Kardex Group at a glance

Transcription

1 2013 Annual Report

2 Kardex Group at a glance Operating result (EBIT) in EUR millions Net cash flow from operating activities in EUR millions * * without gain of sale of the Kardex Stow Division Net Cash/Equity in EUR millions Net revenues by division in EUR millions Net cash Equity Kardex Remstar Kardex Mlog (2010: May to December) Kardex Stow (2013: January to July) Segment net revenues (continued) Business year 2013 in % Net revenues by regions (continued) Business year 2013 in % Kardex Remstar Kardex Mlog Europe, Middle East and Africa Americas Asia/Pacific 2009 financial accounting applied to IFRS, since 2010 to Swiss GAAP FER.

3 Highlights and key figures in 2013 Kardex Group successfully completes strategic realignment Kardex Remstar profits from efficiency improvements and increases EBIT margin to 10.2% Kardex Mlog achieves turnaround and returns to profitability Sale of Kardex Stow strengthens balance sheet and allows special dividend Key figures EUR millions 1 January to 31 December / % Bookings % % 16.1% Order backlog (31 December) % % 32.1% Net revenues % % 17.6% Gross Profit % % 4.0% OPEX % % 6.7% Gain of sale of the Kardex Stow Division % n. a. Operating result (EBIT) % % 37.0% EBITDA % % 22.3% Result for the period % % 47.2% Earnings per share (EUR) % Free cash flow % ROCE (continued operations) 28.7% 21.2% 35.4% / % Net working capital % Net cash % Equity/Equity ratio % % 25.2% Employees (full-time equivalents) %

4 The Kardex Group is a global industry partner for intra-logistic solutions and a leading supplier of automated storage solutions and materials handling systems. The Group consists of the two entrepreneurially managed divisions Kardex Remstar and Kardex Mlog. Kardex Remstar develops, produces and maintains shuttles and dynamic storage and retrieval systems, and Kardex Mlog offers integrated materials handling systems and automated high-bay warehouses. The two divisions are partners for their customers over the entire lifecycle of a product or solution. This begins with an assessment of customer requirements and continues via the planning, realization and implementation of customer-specific systems through to ensuring a high level of availability and low lifecycle costs by means of customer-oriented lifecycle management. Around employees in over 30 countries worldwide work for the companies of the Kardex Group. Kardex AG has been listed on the SIX Swiss Exchange since 1987.

5 Contents 04 Report to the shareholders 08 Information on the Kardex share 12 Division Kardex Remstar 16 Division Kardex Mlog 20 Corporate Governance 45 Financial reporting Kardex Group (Consolidated) 81 Financial reporting Kardex AG (Holding) 94 Group companies, addresses and contacts The Annual Report is published in German and English. The financial section is published in English only. Figures indicated in brackets refer to the previous year. On the pictures in this report: Across the globe Kardex products and services are making the handling and storage of goods and materials more efficient. Familiar comparisons are used to tangibly underline the defining features of Kardex solutions and to demonstrate the advantages of modern storage systems and material handling systems. 1

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8 Report to the shareholders Kardex completes its strategic realignment Dear shareholders, Financial year 2013: Kardex completes its strategic realignment and is ready to grow organically In the 2013 financial year, the Kardex Group completed the restructuring process begun in 2011, as well as its strategic realignment. Kardex is now well positioned to achieve organic growth in its two divisions, Kardex Remstar and Kardex Mlog. During the year under review, the Kardex Stow Division was sold, Kardex Mlog was successfully turned around, and further investment was made in the future growth of Kardex Remstar. Despite the divestment of Kardex Stow as of 31 July 2013, the Group was able to exceed the previous years operating result. The Board of Directors will propose to the Annual General Meeting that an ordinary dividend of CHF 1.25 per share should be paid, together with the entire book gain from the sale of Kardex Stow based on the consolidated group result, which corresponds to a dividend of CHF 1.40 per share. The consolidated annual result of the Kardex Group is not comparable with the figure for the previous year, since the results for Kardex Stow are included only until the end of July The Kardex Group reported bookings of EUR million in the year under review, and net revenues came to EUR million. EBIT of EUR 37.8 million includes a book gain of EUR 8.8 million from the sale of the Stow Division. The net result was EUR 31.5 million. This represents earnings per share of CHF Taking into account the pro forma accounting for the continuing operations (see segment reports), i.e. excluding the Stow results, the figures are comparable to those for the previous year. Bookings for both divisions thus picked up again after a weaker second half of 2012 to reach EUR million, which is nearly the same as the previous year (EUR million). At the end of 2013, the order backlog of EUR million was also similar to the previous years (EUR million). Net revenues of EUR million were down 1.9% compared with the strong sales recorded in the previous year, but the year-on-year shortfall of 6.1% that existed on 30 June 2013 was almost eliminated in the second half of the year. The operating result (EBIT) of EUR 24.2 million corresponds to an EBIT margin of 8.0%, up 30.8% on the previous year (EUR 18.5 million). This big improvement is due in particular to the turnaround of Kardex Mlog (+EUR 4.2 million), as well as to a further increase in the profitability of Kardex Remstar (EBIT margin 10.2%). The return on capital employed (ROCE) stood at 28.7% (previous year: 21.2%). 4

9 Kardex Remstar profits from efficiency improvements The 2013 financial year began rather sluggishly for Kardex Remstar. This was owing to a cautious attitude to ordering in most industrial markets from mid onwards. Bookings and revenue growth started to recover in spring, and the shortfall in the first half was nearly compensated by the end of the year. Revenues of EUR million in the Kardex Remstar Division were slightly below the figure for the previous year (EUR million), but at the end of the year the order backlog of EUR 75.1 million was up by 8.2%. Overall, bookings rose by 3.3% to EUR million. In 2013 the service business generated 28.6% of revenues (previous year: 27.9%). The operating result of EUR 24.0 million for Kardex Remstar is up 3.9% on the previous year and represents an EBIT margin of 10.2%, resulting in particular from further efficiency improvements along the entire value chain. In 2013 Kardex Remstar invested significantly in its future growth. The sales department took on more staff and was restructured in Asia/Pacific. At the same time, a new vertical carousel for smaller loads was successfully launched on the market, thus further expanding this product family. In addition, further steps on the way to changing Kardex Remstar from a product manufacturer into a solutions provider were demonstrated at a variety of trade fairs and customer events. In July 2013, the spare parts centre for Europe came into operation at the Bellheim site. This will enable the Group to make further efficiency improvements and provide enhanced customer service. Turnaround achieved at Kardex Mlog Kardex Mlog reported 6.0% lower revenues than in the previous year at EUR 67.0 million. At EUR 60.6 million, bookings were also 16.1% below the previous years figure. This development was due not so much to market conditions as to the companys efforts to improve its strategic product mix and, above all, the risk management. The gross profit for greenfield installations and modernization business was therefore significantly higher than in the same period of the previous year. The service business also grew as planned to 17.6% of revenues (previous year: 15.7%), up 5.8% on the previous year. At EUR 1.2 million (previous year: EUR 3.0 million), operating profit was positive although only to a modest extent for the first time since the company was purchased in Thanks to the provisions made in the previous year, it was possible in the year under review to settle almost all the issues still outstanding from the problem projects of previous years. Collaboration with Kardex Remstar was intensified thanks to the successful integration of the Remstar order picking software into stand-alone systems of Mlog (M-Dynamic product family). 5

10 Report to the shareholders Kardex Stow sold on 31 July 2013 The Kardex Stow Division, part of the Kardex Group only until 31 July 2013, contributed net revenues of EUR 98.0 million and an operating result of EUR 4.8 million. Sales were thus slightly lower than in the corresponding previous year period, while the EBIT margin was unchanged at 4.9%. As has already been reported, the Board of Directors of Kardex AG reviewed all the strategic options for Kardex Stow in the previous year. The sale of this division to the French-based Averys Group, as announced on 8 May 2013 and completed on 31 July 2013, opens up new prospects for the Stow business. The two companies are a good fit both geographically and productwise. The Kardex Group gained a cash inflow of EUR 76.9 million gross from the sale, including the repayment of the intercompany debt, and a book gain of EUR 8.8 million. This divestment gain is obtained after adjusting for goodwill of EUR 23.1 million already written off in accordance with Swiss GAAP FER. At an extraordinary general meeting held on 25 September 2013, the distribution of a special dividend of CHF 4.00 per share from capital contributions was approved. This is roughly equivalent to the capital generated by the capital increase in September 2011, which is thus being returned to the shareholders. Furthermore, the Groups remaining bank debts of EUR 10 million was repaid. Completion of the strategic realignment The divestment of Kardex Stow also completed the strategic realignment of the Kardex Group that began in The focus on automatic storage systems and material flow solutions by the two entrepreneurially managed divisions Kardex Remstar and Kardex Mlog, together with the associated service business, is helping to achieve strong customer retention and attractive returns on capital employed. Kardex intends to invest its unappropriated funds in a careful and focused manner in order to continue expanding its already strong market position in this attractive and growing industry. Further improvements in capital management The strong balance sheet and further progress in capital management provide room for manoeuvre and increased flexibility. The accounts receivable and inventories of Kardex Remstar and Kardex Mlog fell by a further EUR 3.2 million (4.0%). On the liabilities side, accelerated payments of suppliers invoices resulted in an additional income of EUR 1.2 million from early payment discounts. Despite the distribution of the ordinary dividend of EUR 7.5 million in April 2013 and the special dividend of EUR 25.2 million in October 2013, the net cash position rose to EUR 77.0 million at the end of the year. This was owing to net cash inflow of EUR 36.3 million from operations and in addition the net cash inflow of EUR 63.9 million from the sale of Stow. The Groups equity ratio stood at solid 55.9% as at 31 December 2013 (31 December 2012: 36.2%). 6

11 Proposals to the Annual General Meeting The Board of Directors of the Kardex AG has reviewed its dividend policy in view of the results achieved and the further increase in the balance sheet total following the sale of Kardex Stow. It is adhering to the current payout ratio of a maximum of 35% of operating profit, and will therefore propose to the Annual General Meeting to declare a dividend of CHF 1.25 per share, which will be paid out from the capital contribution reserve and is therefore tax free for Swiss individuals. Furthermore, the Board of Directors is proposing to pay out the entire book gain of EUR 8.8 million, or CHF 1.40 per share, from the sale of the Kardex Stow Division to the shareholders (also from the capital contribution reserve). Cautiously optimistic outlook Thanks to the healthy order backlog and the groundwork already completed, the Board of Directors and Executive Committee are cautiously optimistic about the 2014 financial year. Kardex Remstar should be able to grow again while holding its gross margin at the previous years level. Kardex Mlog needs to reinforce the turnaround and demonstrate the sustainability of its business model for Acknowledgements We should like to thank all our business partners and shareholders for their confidence in the Kardex Group, and all our employees for their valuable efforts over the past financial year. Philipp Buhofer Chairman of the Board of Directors Felix Thöni Executive Director 7

12 Information on the Kardex share Information on the Kardex share Share capital and capital structure Par value per share (CHF) Total registered shares Number of treasury shares Number of dividend bearing shares Registered capital (CHF 1000) Conditional capital (CHF 1000) Authorized capital (CHF 1000) Total voting rights Key stock exchange figures per share CHF Share price high Share price low Closing rate Average volume per trading day (no. of shares) Market capitalization CHF million (31.12.) Key figures per share CHF ¹ Earnings per share (EPS) 2 basic Earnings per share (EPS) 2 diluted Price earning ratio (closing rate) Operating cash flow Free cash flow Dividend Extraordinary dividend Equity ¹ In 2009 financial accounting was in accordance with IFRS, since 2010 in accordance with Swiss GAAP FER. 2 Calculated by the generally accepted method (net result/average number of outstanding shares) : Dividend and extraordinary dividend funded by withdrawal from the capital contribution reserve as proposed to the Annual General Meeting held on 24 April The registered shares of Kardex AG are traded in the Domestic Standard of Six Swiss Exchange in Zurich. They are contained in the SPI (Swiss Performance Index). Stock exchange symbol: KARN; Swiss securities number: ; ISIN number: CH ; Bloomberg: KARN SW Equity; Reuters: KARN.S. Current prices can be seen at 8

13 Share price performance Kardex AG (Holding) share On SIX Swiss Exchange to based on the weekly closing price in CHF CHF Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Registered shares of Kardex AG (KARN) Swiss Performance Index (SPI) The value of a Kardex share rose by 60.6% from CHF to CHF in In the year under review, Kardex paid a dividend of CHF 1.20 per share in April and an extraordinary dividend of CHF 4.00 per share in September following the sale of the Stow Division. Both payouts were made from the reserves from capital contribution. The overall performance for the year as a whole was 82%. Shareholder structure As at 31 December 2013, there were 1745 shareholders (1397) entered in the share register. The following shareholders held 3% or more of the outstanding share capital of Kardex AG at year end: Buru Holding and Philipp Buhofer 22.9 % 22.6 % LB (Swiss) Investment AG 3.0 % 4.4 % Contact Kardex AG Thomas Reist, Head of Finance and Controlling Edwin van der Geest, Investor Relations Tel investor-relations@kardex.com Contact share register Ursula Bareth, Corporate Office Tel Calendar of events for Investor Relations Corporate Calendar Annual General Meeting 24 April Interim Report 21 August Media and analysts conference 12 March Annual General Meeting 23 April Interim Report 13 August 2015

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15 Dynamism, efficiency and optimum use of space a superlative experience for passengers on state-of-the art mega-rides. An absolute must for Kardex Remstars intralogistics solutions too, and an essential part of process optimization for customers. 11

16 Division Kardex Remstar Kardex Remstar: Improved result in a challenging market environment During the 2013 financial year, Kardex Remstar succeeded in consolidating its market leadership position by extending its innovative product portfolio, focusing on customer proximity and effecting further operational improvements. In a challenging market environment, demand for dynamic storage and retrieval systems increased during the course of the year, reaching a high level in the fourth quarter. Given a slight year-on-year drop in revenues, the overall result was a solid EBIT margin of 10.2%. Upwards revenue trend throughout the year The Kardex Remstar Division posted revenues of EUR million, almost on a par with last years figure of EUR million. The order backlog at the start of the year was lower than in previous years, while at the same time the industry and most of Kardex Remstars markets were visibly restrained during the first few months of Normality gradually returned, with above-average sales recorded in the fourth quarter. At the end of the financial year, the order backlog stood at EUR 75.1 million, around 8% higher than the previous year. Operating profit tops 10% Thanks to high-quality orders, operational improvements and efficient cost management, the division achieved a good result in the 2013 financial year. The operating result of EUR 24.0 million was 3.9% up on last year and equates to a solid EBIT margin of 10.2%. With its modern product portfolio and high degree of customer proximity, Kardex Remstar is well positioned to react flexibly to any market changes that may occur. A strong euro intensifies competitive pressure Strong competition continues to dominate Kardex Remstars markets, exacerbated by the strength of the euro compared with the US dollar during the year under review. In the EMEA region, which saw moderate growth, demand was good. In America demand was positive in local currency, but was slightly down after adjustment for currency factors. In terms of projects, highlights of the 2013 financial year included successful solutions for e-commerce centres and the pharmaceutical industry. In the US, further efforts were undertaken to optimize sales structures in order to tap into the market with greater focus. This has created the basis for enabling the US business to grow over the next few years. In the Asia/Pacific region, the new management structure is proving its worth, and Kardex Remstar intends to expand these markets further in the years ahead. 12

17 Consolidated key figures for the Kardex Remstar Division EUR millions / % Bookings % % 3.3% Order backlog (31 December) % % 8.2% Segment net revenues % % 0.5% Operating result (EBIT) % % 3.9% EBITDA % % 1.7% Employees (full-time equivalents on 31 December) Net revenues by market regions Kardex Remstar Business year 2013 in % Europe, Middle East and Africa Asia/Pacific Americas Further steps towards becoming a solutions provider One of Kardex Remstars key success factors is ongoing innovation aimed at developing customer-specific, value-added solutions. At LogiMAT, Europes foremost intralogistics trade fair, the applications on display were well received. As well as boosting Kardex Remstars market reputation, this laid the foundations for winning some very interesting projects in the second half of the year. A new vertical carousel for smaller loads was also launched in the first half of the year, thus expanding the product family of automated vertical carousels. Since the fourth quarter of 2013, the new Shuttle XP 1000, a vertical lift system with a maximum load of 1000 kg per tray, has completed the extensive shuttle range. These new products enable Kardex Remstar to offer competitive customer applications in an area previously dominated by its competitors. Stabilizing effect of service business In the period under review, the service business became increasingly important. Accounting for 28.6% of revenues (previous year: 27.9%), it once again demonstrated its stabilizing, recession-resilient nature. In addition to this increase in revenues, it succeeded in further increasing service quality, thus setting itself apart from the competition. One key step in this process came in July 2013, with the opening of a central spare parts centre for Europe at Bellheim. Outlook for 2014 The groundwork for Kardex Remstars growth completed in the year under review should have a positive effect in the current financial year. Overall, Kardex Remstar is well positioned with its high market share and should be able to further improve sales and to consolidate its profitability levels. 13

18 Acceleration, coordination and precision confidence in these factors attracts millions of people onto amusement park rides each year. The same applies to the 1000 or more Kardex Mlog warehouse storage and retrieval systems used each day. 14

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20 Division Kardex Mlog Kardex Mlog: Reorganization starts to bear fruit Kardex Mlog produces and distributes high-quality automated stacker cranes and materials handling systems, primarily in Germany but also in other European countries. With the change process initiated in recent years and an associated focus on less complex greenfield and modernization projects and service offerings, Kardex Mlog returned to profitability. Revenues of EUR 67.0 million generated a positive operating result of EUR 1.2 million. Reorganization proves its worth Introduced in 2011, the transformation process to shift Kardex Mlogs strategic alignment to improved risk management and reduce its reliance on the systems business has begun to pay off. It is now focusing on modernization projects and standardized modular industry solutions, complemented by end-to-end service offerings. Overall, these steps have led to a considerable reduction in complexity at all levels, an improved risk profile and sustainable improvement in financial results. In the year under review, Kardex Mlog reaped the benefits of this reorganization and saw a return to profitability. Remarkable increase in EBIT In the 2013 financial year, Kardex Mlog reported revenues of EUR 67.0 million 6% down on the previous year. At the end of the year, bookings stood at EUR 60.6 million, 16% less than 12 months previously. However, the breakdown of revenues and order backlog has improved considerably since the company has refined its product mix and optimized risk management as part of the repositioning process. This approach is reflected in a considerably higher gross profit of EUR 10.6 million (15.8%). In conjunction with further efficiency increases and cost reductions, this led to a better operating result (EBIT), which improved from EUR 3.0 million the previous year to EUR +1.2 million. This equates to an EBIT margin of 1.8%. This figure includes restructuring expenses of EUR 0.5 million for streamlining operations and reducing the headcount. With the provisions set aside the year before, it was possible to solve most of the issues relating to the previous years problem projects. Solid demand Accounting for 81% of revenues, Germany remains Kardex Mlogs most important market. However, during the year under review demand remained good not only in the domestic market but also in neighbouring countries. From an industry point of view, the pharmaceutical sector in particular contributed to a solid result. In the second half of the year, bookings were slightly up on the first six months an indication of positive economic prospects in the companys key markets. A good seven months worth of orders were on hand at the end of the financial year. 16

21 Consolidated key figures for the Kardex Mlog Division EUR millions / % Bookings % % 16.1% Order backlog (31 December) % % 18.1% Segment net revenues % % 6.0% Operating result (EBIT) % % n.m. EBITDA % % n.m. Employees (full-time equivalents on 31 December) Net revenues by market regions Kardex Mlog Business year 2013 in % Europe, Middle East and Africa Americas Promising product launches At LogiMAT 2014, Europes foremost logistics trade fair, Kardex Mlog presented a whole range of developments that set new standards in terms of space efficiency and performance. In the form of MSpacer, technology was presented that can significantly reduce the amount of unused storage space in high-bay warehouses. The new MMove, a shuttle-vehicle for pallets facilitates particularly compact, dynamic storage solutions. Its ultra-slim profile means that a large amount of available storage space can be used, while at the same time its lightweight design and efficient drive technology give it excellent acceleration qualities. The M-Dynamic range was expanded in the fourth quarter of 2013 in collaboration with Kardex Remstar. Thanks to the successful integration of Kardex Remstars order picking software into Mlog s stand-alone systems, cooperation between the two divisions has intensified with the intention of also selling these Mlog products via the Kardex Remstar worldwide distribution network in the future. Service and modernization business continues to grow Great importance is being attached to expanding the service business. Revenues from service offerings increased once more in 2013, by around 6% from EUR 11.2 million to EUR 11.8 million, thus achieving a revenue share of 17.6%. Closer collaboration with existing customers is also paying off, and has led to an aboveaverage increase in revenues from modernization projects of more than 50% compared with the previous year. Outlook for 2014 Kardex Mlog aims to confirm its turnaround in 2014, continuing to focus on life cycle management and improving its strategic product mix during the current financial year. However, further efficiency gains are additionally needed to offset rising costs at the German production site and achieve the goal in the medium term of a 4% 6% EBIT margin. 17

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23 Maximum availability, constant operational safety and ongoing modernization key features of very expensive mega-rides. Kardex life cycle management meets these customer requirements worldwide. 19

24 Corporate Governance Corporate Governance The Kardex Group is committed to the recognized principles of responsible corporate governance as published by economiesuisse in the Swiss Code of Best Practice for Corporate Governance. By acknowledging these principles, the Groups aim is to strengthen and increase confidence on a lasting basis in management and corporate policies which are pursued in the interests of present and future shareholders, investors, employees, business associates and the general public. Through defined internal controls and mechanisms for the monitoring of business processes, the Group seeks to achieve risk-controlled decisions and results and has set itself the goal of ensuring comprehensive, transparent communication with all stakeholder groups. The principles of corporate governance at the Kardex Group are enshrined in its Articles of Incorporation, Organizational By-Laws, Code of Conduct and other guidelines. The Group publishes further details on its website at In the following section, as required by the guidelines of SIX Swiss Exchange, the Kardex Group provides information about its corporate governance. The information is organized as in the guidelines. To avoid redundancy and in the interests of readability, there are several cases where the reader is referred to other places in the Annual Report or other Kardex Group publications. Any significant changes occurring between the balance sheet date and this report going to press have been noted. 20

25 1. Group structure and shareholders 1.1 Group structure Structure of Group operations The Kardex Group is divided into the two divisions or segments Kardex Remstar and Kardex Mlog. Kardex Stow, which previously operated as the third division or segment, was disposed of during the year under review. Board of Directors Committees: Audit Committee Compensation and Nomination Committee Executive Committee Group functions Kardex Remstar Division Dynamic storage and retrieval systems Kardex Mlog Division Automated warehouse and materials handling systems The Kardex Group is led by the Board of Directors and the Executive Committee, which is headed by Felix Thöni as Executive Director. Additional members of the Executive Committee are the heads of division of Kardex Remstar and Kardex Mlog. The former head of division of Kardex Stow, the division which has been sold, and the former Chief Financial Officer (CFO), whose position was abolished as part of the restructuring, left the Executive Committee in the course of the financial year. The Executive Committee is now assisted by the Head of Finance and Controlling of the holding company, although he is not a formal member. The division of responsibilities between the Board of Directors, the Executive Director and the Executive Committee is explained in section 3.5, page

26 Corporate Governance Listed company in scope of consolidation Company Kardex AG Registered office Zurich, Switzerland Listed at SIX Swiss Exchange Swiss security no ISIN CH Symbol KARN Market capitalization as at 31 December 2013 CHF million Kardex AG is a public limited company under Swiss law and is headquartered in Zurich, Switzerland. The registered shares of Kardex AG are traded according to the Domestic Standard of the SIX Swiss Exchange in Zurich. The par value per share is CHF The other companies in the scope of consolidation are not listed Non-listed companies in scope of consolidation The directly and indirectly held companies of the Kardex AG within the scope of consolidation of Kardex Group are listed in the notes to the consolidated financial statements on pages 75 to 76 of the Annual Report. 1.2 Significant shareholders As at 31 December 2013, there were 1745 shareholders (1397) entered in the share register. The registered shares are held largely by private shareholders who are in most cases resident in Switzerland. As at the balance sheet date (31 December 2013), the following shareholders (in terms of capital held) had stakes equalling or exceeding 3%: BURU Holding and Philipp Buhofer 22.9% LB (Swiss) Investment AG 3.0 % 74.1 BURU Holding und Philipp Buhofer LB (Swiss) Investment AG Other shareholders Neither the company nor any of its subsidiaries held shares in Kardex AG at the balance sheet date (previous year: 0.3%). Shares pending registration of transfer amounted to 35.5% of the total as at 31 December 2013 (previous year: 28.1%). Reports on significant shareholders or groups of shareholders filed with the company and the Disclosure Office of SIX Swiss Exchange Ltd in accordance with article 20 SESTA can be viewed on the Disclosure Offices publication platform at six-exchange regulation.com/ obligations/disclosure/ major_ shareholders_ en.html. 1.3 Cross-shareholdings There are no cross-shareholdings. 22

27 2. Capital structure Share capital and capital structure Par value per share (CHF) Total registered shares Number of treasury shares Number of dividend bearing shares Registered capital (CHF 1000) Conditional capital (CHF 1000) Authorized capital (CHF 1000) Total voting rights Price per share The key share figures are shown on page 8 of this Annual Report. 2.1 Ordinary capital The company had ordinary capital of CHF (number of shares ) as at 31 December Conditional and authorized capital 2.3 Changes in capital The company had no conditional or authorized capital as at 31 December For an overview in table form of the capital changes during the financial years , please see the table Share capital and capital structure on page 8. 23

28 Corporate Governance 2.4 Shares and participation certificates The registered shares of Kardex AG have a nominal value of CHF each and each registered share corresponds to one vote at the General Meeting (one share one vote principle) and is eligible for dividends. The right to apply the special rules concerning treasury shares held by the company is reserved, particularly in relation to the exception from the entitlement to dividends. As a rule, up to 35% of the operating result (net profit based on the consolidated group result) for the period is to be distributed to shareholders in accordance with a proposal of the Board of Directors to the Annual General Meeting. 2.5 Profit participation certificates Kardex AG had no profit participation capital as at 31 December Kardex AG had issued no profit participation certificates as at 31 December Restrictions on transferability and nominee registrations The registered shares of Kardex AG may be purchased by any legal or natural person. Nominee registrations are permitted. The purchasing of shares is subject to the following limitations on nominee registrations: The company may refuse registration as a shareholder with voting rights in the share register if upon request the purchaser does not expressly declare that they hold the shares in their own name and for their own account. The Board of Directors is entitled to delete an entry in the share register with retroactive effect from the date of that entry if such entry was based on false information. It may hear the shareholder or beneficiary in question in advance. Evidence of purchase is also required. The aforementioned limitations on nominee registrations are explicitly laid down in 3c, paras. 4 and 5 of the Articles of Incorporation. These provisions of the Articles of Incorporation may be rescinded by a simple decision of the General Meeting. The foregoing applies subject to any restrictions on transferability imposed by the law. No exceptions were granted in the year under review. 2.7 Convertible bonds and options As at 31 December 2013, Kardex AG had no convertible bonds or options outstanding. 24

29 3. Board of Directors From left to right: Jakob Bleiker, Walter T. Vogel, Philipp Buhofer, Felix Thöni, Ulrich J. Looser 3.1 Members of the Board of Directors The Board of Directors of Kardex AG currently consists of four non-executive members and one executive member. The Articles of Incorporation stipulate between three and seven members. The non-executive members are independent in the sense of the Swiss Code of Best Practice for Corporate Governance and, with the exception of Philipp Buhofer, who served as Chairman of the Board of Directors from the General Meeting held on 26 April 2011 to the General Meeting held on 24 April 2012 as well as on the Executive Committee, have not served on either the management of Kardex AG (holding company) or the management board of any subsidiary during the past three years. They have no business interest with the Kardex Group. Felix Thöni as President of the Executive Committee is an executive member of the Board of Directors and as such not independent in the sense of the Swiss Code of Best Practice for Corporate Governance. He has been performing this function since the General Meeting of 24 April The tasks of the Executive Committees are described in section 3.5 on page 32. The Board of Directors consists of the following members: 25

30 Corporate Governance Philipp Buhofer Member of the Board of Directors since 2004, term expires April 2014 Chairman of the Board of Directors since the Annual General Meeting , Swiss citizen, HWV Horw/Lucerne Since 1997 Independent entrepreneur EPA AG, Delegate and Chairman of the Board of Directors EPA AG, purchasing and sales and member of Executive Management Metro International, Baar, Düsseldorf and Hong Kong, procurement and marketing Walter T. Vogel Member of the Board of Directors since 2006, term expires April 2014 Vice Chairman of the Board of Directors since the Annual General Meeting , Swiss citizen, grad. mechanical engineer, ETH Zurich Since 2007 CEO Aebi-Schmidt Group CEO Von Roll Holding AG Von Roll Group, Head of the Infratec Division and member of Group management HILTI AG, Head of Direct Fastenings Business Unit and member of extended Group management Aliva AG, Director of Marketing and Sales and member of Executive Management Jakob Bleiker Member of the Board of Directors since Annual General Meeting 2012, term expires April , Swiss citizen, grad. phys. ETH lic. oec. HSG Since 2011 Bosch Packaging Technology: Manager Confectionery and Food division Manager Bosch Packaging Systems division Manager Business Unit Sigpack Service and Specialty Market Sulzer Textil AG, Manager Customer Support Service/member of the Executive Board Sulzer Group, various management functions Kannegiesser Maschinen AG, Ziefen BL 26

31 Ulrich Jakob Looser Member of the Board of Directors since Annual General Meeting 2012, term expires April , Swiss citizen, grad. phys. ETH, lic. oec. HSG Since 2009 Berg Looser Rauber & Partners, partner (BLR & Partners) Accenture, Chairman Accenture AG (Switzerland) McKinsey & Company Inc; partner (since 1993) Spectrospin AG (Fällanden); software development Felix Thöni Executive Director since the Annual General Meeting 2012, term expires April 2014 Vice Chairman of the Board of Directors from the Annual General Meeting 2011 to the Annual General Meeting , Swiss citizen, Dr. oec. HSG Since 2010 Management Consultant, Cham CFO Charles Vögele Group, Pfäffikon CFO Gavazzi Group, Steinhausen Area Controller, Schindler Management AG, Ebikon 3.2 Other activities and interests Philipp Buhofer Other directorships with listed companies: Chairman of the Board of Cham Paper Group Holding AG, Cham; Chairman of the Board of Rapid Holding AG, Dietikon Other directorships with non-listed companies: Executive Director of BURU Holding AG, Hagendorn; Chairman of the Board of Lorzengrund Immobilien AG, Hagendorn Vice Chairman of the Board of DAX Holding AG, Hagendorn Walter T. Vogel Other directorship with non-listed company: Stadler Stahlguss AG, Biel Jakob Bleiker Other directorship with non-listed company: Chairman of the Board of IQ-Plus Holding AG, Winterthur Ulrich Jakob Looser Other directorship with listed company: Straumann Holding, Basel; Other directorships with non-listed companies: Bachofen Group, Uster; Econis, Dietikon; Stellba, Dottikon; Balgrist Tec, Zurich 27

32 Corporate Governance Other activities: University Council of Zurich University; Member of the Board of economiesuisse: Chairman of the Committee on Education and Research; Swiss Association Balgrist: Member of the Board; Swiss-American Chamber of Commerce: Lead of the Doing business in the US chapter; Swiss Study Foundation: Head of the Finance Committee Felix Thöni Other directorship with listed company: Cham Paper Group Holding AG, Cham Other directorship with non-listed company: Renergia Zentralschweiz AG, Perlen/Root. 3.3 Elections and terms of office Principles of the election procedure and restrictions on term of office The members of the Board of Directors are elected by the General Meeting annually for a term of office of one year. Unless the shareholders request otherwise, members of the Board of Directors due to have their terms of office renewed at the same General Meeting may be jointly re-elected. Members of the Board of Directors were jointly re-elected in the year under review. There is no limit to the number of times a member may be re-elected. If by-elections are held, new members serve out the term of office of their predecessors. Once they reach the age of 70, Members of the Board of Directors retire from the Board of Directors automatically with effect from the next Ordinary General Meeting ( 13, para. 3 of the Articles of Incorporation) Initial election and remaining term of office of each member of the Board of Directors Name Year elected Term expires Philipp Buhofer Walter T. Vogel Jakob Bleiker Ulrich Jakob Looser Felix Thöni Internal organization The tasks of the Board of Directors are governed by the Swiss Code of Obligations, as well as the Articles of Incorporation and Organizational By-Laws of Kardex AG Allocation of tasks within the Board of Directors Philipp Buhofer has served as Chairman of the Board of Directors since the General Meeting 2011 and Walter T. Vogel as Vice Chairman since Since the General Meeting 2012, Felix Thöni has been Executive Director and President of the Executive Committee. The two permanent committees of the Board of Directors are headed by Jakob Bleiker (Audit Committee) and Ulrich Jakob Looser (Compensation and Nomination Committe). There are no other committees. 28

33 3.4.2 Composition, duties and authority of the Board committees Two permanent committees, the Audit Committee and the Compensation and Nomination Committee, exist to assist the Board of Directors in or prepare it for important decisions. The committees are constituted as follows: Name Audit Committee Compensation and Nomination Committee Philipp Buhofer Member Member Walter T. Vogel Member Jakob Bleiker Chairman Ulrich Jakob Looser Chairman Felix Thöni Member According to the Organizational By-Laws, the Board of Directors may set up other committees to help it carry out its duties more efficiently. It appoints the chairmen and members of the committees and defines their duties. The committees report back to the Board of Directors on their activities. However, overall responsibility for the duties assigned to the committees remains with the full Board of Directors. Audit Committee The Audit Committee supports the Board of Directors in its duties of ultimate supervision, with particular regard to monitoring the integrity of the financial statements, the annual and interim reports, the internal control system for accounting processes, risk management and the auditing activities of the external and internal auditors. The Audit Committee critically reviews the annual and interim financial statements, consulting the external auditors and the members of the Executive Committee or other management personnel, and submits a proposal to the Board of Directors for approval or rejection; assesses the auditing activities, audit plan, independence and remuneration of the external auditors as well as their cooperation with the finance and control officers of the company and discusses their reports and recommendations; makes an assessment of the functioning of the internal control system and the reliability of the reporting; monitors compliance with legislation, internal guidelines and other provisions; submits proposals to the full Board of Directors when necessary, if it notices a need for action in the course of its activities. 29

34 Corporate Governance Compensation and Nomination Committee The Compensation and Nomination Committee advises and submits proposals to the full Board of Directors primarily in the following areas: fundamental personnel issues within the Kardex Group; appointments to the Board of Directors and key positions within the Group; approval of conditions of employment for members of the Executive Committee (in particular compensation, duration of contract); defining fundamental parameters with regard to performance-related payments within the Kardex Group; setting individual performance-related payments to members of the Executive Committee; monitoring salary structure and salary development overall as well as individual total remunerations received which exceed a specific amount to be set by the committee; compliance with official and/or supervisory regulations concerning publication of remunerations received by the members of the Board of Directors and the Executive Committee Procedures of the Board of Directors and its committees The Board of Directors convenes by invitation of the Chairman or a member representing him, or at the request of one of its members. The Board of Directors appoints a Chairman from among its own members for a period of one year. Minutes detailing the Boards discussions and decisions are kept and signed by both the Chairman and the Secretary. The Secretary is appointed by the Board of Directors and need not be a member. The Chairman also presides over the General Meeting and, together with the Executive Committee, ensures that all stakeholders receive any necessary information in good time. The Board of Directors meets regularly and as often as business requires in regular meetings which generally last half a day. The Board of Directors also meets once a year for a one-to-two-day strategy session. In the year under review the Board met for three meetings and one two-day strategy session. The meetings lasted half a day and two days. The full Board of Directors usually visits and inspects one of the Groups production companies once a year. All members of the Executive Committee are invited to the regular meetings of the Board of Directors. The full Executive Committee also attends the strategy and budget session. The Board may invite division heads, other management personnel or external advisors to attend as needed when dealing with specific issues. In the year under review the Board of Directors consulted advisors in connection with the sale of the Kardex Stow Division and the review and implementation of the strategic alignment of the Kardex Mlog Division. Written documentation on the agenda items specified by the Chairman or at the request of the Executive Committee is submitted to the Board of Directors well in advance of meetings. The inalienable legal duties of the Board of Directors are described in article 30

35 716a of the Swiss Code of Obligations. The Board of Directors of Kardex AG has the following duties and authority in particular: strategic direction, organization and management of the Group; defining finance and accounting as well as financial planning and control; appointment and dismissal of the members of the Executive Committee and signatories; regular review of business operations; making decisions on issues that have not been reserved or transferred by law, the Articles of Incorporation or other regulations to another body; formulation and preparation of proposals to be put to the General Meeting. The Audit Committee comprises two to three members of the Board of Directors, elected by the Board of Directors for a term of one year. The majority, including the Chairman, should be experienced in financial matters and accounting. The Board of Directors appoints the Chairman of the Audit Committee. The committee currently comprises Jakob Bleiker as Chairman and Philipp Buhofer and Felix Thöni as members. The Audit Committee meets as often as required, but as a rule three times a year. At the invitation of the Chairman of the Audit Committee, the Head of Finance of the Kardex Holding and, if necessary, other employees from the finance department attend. The external auditors attend all meetings. In the year under review, the Audit Committee met on three occasions. These meetings generally lasted half a day. The duties and responsibilities of the Audit Committee are laid down in the Organizational By-Laws. The Audit Committee supports the Board of Directors in supervising finance and accounting. It is responsible for monitoring internal and external financial reporting by management as well as evaluating the effectiveness of the internal control system. The Audit Committee evaluates the performance, effectiveness and independence of the external auditors as well as that of internal auditing activities. The auditors fees and the compatibility of external auditing activities with other advisory mandates are reviewed. Furthermore, the Audit Committee checks compliance with the statutory requirements. The Audit Committee reports back to the full Board of Directors and puts forward proposals to them when necessary. The Compensation and Nomination Committee comprises two to three members appointed from within the Board of Directors; the Board of Directors also appoints the Chairman of the Compensation and Nomination Committee. The Compensation and Nomination Committees members currently comprise Ulrich Jakob Looser (Chairman), Philipp Buhofer and Walter T. Vogel. The Executive Director also attends these meetings when the topics covered so require. The Compensation and Nomination Committee meets as often as required by business, but at least once a year. In the year under review, the Compensation and Nomination Committee held three meetings, each of which lasted one to three hours. 31

36 Corporate Governance The duties and responsibilities of the Compensation and Nomination Committee are specified in the Organizational By-Laws. The Compensation and Nomination Committee supports and advises the Board of Directors on matters concerning the composition as well as the conditions of appointment and compensation of the members of the Board of Directors, members of the Executive Committee and other important positions in the Group. In particular, the Compensation and Nomination Committee proposes the basic criteria regarding performance-related payments within the Group. 3.5 Definition of areas of responsibility The Kardex AG Board of Directors is the supreme managerial and supervisory body of the holding company and the Kardex Group. It bears ultimate responsibility for managing, supervising and monitoring the Executive Committee, which is responsible for the Kardex Groups management. In essence, it is responsible for decisions concerning corporate strategy and organizational structure as well as determining the corporate policy. The Board of Directors is responsible for appointing and dismissing members of the Executive Committee and defining finance and accounting, as well as approving long-term plans and annual as well as investment budgets. The Board of Directors delegates management of Kardex AG and the Kardex Group as a whole in full to the Executive Committee chaired by the Executive Director, unless otherwise specified by law, the Articles of Incorporation or the Organizational By-Laws. The Board has also appointed a head for each division. The Executive Committee manages the Kardex Group on the basis of the strategy adopted by the Board of Directors. The duties and authority of the Executive Committee are laid down in the Organizational By-Laws. The Executive Committee bears primary responsibility for developing Group strategy for the attention of the Board of Directors, for the operational management of the Company, its overall financial results and for the implementation of the strategy and action plan adopted by the Board of Directors. The Head of Finance of the holding company is responsible for financial, tax and capital management for the holding company and is accountable for the development and implementation of the principles, regulations and limits of risk control. He is also responsible for creating transparency in respect of financial results and accountable for timely, high-quality financial reporting. Each head of division bears overall responsibility for his division and the management, results and risks thereof. 3.6 Information and control instruments to monitor the Executive Committee Board of Directors The Board of Directors is informed about the course of business and important business events by the Executive Committee at every Board meeting. This enables the Board to carry out its supervisory duties regarding the Groups strategic and operational progress. 32

37 Other instruments that enable it to monitor and control the Executive Committee are: monthly written reports from the Head of Finance of the holding company and the Heads of Division on current business performance and the outlook for the next three to four months; periodic information concerning the revenue and results figures expected by the divisions in the current financial year; annual strategic analyses of the individual divisions and the Group as a whole, prepared by the Executive Committee, together with a long-term plan revised by the Executive Committee; annual revision of the business risk matrix for the Kardex Group by the Executive Committee. The risk matrix describes and evaluates the risks to the Kardex Group in the following categories and defines risk control measures: environment, corporate strategy, corporate management, production, market, information technology, finance and compliance; special reports by the Executive Committee on important investments, acquisitions and cooperative agreements; briefing of the Board of Directors by the Executive Committee on significant developments. Chairman of the Board of Directors The Chairman of the Board normally meets the Executive Director every month to discuss the course of business. Audit Committee The Audit Committee reports as a rule three times a year to the Board of Directors on matters concerning finance and accounting, accounting standards, compliance (laws and processes), as well as internal and external auditing. It also reviews the financial reporting processes. Internal audit function The internal audit function is integrated into the finance function of the holding company and the controlling processes of the divisions. The internal auditors support the various organizational units in achieving targets related to the maintenance and improvement of the internal control systems. When the investigations have been completed, Controlling submits reports to the Audit Committee. It reports actual or suspected irregularities to the Audit Committee. Measures based on the reports described in this chapter and submitted to the above-mentioned bodies are placed on the agenda for the relevant meetings and handled in succession. 33

38 Corporate Governance 4. Executive Committee 4.1 Members of the Executive Committee The Executive Committee currently comprises three members and manages the operational business of the Kardex Group in this structure. Felix Thöni is President of the Executive Committee in his capacity as Executive Director. In addition the two heads of division are also members of the Executive Committee. The heads of division are responsible for the operational management of their respective divisions. The management structure can be seen in section of this report on page 21. Felix Thöni 1959, Swiss citizen Dr. oec. HSG Since 24 April 2012 President of the Executive Committee Member of the Board of Directors since 2011, term expires April 2014 Since 2010 Management Consultant, Cham CFO Charles Vögele Group, Pfäffikon CFO Gavazzi Group, Steinhausen Area Controller, Schindler Management AG, Ebikon Jens Fankhänel, Head of Kardex Remstar Division 1965, German citizen Grad. electrical engineer/automation technologist, University of Chemnitz Since January 2011 Head of Kardex Remstar Division Managing Director WDS Region Europe 1 Swisslog AG, Buchs Vice President and CEO Hub Central Europe Dematic GmbH & Co. KG Offenbach Managing Director Swisslog Australia Senior Consultant/Director i+o GmbH, Heidelberg Hans-Jürgen Heitzer, Head of Kardex Mlog Division 1962, German citizen Grad. mechanical engineer, Aachen Technical University Since 1 September 2011 Head of Kardex Mlog Division Managing Director Mlog Logistics GmbH, Neuenstadt Managing Director Locanis AG, Unterföhring Division Manager Distribution and Project Management automatic high rack storage systems MAN Logistics, Heilbronn Division Manager Systems Mannesmann Dematic, South Africa Project Manager Entire projects Mannesmann Dematic, Offenbach 34

39 The Head of Division of the in the year under review sold Kardex Stow Division (Jos De Vuyst) and the CFO (Gerhard Mahrle) left the Executive Committee before the closing date of 31 December 2013 and are therefore no longer listed (section 1.1). 4.2 Other activities and interests The members of the Executive Committee do not engage in any other relevant activities. There are no relevant interests. Other offices held by Felix Thöni are listed on page Management contracts Kardex AG and its subsidiaries have no management contracts with third parties. 5. Compensations, shareholdings and loans 5.1 Content and method of determining compensation and shareholding programmes Guiding principles The success of the Kardex Group depends very much on the quality and commitment of the members of the Board of Directors and of the Executive Committee. The aim of the compensation policy is to attract and retain qualified staff in both bodies. Performance-related compensation is an important element in achieving this objective. The most important principles of this are: remuneration should be performance-dependent and in line with the market; decisions on remuneration should be transparent and comprehensible; remuneration should be linked to the business success of the company/division Responsibilities At the beginning of each term of office, the Compensation and Nomination Committee appointed by the Board of Directors (section 3.4.2) submits proposals to the full Board of Directors concerning the nature and amount of the annual emoluments of the members of the Board of Directors (section ) and submits an annual proposal to the Board of Directors concerning the compensation for the Executive Committee (section ). Moreover, in consultation with the full Board of Directors, the Compensation and Nomination Committee prepares targets for the Executive Committee, assesses the target attainment of the Executive Committee and submits a proposal to the Board of Directors concerning the variable compensation of the Executive Committee. 35

40 Corporate Governance Once a year, at the request of the Compensation and Nomination Committee, the full Board of Directors approves the fixed compensation for the individual members of the Board of Directors for the following term of office. The member concerned has a right of consultation in this connection. Once a year, at the request of the Compensation and Nomination Committee, the full Board of Directors also sets the fixed compensation for the next financial year for the Executive Committee, as well as the basic principles of the target-based, variable compensation of the Executive Committee for the next financial year. Finally, at the request of the Compensation and Nomination Committee, the full Board of Directors approves the variable compensation of the Executive Committee, based on the attainment of the defined targets for the financial year which has ended. The members of the Executive Committee have no right of consultation or participation in this connection System of compensation Members of the Board of Directors The members of the Board of Directors receive a fixed annual fee for their work, in particular for preparing for and participating in meetings and for their work on the committees. In addition to the fixed fee, they may also be compensated for the time spent on special projects, at the agreed daily rates, provided that the full Board of Directors agrees to this in advance. The fixed fee is set according to the criteria of the responsibility assumed, the complexity of the task, the demands in terms of specialist expertise and personal qualities and the time expected to be taken. Publicly accessible information from comparable Swiss industrial companies listed on SIX Swiss Exchange which are of similar size and have international production and market organizations is also taken into account. At least 20% and at most 100% of the fixed fee is paid in shares. The remainder is paid in cash. The share price is calculated using the weighted average price for the preceding month (usually August). These shares cannot be traded for three years and are therefore priced 16% lower Executive Director In addition to the emolument received as a member of the Board of Directors, the Executive Director receives a basic cash remuneration for his operational activity as a member of the Executive Committee based on actual time spent. He also receives variable compensation. This was paid in Kardex shares in the year under review. The variable compensation in Kardex shares is calculated in accordance with the price performance of the share. This variable portion is included in the statement of remuneration on page 87 of this Annual Report. 36

41 Other members of the Executive Committee The other members of the Executive Committee (heads of division) receive remuneration consisting of fixed cash emoluments and variable performance- and result-related payments. The fixed cash emoluments consist of a monthly salary, a flat-rate expense allowance and a company car. In addition, a salary-related contribution is paid into the pension scheme. The fixed basic salary is determined taking account of the tasks and responsibility assigned, the qualifications and experience required and the market environment. The weighting of the criteria cited is discretionary. In addition, in setting the form and amount of the salary components, due account is taken of publicly accessible information from comparable Swiss industrial companies listed on the SIX Swiss Exchange which are of similar size and have international production and market organizations. The variable performance- and result-related remuneration is determined on the basis of the fulfilment of the individual performance targets and the business success of the company or division, based on the targets adopted by the Board of Directors. At the beginning of the year, the Compensation and Nomination Committee proposes to the Board of Directors the individual performance targets for the heads of division. After the end of the financial year, the Compensation and Nomination Committee assesses the fulfilment of these targets and criteria and, based on this, submits to the Board of Directors a proposal for the variable compensation. For a head of division, the weighting of the variable component is 70% for attainment of the financial targets of the division he is responsible for and 30% for personal targets. The business success of the company and the divisions is measured on the basis of the following key financial indicators: Weighting above 80%: operating result (EBIT) Weighting below 20%: development of net working capital According to the rules that were in force up to 31 December 2013, the members of the Executive Committee had to draw at least 20% of their variable compensation in shares, and could increase this portion to up to 100%. In the year under review, this rule was suspended because the Kardex Stow Division was in the process of being sold. As of 1 January 2014, the obligation to draw a minimum portion in shares was removed. However, up to 100% of the variable component may still be drawn in Kardex shares. The share price is calculated using the weighted average price for the preceding month (usually February). These shares cannot be traded for three years and are therefore priced 16% lower. 37

42 Corporate Governance Notice Periods All members of the Executive Committee have employment contracts with periods of notice below twelve months. Members of the Board of Directors and the Executive Committee are not entitled to any contractual severance payments or other remuneration or benefits in connection with their departure. 5.2 Transparency concerning compensation and loans in the year under review Compensation The remuneration of the Board of Directors and the Executive Committee disclosed in the following includes the relevant remuneration for the year under review as a whole. The reported variable elements of remuneration relate to the reporting year which has ended. The variable emoluments are allocated and paid out according to the target attainment for the year under review described in and , pages 36 and 37. New members of the Board of Directors or the Executive Committee normally receive compensation from the month in which they assumed the relevant function. Departing members of the Board of Directors receive remuneration until the end of the month of their departure. Departing members of the Executive Committee receive remuneration until the date of termination of the contract. One head of division is provided with a company car. All payments made to pension schemes are reported under pension expenses. Some members of the Executive Committee are also members of the Boards of Directors of subsidiaries of Kardex AG within the Group. No fees or compensation are paid for these activities. No collateral (sureties, guarantees etc.) was granted to members of the Board of Directors or the Executive Committee during the year under review. Neither Kardex AG nor any other Group company waived any claim in relation to a member of the Board of Directors or the Executive Committee. In addition to the emolument received as members of the Board of Directors, the members of the Board of Directors received a cash remuneration for their operational activities based on actual time spent. The Executive Director receives a variable compensation payment (see section on page 36). During the year under review the emoluments of the Board of Directors increased by the amount of CHF 0.5 Mio. compared with the previous year. The increase in total variable emoluments is due to the remuneration of operational activities performed by the executive member of the Board of Directors. 38

43 Members of the Board of Directors of Kardex AG In the year under review, the members of the Board of Directors received compensations totalling CHF (CHF ). Of this total, CHF (CHF ) was drawn in shares. A detailed list of the compensations including shareholdings of the members of the Board of Directors can be found in the notes to the financial statements of Kardex AG (Holding) under note 16 (Compensation and shareholdings), pages 87 to Members of the Executive Committee of Kardex AG For the year under review, the members of the Executive Committee (excluding the Executive Director but including Jos De Vuyst, Head of Kardex Stow Division, and Gerhard Mahrle, CFO, who left the Committee during the year under review), received compensations totalling CHF ( CHF ). During the reporting year, the variable component of the compensation for the members of the Executive Committee came to an average of 49.8% (31.1%) of total remuneration. The quantitative targets were mostly met or exceeded. A detailed list of the compensations including shareholdings of the members of the Executive Committee can be found in the notes to the financial statements of Kardex AG (Holding) under note 16 (Compensation and shareholdings), pages 87 and Previous members of governing and executive bodies In the year under review no compensations were paid to members of governing or executive bodies who left in 2012 or earlier Related parties During the year under review, no fees or other emoluments were paid to individuals closely linked to members of the Board of Directors or the Executive Committee for services performed for the Kardex Group or any of its subsidiaries Loans Current and previous members of governing and executive bodies No loans from Kardex AG or any other Group company were granted to current or previous members of governing or executive bodies and as at 31 December 2013 there were no such loans outstanding Related parties Kardex AG did not grant any loans to parties related to current or previous members of governing or executive bodies. 39

44 Corporate Governance 6. Shareholders participation rights 6.1 Voting right restrictions and representation On 31 December 2013, there were shareholders entered in the share register. A majority of them had their registered office or domicile in Switzerland. Each Kardex AG registered share entitles the holder to one vote at the General Meeting. There are no voting right restrictions. Furthermore, any shareholder has the right to have his shares represented at the General Meeting by a proxy authorized in writing. 6.2 Statutory quorums Unless the law or Articles of Incorporation provide otherwise, the General Meeting passes its resolutions and conducts its elections by an absolute majority of the valid voting rights represented. In the event of a tied vote, the Chairman of the General Meeting has the casting vote. Kardex AGs Articles of Incorporation do not prescribe specific quorums other than those required by company law. 6.3 Convening the General Meeting The General Meeting is called by the Board of Directors at least 20 days prior to the date of the meeting by way of a notice published in the Companys official publications and by a letter sent to all shareholders registered in the share register. In addition to the meeting date, time and venue, the announcement must state the items to be discussed and the resolutions proposed by the Board of Directors and shareholders who have requested a General Meeting or put forward an item for inclusion on the agenda. No resolution may be passed on items that have not been announced in this way, except for requests to convene an extraordinary General Meeting, carry out a special audit or appoint an auditor at the wish of a shareholder. Shareholders representing at least one-tenth of the share capital may request in writing that an extraordinary General Meeting be convened, setting forth the items and the proposals. 6.4 Inclusion of items on the agenda Shareholders representing shares with a par value of at least CHF may request in writing that items be added to the agenda, specifying the proposed resolutions. Such items must be submitted to the Board of Directors in writing at least 40 days before the General Meeting. 6.5 Entry in the share register Once invitations to the General Meeting have been dispatched, no entries are made in the share register until the day after the General Meeting. 40

45 7. Changes of control and defence mechanisms 7.1 Duty to make an offer In accordance with 4 of Kardex AGs Articles of Incorporation, a purchaser of company shares is only obliged to make a public offer under the terms of article 32 (the statutory opting-up clause) of the Swiss Federal Act on Stock Exchanges and Securities Trading (SESTA) if his holding exceeds 49% of the companys voting stock. 7.2 Change-of-control clauses There are no change-of-control clauses. 8. Statutory auditors 8.1 Duration of the mandate and term of office of the auditor in charge Time of assumption of existing audit mandate The auditors are elected by the General Meeting for a period of one year. KPMG Ltd, Zurich, have been Kardex AGs statutory auditors since Time of assumption of office by the auditor in charge of the existing audit mandate The auditor in charge, Thomas Schmid, has been responsible for the mandate since the General Meeting on 21 April The auditor in charge may exercise his mandate for a maximum of seven years and resume the same mandate after a break of three years. 8.2 Audit fees In 2013, KPMG provided audit services to the value of CHF (CHF ). These amounts include expenses. 8.3 Additional fees KPMG was also paid fees totalling CHF (CHF ) for non-auditrelated services. The entire amount was for tax advice (tax audits in Switzerland and Germany, clarification of international tax matters), assistance with the sale of the Kardex Stow Division and legal advice. 41

46 Corporate Governance 8.4 Information tools of the external auditors The Audit Committee verifies the licensing, independence and performance of the auditors on behalf of the Board of Directors and proposes the appointment and, where necessary, discharge of auditors to be appointed or discharged by the General Meeting. The Audit Committee monitors the auditing of the annual financial statements of Kardex AG and the consolidated financial statements by the auditors. As part of their audit services, the statutory auditors provide the Audit Committee with regular written and verbal feedback on their findings and suggestions for improving the accounting and the internal control system. These are summarized in a comprehensive report by the auditors to the full Board of Directors (also containing the management letter). The Audit Committee meets the external auditors at least three times a year (three times in the year under review) to determine the audit scope and the criteria for the annual approval of the fees. It ensures compliance with the mandatory rotation of the auditor in charge. The Audit Committee also reviews the amount of the fees and their composition, broken down into audit services and non-audit-related services. The Board of Directors is informed via the Audit Committee. 9. Information policy Kardex AG is committed to an open information policy and provides shareholders, the capital market, employees and all stakeholders with open, transparent and timely information. The information policy accords with the requirements of the Swiss stock exchange (SIX Swiss Exchange) as well as the relevant statutory requirements. As a company listed on SIX Swiss Exchange, Kardex AG also publishes information relevant to its stock price in accordance with article 53 of the Listing Rules (ad hoc publicity). The Group publishes a report on its activities every six months in March and August. All publications are available in electronic form. The Annual Report is also available in printed form. The Interim Report is published on the Companys website and printed and delivered on request. Press releases are additionally issued on a regular basis. Kardex maintains a dialogue with investors, analysts and the media at special events and road shows. The annual media and analysts meeting, as well as the General Meeting, are held in Zurich, Switzerland. 42

47 Information is sent electronically or by to SIX Swiss Exchange, the Swiss Commercial Gazette (the Companys official publication) and other relevant national business publications. It is also published simultaneously on the Group website at In addition, interested parties who have registered at information-service-subscription.html can receive the requested information by . The President of the Executive Committee bears primary responsibility for corporate communications. The Companys official publication is the Swiss Commercial Gazette. Information published in connection with the maintenance of registered share listings on SIX Swiss Exchange complies with SIX Swiss Exchanges Listing Rules and their implementing decrees. These can be found at The website provides detailed, up-to-date information about the Group, its products and contact information. Calendar of events for Investor Relations 2014 Annual General Meeting 24 April Interim Report 21 August Media and analysts conference 12 March Annual General Meeting 23 April Interim Report 13 August

48 44

49 Financial reporting Kardex Group 46 Consolidated income statement 47 Consolidated balance sheet 48 Consolidated cash flow statement 49 Consolidated statement of changes in equity Notes to the consolidated financial statements General information Significant accounting policies 58 Notes to the consolidated financial statements 78 Report of the statutory auditor on the consolidated financial statements 45

50 Financial reporting Kardex Group Consolidated income statement EUR millions Notes 2013 Proportion (%) 2012 Proportion (%) Net revenues % % Cost of goods sold and services provided % % Gross profit % % Marketing and sales expenses % % Administrative expenses % % Development expenses % % Other operating income 5, % % Other operating expenses % % Operating result (EBIT) % % Financial result, net % % Result for the period before tax % % Income tax expense % % Result for the period % % Earnings per share (EUR)¹: No dilutive effect occurred in 2013 and 2012.

51 Consolidated balance sheet EUR millions Notes Property, plant and equipment Intangible assets Financial assets Non-current assets Inventories and work in progress Trade accounts receivable Other receivables Prepaid expenses Cash and cash equivalents Current assets Assets Share capital Capital reserves Retained earnings incl. translation differences Treasury shares Equity Non-current financial liabilities Non-current provisions Non-current liabilities Trade accounts payable Current financial liabilities Current provisions Accruals Other current liabilities Current liabilities Liabilities Equity and liabilities

52 Financial reporting Kardex Group Consolidated cash flow statement EUR millions Notes Result for the period Depreciation on property, plant and equipment and amortization on intangible assets Changes in provisions and pension liabilities Gain of sale of the Kardex Stow Division 5, Other non-cash items Change in accounts receivables Change in inventories and work in progress Change in other receivables and prepaid expenses Change in accounts payables Change in other current liabilities and accruals Net cash flow from operating activities Purchase of property, plant and equipment Sale of property, plant and equipment Purchase of intangible and financial assets Sale of intangible and financial assets Acquisition of companies Disposal of the Kardex Stow Division, net of cash disposed of Net cash flow from investing activities Free cash flow Acquisitions of treasury shares Disposals of treasury shares Changes in current financial liabilities Changes in non-current financial liabilities Dividend paid 32.7 Net cash flow from financing activities Effect of foreign currency translation differences on cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December Net change in cash and cash equivalents, Group

53 Consolidated statement of changes in equity EUR millions Notes Share capital Capital reserves Retained earnings Translation differences Total reserves Treasury shares 1 Equity Opening balance 1 January Result for the period Acquisition companies Foreign currency translation differences Acquisition of treasury shares Disposal of treasury shares Closing balance 31 December Opening balance 1 January Result for the period Acquisition companies Disposal of the Kardex Stow Division Foreign currency translation differences Acquisition of treasury shares Disposal of treasury shares Dividend paid Closing balance 31 December Number of treasury shares held as of 31 December 2013: 0 (21 500). 2 Reduction of purchase price for the acquisition of Mlog Logistics GmbH due to compensation payment by sellers. 3 This item also includes the exchange rate differences arising from net investments in foreign operations less deferred tax. 4 As part of share-based remuneration, treasury shares were allocated in the amount of EUR 0.6 million (EUR 0.3 million). 5 Increase of purchase price for the acquisition of Mlog Logistics GmbH due to reversed compensation payment by sellers.

54 Notes to the consolidated financial statements Notes to the consolidated financial statements 1. General information The consolidated financial statements of the Kardex Group include Kardex AG and its subsidiaries (referred to collectively as the Group and individually as the Group companies ). Kardex AG is the Group s parent company, a limited company under Swiss law, which is registered and domiciled in Zurich, Switzerland. Kardex AG is listed on SIX Swiss Exchange. 2. Significant accounting policies Basis of preparation The Group s consolidated financial statements were prepared in compliance with the provisions of Swiss company law and are in accordance with Swiss GAAP FER (FER) in their entirety FER 31 Complementary recommendation for listed companies which has not been adopted early; will be effective as of 1 January The financial years 2013 and 2012 are not comparable due to the sale of the Kardex Stow Division on 31 July 2013; see notes 1 and 28 for more information. Principles of consolidation Consolidation is based on the individual Group companies audited financial statements, as prepared on a consistent basis. The balance sheet date for all Group companies is 31 December. The consolidated financial statements are prepared on a historical cost basis with the exception of derivative financial instruments, which may be stated at fair value. The consolidated financial statements include Kardex AG as well as all domestic and foreign subsidiaries in which Kardex AG holds a direct or indirect ownership. Acquisitions are accounted for using the purchase method. All subsidiaries in which the Group holds more than 50% of the voting rights or for which it is able to exercise a controlling influence on the subsidiary s operating or financial policies are accounted for using the full consolidation method, which incorporates assets and liabilities as well as revenues and expenses in their entirety. Intra-Group balances, transactions and profits not realized through third parties are eliminated in the consolidation process. Kardex AG currently has no investments with voting rights of less than 20%, no investments in associated companies and it is not currently engaged in any joint ventures.

55 Foreign currency translation Functional and presentation currency The consolidated financial statements are presented in millions of euros. The euro is Kardex AG s functional currency and the presentation currency of the Group because the Group s cash flows and transactions are denominated mainly in euros. Foreign currency transactions Foreign currency transactions are translated using the exchange rates prevailing at the dates of the transactions. Gains and losses resulting from transactions in foreign currencies and adjustments of foreign-currency items as at the balance sheet date are recognized in the income statement. Financial statements of subsidiaries in foreign currencies The assets and liabilities of subsidiaries whose financial statements are prepared in currencies other than the euro are converted for consolidation purposes as follows: Assets and liabilities are translated on the balance sheet date at the exchange rate prevailing on that date. Revenues and expenses as well as cash flows are translated at the average exchange rate. Equity is translated at historical rates. All resulting translation differences are shown separately under equity (translation differences). If a subsidiary is sold, its cumulative translation differences are included in the income statement as part of the gain or loss arising from the sale. Foreign currency impacts on long-term intra-group loans with equity characteristics are recognized in equity. Derivative financial instruments and hedging transactions The Group uses derivative financial instruments exclusively to hedge its exposure to foreign-exchange and interest-rate risks arising from operational, financing and investment activities. Derivative financial instruments for the hedging of assets and liabilities are measured initially and also subsequently in accordance with the same valuation principle as the hedged item. This means that if the hedged item is measured at fair value, the derivative financial instrument is also measured at fair value. If the lower of cost or market value is applied to the hedged item, a loss in value on the derivative financial instrument does not need to be recognized if, based on the application of the lower of cost or market value, no increase in value is possible on the hedged item. The changes in value of the derivative financial instrument are recognized in the income statement, i. e. in the same way as the hedged item. The gain/loss on the derivative is neutralized by the loss/gain on the hedged item. A derivative is derecognized as soon as the end of the term has been reached or as soon as there is no further claim to future payments following disposal or default by the counterparty. At derecognition, the difference between the carrying amount and the consideration received or given is recognized in the income statement.

56 Notes to the consolidated financial statements Property, plant and equipment Owned assets Items of property, plant and equipment are stated at acquisition or construction cost less accumulated depreciation and impairment losses. The acquisition and construction cost includes all expenses directly attributable to the acquisition and necessary to bring the asset to working condition for its intended use. Interest expenses during the construction phase of property, plant and equipment are not capitalized. Leased assets Leasing agreements under which the Group company essentially assumes all the risks and rewards associated with the acquisition are treated as finance leases. These assets are stated at an amount equal to the lower of cost of acquisition/net fair value or present value of the future lease payments at the start of the agreement, less the accumulated depreciation and impairment loss. Obligations arising from finance leasing are recognized as liabilities. Maintenance and renovation costs Major renovation or modernization work, as well as expenses that significantly in-crease fair value or value in use, and expenditure that extends the estimated useful life of property, plant and equipment, are capitalized. Repairs and maintenance costs are recognized directly under operating expenses. Depreciation Depreciation is charged to the income statement on a straight-line basis over the following estimated useful lives: Buildings Machinery and production tools Equipment and vehicles Information technology (hardware) 25 to 50 years 4 to 10 years 6 to 12 years 3 years Depreciation of an item of property, plant or equipment begins when actual operational use commences. Property, plant and equipment under construction is not depreciated, but is regularly assessed for any indication of a need to apply impairment charges. Depreciation expenses are included in Cost of goods sold and services provided, Marketing and sales expenses, Administrative expenses and Development expenses. The residual value and the useful economic life of the property, plant and equipment are reviewed annually and adjusted where necessary. Gains and losses arising from the sale of property, plant and equipment are recognized in the income statement.

57 Intangible assets Goodwill Goodwill, the difference between the cost of acquisitions and the fair value of the net assets acquired, results from the purchase of subsidiaries. Any goodwill that arises is offset against equity (retained earnings) at the time of acquisition. In case of the disposal of a subsidiary, acquired goodwill offset against equity at an earlier date is stated at original cost to determine the gain or loss recognized in the income statement. The effects of a theoretical capitalization of goodwill with scheduled amortization and any value adjustment impacting on the balance sheet and income statement over a useful life of five years are disclosed in the notes. Intangible assets from development activities Expenditure on development activities related to new technologies or know-how is recognized in the income statement in the period in which it is incurred. Capitalized development costs prior to conversion to FER in 2010 are amortized over the remaining useful life. Other intangible assets Other internally generated or acquired intangible assets are capitalized where they will generate measurable benefits for the Group over several years. Such intangible assets are stated at cost of production or acquisition less accumulated amortization and impairment loss. Subsequent costs Subsequent expenditure on existing intangible assets is capitalized only when it increases the future economic benefits of the assets concerned to at least the same extent. All other expenditure is expensed at the time incurred. Amortization Amortization of intangible assets is charged to the income statement on a straightline basis over their estimated useful lives. Amortization of intangible assets begins on the date they are available for use. The estimated useful lives applied are as follows: Capitalized development costs Licences and patents Trademark rights Capitalized software Other intangible assets 3 years 5 years 5 years 5 years 5 years Amortization is included in Cost of goods sold and services provided, Marketing and sales expenses, Administrative expenses and Development expenses. The residual value and the useful economic life of the intangible assets are reviewed annually and adjusted where necessary. Gains and losses arising from the sale of intangible assets are recognized in the income statement.

58 Notes to the consolidated financial statements Financial assets Financial assets are normally measured at acquisition cost less any impairments. Impairment of assets Property, plant and equipment and other non-current assets are tested as at each balance sheet date to determine whether any events or changes in circumstances have occurred that might indicate an impairment. Where such indications exist, an impairment test is conducted. If the carrying amount of the asset exceeds the recoverable amount, an impairment loss is recognized. The recoverable amount is the higher of the net selling price and value in use of the asset. The recoverable amount is normally determined for each asset. If the asset in question does not generate any separate cash flows, the smallest possible group of assets that generate separate cash flows is tested. Where the impairment exceeds the residual carrying amount, a provision amounting to the remaining difference is created. On each balance sheet date, impairments previously recorded are examined to establish whether the reasons that led to the impairment still apply to the same extent. If the reasons for an impairment no longer apply, the value will be reinstated up to a maximum of the carrying amount, as adjusted according to scheduled depreciation. The reverse booking is recognized in the income statement. Trade accounts receivable and other current assets Accounts receivable are stated at nominal value less any impairments. The value adjustment consists of individual allowances for specifically identified positions for which there are objective indications that the outstanding amount will not be received in full and of a collective allowance for positions that have been overdue for 180 days or longer. Inventories Inventories are stated at the lower of acquisition/production cost or fair value less costs to sell. Fair value less costs to sell is defined as the value of the sales proceeds less the remaining costs of production, sale and administration incurred until the time of sale. Inventories are valued on a weighted-average basis. The acquisition and production cost also includes the cost of purchase and transport of inventories. In the case of inventories manufactured by the Group, production costs also include an appropriate share of the overheads incurred. Discounts are treated as financial income. Adjustments are made for items lacking marketability and for slow-moving items. Construction contracts Provided contractual performance by the customer is highly probable and income and expenses arising from long-term construction contracts can be reliably estimated, the resulting revenues are reported using the percentage-of-completion method: the revenues and expenses are recognized in the income statement proportionally to the stage of completion. The stage of completion is determined using the cost-to-cost method, i. e. by calculating the ratio between the project costs incurred to date and the estimated overall costs of the project. Expected losses from construction contracts are immediately recognized in the income statement as at the date of detection.

59 Cash and cash equivalents Cash and cash equivalents comprise cash balances, postal and bank account balances and other liquid investments with a maximum total maturity of three months from the balance sheet date. Repurchase of treasury shares If the Group repurchases its own shares, the payments, including directly related costs, are deducted from equity. Any gains or losses arising from transactions with treasury shares are recognized in equity (capital reserves). Dividends Dividends are recognized as a liability in the period in which they are approved. Liabilities Liabilities are normally shown at their nominal value. Employee benefits Pension plans There are several employee pension plans within the Group, each of which complies with the legal requirements for the country in question. A majority of employees are insured against the risk of old age, death and disability, whether through a defined benefit or defined contribution plan. These plans are funded by contributions from employees and employers. Actual economic impacts of employee pension plans on the Group are calculated on the balance sheet date. The pension plan s financial position is relevant to the measurement of pension assets and pension liabilities. In the case of Swiss pension plans, the latest financial statements prepared in accordance with FER 26 Accounting of pension plans constitute the basis. An economic obligation is carried as a liability if the conditions for the recognition of a provision are met. An economic benefit is capitalized if it is used for the Group s future employee benefit expenses. Freely disposable employer contribution reserves are capitalized. The economic impacts of pension fund surpluses and deficits and the change in any employer contribution reserves are recognized in the income statement together with the amounts accrued over the same period. These same principles are applied in the case of foreign pension plans. Share-based payments Share-based payments are recognized at fair value at the grant date and, until such time as entitlement is asserted, are charged to the corresponding positions in the income statement as personnel expenses. Since these remunerations are settled with equity capital instruments, the counter-entry is recognized in equity.

60 Notes to the consolidated financial statements Provisions Provisions are made insofar as the Group has, or may have, an actual or possible obligation (legal or constructive) due to past events, insofar as it is probable that settlement of this obligation will lead to an outflow of resources, insofar as the extent of the obligation can be reliably estimated. If the time effect is significant, long-term provisions at the present value of probable future cash outflows will be created. Warranties The provision for warranty risks from the sale of products and services is based on information about warranties from earlier periods. Restructuring Restructuring costs are provided for in the period in which an official, detailed restructuring plan is available to the Group and is announced. No provision is made for future operating losses. Revenues from goods sold and services provided Net revenues include all revenues from products sold and services provided less items such as rebates, other agreed discounts and value-added tax. Early payer discounts are reported in the financial result. Revenue from the sale of goods is recognized when the risks and rewards of ownership have transferred to the buyer, which is most frequently after finalized installation or based on accepted international commercial terms, such as EXW, FOB or DDP. Provided that the conditions are met (see Construction contracts ), the revenues resulting from construction contracts are reported using the percentage-of-completion method. Revenues from services are recognized according to the stage of completion. No revenue is recognized if there is significant uncertainty regarding the collectability of the consideration due, associated costs or the possible return of goods. Operating lease payments Payments made under operating leases are recognized in the income statement on a straight-line basis over the term of the lease. Finance lease payments Lease payments are allocated between the financing costs and repayment of the principal. The financing costs are allocated to each period during the lease term to produce a constant rate of interest over the term of the liability. Funding Net financing costs comprise the interest expense on borrowings and finance leasing, interest earned on investments, income and expenses from discounts, gains and losses from foreign currency translation, as well as gains and losses from derivative financial instruments used for exchange rate hedging, all of which are recognized in the income statement. Interest income and expense as well as gains or losses from interest rate hedging are recognized in the income statement as they accrue.

61 Income tax Income tax comprises current and deferred tax. Income tax is recognized in the income statement unless it relates to items recognized in equity. Current tax is the expected tax payable on the taxable income for the year and any adjustment to tax payable related to previous years. Income tax is calculated using tax rates already in force or substantially enacted at the balance sheet date. Deferred tax is calculated using the balance sheet liability method on the basis of tax rates already in force or substantially enacted at the balance sheet date and is based on temporary differences between FER carrying amounts and the tax base. Deferred income tax assets and liabilities are netted only if they relate to the same taxable entity. Tax savings due to tax loss carryforwards on future taxable income are not recognized. Earnings per share Earnings per share are calculated by dividing the consolidated net result attributable to the shareholders of Kardex AG by the weighted average number of shares outstanding during the reporting period. The diluted earnings per share figure additionally includes the shares that might arise following the exercising of option rights.

62 Notes to the consolidated financial statements Notes to the consolidated financial statements 1. Segment reporting The Group is a globally active industry partner for intra-logistic solutions and a leading supplier of automated storage solutions and material handling systems. The Group consists of two entrepreneurially managed divisions, Kardex Remstar and Kardex Mlog. Kardex Remstar develops, produces and maintains shuttles and dynamic storage and retrieval systems and Kardex Mlog offers integrated materials handling systems and automated high-bay warehouses. The two divisions are partners for their customers over the entire life cycle of a product or solution. As at 31 July 2013, Kardex AG sold the Kardex Stow Division, which is presented separately as a discontinued operation hereafter. So that continuing operations can be compared in future, the gain of sale of the Kardex Stow Division of EUR 8.8 million, which arose in Kardex AG, is also presented separately. For further details refer to note 28. Segment reporting 2013/Income statement Operating segments EUR millions Kardex Remstar Kardex Mlog Kardex AG Zurich (Holding) Eliminations 1 Continued Kardex Group Discontinued Kardex Stow Kardex AG Zurich (Holding) Gain from divestment Eliminations 1 Kardex Group Net revenues, third party Europe, Middle East and Africa Asia/Pacific Americas Total net revenues, third party Net revenues, with other operating segments Net revenues Cost of goods sold and services provided Gross profit Gross profit margin 36.3% 15.8% 31.8% 18.0% 28.5% Marketing and sales expenses Administrative expenses Development expenses Other operating income Other operating expense Operating result (EBIT) EBIT margin 10.2% 1.8% 8.0% 4.9% 9.5% Depreciation and amortization EBITDA EBITDA margin 12.5% 2.7% 10.1% 7.0% 11.5% 1 Eliminations concern intra-group transactions.

63 Segment reporting 2012/Income statement Operating segments EUR millions Kardex Remstar Kardex Mlog Kardex AG Zurich (Holding) Eliminations 1 Continued Kardex Group Discontinued Kardex Stow Eliminations 1 Kardex Group Net revenues, third party Europe, Middle East and Africa Asia/Pacific Americas Total net revenues, third party Net revenues, with other operating segments Net revenues Cost of goods sold and services provided Gross profit Gross profit margin 34.9% 7.4% 28.5% 16.8% 24.4% Marketing and sales expenses Administrative expenses Development expenses Other operating income Other operating expense Operating result (EBIT) EBIT margin 9.8% 4.2% 6.0% 5.0% 5.7% Depreciation, impairment and amortization EBITDA EBITDA margin 12.2% 3.4% 8.1% 7.0% 7.8% 1 Eliminations concern intra-group transactions.

64 Notes to the consolidated financial statements 2. Foreign currency translation The main exchange rates for currency translation are: Average rates Year-end rates in EUR CHF CNY GBP USD EUR millions Long-term construction contracts Revenues from construction contracts (POC) EUR millions Personnel expenses Salaries and wages Social security contributions Retirement and pension plan costs Other personnel expenses Total personnel expenses EUR millions Other operating income and expenses Gain of sale of the Kardex Stow Division Gains from non-current assets sold Scrap sales Completion of legal cases Other income Total other operating income Losses from non-current assets sold 0.1 Taxes other than income taxes Contribution to pension schemes Legal and other expenses Total other operating expenses Details for the disposal of the Kardex Stow Division, see note Restructuring expenses Restructuring expenses totaling EUR 1.5 million (EUR 3.3 million) were recognized in the income statement for the year under review. Thereof EUR 0.4 million (EUR 1.2 million) was included in Marketing and sales expenses, EUR 1.1 million (EUR 0.2 million) in Administrative expenses, none (EUR 0.7 million) in Development expenses and none (EUR 1.2 million) in Cost of goods sold and services provided.

65 EUR millions Financial result, net Interest income Exchange gains (net) 0.1 Other financial income Total financial income Interest expense Exchange losses (net) 0.4 Other financial expenses Total financial expenses Total financial result, net Including early payer discounts. 8. Income tax expense and tax losses carryforward 8.1 Income tax expense EUR millions Current income tax Deferred income tax Total income tax expense The low effective tax rate of 12.0% (12.7%) is largely attributable to the usage of tax losses carryforward. The expected average tax rate for the year under review is 21.7% (25.2%). The locally applicable expected average tax rate is applied for the deferred tax calculation per subsidiary. Deferred tax assets from tax losses carryforward are not capitalized. The tax losses carryforward expire as follows: 8.2 Tax losses carryforward EUR millions Tax losses carryforward by expiration Following year In 2 to 5 years After 5 years Total tax losses carryforward Remaining tax losses carryforward mainly relate to Germany and the US. On 31 December 2013, the non-capitalized tax effects on losses carryforward amounted to EUR 13.1 million (EUR 16.4 million).

66 Notes to the consolidated financial statements 9. Property, plant, equipment and intangible assets 9.1 Property, plant and equipment 2013 EUR millions Undeveloped properties Land and buildings Machinery and production tools Equipment and vehicles Information technology Plant under construction Total property, plant and equipment Acquisition cost, 1 January Disposal of the Kardex Stow Division Additions Disposals Other reclassifications December Accumulated depreciation and impairment, 1 January Disposal of the Kardex Stow Division Additions depreciation Disposals depreciation Disposals impairment December Net carrying amount, 1 January Net carrying amount, 31 December Carrying amount of fixed assets held under finance leases, 1 January Carrying amount of fixed assets held under finance leases, 31 December The insurance value of property, plant and equipment amounts to EUR million. Depreciation of property, plant and equipment is included in the following items: EUR 5.3 million in Cost of goods sold and services provided, EUR 0.2 million in Marketing and sales expenses, EUR 0.1 million in Development expenses and EUR 1.0 million in Administrative expenses.

67 9.2 Property, plant and equipment 2012 EUR millions Undeveloped properties Land and buildings Machinery and production tools Equipment and vehicles Information technology Plant under construction Total property, plant and equipment Acquisition cost, 1 January Additions Disposals Other reclassifications Exchange rate differences December Accumulated depreciation and impairment, 1 January Additions depreciation Disposals depreciation Disposals impairment Other reclassifications Exchange rate differences December Net carrying amount, 1 January Net carrying amount, 31 December Carrying amount of fixed assets held under finance leases, 1 January Carrying amount of fixed assets held under finance leases, 31 December The insurance value of property, plant and equipment amounts to EUR million. Depreciation of property, plant and equipment is included in the following items: EUR 6.4 million in Cost of goods sold and services provided, EUR 0.2 million in Marketing and sales expenses, EUR 0.1 million in Development expenses and EUR 1.3 million in Administrative expenses.

68 Notes to the consolidated financial statements 9.3 Intangible assets in 2013 EUR millions Capitalized development costs Capitalized software Patents, licences and other intangible assets Total intangible assets Acquisition cost, 1 January Disposal of the Kardex Stow Division Additions Disposals Other reclassifications Exchange rate differences December Accumulated amortization and impairment, 1 January Disposal of the Kardex Stow Division Additions amortization Disposals amortization Other reclassifications December Net carrying amount, 1 January Net carrying amount, 31 December Amortization of intangible assets is included in the following items: EUR 0.1 million in Cost of goods sold and services provided and EUR 1.6 million in Administrative expenses.

69 9.4 Intangible assets in 2012 EUR millions Capitalized development costs Capitalized software Patents, licences and other intangible assets Total intangible assets Acquisition cost, 1 January Additions Disposals Other reclassifications Exchange rate differences December Accumulated amortization and impairment, 1 January Additions amortization Disposals amortization December Net carrying amount, 1 January Net carrying amount, 31 December Amortization of intangible assets is included in the following items: EUR 0.4 million in Cost of goods sold and services provided and EUR 1.7 million in Administrative expenses.

70 Notes to the consolidated financial statements 10. Treatment of goodwill Goodwill is offset against retained earnings at the time of acquisition. The resulting impact on equity and the net result, taking into account a goodwill amortization period of five years, are documented below. Effects of a theoretical amortization of goodwill on the balance sheet and income statement: EUR millions Declared result for the period Theoretical annual amortization of goodwill Theoretical exchange rate differences Theoretical result for the period Acquisition value of goodwill, 1 January Disposal of the Kardex Stow Division 23.1 Increase of purchase price Mlog Logistics GmbH 0.2 Reduction of purchase price Mlog Logistics GmbH 0.5 Exchange rate differences Acquisition value of goodwill, 31 December Theoretical accumulated amortization, 1 January Theoretical annual amortization of goodwill Disposal of the Kardex Stow Division 23.1 Theoretical exchange rate differences Theoretical accumulated amortization, 31 December Theoretical net book value goodwill, 31 December Declared equity, 31 December Theoretical effect of recognition of goodwill, 1 January Theoretical effect of recognition of goodwill in reporting period Theoretical equity, 31 December In connection with the sale of the Kardex Stow Division (refer to note 28), goodwill of EUR 23.1 million, which was previously offset against equity, was recycled in the calculation of the related gain and recognized in the statement of changes in equity accordingly. EUR millions Financial assets Investments Pension assets Other financial assets Deferred tax assets Total financial assets

71 EUR millions Inventories and work in process Raw materials, supplies and other consumables Finished goods Spare parts Work in progress Allowances Advance payments by customers Advance payments to suppliers Total inventories and work in progress EUR millions Trade accounts receivable Trade accounts receivable Construction contracts with amounts due from customers (underfinanced) Allowances for doubtful accounts Total trade accounts receivable Trade accounts receivable are distributed over a widely scattered customer base. Management does not expect any further material losses on receivables. Allowances on trade accounts receivable are made mainly on a case-by-case basis; a collective allowance for positions that have been overdue for 180 days and longer is also made. EUR millions Other receivables Income tax receivables VAT, withholding and other refundable tax Guarantees 0.4 Advance payments Other receivables Total other receivables EUR millions Cash and cash equivalents Cash, postal and bank current accounts Time deposits Total cash and cash equivalents Of cash and cash equivalents, EUR 0.5 million (EUR 1.9 million) is currently held in countries with specific formalities and request procedures for transfers abroad. By complying with these requirements, the Group has these funds at its disposal.

72 Notes to the consolidated financial statements 16. Share capital Nominal value per share (CHF) Number of shares Share capital in EUR millions Number of treasury shares Treasury shares in EUR millions January Additions Disposals December Kardex AG s share capital is denominated in EUR. When Kardex AG s functional currency was changed from CHF to EUR, the share capital was converted historically; therefore, there are no currency translation effects on the share capital. As at 31 December 2013, there were ( ) fully paid up registered shares with a nominal value of CHF (CHF 11.00) outstanding. The capital reserves comprise premiums as well as gains/losses from transactions with treasury shares. In the period under review as well as in the previous period, the Executive Committee drew no shares from the Company s holdings of treasury shares. In the period under review, the Board of Directors, as part of their compensation for the 2013 financial year, drew (9 599) shares from the Company s holdings of treasury shares. As at 31 December 2013, Kardex AG held no treasury shares (21 500) Earnings per share Number of outstanding shares at the beginning of the financial year Purchases of treasury shares Disposals of treasury shares Number of outstanding shares at the end of the financial year Weighted average number of outstanding shares Net result Group (EUR) Basic earnings per share (EUR) Diluted earnings per share (EUR)¹ No dilutive effect occurred in 2013 and 2012, the diluted result per share is the same as the basic result per share (net result/average number of outstanding shares). 18. Financial liabilities Non-current financial liabilities EUR millions Banks Finance lease liabilities 0.6 Total non-current financial liabilities

73 Non-current financial liabilities with banks by due date EUR millions to 5 years Over 5 years 1.2 Total non-current liabilities with banks by due date Current financial liabilities EUR millions Current bank loans 5.5 Current portion of finance lease liabilities 0.4 Current portion of non-current financial liabilities 0.5 Total current financial liabilities 6.4 On 17 August 2011, Kardex AG took out a syndicated loan in the total amount of EUR 50 million, arranged by UBS AG (42.86%), Credit Suisse AG (35.71%) and Zürcher Kantonalbank (21.43%). This facility is divided into a credit line totaling EUR 20 million (tranche A), which has to be amortized, and a revolving, working capital credit line of EUR 30 million (tranche B). The credit line subject to amortization can be drawn in EUR and is subject to annual ordinary amortization of EUR 5.0 million payable on 30 April each year. Tranche A was fully repaid on 7 August 2013 and is no longer available to Kardex AG. Tranche B is for the financing of working capital and non-current operating assets and can be drawn in EUR and CHF or other freely convertible currencies acceptable to all lenders. Tranche B had not been utilized as at 31 December The interest margin to cover Company-specific risk was 1.25% as at 31 December 2013, which reflects the lowest in the agreed margin grid on the syndicated loan. Tranche B matures on 30 April The commitment fee for tranche B is 35% of the respective current interest margin for the calculation period, calculated on the average undrawn amount. Compliance with the covenants agreed with the banks must be confirmed quarterly. The covenants include key financial figures relating to the leverage factor and equity ratio. All covenants were complied with as at 31 December The market-dependent interest component of the syndicated loan depends on the development of the Euribor rate, on the one hand, and the chosen interest period, on the other; it is fixed for one to six whole months, depending on the choice of interest period. Under the syndicated loan the distributable amount for dividends, capital reductions or share buyback may not exceed 50% of the consolidated net profit of the Group. Financial liabilities at year-end in all currencies had an average interest rate of 1.84% (3.01%).

74 Notes to the consolidated financial statements 19. Employee benefits Current employee benefits EUR millions Employee claims in other current liabilities Employee claims in accruals Total employee claims Social security and pension plan liabilities Total employee claims and current pension liabilities Employee claims include bonuses, holiday and overtime. There was no liability towards pension institutions (EUR 0.2 million). EUR millions Total pension assets Provisions Pension liabilities relating to defined benefit plans Other non-current employee benefit obligations Total non-current provisions Current pension liabilities Other current employee benefit obligations Total current provisions Total provisions These items represent the Economic part of the Group in table Pension institutions. Employees and former employees receive different employee benefits and retirement pensions, which are determined in accordance with the legislative provisions in the countries concerned. All Swiss companies in the Group are members of collective foundations, which are not direct risk-takers. These pension plans are funded by contributions from both the employer and employee. The private pension plans in Switzerland are structured for the purpose of building up retirement assets to be converted into fixed retirement pensions and supplementary risk benefits. Some of the pension plans abroad are made into independent schemes. Measurement and recognition of these plans comply with FER 16. Pension institutions EUR millions Surplus/deficit Economic part of the Group Economic part of the Group Change to prior period or recognized in the result of the period, respectively Contributions concerning the business period Pension benefit expenses within personnel expenses 2013 Pension benefit expenses within personnel expenses 2012 Economic benefit/(economic obligation) and pension expenses Pension plans without surplus/deficit Pension plans with deficit Pension institutions without own assets Total

75 20. Provisions EUR millions Deferred tax liabilities Legal disputes and contractual penalties Warranties Retirement and other employee benefit obligations Restructuring Others 2013 Total 2012 Total 1 January Disposal of the Kardex Stow Division Additions Utilization Reversal Reclassifications December Non-current provisions Current provisions Deferred tax liabilities are shown net after offsetting them against deferred tax assets. Netting takes place at individual company level. The provisions for legal disputes and contractual penalties relate to ongoing proceedings and include provisions for contractual obligations. In the period under review provisions of EUR 1.9 million were used by the Kardex Mlog Division in order to cover losses and contractual penalties incurred in four projects. Provisions for disputes from the sale of an operating segment could be reversed. The provision for warranties covers the cost for guarantee claims. The actual amount is based on current sales and available data. Experience shows that the provisions will be used in the following one to two years. For employee benefit obligations, see note 19. Provisions for restructuring relate to measures for adjusting cost structures in Mlog Logistics GmbH and other subsidiaries. Provisions for restructuring include severance payments and are only recognized in the balance sheet once the restructuring decision has been announced. Normally the expenses fall due within one to two years. Additional details on the other provisions will not be given as these details may adversely affect the position of the Group in ongoing proceedings. EUR millions Other current liabilities VAT, withholding tax and other tax liabilities Construction contracts with amounts due to customers (overfinanced) Advances received (POC) 0.3 Social security and pension plan liabilities Employee claims Other current liabilities Total other current liabilities

76 Notes to the consolidated financial statements EUR millions Derivative financial instruments Currency derivatives (hedging) Contract volumes 0.5 No derivative financial instruments were outstanding as at the end of the period under review. In the previous year, currency derivatives (cash flow hedges) were used to hedge the Polish zloty and UK pound sterling. The currency contracts were recognized in the balance sheet at replacement (i. e. market) value. Any gains and losses accruing were recognized directly in the income statement. EUR millions Operating leases Expense for operating leases for the year Future minimum payments for non-cancellable lease agreements: Up to 1 year to 5 years Over 5 years Total future minimum payments for operating leases Operating leases apply mainly to vehicles and rents on buildings. Leasing contracts are agreed at current market conditions. 24. Contingent liabilities The Group is currently involved in various litigations arising in the course of business. The Group does not anticipate that the outcome of these proceedings, either individually or in total, will have a material effect on its financial or income situation. The total amount of guarantees in favor of third parties was EUR 30.6 million as at 31 December 2013 (EUR 43.7 million). EUR millions Assets pledged or of restricted disposability Property, plant and equipment Cash and cash equivalents Total assets pledged or of restricted disposability Related parties Related parties (natural persons or legal entities) are defined as any party directly or indirectly able to exercise significant influence over the organization as it makes financial or operational decisions. Organizations that are in turn directly or indirectly controlled by the same related parties are also deemed to be related parties. With the exception of the pension plans (see note 19), there were no outstanding receivables from or liabilities towards these parties. No transactions were carried out with related parties during the year under review or the previous year. Disclosures of compensation and shareholdings in accordance with the Swiss Code of Obligations may be found in the notes to the financial statements of Kardex AG.

77 27. Acquisition of subsidiaries No acquisition took place during the period under review. In the previous year, the purchase price for the acquisition of Mlog Logistics GmbH, Neuenstadt (Germany), which occurred in 2010, was reduced by EUR 0.5 million due to tax claims compensated by the sellers. In the year under review, the appeal against the tax assessment was admitted, the tax claim was reduced and EUR 0.2 million of the compensation payment was reimbursed to the sellers. This amount is reported as an acquisition of companies. 28. Disposals of subsidiaries The Kardex Stow Division was sold by Kardex AG to the French-based Averys Group. As at 31 July 2013, the date on which all the necessary approvals were received from the competition authorities, all pre-closing conditions were fulfilled and the closing agreement between Kardex AG and Averys was signed. Since this date, Stow International nv, Spiere-Helkijn (Belgium) and its subsidiaries have not been part of the Kardex Group anymore. The balance sheet of the Kardex Stow Division as at 31 July 2013 and the resulting gain from the sale were as follows: EUR millions Property, plant and equipment 24.8 Intangible assets 1.3 Financial assets 0.2 Non-current assets 26.3 Inventories and work in progress 11.9 Trade accounts receivable 33.7 Other receivables 3.2 Prepaid expenses 1.9 Cash and cash equivalents 3.6 Current assets 54.3 Assets 80.6 Share capital 11.4 Capital reserves 1.0 Retained earnings incl. translation differences 23.2 Equity 35.6 Non-current financial liabilities 2.7 Non-current provisions 1.2 Non-current liabilities 3.9 Trade accounts payable 29.2 Current financial liabilities 0.7 Accruals 1.5 Other current liabilities 9.7 Current liabilities 41.1 Equity and liabilities 80.6 Equity 35.6 Goodwill (recycled) 23.1 Net assets 58.7 Sales price after transaction costs 67.5 Gain of sale of the Kardex Stow Division 8.8

78 Notes to the consolidated financial statements The Kardex Stow Division realized net revenues of EUR 98.0 million in the reporting period (EUR million). This divestment affects mainly the geographical markets Europe, Middle East and Africa, while Asia Pacific and Americas will only experience a minor effect. The operating result (EBIT) of the Kardex Stow Division amounted to EUR 4.8 million in the reporting period (EUR 9.1 million). The Kardex Stow Division held subsidiaries in Austria, Belgium, China, Czech Republic, France, Germany, the Netherlands, Poland, Slovakia and in the United Kingdom. The local entities of the remaining divisions Kardex Remstar and Kardex Mlog are not affected or influenced by this divestment. The cash flow statement of the Kardex Stow Division as at 31 July 2013 was as follows: EUR millions Jan. to July 2013 Net cash flow from operating activities 1.0 Net cash flow from investing activities 1.9 Net cash flow from financing activities 1.9 Net change in cash and cash equivalents 2.8 Additionally Kardex Slovensko s.r.o, Bratislava (Slovakia) was liquidated and Kardex Megamat Beteiligungs GmbH, Neuburg/Kammel (Germany) was merged with Kardex Produktion Deutschland GmbH, Neuburg/Kammel (Germany) during the period under review.

79 29. Subsidiaries Country Finance, property, services Development, production Distribution, service Company, domicile Division Headcount Currency Share capital in local currency Percentage holding Held by: AT * Kardex Austria GmbH, Vienna AUS * * Kardex VCA Pty Ltd, Wodonga BE * S.A. Kardex nv, Forest/Brussels CH * Kardex Systems AG, Volketswil * KRM Service AG, Zurich CN * Kardex Logistic System (Beijing) Co. Ltd., Beijing CY * Kardex Systems Ltd., Limassol CZ * Kardex s.r.o., Prague DE * * Kardex Produktion Deutschland GmbH, Neuburg/Kammel * * Kardex Software GmbH, Wörth a. Rh. * Kardex Germany GmbH, Bellheim/Pfalz * * Kardex Deutschland GmbH, Neuburg/Kammel * * * Mlog Logistics GmbH, Neuenstadt am Kocher ES * Kardex Sistemas S.A., San Fernando de Henares, Madrid FI * Kardex Finland OY, Jyväskylä FR * Kardex France SASU, Neuilly-Plaisance Cedex HU * Kardex Hungaria Kft., Budaörs IE * Kardex Systems Ireland Ltd., Dublin IN * Kardex India Storage Solutions Private Ltd., Bangalore IT * Kardex Italia S.p.A., Opera (Mi) Kardex Remstar 20 EUR Kardex Remstar 15 AUD Kardex Remstar 17 EUR Kardex Remstar 42 CHF Kardex Remstar 15 CHF Kardex Remstar 38 EUR Kardex Remstar 12 EUR Kardex Remstar 24 CZK Kardex Remstar 399 EUR Kardex Remstar 33 EUR Kardex Remstar 37 EUR Kardex Remstar 136 EUR Kardex Mlog 238 EUR Kardex Remstar 22 EUR Kardex Remstar 16 EUR Kardex Remstar 71 EUR Kardex Remstar 10 HUF Kardex Remstar 3 EUR Kardex Remstar 24 INR Kardex Remstar 32 EUR Kardex AG, Zurich, CH 2 Kardex Produktion Deutschland GmbH, Neuburg/Kammel, DE 3 Kardex Deutschland GmbH, Neuburg/Kammel, DE 4 Kardex Germany GmbH, Bellheim, DE 5 Kardex Production USA Inc., Westbrook (Maine), USA 6 KRM Service AG, Zurich, CH 7 Kardex Systems Ltd., Limassol, CY

80 Notes to the consolidated financial statements Country Finance, property, services Development, production Distribution, service Company, domicile Division Headcount Currency Share capital in local currency Percentage holding Held by: MY * Kardex Malaysia Sdn Bhd, Kuala Lumpur NL * Kardex Systems bv, Woerden NO * Kardex Norge AS, Skedsmokorset PL * Kardex Polska Sp.z.o.o., Warsaw RU * OOO Kardex Moscow SE * Kardex Sverige AB, Bromma SG * Kardex Far East Private Ltd., Singapore TR * Kardex Turkey Depolama Sistemleri Ltd. Sti., Istanbul UK * Kardex Systems (UK) Ltd., Hertford US * Kardex Remstar LLC, Westbrook (Maine) * * Kardex Production USA Inc., Westbrook (Maine) Kardex Remstar 3 MYR Kardex Remstar 33 EUR Kardex Remstar 18 NOK Kardex Remstar 6 PLN Kardex Holding RUB Kardex Remstar 26 SEK Kardex Remstar 5 SGD Kardex Remstar 10 TRY Kardex Remstar 61 GBP Kardex Remstar 56 USD Kardex Remstar 6 USD Kardex AG, Zurich, CH 2 Kardex Produktion Deutschland GmbH, Neuburg/Kammel, DE 3 Kardex Deutschland GmbH, Neuburg/Kammel, DE 4 Kardex Germany GmbH, Bellheim, DE 5 Kardex Production USA Inc., Westbrook (Maine), USA 6 KRM Service AG, Zurich, CH 7 Kardex Systems Ltd., Limassol, CY

81 30. Risk management As part of its duty to supervise the Company, the Board of Directors performs a systematic risk assessment at least once a year. The risk assessment was based on a company-specific risk universe and on information obtained from interviews with division and Group management. Risks were recorded according to their likelihood, reputational risk and potential financial impact. This process is supported by a risk matrix that describes and values the substantial risks valid for the Group according to the following categories: external environment, strategy, management and leadership, production, market and sales, information technology and finance and compliance. Measures in order to cope with these risks are also contained in the risk matrix. The Board of Directors noted the report of the Executive Committee on Group-wide risk management at the meeting on 10 December 2013 and approved the measures contained therein. 31. Release for publication and approval of the financial statements The Board of Directors approved these financial statements on 12 March 2014 and released them for publication. They must also be approved by the Shareholders General Meeting. 32. Events after the balance sheet date No events took place between 31 December 2013 and 12 March 2014 that would require an adjustment to the book value of Kardex AG s assets, liabilities or equity. In February 2014 Kardex AG terminated the syndicated committed loan of EUR 30 million and concluded bilateral uncommitted credit lines in the same amount. Besides this, there were no other events that are subject to disclosure here.

82 Report of the statutory auditor on the consolidated financial statements Report of the statutory auditor on the consolidated financial statements Report of the Statutory Auditor to the General Meeting of Shareholders of Kardex AG, Zurich Report of the Statutory Auditor on the Consolidated Financial Statements As statutory auditor, we have audited the accompanying consolidated financial statements of Kardex AG, presented on pages 46 to 77, which comprise the income statement, balance sheet, cash flow statement, statement of changes in equity and notes for the year ended 31 December Board of Directors responsibility The board of directors is responsible for the preparation of the consolidated financial statements in accordance with Swiss GAAP FER and the requirements of Swiss law. This responsibility include s designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The board of directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

83 Opinion In our opinion, the consolidated financial statements for the year ended 31 December 2013 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with Swiss GAAP FER and comply with Swiss law. Report on other legal requirements We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. KPMG AG Thomas Schmid Licensed Audit Expert Auditor in Charge Roman Wenk Licensed Audit Expert Zurich, 12 March 2014

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85 Financial reporting Kardex AG (Holding) 82 Income statement of Kardex AG 83 Balance sheet of Kardex AG 84 Notes to the financial statemens of Kardex AG 92 Report of the statutory auditor on the financial statements

86 Financial reporting Kardex AG Income statement of Kardex AG CHF millions Notes Income from investments Licensing income Financial income Other income Release of impairment on investments and loans to Group companies 6, Total income Administrative expenses Licensing expenses Trademark amortization 0.1 Financial expenses Income tax 0.1 Total expenses Result for the period

87 Balance sheet of Kardex AG CHF millions Notes Property, plant and equipment Loans to Group companies Investments Non-current assets Receivables from Group companies Other short-term receivables 0.1 Prepaid expenses Securities Cash and cash equivalents Current assets Assets Share capital General (legal) reserves Capital contribution reserve Reserve for treasury shares Unrestricted reserve Retained deficit and release of reserves for treasury shares Result for the period Equity Non-current financial liabilities 12.1 Non-current financial liabilities 12.1 Payables to Group companies Other short-term payables Accrued expenses Provisions Current portion of non-current financial liabilities 6.0 Current liabilities Liabilities Equity and liabilities

88 Notes to the financial statements of Kardex AG Notes to the financial statements of Kardex AG 1. Accounting principles The financial statements of Kardex AG comply with the requirements of the Swiss Code of Obligations. The euro is Kardex AG s functional currency and the presentation currency of the Group because the Group s cash flows and transactions are denominated mainly in euros. The accounts of Kardex AG are presented in millions of Swiss francs. As at 31 December, the annual financial statements are translated into Swiss francs as follows: Assets and liabilities (including shareholdings and loans to Group companies) are translated at closing rates. The income statement and movements in equity capital are translated at average year-end rates. Equity capital is translated at historic rates. Translation differences are recognized as income in accordance with the imparity principle (provisioning of unrealized gains). CHF millions Administrative expenses Personnel expenses Other expenses Total administrative expenses Financial expenses and income Financial income decreased due to the lower amount of outstanding loans to Group companies and the lower rate of interest charged on these loans. Financial expenses decreased because financial debts were repaid in full during the reporting period and due to the low interest-rates. 4. Fire insurance for property, plant and equipment The fire insurance value of property, plant and equipment of Kardex AG amounts to CHF 0.6 million (CHF 0.6 million). 5. Investments Investments are made up entirely of shareholdings of Kardex AG in subsidiaries which are listed on pages 75 and 76 of this report. Kardex AG held no minority interest as at 31 December During the reporting period Kardex AG sold the Kardex Stow Division. This divestment resulted in a gain of CHF 35.1 million which is reported under other income.

89 6. Loans to Group companies Provision for impairment of loans to subsidiaries were reduced by CHF 5.8 million (CHF 3.0 million). Due to consistently good results and the recovery of the equity of most subsidiaries, CHF 21.2 million (CHF 0) of the provisions for impairment of investments in subsidiaries was released. 7. Securities Securities are made up entirely of equity shares. Kardex AG held no equity shares at 31 December 2013; therefore it was possible to release the reserve for treasury shares. Treasury shares underwent the following movements: Number Price per share in CHF Total CHF December Disposals Valuation adjustments December Disposals Valuation adjustments December Purchases Disposals Valuation adjustments December Purchases Disposals Valuation adjustments December Liabilities towards pension funds Kardex AG had no liabilities towards pension funds as at 31 December 2013 (CHF 0). 9. Release of hidden reserves During the period under review CHF 21.7 million of hidden reserves relating to value adjusted shareholdings was released (CHF 0).

90 Notes to the financial statements of Kardex AG 10. Significant shareholders as defined by Art. 663c of the Swiss Code of Obligations The following shareholders owned more than 3% of the share capital of CHF 85.0 million as at 31 December: Buru Holding and Philipp Buhofer 22.9% 22.6% LB (Swiss) Investment AG 3.0% 4.4% CHF millions Operating leases Expense for operating leases for the year Future minimum payments for non-cancellable lease agreements: Up to 1 year to 5 years Total future minimum payments for operating leases Operating leases apply mainly to vehicles and rents on buildings. Leasing contracts are agreed at current market conditions. 12. Securing of liabilities In view of the group taxation principle, all Swiss companies bear unlimited joint and several liability for value-added tax (in accordance with Art. 15, 1c of Swiss VAT legislation). Kardex AG has joint responsibility for all liabilities arising from the cash-pooling agreement. CHF millions Contingent liabilities Contingent liabilities in favour of subsidiaries and third parties Subordinated loans to subsidiaries Risk management As the ultimate parent company of the Group, Kardex AG is fully involved in the Group-wide risk management process. As part of its duty to supervise the Company, the Board of Directors performs a systematic risk assessment at least once in a year. The Board of Directors noted the report of the Executive Committee on the Group-wide risk management at the meeting on 10 December 2013 and approved the measures contained therein. 15. Events after the balance sheet date No events took place between 31 December 2013 and 12 March 2014 that would require an adjustment to the book value of Kardex AG s assets, liabilities or equity. In February 2014, Kardex AG terminated the syndicated committed loan of EUR 30 million and concluded bilateral uncommitted credit lines in the same amount. Besides this, there were no other events that are subject to disclosure here.

91 16. Compensations and shareholdings 16.1 Compensations Board of Directors 2013 CHF Board of Directors total Philipp Buhofer Chairman Walter T. Vogel Jakob Bleiker Ulrich Jakob Looser Felix Thöni Cash payments Payments in shares with retention period 2, 3 Value Units Payments for the work in the Executive Committee: 1 Fixed component Variable component Total Employer contributions to state social insurance schemes (AHV, ALV etc.) are included. 2 Valuation of the shares is based on the average share price for the month preceding the date of distribution which was CHF per share (CHF 16.05/share). As all shares distributed to members of the Board of Directors are subject to a three-year vesting period, they are dispensed at 16% (16%) below the relevant average share price. 3 The fixed minimum portion of the director s fee drawn in shares is 20% (20%). 4 The variable component was fully drawn in shares ( units). Board of Directors 2012 CHF Board of Directors total Philipp Buhofer Chairman Walter T. Vogel Jakob Bleiker 1 Ulrich Jakob Looser 1 Felix Thöni Leo Steiner 2 Martin Wipfli 2 Cash payments Payments in shares with retention period 4, 5 Value Units Payments for the work in the Executive Committee: 3 Fixed component Variable component Total Since Annual General Meeting Until Annual General Meeting Employer contributions to state social insurance schemes (AHV, ALV etc.) are included. 4 Valuation of the shares is based on the average share price for the month preceding the date of distribution which was CHF per share (CHF 13.82/share). As all shares distributed to members of the Board of Directors are subject to a three-year vesting period, they are dispensed at 16% (16%) below the relevant average share price. 5 The fixed minimum portion of the director s fee drawn in shares is 20% (20%). No severance payments, credits or other emoluments of any kind were granted to members of the Board of Directors or related parties.

92 Notes to the financial statements of Kardex AG Executive Committee CHF Executive Committee total 1 Highest compensation Jos De Vuyst² Executive Committee total 1 Highest compensation Jens Fankhänel 3 Fixed component Variable component Payments in kind Occupational pension expenses Total Payments to executive members of the Board of Directors are included in the payments to the Board of Directors. In 2013 Jos De Vuyst, the former Head of Kardex Stow Division, as well as Gerhard Mahrle, the former CFO, retired. 2 Jos De Vuyst was heading the Kardex Stow Division. 3 Jens Fankhänel is heading the Kardex Remstar Division. 4 The Executive Committee receives compensation consisting of a fixed base salary plus a variable component. The members of the Executive Committee can draw the variable salary component in cash or up to 100% in shares. Valuation of the shares is based on the average share price for the month preceding the date of distribution. As all shares distributed to members of the Executive Committee are subject to a three-year vesting period, they are dispensed at 16% below the relevant average share price. 5 Vehicles. 6 Employer contributions to state social insurance schemes (AHV, ALV etc.) are included.

93 16.2 Shareholdings of members of the Board of Directors, the Executive Committee and related parties Related parties and companies comprise family members and individuals or companies that can exert a significant influence. All transactions with related parties and companies are conducted at arm s length. Other than compensation payments and ordinary contributions to the various pension plans for members of the Board of Directors and Executive Committee, no significant transactions with related parties and companies took place. Board of Directors Board of Directors Philipp Buhofer Ulrich Jakob Chairman 1 Walter T. Vogel Jakob Bleiker 2 Looser 2 Felix Thöni Shares held 31 Dec Shares held 31 Dec Including shares held by Buru Holding. 2 Since Annual General Meeting Executive Committee Executive Committee Jens Fankhänel Head of Kardex Remstar Division Hans-Jürgen Heitzer Head of Kardex Mlog Division Jos De Vuyst 1 Head of Kardex Stow Division Gerhard Mahrle 2 CFO Shares held 31 Dec n.a. n.a. Shares held 31 Dec Until 31 July Until 31 October Since 24 April 2012, the Executive Committee has been headed by the Executive Director Felix Thöni.

94 Proposal to the Annual General Meeting Proposal of the Board of Directors to the Annual General Meeting 1. Appropriation of retained earnings The Board of Directors will propose to the General Meeting that accumulated gains be carried forward as follows: CHF millions Balance brought forward 15.4 Release of reserves of treasury shares 0.6 Result for the period 81.6 Net result 66.8 Allocation to general reserves 17.0 Net result at the disposal of the General Meeting 49.8 Balance to be carried forward Distribution of dividends from the capital contribution reserve The Board of Directors will propose to the General Meeting that it distribute an ordinary dividend of CHF 1.25 per share on the share capital entitled to dividends, which will be funded by a withdrawal from capital contribution reserve. Furthermore, the Board of Directors will propose to the General Meeting that it distribute an extraordinary dividend of CHF 1.40 per share on the share capital entitled to dividends, which will be funded by a withdrawal from capital contribution reserve, this will represent the profit recorded in the consolidated income statement resulting from the sale of the Kardex Stow Division. The share capital entitled to dividends amounts to CHF ( shares). As at the end of the period, Kardex AG held no treasury shares. CHF millions Distribution of an ordinary dividend from the capital contribution reserve 9.7 Distribution of an extraordinary dividend from the capital contribution reserve 10.8

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96 Report of the statutory auditor on the financial statements Report of the statutory auditor on the financial statements Report of the Statutory Auditor to the General Meeting of Shareholders of Kardex AG, Zurich Report of the Statutory Auditor on the Financial Statements As statutory auditor, we have audited the accompanying financial statements of Kardex AG, presented on pages 82 to 89, which comprise the income statement, balance sheet and notes for the year ended 31 December Board of Directors responsibility The board of directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements for the year ended 31 December 2013 comply with Swiss law and the company s articles of incorporation.

97 Report on other legal requirements We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors. We further confirm that the proposed appropriation of retained earnings and the proposed distribution of dividends from capital contribution reserve comply with Swiss law and the company s articles of incorporation. We recommend that the financial statements submitted to you be approved. KPMG AG Thomas Schmid Licensed Audit Expert Auditor in Charge Roman Wenk Licensed Audit Expert Zurich, 12 March 2014

98 Group companies, addresses and contacts Group companies, addresses and contacts Europe Austria Kardex Austria GmbH Belgium S.A. Kardex nv Cyprus Kardex Systems Ltd. Puchgasse 1 AT-1220 Vienna Tel Fax info.remstar.at@kardex.com Contact: Susanne Seitz 155, rue Saint-Denis BE-1190 Forest/Brussels Tel Fax info.remstar.be@kardex.com Contact: Ruud Hoog Iris House 8th Floor, John Kennedy St. PO Box CY-3300 Limassol Tel Fax info.remstar.cy@kardex.com Contact: Demetris Kouloundis Czech Republic Kardex s.r.o. Petrská 1136/12 CZ Prague 1 Tel Fax info.remstar.cz@kardex.com Contact: Pavel Kraus Denmark Kardex Danmark AB, Filial of Kardex Sverige AB Kærvej 39 DK-5220 Odense SØ Tel Fax info.remstar.dk@kardex.com Finland Kardex Finland OY Piippukatu 11 FI Jyväskylä Tel Fax info.remstar.fi@kardex.com Contact: Jari Kaiho Contact: Ole Sverre Spigseth France Kardex France SASU ZA la Fontaine du Vaisseau 12, rue Edmond-Michelet FR Neuilly-Plaisance Cedex Tel Fax info.remstar.fr@kardex.com Contact: Ruud Hoog Germany Kardex Deutschland GmbH Megamat-Platz 1 DE Neuburg/Kammel Tel Fax info.remstar.de@kardex.com Contact: Manfred Schleicher Germany Kardex Produktion Deutschland GmbH Megamat-Platz 1 DE Neuburg/Kammel Tel Fax info.remstar.de@kardex.com Contact: Hartmut Conrad Germany Kardex Produktion Deutschland GmbH Germany Kardex Software GmbH Germany Mlog Logistics GmbH Kardex-Platz DE Bellheim/Pfalz Tel Fax info.remstar.de@kardex.com Contact: Hartmut Conrad Im Bruch 2 DE Wörth/Rhein Tel Fax info.remstar.de@kardex.com Contact: Jürgen Schnatterer Wilhelm-Maybach-Str. 2 DE Neuenstadt am Kocher Tel Fax info.mlog.de@kardex.com Contact: Hans-Jürgen Heitzer

99 Germany Mlog Logistics GmbH Am Hasselbruch 20 DE Bad Salzuflen Tel Fax info.mlog.de@kardex.com Contact: Guido Schanz Hungary Kardex Hungaria Kft. Szabadság út 117 HU-2040 Budaörs Tel Fax info.remstar.hu@kardex.com Contact: Gyula Konya Ireland Kardex Systems Ireland Ltd. The Enterprise Centre, Clondalkin Industrial Estate IE-Dublin 22 Tel Fax info.remstar.ie@kardex.com Contact: Mike Paull Italy Kardex Italia S.p.A. Via Staffora n. 6 IT Opera (Mi) Tel Fax info.remstar.it@kardex.com Contact: Alessandro Manfredini Netherlands Kardex Systemen bv Pompmolenlaan 1 NL-3447 GK Woerden Tel Fax info.remstar.nl@kardex.com Contact: Ruud Hoog Norway Kardex Norge AS Industrieveien 25 NO-2020 Skedsmokorset Tel Fax info.remstar.no@kardex.com Contact: Ole Sverre Spigseth Poland Kardex Polska Sp.z.o.o. Rzymowskiego 30 PL Warsaw Tel Fax info.remstar.pl@kardex.com Contact: Pavel Kraus Sweden Kardex Sverige AB Johannesfredsvägen 11A SE Bromma Tel Fax info.remstar.se@kardex.com Contact: Ole Sverre Spigseth Switzerland Kardex AG (Holding) Airgate, Thurgauerstrasse 40 CH-8050 Zurich Tel. +41 (0) Fax +41 (0) info@kardex.com Contact: Thomas Reist Switzerland KRM Service AG Airgate, Thurgauerstrasse 40 CH-8050 Zurich Tel. +41 (0) Fax +41 (0) info.remstar.ch@kardex.com Contact: Jens Fankhänel Switzerland Kardex Systems AG Chriesbaumstrasse 2 CH-8604 Volketswil Tel. +41 (0) Fax +41 (0) info.remstar.ch@kardex.com Contact: Manfred Schleicher Spain Kardex Sistemas S.A. Av. de Castilla 1, Planta 1a Oficina 5 ES San Fernando de Henares, Madrid Tel Fax info.remstar.es@kardex.com Contact: Daniel Lopez

100 Group companies, addresses and contacts Europe (continued) Turkey Kardex Turkey Depolama Sistemleri Ltd. Şti. 19 Mayıs Mah.Inonu Cd. Seylan İş Merkezi No:83 D:4 K:3 TR Kozyataǧı-Kadıköy Istanbul Tel Fax Contact: Emre Yenal UK Kardex Systems (UK) Ltd. North Suite, First Floor Stag House, Old London Road Hertford GB-Hertfordshire SG13 7LA Tel Fax Contact: Mike Paull America USA Kardex Remstar LLC 41 Eisenhower Drive US-Westbrook ME Tel Fax Contact: Christian Rueckerl USA Kardex Production USA Inc. 41 Eisenhower Drive US-Westbrook ME Tel Fax Contact: Patrick Mulligan Asia / Pacific China Kardex Logistic System (Beijing) Co. Ltd. Room 2118, Unit 1, Area A1 Zhao Wei Hua Deng Building 14 Jiu Xian Qiao Road, Chao Yang District, Beijing , P.R. China Tel Fax info.remstar.cn@kardex.com Contact: Jacky Li India Kardex India Storage Solutions Private Ltd. No. 1003/25, 2nd Floor 59 C Cross, 4th M Block Rajajinagar Bangalore , India Tel Fax info.remstar.in@kardex.com Contact: Balaji Srinivasan Malaysia Kardex Malaysia Sdn Bhd 27-8, Menara 1MK 1 Jalan Kiara, Mont Kiara Kuala Lumpur Malaysia Tel Fax info.remstar.my@kardex.com Contact: Karl desouza Singapore Kardex Malaysia Sdn Bhd Australia Kardex VCA Pty Ltd. 27-8, Menara 1MK 1 Jalan Kiara, Mont Kiara Kuala Lumpur Malaysia Tel Fax info.remstar.my@kardex.com Contact: Karl desouza 174 Victoria Cross Parade Wodonga, Victoria 3690 Australia Tel Fax info@kardex.com.au Contact: Julie Sage

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102 Products and solutions of the Kardex Group Kardex Tool Storage and Material Handling Shuttle XP Kardex Remstar Megamat RS Kardex Remstar Horizontal Kardex Remstar Kardex Warehousing and Small Parts Storage Megamat RS Kardex Remstar Shuttle XP Kardex Remstar Service Kardex Mlog and Kardex Remstar Conveyor Systems Kardex Mlog Miniload SR Machines Kardex Mlog

103 Kardex High Bay Storage and Conveyor Systems Greenfield Installation Kardex Mlog Pallets SR Machines Kardex Mlog Monorail Kardex Mlog Vertical Conveyor Kardex Mlog Conveyor Systems Kardex Mlog Miniload SR Machines Kardex Mlog Mobile Shelving Kardex Remstar Lektriever Kardex Remstar Times Two Kardex Remstar Kardex Office Solutions