Half Year Report 2007/08
At the heart of power electronics

BUSINESS REPORT

Dear Shareholders,		
It is with pleasure that we announce a very good progression of your company
LEM, with continued sales growth and results that are profitable.
The first half of the year 2007/08 was another successful one for LEM. We haveachieved sales of CHF 98.5 million, which represents an 11% increase compared tothe same period last year with CHF 88.6 million. The bookings also reflect this growthand reached CHF 109.1 million for the first half, which represents an improvement of18%, and our future outlook is optimistic with a book-to-bill ratio of 1.11.
This sales growth has been profitable as we have reached an EBIT of CHF 18.0
million which is an increase of 60%. Net earnings have almost doubled to reach
CHF 12.3 million from CHF 6.2 million in the same period last year. We have createda new legal entity LEM International to adapt our legal structure to the growth of theAsian entities and to improve fiscal effectiveness.
The gross margin has developed in our favor increasing by 4.7 percentage points toreach 45.7% compared to 41.0% in the first half of last year. This margin increaseis mainly due to the continuous transfer of some production lines to our factory in
China and the ongoing efforts that we have made in the area of our global sourcing project. The currency exchange rates have also impacted the gross margin ina favorable way.
In a recently conducted customer and employee survey we have improved ourscore substantially on both customer and employee viewpoint, indicating better
performances as measured by the customer and better engagement from ouremployees worldwide.
The Industrial Segment - keeping the good momentum
Sales growth in the Industrial Segment remains very solid reaching an overall
CHF 88.1 million, which is an increase of 14% compared to the first half of last year.
The EBIT is in trend with our profitable growth and has increased by 63% to reach
CHF 17.7 million.
The main growth has been seen in the market of Traction which continues toexceed our expectations; sales have gained 25% compared to the first half of lastyear. This is mainly due to the increased demand of transportation that we havebeen experiencing. The industrialized countries realize the importance of good, fastand reliable public transportation and the emerging countries, especially in Asia,
the need to build this up.

BUSINESS REPORTWe are now offering a full range of products for this market and our innovative EM4T
product – the Energy Meter for Traction – which is a complex transducer to measure
the energy consumption on the train is very successful.
Sales in the new Energy & Automation market are doing well and have experienced
an increase of 64% versus the same period last year. These numbers however are still
growing from a small base. We are starting to see the effects of last year’s flagshipproducts Sentinel – to measure the state of health of standby batteries and Wi-LEM –the Wireless Local Energy Meter to measure energy consumption. We expect that wewill be able to share more success stories with you in the next few months.
The Industry market remains the main driver for LEM. Sales growth has been very
solid with a 10% increase compared to the same period last year. The main market forLEM transducers remain the electric motor drives where it is now proven that adding acontrol to the motor can reduce the energy consumption by up to 30%.
The renewable energies represent another market which continues to gain further
momentum. LEM plays an important role in the generation and conversion of energy produced by wind turbines and solar panels. We have been experiencing growth
above average and can report an approximate 25% increase in our sales of products.
Automotive – weak start but first signs of change
The Automotive Segment has been impacted by the slowdown in production of theUS car manufacturers. For this first half of 2007/08 we are reporting a slightly negative
growth of - 5%, which is a total sales of CHF 10.4 million from the CHF 11.0 million in
the same period last year. However, the last months have demonstrated an improvement. We have just gained several new contracts with manufacturers in the USA andChina. The production for this new business will commence in 2008.

BUSINESS REPORT

China – a success story
Sales in the Chinese market have grown by 18% to CHF 9.9 million whilst our production volumes have increased 3.5-fold to CHF 13.4 million.
We are producing some of our key products in China and have achieved the ISO certifications 9001, 14001 and this September TS16949 for the Automotive product line
to document that we are producing the “Made by LEM” quality that we are respectedand known for.
We are happy to announce that the LEM family has increased and now counts over
300 employees based in our production and sales sites in China.
The BRIC (Brazil, Russia, India and China) countries have been performing well and weare experiencing a 15% increase in sales. This is mostly driven by Industrial applications and the Traction market.
Capital reduction – completed
The capital reduction that was approved during the last shareholders’ meeting has
become effective as of 27 September, 2007.
Personnel – new Board member
Mr. Ueli Wampfler has been elected as a new member of the Board of Directors during
the last shareholders’ meeting.
Outlook
The Outlook remains quite positive; we see a continued but slower growth between
6 and 8% over the year after the high growth of last year. The increase in net earnings
will be substantial and is expected to be above 45% for the year.
For the Automotive segment, sales will be about the same as last year, however with apositive EBIT. We expect to see an increase in sales towards the end of the year.
Our confidence in the medium to long term remains unchanged. The drivers for ourmarket are energy and energy savings related, which will continue to be strong in theforeseeable future.
We would like to thank you for your continued trust in LEM.
With kind regards,

Paul Van Iseghem

Felix Bagdasarjanz

President and CEO

Chairman of the BoardInterim Consolidated Financial Statements

CONSOLIDATED BALANCE SHEETAssets	30.09.2007	31.03.2007
TCHF

TCHF

Current assets		Cash and cash equivalents
13’227
Trade debtors and other debtors
37’588Other current assets
1’724
Inventories
26’26919’79838’7262’140
25’082

Total current assets
78’808		
Non-current assets		
Deferred tax assets
626
Other financial assets
76
Property, plant and equipment
18’112Intangible assets
4’588

85’746903
73
17’067
4’377

Total non-current assets	23’402	22’420
Total assets

102’210108’166		
Liabilities and equity	30.09.2007	31.03.2007
TCHF		
Short-term liabilities		
Trade and other payables
13’075
Other short-term liabilities
647
Accrued expenses and deferred income
10’116
Current income tax payable
6’562
Short-term provisions
466
Short-term financial liabilities
1’480

TCHF
16’332
345
9’566
4’909
983
7’556

Total short-term liabilities	32’346	39’691		
Long-term liabilities		
Long-term provisions
2’241
1’921
Long-term financial liabilities
1617
Other long-term liabilities
4850
Deferred tax liabilities
1’604
1’607
Total long-term liabilities	3’909	3’595
Total liabilities	36’255	43’286		
Equity		Share capital
575
600
Reserves
21’36422’537Retained earnings
43’83941’565Equity attributable to equity holders of the parent	65’778	64’702
Minority interests
177
178
Equity	65’955	64’880
Total liabilities and equity

102’210108’166

CONSOLIDATED INCOME STATEMENTAPRIL TO SEPTEMBER	2007/08	2006/07
Sales
Cost of goods sold

TCHF

TCHF

98’513(53’455)

88’602(52’305)

Gross margin	45’058	36’297		
Sales expense(11’050)(10’276)
Administration expense(11’290)(10’312)
Research & development expense(5’071)(4’650)
Other expense
(13)
(176)
Other income
331
359
Operating profit
17’965		
Financial expense(570)
Financial income
136
Exchange effect542

11’242

Earnings before taxes

18’073	

10’630		

Income taxes(5’755)(4’405)		

(535)
120
(197)		Net earnings
12’318	6’225		
Attributable to :		
LEM shareholders
12’281
6’182
Minority interests
3743
Net earnings
12’318	6’225				
Earnings per share
CHF
CHF
Earnings per share undiluted
10.7
5.3
Earnings per share diluted
10.4
5.2



APRIL TO SEPTEMBERCONSOLIDATED CASH FLOW STATEMENT	2007/08	2006/07
TCHF

TCHF

CASH FLOW FROM OPERATING ACTIVITIES			Net earnings
12’3186’225
Adjustment for non-cash items			- Current income taxes
5’216
4’405
- Net financial result
434
254- Expenses for share-based payments
551
491- Depreciation and amortisation
2’221
2’173
- Increase (+) / decrease (-) of provisions and deferred taxes
50
227
Interest received
136
172
Interest paid
(570)
(426)
Taxes paid
(3’548)(1’658)Treasury shares acquired for stock option plans(5’442)0Cash flow before changes in net working capital
11’366	
11’863
Change in inventory(1’507)(4’462)
Change in debtors and other current assets
1’160(5’319)Change in payables and current liabilities(2’495)
221
Cash flow before changes in net working capital(2’842)(9’560)Cash flow from operating activities

8’524	2’303					CASH FLOW FROM INVESTING ACTIVITIES			

Investment in tangible fixed assets
Disposal of tangible and intangible fixed assets
Investment in intangible fixed assets
Increase (-) / decrease (+) in long-term financial assets(3’270)83(416)(5)(3’418)
366
(81)
53

Cash flow from investing activities(3’608)(3’080)				
CASH FLOW FROM FINANCING ACTIVITIES			Treasury shares acquired via share buy-back program
Dividends paid to the shareholders of LEM Holding SA
Dividends paid to minorities
Increase (+) in financial liabilities
Decrease (-) in financial liabilities

0(5’175)(38)
1’187(7’260)(6’973)(11’725)
(26)
5’286
0

Cash flow from financing activities(11’286)(13’438)					Change in cash and cash equivalents(6’370)(14’215)			Cash and cash equivalents at the beginning of the period
19’798	25’395
Exchange effect on cash and cash equivalents
Cash and cash equivalents at the end of the period

(201)

(457)

13’227

10’723						April - September 2006	

Industrial

Automotive

Total

TCHF			Orders received
81’824
10’47992’303
Sales
77’55811’04488’602
EBIT
10’847395
11’242						April - September 2007

Industrial

Automotive

Total

TCHF				Orders received
Sales
EBIT

97’97788’06917’70311’07810’444262

SEGMENT INFORMATION –CONSOLIDATED STATEMENT OFCHANGES IN EQUITY

Segment information			109’055
98’51317’965

Consolidated statement of changes in equity
Attributable to equity holder of the company
TCHF

Sharecapital

Capitalreserves

Reservefor treasury
sharesTreasurysharesStockoption
plan

Currencytranslation
diff.

Retainedearnings

MinoritiyInterest

Totalequity

Balance on 1 April 2006
Changes in capital
Dividends paid
Changes in scope of consolidation
Dividends paid to minority interests
Attribution of earnings
Currency translation difference
Stock option plan
Treasury shares

600

27’703000041’315

123

69’7410(11’725)0(26)6’225(786)490(6’973)

Balance on 30 September 2006
There of P&L items recorded in equity(11’725)

6’182

(26)
431(787)490(6’973)

6’973(6’973)600

20’730

6’973(6’973)

490
490

(787)

35’772

141

56’946
490

Balance on 1 April 2007
Changes in capital
Dividends paid
Changes in scope of consolidation
Dividends paid to minority interests
Attribution of earnings
Currency translation difference
Stock option plan
Treasury shares

600
(25)

19’00925

7’820(7’820)

1’429

2’098

41’566178

64’8800(5’175)0(38)12’318(1’138)(4’892)0Balance on 30 September 2007
There of P&L items recorded in equity

575(5’175)12’281(38)
37(1’138)(59)

19’034(7’820)

7’820

0

0

1’370551(4’833)960

43’839177

65’955551

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of operations
The LEM Group (the Group) is a market leader in providing innovative and high quality
solutions for measuring electrical parameters. Its core products – current and voltage
transducers – are used in a broad range of applications in industrial, traction, energy
and automotive markets.
2. Basic principles of group accounting
These unaudited consolidated financial statements for the six months ended on
September 30, 2007 have been prepared in accordance with the International
Financial Reporting Standards (IFRS) and comply with IAS-34 “Interim Reporting”.
The consolidated statements are based on the accounting principles set out in the2006/07 annual report of the LEM Group, which were applied without changes.
The following changes in accounting standards have been taken into consideration but
did not have any effect on the balance sheet and income statement of LEM : IFRIC-8,IFRIC-9, IFRIC-10. The new disclosures in relation to IAS-1 and IFRS-7 will be presented in the annual report 2007/08 of LEM.
3. Income taxes
The variation in the Groups effective tax rate is caused by changes in volumes, productmix and profitability of the Groups subsidiaries in the various jurisdictions. It includes
the release of a tax provision following the closing of a tax investigation.
4. Financial liabilities
The Group repaid short-term financial liabilities in LEM Holding SA of TCHF 7’000,
bearing an interest rate of libor + 0.60%. Beijing LEM Electronics Co Ltd borrowed
TUSD 1’000 from a bank at libor +1%. The loan is payable in full on 30.05.2008.
5. Shareholders’ equityDividend
At the shareholders’ meeting held in Geneva on June 29, 2007, the shareholders
approved the distribution of an ordinary dividend of CHF 4.50 per share. The exdividend day was July 2, 2007. The total amount spent for the gross dividend was
TCHF 5’175.
Cancellation of treasury shares
At the shareholders’ meeting held in Geneva on June 29, 2007, the shareholders approved the cancellation of 50’000 treasury shares. The capital reduction has beenregistered in the register of commerce September 27, 2007.

10On May 10, 2007 the Board of Directors approved a new stock option plan for themanagement team and the directors. Each of the 26’820 options give the right to buy
one LEM share at a strike price of CHF 240.52 during the exercise period from April 1,2010 to March 31, 2012.
7. Events after the balance sheet date
Between the balance sheet reference and the approval of the consolidated financial
statements by the Board of Directors on November 2, 2007, no further significant
events occurred which might make the 2007/08 consolidated financial statements forthe six months ended on September 30, 2007 less meaningful or which would warrant
disclosure at this point.
8. Exchange rates
The following exchange rates were used :Period-end
rate forbalance sheet

EUR
GBP
JPY
USD
RUB
CNY

Period averagerate for income
statement

30.09.07

31.03.07

2007/08

2006/07

1.661
2.384
0.0101
1.1644
0.047
0.155

1.624
2.390
0.0103
1.218
0.047
0.158

1.648
2.425
0.0102
1.211
0.047
0.159

1.57
2.296
0.0108
1.241
0.046
0.156

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

6. Stock option plan11

Postal address
LEM Holding SA
P.O. BOX 785
CH – 1212 Grand-Lancy 1

Visitors address
LEM Holding SA
8, chemin des Aulx
CH – 1228 Plan-les-Ouates
Phone +41 22 706 11 11
Fax+41 22 794 94 78 78
www.lem.com