LEM Annual Report 2009/10
Postal address
LEM Holding SA
P.O. BOX 785
CH – 1212 Grand-Lancy 1
Visitors’ address
LEM Holding SA
8, chemin des Aulx
CH – 1228 Plan-les-Ouates
Phone +41 22 706 11 11
Fax+41 22 794 94 78
www.lem.com

Annual Report
2009/10At the heart of power electronics

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Publication No. CH 21000 E(06.10 - 2.6 HRG)
LEM Holding SA, Geneva
Phone +41 22 706 11 11
Fax+41 22 794 94 78
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ANNuAl REPORT 2009/10
Period 1 April 2009 to 31 March 2010

2

LEM at a glance

22

LEM Group49

LEM Holding SA

4Foreword

23

50

Balance sheet

6

At the heart of…

Consolidated statement offinancial position
Consolidated income
statement

51

Income statement

24

53

Consolidated statement ofcomprehensive income

Notes to the financial
statements

57

Consolidated statementof changes in equity

Proposed appropriationof retained earnings

58

Auditor’s report

59

Information for investors

60

Group subsidiaries

8

Business report

10

Values and Principles

11

Corporate Governance

18

Financial results –Summary and comment

25

26

Consolidated cash flow
statement

27

Accounting policies

31

Notes to the consolidated
financial statements

48

Auditor’s report

lEM AT A GlANCE

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

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

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

2

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

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

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

Key figures 2009/10
In CHF millions

2007/08

2008/09

2009/10

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

203.0
34.9
17.2%
30.6
21.9

196.8
29.2
14.8%
33.8
23.9

185.5
25.8
13.9%
17.5
10.5

Shareholders’ equity
Net financial assets
Market capitalization (per 31.03.)

71.2
23.7
310.5

83.5
27.9
172.4

83.4
29.8
391.0

Sales over 5 years per segment
200

Regional sales breakdown 2009/10

Asia
32%

CHF Millions

175

Rest of the World
2%

150
125
100
75
50
25

❚ Industrial Segment

0❚ Automotive Segment
05/06

06/07

07/08

08/09

09/10

North America

Europe15%

51%

Share price development LEHN Holding SA compared to SPI
400

CHF

350
300
250
200
150
100
50

LEHN

0

SPI

01/04/05 01/09/05 01/02/06 01/07/06 01/12/06 01/05/07 01/10/07 01/03/08 01/08/08 01/01/09 01/06/09 01/11/09 30/04/10

3

fOREwORd

Dear Shareholders,
LEM announced the impact of the economic crisis on our business quite
early, in November 2008. It hit us very
hard in the second half of the previous
financial year. The repor ted year
2009/10 started with the lowest quarterof this crisis period and ended with thehighest quarter ever. Talk about aunique crisis!
As an industrial components company,
the low point in Q1 was indeed difficult;bookings were down by 37% and billings down by 36% from the prior year.
Our immediate and active cost reduction and scaling-down of management
were our main tools to maintain a reasonably good profitability and at thesame time secure the future. Thisleaner company will actually benefit
from the crisis to assure an even better
sustainable future.
We closed the year with total sales of
CHF 185.5 million, an operating EBIT of
CHF 25.8 million and a net profit for theyear of CHF 10.5 million, beating thelast outlook statements in sales and inoperating EBIT.
In Q4 sales (CHF 58.4 million) andbookings (CHF 78.3 million) were an alltime record.

Focus on LEM’s strategic
drivers for the business
LEM has benefi tted from its strategic
focus on the 4 market drivers publishedover the last years, (1) the need formore and renewable energy, (2) theneed for reliable energy, more controls
and standby battery management, (3)the need for better energy efficiencies,
increasing demand for more efficient
motor controls, and (4) the need formore mobility, and a shift towards
energy friendly solutions for public
transport.

4

As a pure play components company,
we have been able to position ourselves as the best provider of criticalcurrent and voltage measuring components to many customers, as the strategic partner LEM-Inside, and gain
market share on a global scale.

“Green cars” are attracting more interest than ever. LEM has focussed its
development in those markets, forenergy efficiency, battery management
and motor controls, especially in hybrid
and electrical cars.

As a company with one core technology but focussed on many markets,
our diversification has allowed tempering the extremes in the downturn.
Some markets are in the early economic cycle, others in the later stage.

Acquisition of Danfysik
ACP

Continued focus on new
business opportunities

LEM Danfysik was born in July 2009, tosupport us in the new domain of very
high precision transducers. As a smallbolt-on acquisition, based in Copenhagen, Denmark, the integration into the
LEM family happened quickly. We now
have reached full integration in thecommercial, logistics, quality, fi nanceand R&D area. We have already started
to accelerate the development of new
products in the fi eld of high precisiontransducer products in order todevelop new businesses.

Renewable energies have gained significant momentum over the last years.
Wind energy has reached a sustainablebusiness level worldwide and LEM’srange of products that control the position of the blades and measure the current in the power inver ters thattransform the energy supplied to thegrid have been very successful.
Solar energy has also gained a lot ofgrowth momentum due to the pricedecrease of the silicon cells producedin very high volumes and the various
government subsidies that are awarded
in many countries. A new set of global
players and customers for LEM is being
formed. LEM has created and isactively creating new products for different solar applications. The energy
generated by the sun is in DC (direct
current) form and needs to be transformed to AC (alternating current) to becompatible with the power grid. Ourtransducers are used in various stepsof this process. They can measure theDC current at the solar panel level. The
power electronics in the inverter process rely on the signals coming from thetransducer to ensure quality and flow to
the grid. Another application is tomeasure the leakage current to ensure
the safety of the system.

After a long period of commercial
cooperation, the Danish entity came up
for sale.

Succession of the CEOPaul Van Iseghem, the President andCEO of LEM, has decided to retire by
the end of 2010 after some 10 years
with LEM. Initially Paul was a Board
member, then President of the Components Division, and for the last 5 years
President and CEO of the LEM Group.
Paul has earned a high reputation for
his leadership and successful development of the company. Since the divestment of LEM Instruments in 2005, Paul
Van Iseghem has been leading thecompany successfully during an
impressive phase of profi table growthand shareholder value creation. Noteworthy are the expansion in new markets, in particular China, and in new
applications such as renewable energies. The Board of Directors gratefully

recognizes his outstanding achievements and the excellent performanceof LEM throughout the years of his
mandate.
We are happy to announce François
Gabella as the succeeding CEO of
LEM. He will assume this role as of 1
July, 2010. The Board is confident that
his broad experience gained in various
management functions as well as his
personality are a guarantee for the continuation of the strong executive leadership and the future prosperity of thecompany.

Proposals to the Annual
Shareholders’ Meeting
Last year we were able to pay out adividend of CHF 10.00 per share to ourshareholders.
In line with our policy to return 25% to
50% of the consolidated net profit for
the year to our shareholders the Boardof Directors will propose the paymentof an ordinary dividend of CHF 5.00 per
share. In view of the positive outlook forfurther profitable growth of the company and of the significant potential toincrease the financial leverage in thebalance sheet of LEM, the Board of
Directors will propose in a first step the
payment of an additional extraordinary
dividend of CHF 15.00 per share. As asecond step, the Board of Directors
intend to launch a share buy-back program on a second line of trading tostart in summer this year. This program
shall be in the amount of up to CHF 15
million and extend over a period of
maximum two years.

We would especially like to thank ourmanagers and employees worldwide
for their extra efforts during the crisisand their dedication to LEM. They haveenabled us to be where we are today.
Thanks also to our customers for theirtrust in our products, competence andcooperation.
We would also like to thank our shareholders for the continued faith that theyshow in LEM.

Following the recommendation of
LEM’s second largest shareholder,
7-Industries Holding BV, the Board of
Directors proposes the election of Dr.
Ilan Cohen as a new Director. Israel andBelgium national, Ilan Cohen is President and CEO of the Israel based companies Servotronix Motion Control Ltd
and Servotronix Motion Systems Ltd.

Thanks
LEM had a challenging year, but wehave come out of the recession with astronger position and an increased
market share.

Felix Bagdasarjanz
Chairman of theBoard of Directors

Paul Van Iseghem
President & CEO

5

AT ThE hEART Of…

Medical Scanners
Magnetic resonance imaging (MRI) is a
medical imaging technique most commonly used to visualize the detailed
internal structure of the body. It is a relatively new technology. The first MR
image was published in 1973.
MRI provides a much greater contrast
between the different soft tissues of the
body than computed tomography
does, making it especially useful inneurological, cardiovascular and oncological (cancer) imaging.
In clinical practice, MRI is used to distinguish pathologic tissue (such as abrain tumor) from normal tissue. One
advantage of an MRI scan is that it isharmless to the patient. It uses strong
magnetic fields and non-ionizing radiation in the radio frequency range, unlike
CT scans and traditional X-rays which
both make use of ionizing radiation.
How it works
The body is largely composed of watermolecules which each contain twohydrogen nuclei or protons. When aperson goes inside the powerful magnetic field of the scanner, the magnetic
moments of these protons align with

ITL 900

6

the direction of the field. A radio frequency electromagnetic field is thenbriefl y turned on, causing the protons
to alter their alignment relative to thefi eld. When this fi eld is turned off the
protons return to the original magnetization alignment. These alignmentchanges create a signal which can bedetected by the scanner. The frequency at which the protons resonate
depends on the strength of the magnetic field. The position of protons in
the body can be determined by applying additional magnetic fields during
the scan which allows an image of the
body to be built up. These are createdby turning gradient coils on and off
which creates the knocking sounds
heard during an MRI scan.
The magnetic field is generated by 3
gradient amplifiers that increase theenergy signal before it reaches the gradient coils. They are capable of creating a precise magnetic field that willneed to vary depending on the location. The 3 coils are perpendicular toeach other in order to reproduce a 3
dimensional image. One LEM Danfysik
ITL 900 transducer is used for each
gradient amplifier.

The ITL 900 measures and assures theprecise level of electric current going to
the gradient amplifiers used to generate
the magnetic field. The precision of thecurrent measurement is a critical factor
to be able to generate the optimal magnetic field according to the position of
the patient and the body part to be
imaged.
The current measurement has a direct
impact on the quality of the image andif it is not precise enough will lead to a
blurred and illegible image. The LEM
Danfysik ITL 900 current transducer
sets a new standard for accuracy andis the most precise industrial product inthe market today. The transducer provides a new level of stability and precision, which is at about 1–3 parts per
million. This is why the large majority of
the MRI manufacturers have chosen it
for their scanners.

Plasma Arc Welding
The plasma arc welding process wasintroduced to the welding industry as amethod of bringing better control to thearc welding process in lower current
ranges. Plasma provides an advanced
level of control and accuracy to produce high quality welds in miniature or
precision applications and to provide
long electrode life for high production
requirements.
The plasma process is equally suitedfor manual and automatic applications.
It is used in a variety of operations
ranging from high volume welding ofstrip metal, to precision welding of surgical instruments, to automatic repair of
jet engine blades, to the manual welding of kitchen equipment for the foodand dairy industry.
Plasma is a hot ionized gas. The characteristics of plasmas are significantly
different from those of ordinary gases
so that plasmas are considered a distinct “fourth state of matter”. The
plasma arc welding process uses thisplasma to transfer an electric arc to awork piece. The metal to be welded ismelted by the intense heat of the arc
and fuses together.

By forcing the plasma gas and arc
through a constricted opening, thetorch delivers a high concentration ofheat to a small area. With high performance welding equipment, the plasma
process produces exceptionally highquality welds.
HAS

The LEM product HAS measures thelevel of current that is used to heat theplasma. The precise control of this current is critical to ensure a good andstrong weld that will hold well. Plasmaarc welding will use high current levels
any where between 100 and 600
ampere. Depending on the type ofmaterial used and the kind of the object
to be welded, a special current profile
must be maintained to ensure a highquality weld. This is the role of LEM’stransducers.
The HAS product is designed especially for this harsh industrial environment. It is almost immune to externalinterferences and operates at a temperature range anywhere between–40° C and +85° C. Its small size andeasy installation make it the choicesolution for most plasma arc welding
machines.

7

BusiNEss REPORTThe year started in the midst of the economic recession,and ended up exceeding expectations
The fiscal year started with a net loss in quarter 1; after that both the results in operational EBIT and net profit recovered quarter by quarter and finished quite well inline with the rapid increase in sales. Quarter 4 over quarter 1 sales increased by an
unprecedented 64%. In quarter 4, the book to bill is at 1.34, indicating further substantial growth.

In CHF millions

Q1

Q2

Q3

Q4

2009/10
Total

Orders received
Sales
Operational EBIT
Net profit

36.4
35.6
3.2
(1.3)

47.1
43.2
5.4
2.9

54.8
48.3
7.4
3.9

78.3
58.4
9.8
5.0

216.6
185.5
25.8
10.5

We managed to keep our overhead
costs (SG&A) in control; whilst we substantially reduced the base SG&A cost(by 7MCHF annualized), the level
increased to above 30% to sales in the
midst of the crisis. By Q4 we scored at
the lower end of 26% to sales.

business cycle or in the later part of abusiness cycle. This diversification
helps LEM to even out the extremes ofthese cycles. We have also set upsome new leading indicator parametersthat will help us increase our reactivity
to the market.

The share price climbed from CHF
149.90 to CHF 340 per share, which
made a major correction in the financial
provisions for the stock option plans of
CHF 8.3 million.

The Industrial Segment –Industry is leading the way
Sales in the Industrial Segment were
CHF 170.8 million, which is a decreaseof 6% compared to the previous year.
We have seen the results start to pickup gradually as of the second quarter.
The fourth quarter was a record one forLEM. Sales in Q4 compared to Q4 oflast year were up by 41%.

Strategy reconfirmed
The depth of the economic crisis
caused us to raise questions about thelong term strategic sustainability of ourbusiness. As a pure play components
company, LEM is subject to thedemand profile of our customers,
which is to some extent enhanced bytheir actions to change their inventory
levels. At bookings level, we have experienced drops of more than 50%, evenworse in some areas.
We are more than ever convinced thatour business strategy and our “fourstrategic drivers for growth” will produce enough organic growth to ensurea healthy company. The entire domainof Power Electronics is a robust andfast growing economic area. We have athorough understanding of the various
markets – whether they are in an early8

The operational EBIT reached CHF
26.8 million, which is – 14% compared
to last year. The Q4 comparison to lastyear’s Q4 was + 104%.
The INDUSTRY market experienced
the first two quarters of the year withcrisis driven low sales. We did see
a significant pick up as of the third
quarter and even acceleration in the
fourth quarter. Sales increases for thelast two quarters were Q2 to Q3 of 15%
and Q3 to Q4 of 28%. This is mainly
due to the electric motor drives business, which remains the main market
for LEM with more than a third of sales
in the Industry market and which isback to pre-crisis levels. The second
driver for the exceptional growth has

been the renewable energy, which
nearly doubled compared to pre-crisis
levels. It now represents 18% of thetotal Industry sales. Business in thephotovoltaic market was over 50%
higher than pre-crisis levels. The main
countries for this market have been
China, Germany, Italy, Japan and Switzerland. The medical market is noteworthy as LEM transducers are present
in MRI scanners. Sales more than doubled over the year due to the acquisition of LEM Danfysik, though still
remaining a modest contributor.
The TRACTION market is typically alate-cycle business and hence was
impacted by the crisis later than theother markets and is recovering slower.
Annual sales decreased by 5%. In
Europe, Russia and North America,
projects were delayed due to the highpublic debts and market weakness,leading to a drastic decrease in production of freight trains. In otherregions, in particular in China the public
investment level was raised substantially. As our market share could
increase significantly, we enjoyed agrowth of 113% year on year.
The ENERGY & AUTOMATION market
has also been heavily impacted by thecrisis. Year on year we noted adecrease of 17%. This business isbased on the roll-out of investment
projects. Typical products for this market are transducers used in factory
automation with an additional functionality that can communicate to a microcontroller. It also includes Wi-LEM, theWireless Local Energy Meter productand the Battery Monitoring product forstandby industrial batteries used in critical applications. The latter sales havemore than tripled in the last year – stillcoming from a small base.

The Automotive Segment –Green cars are coming
Sales for the Automotive segment were
CHF 14.7 million, this is almost thesame level as the previous year of CHF

14.9 million. Starting from a very low
quarter 1, due to the economic crisis,
sales grew steadily to reach a quarter 4
level 70% above Q1. The operational
EBIT is still negative, CHF – 1.0 million.
LEM has invested in the Automotive
market over the long term with its coretechnology and we are slowly seeing
the success within the so called “greencars”, which tend to be hybrid electricand electric vehicles. The battery management business has grown substantially, with new platforms ramping up
production. They provide a continued
growth momentum as the batteries
play a more active role in the energy
management of a car. In addition the
motor control business is now picking
up. Here, we are in the controls for theelectrical motors in hybrid and pure
electrical cars. LEM has acquired agood market share in the initial designins. The value of this new business issubstantially higher per car than theclassical car.
Regional focus
In this past year the regions have eachbeen affected by the crisis differently.
Asia was only touched for a very brief
period and sales have increased by
15% compared to the previous year.
China has been the main driver assales have increased by 41% comparedto the previous year.

Cost and capacity management
In this year unlike any other we have
kept a stringent control over all our
expenses. In summer 2008 we had
introduced strict costs controls, hiring
stops, and a bit later shor t-term
employment programs where ever reasonably possible. Our sites in Geneva
and Machida could receive the welcome help of the local governments.
LEM’s manufacturing capacity increasein the second half of the year has beenslowed down by the supply shortage ofcritical components. LEM is using special components having a limited
number of sources and hence supply
has been a serious limiting factor. During the economic crisis, many of our
suppliers reduced their capacities anddid not ramp up fast enough.
In September 2009 we opened a stateof the art 10’000 m2 facility in Beijing
China. This site will ensure the continued development of the global market
for LEM. Like all other production sites
in Geneva (Switzerland), Copenhagen(Denmark) and Machida (Japan) the
quality of our products remains “madeby LEM” with a unified highest level ofoperational performance.
Investment in the future
We have continued our investments forthe future of LEM.

The North American region has beenheavily impacted by the crisis and sales
decreased by 14% compared to thelast year.

Our Research and Development
budget remains high with 6.2% of sales
this year. We have started to expand
our team in Beijing.

Sales in our main European market
have also suffered from the recession
and have decreased by 12% comparedto the last year.

The recent acquisition of LEM Danfysik
brings an additional experience in thevery high accuracy area and LEM has
started to leverage on this for the
future.

The BRIC countries have also had
mixed per formances: Bra zil has
decreased significantly, almost by half,
China as mentioned was doing very
well, India increased by 19% and Russia decreased by 22%.

In the Industry market, the new ITL
4000 product allows the precise current monitoring of high-voltage DC
lines, typically needed for energy production in remote sites like off-shore
windmills.

In the Energy & Automotion market, we
completed the battery monitoring products por tfolio, and launched the
Rogowski RT coil (patented), setting
the new benchmark expected by themarket for accurate energy consumption measurement.
Outlook
We are currently enjoying a very highbookings level, which is coming fromthe traditional and robust drives market
and from the renewable energy market.
We are also expecting a start of production for various new projects in theautomotive segment. We are confident
to begin the year on a high note, above
Q4 in billings. The rest of the year
remains unclear and is not yet predictable. The global financial uncertainties
have not been removed; they do influence the levels of growth and industrial
investment as well as the various
exchange rates.
We firmly believe that the four strategic
drivers for our business give us anadvantage in the present economy:• T he need for more energy and thedemand for more renewable energy• T he need for reliable energy andmore controls and standby battery
management• The need for better energy efficiency,
increasing the demand for the more
efficient motor controls• T he need for more mobility (public
transport and automotive) with a shift
to more energy friendly solutions
In addition, we will maintain our clear
focus on cost control and the operational priorities.
The financial strength of LEM also
allows us to continue to build up newmarkets and applications and continue
to invest in the development of promising new business.

9

VAluEs ANd PRiNCiPlEs

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

10

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

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

CORPORATE GOVERNANCE

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

1 Group structure andshareholders
Group structure
LEM Holding SA is domiciled at 8,
Chemin des Aulx in CH-1228 Plan-lesOuates, Geneva. LEM’s registeredshares are listed on the main segment of
the SIX Swiss Exchange (LEHN, security no. 2 242 762; ISIN 0022427626).
On March 31, 2010, the market capitalization was CHF 391 million.
The LEM Group is structured into theIndustrial Segment and the Automotive
Segment. Appropriate segment reporting pursuant to IFRS is contained on
page 31 of the notes to the consolidated financial statements. All companies in the LEM Group are listed under“scope of consolidation” on page 46,
where the company names, registeredoffices, share capitals and the relevant
percentages of shares held are indicated. There are no other listed companies in the scope of consolidation.
Significant shareholders
On 31 March 2010 the following shareholders held 3% or more of the sharecapital and voting rights:

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

2 Capital structure
Capital and shares
The nominal value of the share capitalof LEM Holding SA is CHF 575’000,
which is divided into 1’150’000 fully
paid-up registered shares with a parvalue of CHF 0.50 each. There are noshares with preferred voting rights. All
shareholders are entitled to the same
dividends.
Detailed information about the capital
structure in the last three years isshown in LEM Holding statutor yaccounts on page 52.
There are no restrictions on the transferof shares. In order to be registered in
the share register, each shareholder
shall declare that he holds the sharesfor his own account.
On 31 March 2010, LEM Holding SA
held 5’232 treasury shares and 30’000
options on shares.
Authorized and conditional capital
There is no authorized or conditional
capital, nor are there any profit sharing
certificates or participation in certificates or any convertible bonds outstanding.

Shareholder
WEMACO Invest AG, in Zug and Werner O.Weber, in Zollikon, Switzerland
7-Industries Holding B.V., in Amsterdam, Netherlands
Threadneedle Asset Management Holding Ltd, in London, United Kingdom
Sarasin Investmentfonds AG, in Basel, Switzerland
Erwin Studer and Joraem de Chavonay SA, in Zollikon / Zug, Switzerland
Impax Asset Management Ltd, United Kingdom

27.4%
12.6%
10.6%
8.8%
6.0%
4.5%

Information on the Performance SharePlan and the stock option plans is provided below under Section 5, “Compensation and Shareholdings”, under
the Note “Stock option plans, Performance Share Plan” on page 40 and in
the notes to the LEM Statutor y
Accounts on page 55.

3 The Board of Directors
Election, terms of office and crossinvolvement
The Board of Directors is comprised ofat least three members who are individually elected at the ordinary shareholders’ meeting for a mandate of one year,
which is renewable up to an age limit of
70. The Board constitutes itself and the
Chairman is nominated by the Board.
At the ordinary shareholders’ meetingon 26 June 2009, Felix Bagdasarjanz,Peter Rutishauser, Anton Lauber andUeli Wampfler were re-elected as members of the Board of Directors. Felix
Bagdasarjanz maintained the Chairmanship. All of the members of theBoard are non-executive and have at
no time been part of the executive
management of LEM. Furthermore,they have no significant business connections with the LEM Group.
Internal organizational structure
The Board of Directors meets as often
as necessary, but five to six annual
meetings are planned in advance. In
the completed financial year, seven fullday meetings and four half-day preparatory meetings were held. Additionally,
several ad hoc conference calls took
place during the year. The meetings
usually take place at the company’s
headquarters. The Chairman, after
consultation with the CEO, determines
the agenda for the Board meetings.
The members of the Board of Directors
can ask for additional items to be
included. The Board members receive
supporting documents beforehand
which allows a good preparation of the11

CORPORATE GOVERNANCE

The Board of Directors obtains theinformation required to perform its
duties through several means:• T he Board of Directors receives
monthly and quarterly reports on thecurrent development of the business.
• Informal meetings and teleconferences are held as required between
the Chairman and the CEO as well as
between the Chairman and individual
members of the Board.
• T he Committees meet at regularintervals and exchange detailed information with the Management.
• The Board receives detailed information to each agenda item one week
before the board meeting.
• At least once a year a session is heldin the Board meeting including all
Senior Managers.
The Board of Directors

meeting. As a rule the CEO (and formost of the agenda items also the CFO)
attend the meetings of the Board of
Directors without having a right to vote.
Depending on the issues, other members of Senior Management participate
in the meetings in order to respond to
specific questions. Decisions can betaken by the Board if at least half of the
Directors are present, and a simple
majority of them is sufficient. In theevent of deadlock, the Chairman has
the casting vote. Minutes of the meetings including decisions taken are prepared by the outside Secretary of theBoard and distributed to the membersof the Board, the CEO and the CFO.
The Board of Directors reflects, in its
working procedures, the efficiency andeffectiveness of the teamwork as wellas its interaction with the managementof the company on a regular basis.
Regular feedback-sessions at the endof a meeting provide valuable inputs forthe continuous improvement of theBoard’s coherence and leadership.
Definition of areas of responsibility
The Board of Directors delegates the
management of the company to the
CEO to the fullest extent permitted

12by the Swiss Code of Obligations. The
Board of Directors reviews and asses­
ses at least on an annual basis andtakes decisions in the following areas:• Review and approval of the strategy,
business plan, annual business objec­
tives and budget for the LEM Group.
• A pproval of creation/closing of any
subsidiary and purchase/sale of any
interest in any company or entry into
any merger or joint venture agreement.
• A ppointing/dismissing of the Senior
Management.
• M onitoring the ethical and legal
behavior of LEM.
• Reviewing of human resources management, especially co-worker satisfaction and management development and legal, intellectual property,social & environmental aspects.

Information and control systemsof the Board of Directors vis-à-vis
Management
The Board of Directors ensures that it
receives sufficient information from the
Senior Management to perform its
supervisory duty and to make the necessary decisions.

Business risk management
In compliance with Art 663b of the
Swiss Code of Obligations, LEM is using
a standardized procedure to analyze its
business risks. LEM’s risk management
covers all types of risk: financial, operational and strategic – up to the externalbusiness environment, compliance andreputational aspects.
The Senior Management conducts anannual risk analysis. The results andconsecutive action plans are thereafter
presented to and formally approved by
the Board of Directors.
The risk management approach follows
five steps: In a first step, potential hazards are evaluated and a consensual
list with 10–15 main hazards is set up.
In a second step, each hazard is asses­
sed by a multiplication of probability
with frequency. Step two results in a risk
map which visualizes LEMs potential
risk environment. In step three anaction plan is put in place to reduce therisks. The hazards thereaf ter are
revalued a second time, taking into
consideration the action plans. In step
four the action plan is validated andthereafter monitored on a monthly
basis (step five).

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

CH Nationality
Born – 1945
Chairman
Entry – 2002
Member NCC

CH Nationality
Born – 1951
Member
Entry – 2004
Chairman NCC

Felix Bagdasarjanz

Peter Rutishauser

Education
Dr. of Electrical Engineering, ETH Zurich

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

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

Professional background
Since 1989, independent businessman

CH Nationality
Born – 1956
Member
Entry – 2003
Chairman AC

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

Anton Lauber

Ueli Wampfler

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

Education
Lic. oec., University of Zurich
Certified auditor

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

CH Nationality
Born – 1950
Member
Entry – 2007
Member AC

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

AC = Audit Committee
NCC = Nomination and Compensation Committee

13

CORPORATE GOVERNANCE

Internal control system
In compliance with Art 728 a/b of the
Swiss Code of Obligations, LEM has
put in place an internal control system.
Starting from the material positions in
the financial result of the Annual
Report, the important underlying processes and process owners have been
identified. For each process, key risks
that could lead to errors in the financial
reporting have been identified. For
each key risk, key controls have been
defined and responsibilities assigned toassure effective compliance and documentation of the key controls. The
process has been presented to andapproved by the Audit Committee.
Looking forward, the process owners
will perform an annual process review
whereby identified weaknesses shall be
continuously improved and key risks
and controls shall be updated. Basedon the input of the process owners the
CFO prepares an annual report on theinternal control system which is presented to and discussed with the Audit
Committee.
Committees
Two standing committees support theBoard of Directors. They are comprisedof two non-executive and independent
members of the Board of Directors.
They meet whenever necessary but atleast twice a year.
•T he primary objective of the Audit
Committee (AC) is to provide theBoard of Directors with effective support in financial matters, in particular
the selection and supervision of theexternal auditor, assessment of theeffectiveness, compliance and clarityof the Group financial reporting andthe assessment and preparation of
the financial reports to the shareholders. Furthermore, it reviews criticalaccounting policies, financial control
mechanisms and compliance withcorresponding laws and regulations
as well as the development and continuous improvement of the internal
control system. If required, the exter-

14

nal Group auditors are invited to participate at the meeting. The ACprepares proposals to be decided by
the Board of Directors. In the completed financial year four half-day
meetings were held.
• The Nomination and Compensation
Committee (NCC) deals with succession, recruitment and compensation of the members of the Board of
Directors and the Senior Management. It ensures and monitors the
personnel development plan andadequate succession planning for the
middle and top management. It
reviews and updates the performance based compensation system for
the Senior Management. The NCC
prepares proposals to be decided by
the Board of Directors. In the completed financial year three half-day
meetings were held.

4 Senior Management
None of the members of the Senior
Management have other activities ingoverning or supervisory bodies, any
official functions or political posts nor
any permanent management functions
for important Swiss and foreign interest
groups.
Management contracts
There are no management contracts
with companies or individuals outside
the LEM Group.

5 Compensation andshareholdings
Board of Directors
General principles
Remunerations for the Board of Directors are approved by the Board of
Directors based on recommendations
by the Nomination & Compensation
Committee (NCC).
The remuneration of the Board of
Directors is reviewed on an annual
basis.

The Board of Directors has decided toadopt a remuneration scheme with afixed fee paid in cash in the amount of
CHF 120’000 for the Chairman and
CHF 60’000 for a member. Committee
activity will be compensated with CHF
30’000 for the Committee’s chairman
and with CHF 20’000 for its members.
There will be no additional variable
compensation nor any participation in
an equity based compensation plan.
The members of the Board of Directors
are requested to hold for their own
account a minimum of 1’000 shares.
Compensation of former members
In financial year 2009/10, no compensation was paid to former members of
the Board of Directors.
For more details on financial compensation, see note 18 “Stock option plans,Performance Share Plan” on page 40
and the notes of LEM Holding Statutory
Accounts on page 55.
Senior Management
General principles
Remunerations for the Senior Management are approved by the Board of
Directors based on recommendations
by the CEO and the Nomination & Compensation Committee. The remunerationof the CEO is proposed to the Board of
Directors by the Chairman and decided
in a private meeting of the Board.
The remuneration of the Senior Management is reviewed on an annual basis.
The total annual compensation for the
Senior Management consists of a fixedbase salary and a performance related
cash bonus (LEM Incentive System).
LEM Incentive system
The LEM Incentive System (LIS) consists of two parts:• LIS part 1: performance related to theindividual’s function and responsibility.
• L IS part 2: performance related to
LEM group.

Members of the Senior Management
The Senior Management was comprised of the following members on 31 March 2010:

Paul Van Iseghem

Julius Renk

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

Nationality: German
Education: Lic. oec. HSG,
CEMS Master in Int’l Management
Born – 1970
Function: CFO
With LEM since 2009
Previous companies and positions:
Financial positions with RTL Group,
AB Enzymes

Hans-Dieter Huber

Luc Colombel

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

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

Simon Siggen

Eric Favre

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

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

For the LIS part 1, annual objectives areagreed between the manager and his
superior at the beginning of each business year and a final review is performed at the end of the year. The
objectives as well as the performance
evaluation are approved by the nextlevel superior. The final approval is givenby the Nomination and Compensation
Committee (NCC) of the Board of Directors, in the case of the CFO by the Audit
Committee (AC). Objectives and performance evaluation of the CEO areagreed between the CEO and the Chairman of the Board of Directors and they
are approved by the Board of Directors.
The maximum value of the annual

bonus related to LIS part 1 is 35% of thebase salary for the Senior Management,
30% for the CFO and 60% for the CEO.
The LIS part 2 is an annual bonus
which is based on the performance of
LEM evaluated over a period of threeconsecutive years. The performance isevaluated by determining the Economic
Value Added (EVA) cumulated overthese three years. The definition of the
EVA objective takes place at the beginning of year one and the evaluation of
the performance at the end of year
three determines this last year’s annual
bonus. Once the forward looking EVA
objective is defined, the EVA objective
remains unchanged over the period of

three years. Every year, the new threeyear objective for the cumulated EVA isdefined and kept unchanged over therespective three year period. The
bonus payment takes place every year
based on the comparison between the
EVA objective defined three years
before and the performance achievedat the end of the three years period.
The EVA objectives are set yearly by
the Board of Directors, based on the
proposal by the NCC. The maximum
value of the annual bonus related to LIS
part 2 is 25% of the base salary for the
Senior Management, 20% for the CFO
and 40% for the CEO.

15

CORPORATE GOVERNANCE

The bonus payments are made in cash
and in the first quarter of the new fiscal
year based on the annual accounts andthe personal performance review conducted by the direct superior andapproved by the next level superior.
For more information on the previous
Performance Share Plan and on theprevious Stock option plans, see note
19 “Stock option plans, Performance
Share Plan” on page 40 and the notesof LEM Holding Statutory Accounts on
page 55.
Compensation of former members
In financial year 2009/10, no significant
compensation was paid to a former
member of the Senior Management.
Pensions and Healthcare Plans
Pension benefits at LEM are designed
to provide and contribute to a reasonable level of retirement income reflecting
the number of years of service with
LEM and also to help in the case of disability or death.
As a general policy, the level of pension
benefits provided to employees iscountry-specific and is influenced by
local market practice and regulations.

A global management meeting

16

The pension and healthcare benefits inthe main countries where LEM operates
are described in more detail below.
LEM in Switzerland
The LEM pension plan operates adefined benefit plan that provides
retirement benefits and risk insurance
for death and disability. The insured
salary is based on LPP Swiss law andis without limitation on the amount. The
pension fund is funded by contributions
from the company and the insured
employees. The average contribution
for the employee is 40% and 60% for
the company. You can find more information in the notes under retirement
benefit obligations.
LEM does not provide healthcare benefits to its employees in Switzerland.
LEM in China
The pension plan is a government plan.
Both company and employee pay acertain percentage of a fixed amountfor the insurance each month.
The healthcare plan is both government and company funded.

LEM in Japan
Only the government plan prevails.
The labour insurance (injury or disease
regarding work) and health insurance isfor all employees.
The regular employees are included in
the pension programs. There is a special pension fund for Directors.
LEM in Germany
In addition to the legally required pension and health insurances, the company pays into an insurance pension
plan for employees.

6 Shareholders’participation rights
The rules on Shareholders’ participation rights are outlined in the Articles ofIncorporation. The rules for the convening of shareholders’ meetings, the participation rights and the majority rules
for decisions are all following the Swisslaw. The complete Articles of Incorporation can be downloaded from theInvestor Relations pages on the internet
page www.lem.com.

Voting rights and representation
restrictions and inscription in theshare register
There are no limitations on voting rights
for shareholders who are entered into
the shareholders’ register with voting
rights. Anyone purchasing registeredshares is registered by the Board of
Directors in the share register onrequest as a shareholder with voting
rights, provided he expressly declaresthat the shares have been bought andwill be held for his own account.
Each shareholder may be represented
by the representative of the Company,by the independent representative, orby a third party who need not be ashareholder of LEM Holding SA.
Statutory quorums
The Articles of Incorporation contain no
deviation from the applicable law.
Convocation of the general meetingof shareholders
Shareholders registered are convened
to shareholders’ meetings by ordinary
mail and by publication in the Swiss
Official Gazette of Commerce at least
20 days prior to the day of the meeting.
Any shareholder who, on the day determined by the Board of Directors, is registered as a shareholder has the right toattend and vote at the shareholders’meeting.
AgendaAccording to Article 10 of the Articles ofIncorporation, one or several shareholders who collectively hold 10% of
the share capital can call for a shareholders’ meeting and submit matters to
be placed on the agenda.

7 Change of control anddefensive measures
Duty to make an offer
In accordance with Art. 32 of the Swiss
Federal Act on Stock Exchanges andSecurities Trading (SESTA), any shareholder who exceeds 33.3% of the control of the company has to make apublic offer for all outstanding shares.
The Articles of Incorporation of thecompany do not provide for any exceptions to this rule.
Clauses of changes of control
There is no particular clause in the Articles of Incorporation for changes ofcontrol. If dismissed in the case of achange of control of the company, threemembers of the Senior Management
will receive additional severance payments equal to 6 months remuneration.

8 Auditors
The Group auditors Ernst & Young Ltd,
Geneva were appointed in 2005 initiating their mandate with the financial year
2005/06. The responsible partner since2005 is Hans Isler.
Ernst & Young charged the following
fees for professional services rendered
for the 12 month period ending March
31, 2010:
Type of service
In CHF thousands
Audit services
Tax services
Other services
Total

Dividend policy
The aim is to pay out 25–50% of the
net profit in the form of dividends, to be
decided by the Board of Directors.

2009/10
280
480
272
1’032

of Directors. In particular, the Audit
Committee evaluates the performance,
fees, and independence of the auditors.
The auditors report on the results of
their audits both orally and in writing.
Financial statements as well as management letters are discussed in the
Audit Committee in the presence of theexternal auditors.
D u r ing 20 0 9/10 Er nst & You ng
attended two regular Audit Committee
meetings.

9 Information policy
LEM informs its shareholders on thebusiness status and its results on aquarterly basis. After the first six
months a half-year report is published.
This report, as well as the Annual
Report, is distributed to all shareholders inscribed in the share register andmade publicly available on its website
www.lem.com. Once a year, LEM holds
a presentation for the media and financial analysts. Internal processes assurethat price-sensitive facts are publishedwithout delay in accordance with thead hoc publicity rules of the SIX Swiss
Exchange.
At www.lem.com, detailed information(e.g., the Articles of Incorporation,interim and annual reports, investor
presentations, as well as important
dates) is available.
Contact for investors and media:
Julius Renk, CFO
8 chemin des Aulx
CH-1228 Plan-les-Ouates
or send an e-mail to investor@lem.com(phone: +41 22 706 12 30).

Other services include due diligence
services and consulting services related
to the acquisition of LEM Danfysik.
Evaluation and control of the auditors isdone by the Audit Committee whichmakes recommendations to the Board

17

financial results

SalesOperating expenses

LEM sales decreased by 5.7% to CHF
185.5 million in 2009/10. There was anunfavorable foreign currency impact of
3.1% in 2009/10. At constant exchange
rates the sales decrease would havebeen 2.6%. The currency impact stems
mainly from the unfavorable EUR and
USD development during the year.

The operating expenses (includingR&D) of CHF 54.6 million stayed in linewith the previous year (CHF 56.8 million). As a percentage of sales, the ratio
increased from 28.9% to 29.4%.

Gross margin
The gross margin decreased by 0.3
percentage points to 43.4%. The main
reason for this is the lower sales volume which led to a negative leverage
effect (underutilization of the fixed
costs).

The R&D expenses increased by 6.7%
in 2009/10 to CHF 11.5 million (prioryear CHF 10.8 million). The sales ratio
increases to 6.2% (prior year 5.5%).
The valuation of the liabilities for stock
option plans (SOP) at the share priceof CHF 340 on 31.03.2010 (31.03.2009
CHF 149.90) led to an increase of liabilities below operational EBIT of CHF 8.3
million. In 2008/09, this liability had
decreased by CHF 4.6 million.

April to March
In CHF thousands

2009/10

2008/09

Sales
Cost of goods sold
Gross margin

185’512(105’076)
80’436

196’813(110’788)
86’025

Sales expense
Administration expense
Research & development expense
Other expense
Other income
Operational EBIT
Additional SOP costs/income(19’757)(23’583)(11’542)(252)
504
25’807(8’285)(22’925)(23’183)(10’820)(111)
232
29’2194’622

EBIT

17’522

33’841

Financial expense
Financial income
Foreign exchange effect

(419)
372
(1’308)

(516)
318
(792)

Profit before taxes

16’16732’851

Income taxes(5’635)(8’926)

Net profit for the year

10’532

23’92519

Financial Results

Net sales
200

Gross margin
100

CHF Millions

Operating expense (incl. R&D exp.)

CHF Millions■ % of Sales

50%

60

45%

50

45%

40%

40

40%

35%

30

35%

30%

20

30%

25%

10

25%

20%

0

CHF Millions■ % of Sales

50%

90

175

80
150

70
125

60

100

50
40

75

30
50

20
25

10

0

0
05/06

06/07

07/08

08/09

09/10

05/06

R&D expense
15

06/07

07/08

08/09

09/10

Operational EBIT

CHF Millions■ % of Sales

12%

40

CHF Millions■ % of Sales

6%
6

40
30%

35

9

06/07

07/08

08/09

09/10

EBIT

12
9%

20%
05/06

CHF Millions■ % of Sales
30%

35

30

25%

30

25%

25

20%

25

20%

20

15%

20

15%

15

15

10%

10%
3%

10

10

3

5%

5
0

0%
05/06

06/07

07/08

08/09

05/06

Net earnings
25

0%

0

09/10

06/07

07/08

08/09

CHF Millions■ % of Sales

14%

40

12%

35

0%

0

09/10

Net financial assets

5%

5

05/06

06/07

07/08

08/09

09/10

Equity & Equity ratio

CHF Millions

100

CHF Millions■ % of Assets

90

20

80%
70%

80
10%

30

60%
70

25

15

50

20
6%

10

40%

40

15
4%

50%

60

8%

30%

30
10

20%

5

20

0
05/06

06/07

07/08

08/09

2%

5

0%

0

09/10

All the figures reflect continuing operations only.
Figures 2008/09 after restatement IFRIC 14.

20

10%

10
0
05/06

06/07

07/08

08/09

09/10

0%
05/06

06/07

07/08

08/09

09/10

Operational EBIT and EBIT

Balance sheet

The operational EBIT (before SOP
revaluation) decreased by 11.7% to
CHF 25.8 million (prior year CHF 29.2
million).

LEM has continued to improve its net
working capital (current assets – current liabilities – net cash) in % of sales
from 15.1% to 14.8%.

Taking into account the SOP revaluations in 2008/09 and 2009/10, the EBIT
decreased by 48.2% from CHF 33.8
million to CHF 17.5 million.

The efficient cash management has
increased the net financial assets (cash– financial liabilities) from CHF 27.9 million to CHF 29.8 million. On 31 March
2010, LEM had no significant interest
bearing financial liabilities.

Financial expenses
The net financial expenses increased
from CHF 1.0 million to CHF 1.4 million
in 2009/10.

Taxes
The tax rate increased from 27.2% to34.9% in 2009/10. This includes a CHF
0.5 million withholding tax liability
increase covering results of prior years.
Without this impact, the tax rate would
have been 31.9%.

The balance sheet remains healthy withan equity ratio of 63% (prior year 72%).

Cash flow
The improved working capital ratio wasreflected in a favorable change in net
working capital of CHF 8.1 million.
Together with the CHF 7.4 million
acquisition of LEM Danfysik, this led toa free cash flow of CHF 13.0 million(prior year CHF 21.9 million).

Net profit for the year
Net profit for the year decreased by
56.0% compared to 2008/09 resulting
in CHF 10.5 million, strongly impacted
by the increase of provision for the
SOP.

21

LEM Group23	Consolidated statement of financial position
24	Consolidated income statement
25	Consolidated statement of comprehensive income	Consolidated statement of changes in equity
26 Consolidated cash flow statement
27 Accounting policies
31	Notes to the consolidated financial statements
48 Auditor’s reportConsolidated Statement OF
Financial Position

AssetsNotes

31.03.2010

31.03.20091

1
2
3

29’75643’45421’744
1’989
96’94327’95131’92023’7282’834
86’433662
23’6659’697
1’695
35’7190
23’571
4’685
1’522
29’778132’662

116’211Notes

31.03.2010

31.03.20097

23’416
10’077
2’033
328
2
7’335
43’191

12’614
6’406
5’057
1’112
93
2’329
27’611

1’729
4’261
102
6’092

1’763
2’983
362
5’108

49’28332’719575(3’387)21’44864’52983’165214
83’379575(5’627)22’91965’43083’297
195
83’492132’662

116’211

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

16
4
5
6, 20

Total assets

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

8
22
9

8
16
9

Total liabilities
EquityShare capital
Treasury shares and derivative instruments on treasury shares
Reserves
Retained earnings
Equity attributable to equity holders of the parent
Minority interests
Total equity
Total liabilities and equity
1

10
10

11

Refer to Accounting Principle 2.22

23

Consolidated Income statement

April to March
In CHF thousands
Sales
Cost of goods sold
Gross margin

Notes

2009/10

2008/0912

185’512(105’076)
80’436

196’813(110’788)
86’025

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

12
12
12

(20’902)(30’077)(12’188)(252)
504
17’522(22’822)(18’748)(10’735)(111)
232
33’841

Financial expense
Financial income
Exchange effect

13
14
15

(419)
372
(1’308)

(516)
318
(792)

16’16732’851(5’635)(8’926)

Net profit for the year

10’532

23’925Attributable to:
LEM shareholders
Minority interests
Net profit for the year

10’47557
10’532

23’84679
23’925

9.2
9.2

20.9
20.8

Profit before taxes
Income taxes

16

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

17
17

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

24

CONSOLIDATED STATEMENT OFCOMPREHENSIVE INCOME

April to March
In CHF thousands

2009/10

2008/09

Net profit for the period recognised in the income statement

10’532

23’925Currency translation difference
Unrealized gain on derivatives designated as cash flow hedges
Fair value adjustments on cash flow hedges
Other comprehensive income of the period(1’972)
9

6’400
(148)

Total comprehensive income for the period
Attributable to shareholders
Attributable to minorities

8’569
8’502
67

30’17730’14235

Consolidated statement ofchanges in equity

Share
capitalCapitalreserve

Reservefortreasuryshares1 April 2008
Total comprehensive income
Changes in capital
Dividends paid
Dividends paid to minority interests
Performance share plan
Movement in treasury shares
Movement in derivative instruments
on treasury shares575

19’034031 March 2009

Attributable to equity holderof the company
In CHF thousands

Treasury Fair value
sharesreserve

0

146
(148)

Share Translationplanreserve0(2’980)
6’444

Retainedearnings

Minority
interest

Total
equity54’23423’846201
35

71’21130’1770(12’650)(42)423(3’875)(1’752)(12’650)(42)423(5’627)

5’627(3’875)(1’752)575

13’407

5’627(5’627)

(2)

423

3’464

65’430195

83’492

1 April 2009
Total comprehensive income
Changes in capital
Dividends paid
Dividends paid to minority interests
Performance share plan
Movement in treasury shares
Movement in derivative instruments
on treasury shares

575

13’407

5’627(5’627)

(2)
9

423

3’464
(1’982)65’430
10’47519567

83’492
8’569
0(11’376)
(48)
502
2’240
0

31 March 2010575

(11’376)
(48)
502
2’240

(2’240)2’240
015’647

3’387(3’387)

7

925

1’482

64’529214

83’379The 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.

25Consolidated Cash Flow Statement

April to March
In CHF thousands

2009/10

2008/091

CASH FLOW FROM OPERATING ACTIVITIESNet profit of the year
Adjustment for non-cash items– Current income taxes– Net financial result– Derivative financial instruments revaluation– Divestment of companies– Fair value charges for share-based payments– Depreciation and amortisation– Increase (+) / decrease (–) of provisions and deferred taxes
Interest received
Interest paid
Taxes paid
Payment for cash settlement of options
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

10’532

23’925

6’488
46
9
0
9’423
6’541
(4’193)223(419)(9’433)(1’009)18’2083’500(10’402)
14’9938’091
26’299

8’632
198
(148)
22
(3’234)
4’991
1’659
318
(516)
(8’355)(206)
27’286708
10’881(7’938)3’651
30’937

CASH FLOW FROM INVESTING ACTIVITIESInvestment in fixed assets
Disposal of fixed assets and intangible assets
Acquisition of companies
Investment in intangible assets
Increase (–) / decrease (+) in other assets
Cash flow from investing activities(5’757)58(1’362)(6’069)(145)(13’275)(8’864)
66
(242)
(12)
(9’052)

CASH FLOW FROM FINANCING ACTIVITIESTreasury shares aquired (–) /divested (+)
Derivative instruments on own shares acquired
Dividends paid to the shareholders of LEM Holding SA
Dividends paid to minorities
Decrease (–) in financial liabilities
Cash flow from financing activities

2’290
0(11’376)(48)(1’438)(10’572)(3’875)(1’752)(12’650)(42)(2’126)(20’445)

Change in cash and cash equivalents

2’452

1’440

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

27’951(647)
29’75625’787724
27’951

1

Refer to Accounting Principle 2.22

26

ACCOuNTiNG POliCiEs

1 General information
The LEM Group (the Group) is a market leader
in providing innovative and high quality solutions for measuring electrical parameters. Its
core products – current and voltage transducers – are used in a broad range of applicationsin industrial, traction, energy and automotive
markets. The Group has operations in elevencountries and employs around 1’000 people.
The parent company of the LEM Group is LEM
Holding SA (the Company), which is a limited
company incorporated in Switzerland.
The financial year ends on 31 March (the year).
The registered offi ce is as follows: 8, chemindes Aulx; CH-1228 Plan-les-Ouates/Geneva.
The Company has been listed on the SIX Swiss
Exchange since 1986.

2 Summary of significant
accounting principles
2.1 Basis of preparation
The consolidated fi nancial statements of LEM
Group have been prepared in accordance with
the International Financial and Repor tingStandards (IFRS) and interpretations publishedby the International Accounting Standards
Board (IASB) and comply with Swiss law.
The consolidated financial statements havebeen prepared using the historical cost convention except that, as discussed in theaccounting policies below, certain items likederivatives are recorded at fair value.

The Board of Directors approved the consolidated financial statements on 10 May 2010.

2.2 Adoption of new and revised International Financial Reporting Standards andInterpretations
In 2009/10, LEM Group introduced the following revised standards and interpretations:Standard

Description

Impact on LEM Group

IAS-1 revised

Presentation of financial statements

IAS 23 revised
IAS 32 / IAS 1 amended

Borrowing cost – amendment
Financial instruments: Presentation / Presentation of financial statements:
Puttable financial instruments and obligations arising on liquidation
Financial instruments: Recognition and measurement /Financial instruments: Disclosures
First time adaption of international financial reporting standards /Consolidated and separate financial statements
Share-based payments – vesting conditions and cancellations
Operating segments
Embedded Derivatives – Amendments
Customer loyalty programs
Agreements for the construction of real estate
Hedges of a net investment in a foreign operation
Improving Disclosures about Financial Instruments
Annual Improvements to IFRSs

Added statement ofcomprehensive income
None

IAS 39 / IFRS 7 amended
IFRS 1 / IAS 27
IFRS 2 amended
IFRS 8IFRIC 9 / IAS 19
IFRIC 13IFRIC 15IFRIC 16IFRS 7
Amendments

None
None
None
None
None
None
None
None
None
None
None

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

Title

Effective date

ImpactIAS 27 revised
IAS 39IFRS 3 revised
IFRIC 17IFRS 1IFRS 2
IAS 32IFRIC 19
IAS 24IFRIC 14IFRS 9Amendments

Consolidated and separate financial statement
Financial instruments: Recognition and measurement: Eligible hedged items
Business combinations – revised
Distribution of non-cash assets to owners
Amendments to IFRS 1 – Additional Exemptions for first time adopters
Group Cash-settled Share-based Payment Transactions – Amendments
Classification of Rights Issues
Extinguishing Liabilities with Equity Instruments
Related Party Disclosures
Prepayments of a Minimum Funding Requirement – Amendments
Financial Instruments
Annual improvement project

1 July 2009
1 July 2009
1 July 2009
1 July 2009
1 January 2010
1 January 2010
1 February 2010
1 July 2010
1 January 2011
1 January 2011
1 January 2013
1 January 2010
(unless otherwise stipulated)

None
None
None
None
None
None
None
None
None
None
None
None

The Group will implement the relevant new standards when they become effective. The impact from applying above standards and interpretations has notbeen evaluated but is expected to have no material effects on the capital, financial, income or cash flow situation of LEM.

27

ACCOUNTING POLICIES

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

28

Acquisitions are accounted for using thepurchase 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 thesum of the fair value of the assets that are to be
paid to the seller and the obligations that areentered into, or acquired, on the date ofpurchase, plus the cost that can be directly
allocated. Identifiable acquired assets, liabilities
and contingent liabilities are recognized at theirfair value as of the date of their acquisition. The
Group’s share of the purchase price thatexceeds the fair value of the identifiable net
assets is recognized as goodwill. The Group’s
share of the fair value of the identifiable net
assets that exceeds the purchase price isshown as gain on bargain purchase on theincome statement.
Intra-group assets and liabilities as well as
income and expenses are set off against eachother.
Also intra-group intermediate profits on inventories and fixed assets are eliminated.
Associates
Investments in associated undertakings areaccounted for using the equity method. These
are undertakings over which the Group exercises significant influence, but which it does notcontrol.
No associated undertakings exist as per 31
March 2010 and 31 March 2009.
2.5 Foreign currencies
Functional and presentation currency
The consolidated financial statements are presented in Swiss francs as the presentation
currency. The subsidiaries use local currencies
as their functional currency, which is thecurrency of the primary economic environment
in which they operate.
Foreign currency translation
All assets and liabilities in the balance sheets ofsubsidiaries that are denominated in therespective functional currencies are translated
into Swiss francs at the year-end exchange
rate. Items in the income statement and cash
flow statement are translated at the averageexchange rate for the year. The resulting translation differences are recognized in shareholders’ equity. When a company is sold, theForeign currency translation
Currency
Income statement
2009/10
Average rate
In CHF
EUR
1.502
GBP
1.700
JPY
0.0115
USD
1.064
RUB
0.035
CNY
0.156
DKK
0.202

cumulative translation differences recognized inshareholders’ equity are transferred to theincome statement.
The following table summarizes the principal
exchange rates that have been used in thetranslation process.
Foreign currency transactions
Foreign currency transactions by subsidiaries
are translated at the market rate prevailing at
the time. The monetary assets and liabilities aretranslated at the year-end rates while non-monetary assets are translated at historical rates.
Gains and losses arising from the transactions
as well as from the translation of monetary
assets and liabilities in foreign currencies arerecorded as income or expenses in the income
statement (except from translation differences
arising from a monetary item that forms part of
the Group’s net investment in a foreign operation, which are included in shareholders’ equity).
2.6 Cash and cash equivalents
Cash and cash equivalents comprise cash on
hand, cash at bank and cash at postal
accounts and bank deposits with an original
maturity of three months or less from the dateof acquisition, that are readily convertible to
known amounts of cash. This definition is also
used for the cash flow statement.
2.7 Inventories
Inventories are stated at the lower of cost or net
realizable value. The first-in, first-out (FIFO)
method is applied. The cost of finished goods
and work in process comprise raw materials,
direct labor costs and other costs that can bedirectly allocated, such as production overhead
expenditures. Financing costs are not included
in inventories. Provision for write-downs are
established when there is an objective indication that the Group will not be able to sell the
goods in due time.
2.8 Property, plant and equipment
Property, plant and equipment is stated at costof acquisition or construction, less depreciation
and any impairment. Depreciation is calculated
on a linear basis on the following estimateduseful life:Land
nil
Buildings
20–40 years
Machinery & Equipment
5-8 years
Tools & Moulds
2-5 years
Vehicles3-5 years
IT equipment
3-5 years

Income statement
2008/09
Average rate
In CHF
1.562
1.885
0.011
1.102
0.041
0.161
n/a

Balance sheet
31.03.2010
Year-end rate
In CHF
1.432
1.603
0.0115
1.064
0.036
0.156
0.192

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

Repairs and renewals are charged to theincome statement when the expense isincurred. Subsequent expenditure on an itemof tangible fixed assets is capitalized at cost
only when it is probable that future economic
benefits associated with the item will flow to theGroup and the cost of the item can bemeasured reliably.
2.9 Intangible assets
Goodwill
Goodwill represents the excess of the cost ofan acquisition over the fair value of the Group’s
share of the net assets of the acquired subsidiary/associated undertaking at the date ofacquisition. Goodwill on acquisitions is reported
in the balance sheet as an intangible asset andcarried at cost less accumulated impairment
losses. Gains and losses on the disposal of anentity include the carrying amount of goodwill
relating to the entity sold.
Research and development
Research costs are written off as incurred.
Development cost are capitalized as intangible
assets only, if it is probable that future economic
benefits will flow to the Group. Such development costs are capitalized and written off overthe life of the product or process.
In the financial years under review, no development costs have been capitalized.
Other intangible assets
Other intangible assets with definite useful lives
are carried at cost less amortization and any
impairment.
Expenditure on computer software, acquired
patents, trademarks and licenses is capitalized
and amortized using the straight-line method
over their useful lives, not exceeding five years.
2.10 Impairment of tangible fixed assets
and intangible assets
Assets that are subject to depreciation andamortization are reviewed for impairment
whenever events or changes in circumstancesindicate that the carrying amount may not berecoverable. An impairment loss is recognized
for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s
fair value less cost to sell and value in use.
For the purpose of assessing impairment,
assets are grouped at the lowest levels forwhich there are separately identifiable cashflows (cash generating unit).
The value in use is calculated based on theestimated future cash flows expected to result
from the use of the asset and eventual
disposal, discounted using an appropriate noncurrent interest rate. In the financial year underreview no impairment has been recognized.
Goodwill is tested for impairment annually (at31 March) and when circumstances indicatethat the carrying value may be impaired.
Impairment is determined by assessing therecoverable amount of the cash-generating unit
to which the goodwill relates. Impairment
losses relating to goodwill cannot be reversed
in future years.
2.11 Assets held for sale
LEM Group’s assets are reclassified as held forsale when a sale within one year is highly
probable and the assets are available for immediate sale in their present condition.

2.14 Financial liabilities
Financial liabilities comprise bank loans and arerecognized initially as the proceeds received,
net of transaction costs incurred. In subsequent periods, bank loans are stated at amortized cost using the effective interest rate
method with any difference between proceeds(net of transaction) and the redemption value
being recognized in the income statement over
the terms of the borrowing.

Non-current assets held for sale are re-evaluated at the lower of fair value less cost to sell or
the carrying amounts at the date they meet theheld for sale criteria. Any resulting impairment
loss is recognized in the income statement. In
the two years under review there were no
assets held for sale in LEM Group.

Financial liabilities that are due within 12 months
after the balance sheet date are classified as
current liabilities unless the Group has an
unconditional right to defer settlement of theliability until more than 12 months after thebalance sheet date.

2.12 Financial assets
Financial assets can comprise cash, receivables, accrued income, and marketable debt
securities with a fixed duration, marketablesecurities, derivative financial instruments andloans. In the periods under review LEM Group
has no marketable and equity securities, nor
any loans and non-current receivables in its
books.

2.15 Leases
Assets acquired under non-current financeleases are capitalized as part of the fixed
assets. Lease assets are depreciated over theestimated useful life of the asset. However, if
there is no reasonable certainty that the Groupwill obtain ownership by the end of the leaseterm, the asset is depreciated over the shorterof the estimated useful life of the asset and thelease term.

Accounts receivable are carried at original
invoice amount less an allowance made for
doubtful accounts based on a review of all outstanding amounts at the year-end. Allowances
for doubtful accounts are established when
there is an objective indication that the Groupwill not be able to collect the amounts due.
Allowances for doubtful accounts are written
off when identified.
2.13 Derivative financial instruments
Derivative financial instruments are measured
at fair value. Any gains and losses arising fromchanges in fair value on derivatives are taken
directly to the income statement, except for theeffective portion of the cash flow hedges, whichis recognised in other comprehensive income.
Derivative financial instruments are shown aspart of other current assets and other current
liabilities. In case the maturity is more than one
year, derivative financial instruments are recognized under other non-current assets or othernon-current financial liabilities.
For a derivative financial instrument to be recognized as a qualified hedging transaction,certain requirements regarding documentation,
probability of occurrence, effectiveness andreliability of measurement, both of the hedging
instrument and of the hedged underlying transaction, must be fulfilled. When the cash flow
hedging transaction is maturing, the cumulative
gains and losses previously recognized inshareholders’ equity are included in the income
statement of the period.
The Group uses derivative financial instruments
to hedge foreign exchange risks of forecasted
transactions (cash flow hedging) and applies
hedge accounting. Derivative financial instruments can comprise of forward exchange contracts and option based structures.

The associated obligations are included
dependent on their maturity in current or noncurrent financial liabilities respectively. In theyears under review LEM Group does not holdany finance lease.
Rentals payable under operating leases arecharged to the income statement as incurred.
2.16 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 the related periodsin the personnel expenses of the various functions where the employees are located.
Defined benefit plan
A qualified independent actuary values thefunds on an annual basis. The obligation andcosts of pension benefits are determined using
the projected unit credit method. Past service
costs are recognized on a straight-line basis
over the average period until the amended
benefit becomes vested. Gains or losses on the
curtailment or settlement of pension benefits
are recognized when the curtailment or settlement occurs. Actuarial gains or losses areamortized based on the expected averageremaining working time of the participating
employees, but only to the extent that the net
cumulative unrecognized amounts exceed 10%of the greater of the present value of thedefined benefit obligation and the fair value ofplan assets at the end of the previous year. In
accordance with IFRIC 14, any assets resulting
from surpluses in defined benefit plans arelimited to the value of the maximum futuresavings from reduced contributions. Liabilities
are fully provisioned.

29

ACCOUNTING POLICIESDefined contribution plan
The subsidiaries abroad sponsor defined contribution plans based on local practices andregulations.
Other employee benefits
These obligations are covered by a provision in
the balance sheet according to the legal
requirements of certain countries.
Equity compensation plan
LEM Group operates several stock option plans
and a share based plan.
Stock options are granted to the Board of
Directors and managers. The option plans arecash settled and the fair value of the options islinked to the share price development. Basedon the share price at each quarter end the fairvalue of the options – based on the “Hull-White”
option model – is calculated by an independent
specialist. Based on these fair values the provision is adjusted.
The Performance Share Plan (PSP) is granted
to managers and is considered to be equity
settled. The fair value of the PSP granted to theemployees is estimated at the grant date. The
amounts are charged to the income statement
over the relevant vesting period and adjusted toreflect actual and expected levels of vesting.
Stock option plans
The stock option plans are cash settled. The
total amount expensed for the options not yet
exercised is determined by reference of the fairvalue of the instruments granted at eachclosing period. The quarterly fair value calculations are performed by a third party applying
the “Hull & White” model based on the LEM
share price at the period end. The pro rata
payable is calculated based on the fair value
and the estimate of the number of options thatare expected to become exercisable and LEM
recognizes the impact in the income statement.
LEM Incentive System
The LEM Incentive System (LIS) consists of apart 1, which is related to the individual’s performance and a part 2, which is related to theperformance of LEM Group. The LIS part 2 isan annual bonus which is based on the
Economic Value Added (EVA) performance of
LEM evaluated over the 3 previous fiscal years.
Both elements are cash settled and the bonus
payments are made in the first quarter of thefollowing fiscal year. The estimated payments
are accrued for per year-end.
2.17 Provisions and contingent liabilities
Provisions are recognized when the Group has
a present legal or constructive obligation as aresult of past events, it is probable that an
outflow of resources will be required to settle
the obligation, and a reliable estimate can bemade of the amount of the obligation
Claims and litigations
The Group recognizes the estimated liability toreplace products still under warranty at thebalance sheet date. This position is calculated

30

based on past history of the level of repairs andreplacements. Additional specific provisions arebooked when required.
Onerous contracts
The Group presently sees no need for provisions for onerous contracts.
Restructuring
A constructive obligation to restructure arises
only when an entity has a detailed formal planfor the restructuring identifying at least:– the business or part of a business concerned;– the principal locations affected; the location,function, and approximate number of employees who will be compensated for terminating
their services;– the expenditures that will be undertaken; and–w
 hen the plan will be implemented;
and raised a valid expectation in those affectedthat it will carry out the restructuring by starting
to implement that plan or announcing its mainfeatures to those affected by it.
Contingent liabilities
Contingent liabilities arise from past events
where the outcome depends on future events.
As the probability either cannot be measured
reliably or the probability for a subsequent
outflow lies below 50%, contingent liabilities are
not recognized in the balance sheet but aredescribed in the notes.
2.18 Share capital
LEM Holding SA has only ordinary registeredshares. Dividends on ordinary shares are recognized in equity in the period in which they are
declared.
Treasury shares
Own equity instruments which are reacquired(treasury shares) are recognised at cost anddeducted from equity. No gain or loss is recognised in the income statement on the purchase,sale, issue or cancellation of the Group’s own
equity instruments. Any difference between the
carrying amount and the consideration is recognised in other capital reserves.
2.19 Minority interests
Minority interests represent the portion of profit
or loss and net assets not held by the Groupand are presented separately in the consolidated statement of income and within equity inthe consolidated statement of financial position.
2.20 Revenue recognition
Revenue from the sale of products comprises
all revenues that are derived from sales of
products to third parties after deduction ofprice rebates and value added tax. Revenues
from the sale of products are recognized when
the significant risks and rewards of ownershipof the goods have passed to the buyer, usually
on delivery of the products.
2.21 Income taxes and deferred taxation
Income taxes
Income taxes comprise all current and deferredincome taxes, including the withholding tax
payable on profit distributions within the Group.

Income taxes are recognized in the consolidated income statement except for income
taxes on transactions that are recognizeddirectly in shareholders’ equity.
Deferred taxation
Deferred income tax is provided in full, using
the liability method, on temporary differences
arising between the tax base of assets and liabilities and their carrying amounts in the financial statements. The principal temporar ydifferences arise from trade receivables, inventories, depreciation on tangible assets and tax
losses carried forward. Deferred taxes are
determined using tax rates that apply, or havebeen announced, on the balance sheet date in
the countries where the Group is active. Tax
losses carried forward are recognized asdeferred tax assets to the extent that it isprobable that tax profit will be available in the
future against which the tax losses carriedforward can be utilized. Deferred tax assets
and liabilities are offset against each other if thecorresponding income taxes arise by the sametax authority and a legally enforceable right foroffsetting exists.
2.22 Reclassifications
In application of IAS 1 and IAS 37, the liabilities
linked to the SOP have been reclassified as“Other liabilities”. In the statement of financial
position as per 31.03.2009, CHF 2’039
thousand of current SOP liabilities have been
reclassified from “Current provisions” into
“Other current liabilities” and CHF 249
thousand of non-current SOP liabilities havebeen reclassified from “Non-current provisions”
into “Other non-current liabilities”.
In application of IAS 12.5 and 12.38, theincome tax liabilities linked to withholding tax
on future dividend payments have been reclassified as deferred tax liabilities. In the statementof financial position as per 31.03.2009, CHF
1’190 thousand have been reclassified from“Current income tax payable” into “Deferred tax
liabilities”. In the cash flow statement of
2008/09, the same CHF 1’190 thousand havebeen reclassified from “Ta xes paid” into
“Increase (+) / decrease (–) of provisions anddeferred taxes”. In note 16, the same CHF
1’190 has been reclassified from “Current
income taxes” to “Deferred income taxes”.

NOTEs TO ThE CONsOlidATEd
fiNANCiAl sTATEMENTs

Segment information
Industrial
2009/10
2008/09

In CHF thousands
Income Statement
Sales
EBITDA
Operating profit
Net financial expense
Taxes
Net profit for the year

Automotive
2009/10
2008/09

LEM Group
2009/10
2008/09

170’780
24’90019’367

181’931
39’22735’296

14’732(837)(1’845)14’882(396)(1’455)185’51224’063
17’522(1’355)(5’635)
10’532

196’81338’83133’841(990)(8’926)23’925

Depreciation and amortization:
Tangible assets
Intangible assets
Goodwill impairment
Total

4’430
1’103

3’623
308

990
18

1’031
28

5’420
1’121

4’654
336

5’533

3’931

1’008

1’059

6’541

4’990

Significant non cash items(Increase) / decrease of liabilities forshare based payments(8’481)

2’911

(942)

323

(9’423)

3’234

90’72078’323

9’811

8’416

90’72078’323

9’811

8’416

100’53132’13129’757
2’374
132’662

86’73929’472
27’951
1’521
116’21124’540
8’179
5’057
1’190
1’932
32’719

8’864
242
9’106

Balance sheet
Segment assets
Unallocated assets– Of which cash and cash equivalents– Of which other unallocated assets
Total assets
Segment liabilities
Unallocated liabilities– Of which income tax payable– Of which deferred withholding tax liability– Of which other unallocated liabilities
Total liabilities

40’54323’374

2’538

1’166

40’54323’374

2’538

1’166

43’081
6’202
2’033
2’681
1’488
49’283

Capital expenditure :Tangible assets
Intangible assets
Total

5’192
6’218
11’410

7’006
242
7’248

565
0
565

1’858
0
1’858

5’757
6’218
11’975

Geographical information
In CHF thousands

Switzerland
09/10
08/09

Rest of Europe
09/10
08/09

North America
09/10
08/09

Asia
Rest of the World
09/10
08/09
09/10
08/09

Sales by location of customers

4’025

6’019

91’489 103’179

27’33131’88859’64451’890

3’023

50’081

46’491

4’955

2’639

6’628

5’399

38’86832’210050’081

46’491

4’955

2’639

6’628

5’399

38’86832’2100

Segment assets
by location of assets
Unallocated assets
Total assets

3’837

LEM Group
09/10
08/09
185’512 196’813

0 100’532 86’739
32’13029’4720 132’662 116’211

For management purposes, LEM Group is organized into two operating segments, Industrial and Automotive. The Industrial
segment develops, manufactures and sells electronic components called transducers for the measurement of current and voltage of various industrial applications. The Automotive segment develops, manufactures and sells transducers for applications in
automotive markets.
Non-allocated assets correspond to cash, non-current financial receivables as well as deferred tax assets. Non-allocated liabilities comprise bank borrowings, income tax payable and deferred tax liabilities.
Transactions between the subsidiaries and/or business segments are conducted at arm’s length.

31

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

1. Accounts receivable

31.03.2010

31.03.2009

39’789(1’424)38’3655’089
43’45428’516(1’716)26’800
5’120
31’9202009/10

2008/09

1’716
76
(338)
(30)
0
1’424

1’928
92
(375)
71
0
1’716

> 180 days

Total

In CHF thousands
Accounts receivable – trade
Allowance for doubtful accounts
Total accounts receivable – trade
Other receivables
Total

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

Aging analysis of accounts receivable
In CHF thousands

Not due< 30 days

31–90 days 91–180 days

31 March 2010
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total

26’4270
5’089
31’516

9’816
0
0
9’816

1’993
(155)
0
1’838

367
(169)
0
198

1’186
(1’100)086

39’789(1’424)5’089
43’45431 March 2009
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total

16’7420
4’001
20’743

5’946
0
968
6’914

4’051
(124)
108
4’035

349
(164)
6
191

1’428
(1’428)37
37

28’516(1’716)
5’120
31’920

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

2. Inventories

31.03.2010

31.03.2009

10’3962’314
9’034
21’74413’460
1’395
8’873
23’728In CHF thousands
Raw materialWork in process
Finished goods and goods for resale
Total

Above total inventories include provisions for write-down of CHF 2’585 thousand (2008/09 CHF 2’283 thousand).

32

3. Other current assets

31.03.2010

31.03.2009

684
1’298
7
1’989

1’473
1’363
(2)
2’834

Land and
Buildings

Machinery andEquipment

Total

Net book value 1 April 2009
Foreign exchange effectChange in scope of consolidation
Investment
Disposal
Impairment gain (loss)
Other movements
Depreciation charge for the year
Net book value 31 March 2010

351
(8)
0
0
0
0
0
(13)
330

23’220
(537)
335
5’757
(33)
0
0
(5’407)
23’33523’571
(545)
335
5’757
(33)
0
0
(5’420)23’665

At cost of acquisition
Accumulated depreciation
Net book value 31 March 2010

465
(135)
330

58’065(34’730)
23’33558’530(34’865)
23’665Net book value 1 April 2008
Foreign exchange effectChange in scope of consolidation
Investment
Disposal
Other movements
Depreciation charge for the year
Net book value 31 March 2009

310
54
0
0
0
0
(13)
351

18’140
929
(6)
8’864
(66)
0
(4’641)
23’22018’450
983
(6)
8’864
(66)
0
(4’654)23’571

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

476
(125)
351

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

In CHF thousands
Advances to suppliers
Prepayments and accrued income
Derivative financial instruments
Total

For further information on derivative financial instruments, see note 22.

4. Property, plant and equipment
In CHF thousands

33

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

5. Intangible assets
Goodwill

Patents

Other intangible
AssetsTotal

Net book value 1 April 2009
Foreign exchange effectChange in scope of consolidation
Investment
Disposal
Other movements
Amortization charge for the year
Net book value 31 March 2010

3’717
(50)
0
0
0
0
0
3’667

0
0
0
5’940
0
0
(786)
5’154

968
(9)
0
278
(26)
0
(335)
876

4’685
(59)
0
6’218
(26)
0
(1’121)
9’697

At cost of acquisition
Accumulated amortization
Net book value 31 March 2010

5’403
(1’736)
3’667

5’940
(786)
5’154

3’636
(2’760)876

14’979(5’282)
9’697

Net book value 1 April 2008
Foreign exchange effectChange in scope of consolidation
Investment
Disposal
Other movements
Amortization charge for the year
Impairment loss
Net book value 31 March 2009

3’419
298

0
0

1’010
53

0
0

0
0

242
0

0

0

(337)

3’717

0

968

4’429
351
0
242
0
0
(337)
0
4’685

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

3’717
0
3’717

0
0
0

3’401
(2’433)968

7’118(2’433)
4’685

In CHF thousands

The entire goodwill of the LEM Group is from the acquisition of NANA in 2000/01 and is allocated to the cash generating unit
LEM Japan KK. The goodwill relates to the Industrial business segment. The recoverable amount has been determined basedon value in use calculations. These calculations use cash flow projections of 5 years based on financial business plans andbudgets approved by management. The projections include assumptions concerning revenue growth and expected operating
costs. Revenue growth is projected at 2% and operating costs were estimated based on the experience of management. The
discount rate used within these cash flow calculations is 8% (2008/09 8%) 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 and no
impairment was found for the year ended 31 March 2010.

6. Other non-current assets

31.03.2010

31.03.2009

1’493
202
1’695

1’366
156
1’522

31.03.2010

31.03.2009

21’8691’547
23’416

11’2891’325
12’614

In CHF thousands
Pension asset
Other non-current assets
Total

7. Accounts payable
In CHF thousands
Accounts payable – trade
Other payables
Total

34

8. Provisions1
In CHF thousands
Balance 1 April 2009
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effectChange of scope
Balance 31 March 2010
Of which current
Of which non-current
Balance 1 April 2008
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effectChange of scope
Balance 31 March 2009
Of which current
Of which non-current
1

Employee andtermination benefits

Claims andlitigations

Restructuring

Total

1’534
40
(172)
0
(49)

182

1’353

1’159
687
(390)
(867)
(14)
129
704

2’875
727
(656)
(953)
(65)
129
2’057
328
1’729

1’656
47
(200)
(12)
43
0
1’534

1’005
1’467
(1’011)
(303)
1
0
1’159

0
380
(50)
(149)
1
0
182

(94)
(86)
(2)
0
0

2’662
1’894
(1’261)
(464)
45
0
2’875
1’112
1’763

Refer to Accounting Principle 2.22.

Employee and termination benefits
Employee and termination benefits contain obligations which are required in certain countries.
Claims and litigations
Provisions for claims and litigations cover expected warranty claims which are not covered by insurances. The provisions havebeen estimated based on past experience and the risk assessment of management.

9. Other liabilities1

31.03.2010

31.03.2009

6’255
1’182
7’437
7’335
102

2’288
403
2’691
2’329
362

In CHF thousands
Stock option plans
Other liabilities
Total
Of which current
Of which non-current
1

Refer to Accounting Principle 2.22.

Stock option plans
See accounting policies 2.16 Employee benefits, 2.17 Provisions and contingent liabilities and note 19 Stock option plans,Performance Share Plan.

35

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

10. Equity
Share capital
There is no authorized or conditional share capital outstanding. The nominal share capital of CHF 575’000 comprises 1’150’000
registered shares, each with a nominal value of CHF 0.50. Investments in shares of LEM Holding SA held by the Group are classified as treasury shares and are accounted for at historical cost. Treasury shares are not entitled to dividends.
On 4 July 2008, 12’400 shares of LEM Holding SA were purchased at a share price of CHF 312.50. In January 2010, 63 shareswere granted to a retiring employee as a pro-rata payout of the PSP. In February and March 2010, 7’105 shares were sold to
employees at market value less CHF 15 discount per share with an average price of CHF 304.85. The treasury shares werebooked out at historical cost and the difference to the selling price was booked to other capital reserves.

Movement of treasury shares
In CHF

Number of shares

Averagepurchase price

Total

Balance 1 April 2009
Movement
Balance 31 March 2010
Ordinary dividend per share
Extraordinary dividend per share

12’400(7’168)
5’232
5.00
15.00

312.50312.50312.503’875’000
2’240’000
1’635’000

The dividend to be paid will be proposed by the Board of Directors to the shareholders of the Group at the ordinary shareholders’ meeting 25 June 2010.
Balance 1 April 2008
Movement
Balance 31 March 2009
Ordinary dividend per share (in CHF)

11. Minority interests

012’40012’40010.00

312.50312.503’875’000
3’875’000

31.03.2010

31.03.2009

214

195

In CHF thousands
Total

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

12. Staff cost

2009/10

2008/09

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

(16’786)(11’519)(11’131)(7’252)(9’423)(56’111)(17’701)(12’550)(9’883)(7’024)
3’234(43’924)

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

(33’806)(11’769)(1’113)(9’423)(56’111)(35’853)(8’612)(2’693)
3’234(43’924)

In CHF thousands

36Employee benefit plan costs comprise the expenses for defined contribution plans of CHF 645 thousand (2008/09 CHF 648
thousand). See accounting policies 2.16 Employee benefits, 2.17 Provisions and contingent liabilities and note 19 Stock option
plans, Performance Share Plan.

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

13. Financial expense

31.03.2010

31.03.2009

970
37
11
1’018

871
26
12
909

2009/10

2008/09

(283)
0
(136)
(419)

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

2009/10

2008/09

223
149
372

318
0
318

2009/10

2008/09(1’406)(1)99(1’308)

(849)
(75)
132
(792)

2009/10

2008/09(4’997)(638)(5’635)(7’442)(1’484)(8’926)

In CHF thousands
Interest expense
Divestment LEM Malaysia
Other financial expense
Total

14. Financial income
In CHF thousands
Interest income on cash
Gain on bargain purchaseTotal

15. Foreign exchange effect
In CHF thousands
Exchange losses
Fair value revaluation on derivatives
Gains and losses on derivatives1
Total
Position includes cost of derivative hedging

1

16. Income taxes, deferred tax assets and liabilities1
In CHF thousands
Current income taxes
Deferred income taxes
Total
Refer to Accounting Principle 2.22

137

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

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

2009/10

2008/09

25.7
6.2
31.9

25.0
4.7
29.7

0.0
0.0
3.0
0.0
34.9

0.1
(1.8)
0.0
(0.8)
27.2

In %
Group’s average expected income tax rate
Group’s average expected withholding tax rate
Group’s average expected tax rate
Tax effect of– expense not deductible for tax purposes– reduced taxes– withholding tax liability for results covering prior years– adjustment in respect of previous periods income tax
Group’s effective tax rate

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. As a result, the liability forwithholding taxes includes a CHF 0.5 million increase covering results of prior years, corresponding to a 3.0% impact on theGroup’s effective tax rate.
Deferred tax assets and liabilities
Deferred taxes have been calculated on the following balance sheet positions:31.03.2010

31.03.2009

Current assets– Accounts receivable– Inventories– Others
Non-current assets– Property, plant and equipment and other financial assets– Intangible assets
Liabilities– Provisions– Others– Withholding tax on future dividends
Total

470
(346)
(217)
1’033
(949)
(341)
(608)
(3’120)(295)(144)(2’681)(3’599)

(351)
(222)
(497)
368
(935)
(327)
(608)
(1’697)(273)(234)(1’190)(2’983)The balance sheet contains the following
Deferred tax assets
Deferred tax liabilities
Net liabilities

662(4’261)(3’599)0(2’983)(2’983)

In CHF thousands

38Unused tax loss carry forwards not recognized in the balance sheet expire
In CHF thousands– in the next 10 years– until 2020
– without date of expiration
Total

17. Earnings per share
Basic earnings per share
Net profit for the year attributable to LEM shareholders – in CHF thousands
Ordinary number of shares at the beginning of the year
Weighted average number of treasury shares
Weighted average number of shares outstanding
Earnings per share – basic in CHF

31.03.2010

31.03.2009

0
0
878
878

0
0
905
905

2009/10

2008/09

10’47523’846

1’150’000
12’004
1’137’996

1’150’000
9’173
1’140’827

9.20

20.90

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

10’47523’846

1’137’996
4’030
1’142’026

1’140’827
4’180
1’145’007

9.17

20.83

18. Related parties
Related parties are the Board of Directors and the Senior managers as defined in the Corporate Governance guidelines. The
compensation to the Board of Directors is paid as a fixed fee in cash. The compensation for the Senior Management includes
base salary, a performance related bonus (LIS incentive system), bonus and performance shares (2008/09) and post employment benefits. The base salary is the employee’s compensation before deduction of the employee’s social security contributions. Bonus payments are effected in cash.
Compensation of the Board of Directors
In CHF thousands
Base salary
Change in liability for stock option plans
Total
Number of granted stock options

2009/10

2008/09

(440)
(292)
(732)
0

(415)
332
(83)
0

39

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

Compensation of the Senior Management
Base salary
Bonus
Post employment benefits
Change in liabilitiy for stock option plans and performance share plan
Total
Number of granted stock options and performance shares in financial year (m=1)(1’351)(718)(182)(1’572)(3’823)0(1’330)
(103)
(155)
1’525
(63)
3’400

See accounting policies 2.16 Employee benefits, 2.17 Provisions and contingent liabilities and note 19 Stock option plans,Performance Share Plan.
Additional fees and compensations
No member of the Board of Directors received additional fees amounting to more than half of his normal compensation (2009/10
CHF 14 thousand; 2008/09 one member, CHF 50 thousand).

19. Stock option plans, performance share plan
2009/10Grant Date

NumberNumberNumberNumberNumberExerciseof optionsof optionsof optionsof optionsof options

priceoutstanding

issuedcancelled

exercised

outstanding

in CHFin CHF01.04.2009

Fair value

Fair value

Exercise

Exercise

at grant 31.03.2010

periodperiodfrom

until
31.03.2015

in CHF31.03.2010

SOP 4

01.04.2005

14’0130

0(14’013)

0

77.18

24.86

N/A

01.04.2007

SOP 5

01.04.2006

28’7500

0(11’400)

17’350139.8047.69

200.2001.04.2009

31.03.2011

SOP 6

01.04.2007

23’44400

023’444240.5264.92

118.8501.04.2010

31.03.2012

Total

66’2070

0(25’413)40’794
Fair value

Fair value

Exercise

Exercise

at grant 31.03.2009

periodperiodfrom

until
31.03.2015

2008/09

Grant Date

NumberNumberNumberNumberNumberExerciseof optionsof optionsof optionsof optionsof options

priceoutstanding

issuedcancelled

exercised

outstanding

in CHFin CHF01.04.2008

in CHF31.03.2009

SOP 4

01.04.2005

14’825

0

0

(812)

14’013

77.18

24.86

74.42

01.04.2007

SOP 5

01.04.2006

29’7500(1’000)028’750139.80

47.69

34.62

01.04.2009

31.03.2011

SOP 6

01.04.2007

25’8820(2’438)0

23’444240.52

64.92

15.95

01.04.2010

31.03.2012

Total

70’4570(3’438)(812)

66’207SOP 4
In April 2005 the Board of Directors issued the stock option plan SOP 4 for the management team and the non-executive Boardof Directors. The plan was equity settled but has been changed to cash settled as of 31 December 2007. This plan gives theright to cash the counter value of one share at the predetermined strike price (option price). The strike price corresponds to the
LEM share price on 31 March 2005. The number of stock options granted depended on the excess of net earnings above aminimum return on equity (ROE). The vesting period is two years. The details of the contractual terms of the option plan can beseen in the table above. Due to the share split in September 2005, the number of options granted under SOP 4 was adjusted by
the factor of 4.8135. During the financial year 2009/10 all 14’013 remaining options were exercised. The plan is closed. The average share price for the exercised options was CHF 305.94.
SOP 5
In April 2006 the Board of Directors issued the stock option plan SOP 5 for the management team and the non-executive Boardof Directors. The plan was equity settled but has been changed to cash settled as of 31 December 2007. Each plan gives theright to cash the counter value of one share at the predetermined exercise price, which corresponds to the average share priceof the fourth quarter 2005/06. The number of stock options granted depends on the performance of the LEM share price compared to the SIX Index for Small and Mid Cap Companies in Switzerland for the financial year 2005/06. The vesting period isthree years. The details of the contractual terms of the option plan can be seen in the table above. During the financial year
2009/10, 11’400 options were exercised. 17’350 options related to SOP 5 are still exercisable. The average share price for the
exercised options was CHF 292.67.

40

SOP 6In April 2007 the Board of Directors issued the stock option plan SOP 6 for the management team and the non-executive Boardof Directors. The plan was equity settled but has been changed to cash settled as of 31 December 2007. Each plan gives theright to cash the counter value of one share at the predetermined exercise price, which corresponds to the average share priceof the fourth quarter 2006/07. The number of stock options granted depends on the performance of the LEM share price compared to the SIX Index for Small and Mid Cap Companies in Switzerland for the financial year 2006/07. The vesting period isthree years. The details of the contractual terms of the option plan can be seen in the table above.
The calculation with the “Hull-White” model uses the following parameters:

In %Parameters at grant
SOP 6
SOP 5

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

28.98
2.51
2.90

39.11
2.51
2.35

Parameters 31.03.2010
SOP 6
SOP 5

41.15
0.81
2.40

41.15
0.47
2.40

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

m (multiple)
Number of shares expected to be issued
Vesting period
Allocated to recipients
Fair value per unit (CHF)

At grant

31.3.2010

1.0
8’360
3 years
27 June 2008
303.50

0.5
4’030

340.0

As of 31 March, based on a pay-out multiple (m=0.5) and on the number of recipients, the company booked a provision of CHF
925 thousand, of which CHF 502 thousand was charged to the income statement in 2009/10 (prior year: CHF 423 thousand).
In view of disposing of the necessary shares potentially required under the PSP program, LEM has purchased 12’400 own
shares at a share price of CHF 312.50 and call options on own shares as follows:
Terms of options
Transaction date
20.09.2008
20.09.2008

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

Premium paid
61.7
55.1

Exercise period
1.03.2011–30.04.2013
1.03.2012–30.04.2013

The call options which were acquired are intended to be gross settled and they are therefore treated as equity instruments.
During May 2009, the Board of Directors decided not to issue further equity based compensation plans. In view of this decisionand given that the company estimates to require 4’030 shares to pay out the PSP, the Board has made an offer to the remaining
SOP 4 option holders. In the course of this offer, 7’105 shares were sold to employees at market value less CHF 15 discount per
share with an average price of CHF 304.85. Under the present assumptions, the remaining 5’232 shares will suffice to cover the
PSP payout.

41

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

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

31.03.2010

31.03.2009

2’514
856
(1’043)(1’256)
484
0
1’555

2’398
939
(1’226)(1’283)

28’544856
2’514(3’502)464
28’876

26’840939
2’398(1’586)(47)
28’54431.03.2010

31.03.2009

23’181
1’043
2’938(3’502)
2’947
26’60727’250
1’226
2’996(1’586)(6’705)23’18131.03.2010

31.03.2009

28’876(26’607)
2’269(3’762)

28’544(23’181)
5’363(6’729)(1’493)(1’366)

In CHF thousands
Current service cost
Interest cost
Expected return on plan assets
Employee contributions
Amortization of gains & loses
Immediate recognition of loss § 58 A
Net benefit expense

885
1’713

Changes in defined benefit obligation
Defined benefit obligation per beginning of year
Interest cost
Current service cost
Benefits paid
Actuarial (gains)/losses on obligation
Defined benefit obligation per end of year
Changes in the fair value of plan assets
In CHF thousands
Fair value of plan assets per beginning of year
Expected return
Contribution by employer and employee
Benefit paid
Actuarial gains/(losses) on plan asset
Fair value of plan assets per end of year

LEM expects to contribute CHF 1’550 thousand to its defined benefit plan in 2010/11.

In CHF thousands
Present value of funded obligations
Fair value of plan assets
Funded status
Unrecognized net actuarial losses
Unrecognized asset due to limit in IAS19§58A lit b)
Net liabilities / assets (–)

Actual return on plan assets for 2009/10 was CHF 3’990 thousand (2008/09 CHF –5’479 thousand).

42

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

31.03.2010

31.03.2009

31.03.2008

31.03.2007

31.03.2006

26’60728’876(2’269)2’947
464

23’181
28’544(5’363)(6’705)(649)

27’25026’840410(1’304)(1’300)27’20227’066
136
(170)
786

25’40424’332
1’072
(407)
2’413

Strategic pension plan allocations are determined by the objective to achieve a return on investment, which, together with thecontribution paid, is sufficient to maintain reasonable control over the various funding risks of the plans. Estimated returns on
assets are determined based on the asset allocation and are reviewed periodically. A temporary deviation from policy targets isallowed.
Major categories of plan assets as a percentageof the fair value of total plan assets
In %Long-term target

2009/10

2008/09

40.0
50.0
5.0
5.0
100.0

35.0
55.0
5.0
5.0
100.0

32.0
52.0
4.0
12.0
100.0

2009/10

2008/09

3.0
1.5
0

3.00
1.50
0

6.5
3.5
2.5

6.5
3.5
2.5

31.03.2010

31.03.2009

4’345
20’50820’32145’174

3’645
21’01525’60550’265Equity securities
Debt securities
Real estate
Cash and other investments

The principal actuarial assumptions used in the actuarial calculations include:
In %Discount rate
Salary increases
Pension increases
Expected return on plan assets– Equities– Bonds– Other assets

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

In 2009/10 lease expenses amounted to CHF 4’197 thousand (2008/09 CHF 3’913 thousand). Lease agreements exist for thebusiness facilities used by the Group’s companies, the agreements are classified as operating leases. The leases have varying
terms and renewal rights between one and fifteen years.

43

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

22. Contingent liabilities

31.03.2010

31.03.2009

3’206
1’866
5’072

465
1’958
2’423

In CHF thousands
Total guarantees for credits of subsidiaries
Total guarantees to third parties
Total

On 31 March 2010 the Group has no contingent assets. Contingent liabilities include bank guarantees on various matters, nomaterial liability is expected to occur in the ordinary course of business. The Group is from time to time impacted by changing
political, legislative, fiscal and regulatory environments, including those relating to environmental protection. The frequency andeffects on future operations and earnings are unpredictable and are only partly covered by insurances.

23. Financial risk management objectives and policies
The group classifies its financial assets and liabilities into the following categories as per IFRS 7:

Financial assets
In CHF thousands
Cash and cash equivalents
Accounts receivable
Other non-current assets
Total

Financial liabilities
In CHF thousands
Accounts payable
Accrued expenses
Other current liabilities
Current financial liabilities
Other non-current liabilities
Total

31.03.2010
Fair Value

31.03.2009
Fair Value

Loans andreceivables

29’75643’454202
73’412

27’95131’920156
60’027

X
X
X

31.03.2010
Fair Value

31.03.2009
Fair Value

Financialliabilities

23’416
10’0771’080
2
25
34’60012’614
6’406
290
93
40
19’443X
X
X
X
X

The Group enters into derivative transactions such as currency risk reversal contracts to hedge the USD and EUR risk. The purpose of these currency hedges is to manage the currency risks arising from the Group’s operations. It is the Group’s policy thatno derivatives for speculative purposes shall be entered into. The main risks arising from the Group’s financial instruments areforeign currency risks and credit risks, whereas the others are of minor or no impact. The Board of Directors reviews and agrees
policies for managing each of those risks.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable
market data.

44

The Group’s financial assets at fair value amount to CHF 7 thousand per 31.03.2010 (CHF –2 thousand per 31.03.2009), are allclassified under level 2.
During the reporting period ending, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.
Foreign currency risk
The Group operates globally and is exposed to various foreign exchange risks primarily to the USD, EUR, GBP and JPY.
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 stipulates that about 50% of LEM’s net exposure is to be hedged on a rolling 3-9 month basis. It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged
items, and therefore to maximize the hedge effectiveness. Currency risks also arise from translation differences that are 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 with a 5% change in the USD, EUR, GBP and JPY with all other variables held constant of
the Group’s profit before tax (due to the changes in the fair value of the monetary assets and liabilities) and the Group’s equity.
The sensitivity analysis performed for the financial year shows an impact of CHF ±914 thousand for the a ±5% EUR rate change
and of CHF ±356 thousand for a ±5% USD rate change. For other currencies, there is no significant impact. There is no significant impact on the Group’s equity.
Credit risk
The Group trades with recognized and creditworthy parties. The accounts receivable are monitored on a monthly basis. It is theGroup’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In case of adeterioration of the credit history, advance payments are required. The Group’s exposure to bad debts is not significant, themaximum exposure is the carrying amount as disclosed in note 1. There are no significant concentrations of risk within 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 from default of thecounterparty, with a maximum exposure equal to the carrying amount of these positions.
Liquidity risk
The Group monitors its risk to a shortage of funds using a monthly treasury forecast. This forecast considers the maturity ofboth its financial investments and financial assets (e.g., accounts receivable and other financial assets) and projected cash flows
from operations. Capital requirements by subsidiaries are managed centrally by corporate finance. In case liquidity is required abank loan is either 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 of borrowings reflected in the financial statements.

45

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

Financial liabilities
In CHF thousands
Accounts payable
Accrued expenses
Other current liabilities
Current financial liabilities
Other non-current liabilities
Total

31.03.2010

Less than
one yearOver
one year31.03.2009

Less than
one yearOver
one year

23’416
10’0771’080
2
25
36’60023’416
10’0771’080
2
034’575

0
0
0
0
25
25

12’614
6’406
290
93
40
19’443

12’614
6’406
290
93
0
19’403

0
0
0
0
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. Currently,
there are no significant interest bearing financial liabilities and no significant interest rate risk.
Capital management
The primary objective of the Group’s capital management is to ensure that it maintains a healthy and stable equity ratio in order
to secure the confidence of shareholders and investors, creditors and other market players and to strengthen the future development of the Group’s business activities.
The Group manages its capital structure and makes adjustments to it, in light of changes in the economic conditions.
The Board of Directors strives to achieve a pay-out ratio between 25–50%. However, it may diverge from this policy due to economic prospects or on the grounds of planned future investment activities.

24. Scope of consolidation
Full consolidation

Country

Currency

Share Capital

Participation

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

Belgium
Germany
FranceSwitzerland
Switzerland
Italy
Switzerland
Great Britain
RussiaSwitzerland
Denmark

EUR
EUR
EUR
CHF
CHF
EUR
CHF
GBP
RUB
CHF
DKK

60’00075’000240’000
575’000
100’000
25’0008’500’000
2
200’000
20’0002’000’000

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

North America
LEM USA Inc.

USA

USD

150’000

100%

Asia
Beijing LEM Electronics Co. Ltd
LEM Japan KK

China
Japan

CNY
JPY

36’723’000
16’000’000

100%
100%

The participation shares have not changed from prior year, except for LEM Danfysik (0% prior year) and LEM Holding USA(100% prior year) as described below.

46

Changes in scope of consolidation
During the first half year of 2009/10 the scope of consolidation changed as follows:
On 28 July 2009 LEM Holding SA acquired 100% of the shares of Danfysik ACP A/S in Denmark. The business of high precisiontransducers was integrated into the business segment Industrial of LEM Group. The total purchase price for the shares and theintellectual property rights amounts to CHF 7.7 million incl. transaction costs and was paid out of existing liquid funds and two
bridge financings of EUR 2.0 million each for a period of 3 and 6 months.
Between July and March 2010, the acquired business employing 15 people generated third party sales of CHF 5.8 million and a
net profit of CHF 0,1 million.
The following table shows the fair value of assets and liabilities acquired in the share deal, as well as the intangibles acquired
and the negative goodwill arising from the transaction. The Group’s share of the fair value of the net identifiable net assets thatexceeds the purchase price has been shown as gain on bargain purchase on the income statement.
The acquired intangible assets are depreciated over 5 years according to LEM accounting policies and in line with the expected
useful life.
Carrying amount

Fair value
adjustments

Fair valueon acquisition

338
1’025
2’744
530
379
5’943
2’804
2’281
129

0
(99)
(298)
(353)
3
207
(2’804)
163
0

338
926
2’446
177
383
6’150
0
2’444
129
7’846
(149)
7’697
(338)
7’359

In CHF thousands
Cash and cash equivalents
Trade accounts receivable
Inventories
Other current assets
Property, plant and equipment
Intangible assets
Pre-acquisition goodwill
Current liabilities
Long-term liabilities
Net assets acquired at fair value
Goodwill / (Badwill)
Total purchase consideration, including transaction costs
Less cash and cash equivalents acquired
Net cash outflow on acquisition

LEM Holding Inc. has merged with and into LEM USA Inc. per 31 March 2010, with LEM USA Inc. being the surviving entity.
In the previous year the following change in the scope of consolidation occurred: Creation of LEM Management Services S.a.r.l.,fully consolidated as of 16 June 2008.

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

47

AudiTOR’s REPORT

Report of the statutory auditor on the consolidated
financial statements
As statutory auditor, we have audited
the consolidated financial statements of
LEM Holding SA, which comprise thestatement of financial position, income
statement, cash flow statement, statement of comprehensive income, statement of changes in equity and notes(pages 23 to 47), for the year ended 31
March 2010.
Board of Directors’ responsibility
The Board of Directors is responsible
for the preparation and fair presentationof the consolidated financial statementsin accordance with International Financial Reporting Standards (IFRS) and therequirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control
system relevant to the preparation andfair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error. The Board of Directors is further responsible for selecting andapplying appropriate accounting policies and making accounting estimatesthat are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit. We
conducted our audit in accordancewith Swiss law, Swiss Auditing Standards and International Standards on
Auditing. Those standards require thatwe plan and perform the audit to obtainreasonable assurance whether the
consolidated financial statements arefree from material misstatement.

the financial position, the results ofoperations and the cash flows inaccordance with IFRS and comply with
Swiss law.

An audit involves performing procedures
to obtain audit evidence about theamounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of
the risks of material misstatement of
the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor
considers the internal control system
relevant to the entity’s preparation andfair presentation of the consolidated
financial statements in order to design
audit procedures that are appropriate
in the circumstances, but not for the
purpose of expressing an opinion on
the effectiveness of the entity’s internal
control system. An audit also includes
evaluating the appropriateness of theaccounting policies used and the reasonableness of accounting estimates
made, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.

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

We recommend that the consolidated
fi nancial statements submitted to you
be approved.
Lancy, 12 May 2010
Ernst & Young Ltd

OpinionIn our opinion, the consolidated financial statements for the year ended 31
March 2010 give a true and fair view ofHans Isler
Licensed audit expert(Auditor in charge)48

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

Philippe Stöckli
Licensed audit expert

LEM Holding SA

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

AssetsNotes

31.03.2010

31.03.2009

5’221
1’635
1’752
597
22’39231’597

9’597
1’859
308
91
9’473
21’32851’69451’69449’994
1
49’99583’29171’32331.03.2010

31.03.2009

0
4’795
5’414
10’209

4
4’083
7’425
11’512

250
250

669
669

575
26’284
3’387
17’52025’066
72’832575
24’044
5’627
2’977
25’91959’142

83’29171’323

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

2
2
4

3

Total assets

Liabilities and Equity

Notes

In CHF thousands
Current liabilities
Current financial liabilities
Other current liabilities
Group current liabilities
Total current liabilities

4

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

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

50

1
2

Income statement of
LEM Holding SA

IncomeNotes

2009/10

2008/09

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

20’467
256
3’849
4’815
3
29’39029’218
283
38
3’077
436
33’052

Expense2009/10

2008/09(1’453)(179)(410)(2’042)(1’836)(4’061)(477)(6’374)27’348(2’281)25’066

26’678(759)
25’919In CHF thousands

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

5

6

51

LEM HOLDING SA NOTESNotes to the financial statements of
LEM Holding SA

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

1. Share capital
Number of shares

Par value per sharein CHF

Capitalin CHF thousands

1’150’000
1’150’000

0.50
0.50

575
575

Number of shares

Price per sharein CHFValue
in CHF thousands

Value 1.04.2009
ChangeValue 31.03.2010

12’400(7’168)5’232

312.50312.50312.50

3’875(2’240)
1’635

Value 1.04.2008
ChangeValue 31.03.2009

012’40012’4000.00
312.50312.50

0
3’875
3’875

Opening capital 1.04.2009
Closing capital 31.03.2010

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

On 4 July 2008 12’400 shares of LEM Holding SA were purchased at a share price of CHF 312.50.
In January 2010, 63 shares were granted to a retiring employee as a pro-rata payout of the PSP.
In February and March 2010, 7’105 shares were sold to employees at market value less CHF 15 discount per share with an average price of CHF 304.85. The purpose was to close the SOP4 before the contractual term (31.03.2015). The treasury shareswere booked out at historical cost and the difference to the selling price was booked to the profit and loss account (net impact
CHF 50 thousand).
Subsidiaries of LEM Holding SA did not own any shares of LEM Holding SA.
Derivative instruments on treasury shares
On 30 September 2008, LEM has purchased 30’000 call options on LEM shares at a premium of CHF 1’752 thousand. Treasury
shares and derivative instruments on own shares are valued at lower of cost or market value.

3. Investments in subsidiaries

31.03.2010

31.03.2009

51’69451’69449’99449’994

In CHF thousands
Historical cost
Total
See also note 24 “Scope of consolidation” of the consolidated financial statements.

53

Notes to the financial statements of
LEM Holding SA

4. Group current assets and liabilities

31.03.2010

31.03.2009

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

17’741
4’651
22’392

366
9’107
9’473

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

4’743
671
5’414

3’615
3’810
7’425

2009/10

2008/09

(388)
(440)
(153)
(472)
(1’453)(1’753)(415)
0332(1’836)

2009/10

2008/09

(302)
(241)
(1’738)(2’281)(40)529(1’248)(759)

In CHF thousands

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

6. Income taxes
In CHF thousands
Current taxes
Adjustment of tax provisions of previous periods
Withholding taxes on paid and planned dividend repatriation
Total

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

Shareholder with ownership above 3%:
WEMACO Invest AG, in Zug and Werner O.Weber,in Zollikon, Switzerland
7-Industries Holding B.V., in Amsterdam, Netherlands
Threadneedle Asset Management Holding Ltd,in London, United Kingdom
Sarasin Investmentfonds AG, in Basel, Switzerland
Erwin Studer and Joraem de Chavonay SA,
in Zollikon / Zug, Switzerland
Impax Asset Management Ltd, United Kingdom

31.03.2010
Sharesin %31.03.2009
Sharesin %315’000
144’581

27.4%
12.6%

315’000

27.4%

122’444
101’690

10.6%
8.8%

120’750
113’850

10.5%
9.9%

69’00051’7016.0%
4.5%

60’00051’701

5.2%
4.5%

8. Guarantees in favor of third parties on behalf of subsidiaries
31.03.2010

31.03.2009

11’852

8’703

In CHF thousands
Amount of guarantees issued

54

9. Remuneration of Board of Directors and Senior Management
9.1 Compensation of active members of the Board of Directors
Annual salary

2009/10
In CHF thousands

Additional fees

compensation

Cash pay-out
for options granted
in prior years

Felix Bagdasarjanz 1, 2
Anton Lauber 3Peter Rutishauser 4
Ueli Wampfler 5
Total

2008/09
In CHF thousands

160
90
110
80
440

0
0
0
14
14

Annual salary

Additional fees

compensation

250
85
109
0
444
Cash pay-out
for options granted
in prior years

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

140
15
90
90
80
415

0
0
0
50
0
50

0
0
0
0
0
0

The members of the Board of Directors do not participate in bonus schemes, pension funds, nor in the Performance Share Plan.
The Annual salary compensation is therefore equal to the Total Compensation. In 2009/10, Felix Bagdasarjanz and Peter Rutishauser were granted an additional annual salary compensation of CHF 20’000 each for additional efforts in the role and duties
as members of the Board of Directors. No member of the Board of Directors received additional fees amounting to more thanhalf of his normal compensation (prior year one member, CHF 50’000).
9.2 Compensation to active members of the Senior Management of the LEM Group
Annual salary

Annual bonus

Company’s

Number ofCash value of

Total

Cash pay-out

compensationcompensation

contribution toshares granted

shares granted

compensationfor options

pension fundby PSP (m=1)

by PSP (m=1)7

2009/10
In CHF thousands
Total compensation to
Senior Management

1’351

718

182

0

0

2’251

2’711

Annual salary

Annual bonus

Company’s

Number ofCash value of

Total

Cash pay-out

compensationcompensation

contribution toshares granted

shares granted

compensationfor options

pension fundby PSP (m=1)

by PSP (m=1)8

2008/09
In CHF thousands
Total compensation to
Senior Management

granted inprior years

granted inprior years

1’330

103

155

3’400

1’032

2’620

0

Chairman of the Board
Member of the Nomination & Compensation committee
3
Chairman of the Nomination & Compensation committee
4
Chairman of the Audit Committee
5
Member of the Audit committee
6
Member of the Board, resigned on 27.06.2008. Pro rata compensation for the term ending June 2008.
7
There was no PSP in 2009/10; consequently no shares were granted.
8
The cash value of the shares granted by PSP has been calculated using the fiscal value of the PSP shares at grant.
1255

Notes to the financial statements of
LEM Holding SA

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

Annual bonus

Company’s

Number ofCash value of

Total

Cash pay-out

compensationcompensation

contribution toshares granted

shares granted

compensationfor options

pension fundby PSP (m=1)

by PSP (m=1)1

2009/10
In CHF thousands

granted inprior years

Paul Van Iseghem CEO

400

204

80

0

0

684

1’903

Annual salary

Annual bonus

Company’s

Number ofCash value of

Total

Cash pay-out

compensationcompensation

contribution toshares granted

shares granted

compensationfor options

pension fundby PSP (m=1)

by PSP (m=1)2

2008/09
In CHF thousands
Paul Van Iseghem CEO

granted inprior years

406

26

81

1’200

364

877

0

For more information on the Performance Share Plan and stock option plans, see note 19 “Stock option plans, Performance
Share Plan” of the consolidated financial statements.

9.3 Shareholdings

In number of shares / options
Board of Directors
Felix Bagdasarjanz 3, 4
Anton Lauber 5Peter Rutishauser 6
Ueli Wampfler 7
Total

In number of shares / options

Senior Management
Paul Van Iseghem 8
Julius Renk 9
Hans-Dieter Huber 10
Luc Colombel 11
Simon Siggen 12
Eric Favre 13
Ageeth Walti 14
Total

31.03.2010
Numberof shares
held

1’400
1’000
2’300
12’00016’70031.03.2009
Numberof shares
held

Numberof options
held

1’125
938
1’338
0
3’401

Numberof shares
held

31.03.2010
Numberof options
held

2’912
0
796
1’400
850
0
5’958

1’400
500
2’300
11’22515’425

Numberof shares
held byPSP (m=1)

Numberof shares
held

31.03.2009
Numberof options
held

5’250
0
3’500
2’500
2’625
2’625

1’200
0
600
600
500
500

16’500

3’400

1’638
0
160
0
850
0
65
2’713

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

Numberof options
held

2’375
1’938
1’938
0
6’251

Numberof shares
held byPSP (m=1)

1’200
0
600
600
500
500
0
3’400

In 2008/09, the options held by Ageeth Walti were cancelled following her departure from LEM and the options held by Friedrich
Fahrni were cancelled following his resignation from the Board of Directors.
There was no PSP in 2009/10; consequently no shares were granted.
The cash value of the shares granted by PSP has been
2
calculated using the fiscal value of the PSP shares at grant.
3
Chairman of the Board
4
Member of the Nomination and Compensation committee
5
Chairman of the Nomination and Compensation committee
6
Chairman of the Audit Committee
7
Member of the Audit committee
1
2

56

President & CEO LEM Group
CFO, with LEM since 01.09.200910
Vice-President Industry
11
Vice-President Automotive & Traction
12
Vice-President Operations
13
Vice-President Technology
14
CFO, left LEM on 30.06.20098
9

10. Risk management
In accordance with Article 663b of the Swiss Code of obligations, a risk management report was prepared for the financial year
2009/10. The Senior Management of the Group assesses the business risks within its standardized analysis procedure. The
Group has a risk management system in place which allows for the prompt identification and analysis of risks as well as the initiation of an action plan. The Board of Directors of LEM Holding SA took note of the risk management report and approved boththe procedure and the content thereof. The organization, principles and reporting of risk management are described in detail in
the Corporate Governance section 3 in this Annual Report.

Proposed appropriation ofretained earnings

31.03.2010

31.03.2009

17’52025’06642’586(5’724)(17’171)
19’691

2’977
25’91928’896(11’376)

In CHF thousands
Retained earnings brought forward from previous year
Net income for the year
Total available earnings
Ordinary dividend1
Extraordinary dividend1
Balance to be carried forward
1

17’520Excluding dividends on own shares held by LEM Holding SA

The Board of Directors proposes the distribution of an ordinary dividend of CHF 5 per share and of an extraordinary dividend of
CHF 15 per share. Net of 35% withholding tax, this is an ordinary cash dividend of CHF 3.25 per share plus an extraordinary
cash dividend of CHF 9.75 per share.

57

AudiTOR’s REPORT

Report of the statutory auditor on thefinancial statements
As statutory auditor, we have audited
the financial statements of LEM Holding
SA, which comprise the balance sheet,income statement and notes (pages 50
to 57), for the year ended 31 March
2010.
Board of Directors’ responsibility
The Board of Directors is responsible
for the preparation of the financial
statements in accordance with therequirements of Swiss law and thecompany’s articles of incorporation.
This responsibility includes designing,
implementing and maintaining an internal control system relevant to the preparation of financial statements that are
free from material misstatement,
whether due to fraud or error. The
Board of Directors is further responsible for selecting and applying appropriate accounting policies and making
accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements basedon our audit. We conducted our audit inaccordance with Swiss law and Swiss
Auditing Standards. Those standards
require that we plan and perform theaudit to obtain reasonable assurance
whether the financial statements arefree from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in thefinancial statements. The procedures
selected depend on the auditor’s judgment, including the assessment of therisks of material misstatement of thefinancial statements, whether due tofraud or error. In making those risk
assessments, the auditor considers theinternal control system relevant to theentity’s preparation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the 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 reasonablenessof accounting estimates made, as well
as evaluating the overall presentation of
the financial statements. We believethat the audit evidence we haveobtained is sufficient and appropriate toprovide a basis for our audit opinion.

We further confirm that the proposed
appropriation of available earnings
complies with Swiss law and the company’s articles of incorporation. We
recommend that the financial statements submitted to you be approved.
Lancy, 12 May 2010
Ernst & Young Ltd

OpinionIn our opinion, the financial statements
for the year ended 31 March 2010
comply with Swiss law and the company’s articles of incorporation.
Report on Other Legal
Requirements
We confirm that we meet the legal
requirements on licensing according to
the Auditor Oversight Act (AOA) andindependence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our
independence.

Hans Isler
Licensed audit expert(Auditor in charge)

58

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

Philippe Stöckli
Licensed audit expert

iNfORMATiON fOR iNVEsTORs

Number of registered shareholders
0– 499500– 4’999
5’000– 49’999
50’000 and more
Total

31.3.2010
327
67
10
6
410

31.3.2009
326
63
14
5
408

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

31.3.2010
54.2
31.7
2.0
0.5
11.6
100.0

31.3.2009
47.3
32.9
1.7
1.3
16.8
100.0

Share price data
SymbolListingNominal value
ISIN
Swiss Security Number (Valor)
In CHF
Number of sharesYear high 1
Year low1
Year end 1
Average daily trading volume (shares)1
Earnings per share
Ordinary dividend per share 2
Extraordinary dividend per share 2
Market capitalization as per 31 March(in CHF millions)Share information
LEHN
SWX
CHF 0.50
CH0022427626
2’242’762
FY 2009/10
1’150’000
340
137
340
494
9.3
5.00
15.00
391

FY 2008/09
1’150’000
341
120
150
913
20.9
10.00
0.00
172

Financial calendar: The financial year runs from 1 April to 31 March.
25 June 2010
Ordinary Shareholders’ Meeting
Geneva Business Center, Petit Lancy
5 August 2010
First quarter results 2010/11
9 November 2010
Half-year results 2010/11
15 February 2011
Nine months results 2010/11
9 June 2011
Year-end results 2010/11
1 July 2011
Ordinary Shareholders’ Meeting
Contact:
Julius Renk (CFO)
Tel: +41 22 706 12 50
E-mail: jrk@lem.com
1

Source Bloomberg

2

Proposal of the Board of Directors to the Shareholders’ Meeting59

GROuP suBsidiARiEs

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

Beijing LEM Electronics. Co. Ltd
No. 28 Linhe Str.
Linhe Industrial Development Zone
Shunyi CN-101300 Beijing> Zonghui Zhang
LEM Belgium sprl-bvba
Route de Petit-Roeulx 95
B-7090 Braine-le-Comte> Paul Leens
LEM Danfysik A/S
Hassellunden 16
DK-2765 Smoerum> Henrik Elbaek Pedersen
LEM Deutschland GmbH
Frankfurter Strasse 74
D-64521 Gross-Gerau> Martin Hoffmann
LEM France Sàrl
15, avenue Galois
F-92340 Bourg-la-Reine> Paul Leens
LEM Holding SA
Chemin des Aulx 8CH-1228 Plan-les-Ouates/Genève> Paul Van Iseghem
LEM International SA
Chemin des Aulx 8CH-1228 Plan-les-Ouates/Genève> Paul Van Iseghem
LEM Italia Srl
Via V. Bellini 7
I-35030 Selvazzano Dentro, PD> Paul Leens

60

LEM Management Services Sàrl
Chemin des Aulx 8CH-1228 Plan-les-Ouates/Genève> Paul Van Iseghem
LEM Management Services Sarl –India Branch
Level 4, Dynasty Business Park
“A” Wing, Andheri-Kurla Road
Andheri (East)
IN – 400 059 Mumbai> Martin Hoffmann
LEM Japan KK
2-1-2 Nakamachi, Machida
JP-194-0021 Tokyo> Hiroaki Mizoguchi
LEM SA
Chemin des Aulx 8CH-1228 Plan-les-Ouates/Genève> Simon Siggen
LEM UK Ltd
West Lancs Investment Centre
Maple View
White Moss Business Park
UK-Skelmersdale WN8 9TG, Lancashire> Paul Leens
LEM USA Inc.
11665 W. Bradley Road
USA – Milwaukee - Wisconsin 53224> Kimbel A. Nap
TVELEM Ltd
P.O. Box 18
Marshal Budionny St. 11
RU-170023 Tver
> Alexander SemenovImpressum
Publication No. CH 21000 E(06.10 - 2.6 HRG)
LEM Holding SA, Geneva
Phone +41 22 706 11 11
Fax+41 22 794 94 78
Concept, Text, Graphic Design
and Product Photos
LEM
McCann Erickson
GenevaPhotosLEM
Frank Mentha
David Quattrocchi
Production and Prepress
K Genevaa Division of McCann Erickson
GenevaPhotolitho
Denz Lith-Art
Bern
Printing
Hertig+Co. AG
Lyss

LEM Annual Report 2009/10
Postal address
LEM Holding SA
P.O. BOX 785
CH – 1212 Grand-Lancy 1
Visitors’ address
LEM Holding SA
8, chemin des Aulx
CH – 1228 Plan-les-Ouates
Phone +41 22 706 11 11
Fax+41 22 794 94 78
www.lem.com

Annual Report
2009/10At the heart of power electronics