffer 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 passingof the 331/3% threshold by the shareholder group Weber &Wampfler would not trigger the obligation for a public takeover offer.
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 Philippe Stöckli bearing the responsibility forthe audit since 2011/12.
Ernst & Young charged the following fees for professional
services rendered for the 12-month period ending 31 March
2013:
Type of service
In CHF thousands

2012/13

Audit services
Tax services
Other services
Total

292
168
37
496

Evaluation and control of the auditors is done by the Audit
Committee which makes recommendations to the Board of
Directors. In particular, the Audit Committee evaluates theperformance, 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 Audit Committee in the presenceof the external auditors.
During 2012/13 Ernst & Young attended two regular Audit
Committee meetings.

LEM | Annual Report 2012/13

20

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 theshare register and made publicly available on its website
www.lem.com. Once a year, LEM holds a presentation forthe media and financial analysts. Internal processes assurethat price-sensitive facts are published without delay inaccordance with the ad hoc publicity rules of the SIX Swiss
Exchange.
At www.lem.com, detailed information (e.g., the Articles ofIncorporation, interim and annual reports, investor presentations, as well as important dates) is available.
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

LEM | Annual Report 2012/13

21

Compensation Report
The future of LEM depends on our ability to attract, retain and develop talented people. Among themany 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 alignedwith shareholders’ interest.
At our forthcoming AGM on 27 June 2013, we will ask you, our shareholders, again to cast an advisory vote on the compensation of the Board of Directors and the Executive Management. We value
your opinion. Even though it remains an advisory vote, your opinion will seriously be taken into consideration for the future development of our compensation system.
In brief:_ _ Core principles
	LEM’s compensation policies are based on performance and the creation of long-term value forshareholders. The compensation policies are approved by the Board of Directors on recommendations by the Nomination & Compensation Committee (NCC) and reviewed on an annual basis. All
fixed and variable salaries are paid in cash.
_ _ Compensation of the Board of Directors
	The compensation of the Board of Directors consists purely 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 Boardof Director 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 ofLEM, the total compensation of the Executive Management consists of three elements: base salary,bonus according to LEM incentive system (LIS) and nonwage compensation. The target-setting
process for the LIS is carried out on an annual basis and includes performance criteria related tothe individual’s function and responsibility and performance criteria related to financial results of
LEM.
_ _ Changes to the compensation policies
	In 2012/13 there were no material changes to the compensation policies.

Felix Bagdasarjanz
Chairman of the Board of Directors

LEM | Annual Report 2012/13

22Peter Rutishauser
Chairman Nomination &­C ompensation Committee1 Board of Directors
1.1 General principles for compensation of
non-executive directors
Compensation for the Board of Directors is approved by the
Board of Directors based on recommendations by the NCC.
The remuneration of the Board of Directors is a fixed cash
payment and is reviewed on an annual basis. The remuneration compensates for the personal responsibility andexposure as a non-executive 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 themarket within a period of three years after joining the board
shall reach a value of approximately three annual fixed compensations. Trading with LEM shares has to respect theinsider regulation of LEM.

Discontinued plans
All legacy stock option plans have been closed per
31.3.2012. For details, please refer to note 21 in the notes
to the Consolidated Financial Statements.
1.2 Remuneration of non-executive 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 120’000 for the Vice
Chairman and CHF 80’000 for a member. Committee activity will be compensated with CHF 30’000 for the Committee’s chairman and with CHF 20’000 for its members.
In 2012/13, additional fees totaling CHF 130’000 wereawarded to Andreas Hürlimann (CHF 95’000), to Ilan Cohen(CHF 20’000) and to Peter Rutishauser (CHF 15’000) for
additional efforts in their role and duties as members of theBoard of Directors.

2012/13
In CHF thousands

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

Annual salary

Additional fees

Cash-out for options
granted in prior years

200
100
80
100
150
110
740

–
20
95
–
15
–
130

–
–
–
–
–
–
–

The Board of Directors decided to contribute the equivalent of 5% of its annual remuneration to LEM’s cost savings efforts
in 2011/12. The annual salary had been lowered accordingly.
2011/12
In CHF thousands

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

Annual salary

Additional fees

Cash-out for options
granted in prior years

171
95
76
95
143
104
685

–
10
10
–
–
–
20

–
–
–
–
–
–
–

Chairman of the Board of Directors
Member of the Audit Committee
3
Member of the Nomination & Compensation Committee
4
Vice Chairman of the Board of Directors
5
Chairman of the Nomination & Compensation Committee
6
Chairman of the Audit Committee
1
2

LEM | Annual Report 2012/13

23

Compensation of former members
In financial year 2012/13, no compensation was paid to former members of the Board of Directors.

1.3 Shareholdings of non-executive directors
31.3.2013

31.3.2012

Number ofshares held

Number ofoptions held

Number ofshares held

Number ofoptions held

Board of Directors
Felix Bagdasarjanz

1'736

0

1'736

0

Ilan Cohen
Andreas Hürlimann
Anton LauberPeter Rutishauser
Ueli Wampfler
Total

140
505
424
2'606
28'00033'41100
0
0
10'000
10'000

120
211
1'000
2'606
25'00030'673

0
0
0
0
0
0

In number of shares / options

Ueli Wampfler has acquired 10’000 options on LEM sharesfrom the shareholder group Studer/Chavonay. Refer to note
2.1.4 Discontinued plans.
2 Executive Management
2.1 General principles for compensation of Executive
Management
Remunerations for the Executive Management are approvedby the Board of Directors based on recommendations 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 isreviewed on an annual basis. The total annual compensation
is part of the manager’s contract and does not contain any
discretionary elements.
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: performance related to the individual’s function and responsibility
	LIS part 2: performance related to the financial performance of LEM
3. Nonwage compensation
2.1.1 Base salary of Executive Management
LEM’s base salary orients itself around a mid-point of available and comparable benchmark data of industrial companies with a plus and minus band of 20%. In case that available benchmark data allow for a comparison of total
remuneration (base salary plus bonus) the comparison
around a mid-point is made assuming a value of half of the
maximum bonus according to our target-setting philosophy.
Base salaries are fixed amounts of cash paid monthly. We
review base salaries annually to ensure they remain competitive, comparing them with the benchmark data. The benchmark data is taken from Mercer Compensation data base.

LEM | Annual Report 2012/13

24

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
carried out on an annual basis. All bonus payments are
made in cash and in the first quarter of the new businessyear based on the annual accounts and the personal performance review. Objectives and performance evaluation
are prepared by the Chairman of the Board of Directors for
the CEO, by the Audit Committee (AC) for the CFO and by
the NCC for other Executive Management. The final approvalis given by the Board of Directors.
LIS part 1: performance related to the individual’sfunction and responsibility
Annual LIS 1 objectives are agreed between the Executive
Manager and the CEO at the beginning of each businessyear and a final review is performed at the end of the year.
The maximum value of the annual bonus related to LIS part 1
is 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 even under changed business conditions. Since thedegree of achievement of set objectives has to be evaluatedat the end of the period, a clear understanding of the metric
to be applied has to be established at the time of target setting and kept constant for the whole period. For every criterion, the curve between minimum and maximum bonus
level has to be defined. The point of 67% bonus shall be set
at the level of an ambitious but achievable objective.
In order to guarantee consistency of the target-setting process within LEM group, the key objectives for the year will
be defined by the CEO together with Executive Management
at the beginning of each business year.

LIS part 2: performance related to financial­p erformance of LEM group
The LIS part 2 is an annual bonus which is based on theperformance of LEM evaluated over a period of three consecutive years. The performance criterion is the cumulated
economic value added (EVA) achieved over these three
years. The definition of the EVA objective takes place at the
beginning of year one and the evaluation of the performanceat 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
bonus payment 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 historical performance, the actual three-year financial plan of
LEM and the shareholders’ expectations expressed in theshare price development.

The maximum value of the annual bonus related to LIS part 2
is 25% of the base salary for the Executive Management,
20% for the CFO and 40% for the CEO.
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, thisplan is considered as a defined benefit plan. The insured salary is based on LPP Swiss law and is without limitation on
the amount. The pension fund is funded by contributions fromthe company and the insured employees. The average contribution for the employee is 43% and 57% for the company.
2.1.4 Discontinued plans
All legacy stock option and share programs have beenclosed per 31.3.2012. For details, please refer to note 21
in the notes to the consolidated financial statements.

2.2 Remuneration of Executive Management
2012/13
In CHF thousands

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

Annual ­s alarycompen­s ation

Annual bonus
compensation 1

Company's­c ontribution topension fundTotal­c ompen­s ation

Cash-out for
options granted
in prior years

Pay-out of PSP
shares granted
in prior years

450
1'248

329
583

49
112

828
1'943

0
0

0
0

1'698

912

161

2'770

0

0

Executive Management decided to contribute the equivalent of 10% of its monthly remuneration for the duration of short workin LEM’s main sites, i.e., January to February 2012, to LEM’s cost savings efforts in 2011/12. The annual salary had been
lowered accordingly.
2011/12
In CHF thousands

François Gabella, CEO
Executive Management(excl. CEO)
Total compensation to
Executive Management1 

Annual ­s alarycompen­s ation

Annual bonus
compensation 1

Company's­c ontribution topension fundTotal­c ompen­s ation

Cash-out for
options granted
in prior years

Pay-out of PSP
shares granted
in prior years

440
1'154

414
607

46
103

901
1'864

0
730

0
1'904

1'594

1'021

149

2'765

730

1'904

The annual bonus compensation is shown with the accrual for the performance of the corresponding year, to be paid out in the ­f ollowing year. All other­e lements are shown as paid out.

LEM | Annual Report 2012/13

25

Compensation of former members
In financial year 2012/13, no compensation was paid to former members of the Executive Management.
2.3 Shareholdings of Executive Management
Executive Management

31.3.2013

In number of shares/options

Number ofshares held

Number ofoptions
heldNumber ofshares held
by PSP

Number ofshares held

Number ofoptions
heldNumber ofshares held
by PSP

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

0
0
0
0
0
0
0

0
0
0
0
0
0
0

300
45
2'100
1'425
1'500
1'450
6'820

0
0
0
0
0
0
0

0
0
0
0
0
0
0

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

LEM | Annual Report 2012/13

26

31.3.2012

Locomotive
A locomotive obtains energy from theline over the pantograph (1) on the roof.
Usually in Europe this is 15kV or 25kV
AC voltage. The second connection is onearth connected over the wheels to thelocomotive.
Some locomotives are able to run in different systems. The
Eurostar, for example, is able to run with four different voltages: 25kV/AC/50Hz, 3kV DC, 1.5kV DC, and 750V DC.
From the pantograph the energy flows into a transformer (2),which transforms the voltage to 2.8kV or lower. After, a rectifier transforms the voltage from AC to DC.

DVL

LTC 1000

Voltage and current transducers are used to measure the current and the voltage on the secondary side of the transformer
and on the DC-side. Inverters (3) are used to transform theenergy into the right voltage and current to drive the motors(4), usually one motor per axis or every second axis. Special
differential transducers are implemented at the secondaryside of the transformer to detect any leakage current flowing
in the train.
Besides the main drive, additional inverters are used for heating, air-conditioning and ventilation. They are called auxiliary
inverters (5) and normally placed under the roof of the locomotive. Transducers are used to measure the motor currents
and to optimize their efficiency.

1

A
5
A
B
3
1

4

2

4

A
B
1

4

2
3
4
5

LEM | Annual Report 2011/12

4

LEM | Annual Report 2012/13

27

LTC 1000
DVL
PantographTransformer
Inverters
MotorsAuxiliary inverterFinancial Review
Sales
LEM’s sales decreased 0.6% to CHF 235.0 million in financial year 2012/13. At constant exchange rates, sales would
have decreased 3.7%. The favorable currency impact stems
from the depreciation of the CHF against the USD, the CNY,
and the JPY, on a yearly average.

Operating expenses
Operating expenses (including R&D) of CHF 57.6 million
decreased by 0.9% compared to the previous year, mainly
driven by cost saving measures and including a CHF 0.1
million restructuring charge. As a percentage of sales, theratio slightly decreased from 24.6% to 24.5%.

Gross margin
The gross margin increased 2.9 percentage points to 42.0%.
The main reasons for this development are that continued
operating savings in cost of goods sold and the abovementioned favorable foreign currency impacts more thancompensated for the price erosion. In 2012/13 the grossmargin included a restructuring charge of CHF 1.8 million
linked to the announced relocation of production lines to
Bulgaria; in financial year 2011/12 it included an impairment
charge of CHF 2.1 million on production lines.

R&D expenses increased 9.4% in 2012/13 to CHF 14.7 million (prior year CHF 13.4 million). R&D cost as a percentage
of sales increased from 5.7% in prior year to 6.2% for thecurrent financial year, expressing management’s commitment to foster innovation at LEM.

April to March
In CHF thousands

2012/13

2011/12*

Sales
Cost of goods sold
Gross margin

234'953(136'309)
98'644236'334(144'035)
92'299

Sales expense
Administration expense
Research & development expense
Other expense
Other income
Operational EBIT

(22'355)(20'720)(14'676)(153)
296
41'036(23'335)(21'593)(13'412)(84)296
34'171

0

315

EBIT

41'03634'486

Financial expense
Financial income
Foreign exchange effect

(101)
96
(1'484)(359)
101(1'704)

Profit before taxes

39'54732'524

Income taxes(6'931)(4'037)

Net profit of the period

32'61628'487

Attributable to:Shareholders
Net profit

32'61632'61628'48728'487

Additional SOP costs/income* R eclassification for comparative information. Please refer to note 2.20 in the consolidated financial statements.

LEM | Annual Report 2012/13

28

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

08/09

09/10

10/11

11/12

12/13

9%
8%

12

7%
6%

9

6

0%

0
10/11

11/12

In CHF millions

35%% of sales

20%
18%

35
30
25
20

10
5
0
10/11

11/12

12/13

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
09/10

10/11

11/12

5%

0
08/09

12/13

09/10

10/11

11/12

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%

12/13

In CHF millions

35

8%

12/13

50

16%

10%

15

11/12

55

In CHF millions

40

10/11

In CHF millions% of sales

08/09

Net earnings

09/10

EBIT

45

12/13

15%
08/09

50

30

0

12/13

55

35

1%

09/10

11/12

60

4%

2%

3

65

5%

3%

08/09

10/11

In CHF millions% of sales

09/10

09/10

Operational EBIT

In CHF millions

08/09

35%
08/09

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
08/09

09/10

10/11

11/12

12/13

08/09

09/10

LEM | Annual Report 2012/13

10/11

29

11/12

12/13

Operational EBIT and EBIT
The operational EBIT (before additional SOP costs/income)increased 20.1% to CHF 41.0 million (prior year CHF 34.2
million). The 17.5% operational EBIT margin (prior year
14.5%) is inside our target range of 15 to 20%.
All legacy stock option plans and share plans were closed
per 31.3.2012 and generated no impact on the 2012/13
income statement. Operational EBIT is thus equal to EBIT
since this financial year. In financial year 2013/14, LEM willabandon the notion of operational EBIT and communicate
on the EBIT exclusively.
Financial expenses
Net financial expenses decreased from CHF 2.0 million to
CHF 1.5 million in 2012/13, driven by lower interest charges
and a lower foreign exchange effect.
Taxes
The tax rate increased 5.1 percentage points, from 12.4%
to 17.5% in 2012/13. The expected tax rate was stable compared to prior year, at 17.8%. Last year’s one-off items linked
mainly to the Swiss-Japanese double taxation agreement
had provided an additional 5.4 percentage points saving to
the tax rate – an effect that did not repeat in 2012/13.

LEM | Annual Report 2012/13

30

Net profit for the year
Net profit for the year was CHF 32.6 million, 14.5% higher
than last year. Net profit represented 13.9% of sales, an alltime high for LEM.
Balance sheet
LEM reduced its net working capital (current assets minus
current liabilities and net cash) to 9.9% of sales, versus 12.3%
last year.
Net financial assets (cash minus financial liabilities) increased
from CHF 18.1 million to 27.6 million. On 31 March 2013, LEM
had no interest-bearing financial liabilities.
The balance sheet has further strengthened and presents anequity ratio of 62.4% (prior year 60.0%).
Cash flow
Operating cash flow reached CHF 46.2 million and free cash
flow CHF 35.8 million. Both are on comparable levels to prioryear (CHF 46.7 million and CHF 37.5 million, respectively).

LEM Group
Consolidated Financial Statements

Consolidated Statement of Financial Position . . . . . . . . 33
Consolidated Income Statement . . . . . . . . . . . . . . . . . . . . . . 34
Consolidated Statement of ­C omprehensive Income .. 35
Consolidated Statement of Changes in Equity . . . . . . . . 35
Consolidated Cash Flow Statement . . . . . . . . . . . . . . . . . . . 36
Notes to the Consolidated Financial Statements . . . . .

37

Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

LEM | Annual Report 2012/13

31

LEM | Annual Report 2012/13

32

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
Non-current assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Other non-current assets
Total non-current assets

Notes

31.3.2013

31.3.20127
4
5

27'62943'08023'6191'264
3'250
98'841

21'12142'14026'605
2'009
2'956
94'831

3'828
25'373
5'900
5'924
41'026

3'485
24'173
6'657
3'368
37'683139'867

132'514Notes

31.3.2013

31.3.201211

16'766
14'900
11'3193'668
1'377
48'03017'86314'855
8'244
3'043
3'000
632
47'637

1'250
2'647
613
4'510

457
4'217
642
5'316

52'54052'953570(765)
12'25075'27287'328087'328570(1'984)
11'42569'55079'561
0
79'561

139'867

132'5146

198
910, 22

Total assets

Liabilities and equity
In CHF thousands

Current liabilities
Accounts payable
Accrued expenses
Current income tax payable
Current provisions
Current financial liabilities
Other current liabilities
Total current liabilities
Non-current liabilities
Non-current provisions
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities

12
25
13

12
19
13

Total liabilities
EquityShare capital
Treasury shares
Reserves
Retained earnings
Equity attributable to shareholders
Non-controlling interests
Total equity
Total liabilities and equity

14
14
14

LEM | Annual Report 2012/13

33

Consolidated Income Statement
April to March
In CHF thousands

Sales
Cost of goods sold
Gross margin

Notes

2012/13

2011/12*15

234'953(136'309)
98'644236'334(144'035)
92'299

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

15
15
15

(22'355)(20'720)(14'676)(153)
296
41'036(23'302)(21'332)(13'391)(84)
296
34'486

Financial expense
Financial income
Exchange effect

16
17
18

(101)
96
(1'484)(359)
101(1'704)39'54732'524(6'931)(4'037)

Net profit for the year

32'61628'487

Attributable to:Shareholders
Non-controlling interests
Net profit for the year

32'6160
32'61628'4870
28'487

28.67

25.11

Profit before taxes
Income taxes

19* Reclassification for comparative information. Please refer to note 2.20

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

20

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

LEM | Annual Report 2012/13

34

Consolidated Statement of­Comprehensive Income
April to March
In CHF thousands

2012/13

2011/12Net profit for the period recognized in the income statement

32'61628'487

Currency translation difference

2'045

174

Total comprehensive income for the period
Attributable to shareholders
Attributable to non-controlling interests

34'66134'661
0

28'66128'6610

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

1 April 2011
Net profit of the year
Other comprehensive income/loss
Total comprehensive income
Changes in capital
Dividends paid
Performance Share Plan
Movement in treasury shares
31 March 2012
1 April 2012
Net profit of the year
Other comprehensive income/loss
Total comprehensive income
Dividends paid
Movement in treasury shares
31 March 2013

Share
­c apital

TreasurysharesCapitalreserve

Translation
reserve

Share plan
reserve

Retainedearnings

Total
equity575(7'091)

19'034(2'676)

1'556

85'51528'487

96'91328'487174
28'661
0(45'461)(91)(461)
79'561

174
174
(5)

3'968

(3'968)

570

1'681
(542)
(1'984)(1'681)542
13'927(2'502)570(1'984)13'927(2'502)28'4875(45'461)(1'556)
1'465(461)
0 69'550
0

2'045
2'045

570

1'219
(765)

(1'219)12'70869'55032'61632'616(28'374)
1'480
0 75'272(457)

79'56132'616
2'045
34'661(28'374)
1'480
87'328The 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 2012/13

35

Consolidated Cash Flow Statement
April to March
In CHF thousands

2012/13

2011/12

Cash flow from operating activities
Profit before taxes
Adjustment for non-cash items_ _ Net financial result_ _ Derivative financial instruments revaluation_ _ Fair value charges for share-based payments_ _ Depreciation and amortization_ _ Impairment loss
_ _ Gain/Loss on disposal of fixed assets_ _ Increase / (decrease) of provisions_ _ Movement in pension
Interest received
Interest paid
Taxes paid
Payment for cash-settlement of SOP and PSP
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

39'54732'524

1
1'302
0
7'664
374
189
1'203
(200)
52
(53)
(5'638)044'441
4'199(296)(2'153)
1'750
46'191

147
(198)
231
8'026
2'110
866
1'422
(762)
101
(248)
(6'870)(1'933)35'416
8'649
16'358(13'769)
11'23846'654

Cash flow from investing activities
Investment in fixed assets
Investment in intangible assets(Increase) / decrease in other assets
Cash flow from investing activities(7'180)(764)(2'466)(10'410)(8'419)(550)(151)(9'120)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

1'480(28'374)(3'000)(29'894)(461)(45'461)
3'000(42'922)

Change in cash and cash equivalents

5'887(5'388)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

21'121621
27'62926'613(104)
21'121

LEM | Annual Report 2012/13

36

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 & power supplies, traction,
high-precision, conventional and green cars businesses.
The Group has operations in thirteen countries and employs
1’137 people per 31 March 2013. The parent company of
LEM Group is LEM Holding SA (the Company), which is alimited company incorporated in Switzerland.
The financial year ends on 31 March (the year). Following
the move of LEM Holding’s seat on 2 April 2013, the newregistered office is 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 17 May 2013.

2 Summary of significant accounting principles
2.1 Basis of preparation
The consolidated financial statements of LEM Group havebeen 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 preparedusing the historical cost convention except that, as discussed in the accounting policies below, certain items likederivatives are recorded at fair value.
In accordance with IAS 1 “Presentation of Financial Statements”, the financial information is presented in thousandsof 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 orderto keep the accuracy of the original data.

2.2 Adoption of new and revised International ­F inancial Reporting Standards and Interpretations
In 2012/13, LEM Group introduced the following revised standards and interpretations:Standard or­i nterpretation

IAS 12IFRS 1IFRS 7

Title

ImpactEffective date

Deferred tax, recovery of underlying assets – Amendments
Severe Hyperinflation and Removal of Fixed Dates toFirst-time Adopters
Transfers of financial assets – Amendments

None
None

1 January 2012
1 July 2011

None

1 July 2011

LEM Group will adopt the following revised standards and interpretations in the future:
Standard or­i nterpretation

IAS 1
IAS 19IAS 27
IAS 28
IAS 32IFRS 7IFRS 9IFRS 10IFRS 11IFRS 12IFRS 10, IFRS
11, IFRS 12IFRS 13IFRIC 20
Amendments
Amendments to
IFRS 10, IFRS 12
and IAS 27

Title

Effective datePresentation of Items of Other Comprehensive Income – Amendments
Employee benefits – Revised
Separate Financial Statements – Revised
Investments in associates and joint ventures – Revised
Offsetting Financial Assets and Financial Liabilities – Amendments
Disclosures – Offsetting Financial Assets and Financial Liabilities – Amendments
Financial Instruments – Classification and Measurement
Consolidated Financial Statements
Joint arrangements
Disclosure of Interests in Other Entities
Amendments to Consolidated Financial Statements,
Joint Arrangements and Disclosure of interests in other entities: transition
guidance
Fair Value Measurement
Stripping Costs in the Production Phase of a Surface Mine
Annual improvements to IFRS
Investment entities

1 July 2012
1 January 2013
1 January 2013
1 January 2013
1 January 2014
1 January 2013
1 January 2015
1 January 2013
1 January 2013
1 January 2013
1 January 2013

LEM | Annual Report 2012/13

37

1 January 2013
1 January 2013
1 January 2013
1 January 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 fromapplying above standards and interpretations has not been
evaluated but is expected to have no material effects on thecapital, financial position, income or cash flow situation ofLEM except IAS 19 – Revised, as explained below.
The amendments that are expected to have the most signi­
ficant impact include:_ _ Abandonment of the corridor method; the unrecognizedactuarial losses would be registered in the financial statements. As a consequence, an equity adjustment would
be booked against the non-current pension asset and apension liability would be shown. As per the existing IAS
19 evaluation, this would create a negative impact of
CHF 6.1 million on the Group equity, which corresponds
to 6.9% of the Group equity.
_ _ Replacement of the expected return on plan assets andinterests costs on the defined benefit obligation with asingle net interest component which is calculated byapplying the discount rate to the net defined benefits asset
or liability. Also, past-service costs that will be recognizedin the period of a plan amendment and unvested benefits
that will no longer be spread over a future period until thebenefits become vested. These changes will affect the
profit for the period and the earnings per share by increasing employee benefit costs of the Group. It will also impact
the amounts presented in other comprehensive income,and the net employee benefits liabilities/(assets) in the
Balance Sheet. The impact of these latter changes on the
profit or loss and on the other comprehensive income has
not yet been conclusively determined.
2.3 Summary of critical accounting estimates andjudgments
The preparation of financial statements in conformity withIFRS requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses,
assets, liabilities and related disclosures at the date of thefinancial statements. These estimates are based on management’s best knowledge of current events and actions that
the Group may 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 andproperty, 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 theuse of estimates in particular to the expected growth of sales,
discount rates and development of raw material prices.

LEM | Annual Report 2012/13

38

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 theiramount can be estimated reliably. Nevertheless, provisions
are based on assumptions.
Income and other taxes
LEM Group is subject to income taxes in numerous jurisdictions. Judgment is required in determining the worldwide
provision for income taxes. There are many transactions
and calculations for which the ultimate tax determination is
uncertain in the ordinary course of business.
Employee benefits
The standard requires that certain assumptions are made inorder 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 inflation rates, employee turnover,
expected return on plan assets and discount rates. Substantial changes in the assumed development of any of thesevariables 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 oneach balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will beavailable 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, which are those entities over whose operations
the Group has the power to exercise control, which is normally the case when it owns more than one half of the voting
rights, are consolidated.
Acquisitions are accounted for using the purchase method.
Companies that are acquired or sold during the financial year
are included in the Group financial statements up to the dateof transfer of control. The costs of purchasing a company
are determined as the sum of the fair value of the assets thatare to be paid to the seller and the obligations that areentered into, or acquired, on the date of purchase. Identifiable acquired assets, liabilities and contingent liabilities arerecognized 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 shownas gain on bargain purchase on the income statement.
Intra-group assets and liabilities as well as income andexpenses are set off against each other.
Also intra-group intermediate profits on inventories and fixed
assets are eliminated.

Associates
Investments in associated undertakings are accounted forusing 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 2013 and
31 March 2012.
2.5 Foreign currencies
Functional and presentation currency
The consolidated financial statements are presented in
Swiss francs as the presentation currency. The subsidiaries
use local currencies as their functional currency, which is thecurrency of the primary economic environment in which they
operate.
Foreign currency translation
All assets and liabilities in the balance sheets 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 shareholders’ equity. When a company is sold, the cumulative translation differences recognized in shareholders’ equity are transferred to the income statement.
The following table summarizes the principal exchange rates
that have been used in the translation process.
Currency

BGN
CNY
DKK
EUR
GBP
JPY
RUB
USD

Incomestatementof 2012/13
Average rate
in CHF

Incomestatementof 2011/12
Average rate
in CHF

Balancesheet
31.3.2013
Year-end
rate in CHF

Balancesheet
31.3.2012
Year-end
rate in CHF

0.626
0.149
0.162
1.210
1.486
0.0114
0.030
0.940

N/A
0.138
0.163
1.214
1.407
0.0112
0.030
0.882

0.621
0.151
0.163
1.216
1.442
0.0101
0.031
0.949

N/A
0.142
0.162
1.204
1.444
0.01090.031
0.902

Foreign currency transactions
Foreign currency transactions by subsidiaries are translated
at the market rate prevailing at the time. The monetary
assets and liabilities are translated at the year-end rates
while non-monetary assets are translated at historical rates.
Gains and losses arising from the transactions as well asfrom the translation of monetary assets and liabilities in foreign currencies are recorded as income or expenses in theincome 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 inshareholders’ 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 ofacquisition, that are readily convertible to known amountsof cash, net of cash overdrafts at sight.
2.7 Inventories
Inventories are stated at the lower of cost or net realizablevalue. The first-in, first-out (FIFO) method is applied. The
cost of finished goods and work in process comprise raw
materials, direct labor costs and other costs that can bedirectly allocated, such as production overhead expenditures. Financing costs are not included in inventories. Provision for write-downs are established when there is an objective indication that the Group will not be able to sell the goodsin due time.
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
Buildings
Machinery and equipment
Tools and moulds
VehiclesIT equipmentnil
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 tangible fixed assets is capitalized at cost only
when it is probable that future economic benefits associatedwith 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/associated undertaking at the dateof acquisition. Goodwill on acquisitions is reported in thebalance sheet as an intangible asset and carried at cost lessaccumulated impairment losses. Gains and losses on thedisposal of an entity include the carrying amount of goodwill
relating to the entity sold.
Research and development
Research costs are written off as incurred. Development
costs are capitalized as intangible assets only if it is probablethat future economic benefits will flow to the Group. Suchdevelopment costs are capitalized and written off over thelife of the product or process.

LEM | Annual Report 2012/13

39

Other intangible assets
Other intangible assets with definite useful lives are carriedat 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 and­i ntangible assets
Assets that are subject to depreciation and amortization are
reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not
be recoverable. An impairment loss is recognized for theamount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higherof an asset’s fair value less cost to sell and value in use.
For the purpose of assessing impairment, assets aregrouped 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) andwhen circumstances indicate that the carrying value may
be impaired. Impairment is determined by assessing therecoverable 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 can comprise cash, receivables, accrued
income, marketable securities and derivative financial
instruments.
Accounts receivable are carried at original invoice amountless 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 isan objective indication that the Group will not be able tocollect the amounts due. Allowances for doubtful accounts
are written off when identified.
2.12 Derivative financial instruments
Derivative financial instruments are measured at fair value.
Any gains and losses arising from changes in fair value onderivatives are taken directly to the income statement whichmeans that the Group does not apply hedge accounting.
Derivative financial instruments are shown as part of othercurrent assets and other current liabilities. In case the maturity is more than one year, derivative financial instruments
are recognized under other non-current assets or other noncurrent liabilities.
The Group uses derivative financial instruments to hedge
foreign exchange risks of forecasted transactions. Derivative

LEM | Annual Report 2012/13

40

financial instruments can comprise forward exchange contracts and option-based structures.
2.13 Financial liabilities
Financial liabilities comprise bank loans, payables, accrued
expenses and derivative financial instruments at the end of
the period.
Financial liabilities that are due within 12 months after thebalance 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 theincome statement as incurred.
2.15 Employee benefits
The Swiss subsidiaries provide a defined benefit plan for
employees; the other subsidiaries provide defined contribution plans. In both cases the charges are included in therelated periods in the personnel expenses of the various
functions where the employees are located.
Defined benefit plan
A qualified independent actuary values the funds on anannual basis. The obligation and costs of pension benefits
are determined using the projected unit credit method. Past
service costs are recognized on a straight-line basis over
the average period until the amended benefit becomesvested. Gains or losses on the curtailment or settlement ofpension benefits are recognized when the curtailment or
settlement occurs. Actuarial gains or losses are amortizedbased on the expected average remaining working time ofthe participating employees, but only to the extent that the
net cumulative unrecognized amounts exceed 10% of thegreater of the present value of the defined benefit obligationand the fair value of plan assets at the end of the previous
year. In accordance with IFRIC 14, any assets resulting fromsurpluses in defined benefit plans are limited to the value ofthe maximum future savings from reduced contributions.
Liabilities are fully provisioned.

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, whichis related to the individual’s performance, and a part 2,
which is related to the performance of LEM Group. The LISpart 2 is an annual bonus which is based on the Economic
Value Added (EVA) performance of LEM evaluated over thethree previous fiscal years. Both elements are cash settled

and the bonus payments are made in the first quarter of thefollowing 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
is probable that an outflow of resources will be required tosettle the obligation, and a reliable estimate can be madeof the amount of the obligation.
Claims and litigations
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 ofrepairs and replacements. Additional specific provisions arebooked when required.
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, andapproximate number of employees who will be compensated for 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 planor 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 notrecognized in the balance sheet but are described in thenotes.
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 statementon 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 thatthe economic benefits will flow to the Group and the revenue

can be reliably measured, regardless of when the payment
is being made. Revenue is measured at the fair value of theconsideration received or receivable, taking into accountcontractually 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 havepassed 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.
Deferred taxation
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax
base of assets and liabilities and their carrying amounts inthe financial statements. Deferred taxes are determinedusing tax rates that apply, or have been announced, on thebalance 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
be available in the future against which the tax losses carried forward can be utilized. Deferred tax assets and liabilities are offset against each other if the corresponding
income taxes arise by the same tax authority and a legally
enforceable right for offsetting exists.
2.20 Change in the classifications of items in the consolidated income statement
In the frame of the continuous improvement of its processes
and systems, LEM has reviewed the definition of each lineof its consolidated income statement and reached the conclusion that some items should be reclassified in order toprovide a more relevant financial information about its operations.
These reclassifications are related to the following items:_ _ Prior to the reclassification, management compensation
had partially been shown in administration expenses andpartially in the lines to which the managers contributed.
After the reclassification, all management compensationis shown in the line to which the managers contribute.
_ _ Facility cost (rent, energy, etc.) has been attributed into
the lines according to the resources used by each activity;_ _ Expenses of operation support teams had previously beenshown partially in administration expenses. After thereclassification, these expenses are fully shown in cost of
goods sold.

LEM | Annual Report 2012/13

41

The impacts on the 2011/12 consolidated income statement by category of changes are disclosed below:
In CHF thousands

Sales
Cost of goods sold
Gross margin
Sales expense
Administration expense
Research & development expense
Other expense
Other income
Operational EBITManagement­c ompensation

Facility cost

Operation­
support cost

(1'649)(1'295)(1'243)(1'401)
3'650
(601)

(229)
1'395
128

159
1'050
34

0

0

0

Total impact

0(4'187)(4'187)(1'471)
6'096
(438)
0
0
0

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
Significant non-cash items(Increase) / decrease of liabilities forshare-based payments
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

2012/13

2011/122012/13

2011/122012/13

2011/12

199'967
43'387
36'595208'292
39'49030'257

34'986
5'687
4'441

28'042
5'132
4'229

234'953
49'07541'036(1'489)(6'931)32'616236'334
44'62234'486(1'962)(4'037)28'487

5'209
1'329
254
6'792

5'902
1'221
2'110
9'233

1'121
5
120
1'246

898
5
903

6'330
1'335
374
8'039

6'800
1'226
2'110
10'136

0

283

0

32

0

315

86'18490'042

15'312

12'20386'18490'042

15'312

12'203

101'496
38'37127'62910'742
139'867

102'245
30'26921'121
9'148
132'51429'60434'331

3'624

3'153

33'227
19'312
11'3191'703

37'48415'4698'244
2'407

29'60434'331

3'624

3'153

6'290
52'540

4'818
52'953

4'459
764
5'222

7'855
537
8'392

2'722
0
2'722

564
13
577

7'180
764
7'944

8'419
550
8'969

Capital expenditures:
Tangible assets
Intangible assets
Total assets

LEM | Annual Report 2012/13

42

Geographical information
USA

China

Germany

Japan

Italy

Switzerland

Rest of the world

LEM Group

In CHF thousands

2012 /13 2011/12 2012 /13 2011/12 2012 /13 2011/12 2012 /13 2011/12 2012 /13 2011/12 2012 /13 2011/12 2012 /13 2011/12 2012 /13 2011/12

Sales

44'317

40'489Non-current assets

42'76337'041

14'59413'69636'04446'31124'09224'649

5'458

6'825

14'96412'356

4'253

5'133

68'52070'355 234'953 236'334

19'691

15'203

1'283

1'959

41'02637'683For 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, non-current 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.
The depreciation and amortization charge for the Industry segment at 31 March 2012 included the impairment of productionlines specific to several families of products for CHF 2’110 thousand. Please refer to the note 8 Property, plant and equipment for more detail.
4 Accounts receivable
In CHF thousands

31.3.2013

31.3.2012

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

39'790(1'066)38'7244'356
43'08039'419(1'711)37'708
4'431
42'140

In CHF thousands

2012/13

2011/12Opening position

1'711

1'229

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

(560)
(107)
22
1'066

723
(235)
(6)
1'711

Movements of allowance for doubtful accounts

Aging analysis of accounts receivable
In CHF thousands

31 March 2013
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total
31 March 2012
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total

Not due<30 days

31–90 days

91–180 days

>180 days

Total

30'117

5'758

3'985
34'102

73
5'831

2'616
(151)
275
2'740

508
(115)
5
398

792
(800)
18
10

39'790(1'066)
4'356
43'08026'376

8'204

2'004
(125)

1'130
(424)

1'705
(1'162)

4'381
30'757

51
8'255

1'879

706

543

39'419(1'711)
4'432
42'140

The allowance for doubtful accounts is computed as a percentage of aged balances. No receivables have been individually
impaired.

LEM | Annual Report 2012/13

43

5 Inventories
In CHF thousands

31.3.2013

31.3.2012

Raw materialWork in progress
Finished goods and goods for resale
Total

10'931
1'374
11'31423'61911'534
2'682
12'38926'605

Above total inventories include provisions for write-down of CHF 4’082 thousand (2011/12 CHF 4’970 thousand).
6 Other current assets
In CHF thousands

Advances to suppliers
Prepayments and accrued income
Derivative financial instruments
Pensions current assets
Other current assets
Total

31.3.2013

31.3.2012

490
1'135
0
1'615
10
3'250

960
1'809
187
0
0
2'956

For further information on derivative financial instruments, see note 25.
7 Cash and cash equivalents
For the purpose of the consolidated statement of cash flow, cash and cash equivalents comprise the following:
In CHF thousands

31.3.2013

31.3.2012

Cash and cash equivalents
Total

27'62927'62921'121
21'121

LEM | Annual Report 2012/13

44

8 Property, plant and equipment
In CHF thousands

Land and buildings

197
(12)

Machinery andequipment

Total

24'173
914
7'180
(189)
(374)
(6'330)25'373

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

(19)
165

23'976
926
7'180
(189)
(374)
(6'311)
25'209At 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 2011
Foreign exchange effectInvestment
Disposal
Impairment gain (loss)
Depreciation charge for the year
Net book value 31 March 2012

306
(5)

(104)
197

25'306
(205)
8'419
(738)
(2'110)(6'696)
23'976

25'612
(210)
8'419
(738)
(2'110)(6'800)
24'173

At cost of acquisition
Accumulated depreciation
Net book value 31 March 2012

441
(244)
197

68'434(44'458)
23'97668'875(44'702)
24'173

LEM Group owns production lines which are primarily used to manufacture goods for the solar market. The slump in thesolar market demand has given the Group an indication to perform an impairment test per 31.3.2012.
The recoverable amount of the machines has been determined based on a value-in-use calculation using cash flow projections from management estimates. The pre-tax discount rate applied to the cash flow projections was 8.5%.
As a result of the analysis, management had recognized an impairment charge of CHF 2’110 thousand against the valueof the machines previously carried at CHF 6’646 thousand in 2011/12, which was recorded in cost of goods sold in the
Industry segment.

LEM | Annual Report 2012/13

45

9 Intangible assets
In CHF thousands

Goodwill

Patents

Other intangible assets

Total

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

3'568
(186)

2'312

777

3'350

(992)
1'320

32
(343)
1'230

6'657
(186)
764
0
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 2011
Foreign exchange effectInvestment
Disposal
Other movements
Amortization charge for the year
Net book value 31 March 2012

3'601
(33)

3'302

3'568

(990)
2'312

893
(18)
550
(128)
(284)
(236)
777

7'796
(51)
550
(128)
(284)
(1'226)
6'657

At cost of acquisition
Accumulated amortization
Net book value 31 March 2012

5'291
(1'723)
3'568

4'952
(2'640)
2'312

4'204
(3'427)777

14'447(7'790)
6'657

764
(32)

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 pre-tax discount rate used within these cash flow calculations is 10.5% (2011/12 8.5%) 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 2013.
10 Other non-current assets
In CHF thousands

31.3.2013

31.3.2012

5'186
738
5'924

2'873
495
3'368

In CHF thousands

31.3.2013

31.3.2012

Total accounts payable – trade
Other payables
Total

15'172
1'594
16'766

16'319
1'544
17'863

Non-current pension assets
Other non-current assets
Total
11 Accounts payable

LEM | Annual Report 2012/13

46

12 Provisions
In CHF thousands

Balance 1 April 2012
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effectBalance 31 March 2013
Of which current
Of which non-current
Balance 1 April 2011
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effect
Other movements
Balance 31 March 2012
Of which current
Of which non-current

Employee and­­t ermination benefits

0

0

580

(580)
0

Employee and termination benefits
Employee and termination benefits contain obligations
which are required in certain countries.
Claims and litigations
Provisions for claims and litigations cover expected warranty claims which are not covered by insurances. The provisions have been estimated based on past experience andthe risk assessment of management. The warranty provision
is expected to be used over the next five years.
Transfer of activity
On 8 February 2013, LEM has announced the launch of anew production plant in Sofia, Bulgaria. As a continuationof a strategy initiated in 2004, LEM will continue to relocate
production lines from the plants in Machida, Japan, andGeneva, Switzerland, to low-cost countries. Over the next
years, the operations in Japan will be significantly reduced
and concentrate on the local Japanese market. In Switzer-

Claims and litigations

Restructuring

Total

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

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

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

1'945
1'911
(486)
(330)
7

0
453

3'047

453

2'525
2'364
(486)
(330)
7
(580)
3'500
3'043
457

land, the operations will be progressively reduced andfocused on high-complexity / high-precision products forworldwide markets. In parallel, LEM’s site in Switzerland will
be reinforced with continued investment in R&D and marketing.
LEM has announced the relocations to the concerned
employees in LEM Switzerland and LEM Japan following
the press release. A CHF 1’930 thousand provision has been
charged to the income statement at 31.3.2013 in relation
with the above-mentioned relocations of activity. After foreign exchange effect, the provision position amounts to
CHF 1’830 thousand at 31.3.2013.
On 20 March 2012, LEM had launched the relocation of thehigh-precision manufacturing and R&D activity from Denmark to Geneva. A CHF 370 thousand provision had been
booked at 31.3.2012 in relation with this transfer of activity.
This provision has been fully used in 2012/13.

13 Other liabilities
In CHF thousands

31.3.2013

31.3.2012

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

634
0
640
1'274
632
642

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

LEM | Annual Report 2012/13

47

14 Equity
Share capital
There is neither authorized nor conditional share capital outstanding.
The nominal share capital of CHF 570’000 comprises 1’140’000 registered shares, each with a nominal value of CHF 0.50.
Investments in shares of LEM Holding SA held by the Group are classified as treasury shares and are accounted for at
historical cost. Treasury shares are not entitled to dividends.
On 4 July 2011, LEM Holding reduced its capital by 10’000 shares of CHF 0.5 each by the cancellation of the 10’000 own
shares previously acquired for a total amount of CHF 3.97 million.
Movement of treasury shares
In number of shares, 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
0432.39372.63581.00

1'984(1'219)765

Balance 1 April 2011
Movement
Balance 31 March 2012
Ordinary dividend per share
Extraordinary dividend per share

18'247(13'659)
4'588
25
0

388.62373.91432.39

7'091(5'107)
1'984

Per 31.3.2012, the Group held 4’588 remaining treasury shares.
In the first half year 2012/13, 3’419 treasury shares on LEM’s own account have been sold for a total amount of CHF 1’619
thousand.
During the year 2012/13, LEM acquired 147 treasury shares for a total amount of CHF 87 thousand, in the frame of its
market-making contract (2011/12 1’169 shares for CHF 542 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 27 June 2013.
15 Staff cost
In CHF thousands

2012/13

2011/12*(23'382)(14'912)(10'987)(9'792)

Production
Sales
Administration
Research & development
Change in liability for stock option plans and Performance Share Plan
Total

(59'073)(22'887)(12'880)(14'346)(9'199)(190)(59'503)

Salaries and wages
Other personnel costs
Temporary employee costs
Change in liability for stock option plans and Performance Share Plan
Total

(41'036)(14'898)(3'139)0(59'073)(40'496)(14'829)(3'987)(190)(59'503)*The 2011/12 staff cost amount has been increased by CHF 5.1 million compared to the one disclosed in the 2011/12 annual report which did not include thefull year information for one of our subsidiaries.

Number of employees at the end of the financial year

31.3.2013

31.3.2012

1'038
87
12
1'137

1'100
25
11
1'136

In full-time equivalents (FTEs)

Permanent employees
Temporary employees
Apprentices
Total
LEM | Annual Report 2012/13

48

Other personnel costs comprise the expenses for defined contribution plans of CHF 298 thousand (2011/12 CHF 418 thousand).
See accounting policies 2.15 Employee benefits, 2.16 Provisions and contingent liabilities.
16 Financial expense
In CHF thousands

2012/13

2011/12

(53)
(48)
(101)

(248)
(111)
(359)

2012/13

2011/12

96
96

101
101

In CHF thousands

2012/13

2011/12

Exchange gains / (losses)
Fair value revaluation on derivatives
Gains / (losses) on derivative 1
Total

148
(1'302)(330)(1'484)(2'170)198
268(1'704)

In CHF thousands

2012/13

2011/12Current income taxes
Deferred taxes relating to the origination and reversal of temporary differences
Previously unrecognized deferred tax asset used to reduce current tax expense
Previously unrecognized deferred tax asset used to reduce deferred tax expense
Deferred tax income resulting from reduction in tax rates
Adjustment recognized in the period for current tax of prior year
Total

(8'958)
1'846
0
0
0
181
(6'931)(9'156)
2'441
29
420
888
1'341
(4'037)

Interest expenses
Other financial expenses
Total
17 Financial income
In CHF thousands

Interest income on cash
Total
18 Foreign exchange effect1

Position includes cost of derivative hedging

19 Income taxes

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

LEM | Annual Report 2012/13

49

The Group’s effective tax rate differs from the Group’s average expected tax rate as follows:In %2012/13

2011/12Group's average expected income tax rate
Group's average expected ­w ithholding tax rate
Group's average expected tax rate

15.5
2.3
17.8

16.5
1.3
17.8

Tax effect of_ _ expense not deductible for tax purposes_ _ permanent differences_ _ effect of changes in tax rates on deferred taxes_ _ adjustment in respect of ­p revious periods’ income tax_ _ recognition of previously u­ nrecorded tax losses_ _ other differences
Group’s effective tax rate

0.0
0.2
0.1
(0.4)
0.0
(0.2)
17.5

1.8
1.1
(2.7)
(4.1)
(1.4)
(0.1)
12.4

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.
Following its qualification as High/New Technology Enterprise (HNTE) in China, LEM China enjoys reduced income tax
rates from 2011 to 2013. The status will need to be confirmed for 2012 and 2013. Depending on the legal situation in the
People’s Republic of China, this status can possibly be renewed for 2014 to 2016. As per 31.3.2013, the confirmation for2012 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 therisk of losing the HNTE status. LEM China has therefore been reported with a 15% tax rate.
At 31.3.2012, following the double taxation agreement between Japan and Switzerland, no withholding tax on dividends
was due anymore. The liability booked at 31.3.2011 for CHF 1.2 million was reversed and had generated an income in thedeferred tax movement of the year.
Given the stable expected tax rate and the non repetition of the one-off adjustments for prior periods income taxes registered in financial year 2011/12, the effective tax rate has increased by 5.1 percentage points in financial year 2012/13.
Deferred tax assets and liabilities
Deferred taxes have been calculated on the following balance sheet positions:
In CHF thousands

31.3.2013

31.3.2012

Assets_ _ Accounts receivable_ _ Inventories_ _ Property, plant and equipment_ _ Intangible assets_ _ Other financial assets_ _ Other assets

1'597
(278)
1'157
1'172
1'043
(1'725)
228

759
(150)
368
1'590
(633)
(603)
187

Liabilities_ _ Provisions_ _ Others_ _ Withholding tax on dividends

(416)
641
646
(1'703)
1'181(1'491)431
485(2'407)
(732)

Total
The balance sheet contains the following:_ _ Deferred tax assets_ _ Deferred tax liabilities
Net liabilities

LEM | Annual Report 2012/13

50

3'828

3'485

(2'647)
1'181(4'217)(732)

Unused tax loss carry-forwards not recognized in the balance sheet expire
In CHF thousands

31.3.2013

31.3.2012

0
0
0

0
101
101

2012/13

2011/1232'61628'487

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

1'150'000
1'140'000
1'142'575
8'080
1'134'495

28.67

25.11

_ _ in the next 5 years_ _ without date of expiration
Total
20 Earnings per share

Basic 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
Ordinary number of shares after capital reduction
Weighted average number of ordinary shares
Weighted average number of treasury shares
Weighted average number of shares outstanding
Earnings per share – basic in CHF

21 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 2011/12
and 2012/13, 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.
Compensation of the Board of Directors
In CHF thousands

2012/13

2011/12

Base salary
Additional fees
Total

(740)
(130)
(870)

(685)
(20)
(705)

Compensation of the Executive Management
In CHF thousands

2012/13

2011/12

Base salary
Bonus
Post employment benefits
Termination benefits
Change in liability for stock option plans and PSP
Total(1'698)
(912)
(161)
0
0
(2'770)(1'594)(1'021)(149)
0165(2'599)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.
Discontinued plans
During May 2009, the Board of Directors decided not to issue further equity based compensation plans. The company
administrated the legacy programs until the expiry of the last plan (SOP 6) in March 2012 and the settlement of the Performance Share Plan in the first quarter of 2011/12. CEO François Gabella and CFO Julius Renk did not participate in thestock option program and in the PSP.

2011/12

SOP 6
Total

Number ofoptions
NumberNumber­o utstanding of options of options
Grant Date
1.4.2011
issued cancelled

Number of
Number ofoptions
options ­o utstanding­e xercised
31.3.2012

1.4.2007(4'952)(4'952)

4'952
4'952

0
0

0
0

0

Exercise
pricein CHF

Fair value
at grant
in CHF240.52

64.92

Fair value
31.3.2012
in CHF

LEM | Annual Report 2012/13

Exerciseperiod from

Exerciseperiod until

N/A 1.4.2010 31.3.2012

51

In April 2007 the Board of Directors issued the stock option
plan SOP 6 for the management team and the non-executive
Board of Directors. The plan was equity settled but has beenchanged to cash settled as of 31 December 2007. The plangave the right to cash the counter value of one share at thepredetermined exercise price, which corresponded to theaverage share price of the fourth quarter 2006/07. The number of stock options granted depended on the performanceof LEM’s share price compared to the SIX Index for Smalland Mid Cap Companies in Switzerland for the financial year
2006/07. The vesting period was three years. The details of
the contractual terms of the option plan can be seen in thetable above. During the financial year 2011/12, 4’952
options were exercised. The average share price for the
exercised options was CHF 499.66. At 31 March 2012, theSOP6 has expired and all options have been exercised.
On 27 June 2008, the Board of Directors decided to initiatea Performance Share Plan for members of the management,
whereby the number of shares granted would depend on
the achievement of certain targets during a vesting period.
The targets were determined by an Economic Value Added(EVA) model, which was expected to reflect the market
growth of LEM. At the same time, the Board of Directors
approved an initial plan in favor of 30 members of management with a three years vesting period and for which themultiple for the eventual payout could vary between m=0.5
and m=2.0. The PSP expenses have been recorded in theincome statement straight-line over the three years vesting
period. The expense was adjusted at every reporting datebased on the expected number of shares that the participants would receive at the end.

Terms of PSP

At grantm (multiple)
Number of Shares expected to be issued
Vesting Period
Allocated to recepients
Fair value per unit (CHF)

1.0
8'360
3 years
27 June 2008
303.50

As of 31 March 2011, based on a pay-out multiple m=0.92
and on the number of recipients, the company booked aprovision of CHF 1’556 thousand, of which CHF 631 thousand was charged to the income statement in 2010/11. In
June 2011, the Performance Share Plan was settled. The
agreements for Chinese and Japanese employees wereamended and settled in cash. The cash settlement concerned 1’136 shares for which a total amount of CHF 650
thousand was paid. The remaining 4’828 shares were transferred to employees generating a net impact in the equityof CHF 91 thousand.
22 Retirement benefit obligations
The Group operates a defined contribution plan for all its
employees in Switzerland. Under IFRS, this plan is considered as a defined benefit plan.
The benefits are primarily based on years of service andlevel of compensation in accordance with local regulations
and practices.
During the fiscal year 2011/12, the Group moved all its Swiss
employees from its former autonomous pension foundation
into a separate collective foundation. The new foundation
continues to qualify as a defined benefit plan under IFRS.
It is to be noted that this change has had no impact on thebenefits.

The following table provides a reconciliation of the changes in the net benefit obligation.
Net benefit expense
In CHF thousands

2012/13

2011/12Current service cost
Interest cost
Expected return on plan assets
Employee contributions
Amortization of gains and losses
Net benefit expense losses

3'159
890
(1'455)(1'333)
357
1'618

2'970
1'145
(1'450)(1'557)460
1'568

Costs related to the pension plan were charged to the different functional departments based on salary costs.
Changes in defined benefit obligation
Defined benefit obligation per beginning of year
Interest cost
Current service cost
Benefits paid
Settlement of pensioners
Actuarial (gains) / losses on obligation
Defined benefit obligation per end of year

LEM | Annual Report 2012/13

52

35'227890
3'159(1'645)(3'812)875
34'69438'162
1'145
2'970(4'248)(2'802)35'227

Changes in the fair value of plan assets
Fair value of plan assets per beginning of year
Expected return
Contribution by employer and employee
Benefits paid
Settlement of pensioners
Actuarial gains / (losses) on plan asset
Fair value of plan assets per end of year

32'329
1'455
7'151(1'645)(3'812)233
35'71132'214
1'450
3'882(4'248)(969)
32'329In CHF thousands

31.3.2013

31.3.2012

Present value of funded obligations
Fair value of plan assets
Funded status
Unrecognized net actuarial losses
Net liabilities / assets (-)

34'694(35'711)(1'017)(6'056)(7'073)35'227(32'329)
2'898(5'771)(2'873)

LEM expects to contribute CHF 1’887 thousand to its defined benefit plan in 2013/14.
Net pension liabilities / assets

Actual return on plan assets for 2012/13 was CHF 1’688 thousand (2011/12 CHF 481 thousand)Comparison of amounts
In CHF thousands

31.3.2013

31.3.2012

31.3.2011

31.3.201031.3.2009

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

35'71134'694
1'017
233(1'168)32'32935'227(2'898)(969)(2'779)32'21438'162(5'948)
(220)
1'103

26'60728'876(2'269)2'947
464

23'181
28'544(5'363)(6'705)(649)

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.
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

2012/13

2011/12

30.0
36.0
20.0
14.0
100.0

34.0
30.0
23.0
13.0
100.0

29.5
54.0
5.0
11.5
100.0

2012/13

2011/12

2.0
1.5

2.5
1.5

6.5
3.5
2.5

6.5
3.5
2.5

The principal actuarial assumptions used in the actuarial calculations include:
In %Discount rate
Salary increases
Expected return on plan assets_ _ Equities_ _ Bonds_ _ Other assets

LEM | Annual Report 2012/13

53

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

31.3.2013

31.3.2012

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

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

4'460
18'844
6'469
29'773

In 2012/13 lease expenses amounted to CHF 5’141 thousand (2011/12 CHF 4’920 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.
24 Contingent liabilities
In CHF thousands

Total guarantee for credits of subsidiaries
Total guarantee to third parties
Total

31.3.2013

31.3.2012

0
1'832
1'832

0
1'818
1'818

Contingent liabilities include bank guarantees on various matters. No material liability is expected to occur in the ordinary
course of business.
The Group is from time to time impacted by changing political, legislative, fiscal and regulatory environments, including thoserelating to environmental protection. The frequency and effects on future operations and earnings are unpredictable and are
only partly covered by insurances.
25 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

31.3.2013
Fair value

31.3.2012
Fair value

Loans andreceivables

Cash and cash equivalents
Accounts receivable
Other current assets
Other non-current assets
Total

27'62943'080
1'144
738
72'591

21'12142'140
1'996
495
65'752X
X
X
X

In CHF thousands

31.3.2013
Fair value

31.3.2012
Fair value

Financialliabilities

Accounts payable
Accrued expenses
Other current liabilities
Bank loans
Other non-current liabilities
Total

16'766
14'9001'377
0613
33'657

17'86314'855
632
3'000
642
36'992X
X
X
X
X

Financial liabilities

The Group enters into derivative transactions such as currency risk reversal 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 o­ thers
are of minor or no impact.
The Board of Directors reviews and agrees policies for managing each of those risks.

LEM | Annual Report 2012/13

54

Fair value hierarchy
The Group uses the following hierarchy for determining anddisclosing 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 basedon observable market data.
The Group’s financial liabilities at fair value amount to
CHF 1’115 thousand per 31.3.2013 (financial assets of CHF 187
thousand per 31.3.2012), 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.
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 exposurefor the main currency EUR is to be hedged on a rolling 18
month basis. For the USD, between 50% and 100% of the
net exposure is to be hedged on a rolling 6 to 18 months basis.
Currency risks also arise from translation differences thatare not hedged by the Group when preparing the consolidated financial statements in CHF. The foreign exchangetranslation is excluded from the calculation of the sensitivity analysis for currency risk below.
Sensitivity analysis for currency risk
The sensitivity analysis is performed per 31.3.2013 with a
5% change in the USD, EUR, JPY, CNY and GBP with allother variables held constant of the Group’s profit before
tax (due to the changes in the fair value of the monetary
assets and liabilities) and the Group’s equity.

The sensitivity analysis performed for the financial year
shows an impact of CHF ±420 thousand for a ±5% EUR ratechange (CHF ±560 thousand per 31.3.2012), of CHF ±665
thousand for a ±5% USD rate change (CHF ±433 thousand
per 31.3.2012) and of CHF ±291 thousand for a ±5% CNY
rate change (CHF ±285 thousand per 31.3.2012). For othercurrencies, there is no significant impact. There is no significant impact on the Group’s equity.
Credit risk
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 tradeon 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 innote 4.
There are no significant concentrations of risk within theGroup.
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 fromdefault 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 iseither done centrally and passed on as an intercompany
loan, or given directly by the bank to the subsidiary with areduction 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

31.3.2013

Accounts payable
Accrued expenses
Other current liabilities
Bank loans
Other non-current liabilities
Total

16'766
14'9001'377
0613
33'657Less than
one yearOver one year

31.3.2012

613
613

17'86314'855
632
3'000
642
36'992

16'766
14'900
1'377

33'044

LEM | Annual Report 2012/13

Less than
one yearOver one year

17'86314'855632
3'000
36'350

55

642
642

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 31.3.2013, 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 inves-tors, 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 theconsolidated 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.

26 Scope of consolidation
Full consolidation

Country

Currency

Share capital

EuropeLEM Belgium sprl-bvba
LEM Deutschland GmbHLEM France SárLLEM Holding SA
LEM International SA
LEM Intellectual Property SA
LEM Switzerland SA
LEM UK Ltd
LEM Danfysik A/SLEM Bulgaria EOOD
TVELEM Ltd
LEM Management Services SárL

Belgium
Germany
FranceSwitzerland
Switzerland
Switzerland
Switzerland
Great Britain
Denmark
Bulgaria
RussiaSwitzerland

EUR
EUR
EUR
CHF
CHF
CHF
CHF
GBP
DKK
BGN
RUB
CHF

60'00075'000
120'000
570'000
100'000
8'500'000
1'000'000
2
2'000'000
16'0006'600'000
20'000

100%
100%
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%

* Company in liquidation** Company liquidated per 08.4.2013

LEM | Annual Report 2012/13

56

Ownership

27 Changes in scope of consolidation
On 1 July 2012, LEM separated the activity of LEM SA into
two distinct companies. LEM Intellectual Property is incharge of the intellectual property of the Group, with its
offices in Fribourg, LEM Switzerland SA is responsible for
the Swiss production and contract R&D activities, with its
offices in Geneva. This change has not had any impact on
the Group equity.
LEM has launched a project aiming to simplify the structureof its European agency companies and to save administrative cost. LEM has already converted some of its European
entities into branches of a European head office.
_ _ On 1 December 2012, LEM Denmark was created as abranch 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 ofLEM Deutschland GmbH. The former company incorporated as LEM UK Ltd is in liquidation and in the scope of
consolidation at 31 March 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 will improve the natural hedge of its operations by better matching currencies of sales and cost. The new plant,
which will be established in a leased property in Sofia, occupies 4’500 square meters of floor space. LEM intends toinvest CHF 2 million to equip the site and expects to start
production in October 2013. In an initial phase, LEM Bulgaria
will hire 50 employees for the new production plant.
28 Events after the balance sheet dateOn 2 April 2013, LEM Holding transferred its seat to Fribourg.
On 8 April 2013, the company incorporated as LEM Danfysik
A/S was liquidated.

LEM | Annual Report 2012/13

57

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
33 to 57), for the year ended 31 March 2013.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparationand fair presentation of the consolidated financial statements in accordance with International Financial ReportingStandards (IFRS) and the requirements of Swiss law. This
responsibility includes designing, implementing and maintaining an internal control system relevant to the preparationand fair presentation of consolidated financial statementsthat are free from material misstatement, whether due tofraud or error. The Board of Directors is further responsible
for selecting and applying appropriate accounting policies
and making accounting estimates that are reasonable in thecircumstances.
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 dependon the auditor’s judgment, including the assessment of therisks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making thosePhilippe Stöckli
Licensed audit expert(Auditor in charge)

LEM | Annual Report 2012/13

risk assessments, the auditor considers the internal control
system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order todesign 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 theaccounting policies used and the reasonableness ofaccounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We
believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements for theyear ended 31 March 2013 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 Over-sight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there areno 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, 17 May 2013
Ernst & Young Ltd

Laurent Bludzien
Licensed audit expert

58

LEM Holding SA
Financial Statements

Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61

Income Statement .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Notes to the Financial Statements .. . . . . . . . . . . . . . . . . . . . 63
Proposed Appropriation of Retained Earnings . . . . . . . . 68
Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

LEM | Annual Report 2012/13

59

LEM | Annual Report 2012/13

60

Balance Sheet(before distribution of earnings)

AssetsIn CHF thousands

Notes

31.3.2013

31.3.2012

9'725
765
133
42'14352'766

4'141
1'984
538
22'76929'43253'69853'69853'68753'687

106'464

83'11931.3.2013

31.3.2012

0
3'488
33'50936'997

3'000
2'518
25'13830'657

Current assets
Cash and cash equivalents
Treasury shares
Other current assets
Group current assets
Total current assets
Non-current assets
Investments in subsidiaries
Total non-current assets

3
5

4

Total assets

Liabilities and Equity
In CHF thousands

Notes

Current liabilities
Current financial liabilities
Other current liabilities
Group current liabilities
Total current liabilities

5

153

0

37'15030'657570
285
765
22'46845'22769'315

570
288
1'984
11'86137'75952'462106'464

83'119Other non-current liabilities
Total liabilities
EquityShare capital
General reserve
Reserve for treasury shares
Retained earnings
Net profit for the year
Total equity
Total liabilities and equity

2
3

LEM | Annual Report 2012/13

61

Income Statement

IncomeIn CHF thousands

Notes

2012/13

2011/12*45'612
825
492
4'947
0
51'87635'648
391
2'055
4'826
0
42'920Notes

2012/13

2011/12*7(4'429)(385)(1'420)(6'234)(3'580)(305)(912)(4'797)45'642

38'123(415)
45'227(364)
37'759Financial income from Group dividend payments
Interest income from Group loans
Other financial income
Other Group income
Foreign exchange gain
Total income

Expense

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

8

* Reclassification for comparative information. Please refer to note 6.

LEM | Annual Report 2012/13

62

Notes to the Financial Statements
1 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.
2 Share capital
Par value pershare in CHF

Capital in CHF
thousands

0.50
0.50

570
0
570

Number of shares

Price pershare in CHF

Value in CHF
thousands

Value 1.4.2012
ChangeValue 31.3.2013

4'588(3'272)
1'316

432.39(372.62)581.00

1'984
1'219
765

Value 1.4.2011
ChangeValue 31.3.2012

18'247(13'659)
4'588

388.62373.91432.39

7'091(5'107)
1'984

Number of shares

Opening capital 1.4.2012
Change of capital
Closing capital 31.3.2013

1'140'00001'140'000

3 Treasury shares

On 1 September 2010, LEM launched a share buy-back program which ran for one and a half years covering a volumeof up to CHF 15 million on a second trading line. 10’000
shares were bought for a total amount of CHF 3.97 million.
These shares were earmarked for cancellation. LEM terminated its share buy-back program per 23 May 2011.
On 4 July 2011, LEM Holding reduced its capital by 10’000
shares of CHF 0.50 each by the cancellation of the 10’000
own shares previously acquired for a total amount of CHF 3.97
million.
In the first quarter 2011/12, the Performance Share Plan was
settled. 4’828 shares were transferred to subsidiaries, generating a net impact in the equity of CHF 1.08 million. The
agreements for Chinese and Japanese employees wereamended and settled in cash by the subsidiaries.
During the year 2011/12, LEM acquired 1’169 shares for a
total amount of CHF 0.54 million, in the frame of its market
making contract started on 1 July 2011.

Per 31 March 2012, LEM Holding held 4’588 remaining treasury shares. In the first half year 2012/13, 3’419 treasury
shares on LEM Holding’s own account were sold for a total
amount of CHF 1’619 million.
During the year, LEM acquired 147 own shares for a total
amount of CHF 0.09 million, in the frame of its market-making
contract.
The movements in treasury shares during 2012/13 caused
an impact of CHF 1’219 thousand in retained earnings, ofwhich CHF 1’442 thousand through LEM Holding’s own
account and CHF-223 thousand through market-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.

4 Investments in subsidiaries
In CHF thousands

31.3.2013

31.3.2012

Historical cost
Total

53'69853'69853'68753'687

Refer also to note 26 Scope of consolidation of the consolidated financial statements.

LEM | Annual Report 2012/13

63

5 Group current assets and liabilities
In CHF thousands

31.3.2013

31.3.2012

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

34'8097'334
42'14322'081687
22'769Current inter-company loans payable
Inter-company accounts payable
Total

33'370138
33'50925'028111
25'138

6 Reclassification
To increase transparency and to ameliorate the understandability of the Financial Statements, the following reclassifications have been applied to prior year’s figures:_ _ Costs of insurance contracts to be recharged to other Group companies and services from other Group companies
have been reclassified from “Other Group income” into “Office, administration and personnel expense” for CHF 0.67
million.
_ _ Withholding taxes on paid dividend repatriation and other withholding taxes not recoverable from “Income taxes” into
“Office, administration and personnel expense” for CHF 0.42 million.
7 Office, administration and personnel expense
In CHF thousands

31.3.2013

31.3.2012

Office and administration expense
Consulting fees
Board member fees
Other withholding taxes not recoverable
Withholding taxes on paid dividend repatriation
Total(1'826)
(59)
(870)
(113)
(1'561)(4'429)(2'088)(1'210)
(704)
469
(47)
(3'580)31.3.2013

31.3.2012

(395)
(20)
(415)

(364)
0
(364)

8 Income taxes
In CHF thousands

Current taxes
Adjustments of tax provisions of previous periods
Total

LEM | Annual Report 2012/13

64

9 Important shareholders according to article 663c of the Swiss company law
The following shareholders held 3% or more of the share capital and voting rights on 31 March 2013:
In number of shares/options,per cent of shareholding

31.3.2013
Shares

Options

Werner O. Weber and Ueli Wampfler, 398'000 50'000
in Zollikon/Wollerau, Switzerland,through WEMACO Invest AG and
Swisa Holding AG, in Zug/Cham,
Switzerland
Ruth Wertheimer, in Kfar, Israel,
144'581
N/Nthrough 7-Industries Holding B.V., in
Amsterdam, Netherlands
Sarasin Investmentfonds AG, in
90'320N/N
Basel, Switzerland
Montanaro Asset Management Ltd,
69'071
N/N
in London, United Kingdom
Erwin Studer and Joraem de Cha97'000 (50'000)
vonay, in Zollikon/Zug, Switzerland
Amerprise Financial Inc., in Minneap38'216
N/N
olis, USA, through Threadneedle
Asset Management Ltd, in London,
United Kingdom
Impax Asset Management Ltd, in––
London, United Kingdom

31.3.2012

PositionIn %Shares

Options

PositionIn %448'000 39.30%

382'500

N/N

382'500 33.60%

144'581

12.70%

144'581

N/N

144'581

12.70%

90'320

7.90%

101'044N/N

101'044

8.90%

69'071

6.10%

55'251

N/N

55'251

4.80%

47'000

4.10%

89'500N/N

89'500

7.90%

38'216

3.40%

56'777

N/N

56'777

5.00%

–

<3%

35'400N/N

35'4003.10%

N/N = none notified

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

31.3.2013

31.3.2012

1'832

1'598

Amount of guarantees issued
11 Remuneration of Board of Directors and Executive Management
11.1 Compensation of active members of the Board of Directors

The members of the Board of Directors do not participate in bonus schemes, pension funds, nor in the Performance SharePlan (PSP). The annual salary compensation is therefore equal to the total compensation.
In 2012/13, additional fees totaling CHF 130’000 were awarded to Andreas Hürlimann (CHF 95’000), to Ilan Cohen(CHF 20’000) and to Peter Rutishauser (CHF 15’000) for additional efforts in their role and duties as members of the Boardof Directors.
Andreas Hürlimann’s additional fees exceed his normal annual salary. No other member of the Board of Directors received
additional fees amounting to more than half his normal compensation.
2012/13
In CHF thousands

Felix Bagdasarjanz 1
Ilan Cohen 2
Andreas Hürlimann
Anton Lauber 3Peter Rutishauser4, 5
Ueli Wampfler 6
Total

Annual salary

Additional fees

Cash-out for options
granted in prior years

200
100
80
100
150
110
740

0
20
95
0
15
0
130

0
0
0
0
0
0
0

The Board of Directors decided to contribute the equivalent of 5% of its annual remuneration to LEM’s cost saving efforts
in 2011/12. The annual salary had been lowered accordingly.

LEM | Annual Report 2012/13

65

2011/12
In CHF thousands

Annual salary

Additional fees

Cash-out for options
granted in prior years

171
95
76
95
143
105
685

0
10
10
0
0
0
20

0
0
0
0
0
0
0

Felix Bagdasarjanz 1
Ilan Cohen 2
Andreas Hürlimann
Anton Lauber 3Peter Rutishauser4, 5
Ueli Wampfler 6
Total
Chairman of the Board of Directors
Member of the Audit Committee
3
Member of the Nomination & Compensation Committee
4
Vice Chairman of the Board of Directors
5
Chairman of the Nomination & Compensation Committee
6
Chairman of the Audit Committee
12

11.2 Compensation to active members of the Executive Management of the LEM Group
2012/13
In CHF thousands

Annual salarycompensation

Annual bonus
compensation 1

Company's
contribution topension fundTotal compensation

Cash-out for
options granted
in prior years

Pay-out of PSP
shares granted
in prior years

450
1'248

329
583

49
112

828
1'943

0
0

0
0

1'698

912

161

2'770

0

0

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

Executive Management decided to contribute the equivalent of 10% of its monthly remuneration for the duration of shortwork in LEM’s main sites, i.e., January to February 2012, to LEM’s cost saving efforts in 2011/12. The annual salary had
been lowered accordingly.
2011/12
In CHF thousands

Annual salarycompensation

Annual bonus
compensation 1

Company's
contribution topension fundTotal compensation

Cash-out for
options granted
in prior years

Pay-out of PSP
shares granted
in prior years

440
1'154

414
607

46
103

901
1'864

0
730

0
1'904

1'594

1'021

149

2'765

730

1'904

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

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

Discontinued plans
During May 2009, the Board of Directors decided not toissue any further equity- or option-based compensation programs. The company administrates the legacy programs
until the expiry of the last plan (SOP 6) in March 2012 andthe settlement of the Performance Share Plan (PSP) in thefirst quarter of financial year 2011/12. CEO François Gabella
and CFO Julius Renk did not participate in the stock option
program and in the PSP.

LEM | Annual Report 2012/13

66

For more information on Performance Share Plan and stock
options plans, refer to note 21 Related parties of the Consolidated Financial Statements.
Highest total compensation
CEO François Gabella was the Executive Management
member with the highest total compensation in 2012/13 andin 2011/12.

11.3 Shareholdings
Board of Directors

31.3.2013

31.3.2012

In number of shares/options

Number ofshares held

Number ofoptions held

Number ofshares held

Number ofoptions held

Felix Bagdasarjanz 1
Ilan Cohen 2
Andreas Hürlimann
Anton Lauber 3Peter Rutishauser4, 5
Ueli Wampfler 6
Total

1'736
140
505
424
2'606
28'00033'41100
0
0
0
10'000
10'000

1'736
120
211
1'000
2'606
25'00030'673

0
0
0
0
0
0
0

Chairman of the Board of Directors
Member of the Audit Committee
3
Member of the Nomination & Compensation Committee
4
Vice Chairman of the Board of Directors
5
Chairman of the Nomination & Compensation Committee
6
Chairman of the Audit Committee
1
2

Ueli Wampfler has acquired 10’000 options on LEM shares from the shareholder group Studer/Chavonay.
Executive Management
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

31.3.2013

31.3.2012

Number ofshares held

Number ofoptions held

Number ofshares held

Number ofoptions held

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

0
0
0
0
0
0
0

300
45
2'100
1'425
1'500
1'450
6'820

0
0
0
0
0
0
0

12 Business risk management
In accordance with Article 663b of the Swiss Code of Obligations, a risk management report was prepared for the financial
year 2012/13.
The Executive Management of the Group assesses the business risks within its standardized analysis procedure.
The Group has a risk management system in place which allows for the prompt identification and analysis of risks as wellas the initiation of an action plan.
The Board of Directors of LEM Holding SA took note of the risk management report and approved both the procedureand the content thereof.
The organization, principles and reporting of risk management are described in detail in the Corporate Governance section 3
in this Annual Report.

LEM | Annual Report 2012/13

67

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

31.3.2013

31.3.2012

Retained earnings brought forward from previous year
Variation of treasury shares
Retained earnings

21'2491'219
22'46810'717
1'144
11'861

Reclassification from general reserve into available earnings
Net profit for the year
Total available earnings

45'227
67'695

337'75949'623

Proposal of the Board of Directors:
Ordinary dividend 1
Balance to be carried forward(34'161)
33'534(28'374)
21'2491

Excluding dividends on own shares held by LEM Holding SA

		The Board of Directors proposes the distribution of an ordinary dividend of CHF 30 per share.
Net of 35% withholding tax, this is an ordinary cash dividend of CHF 19.5 per share.
The proposed appropriation of available earnings is made in compliance with article 671 of the Code of Obligations.

LEM | Annual Report 2012/13

68

Auditor’s Report
Report of the statutory auditor on the financial­s tatements
As statutory auditor, we have audited the accompanying
financial statements of LEM Holding SA, which comprisethe balance sheet, income statement and notes (pages 61
to 67), for the year ended 31 March 2013.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation of
the financial statements in accordance with the requirements of Swiss law and the company’s Articles of Incorporation. This responsibility includes designing, implementing
and maintaining an internal control system relevant to the
preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Boardof 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 ofmaterial misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, theauditor considers the internal control system relevant to theentity’s preparation of the financial statements in order toPhilippe Stöckli
Licensed audit expert(Auditor in charge)

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 theaccounting policies used and the reasonableness ofaccounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the financial statements for the year ended
31 March 2013 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 Over-sight 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 instructions of 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, 17 May 2013
Ernst & Young Ltd

Laurent Bludzien
Licensed audit expert

LEM | Annual Report 2012/13

69

Information for Investors
Number of registered shareholders
1-499
500-4'999
5'000-49'999
50'000 and more
Total

31.3.2013

31.3.2012

567
75
6
6
654

628
81
7
6
722

31.3.2013

31.3.2012

49.2
32.0
3.6
0.1
15.1
100.0

50.5
33.3
3.4
0.4
12.4
100.0

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)
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 MarchLEHN
SIX Swiss Exchange
CHF 0.50
CH0022427626
2'242'762
2012/13

2011/121'140'000
604
451
589
493
28.67
30
671

1'140'000
601
331
494.5
960
21.11
25
564

(In CHF millions)1
2

Source: SIX
Proposal of the Board of Directors to the shareholders’ meeting

Financial calendar of the financial year
1 April 2013 to 31 March 2014
27 June 2013

Ordinary Shareholders' Meeting
Université de Fribourg, bd. de Pérolles
Dividend ex-date
Dividend payment date
First quarter results 2013/14
Half-year results 2013/14
Third quarter results 2013/14
Year-end results 2013/14
Ordinary Shareholders' Meeting
Dividend ex-date
Dividend payment date2 July 2013
5 July 2013
7 August 201313 November 201318 February 2014
4 June 2014
26 June 2014
1 July 2014
4 July 2014
Contact
Julius Renk (CFO)
Phone +41 22 706 12 50
E-mail investor@lem.com

LEM | Annual Report 2012/13

70

Group Subsidiaries
LEM is a global player with production plants and development
centers in Beijing (China), Geneva (Switzerland) and Machida(Japan). The company has sales offices at all its clients’locations and offers seamless service around the globe.

EuropeLEM Holding SA
Avenue Beauregard 1
CH-1700 Fribourg> Julius Renk
LEM Intellectual Property SA
Avenue Beauregard 1
CH-1700 Fribourg> Jean-Marc Peccoux
LEM International SA
Chemin des Aulx 8
P.O. Box 35
CH-1228 Plan-les-Ouates> Julius Renk
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
LEM Deutschland GmbH
Frankfurter Straße 74
D-64521 Groß-Gerau> Hartmut Graffert
LEM Belgium sprl-bvba
95, route de Petit-Roeulx
B-7090 Braine-le-Comte> Yves Declerck
LEM Deutschland GmbH Denmark,Filial AF LEM Deutschland GmbH
Regus Tuborg Havn
Tuborg Boulevard 12, 3rd
DK-2900 Hellerup> Klaus Corell-Kramer
LEM France Sàrl,
15, avenue Galois
F-92340 Bourg-la-Reine> Yves Declerck

For a complete list of subsidiaries, offices and representatives, refer to www.lem.com > Contact > Sales Locator

LEM Deutschland GmbH, Succursale Italia
Via V. Bellini, 7I-35030 Selvazzano Dentro, PD> Tiziano Rossato
LEM Regional Office UK,
Branch of LEM Deutschland GmbHWest Lancs Investment Centre
Maple View, White Moss Business Park
UK-Skelmersdale WN8 9TG, Lancashire> Brian Carter
LEM Bulgaria EOOD
Tsar Osvoboditel Blvd 10
BG-1000 Sofia> Julius Renk
TVELEM Ltd
Staritskoye shosse,15
RU-170040 Tver
> Evgeny Isaev

North America
LEM U.S.A., Inc.
11665 W. Bradley Road
US-Milwaukee, Wi 53224> Peter Stipan

Asia
LEM Electronics (China) Co. Ltd
28 Linhe Street, Shunyi
CN-101300 Beijing> Zonghui Zhang
LEM Japan KK
2-1-2 Nakamachi
JP-Machida, 194-0021 Tokyo> Hiroaki Mizoguchi
LEM Management Services Sàrl – India Branch
Level 2, Connaught Place
Bund Garden Road
IN-411 001 Pune
> Martin Hoffmann

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LEM | Annual Report 2012/13

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Imprint
LEM Holding SA, Fribourg
Phone +41 26 460 10 30
Fax +41 26 460 10 39
Concept and text
LEM
Sensus Communication Consultants, Zurich
DesignTGG Hafen Senn Stieger, St. Gallen
Images, Illustrations
LEM
Aurélien Bergot / Pedro Neto Whitebalance StudioJasmin Viertl
Printing
Cavelti, Gossau

LEM | Annual Report 2012/13

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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 2012/13

74