Financial Report. Financial year from October 1, 2003, through September 30, 2004

Transcription

1 Financial Report Financial year from October 1, 2003, through September 30, 2004 Eichhof Group Consolidated Income Statement 37 Consolidated Balance Sheet 38 Consolidated Cash Flow Statement 39 Consolidated Statement of Changes in Equity 40 Notes to the Consolidated Financial Statements Accounting Principles 41 Valuation Principles 42 Notes 46 Report of the Group Auditors 63 Eichhof Holding Ltd. Income Statement 64 Balance Sheet 65 Notes 66 Proposal of the Board of Directors 68 Report of the Statutory Auditors 69 Investors' Information 70 Addresses 72 35

2 36

3 CONSOLIDATED INCOME STATEMENT 1) in TCHF 2003/ /2003 Gross sales Sales deductions Net sales ,0% ,0% Changes in inventories Costs for material and goods Gross margin ,2% ,1% Personnel expenses Sales and administration expenses Other operating expenses EBITDA ,8% ,6% Depreciation of fixed assets Amortization of intangible assets EBIT ,6% ,0% Financial result Profit before income taxes ,0% ,4% Income taxes Net profit % % CHF CHF Earnings per share non diluted 112,64 46,46 - diluted 110,41 46,36 1) The consolidated income statement in the cost of sales format is presented in note

4 CONSOLIDATED BALANCE SHEET in TCHF Assets Cash and cash equivalents Financial assets Accounts receivable Other accounts receivable Inventories Prepaid expenses Current assets ,2% ,8% Fixed assets Intangible assets Financial assets Deferred tax assets Non-current assets ,8% ,2% Assets ,0% ,0% Liabilities and shareholders' equity Accounts payable Financial liabilities Current tax liabilities Other liabilities Accrued liabilities Current liabilities ,7% ,3% Financial liabilities Other liabilities Provisions Deferred tax liabilities Non-current liabilities ,8% ,2% Liabilities ,5% ,5% Share capital Own shares Capital reserves Retained earnings Shareholders' equity ,5% ,5% Liabilities and shareholders' equity ,0% ,0% 38

5 CONSOLIDATED CASH FLOW STATEMENT in TCHF 2003/ /2003 Profit before income taxes Depreciation of fixed assets Amortization of intangible assets Non-cash sales deductions (Gain) / Loss on disposal of non-current assets Changes in provisions Interest expense net Income from securities Interest paid Income taxes paid Other non-cash positions Cash flow before working capital changes Changes in accounts receivable Changes in other accounts receivable and prepaid expenses 1) Changes in inventories Changes in accounts payable Changes in other liabilities and accrued liabilities Cash flow from operating activities Investments in fixed assets Investments in intangible assets Investments in financial assets 1) Acquisitions Divestments of fixed assets Interest and dividends received Cash flow from investing activities Decrease of financial liabilities Purchase of own shares Sale of own shares Share repurchase program Reimbursement of par value Dividends paid Cash flow from financing activities Changes in cash and cash equivalents Cash and cash equivalents at beginning of the year Effect of foreign currency translation on opening balances Cash and cash equivalents at end of the year EBITDA Free cash flow (cash flow from operating activities less cash flow from investing activities excluding acquisitions) ) Changes in current financial assets are newly included in investments in financial assets. 39

6 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY in TCHF Accu- Total mulated Hedge Total share- Share Own Capital Retained translation Accounting retained holders' capital shares 3) reserves earnings differences (IAS 39) earnings equity Balance as of Share repurchase program Reimbursement of par value Purchase of own shares Sale of own shares Translation differences Net profit Balance as of Balance as of Dividends Purchase of own shares Sale of own shares Adjustment of financial instruments to fair value ) Translation differences Net profit Balance as of ) ) The share capital as of September 30, 2004, consists of registered shares of CHF 1 par value each. 2) The adjustment of financial instruments to the fair value concerns the valuation of an interest rate swap. For further details see note 3.17 on page 57. 3) Par value; at cost the total reduction in consolidated equity due to own share holdings amounts to TCHF (previous year: TCHF ). For further details regarding equity see note 5 on page 66 of Eichhof Holding Ltd.. 40

7 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 Accounting principles 1.1 General Eichhof Holding Ltd. is a Swiss limited company, domiciled in Lucerne (Obergrundstrasse 110). It is the parent company of the Eichhof Group, the number one independent brewery and one of the biggest beverages distributors in Switzerland, and of the Datacolor Group, a leading provider of color measurement systems. In addition to its Swiss operations, the Eichhof Group also does business through its Datacolor Group in Europe, North America, and Asia. The Eichhof Group employs 679 (previous year: 662) persons. 1.2 Basis of The consolidated financial statements of Eichhof Group comply with Internatiopreparation nal Financial Reporting Standards (IFRS). By the balance sheet date, all applicable standards of the IASB and interpretations of the IFRIC are implemented. Only the new IFRS 3 Business Combinations had an impact on the accounting principles, compared to the previous year, as the accounting for business combinations for which the agreement date is on or after March 31, 2004 has changed. The consolidated financial statements are prepared on a historical cost basis, except for the measurement at fair value of derivative financial instruments and available for sale or held for trading financial assets. Expenses and revenues are recognized on an accrual basis. Comparative information is partly restated to improve the comparison. 1.3 Use of estimates In preparing the financial statements in accordance with IFRS certain assumptions have to be made which affect the reported values of assets and liabilities, the income statement and the disclosure of contingent liabilities. The assumptions are based on forecasts and estimates at the time the financial statements are prepared. Actual outcome may differ from those estimates. 1.4 Scope of General: consolidation The consolidated financial statements include the financial statements of Eichhof Holding Ltd. and its subsidiaries that are controlled by Eichhof Holding Ltd.. Control is presumed to exist when Eichhof Holding Ltd. owns, directly or indirectly through subsidiaries, more than one half of the voting power of an enterprise or otherwise exercises management control. The closing date for the financial statements of Eichhof Holding Ltd. and all its subsidiaries is September 30. There are no associated companies or joint ventures. Changes in the scope of consolidation: There were no changes in the scope of consolidation in the reporting period. A summary of shareholdings is given on page Principles of The assets and liabilities included in the consolidated financial statements are consolidation measured according to uniform principles. Intragroup balances and intragroup transactions and resulting unrealized profits are eliminated upon consolidation. 41

8 1.6 Foreign currency The financial statements of foreign subsidiaries are prepared in their respective translation local currency and translated into Swiss francs (reporting currency) for consolidation purposes. Assets and liabilities of foreign subsidiaries are translated at the rate of exchange ruling at the balance sheet date. The income statements of foreign subsidiaries are translated at weighted average exchange rates for the year. The resulting exchange differences are posted directly to equity. In the financial statements of the local subsidiaries transactions in foreign currencies are recorded at the rate ruling at the date of transaction. Assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. All resulting differences are recognized as exchange gains or losses in the income statement of the local subsidiary. 1.7 Segment reporting Segment information is based on two segment formats: the primary format reflects the business segments whereas the secondary format presents the geographical segments. Segment reporting based on business segments represents the Group s structure with independent management of the Divisions. 2 Valuation principles 2.1 Gross revenue and Gross sales include all invoiced sales and services to third parties. Sales are realization of recognized when the economic benefits associated with the transaction will proceeds flow to the company and the amount of the revenue can be measured reliably. Sales deductions include sales taxes and discounts; the latter category also includes amortization of loans to secure distribution channels. 2.2 Management share Options for purchase of Eichhof registered shares are granted as part of perforoption plan mance-based variable compensation for certain management personnel and members of the Board of Directors. Quantity and prize are determined by the Human Resources and Compensation Committee. The granted options carry the right to purchase one share of Eichhof Holding Ltd. per option, vest in three years, and expire in ten years. The exercise price is determined in advance in accordance with the Black-Scholes-formula. The quantity of the granted options depend on the individual performance of the entitled persons and on the performance of their business unit. To accommodate the option plan with those of other companies the exercise period was increased to ten years. The option premium is recorded on an accrual basis as a personnel expense at the time of issuance. 2.3 Taxes Income taxes are recognized according to economic criteria on an accrual basis. Deferred income taxes are provided, using the comprehensive balance sheet liability-method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. They are measured at the current tax rates. No deferred income taxes are recorded in respect of temporary differences associated with investments in subsidiaries, as it is assumed that such differences will have no tax consequences in the foreseeable future. 42

9 Tax loss carry-forwards are only recognized as deferred tax assets when it can be reasonably assumed that future taxable income will be sufficient to secure tax advantage by offsetting losses. If no dividend payments are planned, withholding taxes and other taxes on potential later dividends are not recognized, since retained earnings are generally reinvested. 2.4 Research and Software development expenses incurred are only capitalized on an individual development project basis if such outlay is likely to be covered by corresponding future income. Research costs are expensed as incurred. Capitalized software development expenditures include material and payroll expenses, depreciation of equipment and machinery and the overhead costs directly attributable. 2.5 Borrowing costs Borrowing costs, incurring during the construction of fixed assets, are recognized as an expense. 2.6 Impairment of The carrying amounts of non-current assets are reviewed for impairment at assets each balance sheet date whether there is any indication that an asset may be impaired. If any indication exists the recoverable amount is estimated. If the carrying values exceed the estimated recoverable amounts, the assets are written down to their recoverable amounts. Impairment losses are recognized in the income statement. The recoverable amount is the higher of the asset s net selling price and its value in use. The net selling price is the amount obtainable from the sale of an asset in an arm s length transaction between independent parties less the cost of disposal. The value in use is the present value of estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. 2.7 Employee benefit Eichhof Group companies have different employee benefit plans in accordance liabilities with local regulations and customs in the relevant countries. These plans comprise financially independent funds and foundations which are organized on a defined contribution or defined benefit basis and cover the majority of employees. They provide benefits in case of death, disability, retirement, or termination of employment. They may be financed through a combination of employee and employer contributions or through employer contributions alone. Assets covering existing and future benefit obligations for insured parties in the Beverages Division are held in the Eichhof Pension Fund, an autonomous, independent foundation organized under the Occupational Pension Act (BVG). The Eichhof Group also has one employer foundations in Switzerland which is likewise governed by the provisions of the BVG. Defined contribution plans: The Color Division's benefit plans are organized through external savings banks. The Eichhof Group is not subject to further obligations beyond ongoing contributions owed and recognized. Defined benefit plans: Actuarial calculations using the projected unit credit method are carried out to define the present value of the expected obligation for Swiss employee pension plans classified as defined benefit plans. All significant pension fund obligations and the assets covering them are assessed periodically, all others on a regular basis. The latest actuarial calculations were carried out as of September 30, 2004, by external experts. 43

10 Benefit expenses resulting from employee services in the current period (current service costs) are recognized in the income statement. Benefit expenses associated with employee services in prior periods, resulting in the current period from the introduction of, or changes to, post-employment benefits (past service costs) are recognized on a straight-line basis over the average period until the benefits become vested. Actuarial gains and losses are recognized as income or expense when the cumulative unrecognized actuarial gains or losses for each individual plan exceed 10% of the higher of defined benefit obligation and the fair value of plan assets. These gains or losses are recognized over the expected average remaining working periods of the employees participating in the plans. Unrecognized actuarial gains and losses are reflected in the balance sheet. Prepaid employee benefits (employer s contribution reserves) are reported as non-current financial assets. Other employee benefit surpluses are only capitalized if available to the Group as future contribution repayments or reductions. 2.8 Cash and cash Cash and cash equivalents include cash, bank accounts, demand deposits, equivalents money market instruments as well as short-term deposits with an initial term not exceeding 3 months. 2.9 Current financial Current financial assets are investments which are classified as held for trading assets and and comprise marketable, easily realized securities. They are measured at fair liabilities value. Not realized gains or losses on investments held for trading are recognized in financial result. Current financial liabilities include bank payables, which are recorded at nominal value Accounts Accounts receivable are recognized and carried at nominal values less necesreceivable sary allowances for individual accounts as well as an overall allowance based on aging Inventories Inventories are measured at the lower of acquisition or production cost or net realizable value, using the weighted average cost formula Fixed assets Fixed assets including investment property are reported at acquisition cost less accumulated depreciation and any impairment in value. Land is depreciated only if periodic appraisals reveal a sustained impairment in value. Expenditures which increase the useful life of an asset are capitalized. Fixed assets are depreciated on a straight-line basis according to economic criteria corresponding to the estimated useful lives of the assets as set forth in the principles of valuation. Essentially, these are: Buildings Machinery and equipment Vehicles years 3 20 years 5 12 years 2.13 Intangible assets Intangible assets such as software development costs, goodwill arising from business combinations for which the agreement date is before 31 March 2004, trademarks, licenses, and patents are capitalized at acquisition or production cost and amortized on a straight-line basis over their estimated useful life, not exceeding 20 years. Impairments are recognized as necessary. Goodwill arising from business combinations for which the agreement date is on or after 31 March 2004 are not amortized on a straight-line basis anymore, but are reviewed for impairment at each balance sheet date (see 2.6). 44

11 2.14 Non-current Non-current financial assets consist of investments available-for-sale, prepaid financial assets employee benefits and non-current loans. Investments available-for-sale are measured at fair value. Not realized gains or losses are included in financial result. Prepaid employee benefits consist mainly of employer s contribution reserves and are recorded at nominal value. The third-party loans are intended to secure distribution channels for the Beverages Division. They are amortized in line with sales and are recognized as sales deductions Non-current Debenture bonds and other interest-bearing loans are measured at amortized financial liabilities cost using the effective interest rate method. Amortized cost was calculated by taking into account any issue costs. Gains and losses through the amortization process are recognized in financial result Derivative financial Derivative financial instruments are recognized as current or non-current instruments financial assets or liabilities, depending on the duration. If Hedge Accounting according to IAS 39 is applied, the gains and losses on the hedging instruments are recognized directly in the equity until the recognition of the hedged risk in the balance sheet. All other derivative financial instruments are recognized at fair value and not realized gains or losses are included in financial result Provisions Provisions are recognized for present obligations with uncertain timing or amounts as a result of a past event and for which a future outflow of resources is probable. The amount is based on the best possible estimate of the expected outflow of resources Own shares Own shares are reported at par value and presented as a deduction from equity. Cost incurred or considerations received in excess of par value are recognized in retained earnings. 45

12 NOTES The figures below are stated in thousands of Swiss Francs (TCHF) unless otherwise indicated. 3.1 Segment information Business segments 2003/ /2003 as % as % of total of total Net sales to third parties , ,0 Beverages Division , ,4 Color Division , ,6 Real Estate ) 3, ,1 Other , ,1 as % as % of sales of sales EBITDA , ,6 Beverages Division , ,3 Color Division , ,0 Real Estate ) 85, ,9 Other n/a n/a as % as % of sales of sales EBIT , ,0 Beverages Division , ,6 Color Division , ,6 Real Estate ) 78, ,4 Other n/a n/a as % as % of sales of sales Depreciation of fixed assets and intangible assets , ,3 Beverages Division , ,7 Color Division , ,1 Real Estate 564 6, ,5 Other 66 n/a 535 n/a as % as % of sales of sales Impairment 0 0, ,4 Beverages Division 0 0,0 0 0,0 Color Division 0 0, ,3 Real Estate 0 0,0 0 0,0 Other 0 n/a 0 n/a 1) includes gain on disposal of investment property of TCHF

13 Business segments 2003/ /2003 as % as % of total of total Gross investments in fixed assets , ,0 Beverages Division , ,9 Color Division , ,5 Real Estate 894 6, ,6 Other 28 0, ,0 as % as % of total of total Average number of employees , ,0 Beverages Division , ,5 Color Division , ,4 Real Estate 2 0,3 2 0,3 Other 5 0,8 5 0,8 Net assets by business segment as of September 30, 2004 Assets Liabilities Net Beverages Division Color Division Real Estate Other Total as of September 30, 2003 Assets Liabilities Net Beverages Division Color Division Real Estate Other Total Return on average net assets 2003/ /2003 Beverages Division 20,2% 18,3% Color Division 138,4% 614,4% Real Estate 15,2% 2,3% The figures of the holding company, financial activities, and consolidation effects are included in the position "Other". The products and business activities of the three business units are described in the report of the business year. The Eichhof group accounts for intra-segment sales and transfers as if the sales or transfers were to third parties at current market prices. There are no material inter-segment sales. 47

14 Geographical segments 2003/ /2003 as % as % of total of total Net sales to third parties , ,0 Europe , ,7 America , ,8 Asia/Pacific , ,5 as % as % of total of total Assets , ,0 Europe , ,6 America , ,7 Asia/Pacific , ,7 as % as % of total of total Gross investments in fixed assets , ,0 Europe , ,4 America , ,0 Asia/Pacific 341 2,5 78 0,6 as % as % of total of total Average number of employees , ,0 Europe , ,2 America , ,9 Asia/Pacific 45 6,8 26 3,9 3.2 Personnel expenses 2003/ /2003 Wages and salaries Social security costs Pension costs for defined benefit plans for defined contribution plans Other personnel expenses Personnel expenses The revaluation of the prepaid employee benefits resulted in a gain of TCHF 122 in the reporting period. In contrast to this, an expense of TCHF was recorded due to the amortization of the funding deficit as of over the expected average remaining working periods of the employees in the previous period. 3.3 Sales and administration expenses 2003/ /2003 Sales expenses Administration expenses Sales and administration expenses

15 3.4 Financial result 2003/ /2003 Interest income Income from securities Exchange gains Financial income Interest expense Expenditure relating to securities Exchange losses Amortization of issue costs Financial expenses Financial result, net Income taxes 2003/ /2003 Current income taxes Deferred income taxes Effective tax expense The effective tax expense, calculated by multiplying the local statutory tax rate with local taxable profit or loss, differs from expected tax expense as follows: 2003/ /2003 Profit before income taxes Expected taxes (25,6%; previous year 24,0%) Effect on deferred tax liabilities due to changes in income tax rates Recognition of tax losses not capitalized Other effects Effective tax expense Changes in deferred taxes were calculated as follows: Deferred tax assets As of Oktober Discharges to income statement Deferred tax assets as of September

16 Deferred tax liabilities As of Oktober Discharges to income statement Deferred tax liabilities as of September The deferred taxes are attributable to the following balance sheet items: Losses available for offseting against future taxable income Inventories Other assets Deferred tax assets as of September Inventories Fixed assets Other assets Liabilties Deferred tax liabilities as of September The Eichhof Group has total tax losses carried forward whose potential tax effect is about CHF 9.6 million (previous year: CHF 8.8 million), of which TCHF 455 (previous year: TCHF 433) were capitalized as deferred tax assets. These tax losses carried forward can potentially be used in Switzerland for seven years and abroad partly unrestrictedly Tax losses may be offset: more than five years Total tax losses carried forward available for offseting

17 3.6 Cash and cash equivalents Cash in hand, postal accounts Cash at bank Short-term deposits (up to 90 days) Cash and cash equivalents Material non-cash transactions refer to the amortization of loans, intended to secure distribution channels, as sales deductions. 3.7 Accounts receivable Gross trade accounts receivable % % Allowances % % Net accounts receivable % % 3.8 Other accounts receivable Other accounts receivable due from third parties government pension funds Prepayments to third parties Other accounts receivable Eichhof Holding Ltd. gave an unsecured, always repayable loan of TCHF (previous year TCHF 3 000) to the pension fund at market terms for partial financing of real estate. 3.9 Inventories Raw materials 820 3% 672 2% Work-in-progress 147 1% 379 1% Semi-finished and finished goods % % Trading goods % % Gross inventories % % Allowances % % Net inventories % % 51

18 3.10 Changes to fixed assets Machinery Land and buildings Fixed assets equipment, Operating Investment under con- Total Acquisition or production costs vehicles property property struction fixed assets as of Additions Disposals Translation differences as of Additions Reclassifications Disposals ) ) Translation differences as of Accumulated depreciation as of Additions Disposals Translation differences as of Additions Reclassifications Disposals ) Translation differences as of Net carrying amount as of as of Insurance values as of Net carrying amount of fixed assets under finance leases as of Fixed assets in construction are investment properties which are developed by the Eichhof Group itself. Market values of investment properties and fixed assets in construction were determined based on valuations performed by independent experts and amount to CHF 48,2 million (previous year: CHF 58,8 million). Income from investment property amounts to TCHF (previous year: TCHF 2 715), expenses for investment property amount to TCHF 780 (previous year: TCHF 730). 1) The Beverages Division sold its trucks in the reporting period. The trucks and vans are now leased (operating lease). Regarding leasing liabilities see note ) In the reporting period, the result on disposal of fixed assets amounts to TCHF (previous year: TCHF -57). It includes a gain after tax on a sale of an investment property of CHF 4,9 million. 52

19 3.11 Changes to intangible assets Capitalized Trade software marks, Acquisition or production costs development licenses, costs Goodwill patents Total as of Additions 425 2) Translation differences as of Additions 0 2) 365 1) Disposals Translation differences as of Accumulated amortization as of Additions Impairment ) Translation differences as of Additions Disposals Translation differences as of Net carrying amount as of as of ) In the reporting period, the Color Division acquired the net assets of Milori, Inc. For further details see note ) Out of the total of TCHF (previous year: TCHF 5 098) spent on software development costs, no costs (previous year: TCHF 425) were capitalized. 3) In the Color Division an additional impairment for patents and licenses in the amount of TCHF had to be recorded in the previous year due to conservative estimates of future cash flows and due to exchange rate risks. 53

20 3.12 Financial assets Marketable securities Derivative financial instruments Current financial assets Investments in third parties Prepaid employee benefits Non-current loans to third parties Non-current financial assets Financial assets Non-current loans to third parties mainly comprise interest-free loans for long-term securing of distribution channels for the Beverages Division. See note 3.16 regarding the prepaid employee benefits Financial liabilities Bank overdrafts Financial liabilities - third parties Debenture bond Derivative financial instruments 11 0 Non-current financial liabilities Debenture bonds Derivative financial instruments Non-current financial liabilities Financial liabilities Eichhof Holding Ltd. has the following bonds outstanding: CHF 60 million bond at 4 1/4%, , due April 1, 2005 CHF 40 million bond at 4%, , due March 30, 2006 Repayable as follows: Up to 1 year Up to 5 years Total Financial liabilities third parties Debenture bonds Derivative financial instruments Financial liabilities

21 Credit lines and bank liabilities include agreements between subsidiaries and their local banks Credit lines available Credit lines not drawn on There are no material debt covenants. All credit terms entered into in order to maintain the credit lines were met at the balance sheet date Other liabilities Other current liabilities towards third parties government pension funds 0 26 Prepayments from third parties Other current liabilities Other non-current liabilities Other liabilities Other non-current liabilties towards third parties include "Deposits on containers" Provisions Warranties Other Total As of Additions Utilized Dissolved Translation differences As of Additions Utilized Translation differences As of Provisions for warranty claims refer to the Color Division. It is expected that most of these costs will incur within the first year after the delivery of the product. 55

22 3.16 Employee benefits Defined benefit plans Net benefit expenses 2003/ /2003 Current service cost Interest cost on benefit obligation Expected return on plan assets Effect of curtailments / settlements Amortization of transition cost Amortization of losses Employee contributions Expense recognized in the income statement Actual return on plan assets Net prepaid employee benefits Present value of funded obligations Market value of plan assets Funding deficit Present value of unfunded obligations Unrecognized actuarial losses Unrecognized transition cost Prepaid employee benefits Movement in the net prepaid employee benefits Prepaid employee benefits as of October Net expense recognized in the income statement Employer's contributions Translation differences 2 17 Prepaid employee benefits as of September The prepaid employee benefits of TCHF are due to Swiss pension plans. These plans are legally independent foundations, the Group is not liable for. The needed coverage is established according to national legislation, where contributions paid until the balance sheet date and the corresponding interest are included. Future salary and pension increases though, in contrary to IAS 19, are excluded. The Swiss pension plans are covered by 103% as of January 1, 2004 (previous year: 100%). According to Swiss law, prepayments reported on the balance sheet cannot be reimbursed to the company, but in some pension schemes they are used to finance employer contributions to individual benefit plans. 56

23 The decrease of the unrecognized actuarial losses in the reporting and in the previous period was the result of a return on assets exceeding expectations, of the amortization included in the current expense and of an actuarial gain due to an adjustment of the assumption of the future rate of pension increases. The plan assets also include (previous year: 2 660) shares of Eichhof Holding Ltd. at fair value of TCHF as of September 30, 2004 (previous year: TCHF 1 862). The weighted actuarial assumptions can be summarized as follows: Discount rate 3,72% 3,70% Expected long-term rate of return on assets 4,50% 4,98% Expected rate of salary increases 2,00% 2,00% Defined contribution plans The company maintains various defined contribution plans for which expenses for 2003/2004 amount to TCHF (previous year: TCHF 2 093) Financial instruments Risk management and risk hedging instruments and off-balance-sheet risks The Group's operating activities are exposed to a certain level of interest rate, foreign currency and credit risks. Individual categories of risks are continuously monitored and adjusted in relation to the overall risk exposure of the Group. To hedge foreign currency and interest rate risks and to improve the yield on financial assets the Eichhof Group uses currency futures, option contracts and other financial instruments. Management of interest rate risks The Group is exposed to interest rate fluctuations due to movements in financial markets. In order to hedge those risks, interest swaps may be entered. Management of foreign currency risks A significant portion of the Group's cash flows is denominated in foreign currencies. The Group attempts to minimize currency exposure by matching operating income and operating expenses in foreign currency. Any residual risk is hedged in accordance with financial risk policy. Hedging instruments include standardized foreign currency futures and options denominated in various major currencies, generally with maturities of less than 12 months. 57

24 Management of credit risks Credit risks comprise of the credit and default risks associated with marketable securities and claims as well as of derivative financial instruments and money market contracts. The credit risk is minimized by only purchasing marketable securities of companies with high ratings. Default risk for derivative financial instruments and money market contracts is reduced by entering into transactions only with banks or other financial institutions with a high rating at the time of closing. The credit risks are continually monitored and kept within defined parameters. Due to its large geographic diversification and number of customers, the Group is not exposed to material concentrations of credit risks. Derivative financial instruments Positive Negative Contract values replacement value replacement value as of Currency instruments Foreign currency futures Interest instruments Interest rate swap Outstanding foreign currency futures transactions are due until October 25, The related derivative financial instruments were recognised in current financial assets and liabilities at fair values. There were no currency options outstanding on September 30, 2004 as in the previous year. The interests of a probable refinancing of the debenture bond, due next year, were hedged by a interest rate swap for the periode from April 1, 2005 to April 1, Eichhof Holding Ltd. pays a fixed interest rate of 2,84% p.a. and receives a variable interest rate based on the 6 months CHF-LIBOR. Fair values The carrying values of cash and cash equivalents, trade accounts reveivable and current liabilities approximate the fair values according to IFRS. Current financial assets and derivative financial instruments were measured at fair values. 58

25 3.18 Management share option plan Options to subscribe Eichhof registerel shares are granted to members of the Board of Directors and of the management as part of their performance-related bonuses. The options carry the right to purchase one share per option, vest in three years, and expire in ten years. They have a predetermined exercise price calculated according to the Black-Scholes-formula. For the possible excercise of the options a conditional share capital of maximally CHF exists at par value of CHF 1. Quantity of Quantity of Quantity of options Expiration Expiration options options Year issued issued Exercise- of blocking of exercise exercised repurchased price (CHF) period periode per October 1: Total No options were exercised in the reporting and in the previous period Earnings per share (EPS) Earnings per share were calculated by dividing the net profit attributable to ordinary shareholders by the average number of ordinary shares outstanding during the year (issued shares less own shares). Diluted earnings per share were calculated by dividing the net profit attributable to ordinary shareholders by the average number of ordinary shares outstanding during the year adjusted for the effects arising as a result of issuing own shares reserved for the management share option plan. 2003/ /2003 Net profit per income statement Average number of shares outstanding Basic earnings per share in CHF 112,64 46,46 Effect of dilution: Number of share options Adjusted average number of shares for diluted earnings per share Diluted earnings per share in CHF 110,41 46,36 59

26 3.20 Related parties Related parties are members of the Board of Directors, the management and important shareholders. As in the previous year, no claims or liabilities exist between the company and its related parties. Additionally, no transactions took place except for those in the normal course of business (e.g. salary, dividends, etc.) in the reporting and in the previous year. The compensatioon paid to the members of Eichhof Holding Ltd s Board of Directors are shown on page Leasing liabilities As in the previous year, no finance lease contracts exist at the balance sheet date. The following overview shows future liabilities arising from non-capitalized operating lease contracts: Due in reporting period + 1 year Due in reporting period + 2 years Due in reporting period + 3 years Due in reporting period + 4 years Due in reporting period + 5 years Due in reporting period + > 5 years Non-capitalized operating leasing liabilities The Beverages Division began to lease its trucks and vans in the reporting period. The lease term is six years. There are no renewal or purchase options Contingent liabilities There were no sureties, guarantee obligations or pledges in favor of third parties either in the reporting period or in the previous year. The company is involved in legal disputes, lawsuits and court cases in the ordinary course of business. As far as the company can assure such legal claims are not currently expected to have a significant impact on its financial situation or operating result on a scale greater than its existing provisions Securing of own liabilities No assets were charged to secure own liabilties in the reporting and in the previous period Commitment to capital expenditure As of September 30, 2004, no commitments to capital expenditure exist. 60

27 3.25 Acquisitions Datacolor acquired the net assets and the technology of Milori, Inc. as of After deducting current assets of USD 0,2 million a goodwill of TUSD 285 remained. This was mainly paid for the technology of color calibaration of Home Theater display devices and video projectors. The fair value could not be measured reliably. The revenue and the result of the purchased activities was immaterial in the reporting period Post balance sheet events The Group Financial Statements were approved for publication by the Board of Directors on November 18, They must still be approved by the shareholders at the Annual General Meeting. No significant events have occurred since the balance sheet date and up to November 18, 2004, which might have any influence on the information presented in the 2003/2004 annual report or which might need to be disclosed here Foreign exchange rates Year-end rates for balance sheet Average rates for income statement Currency Unit / /2003 USD 1 1,2600 1,3200 1,2800 1,3900 EUR 1 1,5500 1,5400 1,5500 1,5000 GBP 1 2,2700 2,1900 2,2800 2,2200 HKD 1 0,1616 0,1710 0,1700 0, Consolidated income statement (cost of sales) 2003/ /2003 Net sales 1) ,0% ,0% Cost of goods sold 1) Gross profit ,8% ,2% Sales and marketing Administration Research and development Other operating expenses EBIT ,4% ,9% 1) The difference of net sales compared to the presentation according to the nature of expense method is mainly due to the reclassification of the beer taxes from sales deductions to cost of goods sold. 61

28 3.29 Subsidiary companies Share capital Holdings Company Location Currency in 1 000s in % Beverages Division Brauerei Eichhof AG* CH-Lucerne CHF Eichhof Getränke AG* CH-Lucerne CHF Bier-Import AG* CH-Lucerne CHF MABAG AG* CH-Lucerne CHF Kellerei St. Georg AG (prev. Lufrisca AG) CH-Lucerne CHF Der fliegende Harass AG CH-Zurich CHF Ulmer & Knecht AG CH-Zurich CHF Color Division Datacolor Holding AG* CH-Lucerne CHF CV US Inc.* USA-Ohio USD Colorvision Administrative AG CH-Lucerne CHF Datacolor AG CH-Dietlikon CHF Datacolor International France SA F-Montreuil EUR Datacolor GmbH D-Marl EUR Datacolor Asia Pacific Pte. Ltd. Singapore SGD Datacolor Asia Pacific (HK) Ltd. Hong Kong HKD Applied Color Systems Inc. USA-Lawrenceville USD Colorvision Inc. USA-Delaware USD Datacolor International Ltd. GB-Altrincham GBP Datacolor Technology (Suzhou) Co., Ltd. China USD *These companies are held directly by Eichhof Holding Ltd. 62

29 REPORT OF THE GROUP AUDITORS to the General Meeting of Eichhof Holding Ltd., Lucerne As Group auditors, we have audited the consolidated financial statements (income statement, balance sheet, cash flow statement, statement of changes in equity, and notes, as set out on pages 37 to 62) of Eichhof Holding Ltd. for the year ended September 30, These consolidated financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence. Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession and with the International Standards on Auditing (ISA), which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the financial position, the results of operations and the cash flows in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law. We recommend that the consolidated financial statements submitted to you be approved. KPMG Fides Peat Markus Forrer Swiss Certified Accountant Auditor in Charge Sandro Mascarucci Swiss Certified Accountant Lucerne, November 18,

30 Eichhof Holding Ltd. INCOME STATEMENT in TCHF 2003/ /2003 Financial income Financial expenses Administrative expenses Income taxes Net profit Retained earnings carried forward Dividend Retained earnings

31 Eichhof Holding Ltd. BALANCE SHEET in TCHF Assets Cash and cash equivalents Current financial assets Other accounts receivable third parties group companies Prepaid expenses Current assets ,5% ,7% Investments in group companies Own shares Loans to group companies Organization costs Non-current assets ,5% ,3% Assets ,0% ,0% Liabilities and shareholders' equity Financial liabilities Other current liabilities third parties group companies Accrued liabilities Current liabilities ,9% ,8% Financial liabilities Non-current liabilities ,1% ,7% Liabilities ,0% ,5% Share capital Legal reserves Reserves for own shares Free reserves Retained earnings Shareholders' equity ,0% ,5% Liabilities and shareholders' equity ,0% ,0% 65

32 Eichhof Holding Ltd. NOTES 1 Introduction The financial statements of Eichhof Holding Ltd. comply with the Swiss Code of Obligation. 2 Accounting and valuation principles Financial assets Financial assets are reported at acquisition cost or lower market value. Investments and loans They are reported at acquisition cost less accumulated depreciation. 3 Loans and investments Loans granted to group companies serve to finance them and are given on a long-term basis. The directly and indirectly hold investments of Eichhof Holding Ltd. are presented in note 3.29, page 62 of this report. 4 Financial liabilities TCHF TCHF Current financial liabilities due to third parties Debenture bond 1) Derivative financial instruments 11 0 Current financial liabilities Debenture bonds 1) Derivative financial instruments Non-current financial liabilities ) For details see notes Eichhof Group on page 54 5 Shareholders' equity Share capital The share capital of Eichhof Holding Ltd. of CHF (previous year: CHF ) is fully paid-in and consists of registered shares with a par value of CHF 1 each (previous year: registered shares with a par value of CHF 1 each). In the reporting period 2002/ shares were bought back and eliminated. Additionally, the par value of the share was reduced from CHF 25 to CHF 1. The resulting effects were recorded in the free reserves. The shares are listed on the Zurich Stock Exchange under issue number