Annual Report 2006/2007 - Infranor · Corporate Governance ... with SSCI Infranor SSCI 0 60 120 in...

Annual Report 2006/2007

Infranor Inter AGSchaffhauserstrasse 418P. O. BoxCH-8050 Zurich

Phone +41 (0)44 307 45 00Fax +41 (0)44 307 45 10

www.infranor.com

Responsible for Investor Relations:Martin Bölsterli, Chief Executive Officer

Phone +41 (0)44 307 45 28Fax +41 (0)44 307 45 10

[email protected]

Contents

Key Figures for the Infranor Group

Infranor Inter Securities

Profile

2006/2007 Business Year

Switzerland

Europe exclusive Switzerland

North America

Corporate Governance

Operating Companies of the Infranor Group

Infranor Group Financial Report

Infranor Inter AG Financial Report

Addresses

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65

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Key Figures for the Infranor Group

Infranor Group 1,000 CHF 02/03 03/041 04/051 05/061 06/071

Sales 63,365 67,827 60,706 62,731 71,�87

Change versus previous year as % – 5.7 7.0 – 10.5 3.3 13.6

Gross margin as % of sales 54.6 53.4 55.5 56.5 56.�

EBIT 2,741 3,647 1,122 4,182 4,530

Change versus previous year as % 194.1 33.1 – 69.2 272.7 8.3

as % of sales 4.3 5.4 1.8 6.7 6.3

Net profit / (loss) 348 1,563 – 674 1,140 �,�0�

Change versus previous year as % – 349.1 – – 93.�

Return on sales as % 0.5 2.3 – 1.8 3.1

RONOA 2 (Return On Net Operating Assets) as % 9.7 10.8 3.8 15.0 15.4

EVA (Economic Value Added) 163 817 – 737 1,429 1,119

Cash flow from operating activities 2,910 3,032 2,213 2,437 680

Change versus previous year as % – 4.2 – 27.0 10.1 – 7�.1

as % of sales 4.6 4.5 3.6 3.9 1.0

Free cash flow 874 2,190 1,368 93 – �,059

as % of sales 1.4 3.2 2.3 0.1 – �.9

Total assets 45,042 45,627 41,049 41,246 47,565

Shareholders’ equity 4,292 5,639 4,150 5,380 7,7�8

Equity ratio (%) 10.0 12.0 10.0 13.0 16.�

Return on equity (%) 10.9 36.4 – 21.2 �8.5

Number of employees 291 284 283 269 �98

1 Accounting practices in accordance with IFRS since 2003/042 RONOA = EBIT/ (working capital – interest-free working capital borrowings) x 100

Sales in 1,000 CHF Gross margin as % EBIT in 1,000 CHF Net profit in 1,000 CHF

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Infranor Group Annual Report 2006 /2007

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Infranor Inter Securities

Key stock figures 02 /03 03/04 04/05 05/06 06/07

Number of bearer shares as at 30.4. 635,000 635,750 640,800 640,800 64�,9�5

Share capital as at 30.4.1 Millions CHF 12.7 12.7 12.8 12.8 1�.8

Dividend per bearer share CHF 0.00 1.00 0.00 1.00 1.50

Payout ratio % – 41.0 – 55.0 43.0

Consolidated EBIT per share CHF 4.31 5.74 1.75 6.53 7.05

Consolidated earnings per share CHF 0.55 2.46 0.00 1.80 3,49

Consolidated equity per share CHF 6.76 8.87 6.48 8.40 1�.0�

P/E ratio 73.0 19.4 – 21.7 13.8

Stock prices

CHF 02/03 03/04 04/05 05/06 06/07

High 50.00 49.00 50.25 42.50 5�.00

Low 22.05 34.05 38.00 31.50 �5.30

As at 30.4. 40.00 47.75 42.50 39.00 48.00

Market capitalization

Millions CHF 02/03 03/04 04/05 05/06 06/07

As at 30.4. 25.4 30.4 27.2 25.0 30.9

Key figures convertible bond 02 /03 03/04 04/05 05/06 06/07

Number of bonds at year-end 1 900,000 897,000 876,800 876,800 868,300

Number of bonds converted in the course of the year 2 3,000 20,200 – 8,500

Prices

High in % 102.00 104.00 104.50 101.50 1�0.00

Low in % 97.00 98.00 97.50 97.50 99.00

As at 30.4. in % (indicative) 101.00 104.50 97.50 101.50 11�.00

1 Increase due to conversion of bonds

1 Term December 18, 2002, until December 18, 2009; coupon 5 percent p.a.; par value 10.00 CHF 2 Conversion ratio: 4 bonds may be exchanged for one bearer share with a par value of 20.00 CHF

Share price performance of bearer share

Infranor in comparisonwith SSCI

Infranor SSCI

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4Infranor Group Annual Report 2006 /2007

Profile

Activity Founded in 1941, Infranor has been focused on the automation of mechanical processes in industrial applications since 1959.

Infranor’s automation solutions enable the rapid and precise deployment of machinery, plant and equipment in industrial production, in the packaging industry, in industrial handling in process engineering for foodstuffs, chemicals, pharmaceuticals, textiles, plastics and paper processing, and in medical and nuclear technology. Widely experienced in a variety of fields of application, Infranor is able to enter markets with new requirements at any time. With the acquisition of Cybelec in 1989, Infranor’s product range expanded to include controls and servosystems for entire machines and plants.

Infranor sells both individual components and complete systems and develops solutions tailored to the needs of the customer. For this, it mainly uses its own servomotors, electronics, controls and software to drive and coordinate several axes and control motion sequences as well as entire machines.

Infranor aims to provide a high level of value added by positioning itself in promising niche markets and offering applications that require extensive knowhow, extensive engineering skills and flexibility in product adaptation.

Core competenceInfranor’s core competence is in intelligent mechatronics: translating electronic signals into controlled motion sequences and then incorporating these sequences into programmable systems.

Infranor – value added with controlled motion

This mechatronic approach allows Infranor to combine the synergies of different engineering disciplines, in particular the organization of mechanics, electronics, control engineering and software engineering.

Organizational structure Infranor forms a cohesive global network of independent operating units, each of which equips its customers in the field of industrial automation with the optimal motion solutions for their specific requirements.

The engineering companies offer customized solutions. They have the extensive expertise they require to solve problems independently, using either complete systems or individual components. Their activities span engineering, the sale of Infranor and complementary products and aftersales service.

The product companies offer their highquality basic products, which can be tailored to the specific requirements of OEMs. As independent suppliers of knowhow and optimized products, they have their own strong identity. Their activities span product development, production, sales and service. Their knowhow and their presence in various regions allow them to play an impor tant role strengthening the engineering companies.

Among the product companies, Cybelec constitutes an independent business unit. It is the world leader in the continuous automation of bending presses using integrated numerical controls.

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MarketInfranor supplies manufacturers of all types of means of production. It sells to the three main geographic markets for automation: Europe, North America and Asia, where the total market volume for servomotors, servoamplifiers, controllers, controls and electronic system components comes to several billion Swiss francs. On average, this market grows by some five percent per annum. Within this overall market, Infranor is positioned mainly in niches, which demand new automated and integrated drives in plant and machinery production on the one hand and customized, complex technical solutions on the other.

Strategy – Infranor addresses its potential customers

and their specific needs directly, and presents its offering on the Internet and at trade fairs.

– Infranor puts its core competence to optimum use by placing an emphasis on working in partnership with each and every one of its customers, and differentiates itself from its competitors by providing better value added.

– Through close working relationships with its customers, Infranor updates its own industrial expertise, which it routinely applies in developing new products and systems tailored to customers’ specific needs.

– Wherever possible, Infranor supplies servomotors with intelligent servoamplifiers and master controls developed and produced inhouse.

Financial targets The prime focus of Infranor’s growth strategy is to improve its financial results. Over the medium term, Infranor’s target is an EBIT margin of more than 10 percent. The emphasis on conscientiously maintaining margins and carefully managing costs and finances forms the basis for profitable sales growth.

Sustainability Human resources Infranor actively promotes the continuing development of employees across the company through knowledge exchange and internal and external training. Each pro duct company runs several courses a year for the engineering companies. By assigning a considerable amount of responsibility at all levels, Infranor requires and encourages its employees to be dedicated and selfsufficient.

Environment Infranor is guided in its business activities by the principle that, in meeting today’s needs, we should not jeopardize those of future generations. At product level, the pressure for miniaturization encourages careful and economic use of natural resources. At the operating level, the rational use of energy is driven by ecological considerations. Using environmentally friendly packaging at every factory is one of Infranor’s priorities.

The introduction of the ISO 14 000 standard is planned on group level.

Infranor System Solutions

Ethernet

Remote I/O

Smart Motor

Servomotor

Valve

CAN open

CAN open

PLC

Drive

Infranor Group Annual Report 2006 /2007 Profile

6Infranor Group Annual Report 2006 /2007

2006/2007 Business Year

Two key activitiesInfranor’s business success is based on two key activities that are equally important.

On the one hand, Infranor has eight engineer-ing companies and a number of sales agents and representatives around the world to ensure that these products are used in our customers’ serial production of machines, plants and equipment.

On the other hand, there are Infranor’s prod-uct companies, Mavilor Motors in Barcelona, Infranor Electronics in Lourdes, MESA Automation in Berlin, Cybelec in YverdonlesBains and Automotion in Ann Arbor near Detroit, MI, which develop and manufacture servomotors, controllers and servoamplifiers. Both key activities are developed and expanded on an ongoing basis.

Input bears fruitThanks to the strong global economy, we are now reaping the full benefit of our systematic basic groundwork in product development and the expansion of our market presence in recent years. In the past years, our customers have achieved market success with a broad range of new production machines that incorporate Infranor products. This has resulted in a satisfactory increase in Infranor’s sales.

Landmarks of the �006/07 business yearIn November 2006, Cybelec, an Infranor subsidiary, acquired four employees and all the assets of Fast SA, an insolvent Geneva company. The main asset of this acquisition is Fastware software, used to control tool ing machines with several axes and very fast motion sequences, which Cybelec has included in its product range. The necessary drives are provided by Infranor, and con trol and drives together come as a coordinated package from a single supplier. Infranor expects this acquisition to generate additional sales of some CHF 5 million in the medium term.

– Infranor has introduced important steps to strengthen its sales and marketing activities. Infranor wants to enhance its market profile and market presence with the object of greater market differentiation in an environment increasingly populated by other participants with highquality products. In 2006, Infranor had its own representative stand at SPS/IPC/DRIVES in Nuremberg, the leading automation trade fair in the world. It grasped this opportunity to launch “GemDrive”, its stateoftheart amplifier and controller equipment. Another development in this direction is the creation of a “Sales and marketing” division at Group level, which integrates the marketing and sales activities of all the engineering companies. Bruno Guanziroli started work as head of the new division on February 1, 2007.

– Financial developments included the issue of the subordinated 7-year collateral debt obligation (CDO) announced in the previous financial year, which was used to pay back various bank loans totalling CHF 8.3 million at relatively favorable conditions. This has enabled Infranor to stabilize its medium to longterm funding.

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nonrecurring capitalization of develop ment costs as required by IFRS), the figure of 6.3 percent in the year under review, despite higher depreciation, brings Infranor 1.7 percent closer to its goal.

The financial result was practically unchanged from the previous year thanks to exchange rate gains of CHF 0.4 million, which offset the higher interest costs on the subordinated CDO. After cumulative provisions for deferred taxes, net profit jumped by 93 percent to CHF 2.20 million (previous year: CHF 1.14 million).

Cash flow from operating activities (CHF 0.7 million) was impacted by temporary, sales related increases in inventories to the tune of CHF 1.8 million. The strong negative free cash flow (CHF –2.1 million) is offset by investments in property, plant and equipment, in particular in production resources for Mavilor Motors AG (CHF 1.0 million) and a sixmonth time deposit (CHF 1.2 million).

Consolidated balance sheetTotal assets rose by CHF 6.3 million or 15.3 percent to CHF 47.6 million yearonyear. This increase is mainly due to higher inventories (CHF 2.6 million), the salesrelated increase in trade accounts receivable (CHF 1.6 million), higher cash, cash equivalents and securities (CHF 0.9 million) deferred charges and an increase in fixed assets of CHF 0.7 million. The increase in inventories reflects longer delivery times and in part a momentary deliveryrelated rise at the balance sheet date.

These higher asset positions were financed in part through higher bank loans of the Group companies, higher accounts payable to suppliers and higher share capital, which at CHF 7.7 million was equal to a capital ratio of 16.2 percent. Including the two subordinated bonds, capital and reserves amount to 51.0 percent.

Notes on the financial statementsConsolidated sales amounted to CHF 71.3 million, 14 percent or CHF 8.6 million higher than in the previous year. Cybelec accounted for CHF 3.6 million (42 per cent) of this sales increase. Spain, France and Germany also recorded particularly strong growth. Direct deliveries by the product companies (excluding MESA) rose by between 15 and 30 percent.

In keeping with sales, the gross margin also rose by CHF 4.6 million to CHF 40.1 million; the result of 56.2 percent was almost identi cal with the 56.5 percent in the previous year. Strong pricing pressure, particularly in servomotors, continued in the year under review. However, this was offset by lower unit costs due in roughly equal measure to construction modifications, economies of scale and changes in suppliers.

Operating costs rose by 13.3 percent from 30.2 million to CHF 34.2 million, primarily because of higher personnel expenditures, which rose by 14.2 percent or CHF 3.0 million to CHF 24.0 million. The product compa nies had to appoint more people to deal with the increase in sales and to bolster their development staff, and in some cases also appoint more highly skilled workers. The increase in personnel was most noticeable at Cybelec, both at its YverdonlesBains operation owing to the acquisition of Fast SA and at its subsidiary in China.

The other small cost increases were related to higher sales expenses and, once again, Cybelec’s expansion in China.

Infranor’s mediumterm target is an EBIT margin of more than ten percent of consolidated sales. Compared with the previous year (4.6 percent after adjustments for the

Sales shares by product

Servomotors 32%

Controllers 26%

Numerical taxes 28%

Services 10%

Traded products 4%

Sales by geographic region

Switzerland 12%

Europe excl. Switzerland 70%

North America 10%

Asia/Africa 8%

Infranor Group Annual Report 2006 /2007 Business Year

8

Assessment and outlookIn this report, the activities of the Infranor Group will be broken down by geographic segments. This break down will be used as the basis of analysis in the following seg ment report.

Infranor is currently in the process of rearranging its accounting on the basis of new business units. The activity will be divided between two closely related business units. The Infranor business unit comprises the general servo and drive technology used by machine and equipment manufacturers in various industries. It includes the engineering and product companies that collaborate with it closely, with the exception of firms owned by Cybelec. The latter will form a separate business unit that, besides NC controls for metalforming machinery, will increasingly become a single source offer ing all powered functions for metal forming presses. This will also include other Infranor products.

The Infranor business unit operates in a broadly diversified market. Its strength lies in its broad product range – from servomotors to controls – which is able to serve most of the existing market niches and the new ones that keep opening up. A crucial factor in the success of this business unit is its strong local presence. Its employees are not only conversant with local habits, conventions, mentalities and languages; they also have extensive specialized knowledge about technologies and applications. The business unit is solidly rooted in

the market: 20 percent of its category A (sales of more than CHF 100,000) and category B (CHF 10,000 to 100,000) customers are new customers acquired in the past two years. This gives it a solid base for growth and a better hedge in times of economic volatility.

The strengthening of marketing and sales is one emphasis in the current business year. Product development will continue to focus on simplifying the product range, finishing and process rationalization and cutting product prices. As the order intake is 30 percent higher than in the previous year, the business unit expects that profit growth in 2007/08 will be similar to that in 2006/07.

The Cybelec business unit is highly specialized in its field and focused on the area of metal forming. Cybelec’s technology is stateoftheart and the company is recognized as a trendsetter in its industry. It supplies all metal processing products, in particular in the bending press market, from standard controls for newcomers to entire customized systems developed in collaborative partnership with the customer.

The current business year is the first after the reorganization of the business unit’s personnel and structure to fulfil its customers’ high quantitative and qualitative requirements. The business unit appears to solid prospects of using its new “Fastware” and “ELITE” product groups to expand beyond its current focus on the booming metalforming industry to other industry segments. The ELITE range will also be able to support the Infranor business unit in complex overall solutions. For 2007/08 the business unit expects unchanged profit margins on further sales growth.

Infranor’s sales break-down by key sector

Industrial manufacturing 52%

Industrial handling 15%

Processing industry 8%

Packaging 4%

Others 21%

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A word of thanksThe Board of Directors and Executive Board wish to express their warm thanks to all employees of the Infranor Group for their commitment during this successful year. Our thanks also go to our customers for the business opportunities they offered us, to our business partners for their efficient cooperation and to our shareholders for their trust and confidence.

Infranor securitiesBearer sharesThe price at the beginning of the 2006/07 business year was close to CHF 39.00. In the course of the year it rose steadily to end the business year at CHF 48.00. The shares posted a 52week high of CHF 52.00 and a 52week low of CHF 25.30.

Subordinated convertible bond 2002 – 2009The price at the beginning of the business year was CHF 101.50 and at the end of the year CHF 112.00 (indicative). In 2006/07, 8,500 bonds were converted into 2,125 shares.

Annual Shareholders’ MeetingOn the basis of the Infranor Group’s positive results, the Board of Directors will propose to the Annual Shareholders’ Meeting on September 13, 2007, the payment of a dividend of 7.5 percent of the par value or CHF 1.50 per share.

Nicolas Eichenberger Chairman of the Board of Directors

Martin BölsterliChief Executive Officer

Cybelec Commandes Numérique CNC 880S


1,3 million toothbrushes per day

Modern toothbrushes are injected onto plastic injection moulding

machines in various colors at the same time. This cost-intensive

procedure makes economic sense with completely automated manu-

facture of huge quantities. Every one of this producer’s plants is

equipped with robots to unload the brushes. For years the French

manufacturer has built for the various servomotors a set of

electronic controllers that are specially designed and built by Infranor

Electronics in Lourdes.

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Switzerland

This segment comprises:– Infranor SA, engineering company,

headquartered in Coppet, branch in Zurich, together with its subsidiary

– Infranor SA is supporting Infranor Asia Ltd, Zurich, with its Shanghai representative office in its startup phase.

– Cybelec SA, product company in YverdonlesBains, together with its subsidiaries

– Cybelec Srl, ITCinisello Balsamo (Milan)– Cybelec Numerical Control Technologies

(Shanghai) Co. Ltd. (CNCT), CNShanghai

Among the geographic segments Switzerland occupies a relatively strong position as an invoicing location in the Infranor Group thanks to the Cybelec Group. Cybelec accounts for all the sales growth in the segment. The firm increased sales by 18 percent compared to the previous year. However, it should be mentioned that 95 percent of Cybelec invoices are written abroad. Its activity is concentrated on Germany, Turkey and China.

Cybelec’s flexible product policies and stateoftheart products allow it to optimize the costbenefit ratio by market and customer. In China, CNCT assumed full responsibility for the China business, including invoicing, in the last part of the past financial year. Thus, Cybelec is on a very solid footing in the important Chinese market.

On account of a temporary drop in orders from a major client, Infranor SA recorded a slight decrease fall in sales. Part of this shortfall was offset by other orders, in particular from new customers acquired in the previ ous two years. As a result, sales fell by just ten percent.

Infranor SA continues to make progress in its efforts to form alliances with manufacturers of complementary products to enable it to offer endtoend product solutions.

The startup phase of Infranor China is proceeding one small step at a time. However, all of our customers around the globe will benefit from our Chinese presence.

The EBIT of 7.5 percent cannot be compared with that of the previous year, as costs were effectively reduced by the capitalization of development expenses as required by IFRS.

New orders in the Switzerland segment were 25 percent higher than sales. This increase creates a solid basis for the current year.

Segment reportSegment Switzerland

1,000 CHF

Year 06/07 05 /06

Order intake 37,011 24,814

of which inter-segment �,805 1,860

Net sales �9,546 26,024

of which inter-segment 775 547

Depreciation and amortization – 460 – 193

EBIT �,�08 2,935

as % of net sales 7.5 11.3

Number of employees 9� 78

Total assets 15,380 11,390

Total liabilities 19,996 16,741

Breakdown of sales in the key sectors for Infranor SA(excl. Cybelec)


Industrial handling/ assembly 25%


Packaging 1%

Others 9%

Geographical break-down of salesCybelec

Switzerland 5%

Europe excl.Switzerland 76%

North America 2%

Asia /Africa 17%

Mavilor Motors SA Servomotor BL 140

Infranor Group Annual Report 2006 /2007 Segment Switzerland

Industrial production of Chocolate Products

The production and packaging of chocolate bars requires many different

machine movements. A Spanish customer uses in all his machines

Infranor; motors, gearboxes, drives and controls. His need for competent

consulting, optimal technical solutions and reliable products is taken

care off by Infranor at its best.

13

Europe exclusive Switzerland

This segment encompasses alltogether eigth engineering and product companies.

Engineeringcompanies:– Infranor SAS, FRLinas – Infranor SLU, ESBadalona (Barcelona)– Infranor GmbH, DEHanau– Infranor B.V., NLOudBeijerland

(Rotterdam)– Infranor Ltd., UKCranleigh

Product companies:– Infranor Electronics SAS, FRLourdes– Mavilor Motors SA, ES Sta. Perpètua de

Mogoda (Barcelona)– MESA Automation GmbH, DEBerlin

In the previous year all the engineering com-panies reported very satisfactory double digit growth in sales (between 12,0 and 18,0 percent). Apart from the subsidiaries in Rotterdam and Cranleigh, all companies reported positive results. Infranor Ltd. is also recovering and fell just short of breaking even.

Segment reportSegment Europe excl. Switzerland

1,000 CHF

Year 06/07 05 /06

Order intake 54,909 46,338

of which inter-segment 18,131 16,247

Net sales 53,04� 46,203

of which inter-segment 17,859 15,702


EBIT �,696 1,529

as % of net sales 5.1 3.3

Number of employees 181 167

Total assets �9,843 27,473

Total liabilities 18,106 17,952

The product companies benefited primarily from the solid operations of the engineering firms. However, in their own external business they achieved sales growth rates of between 18 and 25 percent. MESA external business was weak, but it ensured its existence with strong growth as a supplier of Infranor companies.

The segment as a whole managed to improve EBIT from 3.3 to 5.1 percent. The large increase in the workforce (from 167 to 181 employees) was needed primarily to raise production capacity to meet the increase in order volumes.

In this segment, too, the increase in orders creates a solid basis for the current business year.

Breakdown of salesamong the key sectors




Packaging 8%

Others 32%

Infranor Electronics SAS Drive GemDrive

Infranor Group Annual Report 2006 /2007 Segment Europe exclusive Switzerland

Precisely controlled metal forming for durable consumer products

As emerging markets transition to consumption economies, the demand

for everyday consumer goods has grown rapidly. Accordingly, a grow-

ing number of the corresponding means of production are also needed.

Cybelec is the world leader in controls for metal forming machines,

which are also used to manufacture household white goods.

15

North America

Segment reportSegment North America

1,000 CHF

Year 06/07 05 /06

Orders received 7,3�5 7,329


Net sales 7,391 6,801



EBIT – 374 – 282

as % of net sales – 5.1 – 4.1

Number of employees �5 24

Total assets �,34� 2,383

Total borrowings 1,735 1,173

The North America segment comprises:– Infranor, Inc., USWilmington (Boston) MA,

engineering company– Automotion, Inc., USAnn Arbor MI,

product company

The North American market (USA, Canada and Mexico) is more or less the same size as the European market. Infranor’s goal is to exploit this potential by the profitable deployment of brands, knowhow and products. It is now focusing on adapting market pro file and corporate structures to the changed situation. Both companies are still in the process of being turned around.

Infranor, Inc., the engineering company, has moved its headquarters to the Boston area, a leading centre of electronics and hightech. At the new location the firm continues to pursue all its business operations, expanding some of them; it has also hired some new staff. In the business year under review, it reported a slight increase in sales, largely due to existing customers.

At Automotion, Inc., a successor was found for the CEO who took early retirement. He will focus the business activity on mediumsized orders for customerspecific solutions.

In the previous year, the firm concentrated on supporting existing customers, in some cases in new projects; sales increased by 16 percent.

For the North America segment, the move and new personnel resulted in additional costs, as reflected in the worsening of the company's negative EBIT. Infranor, Inc., plans to break even in the current year. Automotion will again produce a loss.

Breakdown of sales among the key sectors




Packaging 2%

Others 37%

Mesa GmbH Drive MSD1

Infranor Group Annual Report 2006 /2007 Segment North America


Group Structure and Major Shareholders

Capital Structure

Board of Directors

Group Management

Compensations, Shareholdings and Loans

Shareholders’ Participation

Changes of Control and Defense Measures

Auditors

Information Policy

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1. Group structure and major share-holders The chapter on corporate governance shows how Infranor Inter AG has organized the management and control functions within the Group. The corporate governance disclosures are fully compliant with the SWX Swiss Exchange directive on information relating to corporate governance.

1.1 Group structureThe Infranor Group is specialized in the design, manufacture and worldwide distribution of technologically advanced individual components and complete systems for the automation of mechanical processes.

The Infranor Group is divided into engineering and product companies (see page 27). These companies are not listed on the stock market. In legal terms, the companies in the Infranor Group come under the holding company, Infranor Inter AG. Infranor Inter AGs direct stake in these companies and their subsidiaries is shown on page 36.

Infranor Inter AG bearer shares are traded on the local caps segment of the SWX Swiss Exchange under security number 724,910 (Telekurs: INI, Reuters: INI.S.) Based on the 2006/07 yearend price of CHF 48.00, the stockmarket capitalization as at April 30, 2007, was CHF 30.9 million.

The scope of consolidation consists of the unlisted companies which were fully consolidated effective April 30, 2007, and is shown in the consolidated annual financial statements in the Notes on page 36. Infranor Inter AG does not have any holdings in listed companies.

Registered office of the company:Infranor Inter AGSchaffhauserstrasse 418P.O. Box, CH8050 ZurichT +41 (0)44 307 45 00F +41 (0)44 307 45 10www.infranor.com

1.2 Significant shareholdersAs at April 30, 2007, Perrot Duval Holding SA, Geneva, which is listed on the SWX Swiss Exchange, held 77.3 percent (78.6 percent in the previous year) of the shares in Infranor Inter AG.

The Board of Directors is unaware of any other shareholders holding more than 5 percent of the share capital.

1.3 CrossshareholdingsThere are no crossshareholdings.

�. Capital structure2.1 Share capitalThe share capital amounts to CHF 12.9 million, divided into 642,925 bearer shares with a par value of CHF 20.00. With the exception of treasury stock, all shares issued by the company are entitled to dividend payments. The share capital is fully paid up.

As at April 30, 2007, the Infranor Group held 11,110 (9,910 in the previous year) treasury shares, which, at the time of a dividend payout, are not entitled to a dividend.

2.2 Authorized and conditional capitalAt the Annual Shareholders’ Meeting of Infranor Inter AG, held on October 31, 2002, a motion was passed to raise conditional capital of no more than CHF 6,350,000, consisting of no more than 317,500 bearer shares, each with a par value of CHF 20.00.

According to section 5a of the section of Association, the company’s share capital may be increased through the exercise of options or conversion rights which have been granted in connection with bonds or loans of the company or one of its subsidiaries. These shares are ex shareholders’ subscription right.


19Infranor Group Annual Report 2006 /2007 Corporate Governance

2.6 Limitations on transferability and nominee registrationsThere are no restrictions of any kind applicable to the transfer or ownership of Infranor Inter AG bearer shares.

2.7 Convertible bonds and warrants/optionsConvertible bondsOn December 18, 2002, the company issued a subordinated convertible bond of a maximum of CHF 12.7 million, carrying a 5 percent coupon.

Four bonds, each with a par value of CHF 10.00, may be converted into one new bearer share of CHF 20.00 between June 16, 2003, and December 11, 2009, or up to 10 calendar days prior to early redemption of the convertible bond.

The convertible bonds have been traded over the counter at Bondpartners AG, Lausanne, since March 18, 2003. Shareholders subscribed for CHF 9 million of the convertible bond issue. The listing of the maximum of 317,500 new bearer shares on the local caps segment of the SWX Swiss Exchange was approved on June 16, 2003. After December 18, Infranor can redeem the bond early at any time, subject to 30 calendar days’ notice, at the par value plus accrued interest.

OptionsThere are only employee options (see point 5.6).

2.3 Capital changesas at April 30 �007 2006 2005

Share capital 1�,858,500 12,816,000 12,816,000

Statutory reserve 1,707,500 1,603,000 1,603,000

Treasury shares 467,1�8 410,327 236,767

Unappropriated

retained earnings 5,757,53� 5,434,742 7,601,085

Total �0,790,660 20,264,069 22,256,852

In the past year, 8,500 bonds were converted into 2,125 shares, thereby increasing the company’s share capital by CHF 42,500 (previous year: no conversions).

Details of the changes in consolidated shareholders equity over the last three business years are given in the statement of changes in equity in the consolidated annual financial statements on page 33.

In the last three business years, the following capital increases were recorded in the Commercial Register following the conversion of bonds into new shares:

Date of Increase Cumulated Newentry in in CHF conversion totalCommercial from bond shareRegister during capital

23.8.04 15,000 2003/04 12,715,000

25.8.05 101,000 2004/05 12,816,000

2.4 Shares and participation certificatesAs at April 30, 2007, Infranor Inter AG had a total of 642,925 bearer shares only, each with a par value of CHF 20.00, giving a total of CHF 12,858,500. Of these, 11,110 are treasury shares that Infranor Inter AG holds to cover an existing options program. The remaining shares are not subject to any restrictions on voting rights.

2.5 Profitsharing certificatesThere are no profitsharing certificates.

�0Infranor Group Annual Report 2006 /2007 Corporate Governance

3. Board of Directors3.1 Members of the Board of DirectorsThe Board of Directors consists of three executive and two nonexecutive members.

The two nonexecutive members have never held an executive position within the Infranor Group. Neither do they have a significant business relationship with the Group.

Executive members of the Board of Directors

Nicolas Eichenberger (1958), citizen of Geneva and Trub, residing in Mies (CH)

– Chairman of the Board of Directors since 1999

– Member since 1992– Elected until April 30, 2008

Nicolas Eichenberger trained in law and holds a chemistry degree (lic.chem.). Between 1992 and 1998, he was Chief Executive Officer of Infranor Inter AG. Since 1989, he has also worked for other Perrot Duval Group companies. He was previously employed at Sapal in Lausanne. Nicolas Eichenberger is Chief Executive Officer of Perrot Duval Holding SA and a member of the Board of Directors at other, unlisted companies.

Martin Bölsterli (1942), citizen of Baden and Winterthur, residing in Ennetbaden (CH)

– Vice President and Delegate of the Board of Directors since 1998


Martin Bölsterli graduated in mechanical engineering from ETH and has an extensive knowledge of business administration. During the course of his career prior to joining Infranor, he held senior manage-ment positions at large mechanical engineering companies in Swit-zerland and abroad, namely Maag Zahnräder AG, Bühler-Uzwil and Heberlein. He is also a member of the Board of Directors at other, unlisted companies.

Francesc Cruellas (1947), Spanish citizen, residing in Tiana (Barcelona/ES)


Francesc Cruellas studied mechanical engineering at the Technical University of Catalonia (Barcelona). He was already employed at Mavilor Motors SA (E) before the company was taken over by Infranor in 1979. He previously held a senior management position at a food company in Spain. Francesc Cruellas sits on the Board of Directors at other, unlisted companies.

Non-executive members of the Board of Directors

Dr. Richard Müller (1949), citizen of Lenzburg (CH), residing in Oberlunkhofen (CH)

– Attorney-at-law– Member since 1992– Elected until April 30, 2008

Richard Müller is a graduate of the University of Zurich with a PhD in law. He worked as an attorney-at-law in Zurich from 1987 until he moved to Zug in 1994. He is a member of the Board of Directors of several unlisted companies. He was previously a legal adviser to banks and industrial enterprises.

François Jaquier (1962), citizen of Villars-le-Comte (CH), residing in Monaco (MC)

– Independent investment adviser– Member since 2001– Elected until April 30, 2008

François Jaquier graduated in law from the University of Lausanne. He worked for Credit Suisse Group as head of its San Francisco office for four years and in Monaco for a further four years. He has been an independent investment adviser since 2001. He sits on the Board of Directors at other, unlisted companies.

Honorary Chairman

Maurice Eichenberger (1922)citizen of Genf and Trub (CH), residing in Monaco (MC)

Maurice Eichenberger was chairman of the Board of Perrot Duval Holding SA until 1990 and until 1992 Board member of Infranor Inter AG. Since 1992 he has been appointed as Honorary Chairman of Infranor Inter AG.


Francesc Cruellas, François Jacquier, Dr. Richard Müller, Nicolas Eichenberger (Chairman), Martin Bölsterli (Vice President and Delegate)

3.2 Other activities and vested interestsMr. Nicolas Eichenberger, Chairman of the Board of Directors of Infranor Inter AG, is the Chief Executive Officer of Perrot Duval Holding SA, Geneva.

The other members of the Board of Directors do not carry out any other activities and have no vested interests that would be of significance for the Infranor Group and are not mentioned in the overview on page 20.

3.3 CrossinvolvementMr. Nicolas Eichenberger is a member of the Board of Directors of Perrot Duval Holding SA, Geneva. There is no other crossinvolvement among the Boards of Directors of listed companies.

3.4 Elections and terms of officeThe Annual Shareholders’ Meeting elects the Board members for a term of three years. Members may be reelected. At the General Meeting on September 13, 2007, the Board of Directors will be elected for the term that runs from 2008/09 to 2010/11.

3.5 Internal organizational structure and committeesThe Board of Directors is responsible for defining the Group’s strategy. It also checks the company’s basic plans and targets, and identifies external risks and opportunities.

Proposals for the compensation and shareholdings of the members of the Group Management are submitted by the remuneration committee (Nicolas Eichenberger, Martin Bölsterli and Richard Müller) to the Board of Directors, which then approves these proposals. Due to the size of the company and the fact that three executive members sit on the fivemember Board of Directors, the Board does not currently appoint other committees. All tasks within the Board’s area of responsibility are completed by the Board as a whole.

The Board of Directors has a quorum if at least half of its members are present. It passes its resolutions with the majority of the votes cast. In the event of a tied vote, the Chairman has the casting vote. The Board of Directors met four times during the 2006/07 business year, lasting one day each time.

3.6 Definition of areas of responsibilityThe powers and responsibilities of the Board of Directors and the definition of the areas of responsibility of the Board of Directors and the Group Management are stipulated in the rules of organization. These may be inspected at the company’s registered office.

3.7 Information and control instruments towards the senior managementEach month, the Board of Directors receives written reports detailing the sales, incoming orders and volume of orders of all Group units. Four times a year, it receives the units’ quarterly accounts, the consolidated accounts (income statement and balance sheet) and an overview of the key figures and the changes to these figures. These quarterly reports contain comparisons with the previous year, the budget and the latest yearend forecasts. Special events are always reported immediately.

��Infranor Group Annual Report 2006 /2007 Corporate Governance

In the year under review, this company charged CHF 471,210 (CHF 452,469 in the previous year) for management services. The same company was billed CHF 49,730 (CHF 61,443 in the previous year) by ISA Management SA for services. These management contracts have been concluded for an indefinite period and may be terminated annually.

Martin Bölsterli, Zug, has a management contract with ISA Management SA, Coppet. A total of CHF 404,622 was paid in 2006/07 (previous year: CHF 414,400).

4.2 Other activities and vested interestsThe members of the Group Management do not carry out any activities other than those mentioned in the overview and have no vested interests that would be of significance for the Infranor Group.

4.3 Management contractsISA Management SA and Infranor Holding SA have a management contract in place with Perrot Duval Management SA, Coppet.

Martin Bölsterli Personal details on page 20. – CEO since 1998

Francesc Cruellas Personal details on page 20. – Senior Vice-President of Motors and

Mechanical Components since 1987

Bruno Guanziroli (1957),citizen of Onsernone, in Baar (CH)

– Senior Vice-President of Sales and Marketing since April 2007

Bruno Guanziroli holds degrees in mechanical engineering and in economics, specialized in marketing. He worked at Ascom in the field of corporate strategy and M&A, before occupying leading posi-tions in Marketing and Sales at Carlo Gavazzi, Swatch Telecom and Armacell. From 2001 to 2007, he was in charge of the turn around of various companies in Switzerland, Italy and the USA. He does not sit on any Board of Directors.

Pius Bernet (1957), citizen of Egolzwil, residing in Egolzwil (CH)

– CFO since 2002

Pius Bernet completed basic business training in banking and holds degrees in business economics and accountancy. He has held senior financial positions at Mövenpick and Swissair Group and served as CFO at Schweiter, Motorola Schweiz and most recently at the EMEA/ASIA division of K-Tron International (USA). He sits on the Board of Directors of one unlisted company.

4. Group Management4.1 Members of Group Management


5. Compensations, shareholdings and loans5.1 Content and method of determining the compensationThe compensation of the nonexecutive members of the Board of Directors comprises a fixed fee and fixed expense allowances. This compensation is decided upon by the Board of Directors on the basis of proposals put forward by the remuneration committee.

The compensation of the executive Board members is included in the pay they receive as members of the Group Management.

As is the case with the compensation and shareholdings of the members of the Group Management, proposals for the amount of compensation are submitted by the remuneration committee to the Board of Directors, which then approves these proposals.

5.2 Compensations for acting members of governing bodiesThe compensation paid out during the year under review by one or more Group units directly or indirectly to governing body members who were fully or partly active during the 2006/07 business year came to CHF 1,162,128 in total (CHF 886,309 in the previous year). The compensation paid to nonexecutive members of the Board of Directors came to CHF 43,284 (CHF 39,335 in the previous year).

No member of a governing body gave up their position in the year under review.

5.3 Compensations for former members of governing bodiesNone of the Group units paid out compensation, either directly or indirectly, to former executive members of governing bodies in the year under review.

5.4 Share allotment in the year under reviewNo shares were allotted to either members of the Board of Directors or the members of the Group Management in the 2006/07 business year.

5.5 Share ownershipThe executive members of the Board of Directors and the members of the Group Management hold a total of 3,008 Infranor Inter AG shares as in the previous year. We would like to point out that the Chairman of the Board of Directors, Nicolas Eichenberger, is also Chief Executive Officer of Perrot Duval Holding SA, which held 497,235 shares as at April 30, 2007.

from left: Pius Bernet, Francesc Cruellas, Martin Bölsterli, Bruno Guanziroli


The nonexecutive members of the Board of Directors and parties closely linked to these members hold 500 Infranor Inter AG shares. Due to the fact the Infranor Inter shares are bearer shares, it was not possible to ascertain the number of shares held by parties closely linked to Board members.

5.6 OptionsSince the 1998/99 business year, one executive member of a governing body has been sold nontradable options to purchase Infranor Inter shares. The number of call options is determined based on the consolidated net profit. These options may be exercised at the earliest after three years and have a life of eight years. One option entitles the holder to purchase one share. The strike price is the share price in the month prior to the grant date. The option value of the newly issued options amounted to CHF 1,400 (CHF 600 in prior year) on an arms length basis. The share options outstanding are shown in detail on page 50 of the Notes 20.5.

A total of 5,410 options are held at the present time (5,510 in the previous year). Apart from these, no options have been granted.

5.7 Additional fees and remunerationsBoard member Dr. iur. Richard Müller charged a fee of CHF 11,426 (CHF 4,929 in the previous year) for legal services.

Members of the Board of Directors and Group Management have not billed Infranor for any other fees or remunerations.

5.8 Loans granted by governing bodiesNo loans were granted to members of the Board of Directors or the Group Management.

5.9 Highest total compensationThe highest total compensation paid to a member of the Board of Directors during the year under review was CHF 290,440 (CHF 312,673 in the previous year).

6. Shareholders’ participation6.1 Voting rights and representation restrictionsThe companys sections of Association do not contain any restrictions applicable to voting rights.


8. Auditors8.1 Duration of the mandate and term of office of the lead auditorDeloitte AG, Zurich, has been the Infranor Group’s auditor since 2003/04. Gerhard Ammann, as lead auditor, has been responsible for the mandate since 2003/04.

BDO Visura, Zurich, has been Infranor Inter AG’s auditor since 1994/95. Lead auditor Andreas Wyss has held this position since 2003/04.

The group auditor and the auditor are each elected by the Annual Shareholders’ Meeting for one year.

The external auditors conduct their work in accordance with legal provisions and the principles of the profession.

8.2 Auditing feesThe auditing fees paid to Deloitte AG for auditing the consolidated financial statements of the Infranor Group and the Swiss companies excluding Infranor Inter AG amounted to CHF 106,000 (previous year CHF 110,000).

BDO Visura Zurich, charged CHF 10 000 for auditing the accounts of Infranor Inter AG (previous year CHF 10,000).

The foreign auditors charged a total of CHF 204,315 (previous year: CHF 179,441).

6.2 Statutory quorumsThe quorums stipulated in the sections of Association for resolutions carried at the Annual Shareholders’ Meeting are in line with the legal quorums (section 703 et seq. of the Swiss Code of Obligations).

6.3 Convocation of the Annual Shareholders’ Meeting and AgendaThe Annual Shareholders’ Meeting is called by the Board of Directors or by the governing bodies and persons designated in law. One or more shareholders who together represent at least 10 percent of the share capital may request that a Shareholders’ Meet ing be called or an item be added to the agen da. Shareholders whose shares represent a par value of CHF 1.0 million may also request that an item be added to the agenda.

6.4 Entry in the share registerSince only bearer shares have been issued, there is no share register.

7. Changes of control and defense measures7.1 Duty to make an offerA party acquiring shares in the company is not obliged to submit a public purchase offer (opting out) pursuant to sections 32 and 52 of the Federal Act on Stock Exchanges and Securities Trading (section 6a of the section of Association).

7.2 Clauses on changes of controlThere are no clauses on changes of control benefiting the Board of Directors, Group Management and other key personnel.


8.3 Additional feesNo additional fees were paid out to the auditors alongside those mentioned above.

8.4 Supervisory and control instruments pertaining to the auditThe auditor produces a written report for the Board of Directors (management letter). The Board discusses this report with the lead auditor if it feels this to be necessary.

9. Information policyWe provide shareholders, financial analysts and financial journalists with clear and transparent information by means of our annual report, halfyear report, annual media conference and Annual Shareholders’ Meeting. Quarterly figures and commentaries are distributed to the media and those shareholders whose addresses we have, and we brief the media on current events. The Infranor website (www.infranor.com) contains a special section called “For Investors”.

Infranor Inter AG reports on events that may affect the share price in accordance with section 72 of the Listing Rules of the SWX Swiss Exchange regarding adhoc disclosures.

ContactOur CEO and CFO are also available to answer questions personally:

– Martin BölsterliChief Executive Officer Telephone +41 (0)44 307 45 28 [email protected]

– Pius Bernet Chief Financial Officer Telephone +41 (0)44 307 45 [email protected]

Forthcoming eventsSeptember 11, 2007First quarter 2007/08 results

September 13, 2007 Annual Shareholders’ Meeting 2006/07

December 18, 2007Halfyear results

March 11, 2008 Third quarter 2007/08 results

July 8, 2008results 2007/08

�7

Number of Company Activities Manager employees

Engineering companies

Infranor SA Engineering, sales and service Raymond Käser 7 CH-Coppet, Sales office: Zurich [email protected]

Infranor SAS Engineering, sales and service Patrice Delattre 9 FR-Linas [email protected] Infranor Spain SL Engineering, sales and service Josep Barbeta 18 ES-Badalona (Barcelona) incl. Cybelec products [email protected] Sales offices: San Sebastian

Infranor B.V. Engineering, sales and service Robert Vermaase 4 NL-Oud-Beijerland (Rotterdam) [email protected]

Infranor GmbH Engineering, sales and service Peter Fritsch 6 DE-Hanau [email protected]

Infranor Ltd. Engineering, sales and service Adrian Hazelwood 4 UK-Cranleigh [email protected]

Infranor, Inc. Engineering, sales and service, Dan D’Aquila 7 US-Wilmington (Boston) MA incl. Cybelec products [email protected]

Infranor Asia Ltd. Engineering, sales and service John Pan 3 CH-Zurich [email protected] Representative Office: CN-Shanghai

Product companies

Automotion, Inc. Development, manufacture and sale Nathan Turner 17 US-Ann Arbor, MI of intelligent servodrives [email protected] Infranor Electronics SAS Development, manufacture and sale Gilles Lanquetin 34 FR-Lourdes of intelligent servodrives [email protected] Mavilor Motors SA Development, manufacture and sale of AC and Francesc Cruellas 88 ES-Sta. Perpètua de Mogoda (Barcelona) DC servomotors as well as tacho generators [email protected]

MESA Automation GmbH Development, manufacture and sale Bernd Eberding 14 DE-Berlin of intelligent servodrives [email protected]

Cybelec companies

Cybelec SA Development, manufacture and sale of controls, Dr. Jean-Pierre van Griethuysen 57 CH-Yverdon-les-Bains in particular for metal forming machines [email protected] Cybelec Srl Sales and service of Cybelec products Enzo Vicìnanza 4 I-Milano [email protected]

Cybelec Numerical Control Technology Manufacture sales and service Yi Wan Li 19 (Shanghai) Co. Ltd. of Cybelec products [email protected] CN-Shanghai

Operating Companies of the Infranor GroupAs at May 2007


Infranor Group Financial Report

29

30

31

32

33

34

35

42

54

Consolidated Balance Sheet

Consolidated Income Statement

Consolidated Cash Flow Statement

Consolidated Statement of Changes in Equity

Notes to the Consolidated Financial Statements:

Segment Report

Consolidation Principles and Accounting Policies

Explanatory notes on the Consolidated Financial Statements

Report of the Group Auditors

30

Consolidated Balance Sheets

Financial Report 2006/2007 Infranor Group 30

1,000 CHF Note 30.4.07 % 30.4.06 %

Assets

Current assets

Cash 4.1 3,199 6.7 3,612 8.8

Cash equivalents and securities 4.2 1,318 2.8 14 0.0

Trade accounts receivable 5 17 276 36.3 15,628 37.9

Other receivables 6 998 2.1 726 1.8

Inventories 7 14,930 31.4 12,361 30.0

Deferred charges 1,255 2.6 976 2.4

Total current assets 38,976 81.9 33,317 80.9

Non-current assets

Financial assets 22 0.0 92 0.2

Property, plant and equipment 8 5,124 10.8 4,599 11.1

Intangible assets 9 2,006 4.2 1,870 4.5

Deferred tax assets 10 1,437 3.1 1,368 3.3

Total non-current assets 8,589 18.1 7,929 19.1

Total assets 47,565 100.0 41,246 100.0

Liabilities

Current liabilities

Current financial liabilities 11 6,154 12.9 10,382 25.2

Trade accounts payable 8,439 17.7 7,025 17.0

Other current liabilities 12 871 1.8 691 1.7

Accruals and deferred income 13 3,975 8.4 3,927 9.5

Short-term provisions 14 735 1.6 736 1.8

Provisions for income taxes 694 1.5 410 1.0

Total current liabilities 20,868 43.9 23,171 56.2

Non-current liabilities

Non-current financial liabilities 11 1,151 2.4 3,168 7.7

Subordinated convertible bond 2002–09 11 8,464 17.8 8,465 20.5

Subordinated CDO 2006-13 11 8,105 17.0 0 0.0

Long-term provisions 15, 16 833 1.8 774 1.9

Deferred tax liabilities 10 416 0.9 288 0.7

Total non-current liabilities 11 18,969 39.9 12,695 30.8

Total liabilities 39,837 83.8 35,866 87.0

Shareholders’ equity

Share capital 17 12,858 27.0 12,816 31.1

Capital reserves – 8,364 – 17.6 – 8,414 – 20.4

Revenue reserves 164 0.4 – 312 – 0.8

Treasury shares – 222 – 0.5 – 198 – 0.5

Currency translation differences 1,090 2.3 348 0.8

Profit/(loss) for the year 2,202 4.6 1,140 2.8

Total shareholders’ equity 7,728 16.2 5,380 13.0

Total liabilities and shareholders’ equity 47,565 100.0 41,246 100.0

Infranor Group Financial Report 2006 /2007

31

Consolidated Income Statements


1,000 CHF Note 06/07 % 05/06 %

Net sales 1, 18, 19 71,287 100.0 62,731 100.0

Cost of goods sold – 33,267 – 46.7 – 27,330 – 43.6

Change in inventories 2,066 2.9 73 0.1

Gross margin 40,086 56.2 35,474 56.5

Personnel costs 20 – 23,972 – 33.6 – 21,006 – 33.5

General and administrative costs 21 – 3,015 – 4.3 – 2,758 – 4.4

Sales costs 22 – 2,198 – 3.1 – 1,949 – 3.1

Other operating expenses 23 – 5,564 – 7.8 – 4,997 – 7.9

Other operating income 24 466 0.7 515 0.8

Total operating expenses – 34,283 – 48.1 – 30,195 – 48.1

Earnings before interest, tax, depreciation and amortization (EBITDA) 5,803 8.1 5,279 8.4

Depreciation and amortization 25 – 1,273 – 1.8 – 1,097 – 1.7

Earnings before interest and tax (EBIT) 4,530 6.3 4,182 6.7

Finance income 792 1.1 494 0.8

Finance costs – 2,111 – 2.9 – 1,788 – 2.9

Financial items (net) 26 – 1,319 – 1.8 – 1,294 – 2.1

Profit/(loss) before taxes 3,211 4.5 2,888 4.6

Taxes 10 – 1,009 – 1.4 – 1,748 – 2.8

Net profit/(loss) 2,202 3.1 1,140 1.8

Undiluted earnings per share in CHF 27 3.49 1.80

Diluted earnings per share in CHF 27 2.34 1.21

In order to enhance comparability the classification of the previous year figures has been restated.


32Infranor Group Financial Report 2006 /2007

Consolidated Cash flow Statements


1,000 CHF Note 06/07 05/06

(Indirect method with cash and cash equivalents)

Cash flow from operating activities

Net profit/(loss) before income taxes and netted financial items (EBIT) 4,530 4,182

Depreciation/amortization of non-current assets 25 1,273 1,097

Write-downs and provisions – 648 – 460

Interest received 47 32

Interest paid – 1,806 – 1,385

Income taxes paid – 625 – 510

Cash flow before change in net current assets 2,771 2,956

Change in trade accounts receivables – 1,176 – 1,948

Change in inventories* – 1,754 110

Change in other current assets – 516 351

Change in trade accounts payables 1,268 522

Change in other current liabilities 87 446

Cash flow from operating activities 680 2,437

Cash flow from investing activities

Disinvestments/investments of financial assets** 4 – 1,235 48

Investments in property, plant and equipment – 1,046 – 824

Disposal of property, plant and equipment 44 18

Investments in intangible assets 9 – 502 – 1,600

Cash flow from investing activities – 2,739 – 2,358

Free cash flow – 2,059 79

Cash flow from financing activities

Decrease in current financial liabilities – 5,766 – 1,623

Increase in non-current financial liabilites 8,274 ,0

Change in obligations under leases – 297 – 265

Payment of dividends – 631 0

Transactions involving treasury shares – 57 – 173

Increase in capital due to convertible bond 84 0

Cash flow from financing activities 1,607 – 2,061

Currency translation differences on cash and cash equivalents 39 15

Change in cash and cash equivalents – 413 – 1,967

Cash and cash equivalents at the beginning of the year 4 3,612 5,579

Cash and cash equivalents at the end of the year 4 3,199 3,612

Change in cash and cash equivalents 4 – 413 – 1,967

* Temporary, sales-related increase in inventories in 2006/07. ** Including fixed-term investments of between 3 and 12 months.

In order to enhance comparability the classification of the previous year figures has been restated.


Consolidated Statements of Changes in Equity


1,000 CHF Share Capital Revenue Treasury Currency Total

capital reserves reserves shares translation share-

differences holders’

equity

Balance at 30.4.05 12,816 – 8,422 – 217 – 120 93 4,150

Net currency translation differences 255 255

Net profit/(loss) 1,140 1,140

Total reported expenditure and income 0 0 1,140 0 255 1,395

Treasury shares – 95 – 78 – 173

Increase in capital due to convertible bond 0

Option plan 8 8

Dividend 0

Total transactions with shareholders 0 8 – 95 – 78 0 – 165

Balance at 30.4.06 12,816 – 8,414 828 – 198 348 5,380

Net currency translation differences 742 742


Total reported expenditure and income 0 0 2,202 0 742 2,944

Treasury shares – 33 – 24 – 57

Increase in capital due to convertible bond 42 42 84

Option plan 8 8

Dividend – 631 – 631

Total transactions with shareholders 42 50 – 664 – 24 0 – 596

Balance at 30.4.07 12,858 – 8,364 2,366 – 222 1,090 7,728

Definition of the equity categories used within the Infranor Group:

– The share capital is the share capital of the parent company, Infranor Inter AG.

– Capital reserves comprise the goodwill from company acquisi-tions that was taken directly to equity in the past, plus premiums from capital increases.

– Revenue reserves comprise the profits retained at the Group companies and the reserves set up with these profits.

– The item treasury shares comprises the Infranor Inter AG shares bought back in the market at the respective stock market price at par value. The difference between par value and market value is charged to the revenue reserves.

– Currency translation differences comprise all currency transla-tion differences relating to the conversion of the foreign group companies.


Notes to the Consolidated Financial Statements


1. Segment report

The Group operates in a single sector of industry. In the seg-ment report, it is therefore broken down geographically, in line with its organizational structure.

The individual reports on the regional segments are based on the figures used for internal reporting purposes (management approach) and contain the segments’ total income and ex-penses. They also contain Group overheads, which are allocated to the segments based on sales. All transactions between the segments were conducted at arm’s length.

1.1 Primary segment report by region Segments Switzerland* Europe excl. North America Intra-Group Total Group

Switzerland transactions

1,000 CHF 06/07 05/06 06/07 05/06 06/07 05/06 06/07 05/06 06/07 05/06

Orders received 37,011 24,814 54,909 46,338 7,325 7,329 – 20,994 – 18,155 78,251 60,326

of which net sales

between regions 2,805 1,860 18,131 16,247 58 48 – 20,994 – 18,155 0 0

Net sales 29,546 26,024 53,042 46,203 7,391 6,801 – 18,692 – 16,297 71,287 62,731

of which net sales

between regions 775 547 17,859 15,702 58 48 – 18,692 – 16,297 0 0

EBITDA 2,668 3,128 3,490 2,330 – 355 – 179 5,803 5,279

as % of net sales 9.0 % 12.0 % 6.6 % 5.0 % – 4.8 % – 2.6 % 8.1 % 8.4 %

Depreciation and

amortization – 460 – 193 – 794 – 801 – 19 – 103 – 1,273 – 1,097

EBIT 2,208 2,935 2,696 1,529 – 374 – 282 4,530 4,182

as % of net sales 7.5 % 11.3 % 5.1 % 3.3 % – 5.1 % – 4.1 % 6.4 % 6.7 %

Financial items (net) – 1,319 – 1,294

Income taxes – 1,009 – 1,748


Number of employees 92 78 181 167 25 24 298 269

EBIT/employee (1,000 CHF) 24.0 37.6 14.9 9.2 – 15.0 – 11.8 15.2 15.5

Total assets 15,380 11,390 29,843 27,473 2,342 2,383 47,565 41,246

Total liabilities 19,996 16,741 18,106 17,952 1,735 1,173 39,837 35,866

Net investments 647 1,513 1,283 907 4 31 1,934 2,451

Depreciation of property,

plant and equipment – 230 – 170 – 654 – 640 – 19 – 84 – 903 – 894

Amortization

of intangible assets – 230 – 23 – 140 – 161 0 – 19 – 370 – 203

Recognition/reversal of

provisions/write-downs** 287 1,302 – 570 – 441 19 – 81 – 264 780

*incl. China **all non-cash costs excluding depreciation and amortization

1.2 Secondary segment report by business line Segments Net sales Assets Investment

1,000 CHF 06/07 05/06 06/07 05/06 06/07 05/06

Motors 22,966 20,422 10,157 8,218 908 492

Servo-amplifiers 18,840 16,682 8,844 7,998 66 314

Controls 19,799 15,672 17,941 14,282 511 1,395

Traded products 2,944 4,086 3,230 4,317 137 103

Service, spare parts and repairs 6,738 5,869 7,393 6,431 312 147

Total 71,287 62,731 47,565 41,246 1,934 2,451

35


2. Consolidation principles and accounting policies

General The Infranor Group is active in the automation industry. The parent company, Infranor Inter AG, is headquartered in Zurich (Switzerland). The business activities of the Infranor Group mainly consist of the development, production and worldwide sales of high-value automation components and solutions.

Registered office of the company: Infranor Inter AG Schaffhauserstrasse 418 P.O. Box CH-8050 Zurich T +41 (0)44 307 45 00 F +41 (0)44 307 45 10 www.infranor.com

Basis for preparing the Groups financial statements The financial statements of the Infranor Group as of April 30, 2007, are to be prepared in accordance with International Finan-cial Reporting Standards (IFRS), always on the basis of historical cost unless the following notes on consolidation principles and accounting policies state otherwise. Information required under the Swiss Code of Obligations has also been provided. The clas-sification and content of the respective prior-year figures have been adjusted accordingly.

The annual financial statements are presented in Swiss francs. However, the majority of the Group’s transactions are conducted in euros.

Change in accounting principles The Infranor Group applies the new and the changed IFRS/IAS standards and interpretations that entered into force on January 1, 2006.

– IAS 19 Employee benefits (revised) – IAS 21 Effects of exchange rate changes (revised) – IAS 39 Financial instruments (revised) – IFRS 1 Initial application of the IFRS (revised) – IFRS 4 Insurance contracts (revised) – IFRS 6 Exploration and evaluation of mineral resources – IFRIC 4 Assessment of whether an agreement comprises a

lease – IFRIC 5 Right to units in funds for disposal, etc. – IFRIC 6 Provisioning requirements arising from

participation in specific markets: waste electrical and electronic equipment

The aforementioned new and revised standards and interpreta-tions, however, do not involve any adjustments to the Group’s accounting and valuation methods and have not influenced the statements for the 2006/07 year. At the time that these consolidated financial statements were re-leased the following IFRS/IAS standards and interpretations had been approved but had not yet entered into force:

– IFRS 7 Financial instrument: Disclosure – IFRS 8 Operating segments – IFRIC 7 Application of the restatement approach in accor-

dance with IAS 29, accounting practices in high- inflation countries

– IFRIC 8 Scope of application IFRS 2 – IFRIC 9 Reassessment of embedded derivatives – IFRIC 10 Interim reporting and impairment of assets – IFRIC 11 Intragroup transactions and treasury stock

transactions in accordance with IFRS 2 – IFRIC 12 Service concession arrangements – as well IFRIC 13 and IFRIC 14

It is management’s opinion that drawing up the financial state-ments on the basis of these IFRS/IAS standards and interpreta-tions starting with the 2007/08 financial year will not significantly influence the Group’s consolidated financial statements. IFRS 7 requires more information about the financial instruments and the group will disclose additional qualitative and quantitative in-formation about credit risks, liquidity risks and market risks. IFRS 8, Operating Segments, will be applicable on account of, among other things, the pending reorganization of the primary segment by division/business unit instead of by geographic re-gion.

Basis of consolidation The consolidated financial statements – consisting of the bal-ance sheet, income statement, cash flow statement, statement of changes in equity and notes – are based on the audited an-nual financial statements of the companies. The consolidated fi-nancial statements are prepared from the annual financial statements of the individual companies, which comply with local regulations and practices, in accordance with International Fi-nancial Reporting Standards (IFRS) by applying uniform Group-wide consolidation principles and accounting policies.

Consolidation principles The consolidated financial statements of the Infranor Group cover all companies in which the Group directly or indirectly holds more than 50 percent of the voting rights or over which the Group exercises significant influence in some other way. Newly acquired companies are consolidated from the date of their acquisition. The results of companies that have been sold are recognized until the date of sale.

Infranor Group Financial Report 2006 /2007 Notes




Companies in which the Group holds over 20 percent but not more than 50 percent of the voting rights are accounted for un-der the equity method provided the Group does not exercise significant influence in some other way. The proportionate equity and the proportionate profit/loss for the period are stated in the consolidated financial statements even if the proportion-ate equity exceeds historical cost.

Holdings in excess of 50 percent are consolidated by the pur-chase method applied in the UK and the USA. The assets and li-abilities of newly acquired companies are stated at fair value at the time of acquisition. Minority interests show the minorities’ share of total assets less liabilities.

All transactions and balances between the consolidated compa-nies are eliminated in the course of consolidation. Intra-Group profits generated from internal transactions are eliminated.

Companies included in the consolidation In the 2006/07 financial year, the sole change in the scope of consolidation is the elimination of Cynum SA, a French com-pany that was liquidated.

Newly included is Cybelec Numerical Control Technology (Shanghai) Co. Ltd, in Shanghai, China, a wholly foreign owned entity (WFOE). It was founded by Cybelec S.A., Yverdon-les-Bains, in May 2006 and began manufacturing Cybelec products in February 2007.

The following companies were fully consolidated as of April 30, 2007:

Companies Purpose8 Remark Share capital Interest Year listed by place of jurisdiction founded Infranor Inter AG, CH-Zurich F 1 CHF 12,858,500 n/a 1987 Infranor Holding SA, CH-Coppet F,S CHF 1,091,000 100 % 1941 Infranor SA, CH-Coppet E CHF 500,000 100 % 1953 Infranor SAS, FR-Linas/Paris E EUR 38,250 100 % 1992 Infranor Electronics SAS, FR-Lourdes P EUR 37,000 100 % 2005 Infranor B.V., NL-Oud-Beijerland (Rotterdam) E EUR 100,000 100 % 2005 Infranor GmbH, DE-Hanau E EUR 100,000 100 % 1968 MESA Automation GmbH, DE-Berlin P EUR 100,000 100 % 1982 Infranor Ltd., UK-Cranleigh E 2 GBP 200,000 100 % 1983 Infranor Spain SLU, ES-Badalona (Barcelona) E EUR 150,000 100 % 2006 Infranor Asia Ltd., CH-Zurich E 3 CHF 300,000 100 % 2005 Infranor Holdings US, Inc., US-Dover, DE F USD 1,620 100 % 2001 Infranor, Inc., US-Wilmington, MA E 4 USD 1,000 100 % 1982 Automotion, Inc., US-Ann Arbor, MI P USD 463,070 100 % 1983 Mavilor Motors SA, ES-Sta. Perpetua de Mogoda (Barcelona) P EUR 135,000 100 % 1973 Cybelec SA, CH-Yverdon-les-Bains P CHF 250,000 100 % 1970 Cybelec Srl, IT-Milano E EUR 100,000 100 % 2004 Cybelec Numerical Control Technology (Shanghai) Co.Ltd., CN-Shanghai P 6 CNY 1,304,400 100 % 2006 ISA Management SA, CH-Coppet S CHF 200,000 100 % 1986 ISA Innovations SA, CH-Coppet S 7 CHF 50,000 100 % 1980 Violet-Indim SA, CH-Coppet F 7 CHF 100,000 100 % 1999 Violet-Indim Sarl, FR-Lourdes F EUR 8,000 100 % 2000

1 Owing to the conversion of bonds, share capital increased by CHF 0.05

million. 2 Share capital was increased by CHF 0.15 million to CHF 0.20 million. 3 Share capital was increased by CHF 0.20 million to CHF 0.30 million. 4 Infranor Inc. moved its headquarters to Wilmington, a suburb of Boston. 5 Cybelec Srl moved to Cinisello Balsamo, a suburb of Milan.

6 Cybelec Shanghai was founded in May 2006 and started to produce in

February 2007. 7 The two firms have moved their headquarters from Fribourg to Coppet. 8 E = Engineering and Sales

P = Production, Development and Sales F = Finance S = Service Provision

37


Foreign currency translation The consolidated accounts are prepared in Swiss francs (CHF). The items included in the financial statements of the individual Group companies are presented in the currency of the primary economic environment in which the respective company oper-ates (functional currency). The income statements of foreign companies are translated into Swiss francs at the average ex-change rates.

The balance sheets of subsidiaries are translated at the ex-change rates ruling on April 30, 2007, using the closing rate method. The resulting translation differences are taken to equity and only recognized in the income statement if and when the subsidiaries are deconsolidated.

Foreign-currency transactions at Group companies are recorded at the exchange rates ruling on the date of the transaction. Gains and losses from such transactions and from the transla-tion of foreign-currency assets and liabilities are taken to the in-come statement, with the carrying amounts in the balance sheet being translated at the exchange rate ruling at year-end. There were no outstanding forward transactions to report as at April 30 – as in the previous year.

Foreign exchange differences on Group loans to a foreign com-pany which are seen as part of the investment are recognized in consolidated equity.

The following exchange rates were used:

CHF Year-end rates Average rates for the

for the balance sheet year for the income

statement

30.4.07 30.4.06 06/07 05/06

USA USD 1.2151 1.2412 1.2260 1.2850

Europe EUR 1.6527 1.5673 1.5960 1.5560

UK GBP 2.4292 2.2615 2.3580 2.2750

China CNY 0.1576 0.1551 0.1560 0.1610

Financial instruments The financial instruments used are entered in the balance sheet on the trading date. Derivative financial instruments are in ac-cordance with IAS 39 carried in the balance sheet at fair value. The Group occasionally uses forward exchange contracts. For-ward exchange transactions are concluded for the purpose of hedging a current contract or an amount due from a customer in a foreign currency (fair value hedge). In this case, each of the changes in the fair value of the hedging instrument and the hedged item are taken to income, bearing in mind deferred taxes, and the fair values are stated in the balance sheet with the hedged item. Ultimately, the changes in the fair value of the hedging instrument and the hedged item offset each other in the income statement.

Market risks and risk management policies The Group is exposed to market risks, mainly in the form of in-terest rate, foreign currency and credit risks. The Board of Direc-tors is responsible for monitoring the Group’s internal manage-ment systems, which can manage but not eliminate the risk of unsuccessful transactions. These systems offer adequate but not total protection against errors and losses. The Group Manage-ment is responsible for identifying and assessing significant risks for the respective company.

In addition to adopting quantitative approaches and formal guidelines – which represent just one element of a comprehen-sive approach to risk management – the Group Management attaches importance to building up and maintaining a suitable risk management culture.

Financial instruments include in particular bank deposits, trade accounts receivable and payable, and interest-bearing liabilities. The majority are dominated in Swiss francs and euros. The bank deposits and the trade accounts receivable and payable are mostly carried at fair value.

The Group’s risk policy also includes protecting against risks through comprehensive and efficient insurance cover and through Infranor’s broad spread of customers across various sectors of industry and geographical regions.

Liquidity risks The Group’s management company ensures that the Group companies always have access to optimum liquidity. The raising of bank loans or issuing of bonds is managed centrally by this management company.

Interest rate risks The risk of changes in interest rates relates primarily to liabilities which are interest-bearing over the long term. In most cases, the Group has concluded long-term contracts at fixed rates of inter-est in order to minimize the risk of changes in interest rates. In-terest is currently paid on the remainder of its non-current finan-cial liabilities at money market rates. The Group reviews the in-terest rate situation and hedging opportunities on a regular ba-sis. No derivatives are used for the purpose of hedging interest rate risks.


38



Exchange rate risks The Group sells products and services in foreign currencies and is therefore exposed to fluctuations in foreign exchange rates. The largest percentage of sales is generated in the European Union in euros while a further significant percentage is gener-ated in Swiss francs. Investments in foreign companies are not hedged. Exchange rate risks arising from intra-company loans are occasionally hedged by means of forward exchange con-tracts. Future cash inflows and outflows are only hedged in cer-tain, larger cases.

Forward exchange transactions are concluded only sporadically where larger items need to be hedged. These instruments are not used as speculative investments.

Credit risks There is no large concentration of risk relating to trade accounts receivable. In order to minimize credit risks, the local manage-ment agrees additional collateral (e.g. irrevocably confirmed credits, bank guarantees, trade indemnity insurance, etc.) where this is deemed appropriate on the basis of specific sec-tor/country and customer analyses. Bank accounts are held only at first-rate credit institutions. The Group carries out regular checks on the creditworthiness of its customers.

Accounting policies

Key assumptions and sources of uncertainty in relation to estimates Accounting procedures require management to make certain es-timates and assumptions that affect the amount of stated assets and liabilities as well as contingent assets and liabilities at the time the statements are prepared, but also income and expenses for the reporting period. Their estimates and assumptions are based on past experience and on various other factors deemed applicable in the given circumstances. The actual results may differ from these estimates.

Assumptions and estimates are constantly monitored and ad-justed as and when new information becomes available. Any changes are recognized in the income statement in the reporting period in which the estimate was adjusted. The most important assumptions are listed below, but are also indicated in the cor-responding notes.

– Income is only recognized where, in the opinion of manage-ment, the relevant risks and benefits have been transferred to the customer. For specific transactions, this means that the payments received are accrued in the balance sheet and only assigned to the income statement once the contractual terms have been met. Based on the information available at the cur-rent point in time, management views the accruals and provi-sions that have been formed as appropriate.

– Other intangible fixed assets are reviewed annually, while con-tributions in kind are reviewed if there are indications of im-pairment. To assess whether impairment has occurred, man-agement estimates and valuations are conducted with regard to the expected future cash flows arising from the use and possible disposal of such assets.

– In determining the assets and liabilities from current and de-ferred income taxes, far-reaching estimates must be made. Some of these estimates are based on the interpretation of exist-ing tax legislation and regulations. Management is of the opin-ion that these estimates are fair, and adequate account has been taken of uncertainties with respect to income taxes in the stated assets and liabilities.

– At some of the Infranor Groups sites, employees are insured under retirement schemes that are classed as defined-benefit plans under IAS 19. Calculation of the stated accruals and liabili-ties in relation to these plans is based on statistical and actuarial calculations. Discrepancies in relation to the assumptions of the actuaries, which have been agreed with management, may have an influence on the stated accruals and liabilities from employee retirement schemes in future reporting periods.

– A number of Group companies are involved in legal disputes. Management has conducted an assessment of the possible con-sequences of these legal cases on the basis of the information currently available, and taken due account of them in the bal-ance sheet.


39


Net sales Revenue from product sales or service provision is recognized at the time the products are delivered or the services provided, less sales deductions and value added taxes.

Cash and cash equivalents Cash and cash equivalents comprise cash on hand, postal giro account and bank deposits, amounts due from money market transactions maturing in up to 3 months.

Trade accounts receivable Trade receivables are carried in the balance sheet at face value. The necessary provisions are recognized for doubtful debts.

Inventories and work in progress Purchased goods and products manufactured in-house are rec-ognized at cost. Manufacturing cost includes the cost of the components, all specific production costs (actual costs) plus an appropriate allocation of production overheads and produc-tion-related depreciation and amortization. A write-down is charged if the net value realizable from the sale of an item is lower than the cost of inventories calculated in accordance with the methods described above.

Inventories are measured using the weighted average cost method. An additional write-down is charged for obsolete inven-tory items based on turnover frequency. Discounts received are recognized as a reduction in the purchase price.

Intra-Group profits from internal deliveries are eliminated in the income statement.

Property, plant and equipment Property, plant and equipment are measured at cost less any necessary depreciation.

Items are depreciated by the straight-line method over the fol-lowing estimated useful lives: buildings and installations 20 to 25 years; machinery and tools, industrial plant, office furniture and equipment 5 to 10 years; motor vehicles and IT equipment 2 to 5 years.

Leases Lease agreements for property, plant and equipment where both the risks and the rights incident to ownership are transferred to the Group (finance leases) are capitalized at present value at ac-quisition and written down over the aforementioned estimated useful lives. The corresponding liabilities are recognized under “Current financial liabilities” or “Non-current financial liabili-ties”, depending on whether they fall due within or after 12 months. The cost of maintaining and repairing the property, plant and equipment is charged to the income statement if it does not add value.

Payments made under operating leases are charged directly to the income statement.

Intangible assets and goodwill Before the switch to IFRS, goodwill arising on acquisitions was eliminated against equity. For the adoption of IFRS as per April 30, 2004, Infranor has decided not to apply IFRS 3, Business Combinations, retrospectively when accounting for goodwill.

The last acquisition, of Automotion, Inc., on December 1, 2000, on which Infranor effectively paid goodwill in the amount of CHF 7.7 million, was charged directly and in full to consolidated equity. The 1989 acquisition of Cybelec SA, on which goodwill in the amount of CHF 13.8 million was paid, was also charged directly to equity.

Research and development costs are, in principle, entered di-rectly on the income statement. Provided that they fulfil the capi-tal asset criteria (the prospect of a net return, in particular, is es-tablished), major services covering the development of new products are entered on the balance sheet at their purchase or production cost (without taking account of finance costs) and depreciated over their useful life up to a maximum of 7 years. Licences, trademarks and patents are amortized over 3 to 10 years, software over 2 to 5 years and product development over 2 to 5 years.

Impairment of assets At least at each balance sheet date, the Group’s assets are re-viewed for impairment. If there are indications that an asset may be impaired, the recoverable value of the asset is calculated. An impairment charge is recognized if the current carrying value exceeds the recoverable value. The recoverable value is the higher of the estimated net selling price and value in use. To de-termine value in use, the present value of estimated future cash flows is calculated. The discount rate used for this is the average interest rate on capital in the country in which the asset is lo-cated, bearing in mind the specific risks to the asset.





Liabilities Borrowings are first stated at fair value less the transaction costs incurred and for all subsequent periods measured using the amortized cost method. Differences between the cash inflow (af-ter deduction of transaction costs) and the repayment amounted are recognized in the income statement using the effective inter-est rate method over the period during which the external funds are being drawn upon. Financial liabilities comprise borrowings on current accounts at banks, obligations under finance leases and all other financial debts. The face value of trade accounts payable is usually taken as their fair value.

Convertible bond When issuing convertible bonds, the fair value of the liability component is carried under the separate item “Subordinated bond” on the basis of a typical market interest rate for a com-parable, non-convertible bond using the amortized cost method. The remainder of the cash inflow (equity component) is as-signed to the option to convert and taken to equity. The value of the option to convert doesn’t change in the subsequent report-ing periods.

Collateralized Debt Obligation “PULS CDO 2006-1”, 2006-13 On July 25, 2006, Infranor Holding SA, a subsidiary of Infranor Inter AG, issued a 7-year subordinated Swiss franc CDO in the amount of CHF 8.3 million carrying a coupon of 7.26 percent as part of “PULS CDO 2006-1”, 2006-13, a collateralized debt obli-gation in the total amount of EUR 260 million. Merrill Lynch, Germany, acted as arranger and Capital Securities Group AG, Baar, as portfolio manager. The new capital was used exclu-sively to repay bank loans of the Infranor Group, with the result that the Group’s long-term financing is now guaranteed by this subordinated loan and the existing convertible bond, respec-tively.

Long-term provisions Long-term provisions comprise pension obligations and other obligations towards employees, plus liabilities which are uncer-tain, either in terms of their due date or their amount.

Income taxes Provisions are provided for taxes incurred on business income irrespective of when such liabilities fall due for payment and bearing in mind any tax-deductible losses carried forward.

Deferred taxes Deferred taxes are taxes for temporary differences between the values of assets and liabilities as recognized by the revenue au-thorities and the values as stated in the consolidated financial statements. Deferred taxes are calculated using the liability method on the basis of the local tax rate ruling at the balance sheet date. Deferred tax assets are calculated for all deductible temporary differences if it is likely that sufficient taxable income will be generated in the future. Deferred tax assets and liabilities are netted insofar as legal regulations permit offsetting. Changes in the amounts of deferred taxes are recognized as tax expense.

Provisions are not provided for taxes that would be incurred were subsidiaries to distribute retained earnings, except where a distribution can be expected in the foreseeable future or where it has been decided.

Earnings per share Diluted earnings per share include the dilutive effect of the con-ditional share capital, which is drawn upon mainly as a result of the conversion of the bond.

Pension plans and other long-term employee benefits In accordance with local laws and practices, the Group operates various benefit plans. Among these plans are defined benefit and defined contribution plans.

The expense and defined benefit obligations for the material de-fined benefit plans are determined based on different economic and demographic assumptions using the Projected Unit Credit Method. This takes into account insurance years up to the valua-tion date. The major assumptions involved in the calculation are expectations about future salary increase, return on pension as-sets, turnover and life expectancy.

41


Valuation of defined benefit obligations is conducted annually by independent actuaries. The last valuation of the defined benefit obligations for the material benefit plans was carried out as per December 31, 2006, and was projected to April 30, 2007. Valuation of pension assets is done annually, at market value.

Current service cost is recorded in the profit and loss account for the period in which they occurred. Past-service costs are recog-nized immediately in the income statement, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortized on a straight-line basis over the vesting period.

Actuarial gains and losses in excess of the greater of 10 percent of the value of plan assets or 10 percent of the defined benefit obligation are charged or credited to income over the employ-ees’ expected average remaining working lives.

The recognized asset will be limited to the present value of any economic benefits available in the form of reductions in future employer contributions to the plan.

The employer contributions to defined contribution plans are recognized in the profit and loss account in the period in which they occur.

Employee stock option plan Since October 1, 1999, options to purchase Infranor Inter AG bearer shares have been sold to one senior employee of the Group and member of the Board of Directors.

The benefit consists of options to purchase Infranor Inter shares at a predetermined price. Options have been granted as part of this stock option plan, with the last options issued in 2006/07. In order to hedge these liabilities and cover all potentially out-standing options, the Group purchases the necessary number of shares and holds these until the options expire or are exercised. No additional shares are issued as part of this equity compensa-tion plan.

The options’ strike prices were determined at the grant date on the basis of the then current share price. The time value to be at-tached to the options is calculated by an actuary using the Black-Scholes formula. If share prices are lower during the exercise period, the options’ strike prices are not adjusted. The options are subject to a three-year vesting period.

Transactions with related parties Related parties (natural or legal) are defined as any party directly or indirectly able to exercise significant influence over the company or the Group as it makes financial or operating deci-sions. Companies which, in turn, are directly or indirectly con-trolled by related parties are also deemed to be related parties.

Off-balance sheet transactions Off-balance sheet transactions comprise a) contingent liabilities and pledged asset b) other obligations not recognized in the balance sheets.

Contingent liabilities and obligations not recognized in the bal-ance sheet include a) guarantees (usually to creditor banks) b)pledges in accordance with section 663b 2 of the Swiss Code

of Obligations (usually to creditor banks) c) guarantees such as purchase guarantees or commitments d)operating leases (excluding interest expense).

Off-balance sheet transactions are measured as at the balance sheet date at year-end rates based on the agreements in place.





Explanatory notes on the consolidated financial statements

3. Impact of foreign currencies on the balance sheet Change as against the previous year 30.4.07 30.4.06

Current assets 2.7 % 1.3 %

Non-current assets 3.5 % 1.2 %

Current liabilities 3.3 % 1.3 %

4. Cash, cash equivalents and marketable securities

4.1 Cash by currency 1,000 CHF 30.4.07 30.4.06

CHF 1,281 2,019

EUR 920 1,463

USD 433 130

Other currencies (GBP, CNY) 565 0

Total cash 3,199 3,612

The actual yield on current accounts with banks and cash and cash equivalent holdings is the variable overnight rate paid by the banks on customer deposits in the respective currencies. As at the end of April the company held no derivative financial in-struments, as was the case in the previous year.

4.2 Cash equivalents and marketable securities 1,000 CHF 30.4.07 30.4.06

Checks, bills EUR 0 14

Time deposits 3 - 12 months (CHF) 1,318 0

Total marketable securites 1,318 14

5. Trade accounts receivable 1,000 CHF 30.4.07 30.4.06

Total trade accounts receivable 17,992 16,506

Bad debt allowances – 716 – 878

Total trade accounts receivable (net) 17,276 15,628

As of April 30, 2007, receivables totalling CHF 1.22 million (pre-vious year CHF 1.48 million) were pledged with banks as loan collateral.

Trade accounts receivable are normally due within 30 to 120 days; in principle they are interest-free and unsecured. The risk of default is taken into account in the corresponding value ad-justments.

6. Other receivables 1,000 CHF 30.4.07 30.4.06

Prior tax charges, withholding taxes 693 655

Income tax 61 0

Payments in advance to suppliers 106 0

Other receivables 138 71

Total 998 726

7. Inventories 1,000 CHF 30.4.07 30.4.06

Raw materials and supplies 8,483 6,183

Semi-finished products and work in progress 2,540 3,357

Finished products 5,140 4,557

Inventories (gross) 16,163 14,097

Valuation allowance – 1,233 – 1,736

Inventories (net) 14,930 12,361

As of April 30, 2007, no longer encumbered with a lien a total amount of CHF 0.52 million (previous year: CHF 0.52 million) of the inventories at an engineering and sales company had been pledged as security. As at the same date, the associated credit facility had not been drawn upon (as was the case in the previ-ous year). Obsolete parts with a total value of around CHF 0.93 million (previous year CHF 0.16 million) were scrapped, as a result of which the gross carrying value and the relevant valuation allow-ance fell by the same amount as of April 30, 2007.

43


8. Property, plant and equipment

8.1 Property, plant and equipment in the year under review 1,000 CHF Land, buildings/ Machinery/ IT Industrial Office furniture Motor Total

installations tools hardware plant and equipment vehicles 06/07

Cost

As at 1.5. 1,561 11,251 1,583 2,523 1,384 490 18,792

Additions 31 681 158 183 45 184 1,282

Disposals – 76 – 114 – 108 – 16 – 100 – 146 – 560

Currency translation differences 80 523 47 127 31 11 819

As at 30.4. 1,596 12,341 1,680 2,817 1,360 539 20,333

Accumulated depreciation

As at 1.5. – 515 – 9,354 – 1,328 – 1,576 – 1,125 – 295 – 14,193

Depreciation – 93 – 334 – 152 – 156 – 73 – 95 – 903

Disposals 76 114 96 5 96 129 516

Reclassification 3 – 3 0

Currency translation differences – 28 – 440 – 44 – 84 – 24 – 9 – 629

As at 30.4. – 560 – 10,014 – 1,425 – 1,811 – 1,129 – 270 – 15,209

Net carrying values 30.4.07 1,036 2,327 255 1,006 231 269 5,124

Net carrying values 1.5.06 1,046 1,897 255 947 259 195 4,599

of which finance leases 880 678 24 105 15 96 1,798

Insured values 10,015

8.2 Property, plant and equipment in the previous year 1,000 CHF Land, buildings/ Machinery/ IT Industrial Office furniture Motor Total

installations tools hardware plant and equipment vehicles 05/06

Cost

As at 1.5. 1,647 11,017 1,209 2,260 1,473 461 18,067

Additions 295 120 237 59 75 786

Disposals – 118 – 415 – 93 – 210 – 53 – 54 – 943

Reclassification 166 330 197 – 117 3 579

Currency translation differences 32 188 17 39 22 5 303

As at 30.4. 1,561 11,251 1,583 2,523 1,384 490 18,792

Accumulated depreciation

As at 1.5. – 491 – 9,169 – 917 – 1,421 – 1,197 – 230 – 13,425

Depreciation – 125 – 278 – 147 – 145 – 88 – 110 – 893

Disposals 109 415 93 210 37 52 916

Reclassification – 166 – 342 – 197 142 – 3 – 566

Currency translation differences – 8 – 156 – 15 – 23 – 19 – 4 – 225

As at 30.4. – 515 – 9,354 – 1,328 – 1,576 – 1,125 – 295 – 14,193



of which finance leases 1,043 445 26 67 0 45 1,626

Insured values 10,067


44



As at the balance sheet date there were no indications of possi-ble impairment of property, plant and equipment. Property, plant and equipment financed by finance lease concerns primar-ily the factory building in Lourdes, France (Infranor Electronics SAS), leased until 2012, and machinery and annex to the factory building in Spain (Mavilor Motors SA), leased until 2014 at the latest.

All leasing agreements include an option to buy at the calcula-tory residual value, which, as a rule, is zero.

The lessor has not imposed and restrictions or conditions.

9. Intangible assets

9.1 Intangible assets in the year under review 1,000 CHF Business ProductTrademarks, Total

soft- devel- patents, 06/07

ware opment other

Cost

As at 1.5. 1,020 1,316 9 2,345

Additions 268 151 75 494

Disposals – 135 – 9 – 144

Currency translation

differences 5 15 20

As at 30.4. 1,158 1,482 75 2,715

Accumulated amortization

As at 1.5. – 428 – 38 – 9 – 475

Amortization – 166 – 201 – 3 – 370

Disposals 135 9 144

Currency translation

differences – 5 – 3 – 8

As at 30.4. – 464 – 242 – 3 – 709

Net carrying values

30.4.07 694 1 240 72 2,006

1.5.06 592 1 278 0 1,870

9.2 Intangible assets in the previous year 1,000 CHF Business ProductTrademarks, Total

soft- devel- patents, 05/06

ware opment other

Cost

As at 1.5. 716 0 29 745

Additions 291 1,316 9 1,616

Disposals – 1 – 29 – 30

Reclassification 9 9

Currency translation differences 5 5

As at 30.4. 1,020 1,316 9 2,345

Accumulated amortization

As at 1.5. – 272 0 0 – 272

Amortization – 133 – 38 – 32 – 203

Disposals 23 23

Reclassification – 20 – 20

Currency translation differences – 3 – 3

As at 30.4. – 428 – 38 – 9 – 475

Net carrying values 30.4.06 592 1,278 0 1,870

Net carrying values 1.5.05 444 0 29 473

As at the balance sheet date there were no indications of possi-ble impairment of intangible assets.

The business software comprises company-specific or com-monly used systems such as ERP, CRM, financial and Internet applications.

The product development and launch costs refer to the new Cy-belec products announced last year (CNC controllers and touch screen control) and those of Infranor Electronics (intelligent am-plifiers) for which supply agreements have already been signed.

Trademark rights are purchased product trademarks which con-tinue to be registered in the leading industrialized nations. Licen-ces and patents are purchased marketing rights for complemen-tary third-party products and purchased patents for motion automation products. Trademark rights and marketing licences developed within the business are not capitalized.


45


10. Income taxes

The notes on taxes have been regrouped and the values for the previous year adjusted accordingly for the purposes of compari-son.

10.1 Income taxes

Income taxes debited against the financial statements 1,000 CHF 06/07 05/06

Current income tax expenditure 962 562

Adjustments for income taxes relating to

a different accounting period – 53 0

Deferred income taxes 100 1 186

Income taxes taken to the financial statements 1,009 1,748

Neither in the year under review nor the previous year were in-come taxes debited or credited to share capital.

Transition account 1,000 CHF 06/07 05/06

Profit (loss) before income tax 3,211 2,888

Expected income tax rate 31.6 % 23.5 %

Income taxes calculated using

the theoretically applicable tax rate 1,013 679

Tax effect of tax-exempt income – 37 0

Tax effect of non-tax-deductible expenditures 90 480

Tax effect of income taxed at other rates 76 0

Tax effect of non-refundable withholding taxes 80 80

Value adjustments of deferred taxes capitalized

to date on tax losses carried forward

or temporary discrepancies 102 448

Subsequent capitalization of unreported

deferred taxes on tax losses

carried forward or temporary discrepancies – 234 0

Expiry of tax losses carried forward

on which deferred taxes were capitalized 299 196

Tax losses in the current year

for which no deferred taxes are capitalized – 186 0

Changes in the tax rate – 112 – 217

Subsequent tax charges/tax relief for previous years – 53 74

Other – 29 8

Total 1,009 1,748

Effective income tax rate 31.4 % 60.5 %

The expected income tax rate is a weighted average that takes into account the probable rates at which profits of the individual Group companies will be taxed in the respective tax jurisdicti-ons. The effective income tax rate is half the rate in the previous year due primarily to non-recurring value adjustments on e-xisting capitalized deferred taxes (additional deferred tax expen-ses) in the previous year.

10.2 Composition of the deferred tax assets and liabilities

Deferred tax assets 1,000 CHF 06/07 05/06

Property, plant and equipment 0 0

Other fixed assets 232 283

Current assets 422 412

Provisions 334 0

Payables 115 341

Subtotal 1,103 1,036

thereof not recognized – 129 0

Losses carried forward/Tax credits 483 417

Total deferred tax assets 1,457 1,453

Deferred tax liabilities 1,000 CHF 06/07 05/06

Property, plant and equipment 0 0

Other fixed assets 0 0

Current assets 419 289

Provisions 0 0

Liabilities 17 84

Total deferred tax liabilities 436 373

Net deferred tax 1,021 1,080

of which recognized in the balance sheet as:

Deferred tax liabilities – 416 – 288

Deferred tax assets 1,437 1,368

Net deferred tax assets 1,021 1,080

It is not expected that distributions by the Group and affiliated companies will generate appreciable additional tax liabilities. The Infranor Group does not make provision for taxes on possi-ble future distributions of profits retained by Group companies, as these amounts are treated as permanently reinvested.





10.3 Tax losses and tax credits brought forward

As of April 30, 2007, individual subsidiaries had brought forward tax losses totaling CHF 15.4 million (previous year: CHF 10.3 mil-lion) that can be set off against taxable earnings in future finan-cial years. In this respect, deferred tax assets are taken into ac-count only insofar as it is probable that the associated tax cred-its can be realized.

As of the balance sheet date, the Group did not show an amount of CHF 12.4 million in deferred tax assets in the balance sheet. These will expire on the following dates:

Tax losses and tax credits brought forward not shown in the bal-ance sheet 1,000 CHF 06/07 05/06

Expire in 1 year 0 0

Expire in 2-3 years 727 0

Expire in 4-7 years 276 0

Expire in more than 7 years 5 120 0

Imprescriptible 6 314 7 210

Total 12,437 7 210

In 2006/07, tax credits (in Spain) on investments and R&D, total-ling CHF 4.3 million, were recognized for the first time, of which CHF 0.1 million were capitalized.

11. Financial liabilities

11.1 Current financial liabilities 1,000 CHF 30.4.07 30.4.06

Current accounts at banks 2,697 932

Bank loans, falling due within one year 3,069 9,093

Total current liabilities due to banks 5,766 10,025

Loans from government institutions 116 94

Obligations under finance leases,

falling due within one year 272 263

Total current interest-bearing liabilities 6,154 10,382

The increase in current accounts at banks is the result of the short-term increase in inventories and debt portfolios. The change in bank loans of CHF 4.3 million reflects additionally the repayment of CHF 8.3 million with the proceeds of a long-time loan on the one hand and the reclassification of fixed advances of CHF 2.0 million in non-current financial liabilities.

Current liabilities due to banks by currency with average interest rates 1,000 CHF 30.4.07 Effective 30.4.06 Effective

interest interest

rates rates

CHF 1,782 4.69% 2,289 4.25%

EUR 3,843 4.55% 7,461 4.19%

USD 0 0.00% 248 6.95%

GBP 141 8.00% 27 7.95%

Total 5,766 10,025

With the retirement of the various aforementioned bank loans from different banks, the following loan covenant was signed with CREDIT SUISSE, the remaining, and henceforth new lead bank, which includes a pari passu clause with reference to the other Swiss banks:

– equity ratio of at least 40 percent (share capital and reserves + subordinated borrowings – intan-gible assets) / (balance sheet total – intangible assets)

As of April 30, 2007, the applicable covenants had been com-plied with in full. Loans agreements with foreign banks are on the basis of indi-vidual assignments of debt and of unsecured loans guaranteed by Infranor Inter Ltd.

11.2 Non-current financial liabilities 1,000 CHF 30.4.07 30.4.06

Long-term bank loans 66 2,104

Total long-term bank liabilities 66 2,104

Loans from government institutions 281 282

Obligations under finance leases (1 – 5 years) 804 782

Obligations under finance leases (more than 5 years) 0 0

Total long-term interest-bearing liabilities 1,151 3,168

The non-current liabilities due to banks fall due as follows:

– in 1 to 5 years 66 2,104

– in more than 5 years 0 0

Total 66 2,104

The remaining bank loan is a fixed-interest advance with a life of more than 12 months. For information on covenants, see note 11.1.

The obligations under finance leases contain mainly the new factory plant of Infranor Electronics SAS in Lourdes as well as production machines of Mavilor Motors SA in Barcelona. The minimum lease payments of 1-5 years amount to CHF 1.1 mil-lion.

47


Non-current liabilities due to banks by currency with average interest rates 1,000 CHF 30.4.07 Effective 30.4.06 Effective

interest interest

rates rates

CHF 0 n/a 1,460 3.87%

EUR 66 4.30% 302 4.45%

GBP 0 n/a 342 7.25%

Total 66 2,104

11.3 Subordinated convertible bond 1,000 CHF 30.4.07 30.4.06

Par value of subordinated convertible bond

at issue date 9,000 9,000

Less equity – 123 – 169

Less transaction costs – 96 – 134

Fair value 8,781 8,697

Less bonds converted – 317 – 232

Carrying value 8,464 8,465

On December 18, 2002, the shareholders of Infranor Inter AG subscribed for a subordinated, seven-year convertible bond in a total amount of CHF 9 million. The bond carries a coupon of 5 percent. Bondholders are entitled to convert four bonds, each with a par value of CHF 10.00, into one new Infranor Inter AG bearer share with a par value of CHF 20.00 between June 16, 2003, and December 11, 2009.

After 5 years, i. e. from December 18, 2007, the issuer may repay the bond at any time prior to maturity, at par plus accrued inter-est, provided the issuer observes a notice period of 30 calendar days (hard call).

After June 16, 2003, the issuer may repay the bond at any time prior to its maturity, at par plus accrued interest, provided it ob-serves a notice period of 30 calendar days and provided there is at least one transaction in the issuer’s shares on SWX Swiss Ex-change on at least 45 out of 90 trading days after June 16, 2003, and the closing price on at least 45 of these 90 trading days is at least CHF 80.00 or twice the conversion price. Notice must be given within the 20 trading days directly following the aforemen-tioned time period of 90 trading days (soft call).

The subordinated convertible bond launched on December 18, 2002, was used to pay down liabilities due to banks in the amount of CHF 7.39 million in the 2002/03 business year.

11.4 Collateralized debt obligation “CDO PULS 2006-1”, 2006-13 CHF 1,000 30.4.07 30.4.06

Par value of collateralized debt obligation

"CDO PULS 2006-1", 2006-13 at issue date 8,300 0

less share of transaction costs – 195 0

Carrying amount 8,105 0

The subordinated CDO holder is introduced on page 40. The life of the CDO runs from July 25, 2006, to July 13, 2013.

The nominal interest rate is fixed at 7.26 percent for the entire period, the effective rate is at 7.75 percent. Coupon date is every quarter.

The agreed covenants for the CDO are as follows:

– Level of debt less than 250 percent (Ratio of a) total liabilities disregarding the total par value of the CDO, but plus other subordinated debt instruments, and b) sha-reholders’ equity taking the CDO into account.)

– Interest coverage of more than 100 percent (ratio EBITDA/net financing costs)

The gearing ratio as at April 30, 2007, stood at 199 percent and interest cover at 336 percent.

11.5 Net indebtedness CHF 1,000 30.4.07 30.4.06

Cash and cash equivalents 4,517 3,626

Current interest-bearing financial liabilities – 6,154 – 10,382

Non-current interest-bearing financial liabilities – 1,151 – 3,168

Subordinated convertible bond 2002 - 09 – 8,464 – 8,465

Subordinated CDO 2006 - 13 – 8,105 0

Net indebtedness – 19,357 – 18,389

The slight increase in net indebtedness is due to the rise in cur-rent assets in connection with the sales growth.

12. Other current liabilities Other current liabilities 30.4.07 30.4.06

CHF 1,000

Customers’ prepayments 44 0

Un-cashed dividend coupons 2 2

Other liabilities 825 689

Other liabilities due to related parties 0 0

Total 871 691





13. Accruals and deferred income 1,000 CHF 30.4.07 30.4.06

Personnel costs (vacation/flexitime /

overtime/bonuses, etc.) 2,724 2,441

Cost of materials/overheads 1,061 1,109

Commission 0 194

Interest 190 183

Total 3,975 3,927

14. Short-term provisions 1,000 CHF Warranties Restruc- Total Total

turing 06/07 05/06

As at 1.5. 552 184 736 859

Currency translation differences 19 16 35 5

Utilized and not taken to income – 552 – 184 – 736 – 624

Reversed and taken to income – 94 0 – 94 – 240

Provided and taken to income 646 148 794 736

As at 30.4. 571 164 735 736

The provisions for warranties were provided for repairs and for replacing defective products. They are based, firstly, on a cost estimate based on known facts and, secondly, on empirical val-ues for further development work on newly launched products.

The restructuring costs consist entirely of current restructurings in the USA that will be completed in 2007/08.

15. Long-term provisions 1,000 CHF Employee Employee Total Total

benefit benefit 06/07 05/06

obligations obligations

excl. incl.

plan assets plan assets

As at 1.5. 382 392 774 913

Currency translation differences 0 0 0 6

Reversed and taken to income – 7 0 – 7 – 293

Provided and taken to income 0 66 66 148

As at 30.4. 375 458 833 774

The outflow of funds provided for in the case of employee bene-fit obligations extends over a period of 20 years and partly oc-curs indirectly via independent pension funds.

16. Pension plans

The Group operates various employee benefit plans in and out-side of Switzerland for employees that satisfy the participation criterions. Among these plans are defined benefit plans and de-fined contribution plans that cover the employees of the Group for death, disability and retirement.

Benefits are usually dependent on one or more factors such as the number of years the employee was covered in the plan, age, pensionable salary and to some extent on the accumulated old age capital. The assets of the funded pension plans are held within separate foundations or insurances and may not revert to the employer.

As of January 1, 2007, and in the context of the harmonization of the employee benefits for the employees in Switzerland, a new pension plan has been introduced for two companies within an already existing pension scheme, and certain benefits for the employees already covered in this scheme have been changed. These changes resulted in a prior service cost of CHF 1.21 mil-lion.

Defined benefit pension plans The following amounts have been recorded in the profit and loss account as personnel expense:

Employee benefits expense 1,000 CHF 06/07 05/06

Current service cost 409 262

Interest on obligation 220 209

Expected return on plan assets – 354 – 293

Past service cost 184 – 33

Net actuarial losses (gains) recognized 0 3

Total, included in employee benefits expense 459 148

Actual return on plan assets 330 821

49


Changes in the present value of the defined benefit obligation 1,000 CHF 30.4.07 30.4.06

Opening defined benefit obligation as at 1.5. 7,401 7,261

Current service cost 409 262

Plan participants contributions 394 278

Interest on obligation 220 209

Benefit payments and net transferals 3,262 – 701

Benefit payments by employer – 29 – 15

Actuarial (gains) or losses 301 181

Past service cost 1,210 0

Settlements 0 – 88

Exchange differences 21 14

Closing defined benefit obligation as at 30.4. 13,189 7,401

Changes in the fair value of plan assets CHF 1,000 30.4.07 30.4.06

Opening fair value of plan assets as at 1.5. 7,942 7,347

Plan participants' contributions 394 278

Contributions by employer 394 278

Benefit payments and net transferrals 3,262 – 701

Expected return on plan assets 354 293

Settlements 0 – 88

Actuarial gains or (losses) – 24 528

Exchange differences 0 7

Closing fair value of plan assets as at 30. 4. 12,322 7,942

The pension assets on April 30, 2007, neither include shares of Infranor Inter AG nor real estate or other assets used by the Group.

Expected employer contributions for fiscal year 2007/08 amount to CHF 0.53 million.

Amount recognized in the balance sheet 1,000 CHF 30.4.07 30.4.06

Present value of funded obligation 12,814 7,022

Fair value of plan assets – 12,322 – 7,942

Under-/(Over-)funding 492 – 920

Unrecognized actuarial gains or (losses) 375 379

Present value of unfunded obligations – 273 753

Unrecognized past service cost 239 562

Net liability 833 774

The following principal assumptions form the basis for the actu-arial calculation:

Calculation of defined benefit obligations 30.4.07 30.4.06

Discount rate 3,0 % 3,0 %

Future salary increases 2,9 % 2,9 %

Future pension indexations 0,7% 0,7 %

Calculation of expense 06/07 05/06

Discount rate 3,0 % 3,0 %

Expected return on plan assets 4,3 % 4,0 %

The pension assets are composed of the following essential as-set classes:

Essential asset classes 2007 Expected 2006 Expected

Valuation date 30.4. in % return in % return

Equities 27 6,8 % 32 6,8 %

Bonds 34 3,0 % 48 3,0 %

Real estate 4 4,5 % 5 4,5 %

Alternative investments 10 6,8 % 0 —

Others including cash 25 2,5 % 15 2,5 %

06/07 05/06

Average return on pension assets 4,3 % 4,0 %

The following table shows how the actual development of obli-gations and assets for the benefit plans deviates from their ex-pected development.

1,000 CHF 2007 2006 2005

Valuation date 30.4.

Defined benefit obligation 13,189 7,401 7,261

Fair value of assets – 12,322 – 7,942 – 7,347

Under-/(Over-)funding 867 – 541 – 86

Experience adjustments on plan liabilities 297 – 146

Experience adjustments on plan assets – 24 528

Defined contribution plans The Group contributes to defined contribution plans. The ex-pense to be recognized corresponds to the amount of contribu-tions paid by the employer.

1,000 CHF 06/07 05/06

Company contributions 168 181

The expected contributions by the employer in 2007/08 will be in around the same range as in the business year under review.


50



17. Shares and share capital

17.1 Shares Number 06/07 05/06

Issued bearer shares, each with a par value of 20.00 CHF

as at 1.5. 640,800 640,800

Bonds converted into bearer shares 2,125 0

As at 30.4. 642,925 640,800

of which treasury shares 11,110 9,910

17.2 Treasury shares 06/07 05/06

Number CHF* Number CHF*

Balance as at 1.5.06 9,910 386,490 0 0

Additions 1,200 56,801 9,910 410,327

Disposals 0 0 0 0

Decrease in value of treasury stock 0 – 23,837

Balance as at 30.4.07 11,110 443,291 9,910 386,490

* Acquisition cost

The holding of treasury stock is used to cover an existing opti-ons program. Further details can be found in note 20.5 on page 51 of the consolidated annual financial statements.

17.3 Share capital CHF 30.4.07 30.4.06

Share capital 12,858,500 12,816,000

Conditional share capital 6,191,500 6,234,000

of which for convertible bond – 4,341,500 – 4,384,000

Remaining conditional share capital 1,850,000 1,850,000

The Infranor Inter AG shares held by the company itself (treas-ury shares) are openly deducted from equity (see also the con-solidated statement of changes in equity on page 33).

18. Impact of foreign currencies on the income statement Change as against the previous year 30.4.07 30.4.06

Net sales 0.7% 1.2%

EBITDA 2.6% 0.7%

19. Net sales by sector 1,000 CHF 06/07 05/06

Industrial manufacturing 52 % 50 %

Industrial handling and assembly 15 % 17 %

Processing industry 8 % 8 %

Packaging 4 % 4 %

Other 21 % 21 %

Total net sales 100 % 100 %

20. Personnel costs

20.1 Personnel costs 1,000 CHF 06/07 05/06

Wages and bonuses 19,160 17,268

Development cost capitalized – 151 – 820

Stock-based remuneration 5 7

Cost of defined benefit pension plans as per note 16 459 148

Social security contributions and

miscellaneous personnel costs 4,499 4,403

Total personnel costs 23,972 21,006

The increase in personnel costs of CHF 2.96 million compared to the previous year is partially due to a total amount of CHF 0.82 million for own work capitalized for the previous year for the de-velopment and launch of new products in accordance with IAS 38.57 f. A further CHF 0.15 million was capitalized for 2006/07. Thus, taking into account this base effect from the previous year, the effective increase in personnel costs is CHF 2.29 million. Of this, approximately CHF 2 million is due to the increase in the workforce and higher costs for temporary staff.

20.2 Number of employees by region 06/07 05/06

Switzerland 70 64

Europe excl. Switzerland 181 167

North America 25 24

Asia 22 14

Total 298 269

The increase in the number of employees is largely due to inc-reased demand at the Group’s manufacturing companies.


51


20.3 Number of employees by role 06/07 05/06

Sales, engineering, service 91 83

Production 116 113

Research and development 43 36

Administration 48 37

Total 298 269

20.4 Average number of employees and personnel costs 06/07 05/06

Average number of employees

during the business year 284 276

Personnel costs in 1,000 CHF 23,972 21,006

Personnel costs per employee in 1,000 CHF 84.6 76.1

20.5 Option plan Number of options 06/07 05/06

(1 option gives right to 1 bearer share

of Infranor Inter AG)

Outstanding at the beginning of the period 5,510 4 910

Granted during the period 1,400 600

Exercised during the period 0 0

Expired/cancelled during the period – 1,500 ,0

Outstanding at the end of the period 5,410 5 510

Average strike price of outstanding options 54.50 59.46

Options with a sales restriction period of 0 to 3 years 2,600 1,854

Exercisable within 1 year 750 1,200

Exercisable within 1 to 5 years 2,060 2,156

Exercisable within 5 to 8 years 2,600 2,154

Average remaining contractual life 8 years 8 years

Number of options “in the money” 3,728 1,034

Number of options “out of money” 1, 682 4,476

Description of the employee’s stock option plan see on page 41.

The options cannot be covered by the conditional share capital. Consequently, the Group holds treasury shares to cover these option rights.

21. General and administrative costs CHF 1,000 06/07 05/06

Administrative costs 1,819 1,651

Consultancy and legal fees 805 716

Services of related parties 452 452

Services to related parties – 61 – 61

Total general and administrative costs 3,015 2,758

22. Sales costs CHF 1,000 06/07 05/06

Marketing 131 133

Exhibitions 268 177

Commission 540 400

Representative office 178 331

Travel expenses 940 812

Miscellaneous 141 96

Total sales costs 2,198 1,949

23. Other operating expenses

23.1 Details of other operating expenses CHF 1,000 06/07 05/06

Production and engineering overheads 1,804 1,869

Costs relating to a different accounting period,

restructuring costs 307 234

Rental costs 1,784 1,761

Warranty costs 927 677

Accounts receivable losses and bad debt allowances 124 134

External R&D costs, cost of trademark and patent rights 618 322

Total other operating expenses 5,564 4,997

The R&D item in the income statement shows only external re-search and development costs, including prototyping costs, and current costs for trademark and patent rights. In the current ac-counting period no external costs in accordance with IAS 38.57 f. were capitalized for the products launched (previous year: CHF 0.47 million). Taking the capitalization effect into account, oper-ating expenses were unchanged from the previous year.

The total research and development costs are allocated to vari-ous items in the income statement and break down as follows:

23.2 Total research and development costs 1,000 CHF 06/07 05/06

Internal engineering 3,455 3,586

External engineering 455 357

Materials, tools and miscellaneous items 228 161

Patents 98 0

Total development costs 4,236 4,104

as % of net sales 5.9% 6.5%


52



24. Other operating income CHF 1,000 06/07 05/06

Commission income 335 422

Income relating to a different accounting period 131 44

Gains from the disposal of property, plant and

equipment / other income 0 49

Total 466 515

Commission income increased due to the successful product representation of slewing rings and special bearings by Infranor Spain SLU.

25. Depreciation and amortization CHF 1,000 06/07 05/06

Depreciation of property, plant and equipment 903 894

Amortization of intangible assets 370 203

Total depreciation and amortization 1,273 1,097

The increased amortization of intangible assets is the result of the investment in software and product development.

26. Financial items (net) 1,000 CHF 06/07 05/06

Interest received 47 32

Foreign exchange gains 745 462

Total finance income 792 494

Interest paid to third parties – 1,644 – 1,302

Interest expense and transaction costs

relating to convertible bond – 84 – 84

Foreign exchange loss – 298 – 402

Realized loss on participations – 85 0

Total finance costs – 2,111 – 1,788

Financial items (net) – 1,319 – 1,294

The foreign exchange gain in accordance with IAS 21.28 is due primarily to realized gains on customers’ payments in EUR.

27. Earnings per share

27.1 Undiluted earnings per share 06/07 05/06

Net profit/(loss) (in CHF) 2,202,000 1,140,000

Weighted average number of outstanding shares 641,863 640,800

Less average number of treasury shares – 10,510 – 7,740

Number of shares on which calculation is based 631,353 633,060

Undiluted earnings per share in CHF 3.49 1.80

27.2 Diluted earnings per share 06/07 05/06

Net profit/(loss) (in CHF) 2,202,000 1,140,000

Number of shares on which calculation is based,

undiluted 631,353 633,060

Dilutive effect of remaining conversion rights 309,575 311,700

Weighted average number of shares used

in calculating diluted earnings per share 940,928 944,760

Diluted earnings per share in CHF 2.34 1.21

28. Contingent liabilities CHF 1,000 30.4.07 30.4.06

Guarantees furnished to third parties 60 60

Guarantees furnished by Infranor Inter AG

for Group companies 20,763 16,840

As of April 30, 2007, Infranor Inter AG had given joint and sev-eral guarantees up to a total amount of CHF 12.4 million (previ-ous year: CHF 16.8 million) in connection with the Group com-panies’ bank credit facilities. Of this amount, Group companies had utilized CHF 4.1 million in total (fixed advances CHF 3.0 mil-lion; current accounts CHF 1.0 million; deposits CHF 0.1 million; previous year: CHF 11.7 million in total). Furthermore, Infranor Inter AG gave a guarantee of CHF 8.3 mil-lion to the PULS CDO 2006-1 PLC, Dublin, for the aforemen-tioned collateralized debt obligation.

As of April 30, 2007, the credit facilities of all Group companies, including discounting facilities, amount to CHF 19.7 million in total (previous year: CHF 25.0 million).

29. Pledged assets CHF 1,000 30.4.07 30.4.06

Assignment of individual accounts receivable 1,224 992

Pledged assets 0 1,412

Total 1,224 2,404

The French sales company and the Spanish sales branch finance their current assets through assigned receivables and dis-counted bills and checks.

The bank loans in the USA were paid off and the associated rights of lien vacated.


53


30. Off-balance sheet obligations under operating leases and rental agreements 1,000 CHF 30.4.07 30.4.06

Obligations

– due within one year 1,389 1,270

– due in 1 to 5 years 2,982 576

– due over 5 years 2,152 0

Total 6,523 1,846

The increase in off-balance-sheet liabilities from operational lea-se and rental contracts is almost exclusively due to various new rental contracts with fixed terms of between three and ten years. Cybelec SA, Yverdon-les-Bains, has signed a new, 10-year rental contract. The building will be fully refurbished.

31. Transactions with related parties 1,000 CHF 06/07 05/06

Gross salaries, bonus, fees 826 656

Social charges & pension charges paid by employer 48 30

Share-based compensation 5 7

Compensation paid to executive members

of governing bodies 879 693




Compensation paid to non-executive members


Compensation paid to former members





Compensation paid to other Group Management

members 396 259

Total compensation 1,320 993

Other transactions 1,000 CHF 06/07 05/06

Rent to two companies of the Perrot Duval Group 709 647

Management services provided by Perrot Duval

Management Ltd 471 452

Management services provided by ISA Management SA

to Perrot Duval Group – 50 – 61

Legal advice provided by Board member

Dr. iur R. Müller 11 5

Previous year OTC purchase of Infranor Inter AG

bearer shares from Perrot Duval Holding SA by

Infranor Inter AG at CHF 40.00 each (pcs) 0 5 571

All transactions have been conducted at arm’s length. Apart from the above-mentioned compensation, no further monetary payments were made.

There are no employment contracts with non-standard periods of notice (more than one year) or with severance payment ar-rangements.

32. Events after the balance sheet date

Between the balance sheet date and the date of publication of this Annual Report, no events occurred which could have a ma-terial impact on the consolidated financial statements for 2006/07.

33. Proposal of the Board of Directors

The Board of Directors proposes to the General Meeting a divi-dend for the financial year 2006/07 of CHF 1.50 (previous year CHF 1.00) per bearer share. This represents a total dividend pay-ment of CHF 0.95 million.

34. Approval of the annual financial statements

The consolidated annual financial statements were approved and released for publication by the Board of Directors of Infranor Inter AG at its meeting on July 6, 2007. The Board of Directors will recommend to the General Shareholders’ Meeting on Sep-tember 13, 2007, that the annual financial statements be ap-proved.


54



To the General Meeting of Infranor Inter AG, Zurich

As group auditors, we have audited the consolidated financial statements (balance sheet, income state-ment, cash flow statement, statement of changes in equity, and notes), pages 30 to 53, of Infranor Inter AG for the year ended April 30, 2007. Other auditors have audited the financial statements of the foreign operations included in the consolidated financial statements.

These consolidated financial statements are the responsibility of the Board of Directors. Our responsibil-ity is to express an opinion on these consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.

Our audit was conducted in accordance with Swiss Auditing Standards and with International Standards on Auditing (ISA), which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. We have exam-ined on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements give a true and fair view of the financial position, the results of operations and the cash flows of Infranor Inter AG in accordance with International Finan-cial Reporting Standards (IFRS) and comply with Swiss law.

We recommend that the consolidated financial statements submitted to you be approved.

Zurich, July 6, 2007

Deloitte AG

Gerhard Ammann Martin Welser Auditor in charge




To the General Meeting of Infranor Inter AG, Zurich

As group auditors, we have audited the consolidated financial statements (balance sheet, income state-ment, cash flow statement, statement of changes in equity, and notes), pages 30 to 53, of Infranor Inter AG for the year ended April 30, 2007. Other auditors have audited the financial statements of the foreign operations included in the consolidated financial statements.

These consolidated financial statements are the responsibility of the Board of Directors. Our responsibil-ity is to express an opinion on these consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.

Our audit was conducted in accordance with Swiss Auditing Standards and with International Standards on Auditing (ISA), which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. We have exam-ined on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements give a true and fair view of the financial position, the results of operations and the cash flows of Infranor Inter AG in accordance with International Finan-cial Reporting Standards (IFRS) and comply with Swiss law.

We recommend that the consolidated financial statements submitted to you be approved.


Deloitte AG

Gerhard Ammann Martin Welser Auditor in charge

Infranor Inter AG Financial Report

55

56

57

58

62

63

Balance Sheet

Income Statement

Notes to the Annual Financial Statements

Appropriation of Available Earnings

Statutory Auditors’ Report

56Infranor Inter AG Financial Report 2006 /2007

Balance Sheet of Infranor Inter AG

2007 Infranor Inter AG Financial Report 2006/ 56

CHF Note 30.4.07 % 30.4.06 %

Assets

Current assets

Cash and cash equivalents 1,794,338 5.9 1,598,687 5.4

Treasury shares 1 443,291 1.5 386,490 1.3

Other receivables 2 8,850 0.0 21,231 0.1

Deferred charges 3 9,036 0.0 5,657 0.0

Total current assets 2,255,515 7.4 2,012,065 6.8

Non-current assets

Investments 4 21,477,795 71.2 21,277,795 72.3

Loans to Group companies 5 6,450,000 21.4 6,150,000 20.9

Total non-current assets 27,927,795 92.6 27,427,795 93.2

Total assets 30,183,310 100.0 29,439,860 100.0

Liabilities

Current liabilities

Current liabilities 6 6,482 0.0 7,456 0.0

Loans from Group companies 7 280,000 0.9 0 0.0

Accruals and deferred income 8 423,168 1.4 400,335 1.4

Total current liabilities 709,650 2.3 407,791 1.4

Non-current liabilities

Subordinated convertible bond 2002–09 9 8,683,000 28.8 8,768,000 29.8

Total non-current liabilities 8,683,000 28.8 8,768,000 29.8

Shareholders’ equity

Share capital 10, 11 12,858,500 42.6 12,816,000 43.5

Statutory reserve 12 1,707,500 5.7 1,603,000 5.5

Reserve for treasury shares 12 467,128 1.5 410,327 1.4

Balance brought forward from previous year 12 4,741,876 15.7 7,601,085 25.8

Increase in holding of treasury shares 12 – 56,801 – 0.2 – 173,560 – 0.6

Profit for the business year 12 1,072,457 3.6 – 1,992,783 – 6.8

Unappropriated retained earnings 12 5,757,532 19.1 5,434,742 18.4

Total shareholders’ equity 12 20,790,660 68.9 20,264,069 68.8

Total liabilities and shareholders’ equity 30,183,310 100.0 29,439,860 100.0


Income Statement of Infranor Inter AG

Financial Report 2006/2007 Infranor Inter AG 57

CHF Note 06/07 % 05/06 %

Income from investments 13 1,491,795 77.5 1,280,829 68.2

Finance income 14 433,137 22.5 596,662 31.8

Total income 1,924,932 100.0 1,877,491 100.0

General and administrative costs 15 – 379,560 – 19.7 – 355,144 – 18.9

Write-downs on investments and

loans to Group companies 16 0 0.0 – 3,004,400 – 160.0

Finance costs 17 – 425,302 – 22.1 – 463,854 – 24.7

Profit / (loss) before taxes 1,120,070 58.2 – 1,945,907 – 103.6

Taxes 18 – 47,613 – 2.5 – 46,876 – 2.5

Profit for the business year 1,072,457 55.7 – 1,992,783 – 106.1




Balance Sheet

1. Treasury shares 06/07 05/06

Number CHF* Number CHF*

Balance as at 1.5.06 9,910 386,490 0 0

Additions 1,200 56,801 9,910 410,327

Disposals 0 0 0 0

Decrease in value of treasury stock 0 – 23,837

Balance as at 30.4.07 11,110 443,291 9,910 386,490

* Acquisition cost

The holding of treasury stock is used to cover an existing op-tions program. Further details can be found in note 20.5 on page 51 of the consolidated annual financial statements.

2. Other receivables CHF 30.4.07 30.4.06

Accounts receivable from Group companies 0 11,933

Other receivables (withholding tax, others) 8,850 9,298

Total 8,850 21,231

3. Deferred charges

This item “Deferred charges” comprises deferred SWX charges.

4. Investments Companies Number of Currency Par value Nom. Share (Interest) 30.4.07 30.4.06

shares per share capital in % CHF 1,000 CHF 1,000

CHF CHF 1,000

Cybelec SA, CH-Yverdon-les-Bains 250 CHF 100 250 100 10,100 10,100

Mavilor Motors SA, E-Sta. Perpètua de Mogoda 2,250 EUR 60 135 100 4,183 4,183

Infranor Holding SA, CH-Coppet 2,182 CHF 500 1,091 100 3,794 3,794

Infranor Holdings USA, Inc., US-Dover 1,620 USD 1 2 100 2,301 2,301

ISA Management SA, CH-Coppet 200 CHF 1,000 200 100 100 100

Violet-Indim SA, CH-Coppet 100 CHF 1,000 100 100 100 100

ISA Innovations SA, CH-Coppet 50 CHF 1,000 50 100 600 600

Infranor Asia Ltd, CH-Zurich 300 CHF 1,000 300 100 300 100

Total net carrying amount 21,478 21,278

Investments are measured in accordance with sections 665 and 670 of the Swiss Code of Obligations, i.e. investments are meas-ured in their entirety at cost less any necessary write-downs.

For the purpose of expanding the Chinese branch of Infranor Asia Ltd, Zurich, its capital was increased to CHF 0.20 million.

The investments’ global measurement permits offsetting against decreases in value and hidden reserves within one balance sheet item.

ISA Innovations SA and Violet Indim SA, two Group companies, moved their domicile from Fribourg to Coppet VD.

5. Loans to Group companies CHF 30.4.07 30.4.06

Infranor Holding SA, CH-Coppet 1,460,000 6,150,000

Cybelec SA, CH-Yverdon-les-Bains 2,800,000 0

Infranor Holdings US, Inc., USA-Dover 2,190,000 0

Total 6,450,000 6,150,000

At the end of July 2006, Infranor Holding issued a subordinated 7-year Swiss franc collateralized debt obligation “CDO PULS 2006-1”, 2006-13, with a coupon of 7.26 percent in the amount of CHF 8.3 million and used the proceeds to pay back the bank debts and loans of Infranor Inter AG. The latter, in turn, granted new loans to Cybelec SA and Infranor Holdings, Inc., Dover, US to enable them to also repay bank loans.

59


6. Current liabilities CHF 30.4.07 30.4.06

Payable to third parties 6,482 7,096

Payable to Group companies 0 360

Total 6,482 7,456

7. Loans from Group companies CHF 30.4.07 30.4.06

ISA Innovations SA, CH-Coppet 200,000 0

Violet Indim SA, CH-Coppet 80,000 0

Total 280,000 0

8. Accruals and deferred income CHF 30.4.07 30.4.06

Annual report and Annual Shareholders’ Meeting 168,737 165,388

Interest on convertible bonds 144,717 157,344

Auditing costs 70,186 50,000

Taxes / miscellaneous 39,528 27,603

Total 423,168 400,335

9. Subordinated convertible bond 2002 – 2009 CHF 30.4.07 30.4.06

Par value of subordinated convertible bond

as at 1.5. 8,768,000 8,768,000

Converted – 85,000 0

Paid back 0 0

as at 30.4. 8,683,000 8,768,000

On December 18, 2002, Infranor Inter AG issued a 7-year subor-dinated convertible bond carrying a coupon of 5 percent. Bond- holders are entitled to convert four bonds, each with a par value of CHF 10.00, into one new Infranor Inter AG bearer share with a par value of CHF 20.00 between June 16, 2003, and December 11, 2009. According to section 5.3 of the terms of the bond issue, the bond may be repaid at par, in part or in full, from June 16, 2003, onwards. According to section 5.2, after 5 years, i.e. from December 18, 2007, the bond may be repaid by the issuer at any time prior to maturity, at par plus accrued interest, provided the issuer observes a notice period of 30 calendar days.

10. Share capital Number of bearer shares issued 30.4.07 30.4.06

With a par value of 20.00 CHF no. 642,925 640,800

Share capital as at 30.4. CHF 12,858,500 12,816,000

Conditional capital (309,575) shares

with a par value of 20.00 CHF) CHF 6,191,500 6,234,000

Treasury shares no. 11,110 9,910 The conditional capital was created for the issue of the converti-ble bond from December 18, 2002, together with the conversion of bank debt.

In the current financial year, 8,500 convertible bonds worth CHF 85,000 were converted into 2,125 bearer shares with a par value of CHF 20.00 each. The premium amounted to CHF 42,500.

Infranor Inter AG holds totally 11,110 own treasury shares ac-cording to note 1 on page 58. For the purpose of covering the aforementioned options program, in the year under review In-franor Inter AG bought 1,200 of its treasury shares at an average price of CHF 48.15 per share.

The bearer shares are listed on the Swiss Exchange SWX in Zu-rich. Security no. 724,910; Telekurs: INI; Reuters: IFI.S.

11. Principal shareholder

Perrot Duval Holding SA, as the principal shareholder, held 77.3 percent of the share capital as at April 30, 2006 (previous year: 78.6 percent).

There are no other shareholders with more than 5 percent of the voting rights (under section 663c of the Swiss Code of Obliga-tions).

Infranor Inter AG Financial Report 2006 /2007 Notes




12. Shareholders’ equity CHF Share Statutory Reserve Unappro- Total

capital reserve for treasury priated

shares retained

earnings

Balance as at 1.5. 12,816,000 1,603,000 410,327 5,434,742 20,264,069

Appropriation of earnings 62,000 – 62,000

Dividend – 630,866 – 630,866

Increase in share capital as a

result of convertible bond 42,500 42,500 85,000

Additions of treasury shares 56,801 – 56,801

Profit for the business year 1,072,457 1,072,457

Balance as at 30.4. 12,858,500 1,707,500 467,128 5,757,532 20,790,660

Income Statement

13. Income from investments CHF 06/07 05/06

Infranor SA, CH-Coppet 500,000 500,000

Cybelec SA, CH-Yverdon-les-Bains 500,000 0

Mavilor Motors SA, ES-Sta. Perpètua de Mogoda 472,295 461,829

ISA Innovations SA, CH-Coppet 19,500 319,000

Total 1,491,795 1,280,829

14. Finance income CHF 06/07 05/06

Interest income

Cybelec SA, CH-Yverdon-les-Bains 164,771 0

Infranor Holding SA, CH-Coppet 142,320 338,250

Infranor Holdings USA Inc, US-Dover 103,206 245,212

Infranor Asia Ltd, Zurich 4,009 0

Subtotal Interest income from Group companies 414,306 583,462

Bank interest 18,831 13,200

Total 433,137 596,662

15. General and administrative costs CHF 06/07 05/06

Personnel expense – 39,573 – 32,539

Auditing costs for Holding Company & Group – 94,000 – 91,827

Tax on capital – 24,989 – 31,200

Other administrative expense – 220,998 – 199,578

Total – 379,560 – 355,144 The non-executive members of the Board of Directors each draw an annual fee of CHF 43,284 (previous year: CHF 39,335). The fee paid to executive members of the Board of Directors is included in their total compensation, which is calculated at the relevant operating companies.

16. Write-downs on investments and loans to Group companies CHF 06/07 05/06

Write-down on loan to

Infranor Holdings USA, Inc. 0 – 4,804,400

Recapture of depreciation

below cost of acquisition 0 1,800,000

Total 0 – 3,004,400 The measurement of investments and loans to group companies was explained in note 4 and 5.

61


17. Finance costs CHF 06/07 05/06

Interest paid on convertible bond (1.5. – 18.12.) – 262,723 – 273,154

Deferred interest on convertible bond (19.12. – 30.4.) – 160,947 – 160,947

Bank interest and Fx transaction loss – 1,632 0

Subtotal finance costs paid to third parties – 425,302 – 434,101

ISA Innovations SA, CH-Coppet 0 – 5,916

Value adjustment on treasury shares 0 – 23,837

Subtotal finance costs paid to Group companies 0 – 29,753

Total – 425,302 – 463,854

18. Taxes

Taxes include the Spanish basic tax on dividends under the terms of the double taxation agreement. Due to the new double taxation agreement with Spain, these taxes will be eliminated in future.

19. Contingent liabilities

As of April 30, 2007, Infranor Inter AG had given joint and sev-eral guarantees up to a total amount of CHF 12.4 million (previ-ous year: CHF 16.8 million) in connection with the Group com-panies’ bank credit facilities. Of this amount, Group companies had utilized CHF 4.1 million in total (fixed advances CHF 3.0 mil-lion; current accounts CHF 1.0 million; deposits CHF 0.1 million; previous year: CHF 11.7 million in total). Furthermore, Infranor Inter AG gave a guarantee of CHF 8.3 mil-lion to the PULS CDO 2006-1 PLC, Dublin, for the aforemen-tioned collateralized debt obligation.

As of April 30, 2007, the credit facilities of all Group companies, including discounting facilities, amount to CHF 19.7 million in total (previous year: CHF 25.0 million).

In connection with Group taxation introduced with effect from May 1, 2004, and in accordance with section 32 (1e) of the Swiss Value Added Tax Act, Infranor Inter AG is jointly and severally liable for all value added tax owed by the Swiss Group compa-nies.

Otherwise, there are no guarantees or pledges in respect of Infranor Inter AG’s assets.

20. Events after the balance sheet date

No events occurred after the balance sheet date which could have a material impact on the 2006/07 annual financial state-ments.

There are no other circumstances which the company is required to disclose under section 663b of the Swiss Code of Obligations.

Infranor Inter AG Financial Report 2006 /2007 Notes


Appropriation of Available Earnings


Resolution for the 2006/07 business year

CHF 06/07 05/06

Balance brought forward from previous year 4,741,876 7,601,085

Allocation to reserve for treasury stock – 56,801 – 173,560

Profit for the business year 1,072,457 – 1,992,783

Unappropriated retained earnings available to the Annual Shareholders’ Meeting 5,757,532 5,434,742

The Board of Directors will propose to the Annual Shareholders’ Meeting on September 13, 2007, that unappropriated retained earnings be utilized as follows:

Distribution of a dividend of 7.5 percent or CHF 1.50 per bearer share* 947,722 630,866

Allocated to statutory reserves 126,500 62,000

Carried forward to new account 4,683,310 4,741,876

Total available to Annual Shareholders’ Meeting 5,757,532 5,434,742

* no dividend on treasury shares amounting to 11,110



To the general meeting of Infranor Inter AG, Zurich

As statutory auditors, we have audited the accounting records and the financial statements of Infranor Inter AG, Zurich, which can be found on pages 56 through 61of the annual report for the year ended April 30, 2007 (balance sheet, income statement, notes).

These financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit. We confirm that we meet the legal require-ments concerning professional qualification and independence.

Our audit was conducted in accordance with Swiss Auditing Standards and the International Standards on Auditing (ISA), which require that an audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also as-sessed the accounting principles used, significant estimates made and the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the accounting records and financial statements and the proposed appropriation of avail-able earnings comply with Swiss law and the company’s articles of incorporation.

We recommend that shareholders approve the present annual financial statements.


BDO Visura

Werner Schiesser Andreas Wyss Certified public accountant Certified public accountant Lead Auditor

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BDO Visura


Infranor Inter AG Financial Report 2006 /2007










BDO Visura


Switzerland

Infranor Inter AGSchaffhauserstrasse 418P.O. BoxCH-8050 Zürich

Phone +41 (0)44 307 45 00Fax +41 (0)44 307 45 10

[email protected]

Infranor SAPlace de la Gare 5CH-1296 Coppet

Phone +41 (0)22 960 70 70Fax +41 (0)22 960 70 80

Sales office: ZurichSchaffhauserstrasse 418, P.O. BoxCH-8050 Zürich

Phone +41 (0)44 308 50 00Fax +41 (0)44 308 50 09

[email protected]

Infranor Asia LtdSchaffhauserstrasse 418CH-8050 Zürich

Phone +41 (0)44 307 45 00Fax +41 (0)44 307 45 10

[email protected]

Cybelec SA27, rue des UttinsCH-1401 Yverdon-les-Bains

Phone +41 (0)24 447 02 00Fax +41 (0)24 447 02 01

[email protected]

AddressesAs at May 1, 2007

Europe

France

Infranor Electronics SASAvenue Jean Moulin, BP 142F-65104 Lourdes Cedex

Phone +33 562 941 067Fax +33 562 421 869

[email protected]

Infranor SAS3, avenue Louis DelageF-91310 Linas

Phone +33 1 69 63 35 15Fax +33 1 69 63 35 16

[email protected]

Benelux

Infranor B.V.Albert Einsteinstraat 6NL-3261 LP Oud-Beijerland

Phone +31 186 610 155Fax +31 186 614 535

[email protected]

Germany

Infranor GmbHDonaustrasse 19AD-63452 Hanau

Phone +49 6181 18012 0Fax +49 6181 18012 90

[email protected]

MESA Automation GmbHMaybachufer 48–51D-12045 Berlin

Phone +49 30 613 90 80Fax +49 30 623 17 66

[email protected]

Italy

Cybelec SrlVia Cesare Cantù 29I-20092 Cinisello Balsamo (MI)

Phone +39 02 66 04 84 32Fax +39 02 61 29 15 73

[email protected]

Spain

Mavilor Motors SAPoligono Industrial Urvasac /Emporda 11–13E-08130 Sta. Perpètua de Mogoda (Barcelona)

Phone +34 93 574 36 90Fax +34 93 574 35 70

[email protected]

Infranor Spain SLAlfonso XII, No 345E-08912 Badalona(Barcelona)

Phone +34 93 460 16 31Fax +34 93 399 96 08

[email protected]

United Kingdom

Infranor Ltd.Unit 60A, Smithbrook KilnsCranleighUK-Surrey GU6 8JJ

Phone +44 1483 274 887Fax +44 1483 276 037

[email protected]

North America Asie

USA

Automotion, Inc.4480, Varsity DriveUSA-Ann Arbor, MI 48108

Phone +1 734 662 7771Fax +1 734 662 3707

[email protected]

Infranor, Inc.299 Ballardvale Street, Suite 4USA-Wilmington, MA 01887-1013

Phone +1 978 988 9002Fax +1 978 988 9112

[email protected]

China

Cybelec Numerical Control Technology (Shanghai) Co. Ltd.Room B4–1, Forward High-tech Zone 33 Forward Rd, Jiading District CN-201 818 Shanghai

Phone +86 21 59 90 05 23 Fax +86 21 59 90 05 65

www.cybelec.com.cn [email protected]

Infranor Asia Ltd, Shanghai Representative Office26H, No. 1800, West Zhongshan RdCN-200233 Shanghai

Phone +86 21 6440 1095Fax +86 21 6440 1097

[email protected]

Infranor Group Financial Report 2006 /2007 65

Drafting and editing: Peter Fenkart, corporate communications consultant, ZollikonDesign: losego & renfer, Zurich Photos: Mattenbach AG, Winterthur; Hans Meier, Zurich;Peter Schälchli, Zurich Setting, lithography, printing: DAZ Druckerei Albisrieden AG, Zurich08/2007

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