ANNUAL REPORT 2018

Notes to the Financial Statements of feintool international holding ag

as at December 31, 2018

Principle

General

Feintool International Holding AG has its headquarters in Lyss, Switzerland. The 2018 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

12/31/2018

12/31/2017

in CHF 1 000

in CHF 1 000

Accounts receivable – third parties

281

507

Accounts receivable – intercompany

8 648

13 938

Interest bearing receivable – intercompany 1)

2 649

Total trade and other receivables

11 578

14 445

1) Interest bearing receivable related to zero balance cash pools

2 prepaid expenses and accrued income

12/31/2018

12/31/2017

in CHF 1 000

in CHF 1 000

Prepaid expenses – third parties

1 144

1 094

Prepaid expenses – intercompany

53

201

Total prepaid expenses and accrued income

1 197

1 295

3 property, plant and equipment

12/31/2018

12/31/2017

in CHF 1 000

in CHF 1 000

Furniture and fixtures

28

35

Automotive

3

8

Other fixed assets

98

155

Total property, plant and equipment

129

198

4 intangible assets

12/31/2018

12/31/2017

in CHF 1 000

in CHF 1 000

Cost for research and development

2 581

3 360

Software

69

Other intangible assets

18

36

Total intangible assets

2 599

3 465

5 financial assets

12/31/2018

12/31/2017

in CHF 1 000

in CHF 1 000

Financial assets – intercompany 1)

147 851

62 809

Total financial assets

147 851

62 809

1) The increase is due in particular to loan increases to companies in Germany, China and the Czech Republic.

6 investments

Company

Locations, country

Capital

Proportion of capital and voting rights as of December 31, 2018

Proportion of capital and voting rights as of December 31, 2017

Consoli dation method

Feintool International Holding AG

Lyss, CH

CHF

49 148 420

100 %

100 %

Full

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

Tianjin, CN

EUR

22 500 000

100 %

100 %

Full

Feintool Engineering Co. Ltd.

Atsugi, J

JPY

400 000 000

100 %

100 %

Full

Feintool Equipment AG 2)

Lyss, CH

CHF

100 000

n/a

100 %

Full

Feintool Fineblanking Technology (Shanghai) Co., Ltd.

Shanghai, CN

USD

2 500 000

100 %

100 %

Full

Feintool Holding GmbH

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

Stanzwerk Jessen GmbH 4)

Frankfurt, GER

EUR

3 000 000

100 %

n/a

Full

Jela GmbH 4)

München, GER

EUR

25 000

100 %

n/a

Full

Feintool System Parts Jessen GmbH 4)

Jessen, GER

EUR

1 000 000

100 %

n/a

Full

Feintool Japan Co. Ltd

Atsugi, J

JPY

225 000 000

100 %

100 %

Full

Feintool Precision System Parts (Taicang) Co. Ltd.

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.

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. 5)

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

Vireo GmbH

Jena, GER

EUR

597 600

100 %

100 %

Full

1) Feintool Automotive System Parts (Tianjin) Co. Ltd. carried out a capital increase in the amount of EUR 12 million in the financial year.

2) Retroactively as of January 1, 2018, Feintool Equipment AG and Feintool System Parts Lyss AG merged.

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 July 31, 2018, Feintool Holding GmbH, Bayreuth, Germany, acquired 100 % of the shares of the German company Stanzwerk Jessen GmbH with its subsidiaries Jela GmbH, SLTJ GmbH and Stanz- und Lasertechnik Jessen GmbH. SLTJ GmbH merged after that with Stanz- und Lasertechnik GmbH. The name of Stanz- und Lasertechnik Jessen GmbH was then changed to Feintool System Parts Jessen GmbH.

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

7 Current interest-bearing liabilities

12/31/2018

12/31/2017

in CHF 1 000

in CHF 1 000

Current interest bearing liabilities – third parties 1)

49 635

8 190

Current interest bearing liabilities – intercompany 2)

48 188

49 127

Total current interest bearing liabilities

97 823

57 318

1) On June 13, 2017, Feintool signed a syndicated loan with six banks amounting to CHF 90 million with an option to increase by another CHF 60 million. On May 17, 2018, this contract was extended and will now run until June 13, 2023. On December 31, 2018, CHF 34.1 million of the syndicated loan was used by Feintool International Holding AG (previous year CHF 8.2 million). Any drawdowns by subsidiaries are guaranteed by Feintool International Holding AG up to a maximum amount of CHF 99 million.

2) Interest bearing liabilities related to zero balance cash pools.

8 trade and other current payables

12/31/2018

12/31/2017

in CHF 1 000

in CHF 1 000

Current liabilities – third parties

3 358

6 457

Current liabilities – related parties

146

157

Current liabilities – intercompany

14

1 228

Current liabilities – organs

44

Trade and other payables

3 562

7 842

9 accrued expenses and deferred income

12/31/2018

12/31/2017

in CHF 1 000

in CHF 1 000

Accruals for salary, bonus, overtime

1 655

4 066

Outstanding accounts payable

1 273

1 131

Tax accruals

2 596

388

Other accrued expenses

30

183

Accrued expenses – intercompany

396

250

Total accrued expenses and deferred expense

5 950

6 018

10 non-current Provisions

Non-current provisions include provisions for insurance payments in the amount of kCHF 383 (previous year kCHF 370) and provisions for anniversary benefits of kCHF 126 (previous year kCHF 147).

11 share capital

12/31/2018

12/31/2017

11.1 Share capital

Number/CHF

Number/CHF

Number of shares

4 914 842

4 462 971

Nominal value

10

10

Share capital

49 148 420

44 629 710

On September 20, 2018, 451 871 new shares, each with a nominal value of CHF 10, were issued as part of the capital increase.

11.2 General legal reserves from capital contributions

The statutory reserves from capital contributions include the premium from capital increases, less the previous dividend distributions. The distribution from reserves from capital contributions is treated in the same way as the repayment of capital for tax purposes. The Swiss Federal Tax Administration (FTA) has confirmed that the reported reserve from capital contributions is recognized as a capital contribution pursuant to Art. 5 (1bis) Swiss Withholding Tax Act. The premium from the share capital increase in 2018 amounting to kCHF 45 479 net has not yet been approved by the FTA.

12 Conditional capital – employee stock option plan

The disclosure of the conditional capital is represented in Note 27.3 on page 73 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 27.4 on page 74.

14 treasury shares

The disclosure of the treasury shares is represented in Note 27.5 on page 74 of the Notes to the Financial Statements.

15 operating income

2018

2017

in CHF 1 000

in CHF 1 000

Operating income – third party

257

388

Income from intercompany services

33 600

29 546

thereof licenses and patents

18 939

16 075

thereof other management services

6 777

6 171

thereof IT services

5 183

4 137

thereof internal services, building maintenance/services and staff restaurant

1 134

1 224

thereof other intercompany services

1 567

1 939

Total operating income

33 857

29 935

16 financial income

2018

2017

in CHF 1 000

in CHF 1 000

Investment income

307

Interest income – third party

14

31

Interest income – intercompany

1 903

817

Other finance income – intercompany

2 500

Foreign exchange gains

16 015

5 357

Total financial income

17 932

9 012

17 reversal of valuation allowance on investments

2018

2017

in CHF 1 000

in CHF 1 000

Reversal of valuation allowance on investments

8 000

Total reversal of valuation allowance on investments

8 000

18 personnel expenses

2018

2017

in CHF 1 000

in CHF 1 000

Salaries and wages

5 189

6 417

Employee welfare expenses

924

1 568

Other personnel expenses

1 309

2 583

Total personnel expenses

7 421

10 568

Feintool International Holding AG employed 34 staff at the end of the year (previous year 40; calculated in Full Time Equivalents).

19 other operating expenses

2018

2017

in CHF 1 000

in CHF 1 000

Research and development

2 747

3 056

Patents and licenses

264

266

Corporate communication and investor relations

1 550

705

Information technology

2 903

2 683

Consulting

960

1 119

Rent

486

482

Staff restaurant

468

442

Capital tax

238

300

Other expenses

710

655

Total other operating expenses

10 326

9 707

20 financial expenses

2018

2017

in CHF 1 000

in CHF 1 000

Interest expense – third party

413

265

Other finance costs – third party 1)

578

378

Foreign exchange losses – third party

16 363

7 497

Total financial expenses

17 354

8 140

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

2018

2017

in CHF 1 000

in CHF 1 000

Guarantees and sureties for Group companies

15 893

16 205

Subordination clauses in favor of subsidiaries

8 955

8 955

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.

On July 15, 2016, a promissory note was issued in the amount of EUR 65 million. The issuer, with a guarantee from Feintool International Holding AG, is Feintool Holding GmbH based in Germany.

22 Major shareholders

The disclosure of the major shareholders is represented in Note 34 on page 83 of the Notes to the Financial Statements.

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

12/31/2018

12/31/2017

Number of registered shares

Number of registered shares

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

30 057

25 057

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

Thomas A. Erb, Member of the Board of Directors

Dr. Thomas Muhr, Member of the Board of Directors 2)

n/a

Dr. Rolf-Dieter Kempis, Member of the Board of Directors 2)

n/a

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

3 481

3 481

Norbert Indlekofer, Member of the Board of Directors from April 24, 2018 on 3)

n/a

Total Board of Directors

33 538

28 538

Bruno Malinek, CEO until December 31, 2017

n/a

1 064

Knut Zimmer, CEO from September 1, 2018

1 702

n/a

Dr. Thomas F. Bögli, CFO

1 623

1 247

Total Group Management

3 325

2 311

1) Held directly and indirectly; the 5 000 shares with a value of CHF 373 000 as remuneration for the 2018 financial year were assigned on January 3, 2019.

2) Dr. Rolf-Dieter Kempis and Dr. Thomas Muhr, previously members of the Board of Directors, waived further candidacy for this committee on April 24, 2018.

3) The General Meeting on April 24, 2018, elected Norbert Indlekofer to the Board of Directors.

24 Liabilities to employee benefit plans

There was no liability to the pension fund as of December 31, 2018 (previous year kCHF 0).

25 Unrecognized lease liabilities

As at December 31, 2018, there were unrecognized lease liabilities of kCHF 213 (previous year kCHF 2 194).

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 2018 financial year. This corresponds to a maximum total dividend distribution of kCHF 9 830 (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.

12/31/2018

in CHF

(Loss)/Gain carryforward from previous year

66 890 962

Result for the year

10 884 644

Available earnings

77 775 605

Allocation from general legal reserves from capital contributions

9 829 684

Payment of a dividend of CHF 2.00

-9 829 684

Gain Carryforward

77 775 605