FINANCIAL REPORT 2015

Transcription

1 AG FINANCIAL REPORT 2015

2 AG FINANCIAL REPORT 2015 Financial year from October 1, 2014 through September 30, 2015 Report of the Board of Directors AG 3 Information and Key Figures Share Information 4 Key Figures 5 Corporate Governance Group Structure 6 Executive Bodies 7 Information for Investors 10 Compensation Report 2014 / Commentary to the Business Year 2014 / Financial Report Consolidated Income Statement 20 Consolidated Balance Sheet 21 Consolidated Cash Flow Statement 22 Consolidated Statement of Changes in Equity 23 Notes to the Consolidated Financial Statements 24 Report of the Statutory Auditor on the Consolidated Financial Statements 41 AG Balance Sheet 42 Income Statement 43 Statement of Changes in Equity 43 Notes 44 Proposed Appropriation of Available Earnings 46 Report of the Statutory Auditor on the Financial Statements 47 Addresses 48

3 Report of the Board of Directors Report of the Board of Directors Major distortions on sales and currency markets turned fiscal 2014 /15 into a significant challenge for global operator. The strong depreciation of the Japanese yen, the turmoil surrounding the financing of Greece s huge debt by the European Union and the visible slowdown in growth in China put pressure on the world economy. The substantial weakening of the euro against the US dollar also had an adverse impact on sales and earnings at, which reports in US dollars. Making up almost 40% of sales, Europe is s largest market. This explains why s net sales are below the previous year s figure. In local currency, on the other hand, achieved a slight increase in sales. Since the targets for fiscal 2014 /15 were not met, the variable components of employees salaries were considerably lower. EBIT therefore matched the year-back level and the EBIT margin even increased moderately. Considering how difficult conditions were, held up well in the year under review. Measures to enhance efficiency were implemented in spring and increased investments made during recent years in marketing, strategic research and development of new products as well as expanding the direct sales structure by centralizing the sales, service and support organization all played a pivotal role in the company s development. The roll-out of new customer-focused, easy-to-operate products as well as market investments in driving s growth strategy forward continued to have a positive impact on results. Due to the solid balance sheet and the fact that delivered encouraging sales and earnings despite the unfavorable economic backdrop, the Board of Directors has decided to propose to the general meeting of shareholders of AG that an unchanged dividend of CHF 11 be distributed for fiscal 2014 /15. In the financial year under review, demonstrated that it is capable of withstanding a harsh economic climate with sizable currency fluctuations and that thanks to its long term growth strategy it is capable to successfully launch new and innovative products with a clear market focus. Moreover, s strong financial base allows it to continue investing in the future, to develop new color measurement technologies, to constantly improve its traditionally solid market position in the textile and apparel industry, to gain new markets and, through organic growth and acquisitions, to increase its market penetration in the paint and coatings industry. On behalf of the Board of Directors, I would like to thank management and all employees for their great commitment and successful hard work. Werner Dubach Chairman of the Board of Directors Analogous translation of the original German version of Geschäftsbericht In case of differences of interpretation arising in comparison to the German version, the wording of the original German version is valid. 3

4 Share Information Key Figures DATACOLOR SHARE INFORMATION KEY FIGURES Stock exchange information Expected dividend ex date (subject to approval by AGM) December Listing SIX Swiss Exchange (Zurich) Security ID ISIN CH Reuters DCN.S Bloomberg DCN Investdata DCN Capital structure Share capital in CHF Conditional share capital in CHF Number of registered shares Nominal value per share in CHF 1 1 Registration restrictions none none Voting restrictions none none Opting out / opting up none none Significant shareholders (in %) Dubach family* 55.30% 54.77% Keller family* 16.72% 16.72% Corisol Holding AG 7.72% 7.72% * Shareholder Dubach family und Keller family form a group of shareholders. Shareholders by category (in %) Significant shareholders 79.74% 79.21% Private investors 82.57% 83.91% Corporate investors 17.43% 16.09% Non-registered shareholders 1.90% 3.53% Share distribution Number of registered shares Numbers of shareholders Numbers of shareholders > * 4* Gesamt *including treasury shares of AG Share price data in CHF 2014 / / 14 First trading day ( ) ( ) Low ( ) ( ) High ( ) ( ) Last trading day ( ) ( ) Average share price Market capitalization in million as of September in USD million 2014 / / 14 Net sales Change relative to previous year in % -4.6% 14.4% EBITDA Change relative to previous year in % 1.0% -3.2% as a % of net sales 9.9% 9.3% EBIT Change relative to previous year in % -1.3% -14.7% as a % of net sales 6.5% 6.3% Profit for the year Change relative to previous year in % -23.0% -9.7% as a % of net sales 4.7% 5.9% as a % of average shareholders equity 8.9% 11.7% Cash flow from operating activities Change relative to previous year in % -41.0% -21.3% as a % of net sales 5.5% 9.0% Cash flow from investing activities Change relative to previous year in % -92.1% 2.0% as a % of cash flow from operating activities -17.7% % Free Cash Flow Change relative to previous year in % % % as a % of net sales 4.6% -2.9% Average number of employees Personnel expenses Total assets Shareholders' equity as a % of assets 63.3% 60.3% Net liquidity including financial assets Per share data 1) Average number of shares Earnings per share in USD (non-diluted) Free Cash Flow in USD Shareholders' equity in USD Dividend in CHF 2) Share price data as of September 30 in CHF Yield in % 3) 1.8% 2.0% 1) Calculation is based on the weighted average number of shares outstanding (issued shares less treasury shares). 2) According to the proposal of the Board of Directors on November 3, ) Distribution in percentage of the share price as of September

5 Corporate Governance Corporate Governance GROUP STRUCTURE EXECUTIVE BODIES Introduction Strategy Board of Directors of AG endorses a state of the art Corporate Governance with high transparency for all stakeholders. Professional processes and individual accountability on all levels of the organization are the foundation. The following information meets the requirements of the Directive on Information Relating to Corporate Governance (Corporate Governance Directive, DCG) of the SIX Swiss Exchange. is further orientated to the Swiss Code of Best Practice for Corporate Governance. If not mentioned differently all information are made for the closing date September 30, The information on Corporate Governance can also be retrieved electronically under the following link: corporate-governance/. Roles and duties of AG AG as top holding company of the Group manages its business by means of objectives, it is involved in the planning process and monitors adherence to the budget. Once the three-year plan and the budget have been approved by the Board of Directors, the Executive Committee acts on its own authority within the limits of the budget and the rules of competence. The Executive Committee is responsible for consolidation, financing, controlling, asset management and investor relations. AG is a Swiss public limited liability company with its head office in Lucerne. Refer to note 28 for a disclosure of controlled subsidiaries; the market capitalization is disclosed on page 4. provides worldwide products and services to industrial as well as professional and hobby applications in the area of color measurement, management, communication and calibration. s debt-free balance sheet enables it to achieve long-term growth targets with continuing organic growth and targeted acquisitions. It aims to achieve significant growth by providing innovative hardware and software products, increasing market penetration, developing new markets, alliances and acquisitions. Its range comprises products and systems solutions that are competitive in terms of quality, performance and ease of use. The products are tailored to customer requirements and able to offer a large potential for generating added value. Providing services for its products is a growing core activity. aims for market leadership in defined customer segments as well as geographical markets. Corporate performance is achieved by a flexible, lean and customer-oriented organization. The production depth is restricted to what is strategically necessary. While meeting the requirements of a publicly listed company, the stable shareholder basis is a key driver of s attainment of its long-term goals. Werner Dubach, 1943, CH Chairman, Board member since 1981 Dipl. Ing. Chem. ETH Zurich, MBA Wharton University of Pennsylvania Until January 2009, CEO and Chairman of Eichhof Holding AG Until 1981, Director of the Eichhof Group s Beverages division Technical Director of the Eichhof Brewery Management Assistant of the Eichhof Brewery Conzetta AG, Zurich, Member of the Board Anne Keller Dubach, 1956, CH Board member since 2012 Lic. phil. I, University Zurich, SEP Stanford Graduate School of Business Since 2014 Head Art & Cultural Engagement, Swiss Re, Zürich Head Corporate Citizenship, Swiss Re, Zürich Head Corporate Sponsorship / Head Brand Communication, Swiss Re, Zurich Project Lead Marketing Services / Head Cultural Sponsoring Credit Suisse Swiss Institute for Art Research SIK-ISEA, Zurich, Chairman, Member of the Board of Trustees Peter Beglinger, 1945, CH Deputy Chairman, Board member since 1992 Dr. iur. University of Zurich Until 2007 law office in Zurich, Counsel own law office in Zurich legal adviser to the executive management of Jacobs AG law office Wenger & Vieli, Zurich 1974 admitted to the bar Würth Finance International B.V., NL, Member of the Board Hans Peter Wehrli, 1952, CH Board member since 2001 Prof. Dr. oec. publ. University of Zurich Professor of Business Administration, University of Zurich Belimo Holding AG, Hinwil, Chairman of the Board Swiss Prime Site AG, Olten, Chairman of the Board Fritz Gantert, 1958, CH Board member since 2004 Dr. sc. techn., Dipl. Masch.Ing. ETH Zurich Since 2012 Enterpreneur, Independent Board Member General Manager Security Communication Division, Member of the Executive Board, Ascom Holding AG CEO of Schaffner Group Sarna Kunststoff Holding AG, Ascom Fritz Gantert, Peter Beglinger, Werner Dubach, Anne Keller Dubach, Hans Peter Wehrli 6 7

6 Corporate Governance Corporate Governance Board of Directors Elections and term of office Members of the Board of Directors are elected by the Annual General Meeting of Shareholders for an individual term of office of one years. Newly elected members complete the terms of their predecessors. There are no limitations on terms of office. Internal organization The Board of Directors is self-constituting. It appoints committee members and the secretariat. Duties The Board of Directors is the supreme executive body of the Holding company. It adopts resolutions which determine the company s fundamental direction and oversees the work of senior management. Committees The Board of Directors has established committees to support its work. The primary role of these committees is to prepare business affairs and oversee the implementation of Board resolutions. Furthermore, the Board of Directors may delegate the final handling of certain affairs to the committees, provided that delegation of such tasks is not prohibited by law. The Board of Directors has established two committees: the Finance Committee as well as the Human Resources and Compensation Committee. Furthermore, the Steering Committee acts as a supervisory and control instrument. The Finance Committee prepares the financial plan, the budgets and the statements for submission to the Board of Directors. Amongs other things, it issues instructions and monitors the appropriation of liquidity and the execution of asset management operations. The Human Resources and Compensation Committee drafts proposals for the compensation of the Board of Directors. It also submits proposals to the Board for appointments to the position of CEO and CFO. The Committee sets the fixed and variable components of remuneration for the top levels of management, taking into account the situation on the labor market, performance and achievement of the targets that have been set. If the Committee deliberates on the remuneration of a member of the Human Resources and Compensation Committee, this member shall withdraw from the proceedings. Finance Committee: Werner Dubach, Albert Busch, Dr. Mark Leuchtmann Human Resources and Compensation Committee: Dr. Peter Beglinger, Dr. Fritz Gantert Principles of operation of the Board of Directors and its committees The Board of Directors meets as often as business requires, but at least four times a year. Committee meetings are held in addition to Board meetings. Board meetings usually last for between half a day and a day. In 2014 /15, the following number of meetings were held: Board of Directors 5 Finance Committee 10 Human Resources and Compensation Committee 4 Areas of competency Board of Directors The Board of Directors represents the company externally and manages all company activities unless responsibility for these has been transferred to another company body in accordance with the law, the Articles of Association or other policies. The non-transferable and inalienable duties are governed in Art. 716a of the Swiss Code of Obligations. Unless the law, the Articles of Association or the directives issued by the Board of Directors stipulate otherwise, the Board of Directors delegate the operational management of the company to the CEO, together with the authority to delegate associated tasks onwards. The company s Organization Regulation governs the breakdown of responsibility between the Board of Directors and the Executive Committee and can be obtained on the following website: Executive Committee Executive Committee members are appointed by the Board of Directors and the Human Resources and Compensation Committee, respectively. Information and control instruments vis-à-vis the Executive Committee The Executive Committee informs the Board of Directors about the current status of the business, the consolidated balance sheet, the income statement and deviations to the budget on a monthly basis. On the occasion of the four meetings of the Board of Directors during the year, the Executive Committee reports on significant business transactions and on the results of the group-wide management of financial and operating risks. Findings of the following bodies also contribute to the regular decision-making process: External auditor KPMG AG, Lucerne (auditor for AG), which conducts its audit in accordance with Swiss law and Swiss auditing standards. Internal Audit and Risk Management, which monitors the existence and adequacy and permanently seeks improvements to the internal control system. Further, a systematic process captures strategic, operational and financial risk and develops and executes measures to mitigate and eliminate risks. Executive Committee Albert Busch, 1967, NL / USA CEO BS / MS in Electrical Engineering MS in Industrial Management Since 2008 with Since January 2009 CEO , NV Bekaert SA, management roles Mark Leuchtmann, 1972, DE / CH CFO Dr. rer.pol. TU Munich Swiss Certified Accountant Since 2009 with Private Equity Fund, Director Zurich Insurance Group, Head Financial & Transaction Analysis , PricewaterhouseCoopers, Manager Nimi Meschke, 1974, USA Vice President Human Resources BS in Management MS in Human Resources Management Since 2015 with Johnson & Johnson, Director Human Resources Mc Master-Carr Supply Company, HR Generalist The Campbell Soup, Senior Manager HR Brian Levey, Nimi Meschke, Patrice Jaunasse, Mark Leuchtmann, Albert Busch, Tae Park Brian Levey, 1957, USA Vice President Marketing BS in Chemistry Since 1996 with Beckmann Instruments, management roles Tae Park, 1963, USA Vice President R&D and Operations BS in Electrical Engineering / Biomedical Engineering Since 2010 with Power Medical Internventions, Sr. VP of Engineering- Operations Kovio, Program / IP Manager Osirix, Chief Technology Officer Patrice Jaunasse, 1964, FR Vice President Sales and Support MS in Engineering, Electronics, Telecom and Computer Since 2012 with Tektronix, General Manager and Sales Director EMEA Nettest Telecom Instrumentation, President and Sales Director Hewlett Packard Instrumentations, management roles Sales 8 9

7 Corporate Governance Corporate Governance Information for investors Share capital The share capital amounts to CHF consisting of registered shares with a nominal value of CHF 1 each. The registered shares entitle the holder to one vote at the General Meeting, provided that the shareholder is recorded with voting rights in the AG share register Authorized capital There is no authorized capital. Conditional capital The share capital can be increased by a maximum amount of CHF (previous year: CHF 4 580) by issuing registered shares with a nominal value of CHF 1 each. This conditional capital increase was implemented to enable the exercise of option rights by the members of the Board of Directors and the Executive Committee. Shareholders are excluded from this purchasing right. Changes in capital In the reporting period and the two preceeding periods the capital structure of AG remained unchanged. Refert to the consolidated changes of equity and the staement of changes in equity of AG. Participation certificates There are no participation certificates. Limitations on transferability and nominee registrations There are no limitations with regard to transferability and nominee registrations. Convertible bonds and options AG has no outstanding convertible bonds. Regarding options please refer to the Compensation report of AG. Share listing AG s shares are listed on SIX Swiss Exchange Zurich under security number See Information about Share on page 4 for an overview of the stock market listing and details of the market capitalization. eral Meeting of Shareholders if the corresponding request is received no later than 40 days before the date of the meeting. Every shareholder may, besides the independent proxy provided for by law, allow his or her shares to be represented at the Annual General Meeting by a shareholder with a written proxy form. Voting rights limitations Every shareholder entered with voting rights in the share register is entitled to vote. No new entries in the share register are made during the 22 days before the Annual General Meeting of Shareholders. There are no limitations on voting rights. Entry in the share register The entry of purchasers in AG s share register is not subject to any conditions. Cross-shareholdings There are no cross-shareholdings. Shareholdings in companies There are no shareholdings in listed companies. Percentage shareholdings in unlisted companies are disclosed in note 28 to the consolidated financial statements. Significant shareholders Refer to share information on page 4. Shareholder Dubach family und Keller family form a group of shareholders. Duty to make an offer The company s Articles contain no provisions regarding a duty to make an offer. Clauses on changes of control There are no clauses on changes of control. Auditors Duration of the mandate and term of office of the lead auditor AG has appointed KPMG AG, Lucerne as auditor. In each case, the mandate is granted by AG s Annual General Meeting of Shareholders for a period of one year. The mandate was first given to KPMG in The auditor in charge started the mandate in fiscal year 2013 /14. Rotation corresponds to the legal requirements of seven years. Audit fee KPMG received an audit fee of TUSD 202 for the reporting year 2014 /15. Additional fees In addition to the audit fee, KPMG provided other services for TUSD 17 relating mainly to tax consultancy services. Supervisory and control instruments vis-à-vis the auditors The Board of Directors holds at least two meetings a year with the auditor in charge of the mandate. The matters dealt with at these meetings include the planning and conduct of audits, the focus points of the audits and the findings thereof, the main points arising from management letters, the reports on special audits and the reports of the auditor and the group auditor. The Board of Directors has appointed a steering committee to manage the audits and to monitor implementation of the auditors proposals. This committee is made up of the Chairman, the CEO and the CFO of AG and the auditor in charge of the mandate and meets regularly while audit work is being carried out. Information policy Publications AG publishes a semi-annual report and an annual report in accordance with Swiss GAAP FER. Additionally, shareholders and the capital market are kept informed of current changes and developments through press releases. As a company listed on SIX Swiss Exchange, AG is aware of its duty to disclose events relevant to its share price (ad hoc disclosure of price-sensitive information). Information of the periodical financial reporting as well as ad-hoc news releases and further information on the Group can be accessed through website under the following link: Key dates Shareholders meeting 2015 December 10, 2015 Semi-annual report May 5, 2016 Press release October 28, 2016 Press conference November 11, 2016 Shareholders meeting 2016 December 6, 2016 Legal status of shareholders Shareholders in Swiss public limited companies are granted extensive statutory participation and protection rights by law. These participation rights are further supplemented by the company Articles of Association. These ensure that, pursuant to the Code of Obligations, the Annual General Meeting of Shareholders is convened by placing a one-time announcement in the Swiss Official Gazette of Commerce (Schweizerisches Handelsamtsblatt) and by sending a written invitation to the registered shareholders. An item is added to the agenda of the Annual Gen

8 Compensation for fiscal 2014 / 15 Compensation for fiscal 2014 / 15 Compensation Report The Compensation report contains information on the remuneration of the Board of Directors and the Executive Committee, which were previously included in the Corporate Governance Report and in the notes to the financial statements of. In terms of regulation against excessive compensation of publicly listed companies (so called VegüV ), which came on 1 January 2014 in force, all information on the remuneration of the members of the Board of Directors and Executive Committee restated in the remuneration report. The information provided in this Compensation report relates to the financial year 2014 /15, unless otherwise noted. The remuneration report is prepared in accordance with the following regulatory provisions: VegüV, Directive on Information Relating to Corporate Governance by SIX Swiss Exchange, the Swiss Code of Best Practice for Corporate Governance» of economiesuisse. According to VegüV, the General Assembly must vote on the remuneration. In addition, the statutes approved by the General Assembly contain newly, among other principles of the tasks and responsibilities of the Compensation Committee, the performance-based remuneration and the allocation of equities, convertible and option rights to members of the Board of Directors and Executive Committee. The complete statutory regulations regarding the approval of the remuneration of Directors and the Executive Committee by the General Meeting (Art. 21), the applicable additional amount for the remuneration of additional members of the Executive Committee, as far as an approved total amount is not sufficient (Art. 22), the regulation the principles of the remuneration (Art. 20), concerning the rules loans and credits (Art. 23) and the remuneration Committee (Art. 27) can be found on our website at the following URL: 08/ AG-Bylaws-Final.pdf 1. General principles The success of depends to a large extent on the quality and commitment of its employees. The key objectives of the remuneration policy are to attract qualified employees, motivate and retain them. The performance orientated variable compensation and in particular the option-based component of the compensation envisages promotion of entrepreneurial thinking and action. The key principles are: The compensation is performance-based and marketdriven, Employees participate in the economic success, The compensation determination is fair and transparent, Short- and long-term compensation components are in a balanced ratio. 2. Principles of the compensation system The remuneration of the members of the Board of Directors and the members of the Executive Committee consists of three components: fixed basic compensation, performance-related cash bonus (current), performance-related compensation in cash or equity securities (non-current). 2.1 Compensation of the Board of Directors The members of the Board of Directors (all are non-executive) are remunerated with a fixed cash compensation. This fixed basic compensation includes a quarterly Board remuneration, lump sum representation and other allowances and other payments based on individual agreement (namely the employment agreement of Werner Dubach with Holding AG) and respective social security deductions. The Board members are not participating in the independent pension fund ( Gemeinschaftsstiftung ) in Switzerland and no pension contributions are paid by. The fixed basic compensation is determined by the Board of Directors. The variable compensation was up to and including the 2013 /14 financial year in cash or, on request and at a specified number determined by the Board annually at its discretion, in the form of options on registered shares of AG. For fiscal year 2014 /15, the variable compensation is paid exclusively in cash and therefore no options are issued to the Board of Directors. The Board is currently reviewing alternative forms for a performance oriented long-term variable remuneration of the Board, since the existing model option is considered to be no longer appropriate. The variable compensation depends on the company s financial success, reflected in the organic growth of sales as well as the operating profit EBIT. However, the weighing of the latter is at the discretion of the Board of Directors. The Board of Directors decisions are not based on benchmarks. For further terms and conditions relating to the options on shares of AG, which Board members may opt for as their variable compensation component (see above), refer to note 21 in the consolidated financial statements. 2.2 Compensation of the Executive Committee The compensation of the Executive Committee consists of a fixed base salary in cash, a variable performance-based bonus in cash that was up to and including the 2013 /14 financial year applicable for the purchase of stock options, plus contributions to pension funds and social insurances. For fiscal year 2014 /15, the variable compensation is paid exclusively in cash and therefore no options are issued to the Executive Committee. The Board is currently reviewing alternative forms for a performance-based long-term variable remuneration for the Executive Committee. The fixed base salary is mainly determined by the function to be executed, the responsibility to be assumed, the individual s qualifications and experience, as well as the market environment. In determining the remuneration of the Executive Committee, the Human Resources and Compensation Committee is not based on benchmarks and salary comparisons. The criteria for determining the variable compensation (performance-related bonus) are defined in the respective regulations adopted by the Human Resources and Compensation Committee; these criteria are valid for several years and were last reviewed by the Human Resources and Compensation Committee in 2014 with deriving amendments being applicable in fiscal 2014 /15 for the first time. Initially, the total pool available for performance-related bonuses payments is determined based on the two financial value drivers, organic growth in sales (without acquisitions or divestitures) compared to previous year figures and budget (60% weighting) as well as the operating profit EBIT compared to budget (40% weighting). The Board of Directors sets respective targets for the financial drivers during the budgeting process for a period of one fiscal year. The pool for performance related bonus payments is a maximum of 200% of the budgeted target value of the variable compensation. In case the actual realized EBIT falls below the target set by the Board of Directors by more than 50% (minimum threshold), no credit is recorded in the variable compensation pool and the payment of variable performancerelated bonuses is subject to approval by the Human Resources and Compensation Committee. No minimum threshold is determined for the achievement of the organic sales growth component. If actual realized EBIT exceeds the budgeted EBIT target, 25% of the exceeding amount is allocated to the variable compensation pool. In case of an overachievement the additional contribution to the variable compensation pool is limited to 200% of the total budgeted variable compensation pool for all employees (maximum threshold). From the pool of performance-related bonuses, the Executive Committee members (and other employees eligible for bonus payments) receive individual performancerelated bonuses based on the achievement of their respective individual performance goals. Measurable individual goals are agreed during the management-byobjectives process at the beginning of the year between the Chairman of the Board of Directors and the CEO as well as between the CEO and the members of the Executive Committee. The performance-related bonus depends on the accomplishment of individual performance objectives and the financial success of the company. For the CEO, the performance-related bonus may be a maximum of 82% and for the other members of the Executive Committee a maximum of 70% to 80% of the annual target salary. The target salary is defined by the fixed basic compensation plus the performance-related bonus. The individual performance-related bonus is determined at 100% by the attainment of the respective individual targets. The members of the Executive Committee were given up to and including the financial year 2013 /14 the opportunity to use a portion of their variable compensation (performance-related bonus) as determined by the Board of Directors at their own discretion to purchase options on registered shares of. A three-year blocking period ensures that the company s long-term success is rewarded. For further information including other parameters of the share option plan refer to note 21 Share option plan. For fiscal year 2015 /16, the Board evaluates alternative forms for a performance oriented long-term variable remuneration and will promptly implement for the compensation of the financial year 2015 /16. The pension and social insurance expenses include employer contributions to social security as well as the mandatory and non-mandatory occupational benefits. Contribution to social security are not estimated as compensation and will not be reflected accordingly. The expense regulations for the members of the Executive Committee are basically the same as those applicable for all other employees of the respective group company. Additional rules apply on lump-sum compensation of representatives and petty expenses for the members of the Executive Committee residing in Switzerland that have been approved by the relevant cantonal tax authorities. The employment contract of members of the Executive Committee does not foresee a company car for their use. No employment agreement has a termination period exceeding six months. The employment agreements covering the Executive Committee members do not provide for any termination pay. Executive Committee members do not hold any executive nor consulting function in any important interest group and do not hold any official or political administrative positions. No management agreement exists. 3. Competences and determination procedures The overall compensation system and the stock option participation plans are drawn up by Corporate Human Resources and submitted to examination by the CEO, the Human Resources and Compensation Committee for final approval by the Board of Directors. In fiscal year 2013 /14, no external consultants were called in. The Human Resources and Compensation Committee consists of two members of the Board of Directors: Dr. Peter Beglinger (Chairman), Dr. Fritz Gantert (Member). The Human Resources and Compensation Committee (i) proposes the terms of the employment contract and the annual variable compensation for the Chairman of the Board for approval by the Board of Directors, (ii) proposes 12 13

9 Compensation for fiscal 2014 / 15 Compensation for fiscal 2014 / 15 at the request of the Chairman, the conditions of labor contracts and the target remuneration for the remaining members of the Board and the CEO for approval by the Board of Directors, and (iii) propose upon the CEO s request amendments to contract terms, the target remuneration and the annual variable compensation for the other members of the Executive Committee for approval by the Human Resources and Compensation Committee. For the determination of the performance-related bonus of the Executive Committee, the Human Resources and Compensation Commission does not draw on benchmarks. The Board of Directors approves upon the request of the Human Resources and Compensation Committee, the conditions of employment contracts and the target remuneration for the Board of Directors (including the Chairman), the CEO and the other members of the Executive Committee and determines at the request of the Human Resources and Compensation Committee the annual variable remuneration for the Chairman of the Board. Furthermore, the Board of Directors determines the classification 4. Compensation for fiscal 2014 / 15 and 2013 / 14 for the allocation of options under the stock option plan to the individual beneficiaries and approves the compensation system (including the compensation and bonus regulations). The Board of Directors determine at the request of the Human Resources and Compensation Committee the annual variable compensation for the members of the Board of Directors. The Human Resources and Compensation Committee determine the annual variable compensation for the CEO at the request of the Chairman. The CEO proposes the conditions of employment contracts, the target remuneration and the annual variable remuneration for the Executive Committee members for review by the Human Resources and Compensation Commission and approval by the Board of Directors. The Directors hold at the meetings of the Board or the Human Resources and Compensation Committee, which is to decide on their remuneration, an attendance right, but no say. 4.2 Executive Committee In the reporting period the variable compensation of the Executive Committee members amounts 10% to 19% of the fixed base salary (previous year between 44% and 99%). Compensation for fiscal 2014 / 15 in TCHF Compensation for fiscal 2013 / 14 Remuneration fix cash based Remuneration variabel cash based option based Pension costs To six members of the Executive Committee Thereof highest compensation: Albert Busch in TCHF Remuneration fix cash based Remuneration variabel cash based optionsbasiert Pension costs To six members of the Executive Committee Thereof highest compensation: Albert Busch Total Total 4.1 Board of Directors The total compensation of the members of the Board of Directors, which are all non-executive, amounted in the reporting period to TCHF 497 (previous year: TCHF 702). In the year under review, the Board s variable compensation amounted to 0% (previous year: 35%) of the fixed compensation. The details of the compensation in the reporting period and previous year respectively are disclosed in the tables below. Compensation for fiscal 2014 / 15 in TCHF Compensation for fiscal 2013 / 14 Remuneration fix cash based Remuneration variable cash based option based Pension costs Werner Dubach, Chairman Dr. Peter Beglinger, Deputy Chairman Anne Keller Dubach, member Prof. Dr. Hans Peter Wehrli, member Dr. Fritz Gantert, member Total in TCHF Remuneration fix cash based Remuneration variable cash based option based Pension costs Werner Dubach, Chairman Dr. Peter Beglinger, Deputy Chairman Anne Keller Dubach, member Prof. Dr. Hans Peter Wehrli, member Dr. Fritz Gantert, member Total Total Total 5. Proposals to the Annual General Meeting 2015 According to Art. 21 of bylaws the shareholders will vote on the remuneration of the Board of Directors and Executive Committee separately at the General Meeting 2015 on 10 December Approval of the remuneration of the Board of Directors Approval of the total fixed remuneration of the members of the Board by the Annual General Meeting 2015 to the Annual General Meeting 2016: The Board of Directors proposes that the shareholders approve the maximum total amount of the fixed remuneration of Board members for the period from the Annual General Meeting 2015 to the Annual General Meeting 2016 of TCHF 600 (exclusive statutory employer contributions to AHV / IV / ALV). Approval of the variable compensation of the members of the Board of Directors for the current fiscal year 2015 /16: The Board proposes that the shareholders approve the maximum total amount of the variable remuneration of the Directors for the current financial year 2015 /16 of TCHF 365 (exclusive statutory employer contributions to AHV / IV / ALV). 5.2 Approval of the remuneration of the Executive Committee Approval of the total fixed remuneration of the members of the Executive Committee of the Annual General Meeting 2015 to the Annual General Meeting 2016: The Board of Directors proposes that the shareholders approve the maximum total amount of the fixed remuneration of the members of the Executive Committee for the period from the Annual General Meeting 2015 to the Annual General Meeting 2016 of TCHF (exclusive statutory employer contributions such as AHV / IV / ALV). Approval of the variable compensation of the members of the Executive Committee for the current fiscal year 2015 /16: The Board proposes that the shareholders approve the maximum total amount of the variable remuneration of the members of the Executive Committee for the current fiscal year 2015 /16 of TCHF (exclusive statutory employer contributions such as AHV / IV / ALV), approve. According to article 22 of the bylaws of, for members of the Executive Committee, who are appointed after approval of the annual total compensation, an additional amount within the meaning of Art. 19 VegüV per new member to the extent of a maximum of 30% of the most recently approved total for the fixed remuneration the management per financial year are available, provided that the total amount approved for the corresponding fiscal year is not enough. 6. Compensation of former members of the Board Directors and Executive Committee A compensation amounting to TCHF 149 was made in fiscal 2014 /15 (previous year: TCHF 0) to former members of the Executive Committee

10 Compensation for fiscal 2014 / Loans No loans to current or former members of the Board Directors and Executive Committee were granted or were outstanding at September 30, 2015 (previous year: TCHF 0). No loans have been granted to related parties by current or former members of the Board Directors and Executive Committee or were outstanding at the end of the reporting period and the previous year respectively. Loans to Board of Directors or the Executive Committee are provided at-arms-length terms. The total maximum amount of outstanding loans is limited to CHF 2 million. 8. Shareholdings and stock options The total number of shares held by the Board of Directors and the Executive Committee amounted to (previous year: ). In the reporting period options (previous year: 5 280) were granted to the Board of Directors and the Executive Committee for fiscal 2013 /14. The Board of Directors determines, limitations to the amounts approved by the shareholders meeting and with the involvement of the Human Resources and Compensation Committee, the number, granting, exercise and buy back conditions such as the minimum and the maximum blocking period, employment status and buy back terms in case of the termination of the respective employment or a change of control. No receivables from and payables to and from related parties were outstanding at the end of the reporting period and previous year with the exception of the independent pension fund Numbers of shares 2014 Numbers of shares 2015 Numbers of options 2014 Numbers of options Board of Directors and Executive Committee Werner Dubach, Chairman Dr. Peter Beglinger, Deputy Chairman Anne Keller Dubach, member Prof. Dr. Hans Peter Wehrli, member Dr. Fritz Gantert, member Executive Committee Total Report of the Statutory Auditor to the General Meeting of AG, Lucerne We have audited the accompanying remuneration report dated November 3, 2015 of AG for the year ended September 30, The audit was limited to the information according to articles of the Ordinance against Excessive compensation in Stock Exchange Listed Companies contained in the sections 4 and 6 to 8 on pages 14 to 16. Responsibility of the Board of Directors The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration report in accordance with Swiss law and the Ordinance against Excessive compensation in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages. Auditor s Responsibility Our responsibility is to express an opinion on the accompanying remuneration report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the remuneration report complies with Swiss law and articles of the Ordinance. An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration report with regard to compensation, loans and credits in accordance with articles of the Ordinance. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatements in the remuneration report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value components of remuneration, as well as assessing the overall presentation of the remuneration report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the remuneration report for the year ended September 30, 2015 of AG complies with Swiss law and articles of the Ordinance. KPMG AG Toni Wattenhofer Licensed Audit Expert Auditor in Charge Sandro Mascarucci Licensed Audit Expert Lucerne, November 3,

11 in fiscal 2014 / 15 in fiscal 2014 / 15 in fiscal 2014 / 15 Sales weaker in a challenging currency environment In fiscal 2014 /15, s net sales increased slightly by 2% in local currency and reached USD 66.8 million (2013/14 USD 70.0 million). The result was negatively impacted by non-recurring large orders from the US pigment industry and significant currency effects. EBITDA was at USD 6.6 million (USD 6.5 million) and EBIT at USD 4.4 million remained on previous year s level. Net profit decreased to USD 3.2 million (USD 4.1 million). has a strong net cash position of USD 25.9 million (USD 28.5 million), including financial assets, as well as a high equity capital ratio of 63.3% (September 30, 2014: 60.3%). Europe remains s key market In fiscal 2014 /15, the European region, in particular the industrial sector, accounted for a substantial 37.3% (35.2%) of sales. Europe remains s key market. Despite the subdued investment climate in the Indian and Chinese textile industries, the Asia-Pacific region maintained previous year s level with 33.6% (33.3%) of sales. The North and South America region contributed 29.1% (31.5%) to sales. Further expansion of direct sales organization ranks among the leading international providers of digital color management solutions. In fiscal 2014 /15, it further consolidated its dominant market position in its core markets, notably the textile and apparel industries, as well as the retail market for display and printer calibration. In addition, the company secured growing market share in the paint and coatings by providing a wide range of innovative, easy-to-operate software and hardware solutions for color measurement and communication as well as customer-centric services. During the year under review, continued to expand its direct sales and service organization in Italy as part of its corporate strategy. The entire sales and service business is now handled direct in order to guarantee customers first-class solutions and support from a single source. During fiscal 2014 /15, also took over sales, service and distribution operations for the German, Austrian and Swiss retail markets for display and printer calibration from long-standing partner Globell. Customers now receive direct support from experts in close collaboration with regional distributors as well as from wholesalers and retailers. During the year under review, invested in the expansion of a service center in Ghent, Belgium, providing technical services for the European market. s customers thus profit from a productive, efficient infrastructure. Efficiency enhancements implemented in the spring brought cost structures in line with sales trends. Executive Committee expanded The Executive Committee was expanded with the position of Vice President Business Development. In his new role, Brian Levey will focus on developing s strategic growth potential. At the same time, CEO Albert Busch took charge of the marketing organization. Thus the cooperation between the areas of marketing, R&D and sales will be better aligned, as well as bringing closer to the market. In addition, newly appointed Vice President Human Resources Nimi Meschke has been tasked with spearheading s global personnel strategy. Innovative product solutions for industry and end consumers In fiscal 2014 /15, expanded its existing product portfolio with numerous innovative, easy-to-operate products for industrial customers as well as for the retail market. During the year under review, the company introduced Check 3.0, a new portable spectrophotometer for customers in the paint, coatings, plastics and textiles industries. also launched Match Textile 2.0, a significant upgrade to its successful color matching software for dyehouses. Not only do the extended capabilities integrated into Match Textile 2.0 satisfy the rigorous quality standards of the textile industry, the software s enhanced efficiency will also translate into longterm cost savings for customers. rolled out the modular, user-friendly color management software Paint 2.0 for paint retailers. The entire workflow from color search and grade matching to physical dispensing can be managed simply, accurately and fast with Paint 2.0. Marking a further addition to its attractive product pipeline for the retail market, has launched the fifth generation of its successful Spyder family, a convenient-to-operate, high-accuracy color management solution. Spyder 5 calibrates monitors to industry color standards and enables users to accurately reproduce colors, making image processing much simpler and faster. s Spyder5 Studio is the most extensive color calibration suite designed for professional photographers who demand the highest level of control and accuracy. The suite offers photographers three tools for monitor calibration and guarantees professional quality prints. Financial figures As a result of the significant weakening of the euro against the US dollar, the gross profit margin decreased slightly to 65.4% (65.8%). succeeded in compensating for some of the currency effect by raising prices and increasing the share of software solutions in total sales. Operating working capital was reduced by USD 0.2 million to USD 11.2 million (USD 11.4 million). Measures to enhance efficiency and reduce costs at the operating profit level (EBIT) compensated for the impact of the lower gross profit attributable to currency fluctuations, and leading to a slight increase in profitability. The EBITDA margin was 9.9% (9.3%) and the EBIT margin 6.5% (6.3%). Tax expenses decreased slightly to USD 0.7 million and the tax ratio was 19% (16%). Total assets were lower at USD 55.6 million (USD 58.9 million). Cash and cash equivalents together with financial assets came to USD 25.9 million (USD 28.5 million), accounting for 47% of total assets. USD 10.2 million is invested in financial assets. is debt-free and has a solid financial structure with a high equity capital ratio of 63.3% (60.3%). AG The parent company AG (holding company for investments) posted a profit of CHF 0.2 million (CHF 0.6 million) in its statutory financial statements for fiscal 2014 /15. As at September 30, 2015, the shareholders equity of s holding company amounted to CHF 20.0 million (CHF 21.5 million). The slight decrease was due to the distribution of a dividend of CHF 1.7 million for fiscal 2013 /14 (representing 47% of the consolidated profit). Outlook Thanks to its efficient market-led organizational structure, a further expanded marketing organization, an attractive product portfolio and a customer-focussed sales and service organization, is well positioned to reach its growth targets. A strong financial basis allows the company to continue making major investments in the future and develop new, innovative technologies for highaccuracy color measurement. has set itself the goal of continually extending its market leadership in the textile and apparel industries, increasing its market penetration in the paint and coatings industry and, through organic growth and acquisitions, selectively moving into new markets. This report contains forward-looking statements that reflect management s views with respect to future events. Such statements are subject to risks and uncertainties. disclaims any liability that actual results correspond to the forward-looking statements and does not assume any obligation to update any forward-looking statements to reflect events or circumstances after the date of this report