ANNUAL REPORT 2019

Notes to the Financial Statements of feintool international holding ag

as at December 31, 2019

Principle

General

Feintool International Holding AG has its headquarters in Lyss, Switzerland. The 2019 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.

Leases

In accordance with the principle of substance over form, all of the company’s leases and rental agreements with third parties will be recognized on the balance sheet from the 2019 financial year onwards, with the exception of short-term contracts (12 months or less) and low-value assets. Up to and including the 2018 financial year, such leases were recognized in the income statement in each accounting period in which the resulting expense was incurred.

Beginning in the 2019 financial year, the right-of-use asset will be capitalized on the balance sheet. Afterwards, the right-of-use asset will be amortized on a straight-line basis from the date of commencement to the end of the lease term unless ownership of the underlying asset is transferred to the company at the end of the lease term or the cost of the lease reflects the fact that the company will exercise a purchase option. In this case, the right-of-use asset is amortized over its useful economic life, which is determined in accordance with the rules for property, plant, and equipment. Upon initial recognition, the right-of-use asset is measured at the present value of the lease liability upon commencement of the lease term. The lease liability corresponds to the present value of future lease payments discounted at an average interest rate of 1.3 % and reduced by the amortization payments.

Short-term leases (<1 year) and low-value leases continue to be recognized under other operating expenses in each accounting period in which resulting expenses are incurred.

Intercompany rental and lease agreements continue to be recognized as rental and lease expenses in each accounting period in which resulting expenses are incurred. This means that the right-of-use asset leased under such contracts is not capitalized, nor is a lease liability recognized. A total of CHF 192 000 is recognized as an expense from such contracts in the income statement for 2019.

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

12/31/2019

12/31/2018

in CHF 1 000

in CHF 1 000

Accounts receivable – third parties

383

281

Accounts receivable – intercompany

5 948

8 648

Interest bearing receivable – intercompany 1)

1 132

2 649

Total trade and other receivables

7 463

11 578

1) Interest bearing receivable related to zero balance cash pools

2 prepaid expenses and accrued income

12/31/2019

12/31/2018

in CHF 1 000

in CHF 1 000

Prepaid expenses – third parties

1 424

1 144

Prepaid expenses – intercompany

51

53

Total prepaid expenses and accrued income

1 475

1 197

3 property, plant and equipment

3.1 Own property, plant and equipment

12/31/2019

12/31/2018

in CHF 1 000

in CHF 1 000

Furniture and fixtures

25

28

Automotive

2

3

Other fixed assets

46

98

Total property, plant and equipment

72

129

3.2 Property, plant and equipment in lease

12/31/2019

12/31/2018

in CHF 1 000

in CHF 1 000

Right of use on buildings

515

Other Right of use assets

87

Total right of use assets

602

In accordance with the principle of substance over form, leases will be recognized on the balance sheet beginning in the 2019 financial year, which includes all rental and lease contracts with third parties with the exception of short-term contracts (12 months or less) and low-value assets.

4 intangible assets

12/31/2019

12/31/2018

in CHF 1 000

in CHF 1 000

Cost for research and development

2 045

2 581

Other intangible assets

9

18

Total intangible assets

2 054

2 599

5 financial assets

12/31/2019

12/31/2018

in CHF 1 000

in CHF 1 000

Financial assets – intercompany

154 174

147 851

Total financial assets

154 174

147 851

6 investments

Company

Locations, country

Capital

Proportion of capital and voting rights as of December 31, 2019

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

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 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 2)

Ohrdruf, GER

EUR

2 556 000

100 %

100 %

Full

Stanzwerk Jessen GmbH 3)

Frankfurt, GER

EUR

3 000 000

100 %

100 %

Full

Feintool System Parts Jessen GmbH 3)

Jessen, GER

EUR

1 000 000

100 %

100 %

Full

Jela Immobilien GmbH 3)

München, GER

EUR

25 000

100 %

100 %

Full

Vireo Verwaltungsgesellschaft mbH 4)

Jena, GER

EUR

245 340

100 %

100 %

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

1) Feintool Automotive System Parts (Tianjin) Co. Ltd. carried out a capital increase in the amount of EUR 12 million in the financial year 2018.

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

3) 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.

4) Jela Immobilien GmbH holds a 90 % interest in Vireo Verwaltungsgesellschaft mbH. The remaining 10 % is held by HL Holding AG. In the 2019 financial year, 90 % of Vireo Verwaltungsgesellschafts mbH was sold by HL Holding AG to Jela Immobilien GmbH.

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

7 Current interest-bearing liabilities

12/31/2019

12/31/2018

in CHF 1 000

in CHF 1 000

Current interest bearing liabilities – third parties

13 572

49 635

Current interest bearing liabilities – intercompany 1)

45 306

48 188

Current leasing liabilities

314

Total current interest bearing liabilities

59 193

97 823

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

8 trade and other current payables

12/31/2019

12/31/2018

in CHF 1 000

in CHF 1 000

Current liabilities – third parties

1 015

3 358

Current liabilities – related parties

204

146

Current liabilities – intercompany

14

Current liabilities – organs

47

44

Trade and other payables

1 266

3 562

9 accrued expenses and deferred income

12/31/2019

12/31/2018

in CHF 1 000

in CHF 1 000

Accruals for salary, bonus, overtime

986

1 655

Outstanding accounts payable

1 162

1 273

Tax accruals

2 596

Other accrued expenses

30

Accrued expenses – intercompany

961

396

Total accrued expenses and deferred expense

3 109

5 950

10 Non-current financial liabilities

12/31/2019

12/31/2018

in CHF 1 000

in CHF 1 000

Non-current interest bearing liabilities – third parties 1)

44 501

Non-current leasing liabilities

294

Total non-current interest bearing liabilities

44 795

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, 2019, CHF 44.5 million of the syndicated loan was used by Feintool International Holding AG (previous year CHF 34.1 million). Any drawdowns by subsidiaries are guaranteed by Feintool International Holding AG up to a maximum amount of CHF 99 million. In accordance with the principle of substance over form, the syndicated loan will be reported as a noncurrent interest-bearing liability to third parties starting in 2019.

11 non-current Provisions

Non-current provisions include provisions for insurance payments in the amount of kCHF 490 (previous year kCHF 383) and provisions for anniversary benefits of kCHF 107 (previous year kCHF 126).

12 share capital

12.1 Share capital

12/31/2019

12/31/2018

Number/CHF

Number/CHF

Number of shares

4 914 842

4 914 842

Nominal value

10

10

Share capital

49 148 420

49 148 420

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

12.2 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.

13 Conditional capital – employee stock option plan

The disclosure of the conditional capital is represented in Note 25.3 on page 66 of the Notes to the Financial Statements.

14 AUTHORIZED SHARE CAPITAL

The disclosure of authorized share capital is reported in the Notes to the consolidated financial statements under Note 25.4 on page 67.

15 treasury shares

The disclosure of the treasury shares is represented in Note 25.5 on page 67 of the Notes to the Financial Statements.

16 operating income

2019

2018

in CHF 1 000

in CHF 1 000

Operating income – third party

861

257

Income from intercompany services

30 430

33 600

thereof licenses and patents

18 875

18 939

thereof other management services

3 045

6 777

thereof IT services

5 907

5 183

thereof internal services, building maintenance/services and staff restaurant

1 221

1 134

thereof other intercompany services

1 382

1 567

Total operating income

31 291

33 857

17 financial income

2019

2018

in CHF 1 000

in CHF 1 000

Interest income – third party

20

14

Interest income – intercompany

2 535

1 903

Foreign exchange gains

20 975

16 015

Total financial income

23 530

17 932

18 personnel expenses

2019

2018

in CHF 1 000

in CHF 1 000

Salaries and wages

6 334

5 189

Employee welfare expenses

799

924

Other personnel expenses

597

1 309

Total personnel expenses

7 730

7 421

Feintool International Holding AG employed 33 staff at the end of the year (previous year 34; calculated in Full Time Equivalents).

19 other operating expenses

2019

2018

in CHF 1 000

in CHF 1 000

Research and development

2 895

2 747

Patents and licenses

312

264

Corporate communication and investor relations

564

1 550

Information technology

3 364

2 903

Consulting

1 392

960

Rent

234

486

Staff restaurant

327

468

Capital tax

-309

238

Other expenses

415

710

Total other operating expenses

9 193

10 326

20 financial expenses

2019

2018

in CHF 1 000

in CHF 1 000

Interest expense – third party

776

413

Other finance costs – third party 1)

540

578

Foreign exchange losses – third party

23 066

16 363

Total financial expenses

24 382

17 354

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

21 Prior-period Expenses

Prior-period expenses relates to prior-period expenses from intercompany services.

22 Contingent liabilities in favor of third parties

2019

2018

in CHF 1 000

in CHF 1 000

Guarantees and sureties for Group companies

27 200

15 893

Subordination clauses in favor of subsidiaries

955

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.

23 Major shareholders

The disclosure of the major shareholders is represented in Note 32 on page 75 of the Notes to the Financial Statements.

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

12/31/2019

12/31/2018

Number of registered shares

Number of registered shares

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

35 057

30 057

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

Thomas A. Erb, Member of the Board of Directors

Heinz Loosli, Member of the Board of Directors

3 481

3 481

Norbert Indlekofer, Member of the Board of Directors from April 24, 2018 on 2)

Total Board of Directors

38 538

33 538

Knut Zimmer, CEO

3 746

1 702

Dr. Thomas F. Bögli, CFO

4 047

1 623

Total Group Management

7 793

3 325

Total other employees

566

552

1) Held directly and indirectly; the 5 000 shares with a value of CHF 298 000 as remuneration for the 2019 financial year were assigned on January 3, 2020.

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

The shares are valued at a price of CHF 61.80 (previous year: CHF 75.20) as of December 31, 2019. This results in a total value of kCHF 2 898 (previous year: kCHF 2 814).

25 Liabilities to employee benefit plans

There was no liability to the pension fund as of December 31, 2019 (previous year kCHF 0).

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 an ordinary dividend of CHF 0.50 per registered share.

12/31/2019

in CHF

(Loss)/Gain carryforward from previous year

77 395 333

Result for the year

25 297 052

Available earnings

102 692 385

Payment of an ordinary dividend of CHF 0.50

-2 457 421

Gain Carryforward

100 234 964

In addition to the ordinary dividend as proposed above, the Board of Directors will request that an additional dividend of CHF 0.50 per registered share be distributed from the capital contribution reserves:

Capital contribution reserves before distribution

129 395 995

Transfer from capital contribution reserves to voluntary retained earnings and payment of an additional dividende of CHF 0.50

-2 457 421

Capital contribution reserves after distribution

126 938 574

This corresponds to a maximum total dividend distribution of kCHF 4 915 (previous year kCHF 9 830). 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.

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