Schweiter GB 02 englisch · unparalleled slump in investment in this industry – there have always...

Schweiter Technologies

Annual Report 2002

3

Contents

Board of Directors, Group Management, Auditors

Report of the Board of Directors

Key figures

Portfolio strategy

Group performance

Essentials of the consolidated income statement

Essentials of the consolidated balance sheet

SSM Textile Machinery

Satis Vacuum

Ismeca Automation

Ismeca Semiconductor

Consolidated financial statementsof the Schweiter Technologies Groupincluding the report of the Group auditors

Annual financial statements of Schweiter Technologies AGincluding the report of the statutory auditors

Corporate Governance at Schweiter Technologies

Addresses / Masthead

4

5

6

7

8

12

16

20

26

30

32

35 – 71

73 – 81

83 – 97

98 –100


4

Schweiter Technologies Group

Board of Directors, Group Management, Auditors

Board of Directors Term of office 2000 to 2003

Dr. Hans WidmerHeinrich FischerMarcel M. MeierDr. Jean-Pierre NardinRolf-D. Schoemezler

Group Beat SiegristManagement Dr. Heinz O. Baumgartner

Walter NadalinDr. Urs MeyerSerge PeguironBeat Siegrist

Auditors Deloitte & Touche AGZurich

Chairman

Chief Executive Officer GroupChief Financial Officer Group

Chief Executive Officer SSM Textile MachineryChief Executive Officer Satis VacuumChief Executive Officer Ismeca AutomationChief Executive Officer Ismeca Semiconductor

5

Dear shareholders

The Group has posted an operating profit ofCHF 6 million and a net loss (before goodwill amortization) of CHF 2 million on sales of CHF 322million. Net debt has been eliminated (net cash 6)and the equity ratio has been increased to 52%.

Sales once again reflect a roughly 30% con-traction in our business following last year's 14%decrease: Ismeca Automation (AUT -58%) ac-counted for half of the decline, while one third wasattributable to Ismeca Semiconductor (SEM -39%);by contrast, it was a reasonable year for SSM Textile Machinery (TEX -4%) and Satis Vacuum(VAC -4%). Thanks to an increase in the gross margin and a roughly 20% reduction in fixed over-heads an operating profit of CHF 6 million remaineddespite this contraction. At the same time, therewere also extraordinary burdens to absorb.

The adjustment of direct costs to sales and thereduction in structural costs led to regrettable butnecessary staff cuts involving the loss of 300 jobs(equivalent to a 27% reduction in staff).

While financial and tax expenses for the cur-rent year decreased, there were one-off increasesin burdens arising from value adjustments on inventories and structural adjustments. In addition,in the United States restructuring measures takenin previous years meant that capitalized tax lossescarried forward had to be dissolved with an impacton the income statement. All of this together de-pressed net earnings by around CHF 18 million.

The operating cash flow nonetheless reachedCHF 46 million. CHF 40 million was released by areduction in current assets, allowing interest-bear-ing liabilities to be reduced by more than CHF 30million. All in all, the result was a net cash positionof CHF 6 million compared with the previous year'snet debt of 15 million. The impairment test on theIsmeca holding led to an impairment loss which resulted in the amortization of virtually the entiregoodwill.

As a result, shareholders' equity decreased toCHF 114 million. Even so, thanks to the reductionin total assets, the equity ratio increased to 52%.

In particular, SSM Textile Machinery can thankstrong demand from Turkey and China for its goodyear (operating profit of CHF 20 million).

Satis Vacuum held its own in its original ophthalmics business and consciously decidedagainst moving into certain precision optics segments. The operating profit of the ophthalmicsbusiness was reduced to CHF 1 million as a resultof unprofitable precision optics projects and the drive to develop the new sputter technology-basedcoating technology.

Ismeca Automation suffered order cancella-tions in its core business and investment in medicaltechnology and electrical engineering was sluggish.This required drastic structural downsizing, whichwas reflected in the decrease in personnel from 260to 170.

Ismeca Semiconductor suffered from the unparalleled slump in investment in this industry –there have always been cycles, but never on the pre-sent scale. Personnel numbers have now fallen toless than half of their peak level at the end of 2000.

However, 2002 was a productive year in thesense that thoroughgoing efforts were made totackle key tasks. The missing ingredient, particularlyin the semiconductor sector, is the upturn. But evenif the emergence of the latter continues to be de-layed, the result should improve in 2003.

The Board of Directors would like to thank allemployees – particularly those who could not beoffered jobs – for their sterling achievements andwishes them every success in 2003.

Yours sincerely

Report of the Board of Directors


6


Key figures

Group

Orders receivedGross revenuesOperating performanceOperating profit before amortization of goodwilland restructuring expenses

Operating profit after amortization of goodwilland restructuring expenses

Net loss / income (after minority interests)

Development expensesInvestments in property, plant and equipment

Overall balance sheet total Shareholders' equity

Average headcountAverage gross revenues per employee

Stock market capitalization as at Dec. 31Loss/earnings per share before dilutionLoss/earnings per share after dilution

Holding company

Net loss / income

Share capital as at December 31– subdivided into bearer shares

with a par value of CHF 10 eachConditional share capital– for share option plan (exercise period:

April 2000 to March 2003)– for bonds or similar issuesAuthorized share capital

Proposal of the Board of DirectorsThat no dividend be paid for the 2002 business year

in CHF 1000s

in CHF 1000s

in CHF 1000s

in CHF 1000s

as % of operating performance

in CHF 1000s


in CHF 1000s


in CHF 1000s

in CHF 1000s

in CHF 1000s

in CHF 1000s

as % of assets

in CHF 1000s

in CHF 1000s

in CHF

in CHF

in CHF 1000s

in CHF 1000s

in CHF 1000s

in CHF 1000s

in CHF 1000s

in CHF 1000s

2002

260 100322 448

285 007

6 4822.3%

- 40 17814.1

- 48 665- 17.1%18 2153 601

220 228114 453

52.0%917352

115 494- 35.10- 35.10

2002

- 37 677

14 437

1 326

3261 0003 000

37

For additional details see notes to the consolidated financial statements.▲

2001

276 200448 285

423 312

18 3214.3%

- 96 71322.9

4 2271.0%

15 7523 699

360 939127 123

35.2%1 416

317

255 1734.203.70

2001

5 189

11 924

1 326

3261 0002 716

7


1. Schweiter Technologies is developing businessunits in the high-tech mechanical engineering sec-tor. The aim is to cover a maximum of customerneeds with a minimum of standardized and modu-larized components and machinery. This is the basis for quality, cost-effectiveness and reliable procurement. Ismeca Automation is also aiming inthis direction, even though the production runs ofidentical plants are small and their engineering content is considerable.

2. Each division is a global market leader in itschosen market segments – or at least has the potential to become one. Each is autonomous – including financially.

3. Each division pursues a soundly based strategywhich is subjected to annual adjustments. Its coreconsists of innovation (starting point for all successto date), an in-house global sales and service systemand exclusive concentration on critical value creation. Structures are light and communicationsdirect. Weaknesses are rapidly recognizable andfunding requirements are low. The net result shouldlargely be free cash flow.

4. The holding company is not interested in buy-ing and selling business units, but aims to developthem beyond the time-span of current players. Theaim of the acquisitions (there have been nine signi-ficant acquisitions since 1987) is to expand existingpositions. The present diversity of sectors gives theportfolio a welcome element of stability – althoughthis was not the intention. Divestments (three todate) are made where a division will have greaterdevelopment opportunities, and hence greater value, under a different owner. Or if it has no pro-spect of market leadership.

5. With just two positions, the holding companyhas very lean staffing levels: the CEO of the holdingcompany (currently also the CEO of Ismeca Semi-conductor) and the CFO of the holding company.There is a cross transfer of core know-how. Onemember of the Board of Directors concentrates onone division (with monthly performance reviews).

Acquisitions Share capital(in CHF 1000s)

1989 Establishment of SSM from Schärer, 8 100Schweiter and Mettler

1998 Satis Vacuum, Baar 8 8001999 Stähle Eltex, Reutlingen, Germany 8 800

Hacoba-Spultechnik, Wuppertal, Germany2000 Ismeca SA, La Chaux-de-Fonds 9 886

RTC Systems, London2001 - 11 9242002 - 14 437

Portfolio strategy

8


Group performance

2002 was a productive year for all four divisi-ons in terms of strengthening their operational position – not only despite the adverse market conditions, but perhaps in many cases because ofthose very conditions.

StrategyAll divisions deepened their strategic analyses

as bases for sustained value generation. In this con-text, it emerged that TEX has expanded its marketleadership in its six most important segments, thatVAC has a global market share (excluding Asia) of 55%, that AUT can build on a growing body ofsatisfied key customers in its three chosen segmentsand that SEM is well placed to occupy dominant positions in most of its market sectors.

InnovationMaintaining its customary annual rhythm, TEX

has again adopted an innovative market application.Machines that were brought up to new performancestandards (productivity) less than one year ago ac-counted for 95% of VAC's sales. The revolutionarysputter technology also passed the market test.AUT developed a new chassis. SEM made perma-nent changes to its backend technology productrange.

MarketingAll core customers have been retained and new

customers have even been added. Overall, the mar-ket presence has focused on sales and service. Withour own organizations in place in all major markets,our structural targets have been achieved. Sales peremployee are high at TEX (CHF 530 000 ) and VAC(CHF 490 000), but are still unsatisfactory at AUTand SEM because of the depressed state of the market. The gross margin improved at TEX andVAC and was held at AUT and SEM despite lowervolumes.

Supply chain managementTEX has largely outsourced previous in-house

production at the plants in Germany. VAC has madepreparations to have the new sputter machine mainly manufactured by outside contractors. AUTand SEM have standardized their entire range of

products and components and have had them outsourced. TEX illustrates the standard they areaiming for: the ratio of operating profit to resourcesemployed (accounts receivable, inventories, less accounts payable and customer downpayments)stands at 95%. The other three divisions have prob-ably made important progress, but still have someway to go before they can match the TEX standard.All divisions are already in a position to completecustomer orders within two to three months.

StructuresMinimization of structures is an ongoing pro-

gramme. TEX has pared back structures at its Ger-man plants in particular, in some cases integratingthem into the parent company. VAC has almostcompensated for the expansion in sputter techno-logy by streamlining its ophthalmics structures.AUT and SEM have undergone radical resizing processes.

ManagementDivision management (primarily at SEM, but

also at VAC) has been modernised and strength-ened, including in particular the introduction of management development programmes.

OutlookOn the operating side all divisions have thus

established a robust starting position for sound pro-fitability. 2003 will not be an easy year. Prices andsales will be depressed by fierce competition and ahesitant revival in some markets. Until mid-year,new orders and sales throughout the Group are only expected to be at the same level as the pre-vious year. However, with a motivated team – anda little luck – it may well be possible to deliver anconsiderable result in 2003.

9


TEX VAC SEMAUTOperating profitas % of operatingperformance(previous year)

(in CHF m)

Operating performance(previous year)

Operating profit(previous year)as % of operating performance(previous year)

Headcount (December 31)(previous year)

Operating performanceper employee(previous year)

Net assets(previous year)

RONA(previous year)


119(-3%)

20(12)17%

(10%)

212(-18%)

0.51(0.43)

21(36)

95%(33%)

Satis Vacuum

58(-22%)

1(-4)2%

(-5%)

144(2%)

0.41(0.49)

29(33)

3%(-11%)

Ismeca Automation

46(-60%)

-5(11)

-10%(9%)

171(-35%)

0.21(0.35)

17(29)

-28%(37%)

Total

285(-32%)

6(18)2%

(4%)

824(-24%)

0.30(0.32)

131(174)

5%(10%)


62(-43%)

-10(0)

-15%(0%)

297(-31%)

0.17(0.20)

64(76)

-15%(0%)

17%

(10%)

2%

(-5%)

-15%

(9%)

(0%)

-10%

12

Sales

Consolidated sales once again declined by almost exactly 30% compared with the previousyear. This trend was mainly attributable to IsmecaAutomation (-58%) and Ismeca Semiconductor (-39%).

2003 will still be difficult, particularly for AUTand SEM. TEX has got off to a good start. VACshould benefit from the assembly-line productionof the compact system.

Essentials of the consolidated income statement

CHF m

1999 2000 2001 20021998

0

Operating profit

The increase in the gross margin and the reduction in the structure of fixed overheads havehad a positive impact. However, overall the resultis still unsatisfactory, mainly because of the conti-nuing crisis in the semiconductor industry and cau-tious investment affecting AUT. The group resultwas also considerably depressed by one-off valueadjustments on inventories at SEM.

TEX

VAC

AUT*

SEM*


1999 2000 2001 20021998

CHF m

SEM*

AUT*

VAC

TEX

0

02

41

5

-10

16

23

17

20

12

44

5

-4

1

11

-9

-1

-5

4

293311

448

523

322

105

60

53

93

100

47

48

98

208

88

75

152

120

121

72

135

74

50

69

129

*Acquisitionin 2000

*Acquisitionin 2000


13

0

2000 2001 20021999

Annual result

At Ismeca, the dissolution of tax losses carriedforward in the United States which had been capi-talized in previous years reduced the consolidatedannual result by around CHF 6 million. This depre-ciation was made necessary by Ismeca's restruc-turing measures in the US (concentration on serviceand sales base).

An impairment test on the Ismeca holding ledto a value impairment of around CHF 47 million anda corresponding goodwill amortization. Thus, theextensive amortization of the total goodwill on theIsmeca holding will only have an insignificant impacton the annual profit in subsequent years.

Cons. operating profit

Price of bearer shares

The cyclical downturn at Ismeca put furtherpressure on its share price in 2002. At the end ofthe year, 1.44 million shares were outstanding. The most important shareholders are Dr. HansWidmer with a 25% holding and CREDIT SUISSEGroup with around 16%.

31.3.03

1295

200

CHF m

CHF

345

80162

1999 2000 2001 20021998

56.4

20.9 21.118.3

6.5

4.2 *34.916.619.2

46.7

-48.7

* including: amortization of goodwill 104.2extraordinary financial income 111.4

0

Minority inter. Financial resultTaxes

Amortization of goodwill

Annual loss


16

Essentials of the consolidated balance sheet

Assets

Cash and cash equivalents

Cash and cash equivalents increased thanks tothe operating cash flow and the reduction in net assets, but decreased as a result of the repaymentof interest-bearing liabilities and liabilities arisingfrom acquisitions amounting to over CHF 60 mil-lion. The net result was a decline of around CHF19 million in cash and cash equivalents, accompa-nied by a sustained high cash holding of CHF 48 mil-lion at the end of 2002.

Net Assets

Having already contracted significantly, net assets saw a further reduction of more than CHF40 million. The CHF 131 million in net assets con-sisted of trade receivables (56), inventories (61),property plant and equipment (34), trade liabilities(14) and payments on account received from cu-stomers (6). Capital tied up in property plant andequipment is minimal thanks to lean structures andsystematic outsourcing and consists primarily of Ismeca's building (head office and production sitein La Chaux-de-Fonds).

Goodwill

An impairment loss of CHF 47 million on theIsmeca holding led to a corresponding value ad-justment. Remaining goodwill totalled a modestCHF 6 million.

Liabilities

Liabilities arising from acquisitions

All liabilities arising from acquisitions were repaid during the course of the financial year. Financing was sourced from the operating cash flowand high liquid assets.

In addition, 251 275 new Schweiter shares were created from authorized capital at the begin-ning of 2002 with a view to acquiring the remaining22.7% stake in Ismeca (thereby raising the holdingto 100% as of then).

Interest-bearing liabilities

Even after drawing on surplus liquidity to scale back interest-bearing liabilities, a net cashsurplus of CHF 6 million was reported. A furtherreduction in interest-bearing liabilities is planned in2003.

Shareholders' equity

In absolute terms, shareholders' equity de-creased following the high annual loss in 2002 (Ismeca impairment loss), but in relative terms it increased because of the reduction in total assets.The ratio of shareholders' equity to total assets improved from 35% to 52%.

Overall, the Group reported a solid balancesheet at the end of 2002 with high cash holdings, anet cash surplus and a high equity ratio.

17


Assets Liabilities

2000 2001 2002 2002 2001 2000

Other 38

33

16

153

112

205

174

131

67

48

49

6

114127

94

42

74

105

45

86

196

113

36

52% 35% 16%

Goodwill

Cash

* Net Assets

Otherincl. minority interests

Liabilitiesfrom acquisition

Interest-bearingliabilities

Equityratio

* Net assets: Trade receivables + inventories + property, plant and equipment - trade liabilities - payments on account receivedfrom customers

Shareholding in Ismeca as at December 31

67% 77% 100% 100% 77% 67%

The division posted a good annual result. A 65% higher operating profit of CHF 20 million(previous year 12.1) was reported on sales of CHF129 million (previous year 135).

Schärer Schweiter Mettler (SSM)

At CHF 101 million, sales were 5% higher than the previous year and were accompanied byan even greater improvement in the operating profit. The sharp increase in the result was prima-rily attributable to improvements in margins and to the absence of the previous year's one-off valueadjustments.

Markets

The year got off to a sluggish start, but steadyhigh demand from the second quarter onward continued until the end of the year. Asia, and in particular China, emerged as the best market by far. Turkey also performed very well. In Europe, Italy,normally the strongest country in Europe, only showed average performance in line with othercountries. The United States and Central and SouthAmerica fared poorly for the second year in suc-cession.

Products

Systematic streamlining of the product port-folio within the three production locations (Hor-gen, Reutlingen and Wuppertal) made it possible to focus on core competencies and eliminate duplica-tion. The functions and quality of existing productswere extended thanks to targeted improvementsor expansions. New niches were developed withnew applications (e.g. winding aggregate in conjun-ction with an upstream process, “take-up”).

New software functions are enhancing the efficiency of existing machines, while graphics-capable machine terminals are making them easierto operate. The number of customer languages wasexpanded, including Chinese for the first time.

Organization

SSM (Horgen) assumed overall responsibilityfor sales and development within the Textile Machinery division. This served to increase thespeed and efficiency of project handling, as well asfacilitating the pooling of specialist resources fromthe three sites. The sales organization is benefitingfrom a streamlining of structures and a concertedmarket presence. and can now can serve more customers and countries.

The importance of the Asian market has beenacknowledged by strengthening the local sales or-ganization in Hong Kong. The Asian market is nowlooked after by a total of 12 locally based people.

Outlook

2003 got off to a successful start with a com-fortable backlog of orders. The broad, modern pro-duct range conveys a sense of confidence in futuredevelopments. Negative factors in the short terminclude the US dollar and the ITMA scheduled tobe held in Birmingham at the end of 2003 (the run-up to the latter normally being marked by a certainreluctance to invest).


20


21


SSM Stähle Eltex

At some CHF 13 million, sales were down byaround one third on the previous year. The de-pressed volume and one-off expenses for value adjustments and restructuring measures translatedinto a negative operating profit.

Demand for air jet texturing machines for pro-cessing filament fibres remained low during the yearunder review. The order intake was adversely affected by the poor performance of the key US market. New markets were developed, but onlypartly compensated for the sharp decline in the US.A major success was achieved with a reference cu-stomer in Turkey, where we held our own againstall competitors from around the world in an inten-sive and strict selection procedure. Our convincingmachine technology and the technical expertise ofour employees played equal parts in securing thisimportant contract.

On the product side, the rapid implementationand launch of a new big yarn machine (RM3-T) andthe patented aggregate for producing special effectyarns (Fancyflex) went at least some way towardcompensating for the weak state of the market. Developments worth highlighting on the organiza-tional front include the complete outsourcing ofparts production and a drastic reduction in assem-bly depth. Unfortunately, this also involved a reduc-tion in personnel numbers.

Mr Roland Rilling, founder and long-standingCEO of Stähle Eltex, retired at the end of the year,but will still retain ties with the company in a sup-porting function.

The growing need for high-quality and specialtextiles and the convincing machine concept (highspeed, texturing nozzle generation) augur well forSSM Stähle Eltex. However, the market is limited andair texturing will remain a niche segment even in thefuture.

Hacoba

Despite a 25% decline in sales to CHF 19 mil-lion, the figure was above budget. The decline is primarily due to streamlining of the product rangerather than to loss of market share. A positive ope-rating profit was reported despite further restruc-turing costs incurred during the year under review.

Focusing on the core competencies in the fields of sewing yarn and wire winding machines hasproved worthwhile. Despite aggressive Asian com-petition, the existing customer portfolio has beenretained and indeed in some cases even expanded.Hacoba benefited from SSM's strong sales networkin Asia.

One development which ran counter to thestreamlining of the product range was the intro-duction of two new machines for sewing yarn applications: ECO Thread, a reasonably priced, flexible machine and Thread-Prince, an automaticwinding machine developed specifically for theneeds of the Asian market. In the wire segment, the efficiency of the Hacoba winding machines canbe exploited to the full thanks to state-of-the-artuncoiling units. Our cooperation with the companyNiehoff, a renowned market leader in the field ofwire processing machinery, has enabled us to further expand our position in a depressed market.

The ongoing process of concentration and optimization is further lowering fixed overheads.We started from a solid base.

22


23

ManagementWalter Nadalin Chief Executive OfficerChristian Hotz Chief Financial OfficerMarc Schaad Head of R&DClaudio Zinetti Head of Supply

Head of Supply GroupPeter Herzog Head of ProductionPatrick Epp Head of Marketing / SalesPeter Fischer-

Fürwentsches Head of Hacoba SpultechnikWalter Nadalin Head of SSM Stähle EltexHorst Lüchinger Head of SSM Far East

Machine programme

SSMDoubling, dyeing, winding, singeing, air covering machines and elastane processing machinesHacobaFinal make-up of sewing yarns, wire winding machinesSSM Stähle EltexAir jet texturing machines

Sales markets Europe 51% (incl. Turkey and Middle East) Americas 9%Asia 40% (incl. India)

2000• Extraordinarily high demand everywhere • Expansion of product range 2001• Fall in demand• New products at Stähle Eltex • Correction of structural costs

– Extensive integration of Stähle Eltexand Hacoba into SSM

– Increased outsourcing2002• Increase in profitability • New product line for sewing yarn • Development and sales centralized


0

162 175 299 260 212Employees at year-end

Gross revenues

CHF m

1998 1999 2000 2001 2002

16 17

23

20

12

93

98

152

135129

Operating profit *

*Scale 10 times gross sales

26

Satis Vacuum has posted an operating profit ofCHF 1.2 million on sales of CHF 69 million (down4% on the previous year). This includes roughlyCHF 2 million for adjustments to deal with inheri-ted problems relating to precision optics projectsand extraordinary value adjustments of aroundCHF 2 million on inventories.

Market

The growth of the market for antireflectivespectacle coatings is roughly half what it was in 2001and now stands at around 3%. Within this figure,Germany has weakened considerably, while southern Europe and the US are still enjoying higher-than-average growth.

The uncertain economic climate and tighter financing conditions have prompted some custo-mers to postpone investments. This hit both neworders and sales in the second half of the year.

The strong position of Satis Vacuum in the important US market and the leading position of its products enabled it to hold its market share.

Product range

The successful launch of the MC 380 at the endof 2001 was followed in mid-2002 by the introduc-tion of the new 1200 FAST technology, with an ensuing increase in performance of more than 30%.The new products are successful, production of theprevious models has been discontinued and the pro-duct range can be streamlined.

Provisioning for spare parts has been in-creased in response to the rapid pace of innovationseen in recent years.

The new SP 100 / 200, a compact model basedon sputter technology, has proved itself in exten-sive customer tests. It is expected to make an important contribution to sales in 2003. Attractiveapplications outside ophthalmics are already emerging.

Organization and structures

Fixed overheads have been reduced by 25%compared with last year without any loss of jobs orreduction in marketing.

The team for the new sputter technology hasbeen strengthened on both the development andservice sides. This is intended to speed up the market launch and satisfy customer demand morequickly.

Outlook

The medium-term growth potential of the market for antireflective coating systems for spec-tacle lenses still stands at 6% to 8% p.a. This is anarea where sputter technology is set to gain in sig-nificance and promote the development of furthercustomer segments, including retail chains.

Well placed both in terms of products and market presence, Satis Vacuum is set to reinforceits position as a profitable market leader, particu-larly in the US. The strengthening of sputter tech-nology activities will be offset by savings in othersectors. Fixed overheads are increasing only negli-gibly.


Satis Vacuum

27

Satis Vacuum

ManagementDr. Urs Meyer Chief Executive OfficerBruno Fischer Chief Financial OfficerDr. Santo Caenazzo Head of R&D (until end 2002)

Hans-Peter Eigenmann Head of Marketing / SalesLino Barbieri Head of Technical ServicesFilippo Casazza Head of Satis Vacuum ItalyDr. Sabine Möller Head of SputteringWerner Kalb Head of ConsumablesLarry Clarke Head of Satis Vacuum USA

Machine programme

OphthalmicsSystems for pre-treatment, anti-reflective treatment and coating of spectacle lenses Precision optics Systems for manufacturing optical layers and coating optical components

Sales markets Europe 70%Americas 25%Asia 5%

2000• Acquisition of RTC (for entry into booming

DWDM market)• First success of own US company 2001• DWDM venture aborted• Structural costs too high in ophthalmics 2002• Venture adjusted • Structural costs reduced • Fall-off in demand (second half of year)• Innovations launched, sputtering has proved

itself in tests with customers

Operating profit *

Gross revenues

CHF m

1998 1999 2000 2001 2002


0

4

53

4

5

-4

1

48


7572 69

30

Difficult market conditions made it impossibleto achieve the targets set at the beginning of 2002.Sales decreased by more than half compared withthe record year in 2001. An important restructu-ring process had to be carried out and the finan-cial year ended with a negative operating profit ofnearly CHF 5 million.

Markets

The division's three strategic market areas experienced an appreciable decline owing to wide-spread caution on the capital investment front.

The medical sector remained comparativelydynamic. However, rising forecasts of demand forexisting products were often downgraded or can-celled and the release of funds for new productswas frequently postponed by 6 to 9 months or evenlonger.

The market for electrical connections under-went a minor revival and our main customers re-gained a book-to-bill ratio of more than one. Theircontinuing overcapacity will enable them to respondquickly enough even without new investment. Demand for Ismeca Automation's systems was therefore very low.

The market for inkjet cartridges is unstable.Although sales volumes held up overall, the productmix is difficult to predict as it depends on the suc-cess of new printers whose market acceptance isdifficult to forecast. Many projects have thereforebeen discontinued or postponed.

The order intake therefore remained unsatis-factory and came to just CHF 45 million in 2002.This accounts for only half of the budget, but stillrepresents a 22% increase compared with the pre-vious year.

Sales and income

Weak order books at the beginning of the year,a sluggish order intake and project cancellations orpostponements in the inkjet cartridges market leddirectly to a decline in sales to CHF 50 million, whichis 58% lower than the record figure in 2001.

The positive result turned in by the parent com-pany in La Chaux-de-Fonds contrasted with heavyrestructuring costs for Ismeca Automation USA.Overall this led to a negative operating profit of around CHF 5 million for the division as a whole.The result was further depressed by value impair-ments on goodwill amounting to CHF 21 million.

Organization

Structures at both production locations havebeen adapted, drastically so in the case of the Californian site, which now concentrates only onsales and service. This has involved reducing the size of the workforce from around 260 people to 170.

Outlook

The necessary structural adjustments shouldmake it possible to begin 2003 on a sound footing.However, for the time being business remains subdued, particularly in the medical sector. Nevertheless, the longer-term outlook for diabeticproducts and inhalers, for instance, are very good.

2003 can be expected to be another difficultyear. New orders will probably be below average in the first half of the year. Plans for the year as awhole envisage a small profit on the back of a year-on-year increase in sales.


Ismeca Automation

31

Ismeca Automation

ManagementSerge Peguiron Chief Executive OfficerPhilippe Maquelin Chief Financial Officer

(until end 2002)

Jean-Paul Boillon Head of EngineeringFrédéric Rappan Head of SupplyJean-Claude Rohrer Electro-mechanics SegmentYves Tabasso Head of ProjectsJean-Pierre Hirschi Medical Market SegmentJacques Sauge Head of Engineering USA

Machine programmeAssembly automation for: • Medical technology• Electromechanical components • Inkjet cartridges


2000• Still some “filler projects”

(with inadequate margins) • Expensive US operation 2001• High demand in the segments inkjet cartridges

and medical technology• Predominance of repeat orders • New projects subject to strict selection • Turnaround in US operation 2002• Sharp fall in order backlog at the beginning

of the year• Drastic restructuring measures at Ismeca USA• Sales significantly lower than previous year

Gross revenues

CHF m

1998 1999 2000 2001 2002


0

4

Operating profit *


-9

-1

11

-5

60

47

88

121

50

32

2002 was another difficult year for Ismeca Semiconductor. However, thanks to much effort,the year still ended without an operating loss. Theresult was nonetheless pressured by significant depreciations, particularly value adjustments on in-ventories. Structural costs have now been reducedsufficiently to enable the unit to make an operatingprofit even if the market environment remains sub-dued.

Market

China and Malaysia were the most importantmarkets. In both countries, we have held on to ourcore customers despite stiff resistance and ourcompetitors' very low prices and have even wonsome new customers. However, the market for machinery in the front and backend of the semi-conductor industry remained subdued in 2002. Theorder intake amounted to CHF 29.3 million (pre-vious year: 14.2). For nearly all our customers utilization of installed production capacity remainedat a low 80%. We are therefore not expecting a sustained revival, and with it rise in demand for Ismeca machinery, until the second quarter of 2003at the earliest.

Sales and earnings

At CHF 73 million, sales were below budget.Even so, a positive pre-depreciation result wasachieved thanks to the streamlining of structuralcosts. The high extraordinary value adjustments referred to squeezed the result by around CHF 6million. The result was further depressed by valueimpairments on goodwill amounting to CHF 26 million.

Product range

The product range has been renewed. Devel-opment has been stepped up with a view to moving into further market segments. In particular,production costs have been reduced by standardi-zing the function modules and engaging in con-structive cooperation with our suppliers. This alsofacilitated a downward adjustment of high sellingprices.

Organization

The new organization has proved itself and themanagement team has streamlined structures andprocesses. It has become standard practice to complete customer orders within 2 to 3 months.Duplication has largely been eliminated, as is reflected by a global headcount of less than 300 employees – compared with 730 at the beginningof 2001.

Outlook

Innovative, high-quality products and a solidmarket position form the basis for the future. 2003will not be an easy year. Prices and sales will be keptdown by continuing stiff competition and a hesitantrevival in the market environment. The unit's orderintake and sales are therefore expected to be mod-est until mid-year.



33


ManagementBeat Siegrist Chief Executive OfficerPhilippe Maquelin Chief Financial Officer

(until end 2002)

Jean-Charles Authier Head of R&DEugen Pfiffner Head of SupplyPhilippe Lorenz Head of ProductionUrs Gull Head of Marketing / SalesSandor Sipos Head of ServicesDaniel Hess Head of Semic. North AsiaGérard Probst Head of Semic. South AsiaGilbert Fluetsch Head of Semic. North America

Machine programmeHigh-speed machines for finishing, testing, inspection, marking and taping of • discretes• IC’s


2000• Boom: order intake worth CHF 303 million• High order backlog as of 31 December • Almost 700 employees as of 31 December 2001• Sharp fall compared with previous year:

Order intake falls to just CHF 14 million • High first-half sales (CHF 91 million) • Only CHF 29 million in second half• Drastic structural adjustment

(already partially implemented on 31 December)2002• Break-even at CHF 80 million• Intensive preparation so as to be able to deal with

the upturn with a minimum of additional personneland friction costs (supply chain management)

• So far no visibility for market-driven volume recovery

• Headcount less than 300

41

Gross revenue

CHF m

1998 1999 2000 2001 2002


0

2

Operating profit *


5

0

-9

105100

208

120

74

34


35


Consolidated financial statements of the Schweiter Technologies Group

Consolidated balance sheet as at December 31

Consolidated income statement as at December 31

Consolidated cash flow statement as at December 31

Change in consolidated shareholders' equity

Notes to the consolidated financial statements

Principles of consolidation and valuation

Segment information by divisions and regions


Report of the Group auditors

36

37

38

39

40 – 70

40 – 47

48

50 – 70

71

36


Consolidated balance sheet as at December 31

Assets (in CHF 1000s)

Current assetsCash and cash equivalentsTrade receivablesOther receivablesPrepaid expenses and accruals Inventories and work in progressTotal current assets

Fixed assetsProperty, plant and equipmentLong-term receivables Participating interests in associated companiesDeferred tax assetsIntangible assets, goodwillTotal fixed assets

Total assets

Liabilities (in CHF 1000s)

Short-term liabilitiesShort-term interest-bearing liabilitiesCommission paymentsTrade liabilitiesOther liabilitiesProvisions, accruals and deferred incomeTax provisions for current taxesTotal short-term liabilitiesLong-term interest-bearing liabilitiesDeferred tax liabilitiesProvisionsTotal long-term liabilitiesTotal liabilities

Minority interests

Shareholders' equityShare capitalTreasury sharesPremiumProfit reservesNet loss/ income for the yearOCI (Other comprehensive income / expense)Translation differencesTotal shareholders' equity

Total liabilities

3812

3

5

6337

8

91012

143416

17

18

2002

48 21655 9959 2972 910

60 567176 985

34 387858

-1 7986 200

43 243

220 228

2002

30 9617 000

13 45910 05116 2042 780

80 45510 676

1 29613 34825 320

105 775

-

14 437-

107 38148 886

- 48 665473

- 8 059114 453

220 228

%

80.4

19.6

%

36.5

11.548.0

52.0


2001

67 46669 52220 6122 204

102 114261 918

39 8501 826

748 060

49 21199 021

360 939

2001

62 2156 799

22 86255 01723 5851 904

172 38211 9966 491

14 57533 062

205 444

28 372

11 924- 54

71 60843 5874 227- 305

- 3 864127 123

360 939

%

72.6

27.4

%

47.8

9.156.9

7.9

35.2


Consolidated income statement as at December 31

(in CHF 1000s)

Gross revenuesSales deductionsNet revenuesChange in inventories of semi-finished and finished goodsOperating performance

Cost of materialsPersonnel expensesDevelopment expensesOther operating expensesOther operating incomeDepreciationOperating profit before amortization of goodwill and restructuring expenses

Amortization of goodwill (impairment loss)Restructuring expensesOperating profit after amortization of goodwill and restructuring expenses

Financial incomeFinancial expensesOther incomeOther expensesIncome before taxes

Income taxesNet loss / income before minority interests

Minority interestsNet loss / income after minority interests

Loss/earnings per share before dilution (in CHF)

Loss/earnings per share after dilution (in CHF)

21

2323242526

2728

293031

32

17

37

2002

322 448- 15 437307 011- 22 004285 007

- 136 030- 81 110 - 18 215- 36 113

113- 7 170

6 482

- 46 660-

- 40 178

3 453- 6 217

--

- 42 942

- 5 723- 48 665

-- 48 665

- 35.10- 35.10


%

113.15.4

107.77.7

100.0

47.728.46.4

12.70.02.5

2.3

16.4

- 14.1

1.22.20.00.0

- 15.1

2.0- 17.1

- 17.1

37

2001

448 285- 16 707431 578

- 8 266423 312

- 206 794- 122 656- 15 752- 51 413

-- 8 376

18 321

-104 208- 10 826

- 96 713

115 014- 7 827

377- 104

10 747

- 2 5798 168

- 3 9414 227

4.203.70

%

105.93.9

102.02.0

100.0

48.929.03.7

12.1

2.0

4.3

24.72.5

- 22.9

27.21.90.10.02.5

0.61.9

0.91.0

38


(in CHF 1000s)

Cash flow from operating activityIncome before taxes and minority interestsAdjustments for: Depreciation and amortization of goodwill

Profit realized on sale of treasury sharesLoss from sale of participationsDecrease in provisionsShare in result of non-consolidated participations

Interest incomeExtraordinary financial incomeInterest expensesOperating profit before adjustment of net current assets (cash flow)Decrease in trade receivablesDecrease in other receivables and accruals Decrease in inventories and work in progress Decrease in trade liabilitiesDecrease in other liabilities and deferralsCash flow from operating activityInterest paidIncome taxes paidNet cash flow from operating activity

Cash flow from investment activityConsolidation/sale of non-consolidated participationsSale of subsidiariesPurchase of intangible assetsPurchase of investment in subsidiariesRepayment of purchase price liability for investment in subsidiariesPurchase of property plant and equipmentSale of property plant and equipmentSales of treasury sharesInterest receivedNet cash flow from investment activity

Cash flow from financing activityIncrease/decrease in long-term receivablesIncrease in shareholders' equityDecrease in leasing liabilitiesDecrease in long-term loansDecrease/increase in short-term loansCurrency translation differences on fixed assetsDividend paidNet cash flows from financing activity

Currency translation differences on cash holdingsDecrease in cash and cash equivalents

Cash and cash equivalents as at January 1Cash and cash equivalents as at December 31

Consolidated cash flow statement as at December 31

2002

- 42 94253 830

2-

- 113074

-1237-

2 5131111012 90910 45740 522- 8 813

- 12 15954 026- 3 770- 3 79346 463

--

- 16- 898

- 30 207- 3 601

61254

1325- 32 731

712-

- 517- 1392

- 31258- 271

-- 32 726

-256- 19 250

67 46648 216

35

36115


2001

10 747113 934

-3 291

- 2 014- 3

- 1544- 111358

2 99916 05266 0483 1668 155

- 27 672- 45 21120 538- 1306- 1828

17 404

25373

-- 200

- 135 915- 3 734

4 218-

1216- 134 089

- 13634 855

- 1737- 6 08978 835

- 558- 1812

72 131

25- 44 529

111 99567 466

39


Position as at Jan. 1, 2001

Capital increase2001 Group net income 2000 dividendPurchase of treasury shares2001 foreign currency differencesOCI IAS 39

Position as at Dec. 31, 2001

Reclassification of unappropriated reserves from premiumCombination of profit reserves/profitcarried forward

Position as at Jan. 1, 2002

Capital increase2002 consolidated annual loss Sale of treasury shares2002 foreign currency differencesOCI IAS 39

Position as at Dec. 31, 2002

Share capitalProfit

reserveSharehold-ers' equity

9886

2 038

11924

11924

2 513

14437

42451

29 157

71608

-1 071

70537

36844

107381

93651

31 1954 227

-1 812- 54221

-305

127123

-

-

127123

39357-48665

56-4196

778

114453

(in CHF 1000s)Translationdifference

-4084

221

-3863

-3863

-4196

-8059

Profit car-ried forwardPremium OCI

40948

4 227-1 812

43363

-43 363

-

-

4450

4450

1 071

43 363

48884

-486652

221

-305

-305

-305

778

473

Treasuryshares

0

-54

-54

-54

54

-

Change in consolidated shareholders' equity

40

General

The Schweiter Technologies Group preparesits consolidated financial statements in accordancewith the principles of the International Financial Reporting Standards (IFRS), previously known asthe International Accounting Standards (IAS). Inaddition, it also presents the information requiredby Swiss company law.

The annual financial statements are presentedin Swiss francs, as the most important group unitsoperate from Switzerland and the majority of theGroup's transactions are conducted in Swiss francs.

Basis of consolidation

The Group's consolidated financial statements,comprising the balance sheet, income statement,cash flow statement and change in consolidated shareholders' equity are based on the audited annual statements of the companies included as atDecember 31, 2002 and December 31, 2001. Thestatements of the individual companies, which follow local requirements and customary practices,have been adapted to IFRS on the basis of standardGroup-wide structuring and valuation principlesand have been combined into the consolidated financial statements.

Principles of consolidation

The consolidated annual accounts of Schwei-ter Technologies Group encompass all companiesin which the Group holds more than 50% of votingrights or exercises de facto control in some otherform. Newly acquired companies are consolidatedfrom the date of acquisition. The results of compa-nies disposed of are included up until the date ofthe sale.

Companies in which the Group holds morethan 20% of voting rights, but not more than 50%,are reported according to the equity method, pro-vided effective control is not exercised in someother form. Thus, they are reported in the balancesheet at acquisition value, corrected for dividendpayments and the Group's shares in the accumulatedprofit or loss after the acquisition.

Companies in which the Group holds less than 20%, are reported in the balance sheet at acquisition value. Permanent decreases in value aretaken into account by corresponding value adjust-ments.

The capital consolidation is performed basedon the purchase method. The assets and liabilitiesof newly acquired companies are stated at their fairvalue at the time of acquisition. Minority interestsare minority shareholders' share in total assets minus liabilities.

In performing the consolidation, all transac-tions and balances between the consolidated com-panies are eliminated. The annual accounts includ-ed in the consolidation are prepared according tostandard valuation principles as at December 31.



non-cash capital contribution rather than by cashpayment as originally agreed. The whole trans-action was recorded at market values. The non-cashcapital contribution gave rise to an increase in theshare capital by CHF 2.5 million and a premium ofCHF 36.8 million. At the same time, the minorityinterests decreased from CHF 28.4 million to zero.

Apart from the above, there were no changesin the scope of consolidation during the year underreview.

In January 2002, the remaining 22.7% stake inIsmeca Holding SA La Chaux-de-Fonds was acqui-red from CREDIT SUISSE Group by means of a share swap (see 36 Purchase of investments in sub-sidiaries and 18 Share capital). In this connection,on March 15, 2002 a total of 251 275 Schweiter shares were reissued against a non-cash capital con-tribution. This transaction also includes payment of the 3.75% stake in Ismeca Holding, which was likewise acquired by means of a share swap and

41


Acquisitions:

In the course of 2001, the Group acquired afurther 10.1% of Ismeca's share capital. The phasedpurchases were financed through securities loanedfrom the principal shareholder. Repayment was made using the authorized share capital created forthis purpose under the capital increase of Decem-ber 10, 2001. Furthermore, the purchase price debtpayable on Ismeca shares acquired in 2000 underirrevocable purchase commitments was reduced bymeans of a cash payment and the issue of shares.

Acquisition price (in CHF 1000s) Ismeca

Cash and cash equivalents 200Shareholder loan/capital increase 37 271Other liabilities 410Total acquisition price for shares 37 881

Minority interests acquired - 13 221Goodwill 24 660

Disposals:

Effective September 30, 2001, RTC SystemsLtd. (acquired in 2000) was sold back to one of thesellers. Reported goodwill was reduced by the out-standing purchase price debt of CHF 6.55 millionno longer due. Certain RTC operations are beingcontinued by other Satis Group companies; appro-priate restructuring costs have been stated in theaccounts.

SSM Corp. USA was liquidated effective March31, 2001. The liquidation dividend was paid toSchweiter Technologies AG.

Other changes:

On the basis of available data revised for thefirst time, wholly owned subsidiary Satis VacuumAsia Pte Ltd. was fully consolidated as from January1, 2001.Founded on December 21, 2001: Satis PhotonicsAG, Horgen, Switzerland

Changes in the scope of consolidation in 2002:

Changes in scope of consolidation

Changes in scope of consolidation in 2001:

42


Share capital in 1000s

CHF 14 437

CHF 6 000

CHF 100

EUR 51

EUR 25

CHF 5 000

CHF 500

EUR 5 165

EUR 102

USD 0.001

GBP 0.001

SGD 100

CHF 500

Company

Schweiter Technologies AGHorgen, Switzerland

Schärer Schweiter Mettler AG (SSM)Horgen, Switzerland

SSM Vertriebs AGBaar, Switzerland

SSM Stähle Eltex GmbHReutlingen, Germany

Hacoba Spultechnik GmbHWuppertal, Germany

Satis Vacuum Holding AGBaar, Switzerland

Satis Vacuum Industries Vertriebs AGBaar, Switzerland

Satis Vacuum Industries S.p.a.Milan, Italy

Satis Vacuum Deutschland GmbHErlensee, Germany

Satis Vacuum of America Inc.Groveport, Ohio, USA

Satis Vacuum (UK) Ltd.Bolton, UK

Satis Vacuum Asia Pte Ltd.Singapore

Satis Photonics AGHorgen, Switzerland

Shareholding

-

100 %

100 %

100 %

100 %

100 %

100 %

100 %

100 %

100 %

100 %

100 %

100 %

Holding company

Production anddistribution

Distribution


Real estate anddistribution

Holding company

Head office anddistribution


Trading and distribution

Distribution

Distribution

Distribution


Scope of consolidation

The following companies were fully consolidated as at December 31, 2002.


43


Share capital in 1000s

CHF 5 000

CHF 150

CHF 1 100

EUR 26

EUR 40

GBP 1

MYR 2 500

HKD 150

USD 1

USD 100

USD 100

USD 1

Company

Ismeca Holding SALa Chaux-de-Fonds, Switzerland

Ismeca Group MgmtLa Chaux-de-Fonds, Switzerland

Ismeca Europe SALa Chaux-de-Fonds, Switzerland

Ismeca GmbHDeckenpfronn, Germany

Ismeca France S.à.r.l.Besançon, France

Ismeca (UK) LimitedCheltenham, UK

Ismeca Malaysia Sdn. Bhd.Melaka, Malaysia

Ismeca Asia, LimitedAberdeen, Hong Kong

CDF Holding Inc.Delaware, DE, USA

Ismeca USA Semiconductor, Inc.Vista, CA, USA

Ismeca USA Automation, Inc.Vista, CA, USA

Ismeca Properties, Inc.Vista, CA, USA

Shareholding

100 %

100 %

100 %

100 %

100 %

100 %

100 %

100 %

100 %

100 %

100 %

100 %

Holding company

Management Services


Distributionand services





Holding company



Real estate

44



USAEuro zoneItalyGermanyUKSingaporeMalaysiaHong Kong

DollarEuroLiraMarkPoundDollarRinggitDollar

USDEURITLDEMGBPSGDMYRHKD

11

1000100

11

1001

The following exchange rates were applied (in CHF)

Foreign currency exchange rates

2002

Year-end rate Average rate

2001

Year-end rate Average rate

1.391.45

--

2.430.80

36.520.18

1.561.47

--

2.340.87

41.030.20

1.681.480.77

75.822.440.91

44.280.22

1.691.510.78

77.222.430.94

44.500.21

Gross revenues

Gross revenues include all invoiced sales of machines, spare parts, services and rental income.Revenues from construction contracts are valuedby the percentage of completion (POC) method.The percentage of completion is based on the ratio of costs incurred (i.e. by the reference date)to the overall anticipated costs of the order.

Net proceeds from revenues and realization of income

Net proceeds from revenues includes all in-voiced sales to third parties after deduction of value added tax, quantity discounts, provisions for bad debts, other sales deductions and the costof carriage, insurance and packaging. Income is accounted for on delivery or rendering of the service respectively.

Conversion of foreign currencies

The annual statements of foreign subsidiariesare prepared in the corresponding national cur-rencies and converted into Swiss francs for consol-idation purposes. The balance sheet is translated atyear-end exchange rates, and the income statementat the average exchange rate for the financial year.Resulting conversion differences are booked direct-ly under shareholders' equity and therefore have noimpact on the income statement. Other exchangerate differences, including those arising from

foreign currency transactions in connection withnormal business activities, are charged or creditedto the income statement.

Financial instruments

Since 2001, derivative financial instruments have been recorded in the balance sheet at marketvalues in accordance with IAS 39. The Group main-ly uses forward exchange contracts as a means ofhedging foreign currency risks. A forward exchangecontract used to hedge an underlying transaction,in particular an ongoing order or a trade receivabledenominated in a foreign currency, constitutes a fairvalue hedge. In this case the changes in market value arising from the hedging transaction and theunderlying transaction are taken to income underconsideration of deferred taxes, and the market values are stated together with the underlying transaction; the netted-out effect is reflected in theresult. A cash flow hedge exists in particular whereexchange rate hedging transactions are concludedin advance for future orders. The change in marketvalue is reported in shareholders' equity withoutaffecting the result (OCI, other comprehensive income/expense) and under consideration of deferred taxes, and the market value is reportedunder accruals and deferrals.

45


Credit risk

There are no cluster risks relating to trade accounts receivables. To minimize default risks,where appropriate additional collateral (e.g. irre-vocable confirmed documentary credits, bank guarantees, credit risk insurance etc.) is agreedupon based on specific industry, country and customer analyses. The Group only has bank accounts with first-class banks. The Group carriesout constant checks on customers' creditworth-iness and does not have any major concentrationsof default risks.

Trade receivables

The reported value corresponds to the in-voiced amounts less value adjustments for provi-sion for bad debts.

Inventories and work in progress

Purchased goods are reported at acquisitioncosts, self-produced goods are reported at production costs. If the net sales value is lower, corresponding value adjustments are made. Theproduction costs include the full costs of the material, the proportionate manufacturing costsand the proportionate general overheads.

Inventories are valued using the weighted average costs method or the FIFO method. For non-marketable parts held in inventory an appropriatevalue adjustment was formed on the basis of fre-quency of turnover.

A corresponding value adjustment is perform-ed for customer-specific, finished machines which remain in inventory for longer than one year and for all machines kept for demonstration purposes.Interim profits on intra-Group supplies are elimi-nated through the income statement.

Work in progress: Where the figures for construction contracts can be reliably estimated inadvance, sales and production costs are taken tothe income statement in accordance with the per-centage of completion (POC) method. Changes toorder specifications and additional costs agreedwith the customer will be factored in accordingly.

Market risks and risk managementBasic principles

The market risks to which the Group is exposed mainly relate to interest rates, foreign currencies and counterparty default. The Board ofDirectors is responsible for overseeing the Group'sinternal controlling systems which monitor, but cannot rule out, the risk of inadequate business performance. These systems provide appropriate,though not absolute, security against significant inaccuracies and material losses. Management is responsible for identifying and assessing risks thatare of significance for the division in question.

In addition to quantitative approaches and formal guidelines – which are only part of a com-prehensive risk management approach – it is alsoconsidered important to establish and maintain acorresponding risk management culture.

Financial instruments should be considered inparticular to be bank balances, receivables, tradeliabilities and interest-bearing liabilities. The bookvalue of the bank balances, receivables and tradeliabilities is largely the same as their market value.Most are denominated in Swiss francs. Smaller amounts for the settlement of day-to-day businessare denominated in foreign currencies.

Risk of changes in interest rates

The risk of changes in interest rates primarilyrelates to long-term interest-bearing liabilities. Inthe case of mortgage loans, interest rate risks areminimized by staggered maturities and fixed interest rates. No derivative financial instrumentsare used to hedge against the risk of changes in interest rates.

Foreign currency risk

As the Group sells products and services in foreign currencies, it is exposed to fluctuations inexchange rates. The bulk of its sales are denomi-nated in Swiss francs. Forward exchange transac-tions are used to hedge exchange rate risks. Theseinstruments are not used for speculative purposes.

46


Property, plant and equipment

Land is reported in the balance sheet at acqui-sition cost. Value adjustments are made for anydecrease in value which has occurred. Buildings, machinery, vehicles and operating equipment arereported at acquisition costs minus accrued de-preciation. Depreciation is calculated using the linear method over the following foreseeable periods of use:• Buildings: 40 years • Conversions: 10 years orthe duration of the rental agreement • Fixturesand fittings: 8 to 10 years • Machines: 5 to 10 years • Computer systems and associated operating software: 3 to 5 years • Vehicles: 3 to 4 years• Furniture: 8 to 10 years • Rented facilities for theduration of the rental agreement.

Development costs

Research and development costs are chargedto the current year's income statement.

Income tax

Taxes incurred on the basis of the business results will be accrued regardless of when such pay-ment obligations become due and allowing for anytax-deductible losses carried forward. In addition,provisions for deferred taxes will be made. Suchprovisions are the result of differences between thestandard Group valuation and the tax valuation inthe individual statements which lead to shifts in thetiming of taxation.

The calculation is made according to the liability method. At the same time, no provisionsare made for positions in which no recovery is expected in the foreseeable future. Calculation isbased on the maximum local tax rate on the balance sheet date.

No provisions are made for taxes which wouldbe incurred on the distribution of retained profitsof subsidiaries, except in cases in which a distribu-tion is likely to be forthcoming in the foreseeablefuture or has been decided upon.

Goodwill

Goodwill is the difference between the acqui-sition price and the pro-rated net assets (fair value)of the acquired company at the time of acquisition.

Goodwill is capitalized and written down overa useful life of 20 years maximum. Residual good-will is subjected yearly to an impairment test and,where necessary, written down further.

Decrease in the value of assetsImpairment

On each balance sheet date, an assessment ismade of whether assets that account for significantsums show signs of decreasing in value (impair-ment). If so, the recoverable value is defined as thehigher of the estimated net market value and theascertained value in use. The value in use corre-sponds to the cash value of the estimated futurecash flow. If the recoverable value thus determinedis lower than the current book value, the decreasein value is taken to income (impairment loss). Except in the case of a decrease in the value of good-will, any recorded decrease in value that ceases to be justified is written back and the respectiveamount taken to the income statement.


47


Benefits due to employeesPension plans and

employee stock option plan

Within the Group, a number of different pension plans are in place in compliance with therelevant legal requirements. The assets of most ofthese pension plans are reported separately underlegally independent pension institutions. In addi-tion to salary-dependent employer's contributions, some pension plans also require employees to paycontributions. In the case of the defined contribu-tion plans, the employer's contributions are takento the income statement.

The pension plans in Switzerland are based onthe BVG principle (BVG = Federal Law on Occu-pational Retirement, Survivors' and Disability Pension Plans) and for purposes of IAS 19 shouldbe described as defined benefit plans since the actuarial and investment risks are not borne solelyby the employee. The pension obligations and pen-sion expenses arising from these pension plans aretherefore determined by an independent actuaryusing the projected unit credit method. Actuarial

cover shortfalls or surpluses are disclosed in thenotes and if they exceed 10% of the pension obli-gation or the market value of the pension plan assets, whichever is greater, they are taken to income throughout the employee's anticipated re-maining period of employment until retirement.Surpluses are only stated if the employer can usethem for future reductions in contributions.

An employee stock option plan has been setup with a view to securing the long-term loyalty ofthe Group's senior executives and providing themwith incentives. Options have been granted underthis employee stock option plan. The fair value ofthe employee options was not charged to the in-come statement of the company in question eitherwhen the option was issued or when it was exer-cised. Exercise prices of options have been set atlevels higher than the current share price; the exer-cise prices of the options have not been adjusted.


48

Segment information broken down by divisions and regions

Regions

Gross revenues

Assets

Capital expenditure

Europe Americas Asia Other Group

140.3

192.8

1.8

322.4

220.2

3.6

-

-

-

111.0

10.6

0.2

71.1

16.8

1.6


Satis Vacuum

Ismeca Automation


Other / transition Group

129.0119.3

-1.0

20.0

16.7%

--

20.0

0.248.934.2

322.4285.0

-7.2

6.5

2.3%

-46.7-

-40.2

-2.8-

-43.0

-5.7-

-48.7

3.6220.2105.8

0.40.4

-

-0.4

--

-0.4

-2.6

18.6

73.561.5

-4.7

-9.5

-15.5%

-25.6-

-35.1

0.697.821.7

50.345.6

-0.5

-4.8

-10.5%

-21.1-

-25.9

0.428.85.1

69.258.2

-1.0

1.2

2.1%

--

1.2

2.442.126.2

2002 (in CHF millions)

Divisions

Gross revenuesOperating performance

Depreciation

Operating profit before amortization of goodwill and restructuring expenses


Amortization of goodwillRestructuring expenses

Operating profit after amortization of goodwill and restructuring expenses

Financial income/expensesOther income/expenses

Income before taxes

Income taxesMinority interests

Annual loss

Capital expenditureAssetsLiabilities

26

27

49


2001 (in CHF millions)

Divisions

Gross revenuesOperating performance

Depreciation

Operating profit before amortization of goodwill and restructuring expenses


Amortization of goodwillRestructuring expenses

Operating profit after amortization of goodwill and restructuring expenses

Financial income/expensesOther income/expenses

Income before taxes

Income taxesMinority interests

Annual loss

Capital expenditureAssetsLiabilities


Satis Vacuum

Ismeca Automation


Other / transition Group

135.0123.2

-1.4

12.1

9.8%

--0.5

11.6

0.559.135.1

448.3423.3

-8.4

18.3

4.3%

-104.2-10.8

-96.7

107.20.2

10.7

-2.6-3.9

4.2

3.7360.9205.4

--

1.3

-1.2

-0.3

-1.5

-14.974.6

120.6109.3

-3.6

0.2

0.2%

-98.6-

-98.4

1.2147.436.0

120.6115.8

-1.7

10.8

9.3%

-5.7-

5.1

0.982.019.4

72.175.0

-3.0

-3.6

-4.8%

0.1-10.0

-13.5

1.157.540.3

Regions

Gross revenues

Assets

Capital expenditure

Europe Americas Asia Other Group

164.4

309.3

2.9

448.3

360.9

3.7

-

-

-

134.2

12.3

0.2

149.7

39.3

0.6

26

27

50



6

4

1 Trade receivables (in CHF 1000s) 2002 2001

– from third parties 60 838 75 440minus bad debt allowances - 4 843 - 5 920

– non-consolidated investments in associates - 2Total net 55 995 69 522

The average time taken for the settlement of receivables in 2002 amounts to 76 days (previous year 88 days)

2 Other receivables (in CHF 1000s) 2002 2001

Receivables from taxes (value added tax, withholding tax, etc.) 6 026 3 629Receivables relating to construction contracts 864 10 246Other receivables – third parties 2 407 5 979Other receivables – arising from non-consolidated investments in associates - 758Total 9 297 20 612

3 Inventories and work in progress (in CHF 1000s) 2002 2001

Raw materials and parts 30 111 53 342Semi-finished goods and work in progress 17 924 32 271Finished goods (at production costs) 11 410 14 417Finished goods (at net disposal costs) 1 122 2 084Total 60 567 102 114

2

10

4 Construction contracts (in CHF 1000s) 2002 2001

Work in progress relating to construction contracts as reported in the balance sheet 103 2 098

Sales booked under construction contracts during the year 37 079 96 769

Accrued costs and profits on construction contracts outstanding at the end of the year recorded pro rata (less losses) 2 440 32 010Advances received on open construction contracts at the end of year - 1 576 - 24 467

864 7 543

Total construction contracts revenue recognized during the year, reported in balance sheet under Other receivables 864 10 246Construction contracts with deficit balance vis-à-vis customers, reported in balance sheet under Other liabilities - - 2 703

864 7 543

The net value of the inventories and work inprogress is after value adjustments of CHF 41.7 mil-lion (previous year CHF 32.5 million).

No value reinstatements were recorded as income.As of December 31, no inventories are encum-

bered by rights of lien.

51


8117400

-3 5253 601

-5 536

75 714

-41 32400

1 558-1 3264 783

-5 018

-41327

34 387

86 70023 798

97

Land andbuildings

Instal- lations

Total2001

MachineryTools Furnishings

Computerequipment Vehicles

Total2002

38 933-

-1652-1806

46-

35 521

-8 936-

1016412

-760-

- 939

-9 207

26 314

29 997

2 346-

1652-42132

-

4 088

-2 024-

-1016-104

--

-211

-3 355

733

322

89 441-3 585

0128

3 754-8 564

81174

-39 6553 343

0348

-1 0854 346

-8 621

-41 324

39 850

107 80027 412

614

13 255--

-3781821

-2 112

12 586

-9 048--

148-28

1588- 807

-8 147

4 439

4 207

11 141--

-515475

-555

10 546

-9 400--

414-261493

-465

-9 219

1 327

1 741

12 867--

-689920

-2 370

10 728

-9 813--

614-277

2 274-2 367

- 9 569

1159

3 054

2 632--

-95207

-499

2 245

-2 103--

74-

428-229

-1830

415

529

5 Property, plant and equipment

The impairment charge of CHF 1.326 million in2002 relates to the Semiconductor (CHF 676 000)and Automation (CHF 650 000) divisions. The im-pairment charge of CHF 1.085 million in 2001 re-lates to the Semiconductor division. As a result of de-mand-driven capacity adjustments and restructuringmeasures assets no longer necessary for operating

Fixed-asset summary (in CHF 1000s)

Acquisition valuesPosition as at January 1Change in scope of consolidationChange of capitalization categoryExchange rate differencesAdditionsDisposals

Position as at December 31

Accumulated depreciationsPosition as at January 1Change in scope of consolidationChange of capitalization categoryExchange rate differencesImpairmentDisposalsDepreciation for the year


Net book value as at Dec.31,02

Net book value as at Dec. 31, 01

purposes were corrected to estimated liquidationvalues. Depreciation for 2001 contains CHF 1.350million for superfluous property plant and equip-ment belonging to the former subsidiary RTC Systems, which was written down prior to sale onSeptember 30, 2001 and stated under restructuringexpenses.

Insurance valuesPledged land and buildingsLeasing obligations for property, plant and equipment reported on balance sheet

26

26

40

52



The main investments in subsidiaries held directly or indirectly by the Schweiter TechnologiesGroup are listed above. These are long-term investments in subsidiaries and associates which are

6 Investments in associated companies (in CHF 1000s) 2002 2001

Elpo AG, Bäretswil, Switzerland Share of equity 24% 0 73Other 0 1Total 0 74

Book value as at January 1 74 327Change in scope of consolidation: Satis Vacuum Asia (fully consolidated) - - 293Writeback of loss provisions for minority interests in associates - 39Share of loss/profit belonging to non-consolidated participation - 74 1Book value as at December 31 0 74

not fully consolidated. Currency and business-related reductions/ increases in value are taken into account by the equity valuation method.

36

2627

7 Intangible assets / goodwill (in CHF 1000s) 2002 2001

Book value as at January 1 49 211 153 385Goodwill acquired 4 105 24 660Recalculation of purchase price commitment - 441 - 24 606Increase in other intangible assets 15 0Depreciation of other intangible assets - 30 - 20Goodwill amortization (impairment loss) - 46 660 - 104 208Book value as at December 31 6 200 49 211

of which – Goodwill 6 177 49 173– Other intangible assets 23 38

The increase in goodwill in 2002 and 2001 wasa result of the acquisition of shareholdings in the Ismeca Group. The Schweiter Technologies sharesissued in connection with the share swap/capital increase were factored in at their current marketvalue. Adjustments of purchase price commitmentsled to reductions in goodwill.

The Ismeca participation and goodwill weresubjected to impairment tests on December 31,2001 and 2002 (see 27 Goodwill amortization). Thisresulted in a goodwill amortization (impairmentloss) of CHF 46.7 million (previous year CHF 104.3million). The remaining goodwill as at December31, 2002 relates to Ismeca Semiconductor and amounts to CHF 6.2 million with a planned amor-tization over a further 17.5 years.

53


9 Trade liabilities (in CHF 1000s) 2002 2001

Toward third parties 13 459 22 834Toward non-consolidated investments - 28Total 13 459 22 862

10 Other liabilities (in CHF 1000s) 2002 2001

Unredeemed dividend coupons 65 65Pension obligations 922 860Arrears toward staff pension schemes 186 - 25Liabilities from construction contracts - 2 703Prepayments received from customers 6 346 12 139Liabilities from acquisitions - 36 218Other liabilities 2 532 3 057Total 10 051 55 017

15

4

11

8 Short-term interest-bearing liabilities (in CHF 1000s) 2002 2001

Current accounts with banks 6 437 22 794Bank loans due within one year 11 088 20 000Mortgages due within one year 551 6 036Other short-term liabilities toward banks 18 076 48 830Financial leasing contracts, due within one year 72 510Shareholder loans 12 813 12 875Total 30 961 62 215

Breakdown of Short-term liabilities toward banks by currencies with average interest rates:

Actual Actual December 31, 2002 interest rates December 31, 2001 interest rates

CHF 13 651 1.93% CHF 38 719 3.43%EUR 3 815 5.50% EUR 2 489 5.33%USD 610 4.56% USD 266 6.90%

LIT 7 356 4.00%18 076 48 830

1320

54


12 Provisions, accruals and deferred income (in CHF 1000s) 2002 2001

Personnel costs (holidays / flexitime / overtime / bonuses / etc.) 8 367 10 986Cost of materials / overheads 2 289 7 191Miscellaneous 5 548 5 408Total 16 204 23 585

13 Obligations arising from finance leasing (in CHF 1000s) 2002 2001

Obligations arising from finance leasing (nominal), due in:– 1 year 76 529– in 2 to 5 years 26 108– in more than 5 years' time - -Total nominal value 102 637

less future financial expense - 5 - 23Total cash value of minimum leasing obligations 97 614

Reporting on balance sheet by due date– in 1 year (in Short-term interest-bearing liabilities) 72 510– in 2 to 5 years (in Long-term interest-bearing liabilities) 25 104Total cash value of minimum leasing obligations 97 614

11 Liabilities arising from acquisitions (in CHF 1000s) 2002 2001

Discounted liabilities as at January 1 36 218 195 464Recorded financial expenses arising from discount facility 461 1 713Payment during the year under review - 30 207 - 136 115Cessation of purchase price commitment from the sell-back of RTC Systems - - 6993Recalculation of purchase price commitment 898 - 17 851Writeback of Ismeca's 3.75% liability (in capital increase) - 7 370 -Discounted liabilities as at December 31 0 36 218


814

55


Breakdown of long-term loans and leasing obligations by currencies with average interest rates

Actual Actual December 31, 2002 interest rates December 31, 2001 interest rates

CHF 390 1.22% CHF 525 1.22%CHF 390 1.58% CHF 525 1.58%CHF 3 000 3.25% CHF 6 116 4.50%CHF 2 526 3.63%USD 4 131 6.90% USD 4 509 6.90%EUR 3 5.00% ITL 7 5.00%EUR 236 4.70% CHF 314 5.80%Total 10 676 11 996

The mortgage loans are secured by encumbrance on real property (see 40 Right of lien).

14 Long-term interest-bearing liabilities (in CHF 1000s) 2002 2001

Long-term bank loans 240 833Mortgage loans 10 411 11 059Long-term liabilities toward banks 10 651 11 892Finance leasing obligations, due after 1 year 25 104Total 10 676 11 996

The maturities of the long-term liabilities toward banks are as follows:– 1 to 2 years 649 709– 2 to 5 years 7 208 2 444– more than 5 years 2 794 8 739Total 10 651 11 892

40

56



15 Pension plans

Staff pension obligations

The Group has a series of pension plans whichcomply with the relevant legal circumstances. These plans provide benefits in the event of death,disability, retirement or termination of employ-ment. In the case of some of these pension plans,employees have to pay contributions which are supplemented by corresponding contributionsfrom the Group. They are financed in conformitywith local legal and tax regulations.

Defined benefit plans

The most important Group units with definedbenefit plans are domiciled in Switzerland and Germany. The pension benefits are based on theemployee's years of service, age and salary. Pension funds’ assets in Switzerland have been splitoff into a separate foundation and can not accrueback to the employer.

The pension liabilities of the defined benefitplans were calculated using the projected unit credit method. The last valuation was performedon December 31, 2001.

Defined contribution plans

The most important Group units with definedcontribution plans are domiciled in the USA, Malaysia, Hong Kong and France.

Employer contributions under these plansamounted to CHF 154 000 in 2001 (CHF 627 000in 2001)

Restructuring measures

Ismeca underwent major restructuring mea-sures in 2002, as a result of which, pension obliga-tions were reduced by CHF 9 213 000 and pensionassets were reduced by CHF 8 510 000, while pension expenditure increased by CHF 267 000.

Shortfalls

In Switzerland, compulsory and extended pen-sion benefits for Schweiter Group employees areregulated through two foundations. On December31, 2002, the annual financial statements of theSchweiter and Ismeca foundations showed short-falls of around 5% and 14% respectively. The Boardof Trustees of the Ismeca foundation has already taken measures to eradicate the shortfall. Thus, infuture, 1.5% of current savings contributions are tobe used as restructuring contributions and the level of interest payable on the retirement savingscapital is to be adjusted. As a contribution towardthe restructuring, the employer will be waiving its claim to a share of surpluses arising from riskpooling and the daily sickness allowance contract.There are no plans for more extensive measureson the part of the employer.

The pension obligations and net pension ex-penditure in the consolidated financial statementswill be determined in accordance with the Interna-tional Financial Reporting Standards (IFRS). Underthese rules, the shortfall for these two plans amounted to CHF 7.9 million. In calculating the obligations, it is necessary to take account of va-rious assumptions regarding salary developments,pension indexation and staff turnover. Conse-quently, the shortfall cannot be compared with thatshown in the annual financial statements of the Foundations. For example, the effect of wage trendsis financed through future employee and employ-er's contributions.

57


The weighted actuarial assumptions can be summarized as follows: 31.12.02 31.12.01

Annual discount interest rate 3.77 % 4.02 %Long-term annual yield 4.50 % 4.64 %Annual wage increases 1.98 % 2.62 %Annual pension adjustments 0.72 % 1.01 %

2002 2001

Employer's contributions to defined contribution plans (in CHF 1000s) 154 627

Net pension expenditure for the period (in CHF 1000s) 2002 2001

Pension entitlement acquired 5 400 6 550Interest paid on future pension entitlement 3 509 3 780Anticipated income from assets - 4 068 - 4 382Amortization of losses 23 -Additional expense 382Restructuring expenses 267 -Employee contributions - 2 714 - 3 016Net pension expenditure for the period 2 799 2 932

Effective income from assets - 3 130 - 2 429

Status of the pension schemes (in CHF 1000s) 31.12.02 31.12.01

Pension obligations covered by segregated assets 91 059 99 603Pension assets - 83 157 - 90 954Cover shortfall 7 902 8 649Pension obligations not covered by pension assets 867 853Losses not yet amortized - 7847 - 8 642Pension obligations reported on the balance sheet 922 860

Development of pension obligations reported on the balance sheet (in CHF 1000s) 2002 2001

Pensions obligations as at January 1 860 825Net pension expenditure for the period 2 799 2 932Employer’s contributions - 2 726 - 3 025Change in prepayments not recorded - 148Exchange rate differences - 11 - 20Pension assets at market values as at December 31 922 860

58



Position as at January 1Change in scope of consolidationForeign currency differencesConsumption with neutral impact on incomeUnused amounts reversed and released to incomeAdditional provisions charged to income


Restructurings Total 2001

14 973-465-105

-2 762

-2 348

5 282

14 575

16 Provisions (in CHF 1000s) Other

5 164

-38

-1438

-851

2 558

5 395

ProjectsGuarantees

1045

-1

-921

0

1212

1335

1582

-14

-1282

-256

228

258

6 784

-41

-4150

-555

4 322

6 360

The provision for restructuring expenses includes the cost of severance payments arisingfrom redundancies implemented as of December31, 2002.

The provision for guarantees was formed forrepairs and the replacement of defective products.It is based partly on a cost estimate derived fromspecific known facts and partly on empirical valuesfor follow-up developments of new products launched in 2002.

The provision for projects includes the cost ofterminating development projects in response toexternal factors (competitive pressure, technical innovations, etc.).

Other provisions comprises business eventswith specific, quantifiable risks in relation to whichit is not known when the associated costs will beincurred as well as provisions for materials risks under master agreements. The materials risks arebased on empirical values and purchase commit-ments vis-à-vis suppliers as of December 31, 2002.

17 Minority interests (in CHF 1000s) 2002 2001

Minority interests as at January 1 28 372 37 652Decrease in minority interest - 28 372 - 13 221Minority shareholders’ share in earnings 0 3 941Position as at December 31 0 28 372

36

At the beginning of January 2002, SchweiterTechnologies took over the remaining 22.7% stakein the Ismeca Group by means of a capital increase

with a contribution in kind drawing on the autho-rized capital. In this connection, 251 275 shares were issued.

Total 2002

14 5750

-94

-7 791

-1662

8 320

13 348


59

Capital increases in 2002: Under the capital increase of March 15, 2002, 251 275 new shares were created from the authorized capital and issuedagainst a contribution in kind in the form of the remaining Ismeca shareholdings (22.7% plus 3.75%in place of the cash payment originally agreed upon)by CREDIT SUISSE Group companies. Moreover,25 400 shares created from the conditional capitalfor employee options exercised in 2001 were registered. The latter 25 400 shares were countedtoward the share capital as of December 31 2001,and deducted from the conditional capital. The contribution in kind was valued at CHF 155 perSchweiter share, which resulted in a premium ofCHF 36.8 million. The change in consolidated shareholders' equity is presented on page 39.

300 treasury shares were held as of December31, 2001. They were acquired at a price of CHF 179per share. At the beginning of 2002, 139 shares were issued to employees at a price of CHF 179per share and in May 2002, 161 shares were soldon the stock market at a price of CHF 192.50 pershare. The gain of CHF 1 806 on trading in treasuryshares was posted directly to profit reserves in shareholders' equity without impacting on income.

Authorized capital: As of December 31, 2002the Board of Directors is authorized to issue300 000 bearer shares by May 15, 2004. The sub-scription right may be excluded for the purpose of taking over companies by share swaps, or for financing the acquisition of companies, parts ofcompanies or participations or new investmentprojects of the company.

Conditional capital: as of December 31, 2002the company's share capital may be increased exrights by up to 132 600 bearer shares, which mustbe fully paid up; a) up to a sum of CHF 326 000through the exercise of employee option rights andb) up to a sum of CHF 1 million through exerciseof option or conversion rights granted in conjunc-tion with bonds or similar paper issued by the com-pany. So far, no such bonds have been issued. Noemployee options were exercised in 2002; 10 000unexercised options were outstanding as of De-cember 31, 2002 (see 19 Employee stock optionplan).

18 Share capital 2002 2001

Number of bearer shares issued with a par value of CHF 10 1443 672 1192 397Share capital as at December 31 (in CHF) 14 436 720 11 923 970Authorized capital (in CHF) 3 000 000 2 716 030Conditional capital (in CHF) 1326 000 1326 000

60



* Exercises Number Exercise

2000 44 600 CHF 180.–2001 23 400 CHF 180.–

2 000 CHF 380.–25 400

2002 0

Options outstanding as per Dec. 31, 2002 Issue date Exercise period Exercise price

3 000 16.3.2000 16.3.2001 - 16.3.2003 CHF 380.–1 000 16.3.2000 16.3.2002 - 16.3.2003 CHF 380.–5 000 16.3.2000 16.3.2001 - 31.3.2003 CHF 330.–1 000 16.3.2000 16.3.2002 - 31.3.2003 CHF 330.–

10 000

19 Employee stock option plan

The Group has an employee stock option planfor executive personnel. In defining the conditionsof the plan, consideration was given to the objec-tive of securing employees' long-term loyalty andcreating incentives. A lock-in period of several yearsand an exercise price above the current share

price was therefore laid down for all plan partici-pants. The expense incurred in issuing shares inconnection with the exercise of employee stock options is not taken to income. The exercise prices of the options will not be adjusted.

2002 2001 2000

Options outstanding at the beginning of the year 10 000 35 400 68 000Options issued 0 0 12 000Exercised * 0 - 25 400 - 44 600Expired 0 0 0Options outstanding at the end of the year 10 000 10 000 35 400

61


20 Transactions with associated persons

with principal shareholder Dr. Hans Widmer:

Cash loan

In 2000, Dr. Hans Widmer, Chairman of theBoard of Directors of Schweiter Technologies,granted the company a shareholder loan of CHF 15million in connection with the acquisition of the Ismeca Group. As of December 31, 2002, the loandebt owed to Hans Widmer still amounts to CHF12.5 million. CHF 2.5 million was repaid during2000.The interest rate is in line with standard market conditions and stood at 2.5% during theyear under review (previous year: 3%). Interest is paid annually. No fixed term to maturity was agreed. No collateral was lodged. The repaymentdate will be determined by the capital requirementsof the company.

Securities lending

2000 business year:Before the end of 2000, a further 17.2% stake in Ismeca, valued at CHF 100.5 million was acquired,bringing the shareholding to 67.2% as of December31, 2000. The transaction was financed by meansof a share loan from Dr. Hans Widmer. In returnhe was credited with a claim under a loan agree-ment amounting to the current market value of thenumber of shares loaned. This loan (as a debt of acertain number of Schweiter shares) was reportedon the balance sheet as a liability toward associa-tes. Under a contractual agreement, the entire loan is to be repaid in the form of the same num-ber of Schweiter shares so that once the Ismeca takeover has been completed Dr. Hans Widmer will once again be left with the same number ofSchweiter shares as he originally held. The numberof shares necessary to fulfil this agreement was created by the company by drawing on the author-ized capital (December 10, 2001).

2001 business year:Acquisition of a further 10.1% stake in Ismeca during the course of 2001. These additional stakes

in Ismeca were acquired along similar lines to thetransaction in 2000 by means of a share-backed loan from Dr. Hans Widmer. The total number ofSchweiter shares (177 397) needed by the companyin order to repay the share-backed loan from Dr. Hans Widmer were created by means of a capital increase drawing on the authorized capital(capital increase: December 10, 2001). A fall inSchweiter Technologies' share price during the intervening period resulted in extraordinary finan-cial income amounting to CHF 111.4 million at thetime of the capital increase / loan repayment.

2002 business year:No further transactions took place with Dr. HansWidmer. Apart from the fee of CHF 50,000 (pre-vious year: 20 000) paid to members of the Board ofDirectors and the interest payments on the above-mentioned cash loan of CHF 312 500 (previousyear: 375 000) he did not receive any emoluments.

With shareholder CREDIT SUISSE Group:

2002 business year:In January 2002, the remaining 22.7% stake in Ismeca Holding SA, La Chaux-de-Fonds was acqui-red from CREDIT SUISSE Group by means of a share swap (see 36 Purchase of investments in sub-sidiaries and 18 Share capital). In this connection,on March 15, 2002 a total of 251 275 Schweiter shares were reissued against a non-cash capital contribution. This transaction also includes pay-ment of the 3.75% stake in Ismeca Holding, whichwas likewise acquired by means of a share swap and non-cash capital contribution instead of by cashpayment as originally agreed.

Relationship with CREDIT SUISSE: The Schwei-ter Technologies Group enjoys a normal businessrelationship with CREDIT SUISSE Group as a bankwhich, for its part, exerts no influence whatsoeveron the Group's business operations. All transac-tions with CREDIT SUISSE Group are effected atstandard business/market prices and conditions(cash investment, payment transactions, granting of loans, forward exchange transactions, rents forbuildings, etc.).

62


23 Development expenses

Development expenses consists mainly of expenses on the development of new applicationsand products and also contains salary expenditureof CHF 9.1 million (previous year: CHF 9.7 million)

for staff working in development. All expenses inconnection with R & D activity are recorded on theincome statement.

22 Compensation for members of the Board of Directors and Management

All members of the Board of Directors, inclu-ding the Chairman, received an annual fee of CHF 50 000 (previous year: CHF 20 000). For 2002,the total compensation paid to the five-member Board of Directors amounted to CHF 250 000 (previous year CHF 100 000). This fee includes attendance of the periodic Board meetings (at leastfive per year) and of the corresponding divisionmeetings. The increase compared with the previousyear relates to the increase in the amount of timespent and in the number of meetings (additional division meetings).

For his executive duties as CEO of the IsmecaGroup, Mr. J.-P. Nardin received a fee of CHF122 128 in 2002 (January 1 - September 30, 2002).

Total remuneration of management memberscovers basic salaries, bonuses for the business yearin question and the estimated value of other bene-fits of a remunerative nature. For the 2002 busi-ness year, the total remuneration for the five management members amounted to CHF 1.794million (previous year: CHF 1.472 million).The maximum compensation amounted to CHF 0.543million (previous year: CHF 0.430 million). The contracts of employment of the acting members ofmanagement contain no agreement on the pay-ment of a severance benefit in the event of their departure. There are no contracts of employmentwith unusual periods of notice (more than oneyear). Apart from the payments listed, no furtherpecuniary benefits were provided.

24 Other operating expenses (in CHF 1000s) 2002 2001

Production overheads 4 581 11 802Sales and distribution 9 126 13 361After sales overheads 7 334 7 464Overheads relating to administration and capital taxes 10 063 12 275Cost of premises 5 009 6 511Total 36 113 51 413


21 Sales deductions (in CHF 1000s) 2002 2001

Commission payments on sales, commission 6 470 7 706Carriage, customs duties, packaging 5 153 4 431Other sales deductions 3 814 4 570Total 15 437 16 707

63


25 Other operating income (in CHF 1000s) 2002 2001

Earnings on sale of property, plant and equipment 113 -

26 Depreciation (in CHF 1000s) 2002 2001

Depreciation of property, plant and equipment 5 018 8 621Decrease in the value of property, plant and equipment 1 326 1 085Depreciation of intangible assets 30 20Restructuring expenses fixed mortgage sale of property 796 -Proportion of depreciation of property, plant and equipment from divestment of RTC (included in restructuring expenses) - - 1 350Total 7 170 8 376

Goodwill amortization / impairment loss (in CHF 1000s) 2002 2001

Semiconductor:Ordinary amortization of goodwill 1 715 6 571Impairment loss (decrease in value) IAS 36 23 841 92 035Total for Ismeca Semiconductor 25 556 98 606

Automation:Ordinary amortization of goodwill 1 141 1 301Impairment loss (decrease in value) IAS 36 19 963 4 438Total for Ismeca Automation 21 104 5 739

Total amortization of goodwill / impairment loss for Ismeca 46 660 104 345

Reintroduced amortization of goodwill for RTC - - 137

Total amortization of goodwill / impairment loss 46 660 104 208

27 Goodwill amortization / impairment loss

The Ismeca participation and goodwill weresubjected to impairment tests on December 31,2001 and 2002. The changed market environmentin Ismeca's Semiconductor division (since 2001) andAutomation division (mainly in 2002), coupled witha sharp fall in sales in 2002 and a cyclical slump indemand pointed to the need for such a test. As ofDecember 31, 2002 the goodwill on the estimatedvalue in use, as stated on the balance sheet, calcu-lated on the basis of anticipated future cash flows

discounted by 12% (unchanged compared with pre-vious year) was written down. The previous year,the reported goodwill on the net market value,which was higher than the estimated value in use,derived from the virtually simultaneous capital mar-ket transaction with CREDIT SUISSE (see 18 Sharecapital), was discounted as a realizable amount.

The remaining amount of goodwill relates toIsmeca Semiconductor and comes to CHF 6.2 million with a planned amortization over a further17.5 years. The goodwill amortization presents thefollowing picture:

35

557

64


28 Restructuring expenses

Restructuring operations in 2002

Restructuring expenses incurred in 2002 wererecorded under the corresponding expenses positions in the ordinary operating profit, since theyare predominantly attributable to structure and capacity adjustments in the Ismeca Semiconductordivision, where they are considered not as one-offexpenses, but as part of the cyclical business. Furthermore, in the Satis Vacuum division the restructuring expenses incurred in addition to theprovisions as of December 31, 2001 were record-ed in the ordinary operating profit.

In 2002, Ismeca took the decision to close itsUS Semiconductor production site and cut back itsUS Automation infrastructure. At the same time,jobs were reduced at Ismeca in Switzerland in response to the downturn in the industry. Ismecahas therefore reduced the value of some property,plant and equipment in the US by CHF 1.326 mil-lion to estimated liquidation values. Under depre-ciations Ismeca has also recorded expenditure ofCHF 796,000 in connection with the terminationof a fixed mortgage on land in the USA.

The announced production site reorganiza-tion at Ismeca Semiconductor resulted in deprecia-tion losses of CHF 1.085 million on fixed assets andstaff severance payments of CHF 2.504 million.

These costs (including restructuring reserves ofCHF 780 000) were charged to the operating result since capacity adjustments at Ismeca Semi-conductor are not considered as one-off items.

Restructuring expenses (in CHF 1000s) 2001

Loss from disposal of RTC 3 154Impairment loss on inventories, work in progress and fixed assets 5 455Closure / relocation costs 2 389Total restructuring costs RTC 10 998Writeback of restructuring reserve - 993Restructuring of RTC Systems 10 005Restructuring of Satis USA distribution system 338Restructuring expenses SSM Textile Machinery 483Total restructuring expenses 10 826


Restructuring operations in 2001

The restructuring costs incurred in 2001 relate mainly to Satis Vacuum. In response to a huge change in demand in the telecommunicationsindustry, it was decided to discontinue the devel-opment and production of equipment for fibre

optic filters and sell back RTC Systems Ltd., ac-quired in 2000. The precisions optics business was relocated to other Satis Group sites and is beingcontinued there.

65


30 Financial expenses (in CHF 1000s) 2002 2001

Interest expenses on bank loans, commission, discount interest purchase price debt 2 712 5 102Exchange loss 3 301 1 876Interest expenses on discounting of documentary credits 113 255Interest expenses on leasing obligations 17 250Share of loss accounted for by non-consolidated participations 74 344Total 6 217 7 827

the authorized capital (see 20 Transactions with associated persons).

The extraordinary income of CHF 111.4 mil-lion in 2001 resulted from the writeback of the shareholder loan repayable in shares by drawing on

29 Financial income (in CHF 1000s) 2002 2001

Interest income 1 236 1 748Realized exchange gains 2 217 1 905Extraordinary financial income - 111 358Share of result accounted for by non-consolidated participations - 3Total 3 453 115 014

31 Other income (in CHF 1000s) 2002 2001

Old export financing facilities - 4Income from sale of property, plant and equipment - 311Other out-of-period income - 62Total - 377

Deferred taxes are attributable to differencesbetween the standard Group valuation and the taxvaluation in the individual statements. The dif-ferences are mainly due to the use of declining balance method of depreciation and the creation of

reserves on inventories, as approved for tax purposes. The following table shows the differencebetween effective tax expenditure and the mean taxexpenditure anticipated on the basis of local tax rates (Page 66):

32 Income taxes (in CHF 1000s) 2002 2001

Current taxes 5 206 2 274Deferred taxes 517 305Total 5 723 2 579

20

66



2002: in 2002, deferred taxes assets were valueadjusted by CHF 8.9 million (included in Other) via tax expenditure, as restructuring measures at Ismeca USA mean that in future it will no longer bepossible to use losses carried forward to the relevantextent. For new losses, losses carried forward wereonly capitalized where their use was presumed to be very likely.

2001: The non-taxable earnings comprise main-

ly tax-neutral internal restructuring and reorganiza-tion gains accruing in 2001. However, losses were sustained which, above all at holding companies, cannot be used in full as tax offsets against future earnings. As a consequence, no deferred tax posi-tion was created.

No additional taxes were set aside for non-distributed earnings of foreign group companies, assuch earnings have been earmarked for reinvestment.

Income taxes (in CHF 1000s) 2002 2001

Loss/earnings before tax and minority interests - 42 942 10 747Mean tax rate anticipated 22.1% 22.7%Mean tax expenditure anticipated - 9 490 2 440Difference versus local tax rates 2 099 - 267Non-taxable earnings - 1 985 - 6 767Non-deductible expenditure 1 066 791Non-capitalized losses carried forward and their appropriation 6 732 6 332Permanent and timing differences - 948 231Amortization of goodwill, local - 238 - 244Other / value adjustment deferred taxes assets 8 487 63Effective tax expenditure 5 723 2 579

Effective tax rate n.a. 24.0%

A value adjustment of CHF 8.9 million was performed on deferred tax assets via tax expendi-ture since they can no longer be used as a result of restructuring.

As of December 31, 2002, the Group had unutilized tax losses carried forward of CHF 46.7 mil-

lion, which could be offset against future earnings. Ofthese, deferred taxes amounting to CHF 1.8 millionwere capitalized for a proportion of around CHF 8million. The other losses carried forward were notcapitalized because of uncertainty over whether thefuture earnings will materialize.

Position as at January 1Change in scope of consolidationForeign currency differencesRecording in shareholders' equityUnused amounts reversed and released to incomeAdditional provisions charged to income


Provisions Total 2001

8 6160

-1391

-634

0

8 060

33 Deferred tax assets(in CHF 1000s) Other

1513

-295

-1003

215

OCIIAS 39

Capitalized taxlosses carried

forward

91

-91

0

2 204

-327

-1 877

0

0

4 252

-987

-6 005

4 323

1583

Total 2002

8 0600

-1609-91

-8 885

4 323

1 798

67


The tax losses carried forward will expire as follows: (in CHF 1000s) 2002 2001

– 1 year 662 241– 2 to 5 years 12 110 4 922– in more than 5 years' time 33 988 27 877Total 46 760 33 040Tax losses carried forward which expired without being used during the business year under review 241 0

35 Disposal of a participation

No disposals of participations took place in 2002.

As at September 30, 2001, the Group sold its investment in RTC Systems Ltd., Biggleswade,

UK (acquired in 2000) back to the former ownerin connection with restructuring measures taken.The net assets were deconsolidated effective September 30, 2001.

Disposal of a participation (in CHF 1000s) 30.9.01Net assets 3 367Sales proceeds - 76Loss on sale 3 291Recovery of goodwill amortization - 137Loss on disposal 3 154Cash proceeds from sale 76Decrease in cash and cash equivalents - 3Net cash flow from disposal of participation 73

The provisions for deferred income taxes were predominantly consumed by utilization viawriteback of local valuation reserves to reduce tax

losses incurred in 2002. Deferred tax liabilitiesmainly resulted from tax-allowable valuation differ-ences on inventories and bad debt allowances.

Of the tax losses carried forward expiring in more than 5 years' time, CHF 3.2 million (previous year CHF1.7 million) will never expire.

Position as at January 1Change in scope of consolidationForeign currency differencesRecording in shareholders' equityUnused amounts reversed and released to incomeAdditional provisions charged to income


Accelerated tax depreciation Total 2001

6 7170

120

-238

0

6 491

34 Deferred tax liabilities(in CHF 1000s) Other

-464

464

0

OCI IAS 39

Tax provisions

0

141

141

2 256

-240

-1276

33

989

4 699

-10

-4 540

8

166

Total 2002

6 4910

-25141

-5 352

41

1296

68



37 Loss/earnings per share 2002 2001

The calculation of earnings per share before and after dilution is based on the following data:

Net loss / income (in CHF 1000s) - 48 665 4 227

Number of shares– Average number of shares before dilution 1385 685 1016 000– Average number of shares factored into dilution 67 987 142 240– Average number of shares after dilution 1453 672 1158 240

Loss/earnings per share before dilution (in CHF) - 35.10 4.20Loss/earnings per share after dilution (in CHF) - 35.10 3.70

Two of Ismeca’s minority shareholders have been granted put options to sell the remaining 27.7%of shares to Ismeca. The acquisition took place in January 2002 on the basis of a share exchange in accordance with an income-based formula. The

options were exercised in 2001 and the capital increase was effected on March 15, 2002 by meansof a contribution in kind drawing on the authorizedcapital.

717

36 Purchase of subsidiaries (in CHF 1000s) 2002 2001

Goodwill acquired 4 105 24 660Minority interests 28 372 13 221Total consideration 32 477 37 881

Paid by: – Shareholder loan/securities loaned (capital increase in 2001) - 37 271– Capital increase in 2002 39 357 -– Reduction in purchase price commitment - 7 370 -– Other liabilities - 408 410– Cash settlement 898 200

Total 32 447 37 881

Decrease in cash and cash equivalents - 898 - 200

In 2002, the remaining shareholdings in Ismeca were acquired (see Changes in scope of consolidationand 18 Share capital).


69

38 Financial instruments and bank balances

The Group engages in forward exchange trans-actions to hedge against exchange rate risks. Theinstruments are not used for speculative purposes.As of December 31, 2002, the maturities of out-

Forward exchange transactions (in CHF 1000s) 2002 2001

Total amount of outstanding forward exchange transactions– Sale of US dollars for CHF, contract value 22 819 26 297– Average exchange rates per USD 1.4943 1.6636

of which outstanding forward exchange transactions for hedging future incoming payments (cash flow hedges) 8 296 18 935– Average exchange rates per USD 1.4985 1.6481

Net fair value (market value) of forward exchange transactions for cash flow hedges 7 682 19 331

Net gain/ loss recorded as OCI in shareholders' equity 614 - 396

December 31, 2001.Non-realized gains and losses from derivative

financial instruments to hedge balance sheet posi-tions are attributed to the latter with an impact onincome.

Since January 1, 2001 non-realized gains andlosses from cash flow hedges have been credited /debited direct as “OCI, Other comprehensive income / expense” to shareholders' equity, (tax adjusted 77%): gain of CHF 473 000 as of December 31, 2002, loss of CHF 305 000 as of

standing forward transactions ranged from 2 weeksto 9 months (previous year between 2 weeks and10 months).

39 Contingent liabilities (in CHF 1000s) 2002 2001

Warranties and guarantees 3 054 9 921Recourse claims and discounting facilities 617 135Total 3 671 10 056

Commitments to take delivery: Under pur-chase contracts for machine parts and raw materials,commitments to take delivery amounting to CHF

27.3 million (previous year CHF 42.3 million) and withmaximum maturities of 18 months have been enter-ed into in the course of ordinary business activities.

Breakdown of bank balances by currencies (in CHF 1000s) 2002 2001

CHF 26 250 50 278EUR 13 766 6 912USD 6 844 8 662Other 1 356 1 614Total 48 216 67 466

70



The Board of Directors of Schweiter Techno-logies approved the present annual financial state-ments at its meeting on March 19, 2003. The General Meeting will give the annual financial statements its final approval on May 14, 2003.

41 Off balance sheet liabilities and balances arising from rental and leasing contracts

Commitments (in CHF 1000s) 2002 2001

– due in 1 year's time 3 256 3 251– due in 2 to 5 years' time 5 633 6 997Total 8 889 10 248

42 Events occurring after the balance sheet date

There are no events after the balance sheet date to report.

The commitments consist mainly of rental agreements for buildings used by the company itself.The average term of the agreements is 2.5 years (pre-

vious year: 3.2 years). Leasing obligations amountingto CHF 1.5 million for IT are included.

Credit balances (in CHF 1000s) 2002 2001

– due in 1 year's time 341 341– due in 2 to 5 years' time 480 720Total 821 1 061

The credit balances consist of sublet premises.Half of the annual rental income comes from rentalagreements of unlimited duration and periods of

notice of 6 months. In the first year this rental income is only taken into account for six months.

40 Rights of lien (in CHF 1000s) 2002 2001

Assets encumbered by rights of lien 23 908 28 025

of which: Land and buildings: – Net book value 23 798 27 412– Right of lien 21 910 22 868– Collateral amount 10 962 17 095

71


To the General Meeting of the Shareholders ofSchweiter Technologies AG, Horgen

As Group auditors, we have audited the consolidated financial statements (balance sheet, income statement, cash flow statement, statementof changes in shareholders' equity and notes of theSchweiter Technologies Group for the year endedDecember 31, 2002.

These consolidated financial statements are theresponsibility of the Company's Board of Directors.Our responsibility is to express an opinion on these consolidated financial statements based onour audit. We confirm that we meet the legal requirements concerning professional qualificationand independence.

Our audit was conducted in accordance withauditing standards promulgated by the Swiss pro-fession and with the International Standards on Auditing issued by the International Federation ofAccountants (IFAC). Those standards require thatwe plan and perform the audit to obtain reason-able assurance about whether the consolidated financial statements are free from material mis-statement. We have examined on a test basis evidence supporting the amounts and disclosures

in the financial statements. We have also assessedthe accounting principles used, significant estimatesmade by management and the overall consolidatedfinancial statement presentation. We believe thatour audit provides a reasonable basis for our opinion.

In our opinion, based on our audit and on the reports of other auditors, the consolidated financial statements give a true and fair view of thefinancial position, the results of operations and thecash flows and comply with International FinancialReporting Standards (IFRS) and Swiss law.

We recommend that the consolidated finan-cial statements submitted to you be approved.

Zurich, March 19, 2003

Deloitte & Touche AG

Gerhard Ammann Daniel O. FlammerSwiss Certified Swiss Certified Accountant AccountantAuditor in charge

Report of the Group auditors

72


73


Annual financial statements of Schweiter Technologies AG

Balance sheet

Income statement

Notes to the annual financial statements

Notes to the balance sheet and the income statement

Proposal of the Board of Directors

Report of the statutory auditors

74

75

76 – 79

76 – 79

80

81

74

Schweiter Technologies AG

Assets (in CHF)

Current assetsCash and cash equivalentsTrade receivables Receivables due from third parties Receivables due from consolidated companiesTotal current assets

Fixed assetsInvestmentsLoans to consolidated companies Total fixed assets

Total assets

Liabilities (in CHF)

Short-term liabilitiesShort-term bank liabilitiesShort-term interest-bearing liabilities toward Group and shareholdersOther liabilitiesOther liabilities toward Group and associatesAccruals and deferred incomeTotal short-term liabilitiesLong-term interest-bearing liabilities toward GroupProvisionsTotal long-term liabilities

Total liabilities

Shareholders' equity Share capitalPremiumStatutory reservesUnappropriated reservesReserves for treasury sharesEarnings carried forwardNet loss/ incomeTotal shareholders' equity

Total liabilities

2002

2 612 03128 1002 005

703 7053 345 841

141 634 93317 005 814

158 640 747

161 986 588

2002

5 127 053

12 826 719147 827

-431 944

18 533 54313 727 000

150 00013 877 000

32 410 543

14 436 720107 380 834

2 400 0001 071 000

-41 964 636

- 37 677 145129 576 045

161 986 588

Balance sheet as at December 31

1

23

45

6

7

810

For additional details see notes to the annual financial statements▲

2001

14 808 3973 395

61 8271 654 752

16 528 371

170 805 03315 992 400

186 797 433

203 325 804

2001

23 857 487

13 012 1931 056 547

36 211 410290 471

74 428 108750 000250 000

1 000 000

75 428 108

11 923 97070 538 0902 329 0001 071 000

53 70036 793 4275 188 509

127 897 696

203 325 804

75


2002

23 600 000915 636

1 096 6001 104 000

26 716 236

- 1 679 404- 718 892- 411 400- 600 200

- 61 205 370- 37 899 030

2 852- 1 387

- 37 897 565

220 420- 37 677 145

(in CHF)

Income from investmentsFinancial incomeRental incomeManagement fee incomeTotal income

Financial expensesAdministrative expensesPersonnel expenses Expenses on premisesDepreciation on investments (impairment loss)Operating profit

Other incomeOther expensesIncome before taxes

Income taxesNet loss / income

Income statement as at December 31

111213

1415

1617

For additional details see notes to the annual financial statements▲

2001

18 850 000112 952 320

1 028 0901 363 700

134 194 110

- 3 520 511- 795 096- 459 926- 510 200

- 106 635 39522 272 982

996 656- 17 955 466

5 314 172

- 125 6635 188 509

2 Investments (in CHF 1000s) Nominal share capital % 2002 2001

Schärer Schweiter Mettler AG (SSM), Horgen 6 000 100 6 000 6 000SSM Vertriebs AG, Baar 100 100 100 100Hacoba Spultechnik GmbH, Wuppertal (SC in EUR) 25 100 6 420 6 420Satis Vacuum Holding AG, Baar 5 000 100 29 285 29 285Ismeca Holding SA, La Chaux-de-Fonds 5 000 100 99 830 129 000Total 141 635 170 805

76

1 Cash and cash equivalents

The year-on-year decline stems from a CHF 14million part payment of the purchase price for Ismeca at the beginning of 2002.



million in connection with the acquisition of the Ismeca Group. CHF 2.5 million was repaid during2000.The interest rate is in line with standard market conditions and stood at 2.5% during theyear under review (previous year: 3%). Interest is paid annually. No fixed term to maturity was agreed. The repayment date will be determined by the capital requirements of the company. Nocollateral was lodged.

6 Other liabilities toward Group and associates

As at December 31, 2002 all purchase pricedebts arising from the acquisition of the IsmecaGroup had been paid back.

7 Long-term interest-bearing liabilities toward Group

Liabilities toward subsidiaries were largely off-set against dividend claims in 2003.

3 Loans to consolidated companies

Receivables due from consolidated companiesdeclined by the same amount as loans to consoli-dated companies increased..

4 Short-term bank liabilities

Strong decrease in short-term bank liabilitiesfollowing repayment of bank loan.

5 Short-term interest-bearing liabilities towards Group and shareholders

This position essentially comprises the shareholder loan granted by Dr. Hans Widmer,which as of December 31, 2002 still amounted toCHF 12.5 million.

In 2000, Dr. Hans Widmer, Chairman of theBoard of Directors of Schweiter Technologies,granted the company a shareholder loan of CHF 15

77


The following shareholders hold more than 5% of voting rights (pursuant to Art. 663c of the Swiss Code of Obligations):

Percentage of shares held 2002 2001

Dr. Hans Widmer / Hans Widmer Management AG, Baar 24.9 % 29.4 %CREDIT SUISSE Group, Zurich 16.2 % -Basel government employees' pension fund, Basel > 5.0 % 5.0 %Tuxedo Invest, Zug < 5.0 % < 5.0 %

Capital increases in 2002: Under the capital increase of March 15, 2002, 251 275 new shares were created from the authorized capital and issuedagainst a contribution in kind in the form of the remaining Ismeca shareholdings (22.7% plus 3.75%in place of the cash payment originally agreed upon)by CREDIT SUISSE Group companies. Moreover,25 400 shares created from the conditional capitalfor employee options exercised in 2001 were registered. The latter 25 400 shares were countedtoward the share capital as of December 31, 2001,and deducted from the conditional capital. The contribution in kind was valued at CHF 155 perSchweiter share, which resulted in a premium ofCHF 36.8 million.

The reserve for treasury shares of CHF 53 700was written back at the beginning of 2002 upon issue to staff / sale of said shares and credited toearnings carried forward.

Authorized capital: As of December 31, 2002the Board of Directors is authorized to issue300 000 bearer shares by May 15, 2004. The sub-

scription right may be excluded for the purpose of taking over companies by share swaps, or for financing the acquisition of companies, parts ofcompanies or participations or new investmentprojects of the company.

Conditional capital: as of December 31, 2002the company's share capital may be increased exrights by up to 132 600 bearer shares, which mustbe fully paid up; a) up to a sum of CHF 326 000through the exercise of employee option rights andb) up to a sum of CHF 1 million through exerciseof option or conversion rights granted in conjunc-tion with bonds or similar paper issued by the com-pany. So far, no such bonds have been issued. Noemployee options were exercised in 2002; 10 000unexercised options were outstanding as of De-cember 31, 2002 (see 9 Employee stock optionplan).

Bearer shares are listed on the main stockexchange in Zurich. Security number: 1075 492; Telekurs: SWTQ; Reuters: SWTZ.

8 Share capital 2002 2001

Number of bearer shares issued with a par value of CHF 10 1443 672 1192 397Share capital as at December 31 (in CHF) 14 436 720 11 923 970Authorized capital (in CHF) 3 000 000 2 716 030Conditional capital (in CHF) 1326 000 1326 000

* Exercises Number Exercise price2000 44 600 CHF 180.–2001 23 400 CHF 180.–

2 000 CHF 380.–25 400

2002 0

Options outstanding as per Dec. 31, 2002 Issue date Exercise period Exercise price3 000 16.3.2000 16.3.2001 - 16.3.2003 CHF 380.–1 000 16.3.2000 16.3.2002 - 16.3.2003 CHF 380.–5 000 16.3.2000 16.3.2001 - 31.3.2003 CHF 330.–1 000 16.3.2000 16.3.2002 - 31.3.2003 CHF 330.–

10 000

78


12 Financial income (in CHF 1000s) 2002 2001

Interest income from Group companies 818 1 357Interest paid by banks 28 228Extraordinary financial income (from shareholder loan/capital increase) - 111 358Realized exchange gains 70 9Total 916 112 952

10 Premium

The higher premium stems largely from the ca-pital increase on March 15, 2002 to finance the ac-quisition of the remaining shares in Ismeca by meansof a non-cash contribution (see also 8 Share capital).

11 Income from investments

Income from investments includes the divi-dends paid by the subsidiaries to the holding com-pany

9 Employee stock option plan

The Group has an employee stock option planfor executive personnel. In defining the conditionsof the plan, consideration was given to the objec-tive of securing employees' long-term loyalty andcreating incentives. A lock-in period of several yearsand an exercise price above the current share pricewas therefore laid down for all plan participants.

Upon the exercise of options the nominal value per share is credited to the share capital and anyexcess subscription amount is credited to the pre-mium. The fair value of the employee options is notcharged to the income statement of the companyin question either when the employee option is issued or when it is exercised. The exercise pricesof the options were not adjusted.

2002 2001 2000

Options outstanding at the beginning of the year 10 000 35 400 68 000Options issued 0 0 12 000Exercised * 0 - 25 400 - 44 600Expired 0 0 0Options outstanding at the end of the year 10 000 10 000 35 400


79


mated value in use, as stated on the balance sheet,calculated on the basis of anticipated future cashflows discounted by 12% (unchanged comparedwith previous year) was written down. The previous year, the reported goodwill on the netmarket value, which was higher than the estimatedvalue in use, derived from the virtually simultaneouscapital market transaction with CREDIT SUISSE(see 8 Share capital), was discounted as a recover-able amount.

The recorded impairment loss amounts toCHF 61.2 million (previous year: 2001 CHF 106.6million).

18 Contingent liabilities

In connection with credit facilities extended to the subsidiaries, the holding company has un-dertaken a guarantee in an amount up to a total ofCHF 70 million. Of this amount, a total of CHF 16million (cash lines: CHF 7.4 million, mortgages andguarantees: CHF 3.1 million) had been drawn on bysubsidiaries as at December 31, 2002.

19 Events occurring after the balance sheet date

There are no events after the balance sheet date to report.

15 Administrative expenses

All members of the Board of Directors, in-cluding the Chairman, received an annual fee of CHF 50 000 (previous year: CHF 20 000). For 2002,the total compensation paid to the five-member Board of Directors amounted to CHF 250 000 (previous year: CHF 100 000). This fee covers attendance of the periodic Board meetings (at leastfive per year) and of the corresponding divisionmeetings. The increase compared with the previousyear relates to the increase in the amount of timespent and in the number of meetings (additional division meetings).

16 Expenses on premises

The rental agreement with CREDIT SUISSSEGroup is valid until December 31, 2005.

17 Depreciation on investments/impairment loss

The Ismeca participation was subjected to im-pairment tests on December 31, 2001 and 2002.The changed market environment in Ismeca's Semiconductor and Automation divisions, coupledwith a sharp fall in sales in 2002 and a cyclical slumpin demand pointed to the need for such a test. As of December 31, 2002 the goodwill on the esti-

13 Rental income (in CHF 1000s) 2002 2001

Rental income from Group companies 600 600Rental income from third parties 497 428Total 1 097 1 028

14 Financial expenses (in CHF 1000s) 2002 2001

Interest expenses Group companies 526 304Interest expenses third parties, discounting of purchase price debt 497 2 263Bank interest 491 636Realized exchange losses 166 318Total 1 680 3 521

80


(in CHF) 2002

Earnings carried forward from previous year 41 964 636Net loss for 2002 according to income statement - 37 677 145

Earnings available to the General Meeting 4 287 491

Proposal

The Board of Directors proposes to the General Meetingof May 14, 2003 that no dividend be paid for the 2002 business year -

Appropriated to statutory reserves -Earnings carry forward 4 287 491

Concerning the appropriation of the availableearnings of Schweiter Technologies AG (2002 business year)

Proposal of the Board of Directors

To the General Meeting of the Shareholders ofSchweiter Technologies AG, Horgen

As statutory auditors, we have audited theaccounting records and the financial statements (balance sheet, income statement and notes) ofSchweiter Technologies AG, Horgen, for the yearended December 31, 2002.

These financial statements are the responsibi-lity of the board of directors. Our responsibility isto express an opinion on these financial statementsbased on our audit. We confirm that we meet thelegal requirements concerning professional qualifi-cation and independence.

Our audit was conducted in accordance withauditing standards promulgated by the Swiss pro-fession, which require that an audit be planned andperformed to obtain reasonable assurance aboutwhether the financial statements are free from ma-terial misstatement. We have examined on a testbasis evidence supporting the amounts and disclo-sures in the financial statements. We have also

assessed the accounting principles used, significantestimates made and the overall financial statementpresentation. We believe that our audit provides areasonable basis for our opinion.

In our opinion, the accounting records, finan-cial statements and the proposed appropriation ofavailable earnings comply with Swiss law and thecompany’s articles of incorporation.

We recommend that the financial statementssubmitted to you to be approved.

Zurich, March 19, 2003

Deloitte & Touche AG

Gerhard Ammann Daniel O. FlammerSwiss Certified Swiss Certified Accountant AccountantAuditor in charge

Report of the statutory auditors


81

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