ANNUAL REPORT 2017

Notes to the Financial Statements of feintool international holding ag

as at December 31, 2017

Principle

General

Feintool International Holding AG has its headquarters in Lyss, Switzerland. The 2017 financial statements were prepared in accordance with the provisions of Swiss accounting law (Art. 32 of the Swiss Code of Obligations). The main applied valuation principles that are not required by law are described in the following.

Treasury shares

Treasury shares are recognized at the time of acquisition at cost as a minus line item in equity. In the event of resale, the profit or loss is taken to equity and reported under free retained earnings.

Capital participation plans

Treasury shares are used for share-based payments to the Board of Directors and employees. They are recognized at a fixed price in the regulations for the issue and transferred to the entitled beneficiary. The corresponding expense including social security contributions is reported in personnel expenses.

Omission of cash flow statement and additional information in the Notes to the Financial Statements

Feintool International Holding AG prepares its consolidated financial statements in accordance with a recognized standard for accounting (IFRS) and consequently omits additional disclosures in the Notes to the Financial Statements and a report on the cash flow statement in these financial statements as set forth in the statutory provisions.

1 Trade and other receivables

12/31/2017

12/31/2016

in CHF 1 000

in CHF 1 000

Accounts receivable – third parties

507

180

Accounts receivable – intercompany

13 938

8 302

Interest bearing receivable – intercompany 1)

4 787

Total trade and other receivables

14 445

13 269

1) Interest bearing receivable related to zero balance cash pools

2 prepaid expenses and accrued income

12/31/2017

12/31/2016

in CHF 1 000

in CHF 1 000

Prepaid expenses – third parties

1 094

515

Prepaid expenses – intercompany

201

218

Total prepaid expenses and accrued income

1 295

733

3 property, plant and equipment

12/31/2017

12/31/2016

in CHF 1 000

in CHF 1 000

Furniture and fixtures

35

72

Automotive

8

10

Other fixed assets

155

190

Total property, plant and equipment

198

272

4 intangible assets

12/31/2017

12/31/2016

in CHF 1 000

in CHF 1 000

Cost for research and development

3 360

1 692

Software

69

108

Other intangible assets

36

72

Total intangible assets

3 465

1 872

5 financial assets

12/31/2017

12/31/2016

in CHF 1 000

in CHF 1 000

Financial assets – intercompany

62 809

40 678

Total financial assets

62 809

40 678

6 investments

Company

Locations, country

Capital

December 31, 2017

December 31, 2016

Consoli dation method

Feintool International Holding AG

Lyss, CH

CHF

44 629 710

100 %

100 %

Full

Feintool Automotive System Parts (Tianjin) Co. Ltd. 1)

Tianjin, CN

EUR

10 500 000

100 %

n/a

Full

Feintool Engineering Co. Ltd.

Atsugi, J

JPY

400 000 000

100 %

100 %

Full

Feintool Equipment AG

Lyss, CH

CHF

100 000

100 %

100 %

Full

Feintool Fineblanking Technology (Shanghai) Co., Ltd.

Shanghai, CN

USD

2 500 000

100 %

100 %

Full

Feintool Holding GmbH 2)

Bayreuth, GER

EUR

818 000

100 %

100 %

Full

Feintool System Parts Ettlingen GmbH

Ettlingen, GER

EUR

766 937

100 %

100 %

Full

Feintool System Parts Jena GmbH

Jena, GER

EUR

3 068 000

100 %

100 %

Full

Feintool System Parts Obertshausen GmbH

Obertshausen, GER

EUR

1 000 000

100 %

100 %

Full

Feintool System Parts Oelsnitz GmbH

Oelsnitz, GER

EUR

550 000

100 %

100 %

Full

Feintool System Parts Ohrdruf GmbH 3)

Ohrdruf, GER

EUR

2 556 000

100 %

100 %

Full

Feintool Intellectual Property AG in Liq. 4)

Lyss, CH

CHF

100 000

n/a

100 %

Full

Feintool Japan Co. Ltd

Atsugi, J

JPY

225 000 000

100 %

100 %

Full

Feintool Precision System Parts (Taicang) Co. Ltd. 5)

Taicang, CN

USD

20 800 000

100 %

100 %

Full

Feintool System Parts Lyss AG

Lyss, CH

CHF

3 100 000

100 %

100 %

Full

Feintool System Parts Most s.r.o 6)

Most, CZ

CZK

100 000 000

100 %

100 %

Full

Feintool Technologie AG

Lyss, CH

CHF

2 000 000

100 %

100 %

Full

Feintool (Chongquing) Technology Co. Ltd. in Liq. 7)

Chongquing, CN

USD

61 000

100 %

100 %

Full

Feintool U.S. Operations, Inc.

Cincinnati, USA

USD

31 421 631

100 %

100 %

Full

Feintool Cincinnati, Inc.

Cincinnati, USA

USD

3 000 000

100 %

100 %

Full

Feintool Equipment Corp.

Cincinnati, USA

USD

50 000

100 %

100 %

Full

Feintool New York, Inc.

White Plains, USA

USD

500 000

100 %

100 %

Full

One Holland Ave. Development LLC

Cincinnati, USA

USD

100 %

100 %

Full

Feintool Tennessee, Inc.

Nashville, USA

USD

100 %

100 %

Full

HL Holding AG

Lyss, CH

CHF

100 000

100 %

100 %

Full

Columba GmbH 8)

Amberg, D

EUR

325 000

n/a

100 %

Full

Vireo GmbH 8)

Jena, GER

EUR

597 600

100 %

100 %

Full

1) On April 13, 2017, Feintool International Holding AG, Lyss, acquired Schuler (Tianjin) Metal Forming Technology Center Co., Ltd. in Tianjin (China). The name of the company was then changed to Feintool Automotive System Parts (Tianjin) Co., Ltd.

2) The headquarters of Feintool Holding GmbH was moved from Amberg, Germany to Bayreuth, Germany on February 10, 2017.

3) Feintool Holding GmbH holds a 60 % stake in Feintool System Parts Ohrdruf GmbH. The remaining 40 % is held by Feintool International Holding AG.

4) On May 10, 2017, the company Feintool Intellectual Property AG, Lyss which was placed in liquidation on March 21, 2016, has been removed from the commercial register.

5) The share capital of Feintool Precision System Parts (Taicang) Co., Ltd. was increased by kUSD 3 200 on January 6, 2016.

6) On October 12, 2016, Feintool International Holding AG, Lyss, founded Feintool System Parts Most s.r.o. in Prague. The headquarters was moved to Most (CZ) on September 13, 2017.

7) The dissolution of Feintool (Chongquing) Technology Co. Ltd. was applied for on January 1, 2015.

8) On October 12, 2017, Columbo GmbH, Amberg, merged with Vireo GmbH, Jena.

7 Current interest-bearing liabilities

12/31/2017

12/31/2016

in CHF 1 000

in CHF 1 000

Current interest bearing liabilities – third parties

8 190

1

Current interest bearing liabilities – intercompany 1)

49 127

24 547

Total current interest bearing liabilities

57 318

24 548

1) Interest bearing liabilities related to zero balance cash pools

8 trade and other current payables

12/31/2017

12/31/2016

in CHF 1 000

in CHF 1 000

Current liabilities – third parties

6 457

7 886

Current liabilities – related parties

157

158

Current liabilities – intercompany

1 228

891

Current liabilities – organs

13

Trade and other payables

7 842

8 948

9 accrued expenses and deferred income

12/31/2017

12/31/2016

in CHF 1 000

in CHF 1 000

Accruals for salary, bonus, overtime

4 066

2 034

Outstanding accounts payable

1 131

1 115

Tax accruals

388

1 696

Other accrued expenses

183

130

Accrued expenses – intercompany

250

306

Total accrued expenses and deferred expense

6 018

5 281

10 non-current Provisions

Non-current provisions include provisions for insurance payments in the amount of kCHF 370 (previous year kCHF 533) and provisions for anniversary benefits of kCHF 147 (previous year kCHF 131).

11 share capital

12/31/2017

12/31/2016

Number/CHF

Number/CHF

Number of shares

4 462 971

4 462 971

Nominal value

10

10

Share capital

44 629 710

44 629 710

12 Conditional capital – employee stock option plan

The disclosure of the conditional capital is represented in Note 27.2 on page 67 of the Notes to the Financial Statements.

13 AUTHORIZED SHARE CAPITAL

The disclosure of authorized share capital is reported in the Notes to the consolidated financial statements under Note 27.3 on page 67.

14 treasury shares

The disclosure of the treasury shares is represented in Note 27.4 on page 68 of the Notes to the Financial Statements.

15 operating income

2017

2016

in CHF 1 000

in CHF 1 000

Operating income – third party

388

277

Income from intercompany services

29 546

27 674

thereof licenses and patents

16 075

13 764

thereof other management services

6 171

7 084

thereof IT services

4 137

3 807

thereof internal services, building maintenance/services and staff restaurant

1 224

1 116

thereof other intercompany services

1 939

1 903

Total operating income

29 935

27 951

16 financial income

2017

2016

in CHF 1 000

in CHF 1 000

Investment income

307

Interest income – third party

31

63

Interest income – intercompany

817

649

Other finance income – intercompany

2 500

Foreign exchange gains

5 357

6 233

Total financial income

9 012

6 945

17 reversal of valuation allowance on investments

2017

2016

in CHF 1 000

in CHF 1 000

Reversal of valuation allowance on investments

8 000

12 000

Total reversal of valuation allowance on investments

8 000

12 000

18 personnel expenses

2017

2016

in CHF 1 000

in CHF 1 000

Salaries and wages

6 417

6 309

Employee welfare expenses

1 568

1 147

Other personnel expenses

2 583

940

Total personnel expenses

10 568

8 396

Feintool International Holding AG employed 40 staff at the end of the year (previous year 35).

19 other operating expenses

2017

2016

in CHF 1 000

in CHF 1 000

Research and development

3 056

3 273

Patents and licenses

266

220

Corporate communication and investor relations

705

676

Information technology

2 683

2 795

Consulting

1 119

677

Rent

482

510

Staff restaurant

442

503

Capital tax

300

312

Other expenses

655

496

Total other operating expenses

9 707

9 462

20 financial expenses

2017

2016

in CHF 1 000

in CHF 1 000

Interest expense – third party

265

77

Other finance costs – third party 1)

378

721

Foreign exchange losses – third party

7 497

5 568

Total financial expenses

8 140

6 366

1) Besides bank charges, other financial expenses include lead syndication commissions (annual amortization of establishing cost for the syndicated loan), valuation expenses from swap transactions and market making costs.

21 Contingent liabilities in favor of third parties

2017

2016

in CHF 1 000

in CHF 1 000

Guarantees and sureties for Group companies

16 205

13 893

Pledging of shares of Group companies within the scope of bank credit limits 1)

35 000

Subordination clauses in favor of subsidiaries

8 955

8 000

Joint and several liability as regards cash pooling

p.m.

p.m.

Joint and several liability as regards Swiss value added tax

p.m.

p.m.

1) The pledging of the shares of key subsidiaries in accordance with the syndicate agreement means that most of the Group's assets have been indirectly pledged in prior period.

22 Major shareholders

The disclosure of the major shareholders is represented in Note 34 on page 74 of the Notes to the Financial Statements.

23 SHAREHOLDINGS OF GROUP MANAGEMENT AND THE BOARD OF DIRECTORS INCLUDING RELATED PARTIES

12/31/2017

12/31/2016

Number of registered shares

Number of registered shares

Alexander von Witzleben, Chairman of the Board of Directors 1)

25 057

22 181

Dr. Michael Soormann, Deputy Chairman of the Board of Directors

Wolfgang Feil, Member of the Board of Directors 2)

n/a

Dr. Kurt E. Stirnemann, Member of the Board of Directors 2)

n/a

Thomas A. Erb, Member of the Board of Directors

Dr. Thomas Muhr, Member of the Board of Directors 3)

616 500

Dr. Rolf-Dieter Kempis, Member of the Board of Directors from April 19, 2016 on

Heinz Loosli, Member of the Board of Directors from April 25, 2017 on 4)

3 481

3 217

Total Board of Directors

28 538

638 681

Bruno Malinek, CEO from 1 September 2016

1 064

1 064

Dr. Thomas F. Bögli, CFO

1 247

3 098

Total Group Management

2 311

4 162

1) Held directly and indirectly; the 5 000 shares with a value of CHF 595 000 as remuneration for the 2017 financial year were assigned on January 4, 2018.

2) The previous members of the Board of Directors, Wolfgang Feil and Dr. Kurt E. Stirnemann waived re-election on April 25, 2017.

3) Held by a subsidiary of Muhr und Bender KG and Dr. Thomas Muhr Beteiligungs AG. On October 2, 2017, Muhr und Bender KG and Dr. Thomas Muhr disclosed official that it had reduced its holding of Feintool shares of 615 000 and had therefore fallen below the minimal reporting treshold of three percent.

4) Heinz Loosli was employed as CEO until August 31, 2016. He assumed the position of member of the Board of Directors on April 25, 2017. The 264 shares as remuneration for the financial year were assigned on December 20, 2017.

24 Liabilities to employee benefit plans

There was no liability to the pension fund as of December 31, 2017 (previous year kCHF 137).

25 Unrecognized lease liabilities

As at December 31, 2017, there were unrecognized lease liabilities of kCHF 2 194 (previous year kCHF 2 110).

26 Events after the balance sheet date

There were no significant events after the balance sheet date.

27 PROPOSAL by THE BOARD OF DIRECTORS

The Board of Directors will propose to the Annual General Meeting that a dividend of CHF 2.00 per registered share be paid (previous year CHF 2.00 per share) from the capital reserves in respect of the 2017 financial year. This corresponds to a maximum total dividend distribution of kCHF 8 926 (previous year kCHF 8 926). The amount of the dividend distribution depends on the amount of the dividend-eligible shares at the time of the distribution. No dividends will be distributed on treasury shares.

12/31/2017

in CHF

(Loss)/Gain carryforward from previous year

48 875 806

Result for the year

18 008 844

Available earnings

66 884 651

Allocation from general legal reserves from capital contributions

8 925 942

Payment of a dividend of CHF 2.00

-8 925 942

Gain Carryforward

66 884 651