Annual Report
2016/17
At the heart of power electronics

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B

6
5

4

8
7

Mild hybrid car
Mild hybrids are internal combustion
engines equipped with an electric
drive allowing the engine to beturned off whenever the car iscoasting, braking, or stopped, yet
restarted quickly. Mild hybrids
employ regenerative brake andsome level of power assist to
the internal combustion engine.

A

A

HSN

B

CAB

1

AC/DC converter
Lithium-ion battery
Battery controller
DC/DC converter
12-volt battery
12-volt electrical
distribution center
Electric motor/generator
Electric supercharger

Mild hybrids may provide some of the benefits of hybrid
technologies, with less of the cost-weight penalty that isincurred by installing a full hybrid series-parallel drivetrain.
Fuel savings would generally be lower than expected withuse of a full hybrid design, but combining regenerative
braking with the "start-stop system" helps to further lower
the fuel consumption.
In electrical mode, LEM's HSN families control the powertransmitted by the inverter to the electrical motor. CAB
families monitor the transfer of the generated energy to thebattery pack while driving and braking with best-in-classaccuracy. LEM's transducers are compact, easy to integrate and their superior accuracy allows the system tocontribute to reduce vehicle emission and improves the
hybrid car's electrical range.
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Annual Report 2016/17 | LEM

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4
5
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8

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Table of Contents
Foreword 5
LEM at a Glance 6
Business Report 9
LEM's Core Values 15
Corporate Governance Report 16
Compensation Report 26
LEM Group Consolidated
Financial Statements 31
LEM Holding SA
Financial Statements 59
Information for Investors 70
Group Subsidiaries 71

Reporting period 1 April 2016 to 31 March 2017

LEM | Annual Report 2016/17

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4

Annual Report 2016/17 | LEM

Foreword
Dear Shareholders,

We look back at another positive year, despite the volatilebusiness sentiment that accompanied us throughout thereporting period. While business in Europe and China weakened, we recorded robust growth in North America and therest of Asia. During Q4 of 2016/17, we noticed improving
market conditions in most regions resulting in a high level oforders for the quarter. After two years of foreign exchangepressure on LEM, the situation has stabilized against mostcurrencies. We achieved high margins while at the same time
significantly stepping up investment in future growth.
Resilient margins
Sales reached CHF 264.5 million, representing growth of
1.2 %, or by 1.0 % in constant currencies. Whereas sales indrives & welding and in the green cars businesses werestrong, demand in renewable energies and traction softened.
EBIT improved by 5.4 % to CHF 55.8 million. Net profit for thereporting year amounted to CHF 44.6 million, exceeding last
year's result by CHF 1.1 million.
On the right track
We are the clear leader in the Industry businesses and keepa market share above 50 %. In the Automotive businesses,
we continue expanding our project pipeline: we estimate thatevery fifth green car produced worldwide in 2017 will beequipped with a LEM transducer.
We executed our three-pillared strategy:––Technology leadership: We launched a high number of new
products and increased production of the latest models. To
accelerate our growth, we have decided to increase significantly our R&D efforts in the future. Aside from increasing
R&D staff in Beijing and Sofia, we have established a new
R&D center in Lyon. The focus will be on innovation in theareas of ASICs and embedded software in order to captureInternet of Things and Industry 4.0 related opportunities.
The center started its operations on 1 April 2017 with a teamof 11 engineers.
– –Efficiency: The share of production from our cost-competitive sites in Beijing and Sofia reached 77 % of the global
output.
–– Flexibility: Requirements on our teams increase steadily,
demanding stronger competencies in production. We redesigned training plans to improve the versatility and skills of
production teams to better meet the changing work situation.
Strong team – loyal customers
Our latest customer satisfaction survey confirmed that ourcustomers recognize us as the global leader in providing solutions to measure electrical parameters. LEM's reputation isbuilt on the reliability, quality and performance of its products,

amongst others. The global employee survey showed a very
high level of employee engagement for the Company. Our
teams are proud to work for LEM and identify themselveswith our strategy.
Proposals to the General Meeting of Shareholders
The Board of Directors will propose at the forthcoming General Meeting of Shareholders a dividend of CHF 35 per share.
The proposal is in line with LEM's dividend policy of distributing significantly more than 50 % of its consolidated net profit
to shareholders and corresponds to a payout ratio of 89.4 %.
The Board of Directors proposes to elect Dr. iur. Werner Carl
Weber as a new member. Mr. Weber is founding partner ofthe law firm weber schaub & partner ag in Zurich. He is Chairman and Board member of several Switzerland based privately held companies. Mr. Weber is a representative of LEM'slargest shareholder WEMACO Invest AG, a long-term oriented
and loyal shareholder for the past 15 years. His standing forelection underpins the long-term commitment of LEM's
anchor shareholder.
ThanksOn behalf of the entire Board of Directors and the Executive
Management, we wish to thank our employees for their commitment and hard work in the past year. We would also liketo extend our gratitude to our customers, suppliers and business partners as well as to shareholders for their trust andconfidence in LEM.

Andreas Hürlimann
Chairman of the Board of Directors

François Gabella
Chief Executive Officer

LEM | Annual Report 2016/17

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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 microturbines and wind and solar power
generation. Additional opportunities have been developed in
the automotive market, such as battery management andstart/stop applications for conventional cars and electrical
motor controls, battery pack management and embedded
chargers for green cars. This evolution underscores the Company's exceptional skills in adapting to rapidly changing
industrial trends, such as miniaturization, higher performancelevels and a greater degree of application, integration andcomplexity.

LEM Holding SA, Fribourg, Switzerland
R&D Centers
Geneva, Switzerland
Lyon, France
Beijing, China
Sofia, Bulgaria
Sales Offices
Geneva, Switzerland
Frankfurt, Germany
Vienna, Austria
Brussels, Belgium
Randers, Denmark
Paris, France
Padova, Italy
Skelmersdale, UK

LEM has the strongest brand recognition in its markets. Its
products – commonly called "LEMs" – are at the heart of many
power electronics applications. LEM's strategy is to increase
its technology leadership, efficiency and production flexibility.
At the same time, LEM is committed to maintaining customer
focus and operational excellence by running cost-effective
and service-oriented production platforms. Profitable growth
is a key objective.

Tver, Russia

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

Adaptation Centers

Beijing, Shanghai, Shenzhen, Xian, Hefei, China
Tokyo, Japan
Pune, India
Seoul, South Korea
Milwaukee, Columbus, Amherst,
Los Angeles, USA
Agents/Distributors

Milwaukee, USA
Tver, Russia
Production Centers (PDCs)
Beijing, China
Geneva, Switzerland
Tokyo, Japan

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Annual Report 2016/17 | LEM

Sofia, Bulgaria

Key figures 2012/13 to 2016/17
In CHF millions, %2012/131

2013/142014/15

2015/162016/17

Orders received
Book-to-bill ratio
Sales

230.6
0.98
235.0

246.4
1.00
245.6

251.0
0.97
257.8

256.5
0.98
261.5

271.2
1.03
264.5

Gross profit
In % of sales
EBIT
In % of sales

98.6
41.9 %
40.8
17.4 %

115.4
47.0 %
55.7
22.7 %

118.4
45.9 %
54.2
21.0 %

120.4
46.0 %
52.9
20.2 %

123.6
46.7 %
55.8
21.1 %Net profit for the year
EPS basic (CHF)
Dividend per share (CHF)

32.4
28.48
30.00

45.6
40.09
40.00

43.1
37.86
40.00

43.5
38.18
35.00

44.6
39.11
35.00 2

Operating cash flow
Investing cash flow

46.2
– 10.4

40.6
– 8.7

50.2
– 9.7

45.6
– 6.6

52.8
– 13.231.3.20131

31.3.201431.3.2015

31.3.201631.3.2017

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

27.6
84.0
61.9 %

24.6
94.2
65.1 %

20.9
91.9
65.0 %

13.6
85.9
61.3 %

12.8
90.5
60.7 %

Market capitalization
Employees (in FTEs)

671.5
1'137

801.4
1'241

910.3
1'274

929.1
1'388

1'064.8
1'453

In CHF millions, %1
2

Restatement following IAS19R application (pensions).
Proposal of the Board of Directors to the Annual General Meeting of Shareholders on 29 June 2017.

Sales per segment

Regional sales breakdown

In CHF millions

In CHF millions

300

300

250

250

200

200
150

98.1
215.2
200.0

211.1

214.3

97.5

91.3

88.2

125.5

129.9

150

221.0
100

100

117.5

90.4

103.2

46.5

45.1

42.7

44.6

46.4

12/13

13/14

14/15

15/16

16/17

50

50
0

97.4

35.0

34.6

36.7

12/13

13/14

14/15

Industry segment
Automotive segment

46.3

50.2
0

15/16

16/17

EuropeAsia and rest of world
North America

LEM | Annual Report 2016/17

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4
3

5

Wireless

1

2

A
2

2

2

Smart Grid Medium Voltage
Line Monitoring
With new Internet of Things, telecom
networks, monitoring overhead
power lines is made possible.
Thanks to an ammeter, installed
between two poles, the grid operator can visualize in real-time the current flow in order to optimize thepower line capacity to distribute
more electricity.

A

ART

1

Ammeter
MV power line
Telecom relay
Cloud and database
Energy management

The wireless ammeter sends data over a telecom relay toa secured database in the cloud. The energy management
platform can regulate, alert and notify the maintenanceteam if needed.
The ammeter uses the rogowski coil ART to measure thecurrent, detects line aging depending on the level of current, and helps prioritizing line capacity and regular maintenance.
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Annual Report 2016/17 | LEM

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Business Report
Net profit increased from CHF 43.5 million in the previous year to CHF 44.6 million in the reporting year, despite
the volatile business sentiment. Our diversified businessmix supported our robust performance. We recorded apositive impact of the improving economic situation in
our cyclical drives and welding business. The strongest
momentum was provided by the green cars businesswhere we continued to establish our reputation. However, the renewable energies and traction businesses
were soft. Business conditions improved in Q4 of
2016/17, resulting in growing sales and a high level oforders.

China represented 30 % (31 % in 2015/16), Asia excluding
China 17 % (15 % in 2015/16), Europe 33 % (35 % in 2015/16),
and North America 18 % (17 % in 2015/16) of Group sales.
Sales growth was robust in Asia excluding China (+14 %) andNorth America (+4 %), but disappointing in China (-3 %) andEurope (-3 %). We achieved the highest growth rates in South
Korea (+26 %), Japan (+14 %), USA (+4 %) and Germany(+4 %).

Financial result
Sales in the financial year 2016/17 totaled CHF 264.5 million,
an increase of 1.2 % compared with the previous year. At
constant exchange rates, Group sales increased by 1.0 %.

Our gross margin improved to 46.7 % (46.0 % in the previousyear) due to effective cost management, innovation, ongoing transfer of production to Sofia and improved sourcing.

In the financial year 2016/17, orders increased by 5.7 % to
CHF 271.2 million and the full year book-to-bill ratio reached1.03, indicating improved business conditions.

Key figures
In CHF millions

Orders received
Sales
Book-to-bill
EBIT
Net profit

Financial year
2015/16

Q1
2016/17

Q2
2016/17

Q3
2016/17

Q4
2016/17

Financial year
2016/17

256.5
261.5
0.98
52.9
43.5

65.2
66.9
0.97
13.4
10.8

67.1
65.7
1.02
14.1
11.4

67.7
65.1
1.04
14.1
10.6

71.2
66.8
1.07
14.1
11.9

271.2
264.5
1.03
55.8
44.6

We reduced sales, general and administrative spending(SG&A) by 2.1 % to CHF 51.8 million. For the financial year
2016/17, SG&A represented 19.6 % of sales, compared with20.2 % in the previous reporting period. Research and development expense (R&D) as a percentage of sales increased
to 6.1 %, above the long term average of 5.5 %. This intended
increase in R&D spending is the result of a strategic decision
to significantly increase investment in innovation.
EBIT for the full financial year 2016/17 increased to CHF 55.8
million from CHF 52.9 million in the previous reporting period.
Our EBIT margin for the financial year 2016/17 came in at
21.1 %, up from 20.2 % in the previous year.
The tax rate has remained stable at 18.9 %. We posted a net
profit for the year of CHF 44.6 million, an improvement of
CHF 1.1 million compared with last year.
Our balance sheet remains strong. As at 31 March 2017, total
assets increased to CHF 149.0 million. Shareholders' equity
reached CHF 90.5 million, representing an equity ratio of
60.7 % (61.3 % as of 31 March 2016). LEM has no interest
bearing financial liabilities. Net working capital has decreasedby CHF 1.7 million.

Cash flow from operating activities in the financial year was
CHF 52.8 million (+15.9 %) and free cash flow was CHF 39.6
million (+1.7 %). CAPEX nearly doubled due to investments
in production lines for new products and in preparation of
production volume increase.
Dividend
The proposed dividend of CHF 35 is a sign of trust in thecompany's ability to continue generating strong cash flows
in the future. The proposal follows LEM's dividend policy of
distributing significantly more than 50 % of its consolidated
net profit to shareholders and corresponds to a payout ratioof 89.4 %.
Industry segment
Sales in the Industry segment decreased by 0.4 % to
CHF 214.3 million in the financial year 2016/17, at constantexchange rates the sales decrease was also 0.4 %. We
achieved strong orders and our book-to-bill ratio for the year
resulted in 1.03, pointing to an increasing momentum. China
has maintained its position as our most important single
country and accounted for 30 % of Industry sales, but sales
development was soft there (-4 %). Sales grew in North
America and the rest of Asia by 11 % and 8 % respectively.
Sales in Europe dropped by 4 %. Still, the EBIT margin
improved to 20.5 % compared with 20.0 % in the previous
financial year.

LEM | Annual Report 2016/17

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Our production volumes kept increasing and we invested inadditional production lines. Our new products enhanced ourcompetitiveness, opened opportunities to explore new markets and were well received. We maintained our market shareabove 50 % in all markets and regions. We did not observe
major changes in our competitive landscape.
In the course of 2016, global economic activity improved in
North America and Europe and we noticed positive signals
from China. Our customers reported a more positive perspective than 12 months ago and started increasing theirinvestment activities. A positive assessment for a continued
cyclical recovery is supported by an improved economic outlook for most of our target regions and positive forwardlooking indicators such as purchasing manager indices.
Sales in the drives & welding business increased by 10 %over the previous year. We achieved robust growth in all
regions, yet growth was strongest in North America. We won
market share in North America and Europe thanks to our
products' superior performances. We witnessed a recovery
in demand from oil and gas producers and ongoing growthin the machine and automation industries.
The renewable energies & power supplies business is dependent of local government decisions, which resulted in a volatile sales development. Solar-equipment production continues to move from North America and Europe to China.
Hence, China has become by far the biggest solar-equipment manufacturer, now increasingly active on export markets. Wind activity was weak in all regions. Overall sales
decreased by 8 %.
Sales in the traction business decreased by 10 %. There waslittle investment activity in new rail infrastructure during thepast year. Some high-speed train projects for export markets
in China were delayed or even cancelled. Yet, we executedan energy meter project in Europe and won market shareglobally.
In the project-driven high-precision business, sales decreasedby 10 %. Some of the sales decrease should be attributed tolast year's strong HVDC sales in China that did not repeat in
the reporting period. We achieved good sales in the Chineseand US medical markets and the Japanese test & measurement market. Overall, we won market share but observed
low activity globally.
In the financial year 2017/18 we aim to leverage the improving market conditions and to further strengthen our market
position. We want to accelerate the pace of product launches
and address new markets with our latest product innovations.

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Annual Report 2016/17 | LEM

Automotive segment
Sales in the Automotive segment reached CHF 50.2 million
in the financial year 2016/17, representing an increase of
8.5 % on the financial year 2015/16. At constant exchange
rates, sales grew by 7.5 %. We recorded strong growth inEurope and Asia. North America is our largest region with
39 %. Sales in China accounted for 29 % of segment sales,
while segment sales in Europe stood at 8 %. We recorded
the strongest growth in South Korea (+69 %), Japan (+23 %)and Germany (+24 %). EBIT reached CHF 11.8 million, up
19.1 % on the financial year 2015/16. The EBIT margin was
23.5 %, compared with 21.4 % one year ago. The marginincrease resulted from volume growth, a favorable productmix and our efficient organization.
In a high-growth and increasingly dynamic market, we kept
the operating performance at a high level. We won awards
from two customers for our delivery reliability, product quality and innovation. We have established close relationships
with Tier 1 companies and OEMs, which recognize us as awell-respected market player.
Strong growth in China pushed the global car market to newrecord levels in 2016. Vehicle production increased by 4.5 %to 94.8 million (source: OICA). Apart from China (+14.5 %),the rest of the world was stable. Green cars saw new record
production levels last year due to more government incentives and better consumer acceptance. Production volumesof plug-in hybrid cars and electric cars amounted to 773'600
units in 2016, an increase of 42 % compared to 2015 (source:
EVvolumes.com). Electrification of cars becomes an increasingly dominant topic in the global car industry, besides connectivity and autonomous driving.
Year-on-year sales in the conventional cars businessdecreased by 5 %, mainly driven by an anticipated technology change in our most important market in the US.
Sales in the green cars business increased by 41 %. We
achieved strong growth across all territories. Growth was
still slower than expected due to delays of customers' product launches and certain reductions of government subsidies for green cars in China. The increasing attractivenessof the market lures new competitors such as system integrators or semiconductor suppliers resulting in increased
competition and price pressure.
We have put the capacities in place to increase R&D activity and hence to increase the number of product launches.
We will defend our market share and margins in the green
cars business and expect the continued growth to morethan offset our slowing conventional cars business. We estimate that every fitfth green car produced in 2017 will beequipped with a LEM transducer.

Strategy implementation
We remain on course with our long-term strategy. It allows
us to maintain our competitive edge, as demonstrated by ourhigh market share and strong margins.
–– Increase our technology leadership
We continuously expanded our R&D team to boost ourinnovation rate. To this end, we not only hired engineers forthe established innovation teams in Beijing and Sofia, butalso set up a new R&D center in Lyon. The focus will be on
innovation in the areas of ASICs and embedded softwarein order to capture Internet of Things and Industry 4.0
related opportunities. The new R&D center started operations on 1 April 2017 with a team of 11 engineers and an
ambitious development plan with first product launches
and the aim to grow to more than 20 engineers within
12 months.
We remain focused on our product road map: we lead thecurrent market trends of miniaturization, embedded software and digitalization with new products. We launched
the first integrated primary sensors, GHS and GO, which
combine transducer and semiconductor technologies. 50 %of our new products include embedded software. The IN
2000, for example, provides unmatched performance levels by digital signal processing for test & measurements,
medical and science applications. We launched digital output versions of HO and HLSR open-loop Hall effect current
transducers, giving us a leading edge in the drives andrenewable energies markets. The LH models for drives andsolar markets incorporate our proprietary ASIC for closedloop Hall effect technology, delivering high performancecomparable with the more complex fluxgate products. The
DVM models for traction applications use LEM's patented
insulating digital technology to achieve improved accuracy
and temperature stability. The accuracy class 0.5 ART models for smart grid applications use our patented Rogowski
loop technology and provide an electrostatic shield. The
two-phase motor control sensor HAH2 for hybrid-electriccars offers high accuracy and speed in a compact andeasy-to-integrate casing. Going forward, we will increasingly develop products using new technologies in order toaddress new markets.
We secured ten new patents, and continue to be active inprotecting our brand and technology in the international
market.
–– Increase our efficiency of operations
Ongoing transfer of production to Sofia and the development of a new supplier base in Eastern Europe were themain cost management contributions in 2016/17. The site
in Bulgaria is developing faster than expected. Production
increased in 2016/17 to 14.2 % of global output (9.3 % in
2015/16). During the reporting year, we increased the shareof cost-competitive production in Sofia and Beijing to 77 %of global output. We increased the work floor in Sofia by
20 % and in Beijing by 10 % to better meet the growth perspectives, mainly in the Automotive business. To offset theongoing price erosion in our markets, we constantly
increase productivity.
–– Increase our production flexibility
We achieved a significant production increase in numberof sensors. We added several new production lines while
maintaining product quality and delivery performance ata high level. Nevertheless, our activities require more technical and engineering skills in production. To this end, we
increased our focus on people development. We redesigned training plans to improve the versatility and skillsof production teams to better meet changing work situations. With the increased experience of our teams in Sofia,
we started transferring more complex product families
with high labor content, adding to the flexibility of theGroup.
Responsibility: Ethical Standards
Our core values (page 15) have laid a strong foundation for
our achievements. We have been embracing the Ten Principles of the United Nations Global Compact (UNGC) since2006. These principles, which relate to human rights, labor,
environment and anticorruption, are embedded in every
aspect of our Company, from our strategy to our recurring
actions. As we do every year, we provided an update on our
progress and made it available on our website (www.lem.com> About LEM > LEM Code of Conduct). We also follow otherbest-practice policies such as the Universal Declaration of
Human Rights and the recommendations of the UK Ministryof Justice relating to antibribery.
The LEM Code of Conduct (CoC; www.lem.com > About LEM> LEM Code of Conduct) connects these principles to a binding behavior for all stakeholders. Every LEM employee
receives training on the CoC (including instructions and casestudies) and signs the CoC. The Code of Conduct also
applies to all business partners we use, whether suppliers,
consultants or agents. They need to sign the LEM CoC prior
to the start of any activities. We regularly audit complianceand detected no violation during 2016/17.
Responsibility: Environmental Standards
Our products help to reduce energy consumption and CO 2
emissions. Hence, our goal is to develop more accurate sensors, which allow our customers to develop applications thatare more efficient. We develop an environmental profile foreach new product before launch, which includes recyclability rate and material saving compared to previous or equivalent models.

LEM | Annual Report 2016/17

11

All our production sites are ISO 14001:2004-certified, an environmental certification which we renew regularly. We will
upgrade to ISO 14001:2015 in 2017/18. Our production activities are compliant with REACH (European Regulation for
Registration, Evaluation, Authorization and Restriction ofChemicals), RoHS (Restriction of Hazardous Substances)and conflict minerals reporting and obligations.
In our Geneva site, we have deployed a smart-grid architecture solution with 36 energy meter devices to map our current
electricity consumption and link it to every energy consumer.
Our aim is to reduce electricity consumption by 20 % in 10
years.
Quality management
Quality and reliability are key strengths of LEM transducers
and well known features to our customers, as evidenced byour recent customer survey. Thus, continuously improving
the quality of our products and services is key. We maintainthe same high principles for all production sites. We follow
ISO standards depending on the market supplied: ISO 9001
for Industry, ISO/TS 16949 for Automotive, and IRIS for traction. Our laboratories are ISO/CEI 17025-certified for test andcalibration. All production sites are ISO 9001:2008-certified.
In 2017/18 we will switch to ISO 9001:2015. We apply quality
improvement techniques such as LEAN and Six Sigma.
Employees
We are convinced that a motivated workforce is essential for
LEM's lasting success. To this end, we support our employees to attend regular job-specific training and develop theirpersonal skills. We invest 1.5 % of Group salary for internalcourses and participation in external trainings. Technicalcompetencies and management skills are the primary focus.
In management development, we emphasize enhancing technical core competencies that are essential for the future. We
also develop the leadership capabilities of middle and top
management as well as project management skills in international and intercultural teams.
31.3.201731.3.2016

Permanent employees (FTE)
Temporary employees (FTE)
Apprentices (FTE)
Total

1'292
148
13
1'453

1'253
121
13
1'388

Women in overall workforce ( %)Women in non-productionrelated activities ( %)

55 %
33 %

56 %
32 %

Fluctuation in non-productionrelated activities ( %)

7.7 %

8.3 %

12

Annual Report 2016/17 | LEM

LEM provides equal opportunity to all qualified individuals.
The share of female employees is 55 % in the overall workforce. However, given the high share of engineering positionsin product development, sales & marketing and management,
the share of female employees in the non-production-related
activities is 33 %, though the balance is improving. We actively
seek female candidates in order to increase their share in thehigher-qualification positions.
We continue to enhance health and safety at the workplace.
The most important measures include systematic health andsafety training for newcomers, employee wellbeing programs,
voluntary employee health checks and ongoing awarenessenhancement of managers. LEM uses the ISO 45001 standard that is currently being developed to help improve occupational health and safety management systems.

Employees per function

7%
16 %

8%
68 %

Production
Sales & Marketing
Logistics, Admin
R&D

Employee engagement
Every two years we conduct a global survey to assess LEM's
employee engagement for the company, employee engagement for the job and managerial effectiveness. 76 % of
employees participated in the latest survey in 2016. The study
reveals that employee engagement around the world
remained stable at the same high level since the previous
study, which was performed in 2014. Overall, LEM people
assess strategy and future, customer focus, managerial
effectiveness, working climate and empowerment as our
main strengths. Employees are satisfied with their job andproud to work for LEM.

Customer satisfaction
In 2016 we also conducted a customer satisfaction survey
which included over 200 customers from all territories. Our
customers gave a very high rating to the quality of our products, a very important reward for an engineering-driven firm
like ours. A look at the detailed findings reveals that we arehighly rated for our products in terms of reliability, quality andperformance. Most customers agree that our products havea positive impact on the value and performance of their own
applications. They confirmed that we have maintained thehigh-level quality of relations and efficiency of processes
since 2014. Customers appreciate working with us and value
us as a reliable business partner. Getting in touch with ourteam and the team's understanding of commercial requests
and expectations were rated as strengths of LEM. Our customers recognize that we are the global leader in providing
transducers to measure electrical parameters.
Outlook
We see encouraging economic signals in our most importantregions and observe increased investment activities among
our customers. Thus, we expect positive momentum in the
Industry businesses. Growth in the green cars business is
forecast to continue. Again, we plan a high number of product launches and ongoing investment in production capacities for new products.
The strong Swiss franc will remain a challenge for LEM,
despite the temporary easing of pressure during the past
year. Adapting the international footprint of all our activities
will thus remain on our agenda.

LEM | Annual Report 2016/17

13

1

A
1
3

A

3

2

2

Induction heating
Induction heating is a process,which is used to bond, harden orsoften metals or other conductive
materials. For modern manufacturing processes, induction heatingoffers an attractive combination of
speed, consistency, control andenergy efficiency.

A

LF 510

1

Power supply
Copper coil (inductor)
Work piece

In a basic induction heating setup, a power supply sends
an AC current through an inductor (often a copper coil),and the part to be heated (the workpiece) is placed inside
the inductor. The inductor serves as the transformer primary and the part to be heated becomes a short-circuit
secondary. An LF 510 LEM transducer is built inside thepower supply.
With its extremely high measurement accuracy, the LF 510
allows a very accurate control of the workpiece's temperature. The LF 510 also features high immunity to externalinterferences generated by adjacent currents or external
perturbations, and provides excellent reliability to the
induction heating process.
14

Annual Report 2016/17 | LEM

2
3

LEM's Core Values
It is vital for all of LEM to share common values andworking principles. All employees understand what
LEM wants to achieve so that everyone works together
for the same purpose.
These values link all LEM employees together and make usa team. They are the common beliefs we share. They are thespirit and intent of everything we do at LEM.
There are six core values, each one guiding us throughout all
our activities.
– –We are customer driven– –We operate with integrity– –We value teamwork– –We commit– –We strive for excellence– –We lead innovation
We are customer driven
We succeed by exceeding our customer expectations 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 commit
We set our goals high because we know we can reach them.
We honor these goals as promises to our customers, ourshareholders and ourselves. Our continued success depends
on keeping our promises and taking responsibility for all our
actions. Success is measured by the results we produce incustomer 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 learningwith 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.

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 coworkers, customers, suppliers, partners and the investor community are based on openness andfairness.
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 are treatedfairly and with respect, where all employees have the opportunity to expand their skill, and accomplishments are recognized. Teamwork is more than just working together, it isbringing out the best of everyone's strengths.

LEM | Annual Report 2016/17

15

Corporate Governance Report
The following information complies with the Corporate
Governance Directive of the SIX Swiss Exchange (SIX)
and the disclosure rules of the Swiss Code of Obligations. In order to enhance the clarity of this chapter, reference is made to other parts of the Annual Report andour website (www.lem.com). Key elements are containedin the Articles of Incorporation.

LEM Group is structured into the Industry and the Automotive segments. Appropriate segment reporting pursuant to
IFRS is contained in note 3 to the consolidated financial statements. All companies in LEM Group are listed under "Scopeof consolidation" in note 24 of the consolidated financial
statements, with their respective company names, registeredoffices, share capitals and the relevant percentages of shares
held. There are no other listed companies in the scope of
consolidation.

1 	 Group structure and shareholders
Group structure
LEM Holding SA is domiciled at Avenue Beauregard 1,
CH-1700 Fribourg. LEM's registered shares are listed on theinternational reporting standard of the SIX Swiss Exchange(LEHN, security no. 2 242 762; ISIN 0022427626). On 31 March
2017, the market capitalization was CHF 1'065 million.

In number of shares / percent of shareholding

Significant shareholders
The following shareholders held 3 % or more of the sharecapital and voting rights:

31.3.2017
SharesIn %31.3.2016
SharesIn %Werner O. Weber and Ueli Wampfler, in Zollikon/Wollerau,
Switzerland, through WEMACO Invest AG and Swisa Holding AG,
in Zug/Cham, Switzerland

548'78648.1 %

527'485

46.3 %

Ruth Wertheimer, in Kfar Shmaryahu, Israel,through 7-Industries Holding B.V., in Amsterdam, Netherlands

141'58112.4 %

141'58112.4 %

J. Safra Sarasin Investmentfonds AG, in Basel,
Switzerland

36'0003.2 %42'999

3.8 %

< 3%

57'3945.0 %36.3 %
100.0 %

370'541
1'140'000

32.5 %
100.0 %

Montanaro Asset Management Ltd, in London,
United Kingdom 1
Total shareholders < 3 %Total

413'633
1'140'000

1 Montanaro Asset Management Ltd indicated on 9 February 2017 that it had crossed the 3 % threshold in the downward direction with respect to the capital and voting rights.

The notifications which have been sent to the Company andthe disclosure office of the SIX Swiss Exchange AG during thefinancial year pursuant to article 120 of the Federal Act on
Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading may be viewed via the searchfunction on https://www.six-exchange-regulation.com/en/
home/publications/significant-shareholders.html/.

Shareholdings of nonexecutive Directors

Andreas Hürlimann
Ilan Cohen
Norbert Hess
Ueli Wampfler
Ulrich Jakob Looser
Total

31.3.2017
Number ofshares held

31.3.2016
Number ofshares held

1'001
300
0
72'500073'801960
170
068'0000
69'130

The Board of Directors has annulled on 3 November 2016
the requirement for nonexecutive Directors to acquire shareson the market within the period of three years after joining
the Board of Directors with a value of approximately three
annual fixed compensations.

16

Annual Report 2016/17 | LEM

3 	 The Board of Directors

Shareholdings of Executive Management

François Gabella, CEO
Andrea Borla, CFO
Frank Rehfeld, SVP Industry
Rainer Bos, SVP Automotive
Total

31.3.2017
Number ofshares held

31.3.2016
Number ofshares held

600
0
0
0
600

600
0
0
0
600

Trading LEM shares for both Board of Directors and Executive Management has to respect LEM's disclosure, insidertrading policy as well as all applicable rules and legislation.
Cross-shareholdings
LEM has no cross-shareholdings with other joint-stock companies.

Election, terms of office and cross-involvement
The Board of Directors is comprised of at least three members who are individually elected at the Annual General Meeting for a mandate of one year, which is renewable up to an
age limit of 70. The Board of Directors constitutes itself,
except for the Chairman of the Board of Directors and themembers of the Compensation Committee who are electedby the Annual General Meeting of Shareholders.
At the Annual General Meeting on 30 June 2016, Ilan Cohen,
Norbert Hess, Andreas Hürlimann, Ulrich J. Looser and Ueli
Wampfler were re-elected as members of the Board of Directors. Andreas Hürlimann was re-elected as Chairman of theBoard of Directors. In addition, shareholders elected Norbert
Hess and Ulrich J. Looser to the Compensation Committee.
Norbert Hess chairs the Committee.

2 	 Capital structure
Capital and shares
The nominal value of the share capital of LEM Holding SA is
CHF 570'000, which is divided into 1'140'000 fully paid-up
registered shares with a par value of CHF 0.50 each. There
are no shares with preferred voting rights. All shareholders
are entitled to the same dividends. There are no restrictions
on the transfer of shares. In order to be registered in the shareregister, each shareholder shall declare that he holds theshares for his own account.

All members of the Board of Directors are nonexecutive andhave at no time been part of the executive management of
LEM.
Servotronix Motion Control Ltd, a company presided by Ilan
Cohen, has bought transducers for CHF 751 thousand in
2016/17 (CHF 662 thousand in 2015/16), including purchases
done by its subsidiaries and subcontractors, from LEM Groupat market price. No other member of the Board of Directors
has any significant business connection with LEM Group.

On 31 March 2017, LEM Holding SA held 947 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.

The Board of Directors was comprised of the following members as of 31 March 2017:

LEM | Annual Report 2016/17

17

From left to right: Norbert Hess, Andreas Hürlimann, Ilan Cohen, Ueli Wampfler, Ulrich J. Looser

Andreas Hürlimann
Nationality Swiss
Born in 1964

Position Chairman of the Board of Directors, Chairman of the Strategy Committee
Entry 2011
Professional background– – Since 2011, 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 business development, sales and management roles with
Siemens Schweiz AG, ABB Power Generation AG and Oerlikon Aerospace Inc., Zürich, Baden,
Montréal
Other notable activities– – Vontobel Real Estate Investments SICAV, St. Gallen, Chairman of the Board of Directors– – Sobrado Software AG, Cham, Chairman of the Board of Directors– – ElectricFeel AG, Zürich, Member of the Board of Directors– – themissinglink ag, Cham, Member of the Board of Directors
Education– – M. Sc. Electrical Engineering, ETH Zürich, Switzerland– – DAS Finance, University of Zürich, Switzerland
Ilan Cohen

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

Nationality Israeli

Entry 2010
Professional background

Born in 1956

– – Since 2010, President, Servotronix Motion System Ltd.
– – 2 008 – 2009, General Manager, Kollmorgen Industrial & Commercial Engineered Solutions Ltd.
(Danaher Group)– – 1997 – 2008, President and CEO, Kollmorgen Servotronix Ltd.
– – 1987, Founder, Servotronix Ltd.
– – 1983 – 1990, Associate professor, University of Tel Aviv, Israel
Other notable activities– – Board member, Servotronix Motion Control Ltd., Israel– – Chairman of the Board, Negba Houses for Children at Risk in 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

18

Annual Report 2016/17 | LEM

Norbert HessNationality German

Position Member of the Board of Directors, Chairman of the Nomination and Compensation
Committee
Entry 2013

Born in 1960

Professional background– – S ince 2012, Member of the Management Board, Chief Operating Officer (COO),EPCOS AG, Munich, Germany– – 2 005 – 2012, Head of Ceramic Components Division, EPCOS OHG,
Deutschlandsberg, Austria– – 1999 – 2005, Head of Surge Arresters Business Division, EPCOS AG, Berlin, Germany– – 1987 – 1999, business, marketing and R&D roles at Siemens AG, Berlin/Erlangen,Germany
Other notable activities– – None
Education– – Ph.D., Technical University of Berlin, Germany– – M. Sc. Mat. Eng., Technical University of Berlin, Germany
Ulrich J. Looser
Nationality Swiss
Born in 1957

Position Member of the Board of Directors, Member of the Audit and Risk Committee,
Member of the Nomination and Compensation Committee
Entry 2015
Professional background– –S ince 2009, Berg Looser Rauber & Partner (BLR&Partners)– –2
 001 – 2009, Accenture, various positions including Managing Director Austria/Switzerland/
Germany Management Consulting and Chairman Accenture AG (Switzerland)– –1987 – 2001, McKinsey & Company, industry, energy, pharma and public sector practices,
partner election 1993
Other notable activities– –Straumann Holding AG, Member of the Board of Directors– –Kardex AG, Member of the Board of Directors– –Bachofen Holding AG, Chairman of the Board of Directors– –Econis AG, Chairman of the Board of Directors / Co-owner– –Spross Entsorgungs Holding AG, Member of the Board of Directors– –University of Zürich, Member of the University Council– –Economiesuisse, Member of the Board– –University Hospital Balgrist, Member of the Board– –Swiss-American Chamber of Commerce– –Swiss Study Foundation, Head of Finance Committee– –Swiss National Science Foundation, Member of the Executive Committee of the Foundation Council
Education– –M.Sc. Physics, ETH Zurich, Switzerland– –M.A. HSG, University of St. Gallen, Switzerland
Ueli Wampfler
Nationality Swiss
Born in 1950

Position Member of the Board of Directors, Chairman of the Audit and Risk Committee
Entry 2007
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)– –Chairman of the Board of Directors, Arcotempo Holding AG, Cham
– –Vice Chairman of the Board of Directors, Merbag Holding AG, Cham (Merbag Group)– –Member of the Board of Directors, Caspar Finanz AG, Baar (Traco Power Group)– –Member of the Board of Directors, Rebew AG, Zürich
Education– –Lic. oec., University of Zürich, Switzerland– –Certified auditor

LEM | Annual Report 2016/17

19

External mandates
Pursuant to Article 31 of the Articles of Incorporation, members of the Board of Directors may not hold more than ten
additional mandates of which no more than four may be inlisted companies. The following mandates are not subject tothe above limitations: (a) mandates in companies which arecontrolled by LEM or which control LEM; (b) up to five mandates held at the request of LEM or companies controlled by
it; and (c) up to six mandates in associations, charitable organizations, foundations, trusts and employee welfare foundations. Mandates shall mean mandates in the supreme governing body of a legal entity, which is required to be registeredin the commercial register or a corresponding foreign register.
Up to 20 mandates in different legal entities which are underjoint control or same beneficial ownership are deemed one
mandate.
Internal organizational structure
The Board of Directors meets as often as necessary, but six
annual meetings are planned in advance. In the completed
financial year, six full-day meetings were held. The meetings
usually take place at the Company's seat in Fribourg. The
Chairman, after consultation with the CEO and the Chairmenof the committees, determines the agenda for the Board
meetings. The members of the Board of Directors can ask
for additional items to be included on the agenda. They
receive supporting documents beforehand, allowing for acomprehensive preparation of the meeting. As a rule the CEO
and CFO attend the meetings of the Board of Directors without having a right to vote. Depending on the topics, othermembers of Executive Management participate in the meetings in order to respond to specific questions. Decisions canbe taken by the Board of Directors if at least half of the Directors are present, and a simple majority of them is sufficient.
In the event of tie, the Chairman has the casting vote. Minutesof the meetings including decisions taken are prepared by
the CFO and distributed to the members of the Board of
Directors, 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.

20

Annual Report 2016/17 | LEM

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 LEM Group;– –approval of creation/closing of any subsidiary and purchase/sale of any interest in any company or entry into any
merger or joint venture agreement;– –appointment/dismissal of the Executive Management;– –monitoring the ethical and legal behavior of LEM;
– –review of human resources management, including coworker satisfaction and management development andlegal, intellectual property, social and environmental
aspects.
Information and control systems of the Board of
Directors vis-à-vis Executive 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 the Board of Directors;– –the Committees meet at regular intervals and exchangedetailed information with the Executive Management;– –the Board of Directors receives detailed information to eachagenda item one week before the Board meeting;– –each Executive Manager joins at least one but usually multiple Board session in any given year.

Business risk management
In compliance with Swiss law, LEM is using a standardized
procedure to analyze its business risks. LEM's risk management covers all types of risk: financial, operational and strategic – including the external business environment, complianceand 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 consolidated list
with 5 to 10 main hazards is set up. In a second step, eachhazard is assessed by a product of probability and quantified
impact. 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 mitigate the risks. The hazards thereafter are revalued a second time, taking into consideration the mitigation
measures. In step four, the action plan is validated and thereafter monitored on a biannual basis (step five).
Internal control system
In compliance with Swiss law, 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 & Risk
Committee.
Looking forward, the process owners will perform an annual
process review whereby identified weaknesses shall be continuously improved and key risks and controls shall be
updated. Based on the input of the process owners, the CFO
prepares an annual report on the internal control system,
which is presented to and discussed with the Audit & Risk
Committee.

Committees
Three standing committees support the Board of Directors.
They are comprised of two nonexecutive members of theBoard of Directors. They meet whenever necessary but atleast twice a year.
– –The primary objective of the Audit & Risk Committee (ARC)
is to provide the Board of Directors with effective support
in financial matters, in particular the selection and supervision of the external auditor, assessment of the effectiveness, compliance and clarity of the Group financial reporting and the assessment and preparation of the financial
reports to the shareholders. Furthermore, it reviews criticalaccounting 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 ARC
prepares proposals to be decided by the Board of Directors. In the completed financial year, four half-day meetings
were held.
– –The Nomination & Compensation Committee (NCC) deals
with succession, recruitment and compensation of themembers of the Board of Directors and the Executive Management. It ensures and monitors the personnel development plan and adequate succession planning for the middle and top management. It supports the Board of Directors
in establishing and reviewing the compensation strategy
and guidelines and the performance objectives as well asin preparing the proposals to be submitted to the General
Meeting regarding the compensation of the Board of Directors and of the Executive Management. It reviews andupdates the compensation policy for the members of theBoard of Directors and the Executive Management and theperformance-based compensation system for the Executive Management. The NCC prepares proposals to be
decided by the Board of Directors. In the completed financial year, three half-day meetings and six telephone conferences were held.
– –The primary objective of the Strategy Committee (SC) is toassist the Board of Directors in fulfilling its duties withrespect to determining the Company's strategy and theappropriate means to pursue it, including LEM's organizational setup. As strategic work and its successful implementation is based upon coordinated and interlocking
activities between Executive Management and the Boardof Directors, the SC ensures close collaboration with the
CEO and the Executive Management. The SC prepares
proposals to be decided by the Board of Directors. The
Board of Directors may also decide to delegate membersof the SC to assist in steering longer-term strategic initiatives by joining the project steering committee. In the completed financial year, seven half-day meetings and five telephone conferences were held.
LEM | Annual Report 2016/17

21

4 	 Executive Management
The Executive Management was comprised of the following members as of 31 March 2017:

From left to right: Frank Rehfeld, Andrea Borla, François Gabella, Rainer Bos

François Gabella
Nationality Swiss
Born in 1958

Function CEO LEM Group
With LEM since 2010
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, Lausanne, Switzerland– – MBA, IMD, Lausanne, Switzerland
Andrea Borla
Nationality Swiss
Born in 1967

Function CFO LEM Group
With LEM since 2015
Previous companies and positions– – 2008 – 2015, CFO, Schindler France– – 2003 – 2007, Field Operations Manager, Schindler China– – 1999 – 2003, Area Controller, Schindler Asia Pacific– – 1996 – 1999, Head of Group Consolidation, SAirGroup
Education– – Ph.D., M.A. HSG, Finance and Accounting, St.Gallen, Switzerland
Rainer Bos

Function Senior Vice President Automotive

Nationality German

With LEM since 2015

Born in 1962

Previous companies and positions– – 2011 – 2015, General Manager, Amphenol Tuchel Electronics GmbH– – 2001 – 2011, Business Unit Director, Delphi Deutschland GmbH– – 1991 – 1999, Key Account Manager, Continental-Teves KGaA
Education– – Dipl. Eng. Industrial Engineering, TU Darmstadt, Germany
Frank Rehfeld
Nationality German
Born in 1968

Function Senior Vice President Industry
With LEM since 2016
Previous companies and positions– – 2009 – 2015, VP Drives, Brose China Co., Ltd.
– – 2006 – 2009, Managing Director, Hella Shanghai Electronics Co., Ltd.
– – 2004 – 2006, Siemens VDO China, Director Body/Chassis Electronics– – 1996 – 2004, Siemens VDO Germany, Director R&D Body/Chassis Electronics
Education– – Dipl. Eng. Electrical Engineering, Erlangen-Nuremberg, Germany

22

Annual Report 2016/17 | LEM

François Gabella is member of the Swissmem Executive
Committee. Apart from that, none of the members of the
Executive Management have other activities in governing or
supervisory bodies, any official functions or political posts
nor any permanent management functions for important
Swiss and foreign interest groups.
External mandates
Pursuant to Article 31 of the Articles of Incorporation, andsubject to approval by the Board of Directors, members of
the Executive Management may not hold more than three
additional mandates of which no more than one may be inlisted companies. The following mandates are not subject tothe above limitations: (a) mandates in companies which arecontrolled by LEM or which control LEM; (b) up to five mandates held at the request of LEM or companies controlled by
it; and (c), subject to approval by the Board of Directors, up
to three mandates in associations, charitable organizations,foundations, trusts and employee welfare foundations. Mandates shall mean mandates in the supreme governing bodyof a legal entity, which is required to be registered in the commercial register or a corresponding foreign register. Up to 20
mandates in different legal entities, which are under joint control or same beneficial ownership are deemed one mandate.
Management contracts
There are no management contracts with companies or individuals outside LEM Group.

Each shareholder may be represented by the independent
representative or by a third party who need not be a shareholder of LEM Holding SA.
Statutory quorums
The Articles of Incorporation contain no deviation from theapplicable law. In case a second vote is necessary for elections, a relative instead of the absolute majority of the votes
represented is required.
Convocation of the General Meeting of the Shareholders
Registered shareholders are convened to General Meetingsby ordinary mail and by publication in the Swiss Official
Gazette of Commerce at least 20 days prior to the day ofthe meeting.
AgendaAccording to Article 12 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.
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 Annual General Meeting.

7 	 Change of control and defensive measures
5 	 Compensation
Please refer to the section "Compensation Report" following on
page 26.

6 	 Shareholders' participation rights
The rules on shareholders' participation rights are outlinedin the Articles of Incorporation. The rules for the conveningof General 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 theInvestor Relations pages on the website www.lem.com >Investor Relations > Corporate Governance.
Voting rights and representation restrictions andinscription in the share register
There are no limitations on voting rights for shareholders whoare entered into the shareholders' register with voting rights.
Anyone purchasing registered shares is registered by the
Board of Directors in the share register on request as a shareholder with voting rights, provided he expressly declares thatthe shares have been bought and will be held for his own
account.

Opting-out clause
In June 2010, the Annual General Meeting introduced an
opting-out clause according to article 32 of the Federal Act
on Stock Exchanges and Securities Trading (now: article
125 of the Financial Market Infrastructure Act, FMIA) in the
Articles of Incorporation of the Company. This clausereleases any shareholder from the obligation to submit apublic takeover offer to all shareholders if his participation
in LEM exceeds 331/ 3 % of the voting rights. The Swiss
Takeover Board has decided on 22 September 2011 thata passing of 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. No member of the Executive Management will receive additional severance payments if dismissedin the case of a change of control of the Company.

LEM | Annual Report 2016/17

23

8 	 Auditors

9 	 Information policy

The duration of the auditors' mandate is one year.
Ernst & Young has been auditing LEM since the financial year
2005/06, with Arthur Bergmann bearing the responsibility
for the audit since 2013/14. As required by law, the auditorin-charge is changed every seven years. Ernst & Young
audits the Group's consolidated financial statements as wellas the majority of Group companies in Switzerland andabroad. The audit fees and fees for additional services are
as follows:

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 made publicly available on its website http://www.
lem.com/hq/en/content/view/227/174/ and may be obtainedin print from the Company's headquarters. Once a year, LEM
holds a presentation for the media, investors and financial
analysts. Internal processes assure that price-sensitive facts
are published without delay in accordance with the ad hoc
publicity rules of the SIX Swiss Exchange.

Type of service
In CHF thousands

Audit fees
Additional fees
Total

2016/172015/16

350
0
350

410
0
410

Evaluation and control of the auditors is done by the ARC
which makes recommendations to the Board of Directors. In
particular, the ARC evaluates the performance, the fees andthe independence of the auditors.
The auditors report on the results of their audits both orally
and in writing. Financial statements as well as management
letters are discussed in the ARC in the presence of the external auditors.
During 2016/17 Ernst & Young attended three regular ARC
meetings.

24

Annual Report 2016/17 | LEM

At www.lem.com, detailed information is available, e.g., theArticles of Incorporation, interim and annual reports, investor
presentations, press releases as well as the financial calendar.
Contact for investors and media: Andrea Borla, CFO, Chemindes Aulx 8, CH-1228 Plan-les-Ouates, or send an e-mail toinvestor@lem.com (phone: +41 22 706 12 50).

5

1
4
B

3
A
2

Hybrid solar inverter with battery
storage inside
Home solar-energy storage is coming into the mainstream. Hybrid solar
inverters store solar energy when thesun is shining in order to use it in theevening, when a household needs
the electricity for cooking and light.
Every home that installs a battery
storage system will need an inverterto convert the stored DC electricity
into an appliance-friendly AC electricity.
In the context of residential solar and storage systems, ahybrid inverter is an inverter which can simultaneously
manage inputs from both solar panels and a battery bank,charging batteries with either solar panels or the electricity
grid, depending on which is more economical or preferred.
LEM's HO transducers control the charge/discharge ofcurrent into the battery and the ATO measures the total
household consumption allowing to decide when to
charge or discharge the battery. The HO offers best-inclass accuracy for the high currents flowing into the battery. The ATO is an attachable current transducer. It issimple to install and provides 1 % accuracy.

A

HO

B

ATO

1

Photovoltaic panel
Battery
Hybrid inverter
Meter
Grid

2
3
4
5

LEM | Annual Report 2016/17

25

Compensation Report
The future of LEM depends on our ability to attract,develop and retain talented people. Among the manymeasures we use to achieve this goal are competitive
remuneration policies. Our compensation policies aredesigned to align the Executive Management's and theBoard of Directors' interest with shareholders' interest.

	Directors and the Executive Management (EM) (Article 27),
the supplementary amount for new members of the Executive Management (Article 28), the general compensation
principles (Article 29) as well as provisions regarding theagreements with members of the Board of Directors andthe Executive Management (Art. 30). www.lem.com> Investor Relations > Corporate Governance.

In brief:– –Core principles
	LEM's compensation policies are designed to reward
results and performance as well as to create long-termvalue for shareholders. The compensation policies arereviewed on an annual basis.

	The Compensation Report is based on section 5 of theannex to the Corporate Governance Directive issued by SIX
Swiss Exchange and Art. 13 to 17 of the Ordinance Against
Excessive Compensation in Listed Stock Companies(OaEC).

	The Articles of Association of LEM contain provisions
regarding the approval of compensation of the Board of	The compensation authorities are summarized in the following table:

Beneficiary

Compensation Element

ProposalApproval

BoD and Executive
Management

Compensation principles

NCC

BoD

BoD

Aggregate maximum amount
fixed compensation

BoD based on NCC proposal

Annual General Meeting(prospective approval)

BoD

Individual compensation

NCC

BoD

Executive Management

Aggregate maximum amount
fixed compensation

BoD based on NCC proposal

Annual General Meeting(prospective approval)

Executive Management

Aggregate amount short-term
incentive

BoD based on NCC proposal

Annual General Meeting(retrospective approval)

Executive Management

Aggregate maximum amountlong-term incentive

BoD based on NCC proposal

Annual General Meeting(prospective approval)

Executive Management

Individual compensation

NCC based on proposal from
CEO

BoD

CEO

Individual compensation

Chairman of the BoD

BoD– –C ompensation of the Board of Directors
	The compensation of the Board of Directors consists exclusively of a fixed fee paid in cash. There is no performancebased variable compensation. The compensation for the
Chairman and the members of the Board of Directors
depends on the amount of responsibility of each member
and the work related to the Board of Directors membershipsuch as Committee activity.
– –C ompensation of the Executive Management
	In order to encourage and reward results that contribute to
the sustainable success of LEM, the total compensation of
the Executive Management consists of three elements:base salary, variable compensation and nonwage compensation. The target-setting process for the variable compensation is carried out on an annual basis and includes quantitative and qualitative performance criteria, including
financial results of LEM.

26

Annual Report 2016/17 | LEM

1 	 Board of Directors
1.1 	 General principles for compensation ofnonexecutive Directors
The compensation for the Board of Directors is approved by
the Annual General Meeting upon proposal by the Board of
Directors based upon recommendation by the NCC. The
remuneration of the Board of Directors consists of a fixedcash payment and is reviewed on an annual basis. The remuneration compensates for the personal responsibility andexposure as a nonexecutive member of the Board of Directors and the work related to the Board of Directors membership. There is neither a variable compensation nor any participation in an equity-based compensation plan.

1.2 	 Remuneration of nonexecutive Directors
The Board of Directors adopted a remuneration scheme witha fixed fee paid in cash in the amount of CHF 220'000 for the
Chairman, CHF 130'000 for the Vice Chairman and
CHF 80'000 for each member. Committee activity will becompensated with CHF 40'000 for the Committee's Chairman and with CHF 20'000 for each member. As long as noVice Chairman is appointed, the Chairman receives a supplementary amount of CHF 30'000 for the additional workload.

The tables below show the compensation per Board memberin the financial years 2015/16 and 2016/17. The shareholders
approved at the Annual General Meeting on June 30, 2016,
a maximum compensation amount for the term of office fromthe ordinary General Meeting 2016 until the ordinary General
Meeting 2017 of up to CHF 900'000. The actual costs for theCompany are slightly lower at CHF 898'000.

2016/17
Annual fees(A)

In CHF thousands

Andreas Hürlimann 1, 2, 7
Ilan Cohen 8
Norbert Hess 5
Ulrich Jakob Looser 4, 6
Ueli Wampfler 3
Total

Taxes, social-security
charges and similar contributions paid by the Company a)
(B)

290
100
120
120
120
750

Total costs for the Company(A) + (B)

26
100
11
11
148

316
200
120
131
131
898

Annual fees
(A)

Taxes, social-security
charges and similar contributions paid by the Company(B)

Total costs for the Company(A) + (B)

290
120
120
100
120
750

26
11
–
9
11
56

316
131
120
109
131
806

a) These amounts also include one-time, nonrecurring contributions to tax and social-security authorities.

2015/16

In CHF thousands

Andreas Hürlimann1, 2, 6, 8
Ilan Cohen 7
Norbert Hess 5
Ulrich Jakob Looser 4
Ueli Wampfler 3
Total
Chairman of the Board
Vice Chairman of the Board
3
Chairman of the Audit & Risk Committee
4
Member of the Audit & Risk Committee

5 hairman of the Nomination &C
Compensation Committee
6M ember of the Nomination &Compensation Committee
7
Chairman of the Strategy Committee
8
Member of the Strategy Committee

2 	 Executive Managementof the Board of Directors is based on the recommendationfrom the NCC. The remuneration of the Executive Management is reviewed on an annual basis.

122.1 	 General principles for compensation of
Executive Management
Remuneration for the Executive Management is approvedby the shareholders at the Annual General Meeting uponrecommendation by the Board of Directors. The proposal

The total compensation for the Executive Management iscomposed of the following elements:

Compensation element

Instrument

PurposeDrivers

Range and Cap

Annual basesalaryMonthly cash
payments

Pay for the function

Scope and responsibilities
Profile and competencies

N/A

Variable short-term
incentive

Annual cash
payment

Pay for annual
performance

Business and individual
performance throughout the
fiscal year

0 %–150 % of target
amountVariable long-term
incentive

Annual cash
payment

Participation in sustainable
company success Alignment
with shareholder interests

Achieved value creation
over three consecutive
business years

0 %–200 % of target
amountNonwagecompensation

Pensioncontributions

Protect against risks plus
retirement and dependents'
coverage

Local legislation and market
practice

N/A

LEM | Annual Report 2016/17

27

Total compensation is in line with the market for comparable
industrial companies considering the various remuneration levels for different functions within LEM Group. The compensation
mix between base salary, variable compensation and nonwage
compensation shall reflect sectorial and functional market practice. Benchmarking is carried out periodically.
2.1.1 Base salary of Executive Management
Base salaries are paid monthly as fixed cash amounts.
2.1.2 Variable Compensation of Executive Management
The target-setting process for the Leadership for Results(L4R) plan is part of the LEM performance management andis carried out on an annual basis by the NCC. All variable
compensation is paid in cash and after approval by the shareholders. Objectives and performance evaluations are prepared by the Chairman of the Board of Directors for the CEO
and by the NCC for the other members of the Executive Management based on personal performance review.
Short-term variable compensation related to the individual's function and responsibility and obtained results
The individual target amount for the short-term incentive planis communicated to the member of the Executive Management at the beginning of the financial year together with theobjectives. The target amount and the objectives are basedon the role and impact of the Executive Management as wellas annual Company priorities. Objectives are linked to bottom line indicators, quantitative or qualitative targets. At theend of the year, the performance is evaluated.
The number of objectives is large enough to allow the members of the Executive Management to reach a fair level ofshort-term variable compensation rewarding them for the
results achieved even under changed business conditions.
Since the degree of achievement of set objectives has to beevaluated at the end of the period, a clear understanding of
the metrics to be applied is established at the time of target
setting and kept constant for the whole period. For eachobjective, the curve between minimum and maximum bonus
level is defined. Ambitious but achievable objectives shall be
set as targets, at which 100 % of the respective target amountshall be attributed.
For the Executive Management, the minimum payout of theshort-term incentive is 0 % of the target amount and the maximum payout 150 %.

28

Annual Report 2016/17 | LEM

The short-term incentive payout is presented for retrospective
approval to the shareholders along with the Annual Report
and the financial statements of the same business year at theAnnual General Meeting 2017 prior to being paid out.
Long-term variable compensation related to the sustainable financial performance of LEM GroupThe long-term incentive is defined as an annual target
amount and is based on the performance of LEM evaluated over a period of three consecutive years (2014/15– 2016/17). The performance criterion is the cumulated
Economic Value Added (EVA) over these three financial
years. The definition of the EVA objective takes place atthe beginning of year one and the evaluation of the performance at the end of year three. Once the forward-looking EVA objective is defined, the EVA objective remains
unchanged over the period of three years.
For the Executive Management, the minimum payout of
the long-term incentive is 0 % of the target amount andthe maximum payout 200 %.
For the long-term incentive cycle ending 2016/17, the maximum amount of the long-term incentive approved prospectively by the shareholders at the Annual General
Meeting in 2014 is of CHF 927'000 for payout in 2017.
2.1.3 Nonwage compensation of Executive Management
For the Executive Management, nonwage compensation
includes pension plans (retirement benefits) only. LEM has
a policy to limit nonwage compensation to what may berequired for the jobholder as a work instrument to fulfill his/her function according to generally accepted local customs.
Executive Management benefits from LEM's Swiss pension
plan, considered a defined contribution plan under Swisslaw that provides retirement benefits and risk insurance fordeath and disability. Under IFRS, this plan is considered asa defined benefit plan. The insured base salary, follows Swiss
professional pension regulations and without limitation on
the amount. The pension fund is funded by contributions
from the Company and the insured employees.

2.2 	 Remuneration of Executive Management
2016/17

In CHF thousands

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

Base salary

Short-term
incentive

Long-term
incentive

Company's
contribution topension fundTotal­compen­sation

Company's
contribution
to socialsecurity
charges

499
920
0
1'419

250
325
0
575

147
182
75
404

64
93
0
157

960
1'520
75
2'555

81
128
7
216

2015/16

In CHF thousands

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

Base salary

Short-term
incentive

Long-term
incentive

Company's
contribution topension fundTotal­compen­sation

Company's
contribution
to socialsecurity
charges

480
420
703
1'603

304
242
362
907

226
0
185
411

61
41
70
172

1'071
703
1'320
3'093

82
55
104
241

The amounts are shown as follows:– –Base salary: as paid out in the reporting period– –Short-term incentive 2016/17: as proposed to the Annual
General Meeting in June 2017 for payout in July 2017
– –Long-term incentive: as accrued for or paid out during thereporting period– –Pension fund contributions: as accrued for or paid out during the reporting period– –Social charges contributions: as accrued for or paid out
during the reporting period– –The compensation of former members of the Executive
Management staying within the Company for their work
after leaving the Executive Management are not taken into
account in the numbers above, whereas the part of thelong-term incentive paid out in 2016/17 corresponding totheir activity while being in the Executive Management istaken into account.
Amounts approved by previous Annual General Meetings
related to the period reported above:– –Maximum amount base salary (valid from 1 October 2016
to 30 September 2017) CHF 1'727'000– –Maximum amount long-term incentive 2014–15 for payment
in 2017: CHF 927'000– –Maximum amount base salary (valid from 1 October 2015
to 30 September 2016) CHF 2'800'000– –Short-term incentive amount for payment 2015/16:
CHF 982'000– –Pension fund contribution and company contribution tosocial security charges as paid out or accrued for in thereporting period are included in the above amounts

2.3 	 Compensation of former members andrelated parties
No compensation has been paid in 2016/17 to former members. In the financial year 2015/16 the former members of the
Executive Management who left the Company received after
their departure from the Executive Management payments inthe amount of CHF 651' 000, including compensation for their
non-compete obligation.
No compensation has been paid to related parties in either
financial year.

3 	 Loans to current and former membersof the Board of Directors and Executive
Management and related parties
Our Articles of Association do not provide the basis to grantloans to current or former members of the Board of Directors,
the Executive Management, or to related parties. Therefore,
no loans have been granted in the financial years 2016/17
and 2015/16 or in any previous year.

LEM | Annual Report 2016/17

29

Auditor's Report
Report of the statutory auditor on the Compensation Report
We have audited the remuneration report of LEM Holding SA for the year ended 31 March 2017. The audit
was limited to the information according to articles 14 – 16 of the Ordinance against Excessive Compensationin Stock Exchange Listed Companies (Ordinance) contained in the note 1.2 on page 27, and on notes 2.2 to
2.3 on page 29 of the Compensation Report.
Board of Directors' responsibility
The Board of Directors is responsible for the preparation and overall fair presentation of the Compensation
Report in accordance with Swiss law and the Ordinance. The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages.
Auditor's responsibility
Our responsibility is to express an opinion on the Compensation Report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether the Compensation Report complies with Swiss law and articles 14 – 16 of the Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration report with regard to compensation, loans and credits in accordance with articles 14 – 16 of the Ordinance. The procedures selected depend on the auditor's judgment, including the assessment of the risks
of material misstatements in the remuneration report, whether due to fraud or error. This audit also includes
evaluating the reasonableness of the methods applied to value components of remuneration, as well as
assessing the overall presentation of the Compensation Report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
OpinionIn our opinion, the Compensation Report for the year ended 31 March 2017 of LEM Holding SA complies with
Swiss law and articles 14 – 16 of the Ordinance.

To the General Meeting of LEM Holding SA, Fribourg
Lancy, 22 May 2017
Ernst & Young Ltd

Arthur Bergmann
Licensed audit expert(Auditor in charge)

30

Annual Report 2016/17 | LEM

Karine Badertscher Chamoso
Licensed audit expert

LEM Group
Consolidated Financial Statements

Consolidated Statement of
Financial Position 33
Consolidated Income
Statement 34
Consolidated Statement ofComprehensive Income 35
Consolidated Statement of Changes
in Equity 35
Consolidated Cash Flow
Statement 36
Notes to the Consolidated
Financial Statements 37
Auditor's Report 56

LEM | Annual Report 2016/17

31

32

Annual Report 2016/17 | LEM

Consolidated Statement of Financial
Position
AssetsIn CHF thousands

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

Notes

31.3.201731.3.201612'80958'47930'628723
1'905
104'543

13'62955'89627'796
1'694
1'739
100'754

5'028
31'381
7'045
985
44'440

5'636
25'1797'630
979
39'424148'983

140'178

Notes

31.3.201731.3.2016924'59822'043
2'824
1'061

4
5
6

17
7
8

Total assets

Liabilities and equity
In CHF thousands

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

11

578
51'10621'301
18'230
3'142
1'552
24
593
44'843

10
17
11

1'127
1'881
4'389
7'397

1'965
2'054
5'422
9'442

58'50354'284

570
(906)
9'467
81'35090'480

570
(502)
9'907
75'91985'894148'983

140'178

10

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

12
12
12

LEM | Annual Report 2016/17

33

Consolidated Income Statement
April to MarchNotes

2016/172015/16

Sales
Cost of goods sold
Gross margin

264'519(140'959)
123'560

261'454(141'061)
120'393

Sales expense
Administration expense
Research & development expense
Other expense
Other income
Operating profit(26'700)(25'246)(16'039)(0)182
55'758(25'855)(27'323)(14'602)(6)300
52'908

(228)
80
(642)

(361)
116
987

54'96853'650(10'403)(10'163)

44'56643'487Notes

2016/172015/16

18

39.11

38.18

In CHF thousands

Financial expense
Financial income
Exchange effect

14
15
16

Profit before taxes
Income taxes

17

Net profit for the year

Earnings per share, in CHF
Basic & diluted earnings per share

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

34

Annual Report 2016/17 | LEM

Consolidated Statement of­Comprehensive Income
April to March
In CHF thousands

Notes

Net profit for the period recognized in the income statement

2016/172015/16

44'56643'487

(845)
(845)

(2'864)(2'864)

1'881
(390)
(302)
1'189

(952)
190
(762)

345

(3'625)44'91039'862Other comprehensive income to be reclassified to profit andloss in subsequent periods
Currency translation difference
Total other comprehensive income to be reclassified to
profit and loss in subsequent periods
Other comprehensive income not to be reclassified to
profit and loss in subsequent periods
Remeasurement gains/(losses) on defined benefit plans, in Switzerland
Remeasurement gains/(losses) on defined benefit plans, in Germany
Income tax
Total other comprehensive income not to be reclassified to
profit and loss in subsequent periods

20
20
17

Other comprehensive income/(loss) for the period, net of tax
Total comprehensive income for the period

Consolidated Statement of Changes in
EquityAttributable to shareholders
In CHF thousands

1 April 2015
Net profit for the year
Other comprehensive income/(loss)
Total comprehensive income
Dividends paid
Movement in treasury shares
31 March 2016 / 1 April 2016
Net profit for the year
Other comprehensive income/(loss)
Total comprehensive income
Dividends paid
Movement in treasury shares
31 March 2017

Notes

Share
­capital

Treasuryshares570(283)

Capital Translation
reserve
reserve

12'226326(2'864)(2'864)

12
12
570

(219)
(502)

219
12'445(2'538)
(845)
(845)

12
12
570

(405)
(906)

405
12'849(3'383)Retainedearnings

Total
equity79'10591'94343'48743'487(762)(3'625)42'726 39'862(45'547) (45'547)
(365)
(365)
75'919 85'894
44'566 44'566
1'189
345
45'75544'910(39'879) (39'879)
(444)
(444)
81'35090'480

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

LEM | Annual Report 2016/17

35

Consolidated Cash Flow Statement
April to March
In CHF thousands

Notes

2016/172015/16

54'96853'650

112
(76)
6'856
0
349
(790)
436
35
(147)
(9'585)52'159(2'615)(2'645)5'926
667
52'827

230
436
7'050
746
767
1'334
1'308
74
(304)
(19'483)
45'809(459)(6'371)
6'593(237)
45'5737
8(12'552)(622)(27)(13'201)(6'881)(439)
717(6'603)

12
12

(444)
(39'879)(25)(40'349)(365)(45'547)25(45'887)(723)(6'917)

13'629(97)
12'80920'920(374)
13'629Cash flow from operating activities
Profit before taxes
Adjustment for noncash items and taxes paid
– – Net financial result– – Derivative financial instruments revaluation– – Depreciation and amortization– – Impairment loss
– – Gain/loss on disposal of fixed assets– – Increase (+)/decrease (–) of provisions and allowances– – Movement in pension
Interest received
Interest paid
Taxes paid
Cash flow before changes in net working capital
Change in inventory
Change in accounts receivable and other current assets
Change in payables and other current liabilities
Cash flow from changes in net working capital
Cash flow from operating activities
Cash flow from investing activities
Investment in fixed assets
Investment in intangible assets
Increase (–)/decrease (+) in other assets
Cash flow from investing activities
Cash flow from financing activities
Treasury shares acquired (–)/divested (+)
Dividends paid to the shareholders of LEM Holding SA
Increase (+)/decrease (–) in financial liabilities
Cash flow from financing activities
Change in cash and cash equivalents
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

36

Annual Report 2016/17 | LEM

Notes to the Consolidated Financial
Statements
1 	 General information

2 	 Significant accounting principles

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 indrives & welding, renewable energies and power supplies,
traction, high-precision, conventional and green cars businesses. The Group has operations in thirteen countries andemploys 1'453 people per 31 March 2017. The parent company of LEM Group is LEM Holding SA (the Company), which
is a limited company incorporated in Switzerland.
The financial year ends on 31 March (the year). The registeredoffice is at Avenue Beauregard 1, CH-1700 Fribourg. The
Company has been listed on the SIX Swiss Exchange since
1986.
The Board of Directors approved the consolidated financial
statements on 16 May 2017, to be submitted for approval by
the ordinary general meeting on 29 June 2017.

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 like derivatives
are recorded at fair value.
The financial information is presented in thousands of CHF.
The totals are calculated with the original unit amounts, which
could lead to rounding differences. These differences in thousands of units are not changed in order to keep the accuracyof the original data.
2.2 	 Adoption of new and revised International
Financial Reporting Standards and interpretations
New standards in 2016/17
In 2016/17, LEM Group introduced the following revised
standards and interpretations:Standard or i­nterpretation

Title

Effective date

ImpactIFRS 10, IFRS
12 and IAS 28

Investment Entities: Applying the Consolidation Exception
Amendments to IFRS 10, IFRS 12 and IAS 28

1 January 2016

None

IFRS 11

Accounting for Acquisitions of Interests in Joint Operations
Amendments to IFRS 11

1 January 2016

None

IFRS 14
IAS 1
IAS 16 and IAS 38

Regulatory Deferral Accounts
Disclosure Initiative Amendments to IAS 1
Clarification of Acceptable Methods of Depreciation andAmortization

1 January 2016
1 January 2016
1 January 2016

None
None
None

IAS 16 and IAS 41
IAS 27

Agriculture Bearer Plants Amendments to IAS 16 and IAS 41
Equity Method in Separate Financial Statements
Amendments to IAS 27

1 January 2016
1 January 2016

None
None

Amendments

Annual improvements to IFRS 2012–2014

1 January 2016

None

LEM | Annual Report 2016/17

37

Future standards
LEM Group will adopt the following revised standards andinterpretations in the future:
Standard or i­nterpretation Title

Effective date

IAS 7

Disclosure Initiative
Amendments to IAS 7

1 January 2017

IAS 12

Recognition of Deferred Tax Assets for Unrealized Losses
Amendments to IAS 12

1 January 2017

IFRS 2

Classification and Measurement of Shared-Based Payment Transactions
Amendment to IFRS 2

1 January 2018

IFRS 4

Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
Amendment to IFRS 4

1 January 2018

IFRS 9IFRS 15

Financial Instruments
Revenue from Contracts with Customers and its
Amendments to IFRS 15

1 January 2018
1 January 2018

IAS 40Transfers of Investments Property
Amendments to IAS 40

1 January 2018

IFRIC 22
Amendments
IFRS 16IFRS 10 and
IAS 28Foreign Currency Transactions and Advance Consideration
Annual improvements to IFRS 2014–2016
LeasesSale or Contribution of Assets between an Investor and its Associateor Joint Venture, Amendments to IFRS 10 and IAS 28

1 January 2018
1 January 2018
1 January 2019
Postponed** In December 2015, the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting.

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 on thecapital, financial position, income or cash flow situation ofLEM resulting from the application of above standards andinterpretations has not been evaluated but is expected tohave no material effects, with the exception of IFRS 15 and
IFRS 16 for which the impact is currently under evaluation.
2.3 	 Summary of critical accounting estimatesand judgments
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 thedate of the financial statements. These estimates are basedon management's best knowledge of current events andactions 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.

38

Annual Report 2016/17 | LEM

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 tested
for impairment if there is a triggering event indicating a
potential impairment. These calculations require the use of
estimates in particular to the expected growth of sales, discount rates and development of raw material prices.
Provisions
Provisions are recognized only if the specific criteria under
IFRS are met. Provisions represent presumed obligations
arising from past events and are recognized only if theiramount can be estimated reliably. Nevertheless, provisions
are based on assumptions.
Income and other taxes
The Group operates in multiple jurisdictions with complex
legal and tax regulatory environments. Some of these positions are inherently uncertain and include those relating totransfer pricing matters and the interpretation of income tax
laws applied to complex transactions. The Group periodicallyreassesses its tax positions. Changes to the financial statement recognition, measurement, and disclosure of tax positions are based on management's best judgment given any
changes in the facts, circumstances, information available
and applicable tax laws.

Employee benefits
The standard requires that certain assumptions are madein order to determine the amount to be recorded for retirement benefit obligations and pension plan assets, in particular for defined benefit plans. These are mainly actuarial
assumptions such as expected salary increase, employee
turnover and discount rates. Substantial changes in theassumed development of any of these variables may significantly change LEM Group's retirement benefit obligationand 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 be available to allow all or part of the asset to be recovered.
2.4 	 Basis of consolidation
The consolidated financial statements are comprised of LEM
Holding SA and of its subsidiaries.
Subsidiaries
Subsidiaries are those entities over whose the Group has
the control. Control is when the Group is exposed, or has
rights, to variable returns from its involvement with subsidiary and has the ability to affect those returns through its
power over the subsidiary to direct the relevant activities.
Business combinations are accounted for using the acquisition method. Companies that are acquired or sold during
the financial year are included in the Group financial statements up to the date of transfer of control. The costs ofpurchasing a company are determined as the sum of thefair value of the assets that are to be paid to the seller andthe obligations that are entered into, or acquired, on thedate of purchase. Identifiable acquired assets, liabilities andcontingent liabilities are recognized at their fair value as ofthe 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 thefair value of the identifiable net assets that exceeds the purchase price is shown as gain on bargain purchase on theincome statement.
Currency

BGN
CNY
DKK
EUR
GBP
JPY
RUB
USD

Intragroup assets and liabilities as well as income andexpenses are set off against each other.
Also intragroup unrealized 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 2017 and
31 March 2016.
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 isthe currency of the primary economic environment in which
they operate.
Foreign currency translation
All assets and liabilities in the balance sheets of subsidiaries
that are denominated in the respective functional currencies
are translated into Swiss francs at the year-end exchange
rate. Items in the income statement and cash flow statement
are translated at the average exchange rate for the year. The
resulting translation differences are recognized in other comprehensive income. When a company is sold, the cumulativetranslation differences recognized in other comprehensive
income are transferred to the income statement.
The following table summarizes the principal exchange rates
that have been used in the translation process.

Income statement of
2016/17

Income statement of
2015/16

Balance sheet
31.3.2017

Balance sheet
31.3.2016

Average rate in CHF

Average rate in CHF

Year-end rate in CHF

Year-end rate in CHF

0.553
0.147
0.146
1.083
1.285
0.0091
0.016
0.989

0.549
0.154
0.144
1.073
1.466
0.0081
0.015
0.972

0.545
0.145
0.144
1.069
1.250
0.0090
0.018
1.001

0.555
0.149
0.147
1.093
1.383
0.00860.014
0.963

LEM | Annual Report 2016/17

39

Foreign currency transactions
Foreign currency transactions are translated at the market
rate prevailing at that time. The monetary assets and liabilities
are translated at the year-end rates while nonmonetary assets
are translated at historical rates. Gains and losses arisingfrom the transactions as well as from the translation of monetary assets and liabilities in foreign currencies are recorded
as income or expenses in the income statement (except fromtranslation differences arising from a monetary item that
forms part of the Group's net investment in a foreign operation, which are included in shareholders' equity).
2.6 	 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, cash atbank and cash at postal accounts and bank deposits with an
original maturity of three months or less from the date ofacquisition, that are readily convertible to known amounts ofcash.
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. Allowances are established when:– –there is an objective indication that the Group will not beable to sell the goods in due time;– –the goods are damaged, in excess or obsolete;– –the net realizable value is below cost.
2.8 	 Property, plant and equipment
Property, plant and equipment is stated at cost of acquisition
or construction, less depreciation and any impairment.
Depreciation is calculated on a linear basis on the following
estimated useful life:Land
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 property, plant and equipment is capitalized 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.

40

Annual Report 2016/17 | LEM

2.9 	 Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group's share of the net assets of
the acquired subsidiary at the date of acquisition. Goodwill
on acquisitions is reported in the balance sheet as an intangible asset and carried at cost less accumulated impairment
losses. Gains and losses on the disposal of an entity include
the carrying amount of goodwill relating to the entity sold.
Research & development
Research costs are written off as incurred. An intangible
asset arising from development should be recognized if, andonly if the Group can demonstrate the following:– –the technical feasibility of completing the intangible asset;– –Group intention to complete the intangible asset;– –ability to use or sell the intangible asset, the intangible asset
will generate probable future economic benefits;– –the availability of adequate technical, financial and otherresources to complete the development; and– –ability to measure the expenditure attributable to the intangible asset during its development reliably.
Such development costs are capitalized and written off overthe life of the product or process.
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 assetsand ­intangible assets
Assets that are subject to depreciation and amortization are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not berecoverable. An impairment loss is recognized for the amountby which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of anasset's fair value less cost to sell and value in use.
For the purpose of assessing impairment, assets are groupedat the lowest levels for which there are separately identifiable
cash flows (cash-generating units).
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 the recoverable amount of the cash-generating unit to which the goodwill relates. Impairment losses relating to goodwill cannot bereversed in future years.

2.11 	Financial assets
Financial assets comprise cash, receivables, accrued income,marketable securities and derivative financial instruments.
Initial recognition and measurement
At initial recognition, financial assets are designated into two
categories, financial assets at fair value through profit andloss, and loans and receivables.
Financial assets are initially recognized at fair value plus, inthe case of a financial asset not at fair value through profit
and loss, directly attributable transaction costs.
Subsequent measurement
The subsequent measurement of financial assets depends
on their classification:– –financial assets at fair value through profit and loss (refer
to note 2.12);– –loans and receivables which are non-derivative financial
assets with fixed or determinable payments that are notquoted in an active market. Loans and receivables are subsequently measured at amortized cost using the effective
interest rate method, less impairment.
Accounts receivable are carried at original invoice 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 is anobjective indication that the Group will not be able to collect
the amounts due. Allowances for doubtful accounts are written off when identified irrecoverable.
Other receivables are measured at amortized cost. The Groupassesses at each reporting date whether there is any objective evidence that an asset or group of assets is impaired.
Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant difficulties, default or delinquency in interest or principal payments.
The amount of the loss is measured as the difference between
the assets' carrying amount and the present value of estimated future cash flows.
2.12 	Derivative financial instruments
The Group uses derivative financial instruments to hedge
foreign exchange risks of forecasted transactions. Derivative financial instruments can comprise forward exchange
contracts and option-based structures.
Derivative financial instruments are initially measured at fairvalue and subsequently at fair value through profit and loss.
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 noncurrent assets or other noncurrent liabilities.
2.13 	Financial liabilities
Financial liabilities comprise bank loans, payables, accrued
expenses and derivative financial instruments at the end of
the period.
All financial liabilities are recognized initially at fair value and,in the case of loans and payables, net of directly attributabletransaction costs.
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 on a straight line basis over the lease term.
2.15 	Employee benefits
The Swiss subsidiaries provide a defined benefit plan for
employees; the other subsidiaries provide defined 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
The defined benefit obligation is determined annually by aqualified independent actuary. The obligation and costs ofpension benefits are determined using the projected unit
credit method. Service costs are part of personnel expenses
and consist of current service costs, past service costs andgains/losses from plan settlements. Past service costs arerecognized at the earlier of the date when the plan amendment occurs, or when restructuring costs are recognized.
They include plan amendment and curtailment. Gains orlosses on settlement of pension benefits are recognized when
the settlement occurs. Net interest is recorded in the financial
result and is determined by applying the discount rate to thenet defined benefit liability/asset that exists at the beginningof the year. Actuarial gains and losses resulting from changes
in actuarial assumptions and experience adjustments arerecorded in other comprehensive income as remeasurementsof employee benefits. The return on plan assets (excludinginterest based on the discount rate) and any change in theeffect of an asset ceiling are also recorded in this line. In
accordance with IFRIC 14, any assets resulting from surpluses in defined benefit plans are limited to the value of the
maximum future savings from reduced contributions.

LEM | Annual Report 2016/17

41

Defined contribution plan
The subsidiaries abroad sponsor defined contribution plans
based on local practices and regulations.
LEM incentive scheme
The LEM incentive system consists of a short-term incentive
component and a long-term incentive component.
The short-term incentive component compensates for theactual annual results and achieved performance. The longterm incentive plan rewards the members of the Executive
Management and senior managers for the sustainable financial
performance of the Group.
Both elements are cash settled and the bonus payments are
made in the first four months of the following fiscal year. The
estimated payments are accrued for per year-end.
2.16 	Provisions and contingent liabilities
Provisions are recognized when the Group has a present legal
or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle theobligation, and a reliable estimate can be made of the amountof the obligation.
Warranty and customer claims
The Group recognizes the estimated liability to replace products still under warranty at the balance sheet date. This position is calculated based on past history of the level of repairs
and replacements. Additional specific provisions are booked
when required.
Litigations and consumption taxes
The Group recognizes the estimated country- and entityspecific risks relating to litigations with former personnel ordirect and indirect taxation.
Restructuring
A constructive obligation to restructure arises only when an
entity has a detailed formal plan for the restructuring identifying at least:– –the business or part of a business concerned;– –the principal locations affected, function and approximate
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 carryout the restructuring by starting to implement that plan or
announcing its main features to those affected by it.

42

Annual Report 2016/17 | LEM

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 statement on the purchase, sale, issue or cancellation of the Group's own equity
instruments. Any difference between the carrying amount andthe 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 have passed
to the buyer, usually on delivery of the products.
2.19 	Income taxes and deferred taxation
Income taxes
Income taxes comprise all current and deferred income taxes,
including the withholding tax payable on profit distributions
within the Group. Income taxes are recognized in the consolidated income statement except for income taxes ontransactions that are recognized directly in shareholders'equity or in other comprehensive income.

Deferred taxation
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax
base of assets and liabilities and their carrying amounts inthe financial statements. Deferred taxes are determined using
tax rates that apply, or have been substantially enacted, on
the balance sheet date in the countries where the Group is

active. Tax losses carried forward are recognized as deferred
tax assets to the extent that it is probable that tax profit will
be available in the future against which the tax losses carriedforward can be utilized. Deferred tax assets and liabilities areoffset against each other if the corresponding income taxes
arise by the same tax authority and a legally enforceable rightfor offsetting exists.

3 	 Segment information
Business segment information
Industry
2016/17

In CHF thousands

Income statement
Sales
EBITDA
Operating profit
Net financial expenses

214'290
49'18043'935

Automotive
2016/172015/162015/16215'151
48'57242'98450'22913'434
11'823

LEM Group
2016/172015/1646'302
12'130
9'924

Taxes
Net profit for the year

264'51962'61455'758(790)

261'454
60'70252'908742(10'403)
44'566(10'163)
43'487

Depreciation and amortization:
Tangible assets
Intangible assets
Impairment loss
Total

4'313
932
0
5'245

4'200
1'092
295
5'588

1'264
347
0
1'611

1'589
316
302
2'206

5'577
1'278
0
6'856

5'789
1'408
597
7'794

Capital expenditures:
Tangible assets
Intangible assets
Total assets

9'365
504
9'870

5'732
361
6'093

3'186
118
3'305

1'152
78
1'230

12'552622
13'174

6'884
439
7'322

For management purposes, LEM Group is organized into
two operating segments, Industry and Automotive. The
Industry segment develops, manufactures and sells electronic components called transducers for the measurementof current and voltage of various industrial applications.
The Automotive segment develops, manufactures and sells
transducers for applications in automotive markets.
Transactions between the subsidiaries and/or businesssegments are conducted at arm's length.
Geographical Information
China

USA

Germany

Japan

Italy

Switzerland

Rest ofthe world

LEM Group

In CHF thousands

2016/172015/162016/172015/162016/172015/162016/172015/162016/172015/162016/172015/162016/172015/162016/17

Sales

79'01381'53544'65442'94432'66831'53224'83921'733

9'835

13'829

3'096

2'973

70'41466'908264'519 261'454

2015/16

Noncurrent assets

9'833

8'980

51

43

253

285

3'601

3'557

65

49

18'49615'079

6'128

4'816

38'42632'809

Sales are reported as per place of transaction.

LEM | Annual Report 2016/17

43

4 	 Accounts receivable
In CHF thousands

31.3.201731.3.2016

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

52'493(689)
51'804
6'675
58'47950'830(1'187)49'643
6'253
55'896

Movements of allowance for doubtful accounts
In CHF thousands

2016/172015/16

Opening position
Additions charged/(reversals
credited) to income statement

1'187
(439)

777
491

(49)
0
(10)
689

(12)
(56)
(13)
1'187

Amounts written off
Other movements
Foreign exchange effect
Total

Aging analysis of accounts receivable
In CHF thousands

31 March 2016
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total
31 March 2017
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total

Not due<30 days

31–90 days

91–180 days

>180 days

Total

39'286

5'745

1'009
(252)

6'167
45'453

13
5'757

3'965
(196)
2
3'771

757

825
(739)
71
158

50'830(1'187)
6'253
55'896

44'861
0
6'675
51'536

5'135
0
0
5'135

1'612
(80)
0
1'532

315
(80)
0
235

570
(529)
0
41

52'493(689)
6'675
58'479The allowance for doubtful accounts is computed as a percentage of aged balances plus an assessment of individual
recoverability. It corresponds to 1.3 % of trade accounts
receivable (2.3 % in 2015/16). In 2016/17, no receivables havebeen individually impaired.

5 	 Inventories
In CHF thousands

31.3.201731.3.2016

Raw materialWork in progress
Finished goods and goods
for resale

11'175
2'105
17'348

11'548
1'706
14'542

Total

30'62827'796The inventories include allowances of CHF 2'260 thousand(2015/16 CHF 2'528 thousand).

44

Annual Report 2016/17 | LEM

6 	 Other current assets
In CHF thousands

Advances to suppliers
Prepayments and accrued income
Other current assets
Total

31.3.201731.3.2016

595
1'292
18
1'905

419
1'296
24
1'739

7 	 Property, plant and equipment
In CHF thousands

Land and buildings

Machinery andequipment

Total

25'728
(646)
6'884
(760)
(238)
(5'789)25'179Net book value 1 April 2015
Foreign exchange effectInvestment
Disposal
Impairment (loss)
Depreciation charge for the year
Net book value 31 March 2016

105
6

(14)
97

25'623
(652)
6'884
(760)
(238)
(5'775)25'082

At cost of acquisition
Accumulated depreciation
Net book value 31 March 2016

348
(251)
97

82'881(57'799)
25'082

83'229(58'050)
25'179Net book value 1 April 2016
Foreign exchange effectInvestment
Disposal
Depreciation charge for the year
Net book value 31 March 2017

97
5

(15)
87

25'082(428)
12'552(349)(5'562)31'29425'179(423)
12'552(349)(5'577)31'381

At cost of acquisition
Accumulated depreciation
Net book value 31 March 2017

364
(278)
87

92'862(61'568)
31'29493'226(61'845)
31'381LEM Group owns for its Automotive segment some equipment and machines, which will have very limited production
volume in the future. This was an indication for the Group to
perform an impairment test during 2015/16. The recoverable
amounts of the equipment and machines have been determined based on a value-in-use calculation using cash flow
projections from management estimates. The pretax discountrate applied to the cash flow projections was 9.9 %. As aresult of the analysis, management had recognized an impairment loss of CHF 238 thousand against the value of themachines previously carried at CHF 431 thousand, which wasrecorded in cost of goods sold. In 2016/17, no additional
impairment has been booked.

LEM | Annual Report 2016/17

45

8 	 Intangible assets
In CHF thousands

Goodwill

Net book value 1 April 2015
Foreign exchange effectInvestment
Disposal
Transfer movement
Impairment (loss)
Amortization charge for the year
Net book value 31 March 2016

3'009
89

At cost of acquisition
Accumulated amortization
Net book value 31 March 2016

3'098

Patents Other intangible assets

Total

(57)
324

5'869
(0)
437
(8)
(379)
(359)
(1'351)
4'208

(359)
(1'408)
7'630

3'098

5'331
(5'007)324

9'407(5'199)4'208

17'837(10'206)
7'630

Net book value 1 April 2016
Foreign exchange effectInvestment
DisposalAmortization charge for the year
Net book value 31 March 2017

3'098
67

324
0

4'208
6
622

3'165

(2)
(76)
247

(1'203)
3'633

7'630
72
622
(2)
(1'278)7'045

At cost of acquisition
Accumulated amortization
Net book value 31 March 2017

3'165

5'329
(5'083)247

10'025(6'392)
3'633

18'519(11'475)
7'045

The new ERP cumulative investment amounted to CHF 4.5
million as of 31 March 2016 and started to be amortized as
per 1 April 2015. This represented a depreciation charge of
CHF 0.9 million. In 2015/16, an additional impairment of
CHF 0.4 million was recognized to reflect the nonutilizationof one ERP module due to internal reorganization.

9 	 Accounts payable

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 basedon value-in-use calculations. These calculations use cash
flow projections of five years based on financial businessplans and budgets approved by management. The projections include assumptions concerning revenue growth andexpected operating costs. Average revenue growth is projected at 6 % and operating costs were estimated based on
the experience of management. The pretax discount rateused within these cash flow calculations is 7.0 % (2015/16
7.0 %) and is based on the weighted average cost of capitalof a peer group. The carrying value of the cash-generating
unit including goodwill was compared to the value in use andno impairment was found for the year ended 31 March 2017.

46

Annual Report 2016/17 | LEM

(0)
2
379

3'098

3'165

8'878
89
439
(8)

In CHF thousands

31.3.201731.3.2016

Total accounts payable – trade
Other payables
Total

21'170
3'428
24'59817'374
3'927
21'301

10 	 Provisions
Warranty andcustomer claims

Litigations andconsumption taxes

Balance as per 1 April 2015
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effectBalance as per 31 March 2016
Of which current
Of which noncurrent

2'371
1'542
(731)
(613)
(37)
2'532

785
53
(160)
(118)
(21)
538

Balance as per 1 April 2016
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effectBalance as per 31 March 2017
Of which current
Of which noncurrent

2'532
932
(877)
(651)
24
1'961

538
21
(304)
(22)
(7)
227

Warranty and customer claims
Provisions for warranty and customer claims have been estimated based on past experience and the risk assessment ofmanagement. The warranty provision is expected to be usedover the next five years.

Transfer of activity
As a continuation of a strategy initiated in 2004, LEM continues to relocate production lines from the plants in
Machida, Japan, and Geneva, Switzerland, to low-cost
countries. The operations in Japan are significantly reduced
and concentrated on the local Japanese market. In Switzerland, the operations are being progressively reduced
and focused on high-complexity / high-precision products
for worldwide markets. In parallel, LEM's site in Switzerland
is being reinforced with continued investment in R&D andmarketing.
In 2015/16, a provision of CHF 445 thousand was set-up
and fully used in 2016/17. No new restructuring plan has
been announced this year, and as a consequence, no new
restructuring provision has been booked in 2016/17.

In CHF thousands

Litigations and consumption taxes
Despite the care that LEM applies in the separation processwith personnel, such separation may result in legal conflicts.
The Group will defend its case and management estimates
the reasonable risk to be provided for.
The Company operates in multiple jurisdictions with complex
legal and tax regulatory environments. In the frame of thecontinuous improvement of its processes and systems, LEM
has reviewed the consumption taxes in several countries. It
has appeared that some of LEM's subsidiaries may not havebeen fully compliant with their local consumption tax regulations. As a consequence, LEM has estimated consumption
tax provisions according to management's best judgment.
Some of these positions are inherently uncertain and include
the interpretation of local regulations applied to complex
transactions.

Restructuring

Total

199
445

3'355
2'040
(891)
(928)
(58)
3'517
1'552
1'965

(197)
447

447
87

3'517
1'041
(1'181)(1'207)
18
2'188
1'061
1'127

(534)
(0)

11 	 Other liabilities
In CHF thousands

Postemployment benefit plans
Derivative financial instruments
Other liabilities
Total
Of which current
Of which noncurrent

31.3.201731.3.2016

3'648
18
1'301
4'967
578
4'389

4'706
94
1'215
6'015
593
5'422

The decrease of the postemployment benefit plan liability ismainly linked to the increase of the discount rate assumption,
as elaborated in note 20.

LEM | Annual Report 2016/17

47

12 	 Equity
Share capital
The nominal share capital of CHF 570'000 comprises
1'140'000 registered shares, each with a nominal value of
CHF 0.50. There is neither authorized nor conditional sharecapital outstanding.

Investments in shares of LEM Holding SA held by the Groupare classified as treasury shares and are accounted for at
historical cost. Treasury shares are not entitled to dividends.

Movement of treasury shares
Price per share in CHF
In number of shares, in CHF

NumberValue 1 April 2015
Purchase at cost
Sales at cost
Value 31 March 2016
Purchase at cost
Sales at cost
Value 31 March 2017

365
8'141
(7'844)662
11'065(10'780)
947

Value

High

AverageLow

830.37835.00743.30747.31597.30610.24

1'169.55
1'180.88

938.93945.39809.00814.39in CHF thousands

283
6'085
(5'867)502
10'700(10'296)906

In number of shares, in CHF

Ordinary dividend per share 2015/16
Ordinary dividend per share 2016/17

35.00
35.00

The dividend to be paid will be proposed by the Board of
Directors to the Annual General Meeting of Shareholders of
the Group on 29 June 2017. The expected payout for dividends amounts to CHF 39'856 thousand.

14 	 Financial expense
In CHF thousands

2016/172015/16

Interest expenses
Other financial expenses
Total

(147)
(80)
(228)

(304)
(57)
(361)

2016/172015/16

80
80

116
116

In CHF thousands

2016/172015/16

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

205
76
(923)
(642)

2'195
(436)
(772)
987

15 	 Financial income
In CHF thousands

13 	 Staff cost
2016/172015/16

Production
Sales
Administration
Research and development
Total(25'668)(19'694)(13'560)(11'248)(70'170)(23'416)(18'035)(13'880)(10'512)(65'843)

Salaries and wages
Temporary employee costs
Cost of defined benefit plans
Cost of defined benefit
contribution(63'136)(4'078)(2'821)(135)(60'127)(2'784)(2'693)(239)(70'170)(65'843)

31.3.201731.3.2016

1'292
148
13
1'453

1'253
121
13
1'388

In CHF thousands

Notes

20.1

Total

Number of employees at the endof the financial year
Permanent employees
Temporary employees
Apprentices
Total

48

Annual Report 2016/17 | LEM

Interest income on cash
Total

16 	 Exchange effect1

Position includes cost of derivative hedging

The 2016/17 exchange effect is mainly driven by the appreciation of USD which led to losses on derivatives.

17 	 Income taxes, deferred tax assets andliabilities
The Group operates in multiple jurisdictions with complex
legal and tax regulatory environments. In certain of thesejurisdictions, the Group has taken income tax positions thatmanagement believes are supportable and are intended towithstand challenge by tax authorities. Some of these positions are inherently uncertain and include those relating totransfer pricing matters and the interpretation of income tax
laws applied to complex transactions. The Company periodically reassesses its tax positions. Changes to the financial
statement recognition, measurement, and disclosure of tax
positions are based on management's best judgment given
any changes in the facts, circumstances, information available and applicable tax laws. Considering all available information and the history of resolving income tax uncertainties,
the Group believes that the ultimate resolution of such matters will not have a material effect on its financial statements.
Differences between the final tax outcome and the amounts
that were initially recorded impact the income and deferredtaxes in the period in which such determinations are made.
The Group calculates its expected average tax rate as aweighted average of the tax rates in the tax jurisdictions inwhich the Group operates.
LEM has taken the decision to repatriate all available dividends
from its subsidiaries in the foreseeable future. Unrecoverable
withholding taxes are considered part of the expected tax
rate. Deferred income tax liabilities have been established for
unrecoverable withholding taxes that would be payable on
the unremitted earnings of foreign subsidiaries.

2016/172015/16(10'378)(12'150)

(101)

1'457

77

530

(10'403)(10'163)

In CHF thousands

Current income taxes
Deferred taxes relating tothe origination and reversalof temporary differences
Adjustment recognized in the period
for current tax of prior year
Total

The tax (expense)/income relating to components of othercomprehensive income amount to CHF (302) thousand forthe year 2016/17 (CHF 190 thousand in 2015/16).
The Group's effective tax rate differs from the Group's average expected tax rate as follows:
2016/172015/16

Group's average expected
income tax rate

16.6

17.8

Group's average expected­w ithholding tax rate

1.2

1.6

Group's average expected tax rate

17.8

19.3

In %

Tax effect of– – permanent differences– – effect of changes in tax rates ondeferred taxes– – adjustment in respect of previous
periods' income tax– – other differences
Group's effective tax rate

0.4

0.3

0.0

0.1

(0.1)

(1.0)

0.9
18.9

0.2
18.9

Deferred tax assets and liabilities
Deferred taxes have been calculated on the following balance sheet positions:31.3.201731.3.2016

Asset

Liability

Asset

74

(38)

92

(13)

– – Inventories

1'393

(240)

1'090

(169)

– – Property, plant and equipment

In CHF thousands– – Accounts receivable

Liability

1'322

(114)

1'442

(11)

– – Intangible assets

149

(484)

507

(478)

– – Other financial assets

767

0

999

– – Tax losses carried forward

875

933

0

– – Other assets

0

(138)

3

– – Provisions

312

0

399

– – Others

767

(27)

753

0

(1'532)

5'719(2'572)– – Withholding tax on dividends
Gross deferred taxes

(151)
(33)
(1'725)

6'160(2'578)

LEM | Annual Report 2016/17

49

Compensation of the Board of Directors

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

31.3.201731.3.2016

5'028(1'881)
3'147

5'636
(2'054)
3'582

In CHF thousands

2016/172015/16

Annual fees
Total

(750)
(750)

(750)
(750)

Compensation of the Executive Management

LEM Group has CHF 933 thousand (CHF 875 thousand in
2015/16) of deferred tax asset on tax losses. The Group
expects that the concerned subsidiaries will be able to only
partially use the tax losses against future taxable profit. On
this basis, a part of the tax losses have not been recognized
as deferred tax assets.
At 31 March 2017, the unrecorded losses carried forward
are the following:– – In the next 7 years– – Without date of expiration
Total

31.3.201731.3.2016

1'572
0
1'572

0
0
0

18 	 Earnings per share2016/172015/16

44'56643'487

Ordinary number of shares atthe beginning of the year

1'140'000

1'140'000

Weighted average number ofordinary shares

1'140'000

1'140'000

Weighted average number oftreasury shares

602

1'065

1'139'398

1'138'935

39.11

38.18

Basic and diluted earnings
per share
Net profit for the year attributable
to LEM shareholders – in
CHF thousands

Weighted average number of shares
outstanding
Earnings per share – basic anddiluted in CHF

19 	 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-relatedbonus (L4R), bonus and postemployment benefits. In
2016/17 and 2015/16, no termination benefits have been
paid. The base salary is the employee's compensation
before deduction of the employee's social security contributions. Bonus payments are effected in cash.

50

Annual Report 2016/17 | LEM

In CHF thousands

2016/172015/16

Base salaryBonus(1'419)(979)(1'603)(1'318)Company's contribution topension fund

(157)

(172)

(2'555)(3'093)

Total

Servotronix Motion Control Ltd, a company presided by Ilan
Cohen, has bought transducers for CHF 751 thousand in
2016/17 (CHF 662 thousand in 2015/16), including purchases
done by its subsidiaries and subcontractors, from LEM Groupat market price. No other member of the Board of Directors
has any significant business connection with LEM Group.
For details on the compensation of the Board of Directors
and of the Executive Management, please refer to note 10 in
the notes to the financial statements of LEM Holding SA. Also,
see Significant accounting principles 2.15 Employee benefits
and 2.16 Provisions and contingent liabilities.

20 	 Retirement benefit obligations
The Group operates a defined contribution plan for all its
employees in Switzerland with a collective foundation.
This foundation is a separate legal entity which is not part of
the Group. It is managed by a board having equal representation of employees and employers of the affiliated companies. It is supervised by the supervisory authority and complies with the requirements of Swiss pension law. According
to Swiss law, the pension plan is considered as a defined
contribution plan whereas it is considered as a defined benefit plan under IAS 19 due to the various benefit guarantees
included in the laws.
The plan is funded by contributions from both employer andemployees.
The plan participants are insured against the financial consequences of retirement, disability and death. The retirement
benefit is based on a notional individual savings account converted at retirement into a pension.
The assets of the foundation are invested into a diversified
portfolio. Death in service and disability benefits are insured
with an insurance company. The pension plan does not
expose the affiliated companies to any additional unusual
risks. No curtailments or settlements occurred in 2016/17.

In view of the increasing interest trend, the discount rate used
for the evaluation of LEM's pension obligations has beenslightly increased from 0.5 % to 0.7 %, thereby decreasing theobligations by CHF – 0.9 million. The plan assets showed anincrease by CHF + 0.6 million. As a result, the overall funded
status increased by CHF +1.5 million, from a liability of
CHF 4.4 million to CHF 2.9 million. In application of IAS 19,
this adjustment was accounted for in other comprehensive
income and did not impact the net profit for the year.
The subsidiaries abroad sponsor defined contribution plans
based on local practices and regulations.
A former employee in Germany benefits from a defined benefit obligation which was insured and covered by plan assets
at 31.3.2016. In December 2016, the plan has been partiallysettled and LEM's engagement revaluated at 31.3.2017, generating a net impact of CHF 291 thousand in LEM Group's
equity.
In CHF thousands

31.3.201731.3.2016

Fair value of plan assets at
year-end

46'87346'298

Defined benefit obligations at
year-end

49'78650'657

Funded status (net liabilities
in the balance sheet)(2'913)(4'359)20.3 	Change in fair value of plan assets
In CHF thousands

31.3.201731.3.2016

Fair value of plan assets per
beginning of year

46'29842'564Return on plan assets excludinginterest income

1'016

661

Interest income on plan assets
Employer's contributions
Employees' contributions
Benefits paid
Fair value of plan assets per
end of year

231
2'406
2'077
(5'156)46'873

383
1'405
1'887
(602)
46'29820.4 	Change in present value of defined benefit obligation
In CHF thousands

31.3.201731.3.2016

Defined benefit obligation
per beginning of year
Current service cost
Employees' contributions
Interest costExperience adjustments on
obligation

50'65744'661

2'821
2'077
253
(866)

2'693
1'887
402
1'615

due to assumption changes
due to population changes
Benefits paid
Defined benefit obligation per endof year(1'489)623(5'156)49'786

3'129(1'514)(602)
50'657

LEM expects to contribute CHF 2'467 thousand to its defined
benefit plan in 2017/18.

The weighted average duration of the Defined Benefit Obligation (DBO) at the end of the current fiscal year is 26 years.

20.1 	Cost of defined benefit plans

20.5 	Asset allocation of investments
Major categories of plan assets as a percentage of thefair value of total plan assets

In CHF thousands

2016/172015/16

Current service cost
Net interest (income)/cost
Total pension expenses recordedin consolidated income statement

2'821
22
2'842

2'693
19
2'712

Costs related to the pension plan were charged to the different functional departments based on salary costs.
20.2 	Remeasurements of employee benefits
In CHF thousands

2016/172015/16

Experience adjustments on defined
benefit obligation

(866)

1'615

Return on plan assets excludinginterest(1'016)(661)

Total remeasurements recorded inother comprehensive income(1'881)954

In %Equity securities
Debt securities
Real estate
Cash and otherinvestments

Long-term
target2016/172015/1630.0 %
29.0 %
25.0 %
16.0 %

34.3 %
24.3 %
27.7 %
13.8 %

32.0 %
29.5 %
24.0 %
14.5 %

100.0 %

100.0 %

100.0 %

Strategic pension plan allocations are determined by theobjective 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. Estimatedreturns on assets are determined based on the asset allocation and are reviewed periodically. A temporary deviation frompolicy targets is allowed.

LEM | Annual Report 2016/17

51

Cash as well as most equity and debt securities have aquoted market price in an active market. Other assets including real estate and other investments do not have a quoted
market price.
20.6 	Actuarial assumptions
The principal actuarial assumptions used in the actuarial calculations include:In %2016/172015/16

Discount rate
Salary increases

0.70 %
0.50 %

0.50 %
0.50 %The present value of the defined benefit obligation is determined annually by independent actuaries using the projected
unit credit method. Actuarial assumptions are required forthis purpose.
Sensitivities of significant actuarial assumptions
The sensitivity analysis is based on reasonable possible
changes as of the end of the year 2016/17. Each change in asignificant assumption was analyzed separately as part of
the test.
The sensitivity of the DBO to changes in the main actuarial
assumptions is as follows:
DBO increase/DBO (decrease) –In CHF thousands

Discount rate
Increase by 0.25 %Decrease by 0.25 %Salary increase rate
Increase by 0.25 %Decrease by 0.25 %2016/172015/16(2'673)2'880(2'738)
2'953

242
(332)

265
(355)

20.7 	Maturity structure of pension obligation
The following main cash outflows are expected in future periods:
In CHF thousandsin 1 yearin 2 years
in 3 years
in 4 years
in 5 years
in 6 to 10 years

52

Annual Report 2016/17 | LEM

978
985
1'057
1'121
1'216
8'095

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

31.3.201731.3.2016

Within 1 year
Between 1 and 5 years
Beyond 5 years
Total

4'966
9'368
403
14'737

4'850
12'298574
17'722

In 2016/17 lease expenses amounted to CHF 5'192 thousand(2015/16 CHF 5'084 thousand). Lease agreements exist forthe 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.

22 	 Contingent liabilities
The French customs authorities have audited LEM International SA for the period from 27 March 2011 to 31 March 2015,
and did not identify any wrongdoings in respect of the customs and duties paid. However they question the validity of
the applied VAT exemption (so-called régime 42) for goods
sold from Switzerland to EU customers, transiting throughFrance. LEM International SA has received an official noticefrom the customs authorities during Q4 2015/16 demanding
to pay the value-added tax for that period, amounting to a
total of EUR 15.4 million. If LEM International SA decides topay, those VAT taxes should be recoverable.
LEM International SA and two renowned external legal counsels firmly disagree with the conclusions rendered by the local
customs authorities. In case of the customs authorities
upholding their position, LEM International SA will consider
to go to court to defend its position. The whole legal disputeis expected to last several years. Per today, the financial
impact of the customs claim cannot be measured with sufficient reliability.

23 	 Financial risk management objectives
and policies
The group classifies its financial assets and liabilities in thefollowing categories as per IFRS 7:
Financial assets
In CHF thousands

31.3.2017
Fair value

31.3.2016
Fair value

Loans andreceivables

Cash and cash equivalents
Accounts receivable
Other current financial assets
Other noncurrent financial assets
Total

12'80958'47918985
72'29113'62955'89624979
70'528X
X
X
X

In CHF thousands

31.3.2017
Fair value

31.3.2016
Fair value

Loans andreceivables

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

24'59822'04318
0
246'66121'301
18'23094
65
40
39'731X
X

Financial liabilities

The management assessed that fair value level of cash andcash equivalents, accounts receivables, other current andnoncurrent assets, accounts payables, accrued expenses
and other current and noncurrent liabilities that are not measured at fair value approximate their carrying amounts in viewof their short-term nature and are consequently not separately disclosed.
The Group enters into derivative transactions such as currency risk reversal and forward contracts to hedge the USD
and EUR risks.
The purpose of these currency hedges is to manage the currency risks arising from the Group's operations.
It is the Group's policy that no derivatives for speculative
purposes shall be entered into.
The main risks arising from the Group's financial instruments
are foreign currency risks and credit risks, whereas the others are of minor or no impact.
The Board of Directors reviews and agrees policies for managing each of those risks.
Fair value hierarchy
The Group uses the following hierarchy for determining 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 level1 that are observable for the asset or liability, either directly(i.e., as prices) or indirectly (i.e., derived from prices).

At fair value
through
profit and loss

At fair value
through
profit and loss

X
X
X

Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable market data.
The Group's financial liabilities at fair value amount to CHF 18
thousand per 31 March 2017 (financial liabilities of CHF 94
thousand per 31 March 2016), 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 foreignexchange risks primarily to the USD, EUR, JPY, CNY and GBP.
The Group seeks to reduce those risks by optimizing its natural
hedging (cash inflows and outflows in a specific currency should
be in balance as far as possible).
The Group's policy states that 100 % of LEM's net exposure forthe main currencies EUR, USD and JPY is to be hedged on arolling 12-month basis.
Currency risks also arise from translation differences that are nothedged by the Group when preparing the consolidated financial
statements in CHF. The foreign exchange translation is excluded
from the calculation of the sensitivity analysis for currency risk
below.
Sensitivity analysis for currency risk
The sensitivity analysis is performed per 31 March 2017 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.

LEM | Annual Report 2016/17

53

The sensitivity analysis performed for the financial year shows
an impact of CHF ± 799 thousand for a ± 5 % EUR rate change(CHF ± 820 thousand per 31 March 2016), of CHF ± 616 thousand for a ±5 % USD rate change (CHF ± 509 thousand per
31 March 2016), of CHF ± 727 thousand for a ± 5 % CNY ratechange (CHF ± 681 thousand per 31 March 2016) and of
CHF ± 178 thousand for a ± 5 % JPY rate change (CHF ± 273
thousand per 31 March 2016). For other currencies, there isno significant impact. There is no significant impact on theGroup's equity.
Credit risk
Credit risk is the risk that a financial loss occurs if a counterparty is unable or unwilling to fulfill its contractual payment
obligation.
The Group trades with recognized and creditworthy parties.
The accounts receivable are monitored on a monthly basis.
It is the Group's policy that all customers who wish to 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.
Financial liabilities

Liquidity risk
The Group operates a cash-pooling agreement in whichcash 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.

In CHF thousands

31.3.2017
Fair valueLess than
one yearAccounts payable
Accrued expenses
Derivative financial instruments – current
Other current financial liabilities
Other noncurrent financial liabilities
Total

24'59822'04318
0
246'661

24'59822'04318
0046'65954

Annual Report 2016/17 | LEM

Over oneyear

31.3.2016
Fair valueLess than
one year

21'301
18'23094
65

2
2

21'301
18'23094
65
40
39'73139'690Over one
year

40
40

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 March 2017, there is no bank loan.
Capital management
The primary objective of the Group's capital management isto ensure that it maintains a healthy and stable equity ratio
in order to secure the confidence of shareholders and investors, creditors and other market players and to strengthen
the future development of the Group's business activities.

The Group manages its capital structure and makes adjustments to it, in light of changes in the economic conditions.
LEM targets a payout 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.

24 	 Scope of consolidation
Full consolidation

Country

Currency

Share capital

Ownership

Germany
Switzerland
Switzerland
Switzerland
Switzerland
FranceBulgaria
RussiaSwitzerland

EUR
CHF
CHF
CHF
CHF
EUR
BGN
RUB
CHF

75'000570'000
100'000
300'000
1'000'000
50'0001'971'000
16'400'000
20'000

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

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 %

25 	 Changes in scope of consolidation

26 	 Events after the balance sheet dateOn 17 February 2017, the Group registered a new R&D center LEM Tech France S.A.S. at the Parc Technologique deLyon, Saint-Priest, France.
The setup of this new company will support LEM's growthstrategy by focusing on innovation.

There were no events subsequent to the balance sheet datethat require adjustment to or disclosure in the financial statements.

EuropeLEM Europe GmbHLEM Holding SA
LEM International SA
LEM Intellectual Property SA
LEM Switzerland SA
LEM Tech France SAS
LEM Bulgaria EOOD
LEM Russia Ltd
LEM Management Services SARL
North America
LEM USA Inc.

LEM | Annual Report 2016/17

55

Auditor's Report
Statutory auditor's report on the audit of the consolidated financial statements
OpinionWe have audited the consolidated financial statements of LEM Holding SA and its subsidiaries (the Group),
which comprise the consolidated statement of financial position as at 31 March 2017 and the consolidated
income statement, the consolidated statement of comprehensive income, consolidated statement of changes
in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated
financial statements, including a summary of significant accounting policies.
In our opinion the consolidated financial statements (pages 31 to 55) give a true and fair view of the consolidated
financial position of the Group as at 31 March 2017, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS)
and comply with Swiss law.
Basis for opinion
We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss
Auditing Standards. Our responsibilities under those provisions and standards are further described in the
Auditor's responsibilities for the audit of the consolidated financial statements section of our report.
We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the
Swiss audit profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled
our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our auditof the consolidated financial statements of the current period. These matters were addressed in the context
of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the consolidated
financial statements section of our report, including in relation to these matters. Accordingly, our audit included
the performance of procedures designed to respond to our assessment of the risks of material misstatementof the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the consolidated financial
statements.

56

Annual Report 2016/17 | LEM

Income taxes, indirect taxes and transfer pricing
Area of focus
The Group operates in multiple jurisdictions with complex legal and tax regulatory environment thatare constantly changing and require more compliance efforts. The country-specific tax risks could
result in potential material amounts payable.
Management monitors these tax risks at corporate level only, including the significant level of estimations and judgments made with respect to the likelihood and magnitude of these risks. In certain of
these jurisdictions, the Group has taken tax position on income tax, indirect tax and transfer pricingthat management believes are supportable. Due to the significance of the deferred tax balances andother tax positions and the judgment involved in determining these, this matter was considered significant to our audit. Refer to notes 17 and 22 to the consolidated financial statements for further
information.
Our audit response
Our procedures included, amongst others, assessing the tax rules in the various jurisdictions in which
the Company operates and assessing the management's assumptions and estimates in relation to
uncertain tax positions, current income tax and deferred taxes.
We involved our tax specialists to assist in assessing the Company's tax methodologies and analyzing the underlying key assumptions, including the advice received by management from external parties to support their position. We audited the current year tax provision, the Company's reconciliationof book to taxable income, as well as the deferred tax balances, and evaluated whether the assumptions applied by management on the recoverability of deferred tax assets is consistent with its budget
and forecasts.
Other information in the annual report
The Board of Directors is responsible for the other information in the annual report. The other information
comprises all information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements, the compensation report and our auditor's reports thereon.
Our opinion on the consolidated financial statements does not cover the other information in the annual report
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the otherinformation in the annual report and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears
to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
 esponsibility of the Board of Directors for the consolidated financial statements
R
The Board of Directors is responsible for the preparation of the consolidated financial statements that give atrue and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as
the Board of Directors determines is necessary to enable the preparation of consolidated financial statementsthat are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing theGroup's ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the Board of Directors either intends to liquidate theGroup or to cease operations, or has no realistic alternative but to do so.

LEM | Annual Report 2016/17

57

Auditor's responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions ofusers taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements is located at
the website of EXPERTsuisse: http://www.expertsuisse.ch/en/audit-report-for-public-companies. This
description forms part of our auditor's report.
Report on other legal and regulatory requirements
In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that aninternal 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.

To the General Meeting of LEM Holding SA, Fribourg
Lancy, 22 May 2017
Ernst & Young Ltd

Arthur Bergmann
Licensed audit expert(Auditor in charge)

58

Annual Report 2016/17 | LEM

Karine Badertscher Chamoso
Licensed audit expert

LEM Holding SA
Financial Statements

Balance Sheet 61
Income Statement 62
Notes to the Financial
Statements 62
Proposed Appropriation of
Available Earnings 66
Auditor's Report 67

LEM | Annual Report 2016/17

59

60

Annual Report 2016/17 | LEM

Balance Sheet(before distribution of earnings)
AssetsIn CHF thousands

Current assets
Cash and cash equivalents
Loans to affiliated companies
Current assets from affiliated companies
Other current assets
Other current assets from affiliated companies
Total current assets
Noncurrent assets
Loans to affiliated companies
Investments in affiliated companies
Total noncurrent assets

Notes

4

1

Total assets

31.3.201731.3.2016

4'878
34'901
970
146
1'627
42'521

4'137
30'829456
238
35'66045'18345'1838'840
45'18354'02387'70489'68331.3.201731.3.201623'87333
1'725
25'63128'61475
1'738
30'427570
285
19'02443'100(906)
62'072

570
285
9'153
49'750(502)
59'25687'70489'683Liabilities and equity
In CHF thousands

Notes

Current liabilities
Loans from affiliated companies
Current liabilities from affiliated companies
Other current liabilities
Total current liabilities
EquityShare capital
Legal reserves
Free reserves – balance carried forward– profit for the year
Treasury shares
Total equity
Total liabilities and equity

2

3

LEM | Annual Report 2016/17

61

Income Statement
IncomeIn CHF thousands

Notes

2016/172015/16

4

41'115
831
2'092
22
5'217
49'27548'708
848
2'337
16
5'415
57'325

Dividend from affiliated companies
Interest income from affiliated companies
Foreign exchange gain
Other financial income
Other income from affiliated companies
Total income

5

ExpenseIn CHF thousands

Notes

2016/172015/166(3'423)(278)(2'046)(5'747)(3'767)(369)(3'072)(7'209)43'529(429)
43'10050'116(366)
49'750

Office, administration and personnel expense
Financial expense
Foreign exchange loss
Total expense

5

Profit before taxes
Income taxes
Net profit for the year

7

Notes to the Financial Statements
Principles for the establishment of the financial
statements
The accompanying financial statements have been preparedin 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.
LEM Holding SA does and did not have any employees.

1 	 Investments in affiliated companies
In CHF thousands

31.3.201731.3.2016

Historical cost
Total

45'18345'18345'18345'183

Refer to note 24 Scope of consolidation of the Consolidated
financial statements.
The percentage of ownership corresponds to the percentage
of voting rights.

62

Annual Report 2016/17 | LEM

2 	 Share capital
Number ofsharesPar value pershare in CHF

Capital in CHF
thousands

Opening capital
1.4.2016

1'140'000

0.50

570

Change of capital
Closing capital
31.3.2017

0
1'140'000

0.50

0
570

3 	 Treasury shares
NumberValue 1.4.2015
Purchase at cost
Sales at cost
Value 31.3.2016
Purchase at cost
Sales at cost
Value 31.3.2017

365
8'141
(7'844)662
11'065(10'780)
947

Price per share in CHF
High
AverageLow

830.37835.00743.30747.31597.30610.24

1'169.55
1'180.88

938.93945.39809.00814.39

Value in CHF
thousands

283
6'085
(5'867)502
10'700(10'296)906

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 	 Dividend from affiliated companies
The Other current assets from affiliated companies of
CHF 1'627 thousand relates to the dividend from EuropeGmbH to be received.
The decrease of dividend revenue is mainly explained by alower dividend of CHF 13'892 thousand paid by LEM China
in 2016/17 compared to a dividend of CHF 19'827 thousand
paid in 2015/16.
The dividend payment generated a withholding tax paymentof CHF 696 thousand as mentioned in note 6 Office, administration and personnel expense.

6 	 Office, administration and personnel
expenseThe decrease in Office, administration and personnel expense
is mainly linked to the withholding taxes paid on dividend
received from LEM China in 2015/16 that has reduced consistently with the dividend payment reduction.

7 	 Income taxes
In CHF thousands

2016/172015/16

Current taxes
Adjustments of tax provisions ofprevious periods

(355)
(73)

(299)
(67)

Total

(429)

(366)

5 	 Exchange effect
In CHF thousands

Exchange gains/(losses) 1
Fair value revaluation on derivatives 1
Gains/(losses) on derivative 2
Exchange effect2016/172015/16

893
76
(923)
46

473
(436)
(772)
(735)

8 	 Significant shareholders according to article
663c of the Swiss Code of Obligations
On 31 March 2017, the following shareholders held 3 % ormore of the share capital and voting rights:

1 P ositions exclude unrealized gains on long-term assets and liabilities, as per
Swiss Code of Obligations.
2 Position includes cost of derivative hedging.

In number of shares / percent of shareholding

31.3.2017
SharesIn %31.3.2016
SharesIn %Werner O. Weber and Ueli Wampfler, in Zollikon/Wollerau,
Switzerland, through WEMACO Invest AG and Swisa Holding AG,
in Zug/Cham, Switzerland

548'78648.1 %

527'485

46.3 %

Ruth Wertheimer, in Kfar Shmaryahu, Israel,through 7-Industries Holding B.V., in Amsterdam, Netherlands

141'58112.4 %

141'58112.4 %

J. Safra Sarasin Investmentfonds AG, in Basel,
Switzerland

36'0003.2 %42'999

3.8 %

< 3%

57'3945.0 %36.3 %
100.0 %

370'541
1'140'000

32.5 %
100.0 %

Montanaro Asset Management Ltd, in London,
United Kingdom 1
Total shareholders < 3 %Total

413'633
1'140'000

1 Montanaro Asset Management Ltd indicated on 9 February 2017 that it had crossed the 3 % threshold in the downward direction with respect to the capital and voting rights.

LEM | Annual Report 2016/17

63

9 	 Guarantees in favor of third parties onbehalf of subsidiaries
31.3.201731.3.2016

1'932

1'839

Annual fees
(A)

Taxes, social-security
charges and similar
contributions paid by
the Company a)(B)Total costs for theCompany(A) + (B)

290
100
120
120
120
750

26
100
–
11
11
148

316
200
120
131
131
898

Annual fees
(A)

Taxes, social-security
charges and similar
contributions paid by
the Company(B)

Total costs for theCompany(A) + (B)

290
120
120
100
120
750

26
11
–
9
11
56

316
131
120
109
131
806

In CHF thousands

Amount of guarantees issued

10 	 Remuneration of Board of Directors andExecutive Management
10.1 	Compensation of active members of the Board of
Directors
The members of the Board of Directors do not participate
in bonus schemes, nor pension funds. The annual salarycompensation is therefore equal to the total compensation.
2016/17

In CHF thousands

Andreas Hürlimann 1, 2, 7
Ilan Cohen 8
Norbert Hess 5
Ulrich Jakob Looser 4,6
Ueli Wampfler 3
Totala) These amounts also include one-time, nonrecurring contributions to tax and social-security authorities.

2015/16

In CHF thousands

Andreas Hürlimann 1, 2, 6, 8
Ilan Cohen 7
Norbert Hess 5
Ulrich Jakob Looser 4
Ueli Wampfler 3
Total
Chairman of the Board
Vice Chairman of the Board
3
Chairman of the Audit & Risk Committee
4
Member of the Audit & Risk Committee
5
Chairman of the Nomination & Compensation Committee
6
Member of the Nomination & Compensation Committee
7
Chairman of the Strategy Committee
8
Member of the Strategy Committee1264Annual Report 2016/17 | LEM

10.2 	Remuneration of Executive Management
2016/17
In CHF thousands

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

Total
compensation

Company's
contribution tosocial-security
chargesBasesalaryShort-term
incentive

Long-term
incentive

Company's
contribution topension fund

499
920

250
325

147
182

64
93

960
1'520

81
128

0

0

75

0

75

7

1'419

575

404

157

2'555

216

Company's
contribution topension fundTotalcompensation

Company's
contribution tosocial-security
charges

2015/16
BasesalaryShort-term
incentive

Long-term
incentive

François Gabella, CEO
Executive Management(excl. CEO)

480
420

304
242

226

61
41

1'071
703

82
55

Former Executive
Management

703

362

185

70

1'320

104

1'603

907

411

172

3'093

241

In CHF thousands

Total

The amounts are shown as follows:– –Base salary: as paid out in the reporting period– –Short-term incentive 2016/17: as proposed to the Annual
General Meeting in June 2017 for payout in July 2017
– –Long-term incentive: as accrued for or paid out during thereporting period– –Pension fund contributions: as accrued for or paid out during the reporting period– –Social charges contributions: as accrued for or paid out
during the reporting period– –The compensation of former members of the Executive
Management staying within the Company for their work
after leaving the Executive Management are not taken into
account in the numbers above, whereas the part of thelong-term incentive paid out in 2016/17 corresponding totheir activity as Executive Management is taken into
account.

Amounts approved by previous Annual General Meetings
related to the period reported above:– –Maximum amount base salary (valid from 1 October 2016
to 30 September 2017): CHF 1'727'000– –Maximum amount long-term incentive 2014–15 for payment
in 2017: CHF 927'000– –Maximum amount base salary (valid from 1 October 2015
to 30 September 2016): CHF 2'800'000– –Short-term incentive amount for payment 2015/16:
CHF 982'000– –Pension fund contribution and company contribution tosocial security charges as paid out or accrued for in thereporting period are included in the above amounts

LEM | Annual Report 2016/17

65

10.3 	Shareholdings
Shareholdings of nonexecutive Directors
31.3. 2017
Number of shares held

31.3.2016
Number of shares held

1'001
300
0
72'500073'801960
170
068'0000
69'13031.3. 2017
Number of shares held

31.3.2016
Number of shares held

600
0
0
0
600

600
0
0
0
600

In CHF thousands

31.3.201731.3.2016

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

18'522(405)
43'10061'2178'870(219)
49'75058'401

Proposal of the Board of Directors:
Ordinary dividend
Balance to be carried forward(39'856)
21'361(39'879)
18'522Andreas Hürlimann
Ilan Cohen
Norbert Hess
Ueli Wampfler
Ulrich Jakob Looser
Total

Shareholdings of Executive Management

François Gabella, CEO
Andrea Borla, CFO
Frank Rehfeld, SVP Industry
Rainer Bos, SVP Automotive
Total

Proposed Appropriation of
Available Earnings
Appropriation of available earnings

The Board of Directors proposes the distribution of an ordinary dividend of CHF 35 per share. Net of 35 % withholding
tax, this is an ordinary cash dividend of CHF 22.75 per share.
The proposed appropriation of available earnings is made incompliance with article 671 of the Code of Obligations.
Shares held by LEM Holding SA or any of its subsidiaries are
not entitled to dividends.

66

Annual Report 2016/17 | LEM

Auditor's Report
Report of the statutory auditor on the financial statements
As statutory auditor, we have audited the financial statements of LEM Holding SA, which comprise the balance sheet, income statement and notes (pages 59 to 66), for the year ended 31 March 2017.
 oard of Directors' responsibility
B
The Board of Directors is responsible for the preparation of the financial statements in accordance with therequirements 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 Board of Directors is further
responsible for selecting and applying appropriate accounting policies and making accounting estimates thatare 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 in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we planand 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 thefinancial statements. The procedures selected depend on the auditor's judgment, including the assessmentof the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers the internal control system relevant to the entity's preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control system.
An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
OpinionIn our opinion, the financial statements for the year ended 31 March 2017 comply with Swiss law and thecompany's articles of incorporation.
Report on key audit matters based on the circular 1/2015 of the Federal Audit Oversight Authority
Key audit matters are those matters that, in our professional judgment, were of most significance in our auditof the financial statements of the current period. We have determined that there are no key audit matters tocommunicate in our report.

LEM | Annual Report 2016/17

67

 eport on other legal requirements
R
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA)
and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with
our independence.
In accordance with article 728a para. 1 item 3 CO and Swiss Auditing Standard 890, we confirm that aninternal 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 thecompany's articles of incorporation. We recommend that the financial statements submitted to you be
approved.

To the General Meeting of LEM Holding SA, Fribourg
Lancy, 22 May 2017
Ernst & Young Ltd

Arthur Bergmann
Licensed audit expert(Auditor in charge)

68

Annual Report 2016/17 | LEM

Karine Badertscher Chamoso
Licensed audit expert

linear Y-axis

linear X-axis

11linear Z-axis

rotary B-axis

2

1

3

A
1

rotary C-axis

1

CNC milling-turning 5-axis
machine tool
Producing mechanical parts is fasterand more profitable when using a
5-axis machining center. In addition
to the usual linear X-axis, Y-axis,
and Z-axis, two additional axes arerotating. The B-axis rotates aroundthe Y-axis and the C-axis around the
Z-axis.

A

LF 210/310

1

MotorsInverter
Numeric control

LEM transducers are key components inside the inverter
that controls the 5 electrical motors driving the 5 axes ofthis milling-turning center. LEM's LF 210 and LF 310 measure the current that powers the motors and generates
their torque.
The efficiency and quality of a CNC milling-turning machine
depends of its speed, its accuracy and of the control quality of all its axes. These high control performances areachieved thanks to the very high accuracy, linearity, andlow thermal drift of LEM's transducers.

2
3

LEM | Annual Report 2016/17

69

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

31.3.201731.3.2016

917
66
7
4
994

907
72
8
4
991

31.3.201731.3.2016

Institutional shareholders
Private individuals
LEM employees, managers and
board

49.9
26.7

49.4
27.0

7.0

6.6

Treasury shares
Non-registered shares
Total

0.1
16.3
100.0

Shareholders by categoryIn %LEM share
2016/172015/16

Number of sharesYear high 1
Year low 1
Year-end 1
Average daily trading ­v olume(shares) 1

1'140'000
1'199.00
807.50934.00499

1'140'000
840.00620.50815.00452

Earnings per share
Ordinary dividend per share
Market capitalization as per
31 March 1 (in CHF millions)39.11
35.00 2
1'065

38.18
35.00
929

In number of shares, CHF

1
2

Share information
SymbolListingNominal value
ISIN
Swiss Security Number (Valor)

0.1
16.9
100.0

LEHN
SIX Swiss Exchange
CHF 0.50
CH0022427626
2 242 762

ContactAndrea Borla (CFO)
Phone: +41 22 706 12 50
E-mail: investor@lem.com

Source: SIX
Proposal of the Board of Directors to the Annual General Meeting of Shareholders

Financial calendar of the financial year
1 April 2017 to 31 March 201829 June 2017

Annual General Meeting of Shareholders for the financial year
2016/17, Université de Fribourg,
bvd. de Pérolles

4 July 2017
6 July 2017
3 August 2017
9 November 2017
8 February 201823 May 2018
28 June 2018

Dividend ex-date
Dividend payment date
First quarter results 2017/18
Half-year results 2017/18
Third quarter results 2017/18
Year-end results 2017/18
Annual General Meeting of
Shareholders for the financial
year 2017/18

3 July 2018
5 July 2018

Dividend ex-date
Dividend payment date

Share price development LEM Holding SA (LEHN) compared to SMI
1400

CHF

1200

1000

800

600

400

LEHN

200

SMI

0
2.5.12

2.11.122.5.132.11.13

Source: Bloomberg

70

Annual Report 2016/17 | LEM

2.5.142.11.142.5.152.11.15

2.5.162.11.16

2.5.17

Group Subsidiaries
LEM is a global player with production plants and development centers in Beijing (China), Geneva (Switzerland), Tokyo(Japan) and Sofia (Bulgaria). The Company has a dedicated R&D Center in Lyon (France) and sales offices at all its customers' locations and offers seamless service around the globe. For a complete list of subsidiaries and offices, refer towww.lem.com > Contact > Sales Locator
EuropeLEM Holding SA
Avenue Beauregard 1
CH-1700 Fribourg
LEM International SA
Chemin des Aulx 8
P.O. Box 35
CH-1228 Plan-les-Ouates
LEM Switzerland SA
Chemin des Aulx 8
P.O. Box 35
CH-1228 Plan-les-Ouates
LEM Intellectual Property SA
Avenue Beauregard 1
CH-1700 Fribourg
LEM Management Services Sàrl
Chemin des Aulx 8
P.O. Box 35
CH-1228 Plan-les-Ouates

Asia
LEM Europe GmbH,
Succursale France
Avenue Galois 15
F-92340 Bourg-la-Reine
LEM Europe GmbH,
Succursale Italia
Via V. Bellini 7
I-35030 Selvazzano Dentro, PD
LEM Europe GmbH,
Branch UK
West Lancs Investment Centre
UK-Skelmersdale WN8 9TG
LEM Bulgaria EOOD
Iliensko Shosse 8
BG-1220 Sofia
LEM Russia, LLC
Starickoe Shosse 15
RU-170040 Tver

LEM Electronics (China) Co. Ltd
Linhe Street 28, Shunyi District
CN-101300 Beijing
LEM Japan KK
2-1-2 Nakamachi
JP-Machida, 194-0021 Tokyo
LEM Management Services Sàrl,
Branch India
Level 2, Connaught Place
Bund Garden Road
IN-411 001 Pune
LEM Management Services Sàrl,
Branch Korea
Office 2049,
Regus Business Center 20F,
Standard Chartered Bldg. 47 Chongro
Chongro-gu
KR-110-702, Seoul
North America

LEM Tech France SAS
Les Allées du Parc
Allée des Parcs 575/655
F-69800 Saint-Priest

LEM U.S.A., Inc.
11665 West Bradley Road
USA-Milwaukee, WI 53224

LEM Europe GmbH
Frankfurter Straße 74
D-64521 Groß-Gerau
LEM Europe GmbH, Branch Austria
Concorde Business Park 2/F/6
A-2320 Schwechat
LEM Europe GmbH, Branch Belgium
Egelantierlaan 2
B-1851 Humbeek
LEM Europe GmbH Denmark,Filial af LEM Europe GmbH
Haraldsvej 60
DK- 8960 Randers

LEM | Annual Report 2016/17

71

Imprint© LEM Holding SA, Fribourg
Concept and text
LEM
Gregor Communications, Zurich
DesignTGG Hafen Senn Stieger, St. Gallen
Images, illustrations
LEM
Pedro Neto
Enol Chen
Jasmin Viertl
Printing
Cavelti, Gossau

72

Annual Report 2016/17 | LEM

LEM | Annual Report 2016/17

73

LEM HOLDING SA
Avenue Beauregard 1
1700 Freiburg/Fribourg
Switzerland
Phone: +41 26 460 10 30
Fax: +41 26 460 10 39
www.lem.com
74

Annual Report 2016/17 | LEM