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Transcription

1 Annual Report 2011

2 Key figures 2011 Net sales CHF 2,721.3 million EBITDA CHF million EBIT CHF million Net profit CHF 83.0 million Total assets CHF 1,949.1 million Shareholders equity incl. minority interests CHF 1,022.8 million Headcount (full-time equivalents) 3,890

3 Staying the course The financial year 2011 was very turbulent for Emmi. However, the company stayed the course struck in the successful year 2010, and generated the second best result in its history, with net sales of CHF 2,721 million, earnings before interest and taxes (EBIT) of CHF million and a net profit of CHF 83.0 million. The basis of this success is a robust corporate strategy, which will also be the compass for Emmi s future growth. Net sales EBIT in CHF million in CHF million as % of net sales 3,000 2,500 2,000 1,500 1, ,501 2,671 2,619 2,684 2,

4 Key figures Emmi Group Amounts in CHF million Net sales 2,721 2,684 2,619 2,671 2,501 Earnings before interest, taxes, depreciation and amortisation (EBITDA) as % of net sales Earnings before interest and taxes (EBIT) as % of net sales Net profit as % of net sales Investment in fixed assets (excl. acquisitions) as % of net sales Headcount (full-time equivalents) as at ,890 3,701 3,525 3,373 3,350 Net sales per employee CHF 000s Volume of milk and cream processed in kg million 1, Total assets 1,949 1,729 1,655 1,683 1,635 of which shareholders equity incl. minority interests and convertible bonds 1, as % of total assets Net profit Net sales by product group 2011 in CHF million as % of net sales 34.0 % Cheese % Fresh cheese 3.3 % Powder/concentrates 5.8 % Other products and services 26.9 % Dairy products 23.6 % Fresh products

5 Emmi Group Annual Report 2011 The information within our Annual Report is originally published in German. Discrepancies or differences created in the translation are not binding and have no legal effect for compliance or enforcement purposes. If any questions arise related to the accuracy of the information contained in the translation, please refer to the German version of our annual report, which is the official and only binding version.

6 Emmi is the largest Swiss milk processor and one of the most innovative premium dairies in Europe. In Switzerland, the company focuses on the development, production and marketing of a full range of dairy and fresh products as well as the production, ageing and trade of primarily Swiss cheeses. Outside Switzerland, Emmi concentrates on brand concepts and specialities in European and North American markets. The primary focus in fresh products is on lifestyle, convenience and health products. Emmi also positions itself as the leading company worldwide for Swiss cheese. Emmi s customers are primarily the retail trade, the food service sector (wholesale, catering and hospitality industry) and the food industry. Having established a solid home base, Emmi is advancing ever further into international markets. In doing so, we are not only exporting premium products, but with them sought-after Swiss values, such as tradition, innovativeness and a strong sense of quality. However, international success also depends on an understanding of the respective markets and their culinary characteristics. For this, we rely on the knowledge of our local employees, who are at the very heart of the markets and are in constant contact with our customers. In this report, we would like to present to you various international markets and listen to what customers say about Emmi. Because they know first hand what it is that makes our products so successful.

7 Contents 3 Contents Annual Report Editorial 8 The Year 2011 at Emmi 12 Group Report 20 Corporate Responsibility Report Corporate Governance 33 Contents 34 Group structure and shareholders 34 Capital structure 35 Board of Directors 42 Group Management 45 Compensation, participations and loans 46 Shareholders rights of co-determination 46 Change of control and defensive measures 46 Auditors 47 Information policy Financial Report Contents 52 Financial Situation 56 Consolidated Financial Statements of the Emmi Group 80 Financial Statements of Emmi AG 89 Share Information 92 Locations

8 4 What our customers say What our customers say 5 magic of the Kaltbach Caves enhances the The flavors of the traditionally produced cheeses. Cathy Strange Global Cheese Buyer National Procurement & Distribution Whole Foods Market, Inc. USA Cheese in new dimensions Other dimensions apply in the land of boundless opportunities: the population of the US is roughly equal to that of Europe as a whole. Several time zones and the long distances involved mean that our planning needs to be excellent and our processes efficient. But when it comes to cheese, the differences between the Americans and the Swiss are shrinking. For example, demand for Le Gruyère AOC has risen sharply in recent years, both from the food service industry and the retail trade. This is an area where we benefit from presenting our premium products. The star turn in our range is our Emmi Kaltbach Le Gruyère AOC, a cheese that is matured for around nine months in a sandstone cave, developing a full-bodied, harmonious aroma and is winning over ever-increasing numbers of Americans.

9 6 Editorial Success despite the strong Swiss franc Dear Shareholders In 2011 we were confronted by more frequent and more severe periods of turbulence than we would have liked. The year was characterised by currency turmoil, with the Swiss franc for a time worth almost the same as the euro. However, 2011 also demonstrated that Emmi is very well positioned, able to react rapidly and therefore able to cope with strong headwinds. The company generated net sales of CHF 2,721 million, which corresponds to growth of 1.4 %. Adjusted for acquisitions and currency effects, this results in a small organic decline in sales of 1.9 %. Net profit declined slightly by 3.7 % to CHF 83.0 million, while the net profit margin fell from 3.2 % to 3.0 % and net profit per share amounted to CHF (prior year CHF 16.10). A proposal will be made to the Annual General Meeting for an unchanged gross dividend of CHF 3.40 per registered share from the capital reserves. The result is in the upper half of the target range and, given the difficult currency environment, we are satisfied with that. One of the reasons that we were able to achieve this result is that we deliberately avoided unprofitable business, which enabled us to secure the profits necessary for the company s further development. This sound result is, however, primarily attributable to Emmi s resolute implementation of its strategy. We were able to retain our market shares in our domestic market, we grew in our key international markets and we increasingly drove forward our rigorous cost management. From a position of strength, we took the correct measures to remain on target. For instance, we implemented several price increases in our foreign markets in order to counter the significant impact of the revaluation of the Swiss franc against the euro and the US dollar. Where price negotiations did not lead to a reasonable outcome, we occasionally accepted declines in sales. We scored in Switzerland with innovations: Milk Shake and Mozzarella Mini Marinati exceeded our expectations after their launch in the spring. At the same time, established brands such as Emmi Caffè Latte and Kaltbach were supported in our key markets by means of extensive marketing activities. Emmi Caffè Latte achieved single-digit growth in Switzerland and internationally; in the Spanish, UK and Belgian markets, growth was significantly in excess of 20 %. We succeeded in countering the economic pressure with exceptional cost savings amounting to CHF 10 million, instead of the CHF 5 million we had initially envisaged. We are pleased that we were able to do this without the need for any layoffs or increases in working hours. Mitigating risk by means of acquisitions The international arena currently accounts for just under 30 % of our total sales, of which about 50 % are accounted for by exports from Switzerland and 50 % by locally manufactured specialities. A major proportion of these local products is the result of recent acquisitions, which help reduce the currency risk. Furthermore, these new subsidiaries are performing admirably. For instance, Onken yoghurts achieved doubledigit growth in its most important market, the UK, while Cypress Grove Chèvre goat s cheese, Emmi Roth USA cow s milk cheese and A-27 dessert specialities posted similar rates of growth. We will continue to pursue our successful acquisition strategy and will in future further consolidate our position in our key markets. Our focus remains on strong brands and profitable niches with leading positions in the relevant countries. From a position of strength, we took the correct measures to remain on target. Konrad Graber

10 Editorial 7 Investments to consolidate our market position A significant proportion of Emmi s profits is invested in current and new production sites in Switzerland and abroad. This enables us to exploit our potential and maintain our growth. In Switzerland, for example, around CHF 4.5 million is to be invested in the production of fresh goat s cheese in Kaltbach, and CHF 8 million in the expansion of maturation capacities for Tête de Moine AOC in Saignelégier. Furthermore, some CHF 5 million per year are spent on replacement investments at each of the biggest Swiss production sites to ensure even more efficient processing of Swiss milk into high-quality products. We were able to further strengthen our market position in the Swiss cheese market with the acquisition of Rutz Käse. Outside Switzerland, we are investing in a new production site in northern Italy for A-27 s premium desserts. In the US, we are setting up a new hard cheese production site at Emmi Roth USA because our existing infrastructure is now barely able to meet demand. This is also the case for Cypress Grove Chèvre in California, where production capacity for goat s cheese is to be doubled, which will enable us to participate even more effectively in this fast growing market. Well prepared for the future This year will also be a challenging one. Import pressure remains high and the fixed CHF 1.20 : EUR 1 exchange rate represents a significant, if predictable challenge. Confronted by such an environment, Emmi must ensure that it keeps costs under control in the future and focus on achieving a streamlined, agile organisation. The company will continue to promote high value-added brand products and strive for qualitative growth. This includes its exports from Switzerland and will also benefit producers. Our employees make an important contribution to ensuring that Emmi remains efficient. They work hard every day for the success and ongoing development of our company and we would like to thank them for this. We would also like to thank our producers, customers, suppliers, business partners and shareholders. Their trust motivates us to give of our best and to maintain our strong commitment to ensuring the well-being of Switzerland as a location. We are confident that we have set the right course. Konrad Graber Chairman of the Board of Directors Urs Riedener CEO We will continue to pursue our successful acquisition strategy and further expand in our defined key markets. Urs Riedener Konrad Graber, Chairman of the Board of Directors, and Urs Riedener, CEO

11 8 The year 2011 at emmi Looking back on an eventful 2011 Innumerable small events shaped The following pages cover a small selection of them. While these examples are very different in nature, they do have one thing in common: they all represent something special; all of them played a role in forging the solid foundations on which Emmi is based; and they are testimony to the innovativeness and the diversity of our company.

12 9 The year 2011 at emmi January The recently acquired yoghurt brand Onken begins the year successfully. In the UK, its most important market, the number one in large pots of yoghurt posts double-digit growth. Elisabeth Wagner- Wehrborn becomes the new Managing Director of Emmi Deutschland, heading operations in Emmi s second-largest foreign market. February Emmi is the official sponsor of the Swiss Ski House at the World Ski Championships in Garmisch-Partenkirchen. The products impress Swiss fans and further increase brand awareness in Germany. The company s CO2 emissions are at 1990 levels, despite production doubling. March Emmi increases net sales and earnings in financial year 2010 thanks to the strong performance of its latest acquisitions, encouraging international growth and strict cost management. The marmot App delights iphone users, young and old. April The Best of Switzerland at famous London department store Harrods: Emmi is prominently represented alongside other wellknown Swiss brands for one month. The new Mozzarella Mini Marinati with two different marinades and the Milk Shake in four varieties are successfully launched in the Swiss market. The company invests CHF 13 million in Dagmersellen and commissions the new milk powder spraying tower. The new technology will reduce annual CO 2 emissions by a further 1,700 tons.

13 May Emmi products also gain a uniform red and white Swiss look in the United States. Emmi acquires the remaining package of shares of the Biedermann organic dairy in Bischofszell, increasing its shareholding to 100 %. June Sehr gut (1,5) Im Test: 25 Erdbeerjoghurts Ausgabe 7/2011 Winner: Emmi Swiss Yogurt is the only strawberry yoghurt to be awarded a rating of very good by the German Stiftung Warentest consumer organisation. Jana, the model for Emmi Caffè Latte Light Brazil Edition, wins the final of Germany s Next Topmodel. July The company permanently employs 100 apprentices. This year, 32 successfully complete their training. Italian premium dessert manufacturer A-27 becomes the latest member of the Emmi Family. August The company publishes its first Sustainability Report. Despite currency turmoil, Emmi processes more milk than in the prior year, and posts the second best first-half result in the Group s history.

14 The year 2011 at emmi 11 September Californian company Cypress Grove Chèvre, acquired by Emmi in 2010, launches the Flashback Family, consisting of five new types of goat s cheese. Emmi expands its ski sponsorship activities. Professional skier Daniel Albrecht becomes an Emmi ambassador. TV chef cook Christian Rach awards Kaltbach Le Gruyère AOC the tested by Rach seal of approval, bearing testimony to its unique taste and high quality. October More than 10,000 Gerbers, including former Miss Switzerland Jennifer Ann Gerber, celebrate the centenary of Gerber brand fondue in Berne. Emmi s new Yogurt Milk, in classic, strawberry and honey varieties, makes every type of muesli a special treat. November All Emmi Caffè Latte varieties are switched to sustainably grown coffee. Kaltbach cheeses win three gold medals at the World Cheese Awards in Birmingham. Emmi is the first listed Swiss company to be awarded the Best Board Practice label for its Board of Directors. December In Hong Kong, one in six yoghurts consumed is an Emmi yoghurt, made from Swiss milk and exported from Switzerland. Jeder Rappen zählt (every cent counts): as part of the Swiss radio fundraising campaign, Emmi sells raclette in Lucerne for women in need. The proceeds, which are topped up by employee donations, total CHF 15,000.

15 12 Group report Objectives achieved despite the challenging environment Emmi generated net sales of CHF 2,721 million in the 2011 financial year, 1.4 % more than the previous year (CHF 2,684 million). Net profit amounted to CHF 83.0 million in 2011, a fall of 3.7 % compared with 2010, while earnings before interest and taxes (EBIT) fell by 4.0 % to CHF million (previous year CHF million). Earnings are thus in the upper half of the anticipated range and the second-best in Emmi s history. Emmi owes this result to a consistent implementation of its strategy. This is based on high-quality Swiss brand products, complemented by the well established, locally manufactured dairy products of our foreign production sites and rigorous cost management.

16 Group report 13 Products and markets 2011 Net sales Emmi posted net sales of CHF 2,721 million in 2011, which corresponds to an increase of 1.4 % on the previous year in CHF million (CHF 2,684 million). Adjusted for acquisitions and currency effects, this resulted in a decline at Group level of 1.9 %, putting sales slightly below expectations as a result of the tough economic environment. 3,000 2,500 2,000 2, ,914 2, ,045 2, ,944 2, ,952 2, % % 1, % Both earnings before interest and taxes (EBIT) and net profit 1,500 fell slightly, with EBIT at CHF million, 4.0 % below the prior-year level (CHF million) and net profit falling slight- 1,000 ly during the same period by 3.7 % from CHF 86.1 million to 500 CHF 83.0 million. Thus Emmi achieved the second-best result in the Group s history in In Switzerland, net sales fell by 2.2 % to CHF 1,909.9 million (prior year CHF 1,951.9 million), The fall of 2.2 % is primarily attributable to activities outside the company s core business, specifically the abandonment of unprofitable logistics services for third parties. This decline had a positive impact on the operating result. Along with Emmi Caffè Latte, innovations such as Milk Shake and Mozzarella Mini Marinati also had a positive effect, as did the acquisitions Fromalp (2010) and Rutz Käse (2011). International Switzerland In the international business, Emmi achieved sales growth of 10.9 % to CHF million (previous year CHF million). This increase of 10.9 % is at the upper end of our expec tations and can be attributed to the outstanding performance of our latest acquisitions (Onken, Cypress Grove Chèvre and A-27), growth at Emmi Roth USA and improved sales of Emmi Caffè Latte. Growth was held back by losses resulting from the strength of the Swiss franc, especially in exports of Swiss cheese. International business accounted for 29.8 % of total Group sales (previous year 27.3 %). Emmi Group net sales, EBIT and net profit in CHF million Switzerland International Group Net sales Net sales Change in % Acquisition effect 1.5 % 18.1 % 6.1 % Currency effect % -2.8 % Organic growth -3.7 % 3.2 % -1.9 % Earnings befor interest and taxes (EBIT) Earnings befor interest and taxes (EBIT) Change in % -4.0 Net profit Net profit Change in % -3.7

17 14 Group report Developments in Switzerland The individual product groups developed differently. Fresh products grew slightly, in particular because of the continued growth of Emmi Caffè Latte and two new products. Fresh cheese sales remained stable while cheese suffered as a result of increasing import pressure. Emmi posted net cheese sales of CHF million in 2011, compared with CHF million in the prior year, which represents a fall of 2.1 %. Contributory factors included the positive development of Raclette cheese marketed under the Emmi umbrella brand and the acquisition of Fromalp. At the same time, the decline in demand for Emmentaler, trading losses from cheeses not produced or matured by Emmi and price pressure on own-brand products in the lower price segment as a result of increasing imports had a negative effect, resulting in a decrease (adjusted for acquisitions) of 7.2 %. Net sales of fresh cheese remained stable at CHF million (prior year CHF million). The warm weather in spring had a favourable impact, although import pressure on own brands was also noticeable here. Lower prices were compensated for by volume growth. Net sales of dairy products (milk, cream and butter) fell by 1.2 % in 2011 to CHF million, compared with CHF million the prior year. Price increases brought about by rising milk prices in the first half of the year had a positive impact, while there was some decrease in generic products and volumes were somewhat lower. The organic decrease amounted to 1.5 %. Net sales of powder/concentrates fell by 6.2 % in 2011 to CHF 62.4 million, compared with CHF 66.5 million in This was a result of falling sales in various food industry segments, tough price competition and a production stoppage for maintenance. Sales of other products and services fell, as expected, by 15.5 % to CHF million (prior year: CHF million). This resulted from the decision to stop providing unprofitable logistics services to third parties in Suhr, which had a positive impact on earnings. The organic decrease amounted to 15.7 %. Fresh products were up 0.3 % on the prior year, from CHF million to CHF million. Emmi Caffè Latte made a positive contribution, as did the newly-launched Milk Shake. This did not draw sales away from existing Emmi products, and Emmi Energy Milk remained virtually stable. Net sales performance by product group: Switzerland in CHF million Net sales 2011 Net sales 2010 Net sales 2009 Difference 2011/2010 Acquisition effect Currency effect Organic growth Cheese % 5.1 % -7.2 % Fresh cheese % -0.1 % Fresh products % 0.3 % Dairy products % 0.3 % -1.5 % Powder/concentrates % -6.2 % Other products and services % 0.2 % % Group % 1.5 % -3.7 %

18 Group report 15 Development in international markets With the exception of the cheese and other services product groups, sales rose in all international segments. Sales of Emmi Caffè Latte increased slightly despite the strength of the Swiss franc, which had a negative impact on other exports from Switzerland. The encouraging performance of our most recent acquisitions cushioned the adverse effects of the currency situation considerably. Net sales of cheese in 2011 amounted to CHF million compared with CHF million in the prior year, corresponding to a fall of 5.3 %. In the US, sales of locally produced cheese both from Emmi Roth USA and Cypress Grove Chèvre saw double-digit increases. However, exports from Switzerland suffered in all key foreign markets due to the strength of the Swiss franc, particularly Emmentaler exported to Italy. Adjusted for currency effects and acquisitions, the organic decrease was 0.6 %. of sales in order not to jeopardise earnings. The strength of the Swiss franc meant that decreases were also sustained in the export of yoghurts and Swiss Müesli. In organic terms, net sales fell by 3.8 %. Net sales of CHF 24.6 million (prior year: CHF 16.5 million) were achieved in the dairy products sector. This is an increase of 48.8 % year-on-year and is attributable to CASP s local business in the US. Net sales of powder/concentrates in 2011 increased by 27.7 % to CHF 26.3 million from CHF 20.6 million in This growth resulted from additional exports made in order to take pressure off the Swiss milk market. Net sales of other products and services fell by 3.3 % to CHF 56.5 million (prior year: CHF 58.4 million) due to the exchange rate situation. Organic growth amounted to 6.0 %. Net sales in the area of fresh cheese rose to CHF 43.7 million compared with CHF 33.2 million in the prior year, an increase of 31.7 %. This is attributable to the good collaboration with Venchiaredo and the expansion of the Trentina (formerly Trentinalatte) brand in Italy. Net sales by country group % Switzerland Net sales of fresh products rose by 41.3 % to CHF million (prior year: CHF million). The acquisition of the Onken business, which achieved double-digit growth in the UK, had a positive impact in this respect. No less encouraging was the double-digit growth achieved by Emmi Caffè Latte in all key markets except Germany particularly in Spain, the UK and Belgium. Decreases on products sold in Germany were a consequence of two retail chains electing to stop stocking Emmi products due to price increases. We accepted this loss 21.0% Europe excluding Switzerland 7.9% North and South America 0.9% Asia/Pacific Net sales performance by product group: International in CHF million Net sales 2011 Net sales 2010 Net sales 2009 Difference 2011/2010 Acquisition effect Currency effect Organic growth Cheese % 6.6 % % -0.6 % Fresh cheese % % 46.7 % Fresh products % 54.2 % -9.1 % -3.8 % Dairy products % 10.7 % -7.6 % 45.7 % Powder/concentrates % 27.7 % Other products and services % 0.1 % -9.4 % 6.0 % Group % 18.1 % % 3.2 %

19 16 Group report Solid result on all levels Stable gross operating profit Gross operating profit rose by 1.6 % to CHF million in the 2011 financial year. This slight increase year-on-year (prior year CHF million) is pleasing, given the sometimes precarious current foreign currency situation. The rigorously implemented price increases abroad in the second half of 2011 made a particular contribution in this regard. As in the previous year, the gross profit margin was 33.3 %. Operating expenses, in contrast, rose at a disproportionately high rate of 3.3 % in the 2011 financial year from CHF million to CHF million. Personnel expenses rose as a result of acquisitions by 3.8 % to CHF million (prior year CHF million). As at the end of 2011, Emmi employed 3,890 people (prior year 3,701). Earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 2.4 % to CHF million (prior year CHF million) as a result of the exceptional gains from the disposal of fixed assets (CHF 15.9 million; prior year CHF 3.1 million), attributable primarily to the sale of a property in Thun. This caused the EBITDA margin to increase slightly from 8.7 % to 8.8 %. Earnings before interest and taxes (EBIT) fell by 4.0 % to CHF million (prior year CHF million) as a result of CHF 29.6 million of increased amortisations on intangible assets (prior year CHF 16.9 million), including a write-down of goodwill for Trentinalatte. This includes the scheduled write-back of negative goodwill of CHF 0.7 million (prior year CHF 1.4 million). The EBIT margin fell from 5.1 % to 4.8 %. The 2.7 % increase in other operating expenses from CHF million to CHF million is a result of the Group s growth through acquisitions. The most significant item in other operating expenses is marketing and selling expenses at CHF million, which fell by 2.2 % compared with the prior year in reaction to the cautious market outlook in consequence of the euro crisis and the resulting more focused market activities. By contrast, energy costs rose by 5.4 % in the year under review, despite a fall in energy consumption, while logistics expenses increased 8.2 %. EBIT in CHF million as % of net sales

20 Group report 17 Second-best net profit margin in Emmi s history Despite sometimes enormous distortions in the international foreign exchange markets, Emmi posted a considerable improvement in its financial result compared with the prior year, with its circumspect hedging strategy allowing it to reduce costs by 61.7 % to CHF -7.0 million (prior year CHF million). However, tax expenditure rose by 49.7 % to CHF 23.6 million (prior year CHF 15.8 million), due to a growth-driven deferral of the tax rate, which now lies at 18.6 % (prior year 13.1 %). This results in a net profit of CHF 83.0 million in 2011 (prior year CHF 86.1 million), giving a net profit margin of 3.0 % (prior year 3.2 %), meaning that Emmi generated its secondbest result in the Group s history, despite the extremely challenging economic environment. Net profit in CHF million as % of net sales Outlook for 2012 Emmi will continue to drive forward its strategy, setting store by successful brand concepts and rigorous cost management. The Group considers these to be a sound basis for the consolidation of its position in the domestic market and for the further reinforcement of its position in key international markets. Emmi has solid foundations with which to withstand the persistent market and price pressure and achieve long-term growth. Raw milk prices are expected to remain at their present level in the first half of 2012, while the cost of other raw materials (coffee, fruit and cereals) and packaging are likely to remain stable or increase only slightly. Import pressure will persist in Switzerland. Demand in the retail trade is expected to be volatile. Emmi expects consumer sentiment in the US and in Germany our two most important markets outside Switzerland to remain stable, and to be subdued in Italy. In view of the economic situation and the value of the Swiss franc standing at CHF 1.20 against the euro, Emmi s success in 2012 will largely be driven by strong brand concepts and by products produced locally abroad, as well as by further cost savings. Emmi will continue the targeted expansion of its activities abroad and investment in strengthening its position in its domestic market in The company is aiming for volume growth in its international markets of 6 % to 8 % (organic) and 8 % to 10 % (including acquisitions) in the medium to long term, with annual growth at Group level of 2 % to 3 % (including acquisitions).

21 18 What our customers say What our customers say 19 Indebted to our past Switzerland is our home and where our roots lie. Our origins make it possible for us to work with a unique raw material, Swiss milk, and as a Swiss company we feel an obligation to always do our best. These two preconditions have allowed us to become the leading Swiss milk processor and provider of a complete range of dairy products. To remain successful, we want to keep on surprising our customers. We certainly managed this with Emmi Milk Shake. With its real, puréed fruit and premium ingredients, it turns fresh milk into a frothy pleasure. We launched the range in 2011 with strawberry, vanilla, chocolate and mocca flavours and will be adding banana to the range in new Milk Shake is popular with people of all ages. The It demonstrates how you can always develop surprising products from traditional ingredients. As a quality product made from Swiss milk, it is a perfect fit with Volg s philosophy. Engelbert Dähler Head of Purchasing Volg Konsumwaren AG Switzerland

22 20 Corporate responsibility report Genuine Swiss Premium Taste With net sales of CHF 2,721 million, Emmi is the largest milk processor in Switzerland. It is the leading provider of Swiss cheese in Switzerland and abroad and one of the most innovative premium dairies in Europe. As a full-range provider, Emmi has a strong position in its domestic market and has been expanding its international market share for a number of years. This business consists of both exports from Switzerland, and local specialities produced abroad. Success in a challenging environment requires above-average specialist knowledge, a strong drive for innovation, great commitment and a high degree of motivation from employees. Emmi provides the perfect environment for this.

23 Corporate responsibility report 21 Long-term strategy based on three pillars Emmi has set itself an objective of long-term success as an independent company in open markets. The company intends to achieve this by means of a strategy based on three pillars, namely defending its leading market position in Switzerland, targeted international growth and rigorous, sustainable cost management. Using this strategy, Emmi plans to generate a net profit margin of 2.5 % to 3.5 % with an equity capital structure of at least 40 %. Over the medium term, the Group aims to generate sales of CHF 4 billion through organic growth and acquisitions in key international markets. Competitive domestic market The Swiss food market is highly competitive. Switzerland became more attractive for foreign suppliers in 2011 due to the strength of the Swiss franc. Emmi therefore not only has to hold its ground against domestic, but also against foreign competition, particularly in the area of cheese. Emmi s advantages in this competitive environment include not only its full range of high-quality dairy products, but also its comprehensive range of logistics services. For example, in addition to over 5,000 proprietary products, Emmi also offers a trading range of a further 4,000 or so articles. A wide selection of customers from the retail, catering and wholesale trades, as well as other renowned food manufacturers, count on the expertise of Emmi to manufacture own-brand products, for product range consultation, or to provide logistics services on their behalf. This strengthens Emmi s reputation as a professional, reliable partner. In a competitive environment, it gives Emmi a good basis for maintaining its market share in the future. Focus on key markets Outside of Switzerland, Germany, Italy, Austria, the UK, the Benelux countries and the US are Emmi s key markets. The company is seeking to expand its international business in these countries in the coming years. Emmi s local subsidiaries ensure the required market proximity. In addition to its key markets, Emmi also selectively leverages opportunities in other markets and works closely with strategic partners. The best example of the success of this approach is the collaboration with Spanish milk processor Kaiku Corporación Alimentaria S.L., thanks to which sales of Emmi Caffè Latte grew, in percentage terms, more strongly in Spain than in any other country in Cost efficiency in production and administration Efficiency is a key factor for Emmi when competing with Europe s largest food manufacturers. The company is investing in efficient structures that conform to European standards through measures to increase productivity and rigorous cost management. Operations such as the SWISS Lean Awardwinning packaging site in Kirchberg help to ensure that Emmi can hold its ground both in Switzerland and abroad.

24 22 Corporate responsibility report Managing strong brands Progressing into the future Strong brands are one of the most important success factors in competition with major international food manufacturers. After focusing on the consolidation of the Emmi umbrella brand in 2010, under which some 150 products were repositioned, the company continued to invest in strengthening the brand in New products such as Milk Shake, Yogurt Milk and Mozzarella Mini Marinati increasingly drew the attention of consumers to the red and white-branded products in the chiller cabinet. In the US, too, an increasing number of lovers of high-quality dairy products are associating the colours red and white with Emmi as alongside fondue, a number of cheeses and dairy products featured the typical Swiss design in Globalisation, social changes and environmental problems are placing the onus on companies to seriously address the issue of sustainability. Emmi has been investing a great deal in corporate sustainability in all areas for two decades. Sustainability is a management issue The first detailed sustainability report was published in In this report, the Board of Directors and Group Management formulated a sustainability mission, which condenses Emmi s responsible approach towards the environment and society: Our future success is based on achieving balance and sustainability with regard to our economic, social and environmental goals. In key areas of sustainability, we aim to act as an international role model within the sector. Expansion of tradition and innovation in the brand portfolio In addition to the Emmi umbrella brand, Emmi s strategy focuses on other well-established brand platforms, including the Kaltbach cave-aged cheese specialities and Emmi Caffè Latte, which combines first-class coffee expertise with Swiss quality. Added to this are innovative dairy products with additional benefits (Benecol, Aktifit) and proven flagship brands. Examples in Switzerland include Luzerner and Gerber the latter a brand which celebrated its centenary in 2011 or brands such as Onken, Cypress Grove Chèvre, Bontà Divina and Trentina in our international business. As the largest Swiss milk processor, Emmi is aware of its special responsibility towards the environment and society. The company assumes this responsibility in a proactive manner by pursuing balanced goals throughout the supply chain, from procurement to distribution.

25 Corporate responsibility report 23 Emmi values as a basis The foundations of the company s focus on sustainability are Emmi s five basic values (see page 26). They describe the aspects of collective effort which are essential to Emmi s success: awareness of actions and responsibility in day-to-day operations, personal competence and ongoing development, plus a pronounced sense of team spirit. Procurement Emmi processed 936 million kilograms of Swiss milk and cream from some 6500 milk producers in 2011, which was over a quarter of Switzerland s total milk volume. Organic milk, at 90 million kilograms, represents over 10 % of this figure. Emmi processed a further 81 million kilograms of milk at its four foreign production locations, Trentinalatte and A-27 in Italy, and Emmi Roth USA and CASP in the United States. These values are implemented throughout the supply chain from the sourcing of raw materials to the product and refining process to delivery to the customer. Sustainability throughout the value chain In addition to milk, the main raw ingredients for Emmi s products are fruit, coffee and sugar. Preference is given to suppliers who aim for sustainability and employ ethically and/or environmentally sustainable production methods. Volumes of milk and cream processed Few sectors are as closely linked to people s day-to-day lives as the food industry. The competition situation and efforts to optimise the supply chain from both an economic and an ecological perspective require a great deal of commitment from companies with regard to innovation and operational efficiency, as well as investments in new technologies and processes. The challenge of maintaining a balance between quality, safety and taste and the lowest possible price makes the milk processing business all the more complex. in Switzerland, in kg million 1, In addition to a full range of dairy products, Emmi also offers a broad range of logistics services. The diversity of services makes Emmi s supply chain particularly complex. In addition, Emmi s most important raw material, milk, is a product that is more demanding than average with regard to shelf life, quality and further processing ) Cream Milk 1) incl. Nutrifrais SA as of 8 July ) incl. Fromalp AG as of 1 July ) 2011

26 24 Corporate responsibility report Processing High quality and food safety are of utmost importance for the company in manufacturing its products. The organisation of quality management, areas of responsibility and ongoing optimisation processes are defined in Emmi Process Management, which is certified by the Société Générale de Surveillance SA (SGS) in accordance with ISO 9001 and the British Retail Consortium Global Food Standard (BRC). Key instruments are the HACCP (Hazard Analysis and Critical Control Points) concept, which is based on self regulation and established in the food industry, as well as the ongoing review of all processes for improvement potential by means of operational excellence programmes (such as Kaizen). Internal and external audits serve to review the required quality standards and their ongoing optimisation. Emmi uses recognised labels such as Bio Suisse, FSC or SUISSE GARANTIE to enable consumers to inform themselves about a product s origin, the basic principles of procurement and manufacture, and the product s sustainability. Sales/logistics Goods shipments are coordinated by the logistics centres and products are dispatched to Switzerland, Europe, overseas and far-flung regions all over the world. Emmi exports its products to several dozen countries. Finished products are prepared for dispatch in accordance with customers specific requirements and in line with Emmi s role as service partner for the retail, industrial, wholesale and food service sectors, and are delivered to the customer at precisely defined times. The trading companies Baumann Käse AG and Emmi Frisch Service AG also supply restaurants, hotels, residential homes, hospitals, specialist stores, commercial operations, petrol stations, independent retailers and many other customers throughout Switzerland. Both these trading partners and Emmi s own logistics department provide additional logistics services for their partners, ranging from simple warehousing to full distribution within Switzerland. Environmental index Emmi Group in % Product sales Electricity consumption Water consumption Waste to incineration plant

27 Corporate responsibility report 25 Responsibility towards the environment A central aspect of sustainable business management is the efficient handling of resources and waste, as well as active climate protection, in particular at production sites and in logistics (e. g. transport). Emmi has been a member of the Energy Agency for Industry (EnAW) since In recent years, the company worked carefully towards reaching the CO 2 objectives agreed with the federal government for 2010, which were exceeded by a considerable margin. The company was almost 8,000 tonnes or 18 % below the maximum emissions target set by the federal government of 43,542 tonnes of CO 2 in As a result, the Federal Office for the Environment (FOEN) exempted Emmi from its obligation to pay the CO 2 levy. Ongoing measures to improve Emmi s ecobalance With environmental objectives in mind, Emmi always takes the latest technological and scientific developments into account for new and replacement assets. At the company s production locations, changes to the energy supply are made on an ongoing basis to improve energy efficiency and consumption levels. In a drive to improve the Group s eco-balance, a wide range of measures aimed at saving water and energy as well as minimising wastewater, waste and consumables (solvents, detergents, chemicals, etc.) were also implemented in recent years. Numerous measures are resulting in annual savings in energy, resources and waste. This trend is all the more significant as production was faced with even stricter conditions due to the substantial expansion in the product range and increased hygiene requirements. Where possible and efficient, materials such as oil are replaced by lower-emission alternatives (e. g. natural gas or wood). Worthwhile investments At the end of 2010, Emmi commissioned a new spraying tower for milk powder production at the Dagmersellen site. The replacement investment amounted to CHF 13.2 million. The new installation uses only one-third of the thermal energy required by the former spraying tower built in the 1960s. This measure alone led to savings of 1,700 tonnes of CO 2 in A more modest investment was made in 2011 at Lataria Engiadinaisa (LESA) in Bever to install a solar array to warm process water. This investment will result in annual savings of 60,000 kwh of electricity and 8,000 litres of heating oil. Emmi reviews its energy policy on a regular basis in order to further optimise its energy requirements. In the case of replacement and new investments, for example, this energy policy serves as a basis for decision-making, with improvements being made on an ongoing basis along the entire value chain. These resulted, in 2011, in a 0.9 % reduction in electricity consumption per 1,000 kilograms of products by comparison with As product sales increased by 1.8 % year-onyear, total electricity consumption increased slightly (+0.9 %) to 119,280 MWh. Improved energy processes at the major production sites (e. g. Ostermundigen -1.7 million kwh yearon-year) and numerous smaller investments including optimisation of a cheese washing machine at the cheese storage facility in Gossau contributed to this change. The increase in consumption was attributable to the rise in volumes of milk processed at most sites. For example, at the Dagmarsellen production site, the volume of milk processed increased by 7 %, while electricity consumption saw a disproportionately low rise of only 4.7 %.

28 26 Corporate responsibility report Following an increase in Emmi s water consumption in 2010, it rose again slightly by 1.5 % in 2011 to 3,019,948 m³. This increase is disproportionately low compared to the rise in product sales. Water consumption increased by 0.26 % per 1,000 kilograms of products over the figure for This result was achieved through numerous microprojects, for example, replacing the old high-pressure pump in the cheese washing machine mentioned before with a positive impact on water consumption. At the same time, humidification for cheese wheels in the cheese maturation cellar in Gossau was optimised. This medium-sized Emmi facility consumed 59 % less fresh water in total than in the prior year. Emmi was able to significantly reduce waste volumes in 2011 by 14.2 % in relation to product sales, or 12.9 % in absolute terms to 2,427 tonnes. This is thanks to rigorous implementation of a sustainable waste policy which prioritises recycling of waste and provides for organic waste to be used in biogas plants or returned to organic cycles (e. g. as animal feed or for composting). The most rewarding progress was made at the Suhr site where thanks to rigorous waste management, particularly as regards waste separation, waste volumes were reduced by more than 300 tonnes or 40.5 % year-on-year. This corresponds to some 11 % of the total waste volumes of all Emmi sites in Switzerland. Employees as a success factor Emmi aims to be a preferred employer as it believes that employees are one of the company s most important success factors. Only with the help of committed and motivated individuals who see themselves as partners can Emmi achieve its long-term goals. Human resources is therefore accorded high strategic importance at Emmi. Corporate values as a foundation Alongside organisation and strategy, corporate culture is one of the most important aspects of sustainable management. The basis of this are the five corporate values which were developed in collaboration with senior managers in 2010: We are Emmi! We are market-oriented! We know how! We are proactive, and not afraid of hard work! We are continually developing! These values were integrated into the everyday working life of employees in They were also a central theme of the employee event in May Communication of the values was supported through reports in the staff magazine LINK which regularly includes employee portraits, detailing the importance of the corporate values to their work.

29 Corporate responsibility report 27 Promoting entrepreneurship Emmi maintains an active dialogue with its employees, because only those who feel involved and taken seriously are prepared to make a real contribution to the company s success. Emmi therefore provides employees with detailed information about key business decisions in a timely manner. Headcount Number of full-time equivalents 4,000 3,500 3,000 2,500 2,000 1,500 1, , , International Switzerland 3, , , , , , , , Emmi employees are given the greatest possible freedom to act. In this way, the company promotes personal responsibility and entrepreneurship. Employees also have the opportunity to express their concerns, opinions and ideas. The sites are now gathering employees ideas and implementing them jointly with employees as part of the cost and quality optimisation programme. More than CHF 5 million are saved every year thanks to these suggestions. Increasing freedom to act Full appreciation is shown at Emmi. The company therefore maintains a fair and appropriate compensation policy. All employees receive a basic salary which matches the requirements of the skills and responsibilities of their role, their performance and their conduct. Professional experience, education and qualifications are also taken into account. To ensure that Emmi pays fair and appropriate salaries, these are regularly reviewed using target group-relevant benchmarks, while the members of Group Management regularly verify the salaries. In addition to the regular salary, Emmi offers its em ployees numerous additional benefits and discounts. For example, if the company achieves good business results, all employees in continuing employment and not under notice are awarded a bonus. The principles of Emmi s compensation policy are currently laid down in a salary strategy which applies to the whole company. For Emmi, appreciation also means promoting health awareness among employees. Prevention and safety are key considerations for HR at Emmi. Health management at Emmi comprises all measures which help promote the health, integrity and well-being of employees. In the knowledge that accidents and sickness-related absences can never be fully prevented, Emmi aims for speedy reintegration into the work process through active support following an accident or the onset of an illness. Solutions are developed with various partners such as doctors, authorities, specialists and line managers. One of these is sheltered workplaces, which allow convalescent employees to reintegrate themselves into day-to-day work without pressure to perform and without putting their health at risk. Employees interests are represented to the company by the em ployee committee (PEKO), which, for example, acts as a point of contact for employees with problems, plays a substantial part in drawing up operational regulations and acts as a channel for employees requests and suggestions to the management.

30 28 Corporate responsibility report Emmi promotes staff development One of the responsibilities of a preferred, successful employer is to develop and encourage its employees. This should include, on the one hand, preparing them for increasing internationalisation within the Emmi Group and the demands this will place on them and, on the other, career prospects and personal incentives. Professional training is the foundation for future-oriented personnel development. It secures the necessary knowledge and skills for the future. Emmi employs more than 100 apprentices. In 2005, the number of apprentices was only 64. In 2011, 34 apprentices in nine different occupations passed their final examinations. Two apprentices failed the examination, but found an interim solution at Emmi. 68 % of trainees were retained by the company following the completion of their training, three-quarters of them on permanent contracts. In order to keep the knowledge of former apprentices, various measures are planned to progressively increase the apprentice retention rate. These include entry-level positions to enable Emmi to employ more apprentices after completion of their training. During this time, young specialist staff are given targeted, practice-oriented training until they can be offered a definite position. Emmi also launched a trainee programme as part of a pilot project in Two graduates with master degrees will be employed by Emmi for two years and gain an insight into marketing, sales and supply chain management. They will also spend six months at a foreign subsidiary. Developing a professional management culture We are continually developing applied in particular to Emmi managers in Given that for most employees, their understanding of work, motivation and performance is dependent on the quality of their managers, Emmi focused on developing a professional management culture in its training in For Emmi, professional management means: goal orientation satisfaction orientation skills management This means that managers should ensure that employees have access to a cycle of target definition, target verification and controlling. Management is professional when the concept of participation is applied and communicated transparently. The importance of being market oriented in their area can thus be clearly demonstrated to employees. Management also means employing the skills of staff in a way that focuses on the abilities required now and in the future. Emmi supports its managers by providing them with standardised tools such as assessment and objective setting tools. Management skills are also strengthened through practiceoriented further training. This training is based on established knowledge in brain research and has been tailored specifically to Emmi in collaboration with the Institute of Applied Psychology (IAP). Emmi offers all employees a broad range of development opportunities. The main emphasis for employees is on professional training, and the sharing of knowledge in the workplace is actively promoted. Emmi also supports external study programmes and offers a targeted selection of internal training courses which focus on working practices.

31 Corporate responsibility report 29 Ongoing talent promotion Emmi launched its Management practice programme in 2010, taking initial steps towards targeted and focused promotion of talent. The participants are members of middle management with the potential for more senior leader ship roles. The programme aims to invest in the skills of the key management members of tomorrow. HR processes found to be ethically sound In 2011, Emmi became the first major food manufacturer in Switzerland to successfully complete an external, internationally recognised audit of its HR processes. The inspection and certification company Société Générale de Surveillance SA (SGS) conducted a Sedex Members Ethical Trade Audit (SMETA) of Emmi s HR processes according to the principles of the not-for-profit organisation Sedex (Supplier Ethical Data Exchange). The objective of this audit was to identify further scope for improvement in the implementation of the Code of Conduct of the Ethical Trading Initiative (ETI). The audit was performed at various sites in Switzerland and served to verify various aspects of the company s social performance, including recruitment terms and conditions, safe and hygienic working environment, discrimination, corruption and environmental performance. Improving the company s image Emmi s image as an employer is to be enhanced and made more consistent in the future. Emmi benefits from strong product brands in various sectors, which makes the company attractive to current and potential employees in segments such as marketing, sales and development. There remains a need to act in other segments, however, where Emmi s image as an employer still lacks clarity. The employer branding project, launched in 2011, aims to position Emmi as a preferred employer. Initial steps taken in 2012 towards achieving this objective included such measures as redesigning job advertisements and the career pages on the website.

32 30 What our customers say What our customers say 31 Meeting high expectations The cosmopolitan Luxembourgers have international tastes when it comes to food. Fresh products from Switzerland go down well with its affluent population. With each bite, the people of Luxembourg are able to enjoy a little piece of Swiss nature. Memories of Johanna Spyri s Heidi, skipping through lush green alpine meadows, flanked by snow-capped mountain peaks, contribute to a positive image of Switzerland, which helps us market our products abroad. Our Emmi Swiss Müesli, made to Dr. Bircher-Benner s original recipe and with a particularly high proportion of fruit and cereals, lives up to the high quality expectations and is a balanced meal that has become very popular in this small country. Müesli has a high fruit content, tastes Swiss homemade and is also good for you which is why, like other Emmi fresh products, it s gaining more and more fans in Luxembourg. Joëlle Guérin Head of Products Cactus Resuma SA Luxembourg

33 32 Corporate Governance Corporate Governance The Emmi Group is committed to modern corporate governance principles with the greatest possible transparency towards all stakeholders, and strives to practise this at the highest level. In November 2011, Emmi became the first listed Swiss company to be awarded the Best Board Practice label. This award was bestowed upon Emmi after undergoing a comprehensive assessment process carried out by The Swiss Association for Quality and Management Systems (SQS). The following information complies with the current information relating to corporate governance (DCG) of the SIX Swiss Exchange. Emmi s corporate governance principles are also oriented to the guidelines of the Swiss Code of Best Practice for Corporate Governance. Unless indicated otherwise, all data relates to the balance sheet as at 31 December 2011.

34 Corporate Governance 33 Contents Corporate Governance 34 Group structure and shareholders 34 Capital structure 35 Board of Directors 42 Group Management 45 Compensation, participations and loans 46 Shareholders rights of co-determination 46 Change of control and defensive measures 46 Auditors 47 Information policy

35 34 Corporate Governance 1. Group structure and shareholders 1.1 Group structure as at 31 December 2011 The Group structure of Emmi AG (hereinafter Emmi ) is presented on this page. All investments in subsidiaries and associates are listed on pages 76, 77 and 83 of the Financial Report together with the headquarters, share capital and the size of the equity interest. Alongside the listed company Emmi AG, the group of consolidated companies contains only non-listed companies. 1.2 Significant shareholders Shareholders holding more than 3 % of the voting rights are listed on page 84 of the Financial Report. No notification in accordance with article 20 of the Federal Stock Exchange and Securities Trading Act (SESTA) was received in the year under review. ZMP Invest AG, Lucerne, the Zentralschweizerischer Milchkäuferverband (ZMKV), Willisau, and the MIBA Milchverband der Nordwestschweiz, Basel, form a group in the sense of article 20 of the SESTA. The Group owns 62.5 % (prior year 62.4 %) of the total voting rights. 1.3 Cross-shareholdings There are no cross-shareholdings with other companies that exceed 5 % of capital or votes on both sides. 2. Capital structure 2.1 Share capital Emmi s share capital amounts to CHF 53,498, Authorised and conditional capital Emmi did not create any conditional or authorised capital in the year under review, and there is no conditional or authorised capital from previous years. 2.3 Changes in capital An overview of changes in capital for the years 2008 to 2011 can be found on page 82 of the Financial Report. Group structure as at 31 December 2011 Konrad Graber Chairman of the Board Urs Riedener Chief Executive Officer Robert Muri Matthias Kunz Robin Barraclough Reto Conrad Dairy products International Marketing Finance & Controlling Legal Othmar Dubach Markus Willimann Marc Heim Max Peter Cheese Industry Sales Trade & Supply Chain Management Natalie Rüedi Group functions: Agriculture Corporate Development Coordination Research & Development IT Group Communications & Investor Relations Milk Procurement Quality Management System & Process Development Internal Auditing Human Resources

36 Corporate Governance Shares and participation certificates The share capital of Emmi comprises 5,349,810 registered shares (security no.: 1,282,989/ISIN code: CH ) with a par value of CHF 10 per share. Only one category of registered share exists and no participation certificates exist. Each share carries the right to one vote. No preferential rights exist. The shares are fully paid up. Further information on shares can be found on page 89 of the Annual Report. 2.5 Dividend-right certificates No dividend-right certificates exist. 2.6 Restrictions on transferability and nominee registrations There are no restrictions on the transfer of registered shares of Emmi. The only precondition for entry in the share register and hence for the exercise of voting rights is a declaration on the part of the purchaser that the shares have been acquired in his/her own name and for his/her account. No other registration restrictions exist. The registration of fiduciaries/ nominees without voting rights is permitted. On request, the Board of Directors shall decide on their registration with voting rights on a case-by-case basis. No fiduciaries/nominees with voting rights were entered during the year under review, nor did the Board of Directors approve any other exceptions for entry in the share register. 2.7 Convertible bonds and options Emmi has neither convertible bonds nor options outstanding to acquire ownership interests in Emmi. The same applies to the other Group companies. 3. Board of Directors 3.1 Members of the Board of Directors All nine members of the Emmi Board of Directors are non-executive members who were not previously members of Group Management or the management team of one of the subsidiaries. No changes were made to the composition of the Board of Directors in the year under review. The following table shows the names of the Board members, their country of origin and the year in which they were elected. Moritz Erni, Hans Herzog and Thomas Oehen-Bühlmann are members of the Board of the Central Switzerland Milk Producers cooperative (ZMP), which supplies a large proportion of its milk to the Emmi Group. ZMP, via its subsidiary ZMP Invest AG, Lucerne, holds a majority stake in Emmi. Josef Schmidli, Chairman of the Zentralschweizer Milchkäuferverband (ZMKV), produces a significant proportion of his cheese for the Emmi Group. ZMKV is a minority shareholder of Emmi. A list of shareholders is shown on page 84 of the Notes to the Financial Statements. Fritz Wyss (born 1944) has been Honorary President of the Emmi Board of Directors since He was a member of the Board of Directors from 1993 to 2009, as Delegate from 1993 to 2003 and Chairman from 2003 to Members of the Emmi Board of Directors Year of birth Country of origin Education First elected Konrad Graber Chairman of the Board of Directors Moritz Erni Vice-Chairman of the Board of Directors 1958 Switzerland Business Administration, HWV Certified Auditor 1952 Switzerland Certified Master Farmer Certified Independent Farmer Dominique Christian Bach 1957 France Stanford Executive Program, USA 2010 Marketing EDHEC, Lille, France Stephan Baer 1952 Switzerland Economics 1999 lic. oec. publ. Joseph Deiss 1946 Switzerland Economics and Sociology 2007 Prof. Dr. rer. pol. Hans Herzog 1951 Switzerland Certified Master Farmer Chairman 2003 Hanspeter Müller 1943 Switzerland Certified Accountant 1999 Thomas Oehen-Bühlmann 1958 Switzerland Certified Master Farmer 2009 Josef Schmidli 1957 Switzerland Federal Commercial Diploma Certified Master Cheesemaker 2003

37 36 Corporate Governance Members of the Emmi Board of Directors from left: Stephan Baer, Thomas Oehen-Bühlmann, Hans Herzog, Dominique Christian Bach, Konrad Graber (Chairman), Hanspeter Müller, Moritz Erni (Vice-Chairman), Josef Schmidli, Joseph Deiss and Ingrid Schmid (secretary of the Board of Directors) 3.2 Professional background and other activities and interests Konrad Graber Member of the Board of Directors since 2006, Chairman since 2009 Konrad Graber worked for KPMG in the auditing department for both national and international companies from 1983, latterly as Partner and Director. Furthermore, he spent eight years as Chairman of the Berufsprüfung für Treuhänder (Organisation for professional qualification as a fiduciary). Since 1999, he has been a Partner at BDO AG, Lucerne, where he was also member of the Swiss Executive Board from 2005 to In this capacity, he was responsible for management consultancy and IT. Konrad Graber has been a member of the Board of Directors of BDO AG since He is also Chairman of the Board of Directors of the Lucerne Transport Corporation (Verkehrsbetriebe Luzern AG) and a member of the Board of Directors of the health insurer CSS Versicherungen. He was a longstanding councillor for the canton of Lucerne, and from 1997 to 2001 he served as Chairman of the CVP (Christian Democratic People s Party), also in the canton of Lucerne. In 2007 Konrad Graber was elected to the Council of States, becoming a member of the National Parliament. Moritz Erni Member of the Board of Directors since 2003, Vice-Chairman since 2006 Moritz Erni works as an independent farmer and a training instructor on his dairy farm. From 1980 to 2003, he was also a technical expert for apprentice and master examinations. He has been Chairman of the Board of the Central Switzerland Milk Producers cooperative (ZMP) since 2003 and Chairman of the Board of Directors of ZMP Invest AG since He is also a member of the Board of Swiss Milk Producers (SMP) in Berne and a member of the Agricultural Chamber of the Swiss Farmers Union.

38 Corporate Governance 37 Dominique Christian Bach Member of the Board of Directors since 2010 Dominique C. Bach has held numerous key and management roles in international companies in the food and luxury goods sectors, including Danone in France (1980 to 1985) and Mars Incorporated in France and Sweden (1985 to 1996). He also ran a San Francisco-based wine company belonging to the luxury goods group LVMH Moët Hennessy Louis Vuitton from 1996 to 2001, and was active as an independent entrepreneur in London from 2001 to From 2003 to 2008, he was responsible for the Central and Eastern European region at the food and beverages company Pepsico, and from 2009 to 2010 he was Head of the Strauss Coffee division of the Israeli food and beverages company Strauss Group. Stephan Baer Member of the Board of Directors since 1999 Stephan Baer worked at OPM AG as a business analyst from 1979 to 1982 before moving to Baer AG in Küssnacht am Rigi, where he was appointed Chief Executive Officer one year later and became Chairman of the Board of Directors in Since Baer AG was acquired by French company Lactalis in 2008, he has worked as an independent management consultant. Stephan Baer is also a member of the Boards of Directors of several companies including Bio Partner Schweiz AG, Seon; frxsh AG, Küssnacht am Rigi (Chairman); and Spichtig AG, Steinen. Joseph Deiss Member of the Board of Directors since 2007 Prof. Dr Joseph Deiss was a longstanding lecturer in macroeconomics at the University of Fribourg, where he was Professor of Macroeconomics and Economic Policy between 1984 and Now a former Federal Councillor, Joseph Deiss began his political career in the cantonal council of Fribourg, of which he was Chairman in From 1982 to 1996, he was the Mayor of Barbarêche and from 1991 to 1999 a Member of the National Council. From 1993 to 1996, he was Switzerland s price regulator, and in 1999 he was elected to the Federal Council as a representative of the CVP (Swiss Christian Democratic People s Party). From 1999 to 2002, he was head of the Federal Department of Foreign Affairs, and from 2003 to 2006 he worked in the Department of Economic Affairs. He served as Federal President in Since his retirement from the Federal Council in 2006, Joseph Deiss has been teaching economic policy at the University of Fribourg and is a business consultant and a member of the Board of Directors of various companies (Zurich Insurance Company South Africa; Zurich Insurance Company Ireland; Clinique Générale, Fribourg). In addition, Joseph Deiss was elected President of the United Nations (UN) General Assembly for its 65th session from September 2010 to September Hans Herzog Member of the Board of Directors since 2002 Hans Herzog works as an independent farmer and a training instructor on his dairy farm. From 1992 to 2004, he was Chairman of the Central Switzerland Association of Producers of Silage-Free Milk. Hans Herzog is a member of the Board of the Central Switzerland Milk Producers cooperative (ZMP). Hanspeter Müller Member of the Board of Directors since 1999 Hanspeter Müller joined the MIBA Milchverband der Nordwestschweiz in 1970 as Head of Finance. From 1994 to 1998, he was a Member of the Board of Directors of Toni Holding AG, Berne, and from 1994 to 2003 he served as Managing Director of MIBA. Thomas Oehen-Bühlmann Member of the Board of Directors since 2009 Thomas Oehen-Bühlmann is a certified master farmer and works as an independent farmer on his own dairy and arable farm. For many years, he acted as a technical expert for apprentice and master exams and was also Chairman of the Supervisory Committee. He was head of a local branch of the CVP (Christian Democratic People s Party) for a number of years and was a district councillor from 1996 to 2008, including from 1996 to 2006 in Lieli and from 2007 to 2008 in Hohenrain following the amalgamation of the municipalities. Thomas Oehen-Bühlmann has been Mayor of Hohenrain since 2008 and is Head of a municipal association for waste disposal in the canton of Lucerne. He is a member of the Board of the Central Switzerland Milk Producers cooperative (ZMP). Josef Schmidli Member of the Board of Directors since 2003 After receiving a federal commercial diploma, Josef Schmidli qualified as a master cheesemaker in 1982 and has worked as a cheesemaker in Mühlau since then. Josef Schmidli has been the proprietor and CEO of Käserei Schmidli GmbH since its foundation in Since 2002, he has been the Chairman of the Central Switzerland Milk Purchasers Association and its pension fund. He is also Vice-Chairman of Fromarte, the association of Swiss cheese specialists, and President of a municipal power utility.

39 38 Corporate Governance 3.3 Election and term of office Members are elected to the Emmi Board of Directors for a term of three years. Re-election is permitted. There is no restriction on the number of terms of office. The members are elected by the General Meeting, with the period between one General Meeting and the end of the next deemed to be one year. All current members of the Board of Directors are elected until the 2012 General Meeting. The elections of the existing members of the Board of Directors put forward for re-election are carried out as a block election unless at least one shareholder requests individual elections. The elections of the Chairman and of new members are carried out as individual elections. All votes and elections are carried out by open ballot unless a majority requests a secret ballot Composition, duties and delimitation of competencies of the committees The composition of the committees and the Agricultural Council (hereinafter the committees ) is shown in the table below. The committees are subject to a regular assessment of their performance (self-assessment). The Controlling Committee supports the Board of Directors in monitoring the management of the company, in particular from a financial perspective. It is entitled to view all documents necessary for the performance of its duties and to request comprehensive information from all areas of the Group, as well as the external auditors, at any time. It comprises at least three members of the Board of Directors, of whom one is the Chairman of the Board of Directors. Its meetings are attended by the CEO, the CFO, the Head of Group Controlling and, on invitation, the Head of Internal Auditing and the external auditor in charge. The Controlling Committee deliberates on and approves: the auditing plan and the remuneration budget for the external auditors the choice of auditors for foreign Group companies. The Controlling Committee assesses the following, in particular, for the Board of Directors in an advisory or preparatory capacity: the organisation of accounting and the organisation and content of financial control, including internal auditing 3.4 Internal organisation Allocation of duties within the Board of Directors The following table shows the names of the Chairman and Vice-Chairman of the Board of Directors and the allocation of other duties within the Emmi Board of Directors. Allocation of duties within the Emmi Board of Directors Konrad Graber Chairman of the Board of Directors Moritz Erni Vice-Chairman of the Board of Directors Dominique Christian Bach Member Stephan Baer Member Joseph Deiss Member Hans Herzog Member Hanspeter Müller Member Thomas Oehen-Bühlmann Member Josef Schmidli Member Controlling Committee Market Committee Committee for Personnel Matters Agricultural Council (Chairman) (Chairman) (Chairman) (Chairman)

40 Corporate Governance 39 the effectiveness and independence of the external auditors the results of internal and external auditing and the monitoring of action plans by management based on these results Group and Holding accounts and the results of subsidiary companies the annual and investment budget the evaluation of risks and of the measures based on this financial and liquidity planning as well as business relations with financial institutions financial reporting to shareholders and the public legal proceedings and out-of-court settlement of disputes, the outcome of which may have implications for the financial situation of the Group. The Market Committee supports the Board of Directors in monitoring the management of the company, in particular from a medium and long-term strategic perspective. It offers recommendations on the basic organisation of brand, product and market strategy as preparation for corporate strategy. It comprises at least three members of the Board of Directors, of whom one is the Chairman of the Board of Directors. Its meetings are attended by the CEO and, on invitation, other members of Group Management. The Market Committee has no approval power. The Committee assesses or processes the following for the Board of Directors in an advisory or preparatory/follow-up capacity: the organisation and composition of management based on the Group s strategy merger and acquisition projects, brand projects and product and market investments based on the Group s strategy the strengthening of the Emmi brand portfolio and innovations based on the Group s strategy the preparation of changes in strategy the development of key customers and markets as well as critical business units the controlling of major projects. The Committee for Personnel Matters supports the Board of Directors in monitoring the management of the company, in particular from a personnel perspective. It comprises at least three members of the Board of Directors, of whom one is the Chairman of the Board of Directors. Its meetings are attended by the CEO on invitation. The Committee for Personnel Matters deliberates on and approves remuneration for the Chairman of the Board of Directors, the CEO and other members of Group Management. It elects the members of Group Management, excluding the CEO. The Committee for Personnel Matters assesses or processes the following, in particular, for the Board of Directors in an advisory or preparatory capacity: the salary policy of the Group, as well as bonus and similar performance-related plans, basic changes to pension fund regulations and other retirement benefit plans the composition of Group Management succession planning and the evaluation of candidates for the Board of Directors succession planning for the Chairman of Group Management and, at the request of the CEO, for members of Group Management employer representation in the Emmi Pension Foundation, the Emmi Welfare Foundation and Group Management s supplementary retirement benefit plan. The Agricultural Council, which consists of members of the Board of Directors and specialists, supports the Board of Directors in monitoring the management of the company, in particular with regard to milk procurement and agricultural issues. It comprises at least four individuals, of whom at least three are members of the Board of Directors (the Chairman of the Board of Directors plus two further members). Internal and external experts inform the Agricultural Council about the latest developments and provide its members with advice where necessary. Members from the Emmi Group who attend meetings include, as internal experts, the CEO, the Head of Agriculture and the Head of Milk Procurement. The external experts are the Managing Directors of the regional milk producer organisations ZMP and MIBA, both of which have a stake in Emmi, the national Milk Sector Organisation (BOM) and the national milk producer organisation SMP. The Agricultural Council has no approval power. It assesses or processes the following, in particular, for the Board of Directors in an advisory or preparatory capacity: general political issues the development of the milk and cheese industry and its organisations milk volumes and price management milk and cheese procurement Work methods of the Board of Directors and its committees As a rule, the Emmi Board of Directors and its committees meet as often as business requirements dictate. In 2011, the Board of Directors held seven approximately half-day meetings and one whole-day strategy meeting. The Controlling Committee met five times for three hours each, and the

41 40 Corporate Governance Market Committee three times for 2.5 hours each plus for one whole day. The Committee for Personnel Matters met five times for 1.5 hours each, while the Agricultural Council met twice for 2 hours each (average times). Meetings held by the Board of Directors are also attended by the CEO, the CFO and, depending on the topic, individual members of Group Management. Individual items on the agenda are handled exclusively within the Board of Directors, i. e. excluding all participants who are not members of the Board of Directors. The entire Group Management participates in the strategy meeting held by the Board of Directors. The inclusion of members of Group Management in meetings held by the committees is shown under point With the exception of the Agricultural Council, the Emmi Board of Directors holds its meetings without any external experts. The Chairman of the Board of Directors is a member of all committees for the purposes of coordinating the various committees of the Board of Directors and integrating the Board of Directors as a whole. The Chairpersons of the committees report to the Board of Directors at every Board meeting regarding their activities and results, and record details of their consultations and decisions in minutes that are distributed to all members of the Board of Directors. If any important issues arise, the Board of Directors is informed immediately. Overall responsibility for the duties assigned to the committees remains with the Emmi Board of Directors. The decisions of the Board of Directors are made with the absolute majority of the votes cast. In the event of a tied vote, the Chairman shall have the casting vote. 3.5 Definition of responsibilities between the Board of Directors and Group Management The Board of Directors is responsible for the overall management of the company and the Group, as well as for monitoring the management of the company. In accordance with article 716a of the Swiss Code of Obligations, it has the following inalienable and non-transferable duties: the overall management of the company and the Group, including the definition of medium and long-term strategies, focal points for planning and guidelines for company policy, as well as issuing the necessary directives the definition of basic organisation and related regulations the definition of guidelines for the organisation of accounting, financial control and financial planning the appointment and dismissal of individuals entrusted with the task of both managing and representing the company, namely the CEO, and the granting of signing authorities the overall supervision of the corporate bodies entrusted with the task of managing the company, namely with regard to compliance with the law, Articles of Association, regulations and directives the drafting of the Annual Report as well as the preparation of the General Meeting and the implementation of its decisions the notification of the court in the event of over-indebtedness the determination of capital increases and related amendments to the Articles of Association. Based on the duties mentioned above, the Emmi Board of Directors deliberates on and determines the following issues: the annual and investment budget the annual and half-year results Group structure up to and including Group Management salary policy evaluation of the main risks investments outside of the budget above CHF 0.5 million multi-year financial and liquidity planning strategy-relevant cooperations and agreements, in particular the purchase and sale of participations, companies, business units, business areas and rights to products or intellectual property rights, provided the annual turnover relating to the subject of the transaction exceeds CHF 1 million the founding and closure of companies the proposal of candidates for the Board of Directors to the General Meeting the election of the Boards of Directors of major subsidiaries Group regulations of strategic importance. All other areas of management are delegated in full by the Board of Directors to the Chairman and the CEO, who is authorised to issue instructions to other members of Group Management. The Board of Directors can, at any time, on a case-by-case basis or on the basis of general powers reserved, intervene in the duties and areas of competence of the corporate bodies that report to it and take over business carried out by these bodies. The CEO is the Chairman of Group Management. He leads, supervises and coordinates the members of Group Management and grants them the necessary authority to perform their functions. In accordance with the law and Emmi s Articles of Association and organisational regulations, he has the authority to lead the Emmi Group. He has in particular the following duties: the implementation of strategic objectives, definition of operational thrusts and priorities and provision of the necessary material and personnel resources to this end

42 Corporate Governance 41 the leadership, supervision and coordination of the other members of Group Management the convening, preparation and chairing of Group Management meetings regular communication with the Chairman of the Board of Directors or the Board of Directors as a whole regarding business developments. The Chairman of the Board of Directors must be informed immediately of any important and unexpected business events. representation of the Group internally and, upon consultation (on strategic issues) with the Chairman of the Board of Directors, externally nominations to the Board of Directors for the election of all members of the Boards of Directors of major subsidiaries. The members of Group Management manage day-to-day business independently. Their areas of competence and responsibility are determined, in particular, by the budget approved by the Board of Directors and by the agreed business strategy. 3.6 Information and control instruments vis-à-vis Group Management The Emmi Board of Directors is informed at every meeting by the Chairman, the Chairpersons of the committees, the CEO, the CFO and depending on the agenda item by other members of Group Management about current business developments, the financial situation and key business events. The CEO, CFO and the Head of Group Controlling attend meetings held by the Controlling Committee, while the CEO also participates in meetings of the Market Committee, the Agricultural Council and, where necessary, the Committee for Personnel Matters. In addition to the meetings, every member of the Board of Directors can, having first informed the Chairman of the Board of Directors accordingly, request information about business developments and, with the authorisation of the Chairman, about individual transactions. The Chairman is kept up to date by the CEO on a regular basis, at least once every fortnight, and receives the minutes of all Group Management meetings. He and the CEO ensure an appropriate flow of information between Group Management and the Board of Directors. Members of the Board of Directors are informed immediately of exceptional incidents by means of circular letter. Additional information and control systems are: The management information system (MIS): Members of the Board of Directors receive detailed sales statistics on a monthly basis. Consolidated financial statements together with a forecast for the year-end closing statement are prepared on a quarterly basis, and the Board of Directors is informed in detail about the financial situation of the company at the same frequency. The members of the Controlling Committee receive the Group financial statements as well as the accounts of all subsidiaries on a quarterly basis and are informed in detail in order to assess quarterly financial performance. Risk management process: At least once a year, the Board of Directors is informed by the CEO for its approval concerning the development of the main risks and their assessment on the basis of relevance and likelihood of occurrence. The Board of Directors monitors the implementation of risk management measures defined and carried out by Group Management (see also page 78 of the Financial Report). External and internal auditing: Details of the external auditor are provided in point 8. The Internal auditing department is a management tool used by the Board of Directors and Group Management, and as such forms a fundamental part of the internal control system. It is directly associated with the Chairman of the Controlling Committee, as well as the Controlling Committee as a whole, through regular participation in its meetings. The Controlling Committee approves the auditing programme and the semi-annual planning, receives all auditors reports and is kept informed at its meetings of all findings and the resulting measures. In addition, the Head of Internal Auditing regularly meets with the Chairman of the Controlling Committee. The Internal Auditing department works in accordance with standards defined in the Audit Manual, and carries out audits in the entire Emmi Group. These audits involve assessing the risk potential in the corporate governance, business processes and information systems of the company in terms of the reliability and integrity of accounting data and other fundamental information, the efficacy and efficiency of business processes, the securing of tangible and non-tangible business assets and compliance with laws, ordinances and agreements. The Internal Auditing department also works closely together with the external auditors and carries out special audits at the request of the Controlling Committee. It evaluates the effectiveness of the internal and external control systems, as well as the risk management organisation and process of the Emmi Group. Compliance is also supported and jointly monitored by the Legal department.

43 42 Corporate Governance 4. Group Management 4.1 Members of Group Management The following table shows the names of the ten members of Emmi Group Management, their country of origin and current function. Members of Emmi Group Management Year of birth Country of origin Education Current function Urs Riedener 1965 Switzerland Business Economist lic. oec. HSG Stanford Executive Program, USA CEO Robin Barraclough 1967 United Kingdom Economist Head of Marketing Reto Conrad 1966 Switzerland Business Economist lic. oec. HSG Certified Auditor Othmar Dubach 1958 Switzerland Certified Food Engineer ETH MBA Marc Heim 1967 Switzerland Business Economist lic. oec. HSG Matthias Kunz 1960 Switzerland Certified Agronomics Engineer ETH MBA Robert Muri 1950 Switzerland Certified Engineer HTL Dairy Farming MBA Max Peter 1954 Switzerland Certified Engineer HTL Mechanical and Production Engineering CFO Head of Cheese Division Head of Sales Head of International Division Deputy CEO, Head of Dairy Products Division Head of Trade and Supply Chain Management Natalie Rüedi 1971 Switzerland Certified Primary School Teacher EMBA Markus Willimann 1956 Switzerland Certified Food Engineer ETH Dr. sc. techn. ETH Head of Human Resources Head of Industrial Business 4.2 Professional background and other activities and interests Urs Riedener CEO and Chairman of Group Management since 2008 Urs Riedener was an Assistant Brand Manager at Jacobs Suchard in Neuchâtel from 1992 to 1995 and latterly Group Brand Manager at Kraft Jacobs Suchard in Zurich. From 1995 to 2000, he held various management positions at Lindt & Sprüngli, both in Switzerland and abroad, the most recent of which were National Sales Manager and Member of the Board of Management for Switzerland. Until 2008, he was Head of Marketing and Member of the Executive Board of the Migros Cooperative in Zurich. Urs Riedener joined Emmi as its CEO in He also sits on the committees of the Swiss branded products association Promarca and the Swiss marketing association GfM. Robin Barraclough Head of Marketing and member of Group Management since 2009 From 1991 to 2007, Robin Barraclough performed various managerial marketing functions at national and international level at Mars Incorporated, latterly as senior member of the Marketing Leadership Team at the European Masterfoods headquarters in Bremen (Germany). In 2008, he was in charge of the coffee business in German-speaking Europe for Kraft Foods. Robin Barraclough joined Emmi Group Management in As Head of Marketing, he is responsible for the ongoing development and marketing of the Emmi product and brand portfolio both in Switzerland and internationally.

44 Corporate Governance 43 Members of Group Management from left: Robin Barraclough, Markus Willimann, Marc Heim, Natalie Rüedi, Reto Conrad, Urs Riedener (CEO), Othmar Dubach, Robert Muri, Max Peter and Matthias Kunz Reto Conrad CFO and member of Group Management since 2006 Reto Conrad worked as a controller for UBS in Basel from 1990 to From 1992 to 2001, he held various functions in the auditing department of PricewaterhouseCoopers in Basel and San Francisco. In 2001, he was appointed CFO of the Bachem Group, which is headquartered in Bubendorf. Reto Conrad joined the Emmi Group in 2005 as Head of Group Controlling, and in 2006 was appointed CFO with responsibil ity for the Finance and Controlling, Legal and Tax departments in 2006, as well as becoming a member of Group Management. Reto Conrad is also a member of the Swiss GAAP FER (Swiss Accounting and Reporting Recommendations) expert committee. In 2011, Reto Conrad received the CFO of the year award from the CFO Forum Switzerland. Othmar Dubach Head of the Cheese Division and member of Group Management since 1993 Othmar Dubach worked as assistant to Prof. Bachmann at the Institute of Dairy Technology at the Swiss Federal Institute of Technology Zurich from 1981, before moving in 1983 to the Central Switzerland Milk Association in Lucerne, where he took over as Head of Dairy Controlling and Advisory Services. He also took on additional tasks in the areas of consulting for cooperatives and cheese dairy structures. Othmar Dubach joined the Emmi Group in 1992 and spent a year heading up marketing activities. In 1993, he became a member of Group Management and took on the role of Head of the Cheese Division with responsibility for production, packaging and maturation both in Switzerland and internationally. Marc Heim Head of Sales and member of Group Management since 2009 Between 1992 and 1999, Marc Heim held various positions with the former Effems AG (now Mars Schweiz AG) in Zug, latterly as Senior Product Manager for the Snackfood Division, specifically for the Balisto brand. From 1999 to 2004, he was Head of Sales and Marketing and a member of the Board of Management at Swiss biscuit specialist Kambly SA in Trubschachen, where he was responsible for the Swiss market, export business and marketing. From 2004 to 2009, he was Managing Director of Halter Bonbons AG. Marc Heim joined the Emmi Group in 2009 and, as Head of Sales for Switzerland and internationally, became a member of Group Management. He is also a member of the marketing committee of the Swiss Association of Brand Articles, Promarca, Vice-President of the Swiss Ice Cream Producers Association and President of the federal examination commission for senior marketing management.

45 44 Corporate Governance Matthias Kunz Head of the International Division and member of Group Management since 2002 Matthias Kunz was head of the department responsible for exports and economic affairs at what was then known as Central Switzerland Milk Producers (now known as Swiss Milk Producers, or SMP) from 1988 to He then became the proprietor and Managing Director of Tucano, Inc. in Carmel, California, before joining the Western Orient Trading Company, which exports US agricultural products. In 1997, he took over as Managing Director of Toni International AG. Following the merger between Toni and Säntis to form Swiss Dairy Food, he was appointed Head of the Cheese Division and a member of Group Management in 1999, and became Managing Director of Top Cheese Switzerland AG in The same year, following the acquisition of Top Cheese Switzerland by Emmi, he took over as Head of Emmi s International Cheese Division and became a member of Group Management. Since 2009, he has been responsible for the International Division and thus for the ongoing development of Emmi in the international markets. Robert Muri Head of the Dairy Products Division and member of Group Management since 1996, deputy CEO since 2007 From 1974 onwards, Robert Muri worked in sales for Falag International AG in Langenthal and as Head of Quality Control at Roco Conserven AG in Rorschach. From 1976 to 1980, he worked in development at International Flavors & Fragrances I.F.F. AG in Reinach (Aargau). In 1980, he moved to the Central Switzerland Milk Association in Lucerne as Head of Production, going on to become Works Manager. In 1994, he took over responsibility for marketing and sales in the Fresh Products Division of the Emmi Group and in 1996 was appointed Head of the Fresh Products Division and a member of Group Management. The Fresh Products and Dairy Products Divisions were merged in 2004, with Robert Muri taking over as Head of the new Dairy Products Division. In this function, he is responsible for the production of fresh and dairy products both in Switzerland and internationally. Robert Muri has also been Managing Director of Mittelland Molkerei AG in Suhr since 2006 and deputy CEO since Max Peter Head of the Trade and Supply Chain Management Division and member of Group Management since 2002 Max Peter worked as a consultant for the Zoller organisation from 1977 and subsequently as a project manager for Nestlé in Vevey from 1980 to He spent the period from 1987 to 1988 in a consulting and project management capacity at Suter+Suter AG in Basel. In 1988, he moved to Coop Schweiz, initially as Head of Technical Planning (Logistics & Engineering) and later as Member of Management for Merchandising/ CRS. In 1999, he was appointed CIO and Member of Group Management for Supply Chain Management at Bon Appétit Group AG in Volketswil. In 2002, he joined Emmi as Head of Corporate Development and subsequently became a member of Group Management. He has been responsible for Retail & Supply Chain Management since Max Peter is also a Member of the Board of Directors of GS 1 Switzerland, Vice- President of Schweizer Sporthilfe and a member of the executive council of Swiss Olympic. Natalie Rüedi Head of Human Resources and member of Group Management since 2011 Natalie Rüedi taught at Kriens primary school from 1992 to 2000 and became its headmistress in She joined the Emmi Group as a Human Resources specialist in 2000, going on to take over the enhancement and leadership of staff development in 2004 and being appointed Head of Human Resources and member of the extended Group Management in She has been a member of Group Management since Markus Willimann Head of Industrial Business and member of Group Management since 1998 Dr. Markus Willimann worked from 1982 to 1987 as a technical assistant at the Swiss Breweries Testing Station. From 1987 to 1990, he worked as a research and development project manager at Jacobs Suchard SA. From 1990 to 1998, he served as Division Manager and member of the Executive Board of UFA AG in Sursee. In 1998, he joined the Emmi Group as a member of Group Management and Head of the Dairy Products Division. He assumed responsibility for Industrial Business, Development Coordination and Agricultural Policy in Markus Willimann is also Chairman of the Swiss Dairy Industry Association and member of the Board of Directors of the Swiss Milk Sector Organisation (BOM), the Swiss Butter Sector Organisation (BOB) and the Federation of Swiss Food Industries (fial). 4.3 Management contracts No management contracts exist.

46 Corporate Governance Compensation, participations and loans 5.1 Content and definition process for compensation and share ownership programmes The remuneration system for the compensation of the Board of Directors and with the exception of the Chairman the remuneration of members of the Board of Directors is determined every three years by the Board of Directors at the recommendation of the Committee for Personnel Matters. The remuneration system for the compensation of Group Management is deliberated on and determined by the Committee for Personnel Matters. This Committee deliberates on and determines remuneration for the Chairman of the Board of Directors, the CEO and other members of Group Management. The Chairman of the Board of Directors and the CEO are not involved in determining their own remuneration. individual performance targets, as well as payments in kind (company car). Variable remuneration can account for up to one-third of total remuneration and consists of the following components: 1. Group performance (weighting 40 %) 2. Business area performance (weighting 40 %) 3. Achievement of individual performance targets (weighting 20 %). The measurement of business performance is based on the three pillars of sales, income and market share. For service areas, the relevant targets also relate to the ongoing development of the appropriate area with a view to providing the core business with even better support. An individual objective can, for example, be the launch of a product in a key market, the implementation of a project aimed at enhancing earnings in a particular product area, or the implementation of improvement measures in the area of corporate culture. The Committee for Personnel Matters assesses remuneration in connection with the general Group pay round (fixed component) and the company result (variable component). The Board of Directors is informed at its next meeting as well as by means of the minutes of the Committee meeting convened to discuss the definition and process implementation of remuneration. External experts are only called upon during the determination of the remuneration system in the event of a fundamental change to the system. At Group Management level, function-specific benchmarks are used when determining remuneration in the event of new appointments or promotions. The reference market is taken as companies from the fast moving consumer goods industry within Switzerland, to which the Emmi Group also belongs. Share ownership programmes and loans: As is the case elsewhere in the Emmi Group, no share or option plans or other share ownership programmes exist for members of the Board of Directors or members of Group Management. Furthermore, no loans are granted as a rule. Remuneration during the year under review is listed on pages 85 and 86 of the Notes to the Financial Statements of Emmi AG (Holding Company) The remuneration paid to the Board of Directors comprises a fixed basic salary only and is thus not related to performance. The remuneration paid to the members of Group Management comprises a fixed component, and a variable component based on business performance and achievement of

47 46 Corporate Governance 6. Shareholders rights of co-determination 6.1 Restrictions on voting rights and proxies Emmi s Articles of Association contain no restrictions on voting rights. A shareholder who has voting rights may only be represented at the General Meeting by a legal representative, another shareholder attending the General Meeting who has voting rights, an officer of the company, an independent proxy designated by the company or a proxy for shares held in safekeeping. The Articles of Association can be downloaded from the Group website at Statutory quorum Unless the law stipulates otherwise, the General Meeting passes its resolutions and performs its elections by an absolute majority of the voting rights represented, not taking into account blank and invalid votes. In addition to the legal exceptions, the resolution concerning the amendment of the provision of the Articles of Association relating to the restrictions on registration (see point 2.6 concerning nominees) also requires at least two-thirds of voting rights represented and the absolute majority of shares represented. 6.3 Convening of the General Meeting The Ordinary General Meeting takes place annually, at the latest six months after the end of the financial year. It is convened by the Board of Directors. The procedure for convening Extraordinary General Meetings is governed by the applicable legal provisions. 6.4 Agenda Shareholders who represent shares with a par value of CHF 1 million and above can request that an item be placed on the agenda at the General Meeting. Requests for an item to be placed on the agenda must be submitted to the Board of Directors in writing at least 45 days before the General Meeting, citing the motions concerned. 6.5 Entries in the share register The share register is usually closed ten days prior to the General Meeting. The Board of Directors may approve exceptional subsequent entries on request. The effective closing date is published in the invitation to the General Meeting and in good time in the financial calendar on the Emmi website at 7. Change of control and defensive measures 7.1 Obligatory offer Emmi s Articles of Association do not include any opting up or opting out clauses pursuant to article 22 of the Federal Stock Exchange and Securities Trading Act (SESTA) regarding the legal obligation to make a takeover bid. 7.2 Change-of-control clauses No contractual agreements exist either for members of the Board of Directors or for members of Group Management in the event of a change in the controlling majority stake. 8. Auditors 8.1 Duration of the mandate and term of the auditor in charge Auditors PricewaterhouseCoopers, Werftestrasse 3, P. O. Box, 6002 Lucerne, have acted as the statutory auditors for the Consolidated Financial Statements of the Emmi Group and the Annual Financial Statements of Emmi AG since its incorporation in At the General Meeting on 5 May 2011, PricewaterhouseCoopers, Lucerne, were reappointed for a further period of one year. Matthias von Moos has been the auditor in charge since the General Meeting convened in Audit fees The auditors charged total fees of CHF 973,000 for the 2011 reporting year for the performance of their mandate as statutory auditors (including audit of the Consolidated Financial Statements).

48 Corporate Governance Additional fees During the year under review, PricewaterhouseCoopers charged a total of CHF 871,000 for additional services beyond the scope of their statutory mandate, i.e. tax and transactionrelated advice. This fee includes CHF 459,000 for tax advice and CHF 412,000 for advice related to transactions. 8.4 Auditor supervision and control mechanisms in respect of the auditors The Board of Directors Controlling Committee assesses the performance, invoicing and independence of the external auditors and provides the Board of Directors with corresponding recommendations. The auditors provide Group Management and the Committee with regular reports that set out the results of their work and recommendations. The Committee annually reviews the scope of the external audit, the audit plans and the relevant procedures, and discusses the audit reports with the external auditors. The chief auditor attended three meetings of the Controlling Committee in Information policy Investor Relations guidelines: Emmi strives to maintain open and ongoing communication with shareholders, potential investors and other stakeholder groups. Emmi s aim is to provide rapid, real-time and transparent information about the company, its strategy and business developments, and to offer a truthful picture of Emmi s performance in the past and the present, as well as its future prospects. This picture is intended to reflect the assessment of the current situation of the company by Group Management and the Board of Directors. Methodology: Emmi publishes an extensive Annual Report every year that presents operating activities, corporate governance and financial reporting for the current year drafted and audited in accordance with Swiss GAAP FER. A half-year report is also produced. Furthermore, media releases are published about events relevant to the share price, such as acquisitions, minority or majority shareholdings, joint ventures and alliances in accordance with guidelines relating to ad-hoc publicity. Important announcements, in particular half and full-year results, are accompanied by presentations together with press and analyst conferences, or analyst calls. Emmi meets during the course of the year with institutional investors both in Switzerland and abroad, presents its results on a regular basis, organises road shows and holds meetings with individual institutional investors and groups. The main point of contact for these meetings and presentations is the CFO, and they focus on Emmi s financial results, its strategic orientation and the current initiatives of the Group. Emmi uses the Internet in order to ensure rapid, real-time and consistent distribution of information. The company s website features an electronic information tool that enables shareholders and other interested parties to add their names to an electronic distribution list: Media releases and investor informations can be accessed via the following link: Notifications to SIX Exchange Regulation of participations that exceed the level at which notification becomes obligatory can be found via the following link: Contact for Investor Relations: Emmi Schweiz AG, Investor Relations, Habsburgerstrasse 12, CH-6002 Lucerne, tel , ir@emmi.ch The General Meeting will take place on 3 May All registered shareholders receive an invitation to the General Meeting by mail. The next business results (half-year results 2012) will be published on 30 August 2012.

49 48 What our customers say What our customers say 49 Regional products that impress Italy is the country of pasta, pizza, wine and yoghurt. Our southern neighbour, with a population of around 60 million, has an open-minded attitude to culinary innovations from the rest of Europe. This is particularly true of Swiss products, which are seen as extremely trustworthy. Swiss Emmentaler with extra big holes has been a much-loved classic for years in Italy. Alongside our import business, we also operate Trentinalatte, our own dairy in Northern Italy. The Trentina range of yoghurts, made from regional milk and natural ingredients, offers a wide range of flavours, pot sizes and product characteristics. The brand s range also includes fresh cheese. It s not just about pasta and pizza! dairy goods are mostly based on natural products. Our Trentina yoghurts, made with milk from Trentino, are extremely tasty. Consumers value their exceptional quality, high fruit content and creamy consistency which is why these yoghurts are a permanent feature in our chiller cabinets. Francesco Avanzini Commercial Director Conad Soc. Coop. Italy

50

51 Financial report 51 Contents Comments 52 Financial Situation Consolidated Financial Statements of the Emmi Group 56 Consolidated Income Statement 57 Consolidated Balance Sheet 58 Consolidated Cash Flow Statement 59 Consolidated Statement of Shareholders Equity 60 Notes to the Consolidated Financial Statements 2011 Principles of Consolidation Principles of Valuation Notes to the Consolidated Financial Statements 79 Auditors Report on the Consolidated Financial Statements Financial Statements of Emmi AG, Lucerne (Holding Company) 80 Income Statement 81 Balance Sheet 82 Statement of Shareholders Equity 83 Notes to the Financial Statements Proposed Appropriation of Available Earnings 88 Auditors Report 89 Share Information

52 52 Comments Financial Situation Income Statement Operating section With a year-on-year increase of 1.4 %, sales developed better than could have been expected under the difficult economic conditions in We succeeded in holding the gross profit margin steady at the prior-year level and, as a result, increased gross operating profit by CHF 14.5 million. The pressure on gross margins created by the challenging currency environment was offset by price increases in markets outside Switzerland and by abandoning unprofitable business. In addition, productivity enhancements in production combined with a further increase in the share of high value-added products helped improving gross operating profit. EBITDA (earnings before interest, taxes, depreciation and amortisation) was up CHF 5.6 million on 2010; accordingly, the EBITDA margin, at 8.8 %, was slightly higher than in prior year (8.7 %). The increase in EBITDA is primarily based on a substantial gain of CHF 15.5 million on the sale of a property, but is also the result of rigorous cost management. For example, personnel costs adjusted for acquisition effects decreased by CHF 2.2 million. The increase in personnel costs Foreign currency exposure 61.0 % EUR 24.6 % USD 1.9 % CAD 12.5 % GBP Proportion of the net position of a currency as a % of the total net foreign currency positions is essentially due to acquisitions. Other operating expenses increased by CHF 9.0 million in Savings in advertising and marketing in response to the currency crisis helped to compensate a growth-related increase in logistics costs of CHF 7.0 million. At CHF million (previous year CHF million) or 4.8 % (prior year 5.1 %) of net sales, EBIT (earnings before interest and taxes) fell just short of the previous year s record level. The difficult market situation in Italy during the year under review led to an impairment on goodwill from the purchase of Trentinalatte S.p.A. in the amount of CHF 10.2 million. Depreciation of tangible assets remained at a high level as a result of large-scale investment activity. Financial result With net expenses of CHF 7.0 million, the financial result was CHF 11.2 million better than in The reason for this is a slightly positive foreign currency result, following a foreign currency loss of CHF 17.1 million in the 2010 financial result. This favourable development can be attributed to rigorous hedging of currency risks as well as to the absence of any significant differences between foreign currency valuation rates at the balance sheet dates. In the year under review, the weak EUR and USD had its impact primarily on gross operating profit and to a lesser extent on the financial result. As in the prior year, ongoing low interest rates continued to have a positive impact on Emmi s interest result. Similar to the previous year, a large part of the current year s investments was financed from current cash flow. However, due to significant business acquistions and its related funding interest expense increased by CHF 3.2 million year-on-year. Part of the funding necessary for the acquisitions was covered by a loan in EUR, with interest largely fixed over the longer term. Although this increases average interest somewhat, it significantly reduces currency and interest rate risk in the Group.

53 Comments 53 Taxes As expected, the average tax rate on pre-tax profit increased in Income tax expense was CHF 7.8 million higher than in 2010, which raised the average tax rate to 18.6 % (prior year 13.1 %). In 2010, one-time effects, notably the capitalisation of tax loss carry-forwards in the US, had a positive effect on the tax rate. In 2011, income taxes increased as a percentage of earnings due to non-capitalisation of deferred tax assets on tax losses of the current year. Cash flow and financing Operating cash flow decreased by CHF 26.0 million year-onyear to CHF million. While as in 2010 operating cash flow made a significant contribution, net working capital increased, leading to a corresponding reduction in cash flow from operating activities. Emmi again made substantial investments in fixed assets in The investments in fixed assets related in particular to the replacement and expansion of plant and machinery and improvements in efficiency thereof. Several large and prestigious projects were succesfully realised. For example, the processed cheese production plant at the Langnau site was expanded to integrate volumes taken over from the acquisition of Fromalp. In Suhr, the production building and the milk mixing facilities were expanded and the UHT production process was optimised. Cash flow Emmi Group in CHF 000s Cash flow from operating activities Cash flow from investing activities Free cash flow Cash flow from financing activities was covered by the issuing of a CHF bond of over CHF 250 million and through the financing of EUR notes worth EUR 50 million. In addition, the acquisition of the Onken business in the UK and Germany as of 3 January 2011 and the mid-year purchases of the Italian A-27 Group and the Rutz Käse Group in Switzerland marked further important business acquisitions for Emmi. These acquisitions are making an important contribution to strengthening the international business but help as well improving operating efficiency through the integration of production and distribution operations (Rutz Käse Group). With this substantial volume of investments and acquisitions, net borrowings increased by CHF million to CHF million (prior year CHF million). As a result of the acquisition activity, the equity ratio declined from 56.5 % to 52.4 %. Given the cash and cash equivalents and the unused credit lines available at the end of 2011, Emmi is still ideally positioned to make further investments. Emmi s financing continues to constitute a solid basis for the company s future growth. Some existing loan agreements expired in The loans were successfully refinanced at favourable conditions in the year under review. Alongside the loans due in 2011, the syndicated loan facility which would have been due in 2013 was also prematurely paid back and refinanced. The funding requirement created by the loan refinancing and acquisitions

54 54 What our customers say What our customers say 55 Cheese with character Arcata on the Californian coast is the location of a particular jewel in the crown of the Emmi Group: Cypress Grove Chèvre, which was acquired in 2010 and produces goat s cheese of the finest quality. The cheeses, which have been produced since 1983, come in unusual flavour varieties with unconventional product names and have quickly gained the attention of a large group of cheese connoisseurs, delicatessens and gourmet restaurants. Mary Keehn, the founder of Cypress Grove Chèvre, successfully created a charismatic brand. The cheese wins many awards and the growing acceptance of goat s milk in the US also supports the positive development of this niche segment. The company has around 400 goats of its own and wants to expand its cheese dairy. Next year sees the 20th anniversary of Humboldt Fog, the most popular of the specialities in its range. Grove cheeses have been a part of New Seasons Cypress since we started our company in We carry a wide variety of these cheeses and they have always been and continue to be a customer and staff favorite. The quality is top notch. Debbie Harris Cheese Buyer New Seasons Market USA

55 56 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP Consolidated Income Statement in CHF 000s Notes 2011 % 2010 % Sales of products 1 2,686,986 2,651,588 Sales of services 1 34,299 32,063 Net sales 2,721, ,683, Changes in inventories of semi-finished and finished products -32, ,211 Cost of materials and services 1,846, ,789, Gross operating profit 907, , Company-produced additions to plant and equipment Gains on the disposal of fixed assets 15, , Personnel expenses 344, , Other operating expenses 2 339, , Operating expenses 684, , Earnings before interest, taxes, depreciation and amortisation (EBITDA) 239, , Depreciation of tangible assets 3 79, , Amortisation of intangible assets 3 29, , Write-back of negative goodwill 656 1, Earnings before interest and taxes (EBIT) 130, , Income from associated companies 3,686 2,690 Financial result 4-6,969-18,203 Earnings before taxes (EBT) 127, , Income taxes 5 23,588 15,753 Net profit before minority interests 103, , Minority interests 20,485 18,359 Net profit 82, , Net profit per share in CHF

56 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 57 Consolidated Balance Sheet in CHF 000s Assets Notes % % Cash and cash equivalents 117, ,991 Securities 3,302 4,039 Trade accounts receivable 7 384, ,601 Other receivables 23,970 21,521 Inventories 8 299, ,727 Accrued income and prepaid expenses 12,847 12,329 Current assets 841, , Associated companies 52,227 48,700 Loans and other receivables 9 22,991 9,651 Securities 3,505 2,848 Employer contribution reserves 17 1,589 1,589 Deferred tax assets 5 9,914 8,848 Total financial assets 90,226 71,636 Accrued income and prepaid expenses 15 1,983 Tangible assets , ,732 Intangible assets ,383 84,106 Non-current assets 1,107, , Total assets 1,949, ,728, Liabilities and shareholders equity Bank overdrafts 12,225 70,373 Trade accounts payable , ,929 Leasing liabilities Other payables 13 24,359 18,478 Accrued expenses and deferred income 14 97,084 86,279 Provisions 16 5,413 8,225 Current liabilities 386, , Bank overdrafts 15 69, ,247 Leasing liabilities 15 3,308 2,365 Loans 15 2,891 3,319 Accrued expenses and deferred income 763 1,781 Bonds , ,000 Provisions 16 11,148 6,388 Deferred tax liabilities 16 77,063 72,055 Non-current liabilities 539, , Liabilities 926, , Share capital 53,498 53,498 Capital reserves 180, ,771 Retained earnings 666, ,539 Shareholders equity excl. minority interests 900, , Minority interests 121, , Shareholders equity incl. minority interests 1,022, , Total liabilities and shareholders equity 1,949, ,728,

57 58 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP Consolidated Cash Flow Statement in CHF 000s Net profit before minority interests 103, ,488 Net interest expenses 7,658 4,168 Gains on the disposal of fixed assets -15,857-3,068 Write-back of negative goodwill ,354 Other non-cash adjustments -5,910 9,950 Depreciation and amortisation 109,613 99,245 Income from associated companies -3,686-2,690 Change in provisions 62-4,073 Income taxes 23,588 15,753 Cash flow before changes in net working capital, interest and taxes 218, ,419 Change in inventories -32,196-1,434 Change in trade accounts receivable -15,548-20,610 Change in other receivables and prepaid expenses -1, Change in trade accounts payable 6,737 3,494 Change in other payables and deferred income 244 3,572 Interest paid -5,850-5,240 Taxes paid -20,000-25,006 Cash flow from operating activities 150, ,372 Investment in tangible assets -94, ,983 Divestment of tangible assets 17,456 4,210 Investment in securities Investment in intangible assets -3,207-1,989 Divestment of intangible assets Acquisition of/capital increase in associated companies -2,533-3,047 Acquisition of consolidated organisations/businesses (less cash and cash equivalents acquired) -174,152-49,985 Sale of equity interests/businesses 100 Repayment/grant of loans receivable -13,246 2,567 Dividends received 1,172 1,158 Interest received Cash flow from investing activities -269, ,149 Proceeds from capital increase by minority shareholders 500 Change in other current financial liabilities -59,515 48,387 Change in other non-current financial liabilities -61,498-17,908 Proceeds from bond issuing 247,613 Change in other non-current liabilities -4,134-13,702 Dividend payments to shareholders -18,189-16,049 Dividend payments to minority interests -2,961-3,009 Cash flow from financing activities 101,316-1,781 Currency translation effects -2,133-8,464 Net change in cash and cash equivalents -19,506 14,978 Cash and cash equivalents at the beginning of the period under review 136, ,013 Cash and cash equivalents at end of period under review 117, ,991 Transactions with no impact on cash and cash equivalents Part of the purchase price for the A-27 Group was due after the balance sheet date. Therefore, this amount (CHF 8.5 million) is not included in the cash flow statement under Acquisition of consolidated organisations, but is recognised in the balance sheet.

58 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 59 Consolidated Statement of Shareholders Equity in CHF 000s Share capital Capital reserves Retained earnings Accumulated exchange differences Total retained earnings Total excl. minority interests Minority interests Total incl. minority interests Shareholders equity as at 31 Dec , , ,207-12, , , , ,799 Changes (acquisitions/disposals) Net profit 86,129 86,129 86,129 18, ,488 Exchange differences -24,203-24,203-24, ,243 Dividends -16,049-16,049-16,049-3,009-19,058 Shareholders equity as at 31 Dec , , ,287-36, , , , ,925 Changes (acquisitions/disposals) -29,704-29,704 Net profit 82,981 82,981 82,981 20, ,466 Exchange differences -6,739-6,739-6, ,743 Dividends -18,189-18,189-18,189-2,961-21,150 Shareholders equity as at 31 Dec , , ,079-43, , , ,933 1,022,794 As at 31 December 2011, 5,349, 810 registered shares with a par value of CHF 10 were issued (as at 31 December ,349,810). With regard to the rights associated with the shares refer to note 6 in the Corporate Governance report. As of 31 December 2011, the accumulated non-distributable reserves amount to CHF 51.9 million (previous year CHF 52.9 million).

59 60 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP Notes to the Consolidated Financial Statements 2011 Principles of consolidation General information The Board of Directors of Emmi AG approved the Group financial statements on 5 March They are subject to the approval of the Annual General Meeting of shareholders. Accounting principles The Consolidated Financial Statements are based on the annual accounts of the Group companies for the year ending 31 December 2011, prepared on a uniform basis. The Group prepares its accounts in compliance with all existing guidelines of Swiss GAAP FER (Swiss Accounting and Reporting Recommendations) and the provisions of Swiss law. Assets are measured at acquisition or production cost. Liabilities are stated at historical rates. The income statement is presented using the classification of expenses based on their nature. The consolidated financial statements are therefore based on economic values and present a true and fair view of the company s assets, financial position and results of operations. The annual financial statements are prepared under the assumption of going concern. The consolidated financial statements are presented in Swiss francs (CHF). Except where stated otherwise, all amounts are presented in thousands of Swiss francs (TCHF). Consolidated companies The Consolidated Financial Statements include the annual accounts of Emmi AG as well as the Group companies in which Emmi AG directly or indirectly holds more than 50 % of the voting rights or where Emmi has a controlling influence over the financial and business policy of a company by contractual agreement (control principle). Investments of 50 % where Emmi does not hold sole management control (joint ventures) and investments of between 20 % and 49 % (associated companies) where Emmi has significant influence are accounted for using the equity method. Accounts based on or reconciliations to Swiss GAAP FER are used to calculate Emmi s proportionate share on shareholders equity, except when this involves disproportionate expense. In this case, accounts based on equivalent international standards are used. Minority holdings of less than 20 % are carried in the balance sheet at acquisition cost less any adjustments for impairment required by generally accepted accounting principles. The consolidated companies are listed in the Notes to the Consolidated Financial Statements (note 25). Changes to the group of consolidated companies The following changes to the group of consolidated companies took place in the year under review. Consolidated companies Currency Capital in thousands Capital share Capital share Emmi Finanz AG, Lucerne Established on CHF % Rutz Käse Group Rutz Käse AG, Wittenbach Acquired on CHF % Rutz Käse AG Käserei St. Niklaus, Koppigen Acquired on CHF % Rutz Käse GmbH, Constance, Germany Acquired on EUR % A-27 Group A-27 S.p.A., Rancio Valcuvia, Italy Acquired on EUR 1, % Sweet Port Germany GmbH, Langenhagen, Germany Acquired on EUR % SWEET PORT SERVICES SA, Lugano Acquired on CHF % In addition, in the UK and Germany the Onken business was acquired on 3 January This business will be operated within Emmi UK Limited and Emmi Deutschland GmbH. For details of other changes to interests in consolidated companies (including through purchase of minority interests, mergers), we refer readers to note 25. Associated companies Sepa S.r.l., Pieve Porto Morone, Italy 1) Partially acquired on EUR % 1) Sepa S.r.l. is a part of the A-27 Group.

60 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 61 Consolidation method Capital has been consolidated using the Anglo-Saxon purchase method. Assets and liabilities as well as expenses and income of the fully consolidated companies are included in their entirety. Minority holdings in consolidated shareholders equity and the net profit are shown separately. All intercompany transactions and relations between the consolidated companies are offset against each other and eliminated. Profits on intercompany transactions are eliminated. Companies and businesses acquired during the course of the year are revalued on their acquisition date on the basis of uniform Group principles and consolidated as from that date. Any goodwill remaining after this revaluation (the difference between the purchase price and the proportionate, revalued share of shareholders equity) is recognised in the balance sheet and amortised through profit and loss over its useful life of generally 5 to 20 years. Any badwill (negative goodwill) is recognised as a provision and is released over a maximum of 5 years. Companies sold during the year are excluded from the consolidated financial statements from the date of sale. Minority interests acquired are likewise measured using the purchase method. Accordingly, the difference between the purchase price and the proportionate equity on the basis of Swiss GAAP FER is recognised as goodwill or negative goodwill. Translation of foreign currencies 1) Foreign currency transactions in Group companies The foreign currency transactions and items contained in the individual financial statements of the consolidated companies are translated as follows: Foreign currency transactions are translated at the exchange rate valid on the transaction date into the functional currency. At year-end, monetary assets and liabilities in foreign currency are measured using the exchange rate valid at the balance sheet date with any profit or loss from such valuation taken to the income statement. Foreign exchange gains and losses resulting from the measurement of intercompany loans in foreign currencies that are part of the net investment in a subsidiary are recognised in equity. Exchange differences resulting from the revaluation of proportionate shares in associated companies are recognised in equity. Translation of financial statements to be consolidated Group financial statements are presented in Swiss francs. Assets and liabilities of Group companies with a functional currency different than Swiss franc are translated at year-end rates (rates on balance sheet date ); equity is translated at historical rates, the income statement and cash flow statement are translated using average rates for the year. Any resulting exchange differences are recognised in shareholders equity. Where interests are sold in fully consolidated companies or companies accounted for using the equity method, the difference between the proceeds of the sale and the proportionate book value including goodwill is presented as a gain or loss in the income statement. Accumulated exchange differences of foreign companies recognised in equity resulting from the translation of annual statements and loans between Group companies are derecognised on the sale of the company and recognised in the income statement as part of the gain or loss resulting from the sale. 1) Currency exchange rates in CHF Average annual rates Year ending rates EUR GBP USD CAD

61 62 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP Cash flow statement Cash and cash equivalents form the basis for the presentation of the cash flow statement. Cash flow from operating activities is presented using the indirect method. Principles of valuation Cash and cash equivalents Cash and cash equivalents include cash, balances in postal giro and bank accounts, and short-term time deposits with a residual term of less than three months. They are valued at their nominal value. Securities Listed securities, include OTC securities with a market price, are valued at the market values prevailing on the balance sheet date. Unlisted securities are valued at acquisition cost less any impairments required by generally accepted accounting principles. Trade accounts receivable Trade accounts receivables include short-term receivables with a residual term of up to one year arising from ordinary operating activities. These receivables are valued at their nominal values. Credit default risks are accounted for by specific and general allowances. General allowances are recognised for items that have not yet been considered with a specific allowance. The general allowance is based on the assumption that the default risk increases as the debt becomes increasingly overdue. Inventories Goods manufactured by the company itself are valued at production cost. Any lower net market value is taken into account (loss-free valuation). Merchandise and other stocks of goods are valued at the lower of average cost or net market price. Discounts are treated as reductions in purchase value. Tangible assets Tangible assets are valued at purchase cost less any depreciation required by generally accepted accounting principles. Company-produced additions to plant and equipment are only capitalised if they are clearly identifiable and the costs reliably determinable, and they bring a measurable benefit to the company over the course of several years. Depreciation is charged on a straight line basis over the useful life of the fixed asset. The useful lives of assets have been determined as follows: Real estate Administrative buildings and residential buildings Industrial buildings, rock caves Installations and fittings Machinery and plant Business infrastructure Vehicles Company-produced additions to plant and equipment no depreciation 40 years 25 to 40 years 15 years 10 to 15 years 5 to 10 years 4 to 7 years 5 years Due to the long lifetime of the new spraying tower in Dagmersellen, the depreciation period for machinery and plant for this investment was set at 30 years in 2010, which is an exception to the generally applicable useful economic life. Impairment The value of non-current assets is assessed on the balance sheet date for signs of impairment. If there is evidence of any lasting reduction in value, the realisable value is calculated (impairment test). If the book value exceeds the realisable value, the difference is recognised in profit and loss as unscheduled depreciation. Financial assets Financial assets include securities held as long-term investments and long-term loans as well as investments in unconsolidated companies. Listed and OTC securities are valued at the lower of cost or market value prevailing on the balance sheet date. Securities without a market value and loans are valued at cost less any impairment required by generally accepted accounting principles.

62 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 63 Intangible assets This item includes mainly EDP software, trademarks and goodwill from acquisitions. Intangible assets are recognised if they are clearly identifiable and the costs reliably determinable, and they bring a measurable benefit to the company over the course of several years. Intangible assets are valued at purchase cost less any amortisation and impairment required by generally accepted accounting principles. Amortisation is charged on a straight line basis. The useful life of EDP software is 2 to 5 years; for trademarks it is 5 to 20 years. The extension of the amortisation period for trademarks to 20 years (previous year: 2 to 5 years) takes into account the expected useful life of the newly acquired brands. Goodwill from acquisitions is amortised over 5 to 20 years (refer to Principles of consolidation). The expected useful life of other intangible assets is determined on a case-by-case basis and is usually between 5 and 10 years. Negative goodwill After the values of the individual net assets acquired have been adjusted and the necessary restructuring provisions created, any provisions required are recognised in the amount of the negative goodwill and released over a maximum of 5 years. The release of negative goodwill takes into account the costs incurred for the integration. Negative goodwill is reported under current and non-current provisions depending on the expected release date. Provisions Provisions are recognised if an event in the past gives rise to a justified, likely obligation which is of uncertain timing and amount, but which can be estimated reliably. Provisions are measured on the basis of the estimated amount of money required to satisfy the obligation. Deferred taxes The accruals of deferred income taxes are based on a balancesheet oriented approach and essentially take all future income tax effects into account. The deferred income tax to be accrued is calculated on the basis of the future tax rate valid on the balance sheet date for the tax subject in question. Deferred tax assets and deferred tax liabilities are offset, provided they relate to the same tax subject and are levied by the same tax authority. Deferred tax assets on timing differences and tax loss carryforwards are only recognised if there is reasonable certainty of future taxable income being available against which they can be realised. Derivative financial instruments Emmi uses derivative financial instruments to hedge its currency and interest rate risks. Recognition of derivative financial instruments depends on the underlyings hedged. Derivates used to hedge changes in the value of an underlying transaction already recognised in the financial statements are accounted for using the same valuation principle used for the hedged underlying. Instruments for hedging future cash flows are not recognised in the balance sheet but disclosed in the Notes until such time as the future cash flow is realised. Upon the occurrence of the future transaction or the disposal of the derivative instrument, the current value of the derivative financial instrument is recognised in the balance sheet and taken through profit and loss at the same time the transaction hedged is recognised in the income statement. Any derivative financial instruments which are open as at the balance sheet date are disclosed in the notes (note 19).

63 64 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP Liabilities Group liabilities are stated at their nominal values. Leasing Leasing transactions are distinguished between finance leases and operating leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. The assets and liabilities arising out of finance leases are recognised in the balance sheet. Leasing liabilities arising out of operating leases that cannot be cancelled within one year are disclosed in the notes (note 21). Employee benefit plan liabilities Employees and former employees receive various employee benefits and old age pensions which are provided in accordance with the laws of the countries in question. Net sales and revenue recognition Revenues are recognised on delivery or provision of the service. Net sales include all goods and services sold to third parties which have been invoiced. Research and development Research and development costs are fully charged to the income statement. These costs are included under Personnel expenses and Other operating expenses. Contingent liabilities Contingent liabilities are valued at the balance sheet date. If an outflow of funds without a simultaneous usable inflow of funds is likely, a provision is recognised. All Swiss companies within the Emmi Group have either their own legally independent pension schemes or are members of collective occupational pension foundations provided by banks or insurance companies, which do not carry risk themselves. These pension schemes are financed by employer and employee contributions. The economic impact of existing pension schemes on the Emmi Group is reviewed each year and the related economic benefit or liability recognised. The employer contribution reserves available are recognised as assets. Changes in employer contribution reserves and stated changes in economic impact arising from excess/insufficient cover for pension schemes are recognised in the income statement under personnel expenses. For further details with regard to the application of Swiss GAAP FER 16 Employee benefit obligations, we refer readers to note 17 in the Notes to the Consolidated Financial Statements.

64 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 65 Notes to Consolidated Financial Statements CHF 000s 1 Breakdown of net sales By product groups and Swiss market/international Switzerland International Group Milk 239, ,277 9,148 9, , ,670 Butter and margarine 275, ,089 10, , ,110 Cream 193, ,814 4,771 7, , ,935 Dairy products 708, ,180 24,600 16, , ,715 As % of net sales Fresh products 370, , , , , ,061 As % of net sales Natural cheese 468, , , , , ,133 Processed cheese 66,433 64,211 50,196 61, , ,472 Cheese 534, , , , , ,605 As % of net sales Fresh cheese 131, ,921 43,651 33, , ,074 As % of net sales Powder/concentrates 62,395 66,518 26,289 20,582 88,684 87,100 As % of net sales Other products 72,510 93,426 51,721 53, , ,033 Sales of services 29,502 27,249 4,797 4,814 34,299 32,063 Other products and services 102, ,675 56,518 58, , ,096 As % of net sales Net sales 1,909,893 1,951, , ,749 2,721,285 2,683,651 As % of group net sales By country group 2011 in % 2010 in % Switzerland 1,909, ,951, Europe excl. Switzerland 571, , North and South America 215, , Asia/Pacific 24, , Total 2,721, ,683,

65 66 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 2 Other operating expenses Advertising and marketing 105, ,559 Occupancy expense, maintenance and repair, leasing 65,021 66,916 Insurance, fees and HGV road tax 12,307 11,072 Energy, operating material and supplies 52,444 49,749 General administrative expense 30,212 29,356 Tools and cylinder costs 4,078 3,718 Transport logistics for outgoing goods 55,741 51,513 Other logistics expenses 10,883 8,081 Other operating costs 3,843 2,735 Total 339, ,699 3 Depreciation and amortisation Ordinary depreciation of tangible assets 76,537 76,598 Unscheduled depreciation of tangible assets 3,444 5,732 Ordinary amortisation of goodwill 9,530 5,720 Unscheduled amortisation of goodwill 12,234 3,910 Amortisation of other intangible assets 7,728 5,958 Unscheduled amortisation of other intangible assets 140 1,327 Total 109,613 99,245 Tangible assets in an amount of CHF 2.3 million were subject to unscheduled depreciation as a result of a decision to close a cold storage facility. In addition, unscheduled depreciation of tangible assets related to impairments on assets no longer used following the integration of the activities of the acquired Rutz Käse Group. The unscheduled amortisation of goodwill relates primarily to the impairment of the goodwill arising from the takeover of Trentinalatte S.p.A. in an amount of CHF 10.2 million, which was triggered as a result of the difficult market situation in Italy. In the previous year, unscheduled depreciation of tangible assets related to impairments of properties no longer in full use in 2011 due to restructuring plans and to other assets not utilised according to the original plans. In addition, the scrapping of assets no longer in use resulted in an unscheduled depreciation in the amount of CHF 2.8 million in On intangible assets, impairments of the goodwill from the acquisition of CASP LLC (CHF 3.9 million) and of IT development costs had been recorded in the previous year. 4 Financial result Interest income Other financial income 375 4,333 Total financial income 1,013 5,299 Interest expense 8,296 5,134 Other financial expenses 1,421 1,225 Total financial expenses 9,717 6,359 Financial result -8,704-1,060 Currency result 1,735-17,143 Total -6,969-18,203 Other financial income in the previous year mainly relates to the release of an allowance on the loan in respect of CASP LLC, as the associated risks are now covered by the value adjustment on goodwill (CHF 4.1 million). Other financial expenses include borrowing costs and bank fees.

66 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 67 5 Income taxes Current income taxes 18,313 16,022 Change in deferred taxes 5, Total 23,588 15,753 Average tax rate 18.6 % 13.1 % Deferred taxes are calculated for every company using the actual applicable tax rate. As at 31 December 2011, the resulting weighted average tax rate was 18.4 % (previous year 19.3 %). In 2011, non-capitalised tax claims from tax loss carry-forwards increased from CHF 6.0 million to CHF 9.6 million. Deferred tax assets include capitalised tax loss carry-forwards amounting to CHF 3.3 million (previous year CHF 4.3 million) and deferred taxes on temporary differences in the amount of CHF 6.6 million (previous year CHF 4.5 million). Accruals for current taxes fell from CHF 14.4 million in 2010 to CHF 13.5 million in Profit per share No. of shares on ,349,810 5,349,810 No. of shares on ,349,810 5,349,810 Average no. of shares 5,349,810 5,349,810 Net profit in CHF 82,981,168 86,128,595 Net profit per share in CHF Net profit per share is calculated by dividing the net profit attributable to the shareholders of the Emmi Group by the average number of shares outstanding. Own shares are not included in the average number of shares outstanding. 7 Trade accounts receivable From third parties 378, ,386 From shareholders 989 1,391 From related parties 1) 14,518 8,236 Allowance for doubtful accounts -9,651-12,412 Total 384, ,601 1) Related parties denote associated companies and other related parties. 8 Inventories Finished products 81,839 69,549 Merchandise 8,799 10,231 Raw materials, semi-finished products and packaging material 216, ,254 Other inventories 1,731 2,053 Allowance for market price adjustments -10,166-9,360 Total 299, ,727 9 Loans and other receivables From third parties 8,920 9,556 From related parties 1) 14, Total 22,991 9,651 1) Loans and other receivables to related parties include in particular a loan of EUR 10 million to an associated company and other liabilities to other related parties.

67 68 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 10 Tangible assets Tangible assets 2011 Vacant land Real estate/ Property Plant/ Equipment Tangible fixed assets under construction Other tangible assets Total Purchase value at , ,444 1,058,800 22,443 41,160 1,760,515 Change in scope of consolidation ,172 51, ,764 69,653 Additions 1,297 8,002 84, ,813 Disposals -10,914-61,000-2,887-74,801 Reclassification ,848 60,360-71,893 7, Currency effects -31-1,370-1, ,545 As at 31 December , ,477 1,116,370 35,666 49,930 1,847,576 Accumulated depreciation at , , ,132 32, ,783 Change in scope of consolidation 57 8,131 39,475 2,050 49,713 Ordinary depreciation 14,117 58,760 3,660 76,537 Unscheduled depreciation 1,391 1, ,444 Disposals -9,541-60,853-2,794-73,188 Reclassification Currency effects As at 31 December , , ,418 35,826 1,032,315 Net book value at 31 December , , ,952 35,666 14, ,261 Of which leasing 3,775 3,775 Tangible assets are reviewed for signs of impairment losses annually. Necessary adjustments for impairments have been recognised according to Swiss GAAP FER 20. These are included under unscheduled depreciation. Tangible assets 2010 Vacant land Real estate/ Property Plant/ Equipment Tangible fixed assets under construction Other tangible assets Total Purchase value at , ,000 1,018,004 38,079 54,063 1,704,068 Change in scope of consolidation ,236 41,337 6,482 76,615 Additions ,065 8,580 75, ,983 Disposals ,898-77,361-11, ,499 Reclassification ,393 77,446-91,345-8, Currency effects ,352-9, ,641 As at 31 December , ,444 1,058,800 22,443 41,160 1,760,515 Accumulated depreciation at , , ,801 42, ,599 Change in scope of consolidation 16,073 31,851 5,267 53,191 Ordinary depreciation 32 13,960 59,133 3,473 76,598 Unscheduled depreciation 1,955 3, ,732 Disposals -14,992-77,262-11, ,357 Reclassification 34 7,056-7,090 Currency effects -3-1,409-4, ,980 As at 31 December , , ,132 32, ,783 Net book value at 31 December , , ,668 22,443 8, ,732 Of which leasing 2,604 2,604 Net book value at 1 January , , ,203 38,079 11, ,469 Of which leasing 2,854 2, Fire insurance values 2,075,951 2,033,876

68 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP Intangible assets Intangible assets 2011 Trademarks Software Goodwill fully consolidated Goodwill equity consolidated Total goodwill Other intangible assets Purchase value at ,363 32, ,092 25, , ,452 Change in scope of consolidation 29, , ,085 2, ,247 Additions 797 2,410 3,207 Disposals ,710 Reclassification Currency effects ,042 As at 31 December ,675 34, ,781 25, ,090 2, ,297 Total Accumulated amortisation ,410 24,957 47,686 5,209 52, ,346 Change in scope of consolidation Ordinary amortisation 1,791 5,249 8,314 1,216 9, ,258 Unscheduled amortisation ,010 1,224 12,234 12,374 Disposals ,470 Reclassification Currency effects As at 31 December ,224 29,982 67,283 7,649 74, ,914 Net book value at 31 December ,451 4, ,498 17, ,158 2, ,383 Intangible assets are reviewed for signs of impairment losses annually. Irrespective of whether there are any triggering events, larger goodwill items are tested for impairment annually, based on a value in use calculation. The value in use calculation is based on future cash flows for the next five years and the extra-polated values from the sixth year. The figures used are part of the multi-year financial planning approved by Group Management. All intangible assets were acquired. Other goodwill shown separately in the 2010 statement of intangible assets related only to fully consolidated companies. It is therefore now classified under goodwill fully consolidated. The presentation for 2010 has been adjusted accordingly. Intangible assets 2010 Trademarks Software Goodwill fully consolidated Goodwill equity consolidated Total goodwill Other intangible assets Purchase value at ,778 35,895 86,746 24, , ,565 Change in scope of consolidation ,724 1,275 22,999 23,149 Additions 100 1, ,989 Disposals ,130-4,050-4,050-9,548 Reclassification Currency effects ,328-1, ,714 As at 31 December ,363 32, ,092 25, , ,452 Total Accumulated amortisation ,175 23,360 43,406 3,965 47, ,983 Change in scope of consolidation Ordinary amortisation 270 5,666 4,476 1,244 5, ,678 Unscheduled amortisation ,910 3,910 5,237 Disposals ,975-4,050-4,050-9,262 Reclassification Currency effects As at 31 December ,410 24,957 47,686 5,209 52, ,346 Net book value at 31 December ,635 55,406 20,100 75, ,106 Net book value at 1 January ,603 12,535 43,340 20,069 63, ,582

69 70 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 12 Trade accounts payable To third parties 221, ,078 To shareholders 20,297 20,325 To related parties 1) 5,741 4,526 Total 247, ,929 1) Related parties denote associated companies and other related parties. 13 Other payables To third parties 19,397 16,095 To shareholders 6 To related parties 1) 4,956 2,383 Total 24,359 18,478 1) Other payables to related parties include payables to employee pension plans. 14 Accrued expenses and deferred income Interest 6,154 2,690 Income taxes 13,472 14,446 Human resources 24,594 21,976 Contractual discounts 22,299 18,317 Other vs. third parties 28,032 26,201 Other vs. shareholders Other vs. related parties 1) 2,422 2,621 Total 97,084 86,279 1) Related parties denotes associated companies and other related parties. Other accrued expenses and deferred income comprise in particular contributions to relevant organisations and associations, energy, advertising costs and various services. 15 Financial liabilities 15.1 Bonds Bond type Bond with reopening option Nominal amount CHF 125 million Securities number /ISIN CH Interest rate 3.00 % Maturity 13 September 2006 to 13 September 2013 Redemption 13 September 2013 at par value Due to the market situation, Emmi decided to settle an existing interest rate swap in June The swap was used as a hedging instrument for the coupon from a bond issue and, accordingly, was concluded concurrently with the issue of the bond on 13 September 2006, with the same maturity (until 13 September 2013). The proceeds from the settlement were recognised as a liability and will now be systematically released over the residual term of the bond. The actual interest rate on the bond is thereby reduced from 3.0 % to 2.1 % per year.

70 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 71 Bond type Nominal amount Securities number Interest rate % Bond with reopening option CHF 250 million /ISIN CH Maturity 30 June 2011 to 30 June 2017 Redemption 30 June 2017 at par value The CHF 2.4 million stamp duty incurred in connection with the issue of the bond were capitalised under accrued income and prepaid expenses on 30 June The corresponding accrual will be released over the term of the bond. The actual interest rate on the bond is thereby increased from % to % per year Other non-current financial liabilities Other non-current financial liabilities 2011 Residual terms 2 to 5 years Residual terms over 5 years Total Of which secured by charges on real property Interest rate in % Bank loans 52,698 16,424 69,122 7,058 Leasing 2, ,308 Loans from third parties Loans from shareholders 1,040 1,040 Loans from related parties 1) 1,206 1,206 Total 57,516 17,805 75,321 7, ) Related parties denote associated companies and other related parties. Non-current bank loans bear interest at actual rates of between 2.6 % and 4.1 % (previous year 0.4 % and 2.8 %). As in the previous year, financing in the form of mortgages bears interest at rates of between 4.1 % and 4.7 %. In accordance with the terms of the credit agreement, the bank loans are linked to financial covenants. As at 30 June 2011, bank loans originally due on 8 November 2011 and 8 November 2013 amounting to CHF 190 million were paid back prematurely and refinanced by means of a bond issue of CHF 250 million. Other non-current financial liabilities 2010 Residual terms 2 to 5 years Residual terms over 5 years Total Of which secured by charges on real property Interest rate in % Bank loans 127,611 3, ,247 17,879 Leasing 1,275 1,090 2,365 Loans from third parties 1, ,279 Loans from shareholders 1,040 1,040 Total 131,650 5, ,931 17, Some existing loan agreements expired in Financial liabilities not covered by continuing contracts were therefore reclassified as current financial liabilities as of 31 December Provisions Ongoing restructuring Negative goodwill Other provisions Deferred taxes Total provisions As at 1 January ,278 1,696 10,639 72,055 86,668 Created 4,130 1,237 2,291 9,693 17,351 Utilised -1,284-3,556-5,359-10,199 Released (income statement) ,316-2,272 Change in scope of consolidation 1, ,090 Currency effects As at 31 December ,824 2,277 9,460 77,063 93,624 Of which current provisions 2, ,640 5,413 Non-current provisions 2,800 1,528 6,820 77,063 88,211

71 72 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP The restructuring provisions recognised as at 31 December 2011 relate in particular to costs related to the integration of Fromalp AG which was acquired in 2010 (CHF 1.2 million) and expenditure in connection with abandoning the frozen products distribution business and the related conversion of the cold storage facility in Ostermundigen (CHF 2.5 million). Other provisions include in particular accruals for pending legal matters (2011: CHF 3.5 million; 2010: CHF 2.1 million) and liabilities for staff departures outside Switzerland as required by law (2011: CHF 2.6 million; 2010: CHF 1.5 million). As at 31 December 2010, other provisions also included dismantling costs (CHF 2.8 million). In all cases, the likelihood of such events occurring has been assessed at above 50 %. Ongoing restructuring Negative goodwill Other provisions Deferred taxes Total provisions As at 1 January ,078 12,540 69,229 84,339 Created 1, ,191 6,694 12,702 Utilised -55-3,903-3,727-7,685 Released (income statement) -1,354-5,130-6,484 Change in scope of consolidation 4, ,662 Currency effects As at 31 December ,278 1,696 10,639 72,055 86,668 Of which current provisions 1, ,022 8,225 Non-current provisions 583 1,188 4,617 72,055 78, Employee benefit schemes Nominal value ECR Waiver of usage Other value adjustments Balance sheet Balance sheet Result from ECR in personnel expenses Employer contribution reserve (ECR) Pension schemes without excess/ insufficient cover (domestic) 1,589 1,589 1,589 Pension schemes with insufficient cover (domestic) Total 1,589 1,589 1,589 Excess/insufficient cover as per Swiss GAAP FER 26 Economic benefit/obligation for the company Change vs. prior year or taken to the income statement in the FY Contributions limited to the period 1) Pension expenses in personnel expenses Economic benefit/economic obligation and pension expenses (domestic) Welfare funds (domestic) 35, Pension schemes without excess/insufficient cover (domestic) 16,812 16,812 16,317 Pension schemes without excess/insufficient cover (foreign) Pension schemes with excess cover (domestic) Pension schemes with insufficient cover (domestic) Total 34,961 17,762 17,762 17,451 1) Including result from employer contribution reserves or comparable items in connection with pension schemes abroad.

72 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 73 Domestic Foreign Total Breakdown of pension expenses Contributions to pension plans at cost to the companies 17, ,762 Contributions to pension plans from employer contribution reserves = Total contributions 17, ,762 +/- change in ECR due to asset performance, value adjustments, etc. Contributions and change to employer contribution reserves 17, ,762 Increase in economic benefit to the company due to excess cover Reduction in economic obligations of the company due to insufficient cover Total change in economic impact arising from excess/insufficient cover = Pension expenses in personnel expenses for the period 17, ,762 Domestic Foreign Total Breakdown of pension expenses Contributions to pension plans at cost to the companies 16, ,451 Contributions to pension plans from employer contribution reserves = Total contributions 16, ,451 +/- change in ECR due to asset performance, value adjustments, etc. Contributions and change to employer contribution reserves 16, ,451 Increase in economic benefit to the company due to excess cover Reduction in economic obligations of the company due to insufficient cover Total change in economic impact arising from excess/insufficient cover = Pension expenses in personnel expenses for the period 16, , Acquisitions The companies acquired by Emmi in 2011 reported the following main balance sheet items at the time of acquisition: Rutz Käse Group A-27 Group Fromalp AG CASP LLC Cypress Grove Chèvre, Inc. Cash and cash equivalents ,081 1,134 1,095 Inventories 5,548 2,760 11, ,128 Other current assets 4,763 13,188 8, ,106 Non-current assets 4,027 15,755 13,320 10,908 13,806 Current liabilities 7,826 18,945 9, Non-current liabilities 3,694 1,060 1,900 3, Shareholders equity 3,352 30,779 23,061 7,109 16,133 Total assets 14,872 50,784 34,520 11,448 17,135 The acquisition of the Onken business in the UK and Germany was completed on 3 January 2011 following approval from the responsible competition authorities. Intangible assets for Onken (brands, recipes, etc.) amounting to CHF 31.4 million were taken over at the time of the acquisition. With the acquisition of the Onken business, Emmi has strengthened its local presence in the fresh products market and also improved its retail access for exported Swiss products. The acquisition of the A-27 Group has increased competence in the area of desserts, improved the share of high value-added fresh products and strengthened Emmi s position in key markets. Finally, the acquisition of the Rutz Käse Group has expanded production and distribution of Swiss branded cheese and fondue, and leveraged synergies in production and administration.

73 74 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 19 Outstanding derivative financial instruments Exchange rate instruments Positive value Negative value Purpose Positive value Negative value Purpose Foreign currency options Forward foreign currency contracts 10 1,282 Hedging 1,887 Hedging Total assets and liabilities 10 1,282 1,887 Foreign currency forward contracts existing at the balance sheet date were used almost exclusively to hedge future cash flows. Like the underlying transaction, the resulting assets and liabilities of these forward contracts are not recognised in the balance sheet. As of 31 December 2011, there was also one foreign currency forward contract to hedge a balance sheet item amounting to EUR 8 million. The corresponding asset value of the derivative of TCHF 1 is recorded under Securities. Emmi also has options to acquire further shares in associated and other companies in which it holds a minority stake. These options cannot currently be reliably measured and are therefore not recognised in the balance sheet. 20 Contingent assets and liabilities Emmi is currently involved in legal disputes in connection with ordinary operating activities. Although the outcome of the lawsuits currently cannot be predicted with certainty, Emmi assumes that none of the disputes will have any fundamental negative impact on operating activities or on the Group s financial situation. Expected outgoing payments are provided for accordingly. As at the date of the financial statements, the Group had no major contingent assets. 21 Pledged assets and off-balance sheet leasing/rental liabilities Pledged assets Charges on real property, nominal values 238, ,460 Of which as security for own liabilities 7,758 17,879 Off-balance sheet leasing/rental liabilities 1 to 2 years 21,550 20,631 3 to 5 years 21,786 15,820 over 5 years 35,802 31,454 Total 79,138 67, Investment obligations and off-balance sheet liabilities Investment obligations in connection with previously concluded agreements 10,520 68,914 Cooperation agreements with suppliers/customers p.m. p.m.

74 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP Transactions with related parties Business transactions with related parties are based on standard contractual forms and conditions. All transactions are reported in the consolidated financial statements for 2011 and 2010, and consist of deliveries of products and raw materials, granting loans, and services to and from related parties. The corresponding net figures for receivables and payables are reported separately in the financial statements (see notes 7, 9, 12, 13, 14 and 15). Transactions with associated companies Net sales 58,660 45,269 Purchase of products 55,301 42,399 Occupancy costs Income from services 1,184 1,163 Services costs 4,284 1,507 Financial income 1, Financial expenses Transactions with shareholders Net sales 9,805 7,116 Purchase of products 225, ,050 Occupancy costs Income from services Services costs Financial income 4 9 Financial expenses 25 Transactions with other related parties Net sales 4,060 2,178 Purchase of products 3,423 3,472 Occupancy costs Income from services Services costs Milk purchases from the main shareholder are included in product costs under Transactions with shareholders. These are made under arm s length conditions. Under Group VAT liability, the Emmi Group is jointly and severally liable for the corresponding liabilities of the Genossenschaft Zentralschweizer Milchproduzenten ZMP and ZMP Invest AG. Other transactions The compensation paid to members of the Board of Directors and Group Management is disclosed in section 5 of the Corporate Governance Report as well as in the Notes to the Financial Statements of Emmi AG, in compliance with Art. 663b bis of the Swiss Code of Obligations. Emmi Pasticceria SA was renamed Regio Molkerei beider Basel AG in 2010 and moved its head office to Frenkendorf. A capital increase was carried out to acquire the facilities of the former Regio Milch beider Basel AG. Emmi AG then sold a 20 % stake to the MIBA Milchverband Nordwestschweiz.

75 76 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 24 Shareholders Nominal capital 2011 % 2010 % ZMP Invest AG, Lucerne 1) 29, , Lombard Odier Asset Management (Switzerland) SA, Geneva 2, , Zentralschweizer Milchkäuferverband, Willisau 1) 2, , MIBA Milchverband der Nordwestschweiz, Basel 1) 1, , Emmi Wohlfahrtsfonds, Lucerne (welfare foundation) Other 17, , Total 53, , ) ZMP Invest AG, Lucerne, the Zentralschweizerischer Milchkäuferverband, Willisau, and the MIBA Milchverband der Nordwestschweiz, Basel, form a group in the sense of article 20 of the SESTA. The group owns 62.5 % (previous year 62.4 %) of the total voting rights. 25 Summary of consolidated and associated companies Consolidated companies Head Office Function Currency Capital in 000s Capital share Capital share Emmi AG Lucerne Holding CHF 53, % 100 % Emmi Finanz AG 1) Lucerne Service CHF % Emmi Schweiz AG Lucerne Service CHF 5, % 100 % Emmi International AG Lucerne Service CHF 5, % 100 % Emmi Frischprodukte AG Lucerne Production CHF 6, % 100 % Mittelland Molkerei AG Suhr Prod. and trade CHF 20, % 60 % Molkerei Biedermann AG Bischofszell Prod. and trade CHF 1, % 90 % Nutrifrais SA Plan-les-Ouates Prod. and trade CHF 4, % 60 % Emmi Käse AG Lucerne Prod. and trade CHF 11, % 100 % Emmi Milch AG Lucerne Production CHF 4, % 100 % Regio Molkerei beider Basel AG Frenkendorf Production CHF 3, % 80 % Emmi Butterzentrale AG 2) Lucerne Service CHF 100 % MOPRO Luzern AG Lucerne Service CHF % 100 % Emmi Logistik AG Lucerne Service CHF 2, % 100 % Emmi Frisch-Service AG 3) Küssnacht Trade CHF 1, % 61 % Swissexport, Aktiengesellschaft Schweizerischer Käseexporteure Berne Service CHF % 79 % Emmi Fondue AG Langnau i.e. Production CHF 15, % 59 % Fromalp AG Zollikofen Prod. and trade CHF 2, % 58 % Fromco S.A. Moudon Moudon Production CHF 2, % 60 % Lesa Lataria Engiadinaisa SA Bever Production CHF 1, % 80 % FDS Fromagerie de Saignelégier SA Saignelégier Production CHF 1, % 86 % Rutz Käse AG 4) Wittenbach Prod. and trade CHF % Rutz Käse AG Käserei St. Niklaus 4) Koppigen Production CHF % Rutz Käse GmbH 4) Constance, Germany Trade EUR % Baumann Käse AG Zollikofen Trade CHF % 100 % Walter Schmitt AG Märwil Trade CHF % 100 % HOLDING der Schweizerischen Milchproduzenten Münchenbuchsee Service CHF 5, % 64 % Emmental AG Exportgesellschaft für Schweizer Käse Münchenbuchsee Prod. and trade CHF 4, % 64 % Burra AG Zurich Trade CHF % 100 % Emmi Deutschland GmbH Essen, Germany Trade EUR % 100 % 1) Emmi Finanz AG was founded on 31 May ) Emmi Butterzentrale AG was merged with Emmi Frischprodukte AG on 1 January ) Emmi Interfrais SA was renamed Emmi Frisch-Service AG on 15 December ) Rutz Käse AG, together with its subsidiaries, was acquired on 1 July 2011.

76 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 77 Consolidated companies Head Office Function Currency 5) A-27 S.p.A. was acquired along with its subsidiaries on 1 August ) Craamer & Co. B.V. was renamed Emmi Nederland B.V. Capital in 000s Capital share Capital share Molkerei Biedermann GmbH Constance, Germany Trade EUR % 100 % Emmi Österreich GmbH Nüziders, Austria Trade EUR 2, % 100 % Emmi Holding Italia S.r.l. Milan, Italy Holding EUR 1, % 100 % Emmi Italia S.p.A. Milan, Italy Trade EUR % 100 % Trentinalatte S.p.A. Rovère della Luna, Italy Production EUR % 100 % Emmental S.r.l. in Liq. Milan, Italy Trade EUR % 64 % A-27 S.p.A. 5) Rancio Valcuvia, Italy Prod. and trade EUR 1, % Sweet Port Germany GmbH 5) Langenhagen, Germany Trade EUR % SWEET PORT SERVICES SA 5) Lugano Trade CHF % Emmi France SAS Rungis, France Trade EUR % 100 % SAS Emmi Ambrosi France E.A.F. Nice, France Holding EUR % 51 % Emmi Lácteos España, S.L.U. Pamplona, Spain Trade EUR % 100 % Emmi Nederland B.V. 6) Tiel, Netherlands Trade EUR % 100 % Emmi Benelux B.V. Tiel, Netherlands Service EUR % 100 % Emmi Belux SA Brussels, Belgium Trade EUR % 100 % Emmi UK Limited London, UK Trade GBP 4, % 100 % Emmi Holding (USA), Inc. New York, USA Holding USD 28, % 100 % Emmi USA Inc. New York, USA Trade USD % 100 % Emmental Cheese Corp. New York, USA Trade USD % 100 % Zingg + Co. Inc. New York, USA Trade USD % 100 % Switzerland Cheese Marketing (USA) Inc. New York, USA Trade USD 1 79 % 79 % Emmi Roth USA, Inc. Monroe, USA Prod. and trade USD % 100 % CASP LLC Penn Yan, USA Production USD 2, % 100 % Cypress Grove Chèvre, Inc. Arcata, USA Prod. and trade USD % 100 % Switzerland Cheese Marketing Inc. Québec, Canada Trade CAD 1 79 % 79 % Emmi Canada Inc. Québec, Canada Trade CAD p.m. 100 % 100 % Associated companies and joint ventures Head Office Function Currency Capital in 000s Capital share Capital share Vermo Tiefkühl Pool AG Lucerne Trade CHF 2, % 35 % Emmentaler Schaukäserei AG Affoltern i.e. Prod. and trade CHF 4, % 36 % BO Butter GmbH Berne Service CHF % 33 % Thurgauische Käse-Reifungs AG Weinfelden Service CHF 2, % 25 % FDC Fromagerie de Courgenay SA Courgenay Service CHF % 25 % Cetra Alimentari SA Lugano Trade CHF % 34 % Sbrinz Käse GmbH Sursee Service CHF % 24 % Switzerland Cheese Marketing AG Berne Service CHF % 23 % Kaiku Corporación Alimentaria, S.L. San Sebastián, Spain Prod. and trade EUR 66, % 43 % Ambrosi S.p.A. Brescia, Italy Prod. and trade EUR 10, % 25 % Sepa S.r.l. 1) Pieve Porto Morone, Italy Prod. and trade EUR % Carl Fr. Scheer GmbH + Co. KG Willstätt, Germany Trade EUR % 25 % Scheer Verwaltungs u. Beteiligungs GmbH Willstätt, Germany Service EUR % 25 % SAS D.I.P.R.O.L.A. Avignon, France Trade EUR % 25 % Big Red Cheese Company LLC Monroe, USA Trade USD p.m. 50 % 50 % White Hill Cheese Company LLC Shullsburg, USA Trade USD 7, % 50 % 1) Sepa S.r.l. was acquired as a part of the A-27 group on 1 August 2011.

77 78 CONSOLIDATED FINANCIAL STATEMENTS OF THE EMMI GROUP 26 Risk management and internal controls The Board of Directors of the Emmi Group has ultimate responsibility for the risk management, while implementation is delegated to Group Management. Irrespective of the type of risk, there is a generally applicable risk management process. As part of a formal process, significant business risks are assessed in group workshops and individual interviews according to the extent of the potential damage and their likelihood of occurrence. This process is divided into two subprocesses: risk analysis and definition of measures. The first subprocess includes risk identification, assessment and classification. Risks are classified according to whether they are strategic, operational, financial or compliance risks. The second subprocess, definition of measures, covers how to deal with risks and creation of a catalogue of measures per risk, as well as risk reporting. The Board of Directors of Emmi AG approved the risk assessment in the year under review and is monitoring the implementation of the defined measures by Group Management. No exceptional risks that went beyond normal limits were detected during the assessment. The process is repeated annually. The following risks, among others, were identified as significant risks to the Emmi Group: Currency risk: The exchange rates for the CHF to the EUR and USD change to Emmi s disadvantage. If prices for Emmi products in foreign currencies remain the same, margins drop; if prices change, market share may be lost. Based on a hedging concept, short-term fluctuations/volatility in the Emmi Group are compensated for. In addition, purchases are increasingly made in foreign currencies as a result of the expansion of natural hedging. Furthermore, as part of Emmi s strategy, expenditure and production in foreign currency areas are expanded through investments and acquisitions. Liberalisation of the milk market: Continuing deregulation in Switzerland will lead to new price relationships, with foreign competition increasing in the medium term and reducing the market shares of the Emmi Group. At the same time, there is a risk of price erosion in generic products. The Emmi Group is preparing for full liberalisation of the milk market with its strategic objectives. The Group s associated international expansion was also identified as a further main risk. A consistent focus on the strategy, its implementation and restrictive cost management will minimise this risk for the Emmi Group. The Emmi Group is subject to various financial risks through its business activities, including credit, liquidity and other market risks. Credit risks are managed by means of suitable, continual monitoring of day-to-day business and appropriate risk assessment when closing a transaction. Liquidity risk is managed by means of central cash management, which ensures that the planned liquidity requirement is covered by corresponding finance agreements. Other market risks, such as currency and interest rate risk, are partially hedged using derivative instruments. The non-hedged part is consciously borne as a risk. The currencies which are of particular relevance to the Emmi Group are EUR, USD, CAD and GBP. To ensure that the consolidated financial statements are in accordance with the applicable accounting standards as well as accurate reporting, the Emmi Group has set up effective internal control and management systems, which are checked regularly. The accounting and valuation includes estimates and assumptions regarding the future. These are based on the knowledge possessed by the respective employees and are regularly examined with a critical eye. Where an item includes a significant risk or a significant fair value adjustment, this is stated accordingly in the notes. However, no risks that could lead to a significant correction to the company s assets, financial position or results of operations as reported in the annual accounts were identified for the financial year under review. 27 Subsequent events In February 2012, Emmi realised a substantial profit from the sale of real estate. As taxes are still provisional and the contractual provisions have to be analysed, the profit cannot yet be definitively calculated, but is expected to be between CHF 13 and 16 million. From the balance sheet date until the consolidated financial statements were approved by the Board of Directors on 5 March 2012 no other major events occurred which could adversely affect the validity of the annual financial statements for 2011 or which would have to be disclosed here.

78 CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP 79 Auditors Report on the Consolidated Financial Statements

79 80 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY) Income Statement CHF 000s Income from investments 25,935 38,347 Financial income 24,934 20,799 Other income 6,720 6,688 Total income 57,589 65,834 Personnel expenses Financial expense 16,290 23,328 Administration expense 1,324 1,047 Amortisation of intangible assets 451 Total expenses 18,640 25,005 Ordinary profit before taxes 38,949 40,829 Income taxes 1, Net profit 37,540 40,400

80 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY) 81 Balance sheet CHF 000s Assets % % Cash and cash equivalents Securities Other receivables from third parties Other receivables from consolidated companies 30, ,634 Accrued income and prepaid expenses Current assets 31, , Loans to consolidated companies 452, ,980 Securities Investment in subsidiaries and associates 250, ,446 Financial assets 702, ,440 Accrued income and prepaid expenses 194 Intangible assets 1,806 p.m. Non-current assets 704, , Total assets 735, , Liabilities and shareholders equity Bank overdrafts 40,000 Other liabilities 275 2,085 Accrued expenses and deferred income 5,449 3,722 Current liabilities 5, , Bank overdrafts 61, ,000 Accrued expenses and deferred income 763 1,781 Bond 125, ,000 Non-current liabilities 186, , Liabilities 192, , Share capital 53,498 53,498 General legal reserves Legal reserves 2, ,863 Capital contribution reserve 186,977 Total general legal reserves 189, ,863 Free reserves 260, ,000 Retained earnings as per ,596 5,385 Net profit 37,540 40,400 Retained earnings as per ,136 45,785 Shareholders equity 543, , Total liabilities and shareholders equity 735, ,

81 82 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY) Statement of Shareholders Equity CHF 000s General legal reserves Share capital Legal reserves Capital contribution reserve Free reserves Available earnings Total Shareholders equity as at 31 December , , ,000 61, ,667 Allocation 30,000-30,000 Dividends -13,910-13,910 Net profit 49,139 49,139 Shareholders equity as at 31 December , , ,000 66, ,896 Allocation 40,000-40,000 Dividends -13,910-13,910 Net profit 43,809 43,809 Shareholders equity as at 31 December , , ,000 56, ,795 Allocation 35,000-35,000 Dividends -16,049-16,049 Net profit 40,400 40,400 Shareholders equity as at 31 December , , ,000 45, ,146 Allocation/Reclassification -186, ,977 25,000-25,000 Dividends -18,189-18,189 Net profit 37,540 37,540 Shareholders equity as at 31 December ,498 2, , ,000 40, ,497

82 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY) 83 Notes to the Financial Statements 2011 CHF 000s Notes pursuant to Art. 663b ff. Swiss Code of Obligations 1. Summary of consolidated and associated companies Capital share Capital share Purpose Currency Capital Emmi Schweiz AG, Lucerne Service CHF 5, % 100 % Emmi International AG, Lucerne Service CHF 5, % 100 % Emmi Frischprodukte AG, Lucerne Production CHF 6, % 100 % Molkerei Biedermann AG, Bischofszell Production and trade CHF 1, % 90 % Nutrifrais SA, Plan-les-Ouates Production and trade CHF 4, % 60 % Mittelland Molkerei AG, Suhr Production and trade CHF 20, % 60 % Emmi Käse AG, Lucerne Production and trade CHF 11, % 100 % Emmi Milch AG, Lucerne Production CHF 4, % 100 % Emmi Butterzentrale AG, Lucerne 1) Service CHF 100 % Emmi Logistik AG, Lucerne Service CHF 2, % 91 % Emmi Fondue AG, Langnau i.e. Production CHF 15, % 49 % MOPRO Luzern AG, Lucerne Service CHF % 100 % Emmi Frisch-Service AG, Küssnacht 2) Trade CHF 1, % 61 % Burra AG, Zurich Trade CHF % 100 % Baumann Käse AG, Zollikofen Trade CHF % 100 % HOLDING der Schweizerischen Milchproduzenten, Münchenbuchsee Service CHF 5, % 64 % Fromco S.A. Moudon, Moudon Production CHF 2, % 60 % Emmi Finanz AG, Lucerne 3) Service CHF % Rutz Käse AG, Wittenbach 4) Production and trade CHF % Emmi UK Limited, London, UK 5) Trade GBP 4, % Cetra Alimentari SA, Lugano Trade CHF % 34 % Switzerland Cheese Marketing AG, Berne Service CHF % 23 % Vermo Tiefkühl Pool AG, Lucerne Trade CHF 2, % 35 % Kaiku Corporación Alimentaria, S.L., San Sebastián, Spain 6) Production and trade EUR 66, % 1) Emmi Butterzentrale AG was merged with Emmi Frischprodukte AG on 1 January ) Emmi Interfrais SA was renamed Emmi Frisch-Service AG on 15 December ) Emmi Finanz AG was founded on 31 May ) Rutz Käse AG, together with its subsidiaries, was acquired on 1 July ) Emmi UK Limited was transferred to Emmi AG by Emmi International AG. 6) Kaiku Corporación Alimentaria, S.L. was transferred to Emmi AG by Emmi International AG. 2. Sureties granted and guarantees in favour of Group companies Guarantees and several liability for loans of Group companies 395,685 20,660 of which drawn down by Group companies 251,770 1,942 Guarantees for Group companies 1,050 1,050 Emmi AG had subsidiary liability for outstanding lease liabilities of Burra AG to Zürcher Freilager AG until 31 August Subordinated loans Loans to Group companies include subordinated loans amounting to CHF 2.9 million (previous year CHF 27.0 million).

83 84 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY) 4. Bond Bond type Bond with reopening option Nominal amount CHF 125 million Securities number /ISIN CH Interest rate 3.00 % Maturity 13 September 2006 to 13 September 2013 Redemption 13 September 2013 at par value 5. Shareholders Nominal capital 2011 % 2010 % ZMP Invest AG, Lucerne 1) 29, , Lombard Odier Asset Management (Switzerland) SA, Geneva 2, , Zentralschweizer Milchkäuferverband, Willisau 1) 2, , MIBA Milchverband der Nordwestschweiz, Basel 1) 1, , Emmi Wohlfahrtsfonds, Lucerne (welfare foundation) Other 17, , Total 53, , ) ZMP Invest AG, Lucerne, the Zentralschweizer Milchkäuferverband, Willisau, and the MIBA Milchverband der Nordwestschweiz, Basel, form a Group in the sense of article 20 of the SESTA. The Group owns 62.5 % (previous year 62.4 %) of the total voting rights. 6. Transactions in own shares There were no transactions in own shares in the year under review. 7. Contingent liabilities Under Group VAT liability, the Emmi Group is jointly and severally liable for the corresponding liabilities of the other Swiss-domiciled Emmi companies and of the Genossenschaft Zentralschweizer Milchproduzenten ZMP and ZMP Invest AG. 8. Capital contribution reserve Confirmed by the tax authorities 181,205 Not confirmed by the tax authorities 5,772 Total 186,977 As from the current year, the general legal reserves are distinguished between legal reserve and capital contribution reserve. The capital contribution reserve results from capital contribution payments above the nominal amount of the shares which were made during capital increases of the company during the past years. Legal reserves are legally required allocations from retained earnings.

84 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY) Compensations and participations of members of the Board of Directors, the Council and Group Management Board of Directors Basic compensation Variable compensation Non-cash benefits Other compensation Total 2011 Total 2010 Konrad Graber, Chairman Moritz Erni, Vice-Chairman Dominique Christian Bach, member (since 12 May 2010) Stephan Baer, member Joseph Deiss, member Hans Herzog, member Alexander Jost, member (until 12 May 2010) 26 Hanspeter Müller, member Thomas Oehen-Bühlmann, member Josef Schmidli, member Total Board of Directors Agricultural Council Christophe Eggenschwiler (since 1 February 2010) Pirmin Furrer (since 1 February 2010) Albert Rösti Markus Zemp (since 7 February 2011) Total Agricultural Council Group Management Urs Riedener, CEO ,198 1,143 Other members 2, ,230 3,902 Total Group Management 3,163 1, ,062 5,428 5,045 Notes Basic and variable compensation is paid exclusively in cash. There are currently no share or option plans within the Emmi Group. The Board of Directors does not receive any variable compensation. The private share of company cars and farewell gifts is included in non-cash benefits. Social security contributions and expenses are included in other compensation. No severance payments were made during the year under review. As at 31 December 2011, the Emmi Group had not granted loans to any current or former members of the Board of Directors or Group Management nor to any persons affiliated to the same. Furthermore, no loans were granted during the entire period under review. No compensation was paid to former members of the Board of Directors or Group Management in connection with their previous activity as members of these corporate bodies. Equally, no compensation not in line with standard commercial practice was paid to persons affiliated to current or former members of the Board of Directors or Group Management. The increase of the compensation to other members of Group Management is due to the extension of Group Management with one person to 10 members (including the CEO).

85 86 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY) Investment in subsidiaries and associates As at 31 December 2011, individual members of the Board of Directors, the Agricultural Council and Group Management (including affiliated persons) held the following number of shares in the company. No of shares No of shares Board of Directors Konrad Graber, Chairman Moritz Erni, Vice-Chairman Dominique Christian Bach, member (since 12 May 2010) Stephan Baer, member 30,000 30,000 Joseph Deiss, member Hans Herzog, member Alexander Jost, member (until 12 May 2010) Hanspeter Müller, member Thomas Oehen-Bühlmann, member Josef Schmidli, member Agricultural Council Christophe Eggenschwiler (since 1 February 2010) Pirmin Furrer (since 1 February 2010) Albert Rösti Markus Zemp (since 7 February 2011) Group Management Urs Riedener, CEO Robert Muri, Deputy CEO Robin Barraclough, member Reto Conrad, member Othmar Dubach, member Marc Heim, member Matthias Kunz, member Max Peter, member Natalie Rüedi, member Markus Willimann, member The members of the Board of Directors, the Agricultural Council and Group Management own a total of 33,291 shares (previous year 32,811 shares) and thus hold 0.6 % of the voting rights (previous year 0.6 %). 10. Risk management Emmi carried out a company-wide risk assessment in the last financial year. As part of a formal process, significant business risks were assessed in group workshops and individual interviews according to the extent of the potential damage and their likelihood of occurrence. The causes of significant risks and measures to combat them were drawn from this assessment. The Board of Directors approved the risk assessment and is monitoring the implementation of the defined measures by Group Management. No exceptional risks that went beyond normal limits were detected during the assessment. Further details on risk management can be found in section 26 of the notes (page 78).

86 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY) 87 Proposed Appropriation of Available Earnings CHF 000s Available earnings Retained earnings carried forward 2,596 5,385 Net profit 37,540 40,400 Available for distribution by the Shareholders Meeting 40,136 45,785 Appropriation of available earnings The Board of Directors proposes that the Annual General Meeting approve the distribution of a dividend of CHF 3.40 (previous year CHF 3.40) gross per registered share for the 2011 financial year on 5,349,810 shares entitled to dividends. The Board of Directors likewise proposes that the distribution of CHF 3.40 per share be paid, in its entirety, out of the capital contribution reserve. Earnings available for distribution by the Annual General Meeting 40,136 45,785 Allocation from confirmed capital contribution reserve 18,189 Dividend -18,189-18,189 Allocation to free reserves -35,000-25,000 Carried forward to new account 5,136 2,596 Total distribution 18,189 18,189 Of which from confirmed capital contribution reserve (exempt from withholding tax) -18,189 Share other available earnings 18,189

87 88 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY) Auditors Report

88 Share Information 89 Share Information Stock exchange information Share price on in CHF Year s high (end-of-day position) in CHF Year s low (end-of-day position) in CHF Market capitalisation on in CHF million 1,005 1, Average trading volume Units 3,018 2,742 2,598 2,393 4,246 Key share data Net profit per share in CHF Shareholders equity per share in CHF Return on shareholders equity 1) in % Distribution in CHF Distribution rate 2) in % Return on dividends 3) in % ) Profit per share/year-end closing price 2) Distribution per share/net profit per share 3) Distribution per share/year-end closing price Capital structure on Share capital CHF 000s 53,498 53,498 53,498 53,498 53,498 divided into number of registered shares Units 5,349,810 5,349,810 5,349,810 5,349,810 5,349,810 Par value per registered share in CHF Share ranking for dividends All Voting rights All registered shareholders have full voting rights Securities number ISIN code CH Ticker EMMN Common code 20,592,664 Traded in the SIX Local Caps segment on the SIX Swiss Exchange Index inclusion SPI, SPI Extra, SPI ex SLI, Swiss All Share Index Share price 2011 in CHF Opening price on 3.1. CHF Closing price on CHF Price Date

89 90 What our customers say What our customers say 91 Quality and care lead to success Our German neighbours love Swiss products, particularly when it comes to food. For instance, Germany is the biggest export market for Swiss cheese. Our Emmi Caffè Latte allowed us to conquer the market with a product less typically Swiss. Nevertheless, the success of this chilled coffee was aided by two typically Swiss values: quality and care. Every single step in the manufacturing process is planned and monitored down to the last detail and the same criteria apply to selecting the raw materials. Rainforest Alliance-certified coffee beans and pure Swiss milk form the foundation. Alongside taste, the success of Emmi Caffè Latte is built on sustainable production, which adds up to a good product. Every year, around 100 million cups are shipped from the production site in Ostermundigen, many of them headed for Germany. Emmi Caffè Latte was launched, the market for Since chilled coffee has grown considerably. The drink is already a near classic in Germany and is a popular convenience product in our range. Axel Zinser Buyer Fresh/Frozen Foods/Ice Cream Lekkerland Deutschland GmbH & Co. KG Germany