Notes to the financial statements – Conzzeta AG

Principles

General

The financial statements 2018 of Conzzeta AG have been prepared in accordance with the provisions of the Swiss Code of Obligations. The significant valuation policies applied, over and above those required by law, are described in the following.

Financial assets

The financial investments comprise securities held as a long-term investment. Loans granted in foreign currencies are valued at year-end exchange rates.

Derivative financial instruments

Currency and interest-rate hedges are used against some currency and interest rate risks arising from business operations. All outstanding derivatives are recognized at market value on the balance sheet date and shown at gross values under other receivables or other short-term liabilities. Changes in the value of derivatives used to hedge recognized underlying transactions are reported in the income statement, as is the underlying transaction.

Interest-bearing liabilities

Interest-bearing liabilities are shown at par value.

Treasury shares

Treasury shares are recognized at cost at the time of acquisition. The holding of treasury shares is disclosed as a negative item in equity. Upon resale, the profit or loss is allocated directly to the capital reserves.

Share-based compensation

Share-based compensation for members of the Board of Directors is measured at cost at the grant date and charged to personnel expenses in the period in which the service is rendered.

Information on the income statement and balance sheet items

Income

The dividend payments by the subsidiaries were determined in relation to available retained earnings and capital requirements. Financial income comprises the interest income on accounts receivable from equity holdings of CHF 5.8 million (2017: CHF 3.5 million), interest income from third parties amounting to CHF 0.3 million (2017: CHF 0.2 million), a reversal of provisions for loans of CHF 1.0 million (2017: CHF 1.5 million), gains on securities of CHF 0.1 million (2017: CHF 1.4 million), and currency gains on liquid assets and accounts receivable from equity holdings of CHF 0.1 million (2017: CHF 0.1 million).

Expenses

Financial expenses are the result of interest on liabilities towards equity holdings of CHF 0.4 million (2017: CHF 0.1 million), interest on short-term bank loans of CHF 0.1 million (2017: CHF 0.1 million) and the cost of currency hedging (interest rate differences) for balance sheet items in foreign currencies of CHF 2.0 million (2017: CHF 1.5 million). Personnel and other operating expenses include current administration expenses, the cost of organizing the Annual General Meeting, the production of the annual report, project costs, taxes on capital, as well as fees to the Board of Directors.

Current assets

Liquid assets consist of current account bank balances, the majority of which are in Swiss francs. Securities include time deposits denominated in Swiss francs with a residual term of more than 90 days. Other accounts receivable due from third parties include recoverable input tax, a balance of CHF 5.3 million (2017: CHF 6.9 million) from exchange rate hedges due from banks, and a balance of CHF 0.4 million (2017: CHF 1.4 million) from exchange rate hedges against equity holdings.

Fixed assets

The financial investments comprise securities held as a long-term investment. In the year under review, accounts receivable from equity holdings grew by CHF 27.8 million.

Liabilities

Other payables to third parties include mainly debts of CHF 1.4 million (2017: CHF 15.4 million) resulting from exchange rate hedges owed to banks, and debts of CHF 1.4 million (2017: CHF 1.3 million) resulting from exchange rate hedges against equity holdings.

Shareholders’ equity

The share capital of CHF 4.1 million (2017: CHF 4.1 million) is divided into 1ʼ827ʼ000 class A registered shares and 1ʼ215ʼ000 class B registered shares. Due to a capital contribution, voluntary retained earnings increased in the reporting year by CHF 50.0 million to CHF 650.0 million. At the end of 2017, 4ʼ125 class A registered shares were held at an average purchase price of CHF 952 each. In the reporting year, 2ʼ200 class A registered shares were acquired at an average transaction price of CHF 826 each for the share-based compensation program. The Board of Directors and members of the Executive Committee received 1ʼ819 class A registered shares at an average transaction price of CHF 1ʼ190 each. In each case, the transaction price corresponded to the market value. The holding as of December 31, 2018, was 4ʼ506 class A registered shares acquired at an average purchase price of CHF 894 each.

Further information

Full-time positions

Conzzeta AG has no employees.

Contingent liabilities

Equity holdings

See note 4.2 to the consolidated financial statements for details. The voting shares correspond to the capital shares.

Significant shareholders

The Auer, Schmidheiny and Spoerry shareholder group comprises Dr. Matthias Auer, Ruth Byland-Auer, Martin Byland, Caliza Holding AG, Marina Marti-Auer, Marina Milz, Adrian and Annemarie Herzig-Büchler, Sven and Rosmarie Mumenthaler-Sigrist, Jacob Schmidheiny, Margrit Schmidheiny, Jacob and Margrit Schmidheiny, Felix Schmidheiny, Helen Schmidheiny, Kathrin Spoerry, Christina Spoerry, Heinrich Spoerry-Niggli, Lotti Spoerry and Robert F. Spoerry.

Shareholdings held by members of the Board of Directors, Executive Committee and related persons

M. Auer, J. Schmidheiny and R.F. Spoerry hold further registered shares under a shareholder agreement within the Auer, Schmidheiny and Spoerry shareholder group.

Compensation paid to members of the Board of Directors and Executive Committee is shown in the Compensation Report.

Share-based compensation

The base compensation for members of the Board of Directors is paid in cash and shares (approx. 50% each) that are subject to a four-year vesting period. Neither discounts nor performance components are taken into consideration when calculating the share allocation of the Board of Directors. The calculation is based on the average share price for the three months from November 1 to January 31.

In 2018, a total of 537 class A registered shares were allocated to the Board of Directors for the previous year. The CHF 0.7 million valuation was based on a share price of CHF 1ʼ294 each. Personnel expenses contain deferred expenses for the reporting year amounting to CHF 0.4 million (2017: CHF 0.4 million) for the share-based component of compensation.

Events after the balance sheet date

The financial statements were approved for publication by the Board of Directors on Friday, March 15, 2019. They are also subject to approval by the Annual General Meeting.

On January 25, 2019, Conzzeta reported signing a binding agreement to sell its Glass Processing segment to Finnish company Glaston Corporation, based in Helsinki. The transaction is expected to be concluded by the end of the first quarter, subject to regulatory approval.