Uster Technologies Ltd | Annual Report 2008 Achievements ...

Uster Technologies Ltd | Annual Report 2008Providing Added Value to the Textile Manufacturing Industry

Gross Sales

154,893 34,1682008

EBITA

2008

Achievements 2008

• Satisfactorytoplinedevelopmentinthefirsthalf,butrapidslow-downofbusinessinsome

marketsectorsinthesecondhalfoftheyear.

• Pro-activeadaptationofcoststructureandoverheadbasetolowermarketdemand.

• EBITAmarginat22.1%maintainedonahighlevel(beforerestructuring:24.9%),

withhighcashconversionratio.

• Netprofitgrowthof48.2%toCHF5.3million.

• StrongcommitmenttoR&Dwithinvestmentsof12.8%oftotalsales.

• Introductiontothemarketofnewvalue-addingproducts.

• Stablepricing,marketleadershippositionmaintained.

2008

Net Result

3,587

5,316 2008

Free Cash Flow

29,409

Milestones

1875 Establishment of an aerial telegraphy workshop in Uster.

1927 Production of auxiliary weaving mill machines started.

1944 Initiation of operations in the textile electronics business.

1957 First publishing of USTER® STATISTICS.

1982 Cooperation with the Chinese textile industry.

2003 Buyout from Zellweger Luwa by the Management and two private-equity

investment companies.

2005 Development and assembly established in China.

Sale of the one millionth USTER® QuAnTum clearer.

2006 Uster Technologies Ltd was sold to its Management and funds advised by Alpha

Beteiligungsberatung GmbH & Co. KG via a secondary buyout.

2007 Listing on the main segment of SIX Swiss Exchange.

2008 Introduction of new product groups specifically targeting the mid-market segment.

GeoffreyScott,CEOofUsterTechnologiesLtd,winneroftheErnst&YoungSwissEntre-

preneuroftheYearAward2008intheIndustrycategory.Thejurywasimpressedbyhis

managerialskills,entrepreneurialinfluenceontheCompany’sworkingculture,aswellas

bythehighmotivationofthestaffandtheirabilitytoidentifywiththeCompany.

Uster Technologies Ltd

Sonnenbergstrasse10

CH-8610Uster/Switzerland

Phone +41433663636

Fax +41433663637

Email [email protected]

TheEnglishannualreportisthegoverningtext.

AGermanversionofthereportisalsoavailable.

2006 163,900

143,651

140,961

186,6662007

2005

2004

46,193

30,729

29,205

52,384

2006

2007

2005

2004

2006

2007

2005

2004

2006

2007

2005

2004

45,348

37,084

32,997

25,724

29,957

18,391

-777

inCHF1,000 in percent of gross sales

inCHF1,000

inCHF1,000


22.1 %

3.4 %

28.1 %

1.9 %

18.3 %

12.8 %

-0.6 %

28.2 %

21.4 %

20.7 %

Ust

er T

echn

olog

ies L

td |

Ann

ual R

epor

t 200

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Global Reports LLC


Gross Sales

154,893 34,1682008

EBITA

2008

Achievements 2008










2008

Net Result

3,587

5,316 2008

Free Cash Flow

29,409

Milestones



















Sonnenbergstrasse10


Phone +41433663636

Fax +41433663637




2006 163,900

143,651

140,961

186,6662007

2005

2004

46,193

30,729

29,205

52,384

2006

2007

2005

2004

2006

2007

2005

2004

2006

2007

2005

2004

45,348

37,084

32,997

25,724

29,957

18,391

-777


inCHF1,000

inCHF1,000


22.1 %

3.4 %

28.1 %

1.9 %

18.3 %

12.8 %

-0.6 %

28.2 %

21.4 %

20.7 %

Ust

er T

echn

olog

ies L

td |

Ann

ual R

epor

t 200

8

Global Reports LLC

AfterSalesServicesandTextileTechnology

i i i i i i

Textile Production Process “Fiber to Fabric”

Process Step

USTER® Products

USTER® Complementary Products and Services

Products and Services

GinningandCottonClassing

FiberTesting YarnTesting YarnClearing FabricQuality Assurance

Intelligent Sourcing

• INTELLIGIN • HVISystems

• HVISystems • AFISPRO• LVI

• TESTER • TENSORAPID • TENSOjET • CLASSImAT • SLIVERGUARD

• QUANTUm • STATISTICS • CLASSImAT • TENSORAPID • TENSOjET

• USTERIzED®

• IntelligentSourcing

• QualityProfiles

USTER® STATISTICSandUSTERIzED®

IntegratedDataandExpertSystems

Portrait

TheUsterGroupistheleadinghightechnologyinstrumentmanufacturerofproductsfor

qualitymeasurementandcertificationforthetextileindustry.TheGroupprovidestesting

andmonitoringinstruments,systemsandservicesthatallowoptimizationandcertification

ofqualitythrougheachindividualstageoftextileproduction;fromtherawtextilefiber,

suchascotton,woolorsyntheticfilamentyarns,tothefinalfinishedfabric.TheUsterGroup

providesbenchmarksthatareabasisforthetradingoftextileproductsatassuredlevelsof

qualityacrossglobalmarkets.

UsterTechnologiesLtdwasestablishedin1875asanaerialtelegraphyworkshopinUster

(Switzerland)andbecameanindependentcompanyin2003followingtheacquisitionofthe

zellwegerUsterdivisionofzellwegerLuwabythemanagementandfundsadvisedbytwo

private-equityinvestmentcompanies.In2006,UsterTechnologiesLtdwasacquiredbyits

managementandfundsadvisedbyAlphaBeteiligungsberatungGmbH&Co.KG.In2007,Uster

TechnologiesLtdbecameapubliccompanybylistingitssharesontheSIXSwissExchange.

Knoxville, USA

Uster, Switzerland

Istanbul, Turkey

Bangkok, Thailand

Coimbatore, India

Sao Paulo, Brazil

Charlotte, USA Suzhou, China

Worldwide Sales and Support Network

TheGroupisheadquarteredinUster,Switzerland,andoperatesthroughaworldwidemarket

OrganizationcomplementedbyTechnologyCenters.Ithassalesandservicesubsidiariesin

themajortextilemarketsandTechnologyCentersinUster(Switzerland),inKnoxville(USA)

andinSuzhou(China).TheSwiss,American,andChinesefacilitiesarecertifiedaccording

totheISO9001standard.TheUsterfacilityisfocusedonproductsforyarntestingandon

fabricqualityassurancewhereastheKnoxvillefacilityisfocusedonproductsforfibertesting

andginprocesscontrol.TheSuzhoufacilitywassetupin2005andisfocusedonlow-cost

developmentandassemblyoperationsaswellasallowingtheGrouptoestablishalocalsupply

chainnetworktocomplementitsglobalsupplychainmanagementactivities.

Technology Centers

RegionalServiceCenters

RepresentativeOffices

Shanghai, China

Are you aiming to optimize your productivity and maximize your profi t?

With USTER® as your partner you move beyond quality management. Our standards and precise measurements provide unparalleled advantages for producing textiles at best quality and mini-mum cost.

Enjoy the application of knowledge and experience – think quality, think USTER®.

Uster Technologies AGWilstrasse 11 • CH-8610 Uster / Switzerland Phone +41 43 366 36 36 Fax +41 43 366 36 37www.uster.com • [email protected]

THINKQUALITY –THINKUSTER®

OUTSTANDING STANDARDS

ANNIVERSARY1957 – 2007 USTER STATISTICS

image_perle_china_market_a5.indd1 1 1.10.2007 8:17:03 Uhr

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i i i i i i


Process Step

USTER® Products










• USTERIzED®


• QualityProfiles



Portrait














Knoxville, USA

Uster, Switzerland

Istanbul, Turkey

Bangkok, Thailand

Coimbatore, India

Sao Paulo, Brazil












Technology Centers



Shanghai, China









Global Reports LLC

Table of Contents

Foreword ...............................................................................................................................3

Operational Review ............................................................................................................... 8

Sales and Marketing .............................................................................................................12

Research and Innovation......................................................................................................13

Operations .......................................................................................................................... 16

Outlook ............................................................................................................................... 20

Corporate Governance ........................................................................................................ 22

Comment on the Consolidated Financial Statements ........................................................47

Uster Group – Consolidated Financial Statements ............................................................. 50

Uster Group – Notes to the Consolidated Financial Statements ......................................... 55

Report of the Statutory Auditor on the Consolidated Financial Statements ..................... 98

Uster Technologies Ltd – Financial Statements ............................................................... 100

Uster Technologies Ltd – Notes to the Financial Statements ............................................102

Report of the Statutory Auditor on the Financial Statements ..........................................108

Information for Investors .................................................................................................. 110

Global Reports LLC

Foreword 3

Foreword

Dear Fellow Shareholder

In the financial year 2008 Uster Technologies Ltd operated in a challenging market environ-

ment, in which the fortune of the world’s textile industry changed. A key business driver for

the Company has been the ongoing investment in quality and testing instruments of spin-

ning mills in China, India and other emerging countries. Even when the manufacturing

equipment suppliers were confronted with a slowdown of demand, as reported by many of

them in 2007, we have seen continued good levels of investment into yarn quality and into

USTER ® products. But following the positive momentum and strong growth in our business

seen in 2006 and 2007, markets significantly slowed down in the reporting period. Primar-

ily, a combination of several external factors had a negative impact on the Group’s opera-

tional performance, among them:

• Massive deterioration of the world’s finance and banking system, negatively impacting

economies worldwide.

• Break out of economic recession in many of the Group’s key markets, further hampering

consumer spending.

• Reduced demand for new textile manufacturing equipment signaling a decline of orders

in that sector of the market.

• High raw material prices and over-supply of yarn, starting at the end of the first quarter

2008.

As a consequence, overall demand for textile manufacturing products, including our major

markets India and China, decreased to levels which were neither expected by the public nor

the Group’s management at the beginning of the year. At the same time, the tough overall

economic conditions restricted Uster Technologies Ltd clients’ ability to obtain credits in

order to implement their investment plans. Spinning mills reduced their levels of investment

in quality systems and USTER ® started to suffer more than in a normal business cycle.

We did not meet our own expectation communicated in February 2008. At the half year, the

business was still satisfactory, but the massive and rapid deterioration of the world’s bank-

ing and finance system was not foreseen and lead to a sharp reduction in business in the

second half of the year. However, taking the current overall economic environment as well

as the downturn in the world’s textile market into account, Uster Technologies Ltd delivered

a solid performance in the 2008 financial year. Total sales reached CHF 154.9 million, 17.0 %

below last year’s record level. EBITA margin remained strong and amounted to 22.1 % (2007:

28.1 %), demonstrating the ability of the organization to respond to difficult conditions and to

continue to deliver strong operating profits. Net profit increased significantly to CHF 5.3 mil-

lion, primarily due to the lack of extraordinary costs in 2008.

Global Reports LLC

4 Uster Technologies Ltd | Annual Report 2008

Providing Added Value to the Textile Manufacturing Industry

Uster Technologies Ltd’s strategic priority lies in our ambition to be the technological mar-

ket leader. USTER ® stands for innovative comprehensive solutions within the textile indus-

try and has established itself worldwide as the standard in quality control and monitoring.

In each step of the value chain, from the classing of the raw material, through the spinning

of yarns, to the finished textile product, Uster Technologies Ltd contributes to increased

efficiency of the textile manufacturing process. We intend to continue on this path since

this strategy represents a key success factor. The added value provided to our customers is

presented on the image pages in this year’s annual report.

Response to the Current Economic Downturn

To weather the storm hitting world-wide economies in general and the textile market in

particular, we concentrate on our operational duties and strengthen the Company’s long-

term growth-perspectives. On the one hand, we pro-actively implement measures to sig-

nificantly reduce and restructure the cost and overhead base by a 10 % reduction of our total

personnel to adjust to the difficult market environment. On the other hand, we further in-

troduce new value-adding products to the market, providing our clients with tools to gain

competitive advantage. The outlook for 2009 continues to be difficult, but our aim is to re-

main flexible and to continue to adjust our cost structure without delay, in line with chang-

ing market conditions.

Max-Ulrich Zellweger, Geoffrey Scott

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Foreword 5

Shareholder and Annual General Meeting

The Board of Directors will propose at the General Meeting to refrain from paying a dividend

to shareholders. Facing current market conditions in which banks follow a restrictive cred-

it policy, lowering debt and ensuring sufficient liquidity to finance the operational business

becomes first priority.

Thanks

The tough market situation in 2008 required the highest levels of commitment and flexibil-

ity of all Uster Technologies Ltd employees worldwide. They all worked hard to limit the

impact of the declining demand and consumer spending in our industry, engaging them-

selves in various projects in order to further strengthen the company’s product and service

offering. On behalf of the Board of Directors and the Executive Committee, it is our wish to

sincerely thank all our people for their efforts. We also thank our business partners, customer

and suppliers for their excellent collaboration with our teams.

We would like to address a special note to our shareholders. Since the IPO in autumn 2007

Uster Technologies Ltd’s share price performance was clearly unsatisfactory. We are very

aware of this situation, which we address by continuously developing and implementing

our strategy. It is not possible to control external market factors, but we can face them and

continue to focus on our worldwide leading position with long-term growth perspectives.

We cordially thank our shareholders for their commitment and their support of this strategy.

They demonstrate a great deal of trust of which we do our utmost to be worthy.

Max-Ulrich Zellweger Geoffrey Scott

Chairman of the Board of Directors Chief Executive Officer

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USTER® products allow government

agencies, traders, and spinning mills:

• To identify raw material quality and reach a

fair market price for each cotton class

• To control the quality parameters of cotton

early in the production process

• To maximize efficiency and productivity by

allowing the best utilization of available cotton

USTER ® HVI Systems

The USTER ® HVI measures all the important quality parameters

currently used in cotton trading and for the proper mix of cotton

in spinning mills: micronaire, fiber length, length uniformity,

strength, color, and waste.

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Corporate Governance 7

Cotton Classing and

Fiber Testing

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Operational Review

Uster Technologies Ltd looks back on a year in which its financial performance was impacted

by a decline in demand for machinery and testing instruments. During the year, different

factors such as downturns in consumer spending, strong currencies (China and India), high

raw material prices and over-supply of yarn had an impact on Uster Technologies Ltd’s client

base and their investment in production machinery. In addition, the struggle of the finance

and banking sectors, which further intensified in the second half of the year, had a major

impact on economies worldwide. The restricted ability of Uster Technologies Ltd’s clients to

obtain credit limited their investment plans and reduced demand for machinery as well as

testing systems.

Nevertheless, the long-term trend for higher quality of textile products as a key differentia-

tor for producers is still intact. Indeed, the majority of Uster Technologies Ltd’s customers

still benefit from focusing on product quality improvements and process efficiency. It allows

them to supply higher value-added products and optimize their margins.

Maintained Strong Margins and Improved Net Result

In the 2008 financial year, Uster Technologies Ltd delivered on the basis of the reduced sales

level a sound bottom line performance. Whilst gross sales declined to CHF 154.9 million (2007:

CHF 186.7 million), the Group achieved an EBITA of CHF 34.2 million (2007: CHF 52.4 million),

keeping the margin on a strong level of 22.1 % (2007: 28.1 %). In the fourth quarter of 2008, a

restructuring program, aiming at adjusting the cost base to the new market environment,

was implemented resulting in costs of CHF 4.4 million. EBITA before restructuring would

have been CHF 38.5 million or 24.9 % of total sales. Net result amounted to CHF 5.3 million,

48.2 % above the previous year figure, which is mainly due to a lower cost level, lack of one-time

costs and a decrease in interest expense following the refinancing after last year’s IPO.

Stable Offline, Impacted Online Business

Despite the decline in business for textile producers faced in the reporting period, some parts

of the business remained solid. The cotton classing business which is funded by governments,

the laboratory testing business, and the after-sales business remained stable although at

lower level compared to previous years.

The cotton classing products, a part of Uster Technologies Ltd’s offline business, which is

not directly linked to new textile machinery purchase, delivered satisfactory results. The

Company successfully secured contracts with the United States Department of Agriculture

(USDA) and the China Fiber Inspection Bureau (CFIB) for HVI cotton classing systems. Besides

these two countries, government classing projects were initiated in several further major

cotton-growing states such as Greece and Turkey. Classing their crop allows them to receive

fair prices on international markets.

In the first half of the year the laboratory yarn and fiber testing business grew driven by the

ongoing need of textile producers to reduce costs, improve quality and optimize production.

In the second half of the year business remained solid although below previous expecta-

tions.

Global Reports LLC

Operational Review 9

In the yarn clearer business Uster Technologies Ltd underlined its market leadership with

stable retrofit sales. Nevertheless, the OEM part of the business was under increasing pres-

sure and experienced a decline in orders in line with machinery manufacturers. However,

Uster Technologies Ltd was able to successfully compensate some of the lost sales with new

Chinese business.

After-sales services also delivered an adequate performance.

Ensuring Long-term Profitability and Growth Perspectives

Looking forward, Uster Technologies Ltd continues to focus on the operational business

and maintains high investments into product and market development.

As a result of the sharp reduction in demand from the textile industry and the uncertain

outlook for 2009, the Board of Directors approved in November 2008 the Executive Manage-

ment’s recommendations to pro-actively implement operational measures to adjust the cost

base of the Group. The reorganization program, which supports the Company’s future sus-

tainable development and long-term growth perspectives, includes a reduction of the world-

wide workforce by approximately 10 % through a combination of early retirement and re-

dundancy programs. Other restructuring measures to downsize the business and adapt to

lower demand included the introduction of a short-time working program in Uster and a

group-wide cost-saving program.

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USTER® products allow spinning mills:

• To monitor 100 % of the production and ensure

consistent quality to the consumers of

yarns according to the industry standard

USTER ® STATISTICS

• To optimize efficiency by choosing machines

setting adequate to the quality

• To improve the organization of operations,

thereby optimizing production efficiency,

minimizing waste and reducing costs

USTER ® TESTER

The USTER ® TESTER measures with an array of advanced

sensors quality parameters like unevenness, hairiness, diameter

variations, waste, dust and foreign matter.

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Production of Yarn

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Sales and Marketing

Whereas in the first half of 2008, the Chinese textile industry still developed in line with the

Group’s expectations, the downturn in business activity caught up with the entire Asian region

within the second half of the reporting period. Indeed, the weakening economic environment

impacted the textile manufacturing industry worldwide. Nevertheless, longer-term planning

and investment in quality improvement programs as supported by the 2007 Chinese eco-

nomic five-year-plan remain a high priority. The strong development throughout most of

2008 of South East Asian markets, in particular Bangladesh, is an encouraging sign.

Overall, sales in the Asian markets contributed 66.1 % to total gross sales (2007: 59.7 %), Europe

and North America generated 22.3 % and 11.5 % respectively (2007: 28.4 % and 11.9 % respec-

tively). This development reflects the ongoing shift of textile production to lower-cost

locations, especially to Asia. In addition, it mirrors the Group’s focus on rapid expansion in

the fast growing Chinese market by targeting the mid-market segment.

Focus on the Asian Market

The heart of Uster Group’s marketing strategy lies in establishing and expanding its presence in

the Asian region, particularly in China, India and South East Asia, through expanding its dedi-

cated product offering. According to this plan, the cotton classing system USTER ® HVI MF100

was introduced to the Chinese market in the third quarter. Besides the launch of new products,

marketing teams worldwide further developed the “USTER ® – Think Quality” concept and

message, which are an integrative part of the Group’s major communication initiatives such

as trade shows, customer seminars and technical trainings.

Presence at All Major Industry Events

Uster Technologies Ltd was present at the first combined ITMA ASIA + CITME exhibition in

Shanghai. At this occasion, the Company marked the 60th anniversary of its USTER ® even-

ness testing system, universally acknowledged as the “industry standard” tool for wide-

ranging yarn quality optimization. Under the theme “Think Quality” the Company displayed

two products specifically developed for the Chinese market (USTER ® TESTER ME100 and

USTER ® HVI MF100) as the centerpieces of its appearance. At ITME INDIA, the Company

showed a new quality know-how management tool for mills. Furthermore, the USTERIZED ®

label was promoted at Expofil and Intertextile with high interest from retailers aiming to

control quality parameters of cotton and yarns early in the production process.

Ongoing Customer Education and Support Services

As part of the USTER ® “Think Quality” approach, symposiums were held for several thousand

key customers worldwide. These meetings with USTER ® experts concentrated on quality

control trainings and support for all markets and segments. In parallel, USTER ® “Certified

Technician” training continued with key technicians and textile technologists from around

the world attending quality seminars at Uster Technologies Ltd’s headquarters.

Global Reports LLC

Sales and Marketing | Research and Innovation 13

Research and Innovation

A high level of research and development (R&D) effort remains key to Uster Technologies Ltd’s

development. Innovation is the engine of future growth; therefore, the Group constantly

develops new value-added systems and features, both for existing and new instruments, in

order to enhance the quality of its client’s products. Irrespective of the current economic

turmoil, the Uster Group is committed to continue investing around 10 % of total sales in

R&D. In 2008, expenses for R&D amounted to CHF 19.9 million, corresponding to 12.8 % of

sales (2007: CHF 18.6 million; 10.0 %).

Technology Center Uster: New Software and Enhanced Sensor Technology

Within the reporting period, the R&D team in Uster paved the way for faster development

cycles by building a complete new production environment for industrial software develop-

ment and establishing a new customized and tailored software process with a highly inter-

active approach. In addition, the team worked on enhancing sensor development capabilities

as a core competence of USTER ®’s product offering.

Technology Center Knoxville: Focus on HVI MF100

The Knoxville R&D team was strongly involved in the development and design of the

USTER ® HVI MF100 for the Chinese market. The new product is tailored to the needs of the

mid-market segment with specifically designed new bale management software. Additionally,

this HVI system features the latest advances in correction algorithms for fiber measurements

based on moisture content.

Technology Center Suzhou: Broadening Product Offering for Local Markets

The R&D team in Suzhou, with extended support and efficient coaching provided by the

Group’s Technology Centers in Uster and Knoxville, concentrated its activities on the

main development phase for new generation of online sliver quality monitoring system

USTER ® SLIVERGUARD. The USTER ® TESTER ME100 jointly developed by the Technology

Centers in Suzhou and in Uster and launched in 2007, was well-received in the local Chinese

market.

Global Reports LLC


USTER® products enables weavers,

knitters and retailers:

• To acquire detailed quality information on

yarn purchased – 80 % of problems in fabric

are caused by quality variations in yarn

• To optimize production at maximum capacity

• To build and maintain their reputation

USTER ® QUANTUM

The USTER ® QUANTUM clearer measures directly on the spinning

or winding machine yarn parameters such as unevenness,

imperfections, foreign fiber, polypropylene content as well as thickness

and eliminates exceptions, monitoring 100 % of yarn production.

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Assurance of Fabric Quality

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Operations

The uniqueness of Uster Technologies Ltd’s business model lies in its consistent adaptation

to the fluctuating demand in the textile industry. USTER ® provides its customers with tools

to save costs, improve efficiency and optimize quality in their products. USTER ® also looks

into its own business to optimize its flexible business model and operational processes. One

of the key elements of this model is an extensive network of outsourcing partners. In order to

further strengthen its flexible business model, Uster Technologies Ltd continues to develop

its Supply Chain Management globally and source its material from low-cost countries. As

such, assessing supplier performance and evaluating potentially new suppliers remains one

of the on-going key tasks, since material accounts for a major part of Uster Technologies Ltd

product’s costs.

Progresses in Operational Efficiency

With the implementation of “in-line” and “pre-testing” processes of critical modules and

components as part of the group-wide Innovation-Efficiency-Improvement-Program, the

Uster Group managed to realize gains in efficiency during the final phases of manufacturing,

in particular in final testing and qualification processes. One result of this process is, for

example, the reduction of qualification standard hours for the HVI products, resulting in

smaller resource requirements in all departments.

The standardization of processes among the Technology Centers resulted in immediate sav-

ings in terms of elimination of duplicate work and increase in efficiency. Among specific

examples are the SAP supplier evaluation and audit processes as well as the Quality Assur-

ance process.

Furthermore, Uster Technologies Ltd developed a Global Sourcing Organization focusing

on the identification of synergies among the Technology Centers by way of introducing

common material groups. This Collaborative Category Management as a new global procure-

ment concept allowed the Group to increase its purchasing power and overall efficiency and

thus make substantial savings within various material groups. For example, the program

allowed the identification of a new high value supplier which now produces the Group’s cable

assembly requirements.

Challenging Resource Management

The first half of 2008 saw strong orders on the level of the previous year challenging the team

to ensure adequate resources and availability of sufficient material. In the second half

however, the situation unexpectedly changed. Management was forced to adapt capacities

in Uster to reflect the significantly reduced demand in the textile industry. Downsizing the

Group’s cost base, entailed a reduction of global headcount of approximately 10 %, primar-

ily affecting staff in Switzerland, as well as the introduction of a short-time work program

as of mid November.

Global Reports LLC

Operations 17

Training and Facility Management

Alongside with preserving the ongoing operational business, special attention was given to

various training initiatives, to the renewal and negotiation of the facility service contracts,

the efficient utilization of manufacturing space and storage areas as well as the consolidation

of offsite storage into main facilities.

Suzhou: Source of Future Growth

The production focus of the operations in Suzhou lay on the newly developed and intro-

duced products for the local market, the USTER ® HVI MF100, the USTER ® SLIVERGUARD;

and the foreign-fiber upgrades for the existing installed base of USTER ® QUANTUM clearers.

Capacities in China were not affected by the Group’s downsizing plans, as the Asian market

is expected to be the first to pick up in its continued aim for higher quality.

Employee and Management Education

Personnel enhancement and education programs across all Technology Centers included

departmental cross-training in order to ensure an adequate skill set in critical areas, training

of new SAP modules, ISO certification refresher seminars as well as various safety trainings.

In addition, four leadership training sessions were held in Uster and Knoxville on internal

management skills improvements as a key resource for the continued development of the

Company’s business.

Risk Management and Internal Control System

In view of the increased importance of proactive risk management, as well as the enhanced

reporting requirements, a continuous special focus was given in 2008 on establishing tools

to efficiently manage the different risks of the Uster Group. Whilst the implementation of

risk management software helped to assess and categorize them, different areas of the Com-

pany have been thoroughly examined with regard to potential risks.

Each risk is allocated to a member of the Executive Committee who as the respective person

in charge takes the responsibility to monitor its development on a regular basis and to report

immediately on any changes. In 2008, the Company took the opportunity to review its processes

and to make further improvements wherever possible. As a result, Uster Technologies Ltd

intensified its efforts to implement an appropriate documentation system, along with pro-

cesses for their monitoring and control.

Global Reports LLC


USTER ® provides the industry quality standards

that allow textile traders and retailers:

• To “speak the same quality language”

• To specify required levels of quality using

USTER ® Quality Profiles

• To control quality costs in their global

supply chains

• To provide textile products that meet or exceed

consumer’s expectations

USTER ® STATISTICS

USTER ® STATISTICS are quality benchmarks which permit a

classification of fibers, slivers, rovings and yarns. They serve as

a basis for specification of trade contracts and for the definition

of quality characteristics for commercial textile transactions.

Global Reports LLC


Sale of Textile Products

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Outlook

Based on information currently available, the year ahead will again be difficult. No major

trend signals improved conditions within the textile machinery market or indicates clearly

when the current financial crisis will end. In addition, consumer spending has started to

fall, thus further impacting world-wide economies. Despite the current textile market down-

turn, Uster Technologies Ltd is convinced that the previously observed trend to quality of

textile products as a key differentiator for producers will resume in the mid-term.

Looking forward, the OEM yarn clearer business is the area of Uster Technologies Ltd’s busi-

ness, which is most at risk as it is linked to the low demand in machinery equipment. Nev-

ertheless, management anticipates to compensate part of the business with retrofit sales

and to furnish a great number of spinning and winding systems, which are not yet equipped,

with improved capability yarn clearers. In addition, some parts of the Uster Technologies Ltd

business will remain sound, although at lower levels than in previous years; this includes

the cotton classing, the laboratory testing as well as the after-sales businesses. Especially

the cotton classing segment bears further potential as a fast growing number of cotton-

producing countries, in addition to the US and China, install government-controlled cotton

classing programs in order to ensure high quality production levels and fair market prices

for their crops. Growing volumes are expected also in the laboratory cotton and fiber testing

businesses thanks to the Company’s strong market position in cotton classing and its unique,

industry-wide acknowledged benchmark USTER ® STATISTICS.

Irrespective of the current economic turmoil and volatile markets, Uster Technologies Ltd

continues to invest in its global marketing and sales efforts as well as in delivering new testing

equipment that enhances the quality level of its client’s products. The Company has a strong

track record of pro-active management of its cost base in line with variable market demand

levels. This will continue and ensure the ongoing delivery of strong financial results. It is

the Company’s ambition to take advantage of the actual cyclical downturn to strengthen its

business fundamentals and – in the mid-term – to return to the sales and profitability levels

achieved in 2007.

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Outlook 21

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Corporate Governance

The information disclosed in this section follows the Directive on Information Relating to

Corporate Governance issued by the SIX Swiss Exchange and complies largely with the Swiss

Code of Best Practice for Corporate Governance issued by Economiesuisse. Uster Technologies

Ltd has implemented these principles of good corporate governance in its articles of asso-

ciation, its organizational rules and its code of conduct.

All information shown in this section applies to the balance sheet date if not indicated other-

wise. Significant changes between the balance sheet date and the copy deadline of the

annual report are listed under “10 Material Changes since the Balance Sheet Date” at the end

of this section.

Further information on Corporate Governance can be found by visiting Uster’s website at

www.uster-investors.com / governance.php.

1 Group Structure and Shareholders

1.1 Group Structure

1.1.1 Operational Structure

The operational structure of the Uster Group is illustrated below:

Board of Directors

5 members

Chairman Max-Ulrich Zellweger

Executive Committee

9 members

CEO Geoffrey Scott

Finance and Support

CFO

Thomas F. Dressendörfer

Sales and Service

Harold Hoke

Textile Technology

Richard Furter

Research and Innovation

Rafael Storz

U.S. Operations

Hossein Ghorashi

Asian Operations

Naiming Wei

Order Fulfi llment

Renato Murk

Marketing and Business

Development

Deniz Bütüner

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1.1.2 Listed Companies within the Group

Uster Technologies Ltd, Uster, Switzerland, is the parent company of the Uster Group and

has been listed on the main segment of the SIX Swiss Exchange since October 19, 2007. It is

the sole listed company within the Group.

Market capitalization CHF 61,729,600

SIX Swiss Exchange USTN

Swiss Security Number 3433153

ISIN CH0034331535

1.1.3 Non-Listed Companies within the Group

The table below shows an overview of the non-listed companies of the Uster Group as of

December 31, 2008:

Company % Capital Shareholdings

Dec 31, 2008

Share Capital in 1,000

Uster Technologies de Mexico S.A. de C.V.(Tlalnepantla, MX) 100 % MXN 6,250

Uster Technologies GmbH(Neuss, DE) 100 % EUR 26

Uster Technologies (India) Pvt. Ltd.(Bangalore, IN) 100 % INR 4,950

Uster Technologies K.K.(Osaka-fu, JP) 100 % JPY 10,000

Uster Technologies (Shanghai) Co. Ltd.(Shanghai, CN) 100 % CNY 1,660

Uster Technologies (Suzhou) Co. Ltd.1)

(Suzhou, CN) 100 % CNY 20,185

Uster Technologies Sulamericana Ltda.(Alphaville-Barueri SP, BR) 100 % BRL 650

Uster Technologies (Thailand) Ltd.(Bangkok, TH) 100 % THB 6,000

Uster Technologies, Inc.(Knoxville, US) 100 % USD 100

Uster Teknoloji Ticaret A.S.(Istanbul, TR) 100 % TRY 50

1) Capital increase in 2008 of CNY 18,724

1.2 Significant Shareholders

As of December 31, 2008, 966 shareholders (2007: 780) were registered in the share register

of Uster Technologies Ltd. In the course of 2008, the following disclosure announcements

were made according to Art. 20 f. BEHG:

• January 16, 2008 (SHAB Publication): Polar Capital LLP, GB-London, acquired on November

20, 2007, 260,482 shares corresponding to 3.97 % of voting rights.

• March 5, 2008 (SHAB Publication): Lombard Odier Darier Hentsch Fund Managers SA

(LODHFM), CH-Geneva, announced it reached the threshold of 3 % of voting shares on

February 27, 2007, and owns through the funds LODH Swiss Caps, LODH Swiss Capital

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Leaders, IF IST 2 Actions Suisse Valeurs Complémentaires and LODH Opportunity Swiss

Small and Mid Caps 218,800 shares, which represent 3.34 % of voting rights. On November

29, 2008, LODHFM announced in a media release, that as of November 25, 2008, it owns

6.92 % of the company’s shares, of which 3.2563 % are owned by the fund LODH Swiss

Caps.

• April 28, 2008 (SHAB Publication): Alcide Ltd notifies that on April 20, 2008, the lock-up

period following the Initial Public Offering has expired. Alcide Ltd is thus no longer part

of the disclosed group, which now consists of Geoffrey Scott and eight other members of

the Management. Alcide Ltd is now a single stockholder with individual disclosure require-

ments. Alcide Ltd is directly held by APEF 5 – IZAR CI L. P., JE-St. Helier; APEF 5 – PIXYS

US L. P., JE-St. Helier; APEF 5 – JABBAH CI L. P., JE-St. Helier; APEF 5 – KUMA CI L. P., JE-

St. Helier; APEF 5 – SYMA US L. P., JE-St. Helier; APEF 5 – PULSAR CI L. P., JE-St. Helier und

ZEBRA S. C., FR-Houilles. General Partner of the listed Limited Partnerships, with the

exception of APEF 5 – PULSAR CI L. P. and ZEBRA S. C., is Alpha General Partner 5 L. P.,

which General Partner in turn is the APEF Management Company Limited. The last men-

tioned company is also General Partner of PULSAR CI L.P.

• October 16, 2008 (SHAB Publication): Marc Bär, CH-Zurich, announces that he indirectly

owns, through Alfred Bär, CH-Wollerau, as of October 10, 2008, 199,935 shares represent-

ing 3.05 % of votes.

• October 16, 2008 (SHAB Publication): the group, composed of Geoffrey Scott and eight

further Members of the Board of Directors or of the Executive Committee and required to

disclose its holdings in Uster Technologies Ltd, announces that the lock-up period follow-

ing the Initial Public Offering has expired. The group, owning together 676,717 shares

(10.32 % of votes), has thus been dissolved. Geoffrey Scott, CH-8702 Zollikon, as well as the

eight other Members of the Board of Directors or of the Executive Committee each own

fewer than 3 % of voting shares.

• On December 2, 2008, DWS Investments GmbH, Frankfurt (indirect holder of:

Deutsche Bank AG, Frankfurt) announced that it passed under the threshold of 3 % on

November 25, 2008.

The following major shareholders owned more than 5.0 % of the share capital of

Uster Technologies Ltd as at December 31, 2008:

• Alcide Ltd, St. Helier, Channel Islands, 36.0 %

• Lombard Odier DH Fund Managers, 6.9 %

• T. Rowe Price International Inc. 5.5 %

1.3 Cross-Shareholdings

Uster Technologies Ltd does not have any cross-shareholdings with other companies.

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2 Capital Structure

2.1 Ordinary Share Capital

The ordinary share capital of Uster Technologies Ltd as of December 31, 2008, amounted to

CHF 61,664,000 and was fully paid up. It consisted of 6,560,000 registered shares with a

nominal value of CHF 9.40 each.

2.2 Authorized and Conditional Share Capital Increase

As of December 31, 2008, the authorized share capital amounted to CHF 8,930,000. Accord-

ing to the articles of association of Uster Technologies Ltd, the Board of Directors is autho-

rized, at any time until October 4, 2009, to increase the share capital in an amount not to

exceed CHF 8,930,000 through the issuance of up to 950,000 fully paid registered shares with

a nominal value of CHF 9.40 each. An increase in partial amounts is permitted.

The Board of Directors determines the issue price, the type of payment, the date of issue of

new shares, the conditions for the exercise of pre-emptive rights and the beginning date for

the dividend entitlement. In this regard, the Board of Directors may issue new shares by

means of a firm underwriting through a banking institution, a syndicate or another third-

party with a subsequent offer of these shares to the current shareholders (unless the pre-

emptive rights of current shareholders are excluded). The Board of Directors may permit

pre-emptive rights that have not been exercised to expire or it may place these rights and / or

shares as to which pre-emptive rights have been granted but not exercised, at market condi-

tions or use them for other purposes in the interest of Uster Technologies Ltd.

The subscription and acquisition of the new shares, as well as each subsequent transfer of

the shares, shall be subject to the restrictions mentioned under “2.6 Limitations on Transfer-

ability and Nominee Registrations.” The Board of Directors is authorized to restrict or exclude

the pre-emptive rights of shareholders and allocate such rights to third parties if the shares

are to be used (a) for the acquisition of enterprises, parts of an enterprise of participations,

or for new investments, or, in case of a share placement, for the financing or refinancing of

such transactions; or (b) for the purpose of the participation of strategic partners (including

in the event of a public tender offer) or for the purpose of an expansion of the shareholder

constituency in certain investor markets or in connection with the listing of the shares at

domestic or foreign exchanges, including for the purpose of the delivery of shares to the

involved banks in case of the over-allotment option.

As of December 31, 2008, Uster Technologies Ltd had a conditional share capital, pursuant

to which the share capital may be increased by a maximum aggregate amount of CHF 3,008,000

through the issuance of a maximum of 320,000 fully paid registered shares with a nominal

value of CHF 9.40 each by the exercise of option rights which the employees, the manage-

ment or directors of Uster Technologies Ltd or another Group company are granted accord-

ing to the respective regulations of the Board of Directors. The pre-emptive rights of the

shareholders are excluded.

The acquisition of registered shares through the exercise of option rights and the subsequent

transfer of the registered shares are subject to the transfer restrictions mentioned under “2.6

Limitations on Transferability and Nominee Registrations.”

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2.3 Changes in Share Capital

Dec 31, 2008 Dec 31, 2007

Ordinary share capital 61,664,000 65,600,000

Authorized share capital 8,930,000 9,500,000

Conditional share capital 3,008,000 3,200,000

On June 13, 2008, a dividend payment by way of nominal value reduction of CHF 0.60 reduced

the ordinary share capital by CHF 3,936,000 to CHF 61,664,000.

On October 18, 2007, the share capital was increased from CHF 45,600,000 to CHF 65,600,000

by the issuance of 2,000,000 shares with a nominal value of CHF 10 each. Both, the authorized

and conditional share capital increase have been approved at the extraordinary Shareholders’

meeting on October 4, 2007.

On December 18, 2006, the share capital was increased from CHF 37,600,000 to CHF 45,600,000

by the issuance of 8,000,000 registered shares with a nominal value of CHF 1 each. On De-

cember 13, 2006, the share capital was increased from CHF 100,000 to CHF 37,600,000 by the

issuance of 37,500,000 registered shares with a nominal value of CHF 1 each.

2.4 Shares and Participation Certificates

2.4.1 Shares

Each share has a nominal value of CHF 9.40 and each share recorded and registered under a

shareholder’s name in the share register of Uster Technologies Ltd is entitled to one vote.

There are no preferential rights for individual shareholders and all shareholders are entitled

to equal dividends.

2.4.2 Participation Certificates

Uster Technologies Ltd has not issued any participation certificates.

2.5 Profit Sharing Certificates

Uster Technologies Ltd has not issued any profit sharing certificates.

2.6 Limitations on Transferability and Nominee Registrations

2.6.1 Limitations on Transferability

Acquirers of registered shares will be recorded in the share register as shareholders with the

right to vote, provided they explicitly declare to have acquired these registered shares in

their own name and for their own account.

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2.6.2 Nominee Registrations

Nominees are persons or entities who do not expressly declare in the application form to

hold the shares for their own account and with whom the Board of Directors has entered into

the according contractual agreements.

According to the articles of association, the Board of Directors may record nominees in the

share register with voting rights for shares up to a maximum of 3.0 % of the outstanding

nominal share capital. Shares held by a nominee that exceed this limit are only registered in

the share register with voting rights if such nominee declares in writing to disclose name,

address and shareholding of any person or legal entity for whose account it is holding 1.0 %

or more of the outstanding share capital.

Legal entities and associations or other partnerships that are linked by capital, voting power,

management or in other manner, as well as all persons, entities and partnerships that are

acting in concert with a view to circumvent the restrictions on nominee registration (espe-

cially as a syndicate), are deemed to be one nominee.

2.7 Convertible Bonds and Warrants/Options

Uster Technologies Ltd has not issued any convertible bonds, warrants or options.

3 Board of Directors

3.1 Members of the Board of Directors

The following information sets forth the name, year of birth, function, election and director-

ship term of each Member of the Board of Directors, all of whom except for Geoffrey Scott

are non-executive directors, followed by a short description of each Member’s business ex-

perience, education and activities.

Max-Ulrich Zellweger, Chairman of the Board of Directors

Max-Ulrich Zellweger has been a Member of the Board of Directors of Uster Technologies Ltd

since 2003 and is elected until 2010. Between 1987 and 1992 he was Area Manager Asia Pacific

of Schindler Elevators Co. and in this function responsible for the subsidiaries and joint

ventures of Schindler in China, Japan, India, Hong Kong and other Asian countries. He is

now Managing Partner of Pacific Consult Ltd, a Zurich and Shanghai based business con-

sultant specialized on business development in Asia, established in 1992 by Max-Ulrich

Zellweger with some partners. He frequently lectures on Asia-related topics at universities

and Executive MBA courses. Furthermore, he is on the Board of Directors of Fr. Sauter AG,

Fr. Sauter Holding AG, Bartec GmbH and Pacific Consult Ltd. Max-Ulrich Zellweger holds a

Masters degree in Mechanical Engineering of the Swiss Institute of Technology (ETH) in

Zurich. He was born in 1941 and is a Swiss citizen.

Dr. Beat E. Lüthi, Vice-Chairman of the Board of Directors

Beat E. Lüthi has been elected a Member of the Board of Directors of Uster Technologies Ltd

for a period of three years until 2011 and holds office of Vice Chairman. He acts as CEO of CTC

Analytics Ltd, a leading mid-sized Swiss Laboratory Instrument Company in the field of

chromatography automation. From 2003 until 2007 he headed the Laboratory Division of

Mettler-Toledo. From 1998 to 2002 he was CEO of Feintool, a listed fine blanking company.

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Board of Directors

Members of the Board of Directors

Harald Rönn

1960, German

Member

Elected in: 2007

Elected until: 2009

Beat E. Lüthi

1962, Swiss

Vice-Chairman

Elected in: 2008

Elected until: 2011

Max-Ulrich Zellweger

1941, Swiss

Chairman

Elected in: 2003

Elected until: 2010

Barry James Mulady

1947, British

Member

Elected in: 2003

Elected until: 2009

Geoffrey Scott

1954, British

Member

Elected in: 2003

Elected until: 2010

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From 1990 to 1998 he held various management positions at Mettler-Toledo. He is a member

of the Board of Directors of Bossard, Stadler Rail and Addex Pharma. Beat E. Lüthi holds a

PhD and graduated in Electrical Engineering from the Swiss Federal Institute of Technology

(ETH) in Zurich. He absolved a Senior Management Program at INSEAD, Paris. He was born

in 1962 and is a Swiss citizen.

Dr. Barry James Mulady, Member of the Board of Directors

Barry James Mulady has been a Member of the Board of Directors of Uster Technologies Ltd

since 2003 and is elected until 2009. He has been Chairman of PageOne Communications

Ltd, London, England, since 2000 and is Chairman of ipTEST Ltd, Guildford, England. From

2000 to 2006, he served as a non-executive Director of Tellermate plc, Newport, Wales and

Sensima Ltd, London. From 1996 to 1999 he was CEO of Airtech plc, Aylesbury, England.

Prior to that, he served as President of Fisons Instruments Europe and CEO of VG Instruments

plc. He has broad experience in general management, mergers and acquisitions and business

development. Barry James Mulady earned a First Class Honours Degree in Physics and a PhD

in Nuclear Magnetic Resonance from the University of Nottingham. He was born in 1947 and

is a British citizen.

Harald Rönn, Member of the Board of Directors

Harald Rönn has been a Member of the Board of Directors of Uster Technologies Ltd since

2007 and is elected until 2009. Prior to joining Alpha Beteiligungsberatung GmbH & Co. KG

in 1997 as a Managing Partner, he worked at Hoechst Brazil, followed by Citicorp in New York

and then Frankfurt in 1987. Harald Rönn moved in 1991 to 3i Frankfurt as a Manager. He holds

a degree in Business Administration from the University Getulio Vargas in Brazil and is fluent

in German, English and Portuguese. He was born in 1960 and is a German citizen.

Dr. Geoffrey Scott, Member of the Board of Directors and Chief Executive Officer

Geoffrey Scott has been a Member of the Board of Directors and CEO of Uster Technologies Ltd

since 2003 (elected until 2010). He was Chief Executive Officer of the Zellweger Uster Division

of Zellweger Luwa, Uster, Switzerland, from 1999 to 2003. Prior to that, he held Senior Man-

agement positions at Kevex Instruments, Fisons plc (Scientific Instruments Division) and

Beckman Instruments. He has broad experience of strategy and business development, sales,

marketing and after-sales, product development and general management. He is a Member

of the Board of Directors of Maillefer SA. Geoffrey Scott earned a BSc Honours degree in

Biochemistry from the University of Liverpool, and a PhD in Biochemistry from the Univer-

sity of Nottingham. He was born in 1954 and is a British citizen.

3.2 Independency of the Board of Directors

None of the non-executive Members of the Board of Directors has been a Member of the

Executive Committee of Uster Technologies Ltd or its subsidiaries during the past three

years and there are no significant business connections between Uster Technologies Ltd and

its subsidiaries and the non-executive Members of the Board of Directors.

In his function of a Managing Partner of Pacific Consult Ltd, Max-Ulrich Zellweger advises

the Company on certain business issues related to China. Also, Barry James Mulady delivers

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sometimes consulting services to the Company. However, the scope of these consultancy

services is not significant.

The Members of the Board of Directors do not have any activities and functions outside

Uster Technologies Ltd that would compromise their independency.

3.3 Elections and Terms of Office

The articles of association of Uster Technologies Ltd provide that the Board of Directors may

consist of a minimum of three Members and a maximum of nine Members. Members of the Board

of Directors are appointed and removed exclusively by shareholders’ resolution. The elections

are held individually. Their maximum term of office is three years, re-election is allowed.

3.4 Internal Organization

3.4.1 Duties and Operating Principles of the Board of Directors

The Board of Directors is entrusted with the ultimate direction of Uster Technologies Ltd

and the supervision of the Executive Committee. The Board of Directors’ non-transferable

and irrevocable duties include the following:

• The ultimate direction of the Company and the issuance of the necessary directives;

• The determination of the organization, including the adoption and revision of the orga-

nizational rules;

• The organization of the accounting system, the financial control as well as the financial

planning;

• The appointment and dismissal of the persons entrusted with the management of the Com-

pany as well as the determination of the signatory power;

• The ultimate supervision of the persons entrusted with the management of the Company;

• The responsibility for the preparation of the annual report and the Shareholders’ meeting

as well as the implementation of the resolutions adopted by the meeting of Shareholders;

• The passing of resolutions regarding the supplementary contribution for shares not fully

paid up and of the corresponding amendments to the articles of incorporation;

• The passing of resolutions concerning an increase in share capital to the extent that such

power is vested in the Board of Directors, and of resolutions concerning the confirmation

of capital increases and corresponding amendments to the articles of incorporation, as

well as making the required report on the capital increase;

• The notification of the judge in case of overindebtedness of the Company;

• The adoption of, and any amendments or modifications to, any equity incentive plan, stock

option agreement, restricted stock purchase agreement, etc.;

• The decision regarding entering into any financing arrangement in excess of CHF 10.0 mil-

lion including loan agreements, credit lines, letters of credit or capitalized leases;

• The issuance of convertible debentures with option rights or other financial market instru-

ments;

• The approval of the business strategy and the approval and adoption of the budget of the

Company;

• The approval of any transaction exceeding the amount of CHF 10.0 million which is not in

accordance with the budget.

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The Board of Directors may entrust some or several of its Members with the duty to prepare

and carry out its resolutions or to supervise certain matters.

According to the current organizational rules enacted by the Board of Directors, the Board

of Directors meets at the invitation of the Chairman, or in the Chairman’s absence, the Vice-

Chairman or any other Member of the Board of Directors, as often as the Company’s business

requires a meeting and in any event at least six times per calendar year. Resolutions of the

Board of Directors are passed by way of simple majority of the vote cast. In the case of a tie,

the Chairman has a casting vote. To validly pass a resolution, the majority of the Members

of the Board of Directors have to attend the meeting.

The Chairman, after consultation with the Chief Executive Officer, determines the agenda

for the Board meetings. Any Member of the Board of Directors may request the convocation

of a meeting or the inclusion of items of business in the agenda. All Members of the Board

receive written information on the agenda items before the meeting in order to be well pre-

pared. The Board of Directors consults external experts where necessary when discussing

specific topics.

In 2008, the Board of Directors held the following meetings:

Number of meetings: 8

Average meeting time (hours): 4

Attendance of Members of the Board of Directors (Meetings):

Max-Ulrich Zellweger 8

Beat E. Lüthi 6

Barry James Mulady 7

Harald Rönn 7

Geoffrey Scott 8

Ulrich Geilinger 1

3.4.2 Committees of the Board of Directors

The Board of Directors has established two committees to further strengthen the corporate

governance structure. The Members of these committees are appointed, as a rule, for the

entire duration of their mandate as Director and are re-eligible. The committees constitute

themselves each year at the first meeting after the annual meeting of shareholders. In dis-

charging their responsibilities, the committees have unrestricted access to the Company’s

and the Management’s books and records.

Audit Committee

According to the Board regulations, the Audit Committee must be composed of non-executive

and independent Directors. It currently consists of Max-Ulrich Zellweger, Ulrich Geilinger and

Harald Rönn and meets as often as necessary. Usually, there will be at least two meetings a

year, one for the review of the budget and one for the review of the year-end closing.

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In 2008, the Audit Committee held the following meetings:





Ulrich Geilinger 1

Harald Rönn 2

The Audit Committee assists the Board of Directors in fulfilling its duties of supervision of

the Executive Committee. It has the following powers and duties:

• To review and assess the effectiveness of the statutory auditors, in particular their inde-

pendence from the Company;

• To review and assess the scope and plan of the audit, the examination process and the results

of the audit and to examine whether the recommendations issued by the auditors have

been implemented;

• To review the auditors’ reports and to discuss their contents with the auditors and with

the Executive Committee;

• To assess the risk assessment established by the Executive Committee and the proposed

measures to reduce risks;

• To assess the state of compliance with norms within the Company;

• To review in cooperation with the auditors, the CEO and the CFO whether the accounting

principles and the financial control mechanism of the Company and its subsidiaries are

appropriate in view of the size and complexity of the Group;

• To review the annual and interim statutory and consolidated financial statements intend-

ed for publication. It should discuss these with the CEO, the CFO and with the head of the

external audit;

• The Audit Committee regularly reports to the Board of Directors on its findings and pro-

poses appropriate actions.

Nomination and Compensation Committee

According to the Board Regulations, the Nomination and Compensation Committee must be

composed of non-executive and independent Directors. It currently consists of Max-Ulrich

Zellweger, Barry James Mulady and Harald Rönn and meets as often as necessary.

In 2008, the Nomination and Compensation Committee held the following meetings:





Barry James Mulady 1

Harald Rönn 1

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The Nomination and Compensation Committee assists the Board of Directors in fulfilling its

duties of supervision of the Executive Committee. It has the following powers and duties:

• To assure the long-term planning of appropriate appointments to the position of the CEO

and to the Board of Directors;

• To nominate candidates to fill the vacancies on the Board of Directors or the position of

the CEO;

• To make recommendations on the composition and balance of the Board of Directors;

• To review and assess on a regular basis the remuneration system of the Company and the

Group (including the management incentive plans) and to make a proposal to the Board

of Directors;

• To recommend the terms of employment, in particular the remuneration package of the

CEO and to make proposals in relation to the remuneration of the Members of the Board

of Directors;

• To recommend upon proposal of the CEO the terms of employment, in particular the re-

muneration package, of employees reporting directly to the CEO as well as review matters

related to the compensation of other top mangers as well as the general employee compen-

sation and human resource practices of the Company;

• To make recommendations on the grant of options or other securities under any manage-

ment incentive plan of the Company.

The Nomination and Compensation Committee regularly reports to the Board of Directors on

its findings and proposes appropriate actions.

3.4.3 Areas of Responsibilities

In accordance with the law, the articles of incorporation and the organizational rules, the

Board of Directors has delegated the Company’s operational management to Geoffrey Scott,

the CEO of Uster Technologies Ltd. Together with the Executive Committee he is responsible

for the overall management of the Uster Group. The CEO has all the powers and duties that

are not explicitly reserved to the Board of Directors or a Board Committee as mentioned

above. In particular, the CEO has the following powers and duties:

• The provision of all information and documents necessary to the Board of Directors;

• The implementation of the resolutions passed by the Board of Directors;

• The organization, management and control of the day-to-day business of the Company;

• The proposal to the Board of Directors for the approval of transactions to be resolved by

the Board of Directors;

• The proposal to the Board of Directors for the appointment and dismissal of Members of

the Executive Committee;

• The organization of the Executive Committee and the preparation, calling and presiding

the meetings of the Executive Committee.

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3.4.4 Information and Control Mechanisms

Board of Directors

The Board of Directors recognizes the importance of receiving sufficient information from

the Executive Committee to fulfill its supervisory duty and to make the decisions that are

reserved to the Board of Directors. It has the following means to monitor the responsibilities

it has delegated to the Executive Committee:

• The CEO of the Group is a Member of the Board of Directors and informs the Board in every

meeting about the current development of the business. Additionally, the CFO serves as

the secretary of the Board and also participates in every meeting. Other Members of the

Executive Committee are invited to attend Board meetings to report on their areas of re-

sponsibility as deemed necessary by the Board.

• The minutes of the Executive Committee Meetings are made available to the Chairman of

the Board.

• Informal meetings are held as required between Board Members and the CEO.

• The Board of Directors receives on a monthly basis the consolidated income statement,

balance sheet and cash flow statement of the Uster Group together with a detailed comment

on the course of the business. The Board of Directors does not have direct access to the

Management Information System of the Company.

• Risk management and monitoring procedures are evaluated at regular intervals by the

Board of Directors.

Board Committees

The Board Committees, especially the Audit Committee, invite external consultants to review

the business and better understand the laws and policies impacting the Company. In addi-

tion, the CEO, the CFO and the representative of the external auditors will be invited to the

meetings of the Audit Committee.

4 Executive Committee

4.1 Members of the Executive Committee

The following information sets forth the name, year of birth, nationality and function of

each Member of the Executive Committee, followed by a short description of each Member’s

business experience, education and activities.

Dr. Geoffrey Scott, Member of the Board of Directors and Chief Executive Officer

Geoffrey Scott has been a Member of the Board of Directors and CEO of Uster Technologies Ltd

since 2003. He was Chief Executive Officer of the Zellweger Uster Division of Zellweger Luwa,

Uster, Switzerland, from 1999 to 2003. Prior to that, he held Senior Management positions

at Kevex Instruments, Fisons plc (Scientific Instruments Division) and Beckman Instruments.

He has broad experience of strategy and business development, sales, marketing and after-

sales, product development and general management. He is a Member of the Board of Direc-

tors of Maillefer SA. Geoffrey Scott earned a BSc Honours degree in Biochemistry from the

University of Liverpool, and a PhD in Biochemistry from the University of Nottingham. He

was born in 1954 and is a British citizen.

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Executive Committee

Members of the Executive Committee

Geoffrey Scott

1954, British

Chief Executive Officer

Member since 2003

Thomas F. Dressendörfer

1958, German

Chief Financial Officer

Member since 2008

Hossein Ghorashi

1945, American

Head of U.S. Operations

Member since 2003

Naiming Wei

1962, German

Head of Asian Operations

Member since 2006

Richard Furter

1943, Swiss

Head of Textile Technology

Member since 2003

Deniz Bütüner

1973, Swiss

Head of Marketing and

Business Development

Member since 2007

Rafael Storz

1967, German

Head of Research and

Innovation

Member since 2006

Harold R. Hoke

1954, American

Head of Sales and Service

Member since 2003

Renato Murk

1956, Swiss

Head of Order Fulfillment

Member since 2003

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Thomas F. Dressendörfer, Chief Financial Officer, Finance and Support

Thomas F. Dressendörfer has been appointed to the CFO position of Uster Technologies Ltd

as of October 1, 2008. He takes responsibility to lead the Finance and Support Team in Uster,

including IT, and reports as member of the Executive Management Committee directly to

the CEO. Thomas F. Dressendörfer has worked in the past years with Randstad, The Nielsen

Company and Procter & Gamble, where he has been holding various key senior finance

positions. He brings extensive experience of leading high performing Finance teams as well

as experience of working with Finance groups internationally. Thomas F. Dressendörfer

holds a Masters degree in Business Administration and Economics from the University of

Erlangen-Nuremberg in Germany. He was born in 1958 and is a German citizen.

Hossein Ghorashi, Head of U.S. Operations

Hossein Ghorashi has been Head of U.S. Operations since 2003. From 1990 through 2002, he

held the positions of Senior Vice President of R&D and Head of Zellweger Uster, Inc. He was

with Special Instruments Laboratory from 1969 through 1989 and was Vice President of R&D

for the last 10 years. He holds a BS and an MS in Electrical Engineering from the University

of Tennessee, Knoxville TN, United States. He is a coinventor of 18 fiber testing patents,

author of numerous papers and presents the Company’s latest innovations in important

international conferences. He is known and referred to as a cotton fiber testing expert world-

wide. Hossein Ghorashi was born in 1946 and is an American citizen.

Dr. Naiming Wei, Head of Asian Operations

Naiming Wei has been a Member of the Management and Head of Asian Operations of

Uster Technologies Ltd since 2006. From 2000 to 2005 he was General Manager at Shanghai

Sachs Huizhong Shock Absorber Co. Ltd, a joint venture company between the German

automotive supplier ZF-Sachs Ltd and Shanghai Automotive Industry Corporation. Prior to

that, Naiming Wei worked as management consultant at Management Engineers GmbH for

large and middle size multinational clients in Germany, in the U.K. and in Switzerland. From

1993 to 1997 he was Sales and Marketing Manager and Purchasing Manager at Siemens Ltd,

Business Division Private Communication Systems. Naiming Wei holds a Masters degree

(Dipl.-Ing.) and a PhD degree (Dr.-Ing.) in Electrical Engineering from the University Erlangen-

Nuremberg in Germany. He was born in 1962 and is a German citizen.

Richard Furter, Head of Textile Technology

Richard Furter has been Head of Textile Technology of Uster Technologies Ltd since 2003.

Prior to that, he has worked for Zellweger Uster Ltd since 1967 where he was an electronic

engineer in R&D and was particularly involved in sensor technology and signal processing.

In this role he has filed various patents. Richard Furter held positions as Product Manager,

Manager of R&D and Manager of Marketing and Sales. He is familiar with the customers in

the most important textile markets. Richard Furter graduated as an electronic engineer

(currently Hochschule für Technik und Architektur, Lucerne). He was born in 1943 and is

a Swiss citizen.

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Dr. Rafael Storz, Head of Research and Innovation

Rafael Storz has been a Member of the Management since 2006. From 2001 to 2006, he was a

Member of the Management and Head of R&D of Leica Microsystems CMS GmbH, Wetzlar,

Germany. From 1998 to 2001, he was a project manager and deputy head of the R&D depart-

ment at Leica Microsystems Heidelberg GmbH, Germany. He is experienced within strategy

and business development and product development. He is a (co-)inventor of 24 patents in

the field of measurement equipment and analysis tools. Rafael Storz earned a PhD in Physics

from the University of Constance, Germany. He was born in 1967 and is a German citizen.

Deniz Bütüner, Head of Marketing and Business Development

Deniz Bütüner has been a Member of the Management and joined Uster Technologies in 2007

as Vice President Marketing. From 2003 to 2006 she was with Bombardier Transportation’s

Propulsion and Controls Division, where she was responsible for the Division’s strategy,

marketing and communication. Between 1998 and 2002 she held marketing, business development

and communications management positions with Hyperion Solutions, MIS Technologies

and Swisslog Management. Deniz Bütüner has extensive experience in strategy, business

development and marketing. She holds a Swiss Federal Diploma in Marketing Management.

She was born in 1973 and is a Swiss citizen.

Harold R. Hoke Jr., Head of Sales and Service

Harold Hoke has been Head of Sales and Service of Uster Technologies Ltd since 2003. He

rejoined Uster Technologies Ltd in 2002 after almost two years as CEO of Savio America.

Harold Hoke originally joined Zellweger Uster Ltd in 1980 in the U.S. operation. Since 1996,

he was based in the Company’s headquarters and was responsible for Sales and Service Asia.

Harold Hoke has substantial experience in sales, marketing, service, business development,

production management and strategy development. Harold Hoke holds a BS from Clemson

University. He was born in 1954 and is an American citizen.

Renato Murk, Head of Order Fulfillment

Renato Murk has been Head of Order Fulfillment of Uster Technologies Ltd since 2003, which

includes the worldwide responsibility for the production processes and supply chain manage-

ment. From 1999 to 2003, he was responsible for production and logistics of the Zellweger

Uster Division of Zellweger Luwa Ltd. From 1996 to 1999, he was a Manager of Product

Assembly Lines at Zellweger Uster. Renato Murk holds a Masters of Industrial Engineering

degree from the Swiss Federal Institute of Technology (ETH) with the majors Process

Engineering and Business Administration. Besides significant experience in general and

production management, he has executed several efficiency and cost-improving programs

as a senior consultant in a Swiss-based management consultancy. He was born in 1956 and

is a Swiss citizen.

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4.2 Other Activities and Vested Interests

There are no further activities of vested interests of the Members of the Executive Manage-

ment except the ones mentioned above.

4.3 Management Contracts

The Board of Directors has not delegated any management tasks to third parties outside the

Company.

5 Compensation, Shareholdings and Loans

5.1 Content and Method of Determining the Compensation and the Share-Ownership

Programs

With respect to the compensation, the Nomination and Compensation Committee has the

following responsibilities:

• To review and assess on a regular basis the remuneration system of the Group including

the incentive plans for the Executive Committee and to make a proposal to the Board of

Directors thereto;

• To make recommendations with respect to the remuneration package of the CEO and the

Directors;

• To recommend upon proposal of the CEO the remuneration package of employees report-

ing directly to the CEO;

• To make recommendations on the grant of options or other securities under any manage-

ment incentive plan.

Based on these recommendations, the Board of Directors approves the remuneration of the

Members of the Board of Directors and the Members of the Executive Committee.

Usually, Uster Technologies Ltd does not adjust salaries during the year. Therefore, the

Nomination and Compensation Committee generally meets during the fourth quarter to

discuss the remuneration package of the Board Members and the Members of the Executive

Committee for the following year. The CEO prepares a proposal by consulting different re-

muneration studies available on the market. This recommendation is distributed to the

Members of the Nomination and Compensation Committee before the meeting and serves

as a basis for the discussion of the remuneration during the meeting. The CEO is partially

present at the meeting but he has to leave when his remuneration is discussed. After the

final decision on the remuneration of the Board Members and the Members of the Executive

Committee by the Board of Directors, the salary changes are signed by a Member of the Board

of Directors.

The remuneration of the Members of the Board of Directors consists of a payment in cash

and is determined by taking into account their respective responsibilities, experience and

the time which they invest in their activity as Members of the Board of Directors. Extraordi-

nary assignments or work which a Director accomplishes outside of his activity as a Director

is specifically remunerated. Such remuneration has to be approved by the Board of Directors.

In addition, the Directors are reimbursed all reasonable cash expenses properly incurred by

them in the discharge of their duties, including their reasonable expenses of traveling to and

from the meetings of the Board of Directors, committee meetings and Shareholders’

meetings.

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The Members of the Executive Committee are remunerated according to the principle of

flexible, performance-related compensation. Their remuneration consists of a basic salary

and a performance-related component in the context of the bonus plan. The performance-

related component is based on the gross sales and the operating earnings achieved by the

Group (EBITA) as well as the individual goals. All the components mentioned above are cash

compensations.

With the exception of a car, the Members of the Executive Committee do not have any

additional benefits.

There are no share-ownership programs or option plans with regard to the compensation of

the Board of Directors and the Executive Committee.

5.2 Compensation of the Members of the Board of Directors and the Executive Committee

Information on the compensation of the Board of Directors and the Executive Committee

for the year ending December 31, 2008, are presented in note 11 of the Financial Statement

of Uster Technologies Ltd.

6 Shareholders’ Participation

6.1 Voting-Rights and Representation Restrictions

Details of restrictions on shareholders’ voting rights are given in the section entitled

“2.6 Limitations on Transferability and Nominee Registrations” above.

In a Shareholders’ meeting each share recorded as a share with the right to vote in the share

register entitles its owner to one vote. By means of a written proxy, each shareholder may

have his shares represented in a Shareholders’ meeting by a third person who needs not be

a shareholder. Shareholders who are recorded in the share register with the right to vote at

a certain date appointed by the Board of Directors are entitled to participate in the Sharehold-

ers’ meeting and to exercise the right to vote.

No exceptions to these rules were granted by the Board of Directors in the year under review.

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6.2 Statutory Quorums

Unless mandatory statutory provisions provide otherwise, the Shareholders’ meeting pass-

es its resolutions and performs elections with the absolute majority of the votes represented

at the meeting.

If an election cannot be completed upon the first ballot and if there is more than one candi-

date, the Chairman shall direct a second ballot at which the relative majority shall decide.

6.3 Convocation of the Shareholders’ Meeting

The Shareholders’ meeting is called by the Board of Directors or, if necessary, the auditors,

not less than 20 days before the date of the meeting. Notice of a Shareholders’ meeting is

given by means of a single publication in the Swiss Official Gazette of Commerce. The share-

holders registered in the share register may in addition receive a written notice sent by

mail.

An extraordinary Shareholders’ meeting is called whenever the Board of Directors or the

auditors consider it necessary or if a Shareholders’ meeting decides so. The Board of Direc-

tors will also call a Shareholders’ meeting if one or more shareholders whose combined hold-

ings represent at least 10.0 % of the share capital so demand in writing and specify the items

and the proposals, in the case of elections the names of the proposed candidates, to be sub-

mitted to the meeting.

6.4 Agenda

Shareholders whose individual or combined holdings represent an aggregate nominal value

of at least CHF 1,000,000 or at least 10.0 % of the share capital may demand that an item be

included in the agenda. This right must be exercised in writing at least 60 days before the

meeting with indication of the items and the proposals of the shareholders.

No resolution shall be passed on items for which no proper notice has been given; this pro-

hibition does not apply to proposals to call an extraordinary Shareholders’ meeting, to initi-

ate a special audit or to elect the auditors as demanded by a shareholder.

No prior notice is required for proposals concerning items included in the agenda and dis-

cussions that do not result in the adoption of resolutions.

6.5 Inscriptions into the Share Register

After the publication or mailing of the written notice of the Shareholders’ meeting until the

day following the Shareholders’ meeting no recordings in the share register will be made,

provided that the Board of Directors does not appoint a different date.

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7 Changes of Control and Defense Measures

7.1 Obligation to Make an Offer

According to the Federal Act on Stock Exchanges and Securities Trading, a shareholder or a

group of shareholders acting in concert acquiring more than 331⁄3 % of the voting rights must

submit a takeover offer to all remaining shareholders. The articles of association of Uster

Technologies Ltd do not include any amendment (i.e. no opting-out or opting-up provision)

to this rule.

7.2 Clauses on Changes of Control

Neither the Members of the Board of Directors nor the Members of the Executive Committee

have contracts that provide for benefits upon termination of employment contracts due to

a change of control.

8 Auditors

8.1 Duration of the Mandate and Term of Office of the Lead Auditor

The statutory auditors and Group auditors are elected by the Shareholders’ meeting. The

term of office of the auditors is one year, beginning with the day of their election and ending

on the day of the next ordinary Shareholders’ meeting.

Ernst & Young Ltd, Zurich, have been the auditors of the Group since 2003. They have been

the statutory auditors of Uster Technologies Ltd since its incorporation in November 2006.

The auditor-in-charge, Daniel Zaugg, took up office in 2008.

8.2 Fees

In the year under review, Ernst & Young Ltd invoiced the following fees:

• Audit fees: CHF 0.6 million

• Additional fees: CHF 0.1 million

The additional fees invoiced were mostly related to tax consulting.

8.3 Information Tools Pertaining to the External Audit

The Audit Committee monitors on behalf of the Board of Directors the performance and

independence of the external auditors. In addition, it reviews the audit result and monitors

the implementation of the findings by the Executive Committee.

The Audit Committee prepares proposals for the appointment or removal of the external

auditors for submission to the Board of Directors which then nominates the external auditor

for election by the Shareholders’ meeting.

Currently, the Audit Committee is informed on the findings of the audit through the Man-

agement Letter issued by the auditors after the year-end audit, which is written after the

year-end audit by the auditor.

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9 Information Policy

Uster Technologies Ltd is committed to an open and clear information policy towards its

shareholders as well as its other stakeholders.

The audited annual as well as unaudited semi-annual reports are available to the sharehold-

ers and other stakeholders. They are provided in printed form and on the internet under

www.uster-investors.com / financial_reports.php. Additionally, they are informed via the

media of material current changes and developments. Events relevant for the share price are

published according to the ad-hoc publicity guidelines of the SIX Swiss Exchange.

Media and analyst conferences are held at least once a year and the press releases as well as

presentations are available on the website under www.uster-investors.com / news.php.

Interested parties can subscribe to the mailing list available under www.uster-investors.

com / subscription_service.php in order to receive ad-hoc publications or other recent infor-

mation relating to the company.

Important Dates

Publication of annual results 2008 March 2, 2009

Media and analyst conference March 2, 2009

Last day for inscription into the share register before the

Shareholders’ meeting 2009 March 24, 2009


Semi-annual results 2009 July 21, 2009

Contact for Media, Investors and Analysts

Thomas F. Dressendörfer, CFO

Sonnenbergstrasse 10

CH-8610 Uster

Phone +41 43 366 36 06

Fax +41 43 366 36 54


10 Material Changes since the Balance Sheet Date

There are no material changes to the information stated in this section since the balance

sheet date.

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Uster Technologies Ltd | Financial Report 2008

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Comment on the Consolidated Financial Statements

Summary

In a challenging market environment Uster Technologies Ltd continued to deliver a solid

performance in the 2008 financial year. EBITA reached CHF 34.2 million and margins remained

strong at 22.1 % or 24.9 % before restructuring costs. Key drivers for these EBITA margins are

the lean organizational structure and the pro-active cost management approach of the Com-

pany, which allowed Uster Technologies Ltd to partly offset declining sales.

The free cash flow was at CHF 29.4 million which equals a cash conversion rate of EBITA to

free cash flow of 86.1%.

The net result reached CHF 5.3 million or 3.4 % of gross sales which represents an increase of

48.2 % compared to the previous year.

Income Statement

Gross Sales

Gross sales for 2008 amounted to CHF 154.9 million, a decrease of 17.0 % compared to the

prior year figure of CHF 186.7 million. The overall decline of gross sales is a result of the cur-

rent difficult market environment. Whereas sales of on-line products to textile machinery

customers followed the textile market trend and dropped, the sales of classing products to

governmental organizations, the sales of off-line fiber and yarn laboratory equipment and

the after-sales services were sustained at comparable levels to 2007.

As Uster Technologies Ltd usually invoices in hard currencies, like CHF or USD, the impact

of exchange rate gains / losses has been negligible (less than 0.5 % of gross sales) in 2008.

EBITA

EBITA for the Group amounted to CHF 34.2 million (2007: CHF 52.4 million) including re-

structuring costs of CHF 4.4 million. These costs entirely relate to one-time expenses occurred

by the redundancy of approximately 10 % of the global workforce and the respective pension

scheme settlement.

As a percentage of gross sales, the EBITA reached 22.1 % (2007: 28.1 %). The comparable EBITA

before restructuring costs was 24.9 %.

R&D expenses increased by 2.8 % to 12.8 % of gross sales in 2008 (2007: 10.0 %), confirming

the Company’s focus on the development of new value added products, systems and features

for the textile industry.

The proportion of added value from our Chinese sales and technology center steadily grew

during the reporting period.

Uster Technology Ltd’s lean and flexible business model allows the Group to adapt its op-

erations to major changes in market demand on a short notice thereby securing a high EBITA

margin. During the course of the year, the cost of goods sold and the overhead costs were

adjusted accordingly with only a minor impact on the EBITA margin.

Comment on the Consolidated Financial Statements 2008 47

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Balance Sheet

The balance sheet total as of December 31, 2008, amounted to CHF 409.8 million (2007:

CHF 432.1 million). This decrease of CHF 22.3 million compared to the previous year was

mainly driven by the amortization of the intangible assets of CHF 15.0 million (assets) and the

loan repayments of CHF 15.0 million (liabilities). Shareholder’s equity increased by CHF 1.0 mil-

lion compared to the previous year, resulting into a strong equity ratio of 38.9 % (2007: 36.7 %).

Impairment Test of Intangible Asset and Goodwill

Uster Technologies Ltd performs an impairment test on the goodwill and the intangible

assets at least once a year. The latest impairment test was performed in December 2008 and

was based on recent market developments, realistic internal assumptions and external input

on key parameters. The impairment test confirmed the carrying amounts of the goodwill

and related intangible assets.

Bank Loans

The Group repaid CHF 15.0 million of bank loans with a maturity date in 2012 and met all loan

covenants in the financial year 2008.

Cash Flow Statement

Uster Technologies Ltd continues to have a strong focus on cash generation with a key

objective of a high conversion rate of EBITA to operating cash flow.

Due to strong working capital management, the cash flow from operating activities reached

CHF 32.8 million (2007: CHF 39.2 million), equaling an improved EBITA to operating cash

flow conversion of 95.9 % (2007: 74.9 %).

The cash flow from investing activities of CHF -3.3 million was higher by CHF 1.3 million

compared to CHF -2.0 million in 2007.

The free cash flow (operating cash flow minus investing activities) amounted to CHF 29.4 mil-

lion (2007: CHF 37.2 million) or 86.1 % of EBITA providing Uster Technologies Ltd with

sufficient cash flow to service all financing activities.

The cash flow from financing activities of CHF -27.4 million (2007: CHF -39.7 million) was

mainly driven by significantly lower interest payments of CHF 8.5 million when comparing

to the previous year and allowing for dividend payments of CHF 3.9 million and bank loans

repayments of CHF 15.0 million.

Cash per December 31, 2008, improved by CHF 2.1 million to CHF 7.5 million (2007:

CHF 5.4 million).

48 Comment on the Consolidated Financial Statements 2008

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Capital Expenditure for Intangible and Tangible Assets

Capital expenditure for intangible and tangible assets only amounted to CHF -3.3 million

(2007: CHF -2.0 million). With only 2.1 % of gross sales, this is low compared to market aver-

ages and is consuming only 10 % of the cash flow from operating activities.

Key reason for this low capital expenditure rate is the consequent outsourcing of all non-core

activities implemented by Uster Technologies Ltd to keep up the lean flexible business model.

Personnel

As of December 31, 2008, the Uster Group employed 536 full time equivalents (2007: 529)

which is an increase of 1.3 % compared to the prior year.

in percent Dec 31, 2008 Dec 31, 2007 Dec 31, 2006

Europe 41 % 41 % 41 %

Asia 36 % 35 % 32 %

Americas 23 % 24 % 27 %

in percent Dec 31, 2008 Dec 31, 2007 Dec 31, 2006

Sales and marketing 46 % 46 % 49 %

Research and development 18 % 16 % 14 %

Order fulfillment 26 % 27 % 25 %

Management and administration 10 % 11 % 12 %

As a part of operational measures to downsize the cost base of the Group to the current re-

duced demand in the textile industry, Uster Technologies Ltd is in the process of reducing

its workforce by approximately 10 % out of a worldwide figure of 536 employees. This re-

structuring program, consisting of a combination of early retirement and redundancy pro-

grams, will be fully implemented by the end of February 2009 and will generate significant

on-going savings. Costs of the program and the respective pension scheme settlement

totaling CHF 4.4 million were included in the 2008 results.

Taxes

The expected income tax for the Uster Group has been kept at CHF 3.3 million for 2008 which

is comparable to 2007.

Dividend Proposal

At the General Meeting on March 31, 2009, the Board of Directors will propose to refrain from a

dividend payment for the 2008 financial year. This measure will enable Uster Technologies Ltd

to ensure sufficient liquidity to further invest into the business and to lower debt.

Comment on the Consolidated Financial Statements 2008 49

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50 Uster Group – Consolidated Financial Statements 2008

Uster Group – Consolidated Financial Statements

Consolidated Income Statement

in CHF 1,000 Notes Jan 1 –

Dec 31, 2008

Restated

Jan 1 –

Dec 31, 2007

Gross sales 154,893 100.0 % 186,666 100.0 %

Sales deductions 6 -1,925 -3,087

Net sales 152,968 98.8 % 183,579 98.3 %

Cost of goods sold 7 -61,952 -76,212

Gross profit 91,016 58.8 % 107,367 57.5 % 1)

Sales and marketing expenses 8.1 -19,465 -21,433

Research and development expenses 8.2 -19,857 -18,645

Management and administrative expenses 8.3 -17,582 -15,930

Other income 77 864

Other expenses 9 -15,289 -18,470

Earnings before interest and tax (EBIT) 18,900 12.2 % 33,753 18.1 % 1)

Amortization and restructuring costs 19,645 18,631

Earnings before interest tax and amortization (EBITA) before restructuring

38,545 24.9 % 52,384 28.1 %

Restructuring costs 23 -2,829 0

Pension costs due to restructuring 15 -1,548 0

Earnings before interest tax and amortization (EBITA) after restructuring 34,168 22.1 % 52,384 28.1 %

Amortization 12 -15,268 -18,631

Earnings before interest and tax (EBIT) 18,900 12.2 % 33,753 18.1 % 1)

Finance income 2,739 1,706

Finance expenses -12,950 -28,571

Finance result 10 -10,211 -6.6 % -26,865 -14.4 %

Earnings before tax 8,689 5.6 % 6,888 3.7 % 1)

Income tax 16 -3,373 -3,301

Net result 5,316 3.4 % 3,587 1.9 % 1)

Earnings per share (in CHF)Basic / Diluted earnings per share 11 0.81 0.72

1) The prior year figures have been restated based on IFRIC 14. See note 15 Pension Benefits for reference.

The notes on pages 55 to 97 are an integral part of these consolidated financial statements.

1)

1)

1)

1)

1)

1)

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Uster Group – Consolidated Financial Statements 2008 51

Consolidated Balance Sheet

in CHF 1,000 Notes Dec 31, 2008 Restated

Dec 31, 2007

Intangible assets 12 349,032 364,129

Property, plant and equipment 14 8,239 6,957

Pension fund asset 15 15,794 16,981

Financial assets 225 182

Deferred tax assets 16 2,031 2,940

Non-current assets 375,321 91.6 % 391,189 90.5 % 1)

Inventories 17 12,233 15,893

Receivables trade 18 12,235 16,203

Other receivables 19 1,734 2,615

Income tax receivables 792 774

Cash and cash equivalents 20 7,490 5,383

Current assets 34,484 8.4 % 40,868 9.5 %

Assets 409,805 100.0 % 432,057 100.0 % 1)

Share capital 61,664 65,600

Share premium 78,647 78,647

Other reserves 123 4

Currency translation differences -1,400 -968

Retained earnings 20,508 15,311

Shareholders’ equity 21 159,542 38.9 % 158,594 36.7 % 1)

Bank loans 22 154,036 168,795

Provisions 23 2,735 2,057

Deferred tax liabilities 16 58,403 60,457

Non-current liabilities 215,174 52.5 % 231,309 53.5 % 1)

Bank loans 22 10,000 10,000

Derivative financial instruments 4 2,111 218

Trade and other liabilities 24 7,277 12,705

Accrued liabilities 25 10,940 15,561

Provisions 23 3,916 2,200

Income tax liabilities 845 1,470

Current liabilites 35,089 8.6 % 42,154 9.8 %

Liabilities 250,263 61.1 % 273,463 63.3 % 1)

Shareholders, equity and liabilities 409,805 100.0 % 432,057 100.0 % 1)



1)

1)

1)

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Consolidated Cash Flow Statement


Dec 31, 2008

Restated

Jan 1 –

Dec 31, 2007

Earnings before tax 8,689 6,888 1)

Adjustments for

Depreciation property, plant and equipment 14 1,880 1,955

Amortization intangible assets 12 15,268 15,271

Impairment of goodwill 12 0 3,360

Change in pension fund asset 15 1,187 -839 1)

Provisions 2,408 -1,337

Finance result 10 10,211 26,865

Gain on sale of intangible assets and property, plant

and equipment

-14 -1

39,629 52,162

Change in

Inventories 3,286 -491

Receivables trade 3,698 -2,774

Other receivables 1,361 2,716

Trade and other liabilities -5,223 -3,769

Accrued liabilities -5,378 -2,668

Change in working capital -2,256 -6,986

Income taxes paid -4,617 -5,951

Cash flow from operating activities 32,756 39,225

Acquisition of subsidiaries, net of cash acquired 0 -353

Purchase of intangible assets 12 -174 -446

Purchase of property, plant and equipment 14 -3,513 -1,991

Purchase of financial assets -48 -179

Disposal of property, plant and equipment 117 24

Disposal of financial assets 7 240

Proceeds on sale of derivative financial instruments 0 564

Interest received 264 125

Cash flow from investing activities -3,347 -2,016




Global Reports LLC

Consolidated Cash Flow Statement (continued)


Dec 31, 2008

Restated

Jan 1 –

Dec 31, 2007

Proceeds from bank loans 22 0 180,000

Repayment of bank loans 22 -15,000 -231,600

Arrangement fees on bank loans 22 0 -1,443

Repayment of shareholder loans 0 -64,500

Proceeds from issue of share capital 0 104,000

Costs related to issue of share capital 0 -6,863

Nominal value reduction 21 -3,936 0

Interest paid -8,477 -19,321

Cash flow from financing activities -27,413 -39,727

Net change in cash and cash equivalents 1,996 -2,518Cash and cash equivalents at beginning of period 5,383 8,393

Exchange differences on cash and cash equivalents 111 -492

Cash and cash equivalents at end of period 20 7,490 5,383

Operating cash flow generated in % of EBITA 95.9 % 74.9 %

Free cash flow (operating cash flow plus investing cash flow) generated in % of EBITA 86.1 % 71.0 %


Uster Group – Consolidated Financial Statements 2008 53

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Consolidated Statement of Changes in Equity

in CHF 1,000 Share

Capital

Share

Premium

Other Reserves Currency

Translation

Differences

Retained

Earnings

2007

Balance at January 1, 2007 45,600 0 0 0 -862 44,738Restatement due to IFRIC 14 1) 0 0 0 0 12,590 12,590 Balance at January 1 (restated) 45,600 0 0 0 11,728 57,328

Currency translation differences 0 0 0 -968 0 -968Total income and expense for the period recognized directly in equity 0 0 0 -968 0 -968

Net result 1) 0 0 0 0 3,587 3,587Total income and expense for the period 1) 0 0 0 -968 3,587 2,619

Issue of share capital 20,000 84,000 0 0 0 104,000Costs related to issue of share capital 0 -6,863 0 0 0 -6,863Tax effect of costs related

to the issue of share capital 0 1,510 0 0 0 1,510Allocation to statutory reserves 0 0 4 0 -4 0Balance at December 31, 2007 1) 65,600 78,647 4 -968 15,311 158,594

in CHF 1,000 Share

Capital

Share

Premium

Other Reserves Currency

Translation

Differences

Retained

Earnings

2008

Balance at January 1, 2008 1) 65,600 78,647 4 -968 15,311 158,594Currency translation differences 0 0 0 -432 0 -432Total income and expense for the period recognized directly in equity 0 0 0 -432 0 -432

Net result 0 0 0 0 5,316 5,316Total income and expense for the period 0 0 0 -432 5,316 4,884

Dividend 2) -3,936 0 0 0 0 -3,936Allocation to statutory reserves 0 0 119 0 -119 0Balance at December 31, 2008 61,664 78,647 123 -1,400 20,508 159,542

1) The prior year figures have been restated based on IFRIC 14. See note 15 Pension Benefits for reference.2) The dividend has been paid by way of nominal value reduction.

For details to the shareholders’ equity refer to note 21 Share Capital and Reserves.



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Uster Group – Notes to the Consolidated Financial Statements 2008 55

Uster Group – Notes to the Consolidated Financial Statements

1 Corporate Information

Uster Technologies Ltd (“the Company”) and its subsidiaries (together “the Group”) are the

world’s market leader in textile quality controlling and provide systems and services that

enable the industry to manufacture optimum quality and competitive products “from fiber

to fabric.” The Group has a long history as the leader in textile electronics. For more than

60 years, the test ing and monitoring solutions have enabled the production of the finest

fibers, yarns and fabrics.

Uster Technologies Ltd is domiciled in Switzerland. The address of its registered office is

Sonnenbergstrasse 10, CH-8610 Uster, Switzerland.

2 Basis of Preparation of the Consolidated Financial Statements

2.1 Statement of Compliance

The consolidated financial statements of the Uster Group have been prepared in accordance

with the International Financial Reporting Standards (IFRS).

The consolidated financial statements of the Uster Group for the year ended December 31, 2008,

were authorized for issue in accordance with a resolution of the Board of Directors on Febru-

ary 17, 2009. The general meeting of shareholders will be held on March 31, 2009. According

to the Swiss Code of Obligation, the general meeting of shareholders has the authority to

approve the financial statements.

2.2 Basis of Measurement

The consolidated financial statements have been prepared on a historical cost basis except

for the derivative financial instruments mentioned in note 4.3 Market Risk that has been

measured at fair value.

2.3 Functional and Presentation Currency

The consolidated financial statements are stated in Swiss Francs, which is the Company’s

functional currency. All values are rounded to the nearest thousand (CHF 1,000) except when

otherwise indicated.

2.4 Significant Accounting Judgments and Estimates

In the process of preparing the consolidated financial statements, the Executive Committee

of the Uster Group has to make judgments, assumptions and estimations that affect the

reported amounts of assets, liabilities, income and expenses. These estimates are reviewed

on a regular basis and are based on past experience as well as assumptions about the future

that currently seem to be reasonable. The actual results, however, could differ from these

estimates.

The key estimates and assumptions that have a significant risk of causing material adjust-

ments to the carrying amounts of assets and liabilities are mentioned below.

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56 Uster Group – Notes to the Consolidated Financial Statements 2008

2.5 Impairment of Goodwill and Intangible Assets

The Uster Group determines at least on an annual basis whether goodwill and intangible

assets with indefinite useful lives are to be impaired or not. For intangible assets with defi-

nite useful lives the useful life is reviewed each year and assessed for impairment whenever

there is an indicator that the intangible asset may be impaired. This requires an estimation

of the value in use of the cash-generating units to which the goodwill and the intangible

assets are allocated. Estimating the value in use requires to make an estimate of the future cash

flows of the cash-generating units and to choose a suitable discount rate for the calculation

of the present value of those cash flows (see note 13 Impairment Testing of Goodwill and

Intangible Assets with Indefinite Useful Lives). These estimations are based on internal and

external sources of information.

2.6 Pension Benefits

The cost of defined benefit pension plans is determined using actuarial valuations. The

actuarial valuation involves making assumptions about discount rates, expected rates of

return on assets, future salary increases, mortality rates and future pension increases. Due

to the long-term nature of these plans, such estimates are subject to significant uncertainty

(see note 15 Pension Benefits).

3 Summary of Significant Accounting Policies

3.1 Changes in Accounting Policies

The accounting policies adopted in the preparation of these consolidated financial state-

ments are consistent with those followed in the preparation of the Group’s annual financial

statements for the year ended December 31, 2007, except that the Uster Group has adopted

the following new and amended IFRS and IFRIC interpretations during the year. The principal

effects of these changes in policies are discussed below.

Standards, Amendments and Interpretations Effective in 2008 and Relevant for the Group

Standard /

Interpretation

Title

Effective Date

IFRIC 14:

IAS 19

The Limit on a Defined Benefit Asset, Minimum

Funding Requirements and their Interactions January 1, 2008

This interpretation clarifies when refunds or reductions in future contributions in relation

to defined benefit assets should be regarded as available, and provides guidance on the impact

on the minimum funding requirements on such assets. It also addresses when a minimum

funding requirement might give rise to a liability. The adoption of this interpretation led to

an initial adjustment (restatement) with a net impact on retained earnings of CHF 12.6 million

as of January 1, 2007 (for further information see note 15).

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Standards, Amendments and Interpretations Effective in 2008

not Relevant for the Group

Standard /

Interpretation

Title

Effective Date

IFRS 7 Financial Instruments: Disclosure July 1, 2008

IAS 39 Financial Instruments: Recognition and Measurement July 1, 2008

IFRIC 11 IFRS 2 - Group and Treasury Share Transactions March 1, 2007

IFRIC 12 Service Concession Arrangements January 1, 2008

Standards, Amendments and Interpretations that are not yet Effective in 2008

and have not been Early Adopted by the Group

Standard /

Interpretation

Title

Effective Date

IFRS 1 First-time Adoption of International Financial Reporting

Standards – Cost of an Investment in a Subsidiary, Jointly

Controlled Entity or Associate – Amendments January 1, 2009

IFRS 2 Share-based Payment – Vesting Conditions

and Cancellations – Amendment January 1, 2009

IFRS 3 Business Combinations – Revised July 1, 2009

IFRS 8 Operating Segments January 1, 2009

IAS 1 Presentation of Financial Statements – Revised January 1, 2009

IAS 23 Borrowing Costs – Revised January 1, 2009

IAS 27 Consolidated and Separate Financial Statements – Cost of

an Investment in a Subsidiary, Jointly Controlled Entity

or Associate – Amendments July 1, 2009

IAS 32

and IAS 1

Financial Instruments – Amended and Presentation

of Financial Statements – Amendment January 1, 2009

IAS 39 Financial Instruments: Recognition and Measurement –

Eligible hedged items – Amendment July 1, 2009

IFRIC 13 Customer Loyalty Programmes July 1, 2008

IFRIC 15 Agreements for the Construction of Real Estate January 1, 2009

IFRIC 16 Hedges of a Net Investment in a Foreign Operation October 1, 2008

IFRIC 17 Distributions of Non-cash Assets to Owners July 1, 2009

IFRIC 18 Transfer of Assets from Customers July 1, 2009

Improvements to IFRS January 1, 2009

July 1, 2009

The following standards and interpretations will be relevant for the Group:

IFRS 8: Operating Segments

This standard was published in November 2006, and replaces IAS 14 Segment Reporting.

IFRS 8 requires entities to define operating segments and segment performance in the fi-

nancial statements based on information used by the chief operating decision-maker. This

new standard has no impact on the segments currently reported. It will lead to changes in

the disclosures due to the different disclosure requirements of IFRS 8.

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IAS 1: Presentation of Financial Statements – Revised

This amendment requires information in financial statements to be aggregated on the basis

of shared characteristics and to introduce a statement of comprehensive income. This will

enable readers to analyze changes in a company’s equity resulting from transactions with

owners in their capacity as owners (such as dividends and share repurchases) separately from

’non-owner’ changes (such as transactions with third parties). The entity has not undergone

a detailed analysis and therefore no final assessment of the impact can presently be made.

Improvements to IFRS

In May 2008 the board issued its first omnibus of amendments to its standards primarily

with the goal to remove inconsistencies and clarifying wording. The Group has not under-

gone a detailed analysis and therefore no final assessment of the impact can presently be

made.

3.2 Basis of Consolidation

The consolidated financial statements comprise the financial statements of Uster Technologies

Ltd and all its subsidiaries for the period ended December 31, 2008 and 2007, respectively.

The financial statements of the subsidiaries are prepared for the same reporting period as the

parent company, using consistent accounting policies.

Subsidiaries are entities over which the Group has control, i. e. has the power to govern the

financial and operating policies so as to obtain benefits from their activities. The financial

statements of subsidiaries are included in the consolidated financial statements from the

date that control commences until the date that control ceases.

All intra-group balances, transactions, as well as any income and expenses arising from

intra-group transactions are eliminated upon consolidation. Profits and losses arising from

intra-group transactions are eliminated in full.

3.3 Foreign Currency

Foreign Currency Transactions

Each subsidiary determines its functional currency and items included in the financial

statements of each subsidiary are measured using that functional currency. Transactions

in foreign currencies are initially recorded in the functional currency at the rate ruling at

the date of the transaction.

Monetary assets and liabilities denominated in foreign currency at the reporting date are

translated into the functional currency using the rates valid at that date.

Exchange rate gains and losses arising from transactions and from the translation of balance

sheet items denominated in foreign currencies are recognized in the income statement.

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Foreign Subsidiaries

As at the reporting date, the financial statements of all subsidiaries that have a functional

currency different from the presentation currency are translated into the presentation

currency as follows:

• Assets and liabilities are translated at the closing rate ruling at the reporting date.

• Income and expenses are translated at exchange rates at the dates of transactions.

The exchange differences resulting from the above translation are recognized directly in

equity. Upon the disposal of a foreign subsidiary the deferred cumulative exchange differ-

ences stated in equity are recognized in the income statement. None of the subsidiaries has

the currency of a hyper-inflationary economy.

Foreign exchange gains and losses resulting from intra-group loans of which the settlement

is neither planned nor likely in the foreseeable future, are considered to be part of a net in-

vestment in a subsidiary and are recognized directly in equity. The deferred cumulative

exchange differences stated in equity are recognized in the income statement on disposal of

the foreign subsidiary or upon repayment of the intra-group loans.

The following rates were used for the translation of the financial statements of the foreign

subsidiaries:

Closing Rates Average Rates

Dec 31, 2008 Dec 31, 2007 Jan 1 –

Dec 31, 2008

Jan 1 –

Dec 31, 2007

CHF CHF CHF CHF

USD 1 1.057 1.126 1.083 1.201

EUR 1 1.488 1.659 1.587 1.641

JPY 100 1.169 0.998 1.051 1.021

CNY 100 15.473 15.419 15.594 15.782

THB 100 3.044 3.771 3.288 3.709

INR 100 2.199 2.860 2.504 2.908

BRL 100 45.370 63.446 59.838 61.501

MXN 100 7.680 10.348 9.767 10.985

TRY 100 69.480 92.438 83.885 92.076

3.4 Intangible Assets

Business Combinations and Goodwill

Business combinations are accounted for using the purchase method. This involves recog-

nizing identifiable assets (including previously unrecognized intangible assets) and liabil-

ities (including contingent liabilities and excluding future restructuring) of the acquired

business at fair value.

Goodwill represents the excess of the cost of the business combination over the Group’s

interest in the net fair value of the identifiable assets, liabilities and contingent liabilities at

the date of the acquisition. When the excess is negative (negative goodwill), it is recognized

immediately in profit or loss. Goodwill acquired in a business combination is initially mea-

sured at cost.

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Following initial recognition, goodwill is measured at cost less any accumulated impairment

losses. For the purpose of impairment testing goodwill is allocated from the date of acquisi-

tion to cash-generating units. The allocation is made to those cash-generating units or groups

of cash-generating units that are expected to benefit from the business combination, irre-

spective of whether other assets or liabilities of the Group are assigned to those units. Each

unit to which the goodwill is allocated represents the lowest level within the Uster Group at

which the goodwill is monitored for internal management purposes. Impairment losses on

goodwill are not reversed.

Research and Development

Research costs are expensed as incurred. An intangible asset arising from development ex-

penditure on an individual project is recognized only when the Group can demonstrate the

technical feasibility of completing the intangible asset so that it will be available for use or

sale, its intention to complete and its ability to use or sell the asset, how the asset will generate

future economic benefits, the availability of resources to complete the asset and the ability

to measure reliably the expenditure during the development. Currently the Group did not

capitalize development cost.

Other Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost

of intangible assets acquired in a business combination is the fair value at the date of acquisi-

tion. Following initial recognition, intangible assets are carried at cost less any accumulated

amortization and any accumulated impairment losses.

The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortized using the straight-line method over their

useful economic life and assessed for impairment whenever there is an indication that the

intangible asset may be impaired. The amortization period and the amortization method

for an intangible asset with a finite useful life are reviewed at least once, usually at the end

of each financial year. Changes in the expected useful life or the expected pattern of consump-

tion of future economic benefits embodied in the asset are accounted for by changing the

amortization period or method and treated as changes in accounting estimates. The amortiza-

tion expense on intangible assets with finite lives is recognized in the income statement.

Intangible assets with an indefinite useful life are tested annually for impairment either

individually or at the level of the cash-generating unit. Such intangibles are not amortized.

The useful life of an intangible asset with an indefinite life is reviewed annually to determine

whether indefinite life assessment continues to be supportable. If not, the change in the

useful life assessment from indefinite to definite is made on a prospective basis.

Prior to the acquisition of the Uster Group in 2006 the Group’s intangible assets mainly

comprised acquired software licenses. In the course of the acquisition, new intangible assets

such as customer base, technology, USTER® STATISTICS and trademark were identified.

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The useful lives of the intangible assets are as follows:

Useful Life in Years

Software 5

Customer base 20

Technology 10

USTER® STATISTICS 25

Trademark indefinite

3.5 Property, Plant and Equipment

Property, plant and equipment including land and buildings are stated at cost less accumu-

lated depreciation and accumulated impairment. Such cost includes expenditure directly

attributable to the acquisition of the property, plant and equipment.

The cost of replacing part of property, plant and equipment is included in the carrying amount

of the item if it is probable that the future economic benefits associated with the item will

flow to the Group and the cost can be measured reliably. The cost for all other repairs and

maintenance is charged to the income statement as incurred.

Depreciation is calculated using the straight-line method over the estimated useful lives of

the assets. Land is not depreciated.

The useful lives of property, plant and equipment are as follows:

Useful Life in Years

Buildings 25

Plant and machinery 3–5

Office equipment 3–5

IT and communication equipment 2–6

Vehicles 4–5

The residual values and useful lives of property, plant and equipment are reviewed and ad-

justed, if appropriate, at the end of each financial year.

The carrying values of property, plant and equipment are reviewed for impairment when events

or changes in circumstances indicate that the carrying value may not be recoverable.

Items of property, plant and equipment are derecognized upon disposal or when no future

economic benefits are expected from their use or disposal. Any gains or losses on disposals

are recognized within “Other income” or “Other expenses” in the income statement.

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3.6 Financial Instruments

Financial Instruments

Financial instruments comprise investments in equity and debt securities, trade and other re-

ceivables, cash and cash equivalents, loans and borrowings as well as trade and other payables.

Financial instruments are classified in the following categories:

• Financial assets at fair value through profit or loss

• Loans and receivables

• Held-to-maturity investments

• Available-for-sale financial assets

• Financial liabilities at fair value through profit or loss

• Financial liabilities at amortized cost

The classification depends on the purpose for which the financial assets or liabilities were

acquired or entered into and is determined at initial recognition.

Non-derivative financial instruments are recognized initially at fair value plus, for instru-

ments not at fair value through profit and loss, any directly attributable transaction costs.

Subsequent to initial recognition, they are measured as described below.

Financial Assets at Fair Value through Profit or Loss

Financial assets at fair value through profit or loss include financial assets held for trading.

A financial asset falls under this category if acquired principally for the purpose of selling

in the short-term. Assets in this category are classified as current assets. The Group did not

have financial instruments falling under this category on December 31, 2008 or 2007.

Subsequent to initial recognition, financial assets at fair value through profit or loss are

measured at fair value and changes therein are recognized in profit or loss, without any

deduction for transaction costs that may occur on sale or disposal.

Loans and Receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments

that are not quoted in an active market. They are included in current assets, except for ma-

turities greater than 12 months after the reporting date. These are classified as non-current

assets. The Group’s loans and receivables comprise “receivables trade” (note 18 Receivables

Trade), “other receivables” (note 19 Other Receivables), “cash and cash equivalents” (note 20

Cash and Cash Equivalents) as well as “financial assets” that include mainly deposits.

Loans and receivables are carried at amortized cost, using the effective interest method less

any allowance for impairment. Gains and losses are recognized in profit and loss when the

loans and receivables are derecognized or impaired, as well as through the amortization

process.

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Held-to-maturity Investments

Held-to-maturity investments are non-derivative financial instruments which carry fixed

or determinable payments and fixed maturities and which the Group has the positive inten-

tion and ability to hold to maturity. The Group did not have financial instruments falling

under this category on December 31, 2008 or 2007.

Available-for-sale Financial Assets

Available-for-sale financial assets are those non-derivative financial instruments that are

designated as available-for-sale or are not classified in any of the three preceding categories.

As of December 31, 2008 and 2007, no financial assets have been designated as available-for-

sale financial assets.

Financial Liabilities at Fair Value through Profit or Loss

Financial liabilities at fair value through profit or loss include financial liabilities held for

trading. A financial liability falls under this category if entered into principally for the pur-

pose of repayment in the short-term. Liabilities in this category are classified as current

liabilities.

Subsequent to initial recognition financial liabilities at fair value through profit or loss are

measured at fair value and changes therein are recognized in profit or loss.

As of December 31, 2008, the Group held one derivative financial instrument (see note 4.3

Market Risk) to hedge its interest rate risk exposure on the bank loans. This interest rate

swap, however, does not qualify as a hedge accounting instrument according to IAS 39.

It is recognized initially at fair value (as an asset or liability at fair value through profit or

loss) and any gains or losses resulting from the valuation at market value are taken to the

income statement as incurred.

Financial Liabilities at Amortized Cost

All loans and borrowings are initially recognized at fair value less directly attributable trans-

action costs. Subsequently, they are measured at amortized cost, using the effective interest

method. Gains and losses are recognized in the income statement when the liabilities are

derecognized as well as through the amortization process.

As of December 31, 2008 and 2007, the Group had bank loans as well as trade and other lia-

bilities that qualified as financial liabilities at amortized cost (see notes 22 Bank Loans and,

24 Trade and Other Liabilities).

Accounting for finance income and expenses is discussed in note 3.14 Finance Income and

Expenses.

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Share Capital

Ordinary Shares

Ordinary shares are classified as equity. Transaction costs directly attributable to the issue

of ordinary shares are recognized as a deduction from equity, net of any tax effects.

Treasury Shares

When share capital recognized as equity is repurchased, the amount of the consideration

paid is recognized as a deduction from equity. When treasury shares are sold or reissued

subsequently, the amount received is recognized as an increase in equity, and the resulting

surplus or deficit on the transaction is recorded in retained earnings. As of December 31, 2008

and 2007, the Group did not have any treasury shares.

3.7 Inventories

Inventories are measured at the lower of cost and net realizable value. Cost for inventories

is based on the weighted average principle and includes expenditure incurred in acquiring

the inventories, conversion costs and other costs incurred in bringing them to their existing

location and condition. Manufactured inventories as well as work in progress cost includes

an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business less the

estimated costs of completion and the selling expenses.

3.8 Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, bank account balances as well as short-term

deposits with an original maturity of 90 days or less.

For the purpose of the consolidated cash flow statement, bank overdrafts that are repayable

on demand and form an integral part of the Group’s cash management are included as a

component of cash and cash equivalents. As of December 31, 2008 and 2007, the Group did

not have any overdrafts drawn.

3.9 Provisions

Provisions are recognized when the following criteria are met:

• The Group has a present legal or constructive obligation as a result of a past event;

• It is probable that an outflow of resources embodying economic benefits will be required

to settle the obligation;

• The amount of the obligation can be reliably estimated.

The expense relating to any provision is presented in the income statement net of any

reimbursement.

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3.10 Impairment

Intangible Assets and Property, Plant and Equipment

Assets with an indefinite useful life are not subject to amortization and depreciation but are

tested for impairment annually or more frequently if events or changes in circumstances

indicate that the carrying value may be impaired.

Assets that are subject to amortization and depreciation are reviewed for impairment when-

ever there is an indication that the carrying amount may not be recoverable.

An impairment loss is recognized for the amount by which the asset’s carrying amount ex-

ceeds its recoverable amount. An asset’s recoverable amount is the higher of an asset’s fair

value less costs to sell and its value in use. For the purpose of assessing impairment, assets

are grouped at the lowest levels for which there are separately identifiable cash in flows

(cash-generating units).

Impairment losses are recognized in the income statement. Intangible assets other than

goodwill and intangible assets with indefinite useful lives and property, plant and equipment

for which an impairment loss was recognized are reviewed for possible reversal of the im-

pairment at each reporting date. Such reversal is recognized in the income statement.

Financial Assets

A financial asset is assessed at each reporting date to determine whether there is any objective

evidence that it is impaired. An impairment loss in respect of a financial assets measured at

amortized cost is calculated as the difference between its carrying amount and its present

value of the future estimated cash flows discounted at the original effective interest rate. An

impairment loss in respect of an available for sale financial asset is calculated by reference to

its fair value. Individually significant financial assets are tested for impairment on an indi-

vidual basis. In relation to trade receivables, a provision for impairment is made when there

is objective evidence (such as the probability of insolvency or significant financial difficulties

of the debtor) that the Group will not be able to collect all of the amounts due under the

original terms of the invoice. The carrying amount of the receivable is reduced through use

of an allowance account. Impaired debts are derecognized when they are assessed as uncol-

lectible.

3.11 Pension Benefits

Defined Benefit Pension Plan

Uster Technologies Ltd provides pension benefits for its employees in Switzerland in the

event of retirement, disability, and death. The pension scheme is organized as a separate

legal entity and is funded in accordance with legal requirements.

Costs and liabilities related to the defined benefit pension plan are determined using the

projected unit credit method with attribution of benefit by service pro rata.

The amount recognized in the balance sheet in respect of defined benefit pension plans is

the fair value of plan assets less the present value of the defined benefit obligation at report-

ing date, together with adjustments for unrecognized actuarial gains and losses and for

unrecognized assets.

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Actuarial gains and losses are recognized as income or expense when the cumulative unrec-

ognized actuarial gain or loss exceeds 10.0 % of the higher of the defined benefit obligation

and the fair value of the plan assets. These gains or losses are recognized over the expected

average remaining working life of the employees participating in the plan.

Defined Contribution Plans

For employees in other subsidiaries the company pays contributions to the separate legal

entity as the plans’ rules require. The regular contributions constitute net periodic costs for

the year in which they are due and as such are included in personnel expenses.

3.12 Leases

Leases in terms of which the Group assumes substantially all the risks and rewards of owner-

ship are classified as finance leases. As of December 31, 2008 and 2007, the Group did not have

any finance leases.

All the Group’s leases are operating leases and the leased assets are not recognized in the

Group’s balance sheet. Operating lease payments are recognized as an expense in the income

statement on a straight-line basis over the lease term. Lease incentives received are recognized

as an integral part of the total lease expense over the term of the lease.

3.13 Revenue Recognition

Revenue from the sale of products and spare parts is measured at the fair value of the con-

sideration received or receivable, net of returns, discounts and volume rebates, sales taxes

and duty. Revenue is recognized when the significant risks and rewards of ownership of the

goods have passed to the buyer, it is probable that the economic benefits associated with the

transaction will flow to the entity, the associated costs incurred or to be incurred can be

estimated reliably, and the amount of revenue can be measured reliably.

The transfer of risks and rewards for products and spare parts sold usually occurs when they

are received by the client at the port of entry. However, sometimes the risks and rewards are

already transferred to the client as soon as the products and spare parts leave an entity of the

Uster Group.

Revenue from service contracts is recognized on a pro rata basis over the contract period.

The length of the service contracts usually varies between 3 and 12 months.

3.14 Finance Income and Expenses

Finance income includes interest income on funds invested as well as changes in the fair value

of the interest rate swap described in note 4.3 Market Risk. Interest income is recognized as it

accrues in profit or loss using the effective interest rate method.

Finance expenses comprise interest expense on loans, changes in the fair value of the interest

rate swap described in note 4.3 Market Risk, and impairment losses recognized on non deriva-

tive financial instruments with the exception of accounts receivable trade for which the valu-

ation allowance is recorded under sales deductions. All interest expenses on loans are recognized

in profit or loss using the effective interest rate method.

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3.15 Income Tax

Income tax includes current and deferred tax. Income tax is recognized over the income

statement except to the extent that it relates to items recognized directly in equity, in which

case it is recognized in equity.

Current Income Tax

Current income tax assets and liabilities for the current and prior periods are measured at

the amount expected to be recovered from or paid to the tax authorities. The tax rates and

tax laws used to compute the amount are those that are enacted or substantively enacted at

the reporting date.

Deferred Tax

Deferred income tax is provided using the balance sheet method on temporary differences

at the reporting date between the tax bases of assets and liabilities and their carrying amounts

for financial reporting purposes.

Deferred income tax recognized for all taxable temporary differences except:

• If the deferred income tax arises from the initial recognition of an asset or liability in a

transaction that is not a business combination and, at the time of the transaction, affects

neither the accounting profit nor the taxable profit or loss;

• With respect to the taxable temporary differences associated with investments in subsid-

iaries where the timing of the reversal of the temporary differences can be controlled and

it is probable that the temporary differences will not reverse in the foreseeable future;

• On taxable temporary differences arising on the initial recognition of goodwill.

Deferred income tax assets are recognized for all carry forwards of unused tax credits and

unused tax losses, to the extent that it is probable that taxable profit will be available against

which the deductible temporary differences and the carry forwards of unused tax credits

and losses can be utilized.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to

apply in the year when the asset is realized or the liability is settled, based on tax rates and

tax laws that have been enacted or substantively enacted at the reporting date.

Deferred income tax assets and deferred income tax liabilities are offset if a legally enforce-

able right exists to set off current tax assets against current income tax liabilities and the

deferred income taxes relate to the same taxable entity and the same taxation authority.

A provision is made for non-recoverable withholding taxes on undistributed earnings of

foreign subsidiaries.

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4 Financial Risk Management

The Uster Group is exposed to the following risks from its use of financial instruments:

• Credit risk

• Liquidity risk

• Market risk

Included in this note is information regarding the Group’s exposure to each of these risks, the

Group’s objectives, policies and processes for measuring and managing risks, as well as infor-

mation about the management of capital.

The Board of Directors has set up the Group’s financial risk management framework. The Ex-

ecutive Committee agrees policies for managing each of the risks and monitors them on a

regular basis. The Audit Committee is responsible to judge the risk assessment established by

the Executive Committee and the proposed measures to reduce risks. It evaluates at regular

intervals the financial risk management and monitoring procedures of the Executive Committee.

4.1 Credit Risk

Credit risk means the risk to suffer a financial loss if a customer or counterparty to a financial

instrument does not meet the contractual obligations. It arises principally from the Group’s

accounts receivable trade.

The Uster Group trades only with recognized, creditworthy third parties. It is the Group’s

policy that all customers who wish to trade on credit terms are subject to credit verification

procedures. The Group also often works with letters of credit and prepayments in hard cur-

rencies such as CHF, EUR, USD. In addition, receivable balances are monitored on an ongoing

basis with the result that the Group’s exposure to losses is not considered significant.

With respect to credit risks arising from other financial assets, the Group’s exposure to

credit risks has a maximum exposure equal to the carrying amount of these financial assets.

Since Uster maintains banking relations with first-class financial institutions, the risk is

considered minimal.

The carrying amount of financial assets represents the maximum credit exposure. The max-

imum exposure to credit risk at the reporting date was as follows:

in CHF 1,000 Dec 31, 2008 Dec 31, 2007


Receivables trade 12,235 16,203

Other receivables 332 674

Cash and cash equivalents 7,490 5,383

Total 20,282 22,442

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4.2 Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as

they become due. The Group manages its liquidity in a way that it will always have sufficient

liquidity to meet its obligations, even under stressed conditions.

The Group uses a recurring cash planning tool to monitor its risk to a shortage of funds. This

tool considers the expected cash inflows and outflows in the Group for the coming six months.

For temporary cash shortages, the Group currently has two revolving credit facilities of

CHF 5.0 million and CHF 10.0 million respectively at its disposal (2007: CHF 20.0 million).

The following table shows the contractual maturities of the financial liabilities and receivables:

Dec 31, 2007

in CHF 1,000

Within

1 year

1 to

2 years

2 to

5 years

Over

5 years

Total

Bank loans 16,948 16,562 177,370 0 210,880Interest rate swap 218 0 0 0 218Trade and other liabilities 12,705 0 0 0 12,705Accrued liabilities 6,966 0 0 0 6,966Total liabilities 36,837 16,562 177,370 0 230,769

Financial assets 0 0 0 182 182Receivables trade 16,203 0 0 0 16,203Other receivables 674 0 0 0 674Cash and cash equivalents 5,383 0 0 0 5,383Total assets 22,260 0 0 182 22,442

Balance -14,577 -16,562 -177,370 182 -208,327

Dec 31, 2008

in CHF 1,000

Within

1 year

1 to

2 years

2 to

5 years

Over

5 years

Total

Bank loans 15,112 14,802 153,675 0 183,590Interest rate swap 704 704 703 0 2,111Trade and other liabilities 7,277 0 0 0 7,277Accrued liabilities 4,336 0 0 0 4,336Total liabilities 27,474 15,506 154,333 0 197,314

Financial assets 0 0 0 225 225Receivables trade 12235 0 0 0 12,235Other receivables 332 0 0 0 332Cash and cash equivalents 7490 0 0 0 7,490Total assets 20,057 0 0 225 20,282

Balance -7,417 -15,506 -154,333 225 -177,032

The negative balance in 2009 of CHF -7.4 million is mainly due to the payments for the in-

terests on the bank loans and the interest rate swap and will be financed by the operating

cash flow generated in 2009.

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4.3 Market Risk

Market risk is the risk that changes in market prices such as foreign exchange rates and

interest rates affect the Group’s income or the value of its holding of financial instru-

ments.

Foreign Currency Risk

The Group is exposed to currency risks on accounts receivables, accounts payables and loans

that are denominated in a currency other than the respective functional currencies of the

Group entities. The currencies in which these positions are primarily denominated as of

December 31, 2008 are USD / CHF and CHF / CNY (transaction currency / functional currency)

(2007: USD / CHF and CHF / CNY).

The Group developed a model to actively control and limit these foreign exchange risks at

the source and therefore has no need to enter into contracts to hedge these exposures as the

remaining risk is not significant. Nevertheless the following sensitivity analysis has been

performed.

Increases of 5 % of the transaction currency against the functional currency would have the

following impact on the consolidated financial statements:

Dec 31, 2007

in CHF 1,000

Effect on Income

Statement

Effect in

Equity

CurrenciesUSD / CHF -52 300

CHF / CNY -72 -72

Dec 31, 2008

in CHF 1,000

Effect on Income

Statement

Effect in

Equity

CurrenciesUSD / CHF -71 64

CHF / CNY -14 -14

Interest Rate Risk

According to the credit facility agreement for the bank loans described in note 22 Bank Loans,

the Group has to hedge at least CHF 50.0 million of the bank loans. Therefore the Group

entered on October 29, 2007, into an interest rate swap contract to fix the Libor at a floor of

2.4 % and a cap of 3.65 %. The interest rate swap is the only derivative financial instrument of

the Group and does not qualify for hedge accounting according to IAS 39. Its contract volume

as of December 31, 2008, amounted to CHF 50.0 million and it expires on October 29, 2011.

The interest situation and hedging possibilities are continuously monitored.

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The table below sets out the carrying amount of the Group’s interest bearing financial instru-

ments exposed to interest rate risk:

Dec 31, 2007

in CHF 1,000

Within

1 year

1 to

2 years

2 to

5 years

Over

5 years

Variable rateCash and cash equivalents 5,383 0 0 0

Bank loans 178,795 169,049 159,297 0

Interest rate swap 218 0 0 0

Total 184,396 169,049 159,297 0

Dec 31, 2008

in CHF 1,000

Within

1 year

1 to

2 years

2 to

5 years

Over

5 years

Variable rateCash and cash equivalents 7,490 0 0 0

Bank loans 164,036 154,277 144,518 0

Interest rate swap 2,111 0 0 0

Total 173,637 154,277 144,518 0

The Group’s bank loans at variable rate are analyzed on a dynamic basis with regards to the

interest rate exposure. On a regular basis, the sensitivity of the Group’s result before tax to a

reasonably possible change in interest rates, with all other variables held constant, is tested.

The result of the sensitivity testing mentioned above is as follows:

Change in base points Effect on result before tax

in CHF 1,000

Dec 31, 2008 Dec 31, 2007

+ 5 -90 -58

+ 20 -361 -233

- 10 180 117

-15 270 175

4.4 Capital Management

The Group’s objectives when managing capital are to safeguard the Group’s ability to con-

tinue as going concern in order to provide returns for shareholders and benefits for other

stakeholders and to maintain an optimal capital structure to reduce the cost of capital. As

of December 31, 2008, equity amounted to 38.9 % of total equity and liabilities (2007: 36.7 %).

Please refer to note 22 Bank Loans for covenant requirement.

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4.5 Financial Instruments – Fair Values

The fair value of financial assets and liabilities together with the carrying amounts shown

in the balance sheet are as follows:

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Carrying

Amount

Fair

Value

Carrying

Amount

Fair

Value

Financial assets 225 225 182 182

Receivables trade 12,235 12,235 16,203 16,203

Other receivables 332 332 674 674

Cash and cash equivalents 7,490 7,490 5,383 5,383

Bank loans 164,036 165,000 178,795 180,000

Interest rate swap 2,111 2,111 218 218

Trade and other liabilities 7,277 7,277 12,705 12,705

Accrued liabilities 4,336 4,336 6,966 6,966

Total -157,478 -158,442 -176,242 -177,447

The fair value of the bank loans has been determined using market interest rates.

Please refer to the specific note to reconcile financial assets, other receivables and accrued

liabilities to the balance sheet.

5 Segment Reporting

5.1 Primary Segment Information

Based on risks and rates of return the Management considers that the primary reporting

format is by business segment. The Management considers that there is only one business

segment as the origin and type of risks of the different product lines are practically identical.

There are very few differences between production processes. Therefore the disclosures for

the primary segment have already been given in these financial statements. The secondary

reporting format is by geographical analysis based on the location of assets.

5.2 Secondary Segment Information

The Group is active in three main geographical regions: Asia, Europe and Americas. Gross

sales are shown by the geographical location of the clients, assets and capital expenditures

are shown according to the legal entity to which they belong.

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Gross Sales by Geographical Location of Customers

in CHF 1,000 Jan 1 –

Dec 31, 2008

Jan 1 –

Dec 31, 2007

Asia 102,447 66.1 % 111,485 59.7 %

Europe 34,566 22.3 % 53,009 28.4 %

Americas 17,880 11.5 % 22,172 11.9 %

Total 154,893 100.0 % 186,666 100.0 %

Assets by Geographical Location of Legal Entity

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Asia 1,432 0.3 % 6,077 1.4 %

Europe 402,357 98.2 % 417,606 96.7 % 1)

Americas 6,016 1.5 % 8,374 1.9 %

Total 409,805 100.0 % 432,057 100.0 %


Capital Expenditure by Geographical Location of Legal Entity

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Asia 355 9.6 % 774 31.8 %

Europe 3,130 84.9 % 1,361 55.8 %

Americas 202 5.5 % 302 12.4 %

Total 3,687 100.0 % 2,437 100.0 %

6 Sales Deductions

Sales deductions include items that are directly related to revenue from sales such as discounts,

currency differences, shipping expenses and the change in the allowance for uncollectible

receivables (see note 18 Receivables Trade).

7 Cost of Goods Sold

Cost of goods sold comprises direct production costs such as material expense and personnel

costs as well as a proportion of overhead costs like logistics procurement and quality control.

The material expense for 2008 amounted to CHF -39.4 million (2007: CHF -52.2 million).

Additionally, warranty costs and the depreciation on the production equipment are included

in this expense category.

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8 Overhead

8.1 Sales and Marketing expenses

This position contains expenses for sales and marketing activities such as wages, amortiza-

tion, depreciation, project cost, agent commissions, consultancy and other overhead costs.

8.2 Research and Development Expenses

The expenditure for research and development includes wages, amortization, depreciation,

material costs, consultancy and other overhead costs related to research and development

projects.

8.3 Management and Administrative Expenses

Management and administrative expenses consist of wages, amortization, depreciation,

rent, consultancy, IT and other overhead costs of the support process.

8.4 Personnel Expense


Dec 31, 2008

Jan 1 –

Dec 31, 2007

Wages and salaries 37,267 41,134

Social security costs 4,332 4,533

Pension costs 3,637 1,619 1)

Other personnel expense 5,602 3,168

Total 50,838 50,454


8.5 Amortization, Impairment and Depreciation


Dec 31, 2008

Jan 1 –

Dec 31, 2007

Amortization of technology, customer base,

USTER® STATISTICS 15,066 15,066

Amortization of other intangible assets 202 205

Impairment of goodwill 0 3,360

Depreciation of property, plant and equipment 1,880 1,955

Total 17,148 20,586

9 Other Expenses

Other expenses amounting to CHF 15.3 million (2007: CHF 18.5 million) consist mainly of the

amortization of technology, customer base, and USTER® STATISTICS as well as the impair-

ment on goodwill in 2007 (see note 8.5 Amortization, Impairment and Depreciation).

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10 Finance Result


Dec 31, 2008

Jan 1 –

Dec 31, 2007

Interest income bank accounts & fixed-term deposits (L&R) 262 121

Interest income other receivables (L&R) 63 63

Gain on interest rate swap (FLFVTPL) 180 564

Exchange gain 2,234 958


Interest expense bank loans (FLAC) -7,583 -11,761

Other expenses / fees bank loans (FLAC) -998 -10,313

Interest on shareholder loans (FLAC) 0 -4,532

Loss on interest rate swap (FLFVTPL) -2,073 -218

Other finance expense -137 -172

Exchange loss -2,159 -1,575

Finance expense -12,950 -28,571

Finance result -10,211 -26,865

Categories:

L&R: Loans and Receivables

FLFVTPL: Financial Liabilities at Fair Value through Profit or Loss

FLAC: Financial Liabilities at Amortized Cost

The loss on the interest rate swap is based on the valuation of the swap as of December 31, 2008,

and has no cash flow impact. The 2007 “other expenses / fees bank loans” contained the recog-

nition of previously capitalized transaction costs related to the bank loans after the refinancing

done in December 2007 of CHF -7.5 million.

The net foreign exchange differences charged to the income statement are included in the

following lines:


Dec 31, 2008

Jan 1 –

Dec 31, 2007

Sales deductions 717 -555

Cost of goods sold 334 26

Finance income 2,234 958


Total 1,126 -1,146

The origin of the above mentioned foreign exchange differences is as follows:

Sales deductions: accounts receivables trade

Cost of goods sold: accounts payable trade

Finance income: mainly other receivables and other payables

Finance expense: mainly other receivables and other payables

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11 Earnings per Share

Basic earnings per share amounts are calculated by dividing the net result for the period by

the weighted average number of shares outstanding during the year. Since there are no di-

lutive potential shares, the calculation of the diluted earnings per share is the same as the

calculation of the basic earnings per share.


Dec 31, 2008

Jan 1 –

Dec 31, 2007

Net result 5,316,000 3,587,000 1)

Weighted average number of shares outstanding

(net of treasury shares) 6,560,000 4,966,593

Earnings / (loss) per share 0.81 0.72 1)


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12 Intangible Assets

in CHF 1,000 Customer Base Trademark Technology USTER®

STATISTICSGoodwill Other

Intangible

Assets

2007

At CostBalance at January 1, 2007 180,000 58,700 48,500 30,400 64,208 164 381,972Subsequent payment in 2007 0 0 0 0 353 0 353Additions 0 0 0 0 0 446 446Currency translation differences 0 0 0 0 -12 2 -10Balance at December 31 180,000 58,700 48,500 30,400 64,549 612 382,761

Accumulated Amortization / ImpairmentBalance at January 1 0 0 0 0 0 0 0Amortization -9,000 0 -4,850 -1,216 0 -205 -15,271Impairment 0 0 0 0 -3,360 0 -3,360Currency translation differences 0 0 0 0 0 -1 -1Balance at December 31 -9,000 0 -4,850 -1,216 -3,360 -206 -18,632

Net book value at January 1, 2007 180,000 58,700 48,500 30,400 64,208 164 381,972Net book value at December 31, 2007 171,000 58,700 43,650 29,184 61,189 406 364,129

in CHF 1,000 Customer Base Trademark Technology USTER®

STATISTICSGoodwill Other

Intangible

Assets

2008

At CostBalance at January 1, 2008 180,000 58,700 48,500 30,400 64,549 612 382,761Additions 0 0 0 0 0 174 174Currency translation differences 0 0 0 0 0 -6 -6Balance at December 31 180,000 58,700 48,500 30,400 64,549 780 382,929

Accumulated Amortization / ImpairmentBalance at January 1 -9,000 0 -4,850 -1,216 -3,360 -206 -18,632Amortization -9,000 0 -4,850 -1,216 0 -202 -15,268Impairment 0 0 0 0 0 0 0Currency translation differences 0 0 0 0 0 3 3Balance at December 31 -18,000 0 -9,700 -2,432 -3,360 -405 -33,897

Net book value at January 1, 2008 171,000 58,700 43,650 29,184 61,189 406 364,129Net book value at December 31, 2008 162,000 58,700 38,800 27,968 61,189 375 349,032

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Customer Base

The intangible asset “customer base” represents the estimated value of the customers of the

Uster Group. Uster enjoys a strong customer loyalty and appreciation in approximately 75

countries. Technical training, product performance, trusted measurement and long living

products as well as after-sales services produce high customer retention and loyalty. Its useful

life of 20 years was reviewed during the 4th quarter of 2008 and was confirmed.

Trademark

Uster products are used as standard references for quality control in the global textile

industry. USTER® STATISTICS are used throughout the industry as the base benchmarks

for the trading of textile products at assured levels of quality across global markets. The

USTER® STATISTICS are perceived as industry standard all over the world.

The USTERIZED® concept (as seal of quality for yarns tested and cleared with USTER®

products) is increasingly used by well-known consumer companies to assure a consistent

level of quality in support of their own branded products.

Due to the brand awareness and the excellent reputation of the brand “USTER®”, this intan-

gible asset is considered to have an indefinite useful life.

Technology

The intangible asset technology summarizes the estimated value of the intellectual property

of the Group, i. e. patents and designs which registered in the name of Uster Technologies Ltd,

Switzerland. These intellectual property rights refer to all the different processes, instruments

and machines which have been developed by the Group through the course of the years. A well-

defined policy protects the intellectual property in the markets relevant to the business. The

Technologies useful life of 10 years was reviewed during the 4th quarter of 2008 and was con-

firmed.

USTER® STATISTICS

Uster provides a service to the textile industry by collecting data from thousands of samples

of fiber and yarn from its customers around the world. The Company produces a database,

USTER® STATISTICS, of performance data against the historic population of quality metrics

and makes the results freely available to the industry. USTER® STATISTICS was established

in 1957 and looks back on more than 50 years of fiber and yarn quality measurement. It is

perceived as industry standard all over the world. The USTER® STATISTICS’ useful life of 25

years was reviewed during the 4th quarter of 2008 and was confirmed.

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13 Impairment Testing of Goodwill and Intangible Assets with Indefinite Useful Lives

The annual impairment test is usually performed in the fourth quarter of each year.

Goodwill and intangible assets with indefinite useful lives acquired through business com-

binations have been allocated to the respective individual cash-generating units (CGUs),

which correspond to the legal entities of the Uster Group.

The legal entities are the smallest identifiable group of assets that generate cash inflows that

are largely independent of the cash inflows from other groups of assets.

For the impairment test of each cash-generating unit the recoverable amount has been de-

fined based on the value in use.

The impairment test showed that the recoverable amount of the tested intangible assets are

well above their carrying amount.

The carrying amount of the goodwill allocated to each of the cash-generating units as of

December 31, 2008 and 2007, was as follows:

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Uster Technologies Ltd 60,538 60,538

Other CGU 651 651

Total 61,189 61,189

The carrying amount of CHF 58.7 million of the intangible asset trademark, the only intan-

gible asset with indefinite useful life, has been allocated to the cash-generating unit

Uster Technologies Ltd.

13.1 Key Assumptions Used for the Value in Use Calculations

The following describes each key assumption on which the Group has based its cash flow

projections to undertake the impairment testing of goodwill and intangible assets with in-

definite useful lives. These key assumptions have been discussed with external profession-

als to ensure that they are best estimates.

EBITDA

The EBITDA projections are based on current financial forecasts and budgets covering the

period from 2009 to 2013. These were established using historic performance track records,

internal expectations and external official statistics and forecasts. The current financial

forecast and budgets are approved by the Board of Directors.

Growth Rate

The growth rate used for the value in use calculation of the cash-generating units for the

planning period is based on financial budgets approved by the Board of Directors. The cash

flows beyond this period are extrapolated using the inflation of the Consumer Price Index of

the corresponding country as the growth rate the cash-generating unit is situated in. Using

the inflation rate as growth rate reflects past experience but also relies on external sources.

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Discount Rate

The discount rate used is the pre-tax weighted average cost of capital (WACC) based on the

capital asset pricing model. It consists of the country specific ten-year bond rate at the date

of the impairment testing, a country specific market risk premium, a debt interest rate and

a debt / equity ratio of 50 / 50. Further, a 2.0 % (2007: 4 %) mark-up on the cost of equity has been

added to take into account the small cap size of the Uster Group. This reduction was made as

discussions with external professionals showed that a mark-up of 4 % became uncommon

and the mark-up usually amounts to 2 %. The values assigned to this key assumption are

consistent with external sources of information.

The following data was used as a basis for the impairment test made during the second half

year 2008:

in CHF 1,000 Growth Rate Discount Rate

2008 2007 2008 2007

Uster Technologies Ltd 1.5 % 1.5 % 9.8 % 11.2 %

Other CGU 5.9 % 5.3 % 12.7 % 20.3 %

13.2 Impairment Loss

An impairment loss is recognized if the recoverable amount is below the carrying amount. For

the year under review no impairment loss on goodwill and intangible assets with indefinite

useful lives has been recognized (2007: CHF 3.4 million). The loss recognized in 2007 was a

result of the unforeseen business development in certain foreign CGUs for which the cash flow

no longer supported the carrying amount and therefore the entire goodwill was impaired.

13.3 Sensitivity Analysis

Due to impairment indicators linked to the financial crisis, the Group has performed a critical

sensitivity analysis on the intangibles with indefinite useful life not only varying the assump-

tions such as discount rate, but also the long-term growth rate and the future EBITDA, the last

two based on the changed economic environment in the 4th quarter 2008. The Board of Direc-

tors and the Executive Committee of the Uster Group consider these underlying assumptions

as accurate. Nevertheless, a sensitivity analysis with the following not cumulative changes on

each of the key assumptions has been performed (all other factors held constant):

EBITDA projections: - 30 %

Growth rate: - 1.5 %

Discount rate: + 2.0 %

None of these changes leads to an impairment of either Goodwill or Trademark.

That means that a negative deviation of the EBITDA of 30 % does not lead to an impairment.

The same applies to an increase of the discount rate of 2 % from 9.8 % to 11.8 %.

Due to the current economic situation the Group decided to base the sensitivity analyses on

higher deviations of the underlying assumptions than usually used.

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14 Property, Plant and Equipment

in CHF 1,000 Land and

Buildings

Machinery and

Equipment

Furniture and

Fixtures

2007

At CostBalance at January 1, 2007 3,369 1,530 2,223 7,122Additions 54 936 1,001 1,991Disposals 0 -23 0 -23Reclassifications 0 454 -144 310Currency translation differences -262 -62 -22 -346Balance at December 31, 2007 3,161 2,835 3,058 9,054

Accumulated Depreciation / ImpairmentBalance at January 1, 2007 0 0 0 0Depreciation -172 -859 -924 -1,955Reclassification 0 -106 -83 -189Currency translation differences 11 23 13 47Balance at December 31, 2007 -161 -942 -994 -2,097

Net book value at January 1, 2007 3,369 1,530 2,223 7,122Net book value at December 31, 2007 3,000 1,893 2,064 6,957

Fire insurance values 5,851 9,183 12,282 27,316

in CHF 1,000 Land and

Buildings

Machinery and

Equipment

Furniture and

Fixtures

2008

At CostBalance at January 1, 2008 3,161 2,835 3,058 9,054Additions 11 2,109 1,393 3,513Disposals -9 -69 -90 -168Currency translation differences -195 -58 -84 -337Balance at December 31, 2008 2,968 4,817 4,277 12,062

Accumulated Depreciation / ImpairmentBalance at January 1, 2008 -161 -942 -994 -2,097Depreciation -156 -814 -910 -1,880Disposals 2 30 33 65Currency translation differences 14 31 44 89Balance at December 31, 2008 -301 -1,695 -1,827 -3,823

Net book value at January 1, 2008 3,000 1,893 2,064 6,957Net book value at December 31, 2008 2,667 3,122 2,450 8,239

Fire insurance values 5,548 16,811 7,504 29,863

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15 Pension Benefits

15.1 Defined Benefit Pension Plan

Uster Technologies Ltd provides pension benefits for its employees in Switzerland in the

event of retirement, disability and death. The pension scheme is organized as a separate

legal entity and is funded in accordance with legal requirements. According to IAS 19 and

its interpretation effective as of December 31, 2007, no pension asset / liability was recognized

in the consolidated financial statements 2007.

The adoption of “IFRIC 14: IAS 19: The Limit on a Defined Benefit Asset, Minimum Funding

Requirements and their Interactions” which became effective on January 1, 2008, led to an

initial adjustment (restatement). The following lines of the financial statements have been

affected by the initial application of IFRIC 14: IAS 19:

in CHF 1,000 Jan 1, 2007 Impact

IFRIC 14

Restated

Jan 1, 2007

Dec 31, 2007 Impact

IFRIC 14

Restated

Dec 31, 2007

Balance SheetPension fund investment 0 16,142 16,142 0 16,981 16,981

Total assets 437,090 16,142 453,232 415,076 16,981 432,057

Retained earnings -862 12,590 11,728 -866 12,590 11,724

Current year result 0 0 0 2,932 655 3,587

Shareholders’ equity 44,738 12,590 57,328 145,349 13,245 158,594

Deferred tax liabilities 61,447 3,552 64,999 56,721 3,736 60,457

Long-term liabilities 342,121 3,552 345,673 227,573 3,736 231,309Total equity and liabilities 437,090 16,142 453,232 415,076 16,981 432,057


Dec 31, 2007

Impact

IFRIC 14

Restated

Jan 1 –

Dec 31, 2007

Income StatementGross sales 186,666 186,666Net sales 183,579 183,579COGS -76,481 269 -76,212

Gross profit 107,098 107,367Marketing -21,598 165 -21,433

Management & Administration -16,083 153 -15,930

Research & Development -18,897 252 -18,645

Other income & expense -17,606 -17,606

EBIT 32,914 33,753Financial result -26,865 -26,865EBT 6,049 6,888Income tax -3,117 -184 -3,301

Net result 2,932 655 3,587

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The following tables summarize the components of net benefit expense recognized in the

income statement as well as the actual return on plan assets.


Dec 31, 2008

Restated

Jan 1 –

Dec 31, 2007

1)

Amounts recognized in the income statementCurrent employer service cost -2,502 -2,340 2)

Interest expense -2,484 -1,905

Expected return on plan assets 3,637 3,455

Curtailment, settlement loss -1,548 0

Pension costs current year -2,897 -790

Actual return on plan assetsExpected return 3,637 3,455

Actuarial gain / (loss) on plan assets -11,185 -3,988

Actual return on plan assets -7,548 -533

1) The prior year figures have been restated based on IFRIC 14.2) The prior year figure has been restated due to an error in presentation. This restatement had no impact

on Consolidated Income Statement, Balance Sheet, and Cash Flow Statement.

Uster Technologies Ltd expects to contribute CHF 1.6 million to the defined benefit pension

plan in 2009.

The funded status of the pension plan and the amounts recognized in the balance sheet of

Uster Technologies Ltd are as follows:

in CHF 1,000 Dec 31, 2008 Restated

Dec 31, 2007

1)

Funded StatusFair value of plan assets 72,245 89,346

Defined benefit obligation -63,802 -70,978

Surplus 8,443 18,368

Amounts recognized in the balance sheetSurplus 8,443 18,368

Unrecognized actuarial loss / (gain) 7,351 -1,387

Pension (accrual) / prepaid in the balance sheet 15,794 16,981

1) The prior year figures have been restated based on IFRIC 14.

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The changes in the present value of the defined benefit obligation are as follows:


Dec 31, 2007

1)

Reconciliation of defined benefit obligationDefined benefit obligation at January 1 70,978 68,859 2)

Service cost net of employee contributions 2,502 2,340 2)

Interest expense 2,484 1,905

Employee contribution 1,461 1,393

Benefit payments / net inflow -8,787 1,855

Plan settlement -3,937 0

Plan curtailment -653 0

Actuarial (gain) / loss -246 -5,374 2)

Defined benefit obligation at December 31 63,802 70,978



The changes in the fair value of the plan assets are as follows:

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Reconciliation of assetsAssets at January 1 89,346 85,001

Expected return 3,637 3,455

Employer contribution 1,710 1,629

Employee contribution 1,461 1,393

Benefit payments / net inflow -8,787 1,856

Plan settlement -3,937 0

Actuarial gain / (loss) on plan assets -11,185 -3,988

Assets at December 31 72,245 89,346

The strategic target of major categories of plan assets as a percentage of the fair value of

total plan assets are as follows:

Dec 31, 2008 Dec 31, 2007

Asset categoriesEquity securities 26 % 26 %

Debt securities 33 % 33 %

Property 28 % 28 %

Other 13 % 13 %

The overall expected rate of return is determined based on the plan’s asset allocation strategy

and current market rates.

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The principal assumptions used in determining the defined benefit pension plan obligations

are shown below:

Jan 1 –

Dec 31, 2008

Jan 1–

Dec 31, 2007

Actuarial assumptionsDiscount rate 3.60 % 3.50 %

Expected return on plan assets 4.00 % 4.00 %

Salary increases 2.00 % 2.00 %

Pension increases 0.00 % 0.00 %

The discount rate 2008 is determined on the basis of corporate bonds with a rating of AA or

AAA. In previous years the discount rate was determined considering the yield of govern-

ment bonds with duration of 15 Years. Regarding the higher yield and risk on high quality

corporate bonds a spread was added. This spread was defined by a specific average rate based

on a defined group of bonds. The change became necessary as a lot of these defined bonds

were downgraded below AA and AAA ratings.

The history of experience gains and losses is summarized below:


Dec 31, 2007

Dec 31, 2006

History of experience gains and lossesFair value of plan assets 72,245 89,346 85,001

Defined benefit obligation -63,802 -70,978 -66,835

Surplus 8,443 18,368 18,166Experience (gain) / loss on plan assets 11,185 3,988 0

Experience (gain) / loss on plan liabilities -174 630 0



1)

2)

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16 Income Tax

Consolidated income statement


Dec 31, 2008

Jan 1 –

Dec 31, 2007

Current income taxes -4,479 -6,168

Current income taxes previous years -234 94

Deferred income taxes 1,340 2,773 1)

Total -3,373 -3,301 1)


A reconciliation of the tax expense based on each subsidiary’s theoretical tax rate is as follows:


Dec 31, 2008

Jan 1 –

Dec 31, 2007

Earnings before tax 8,689 6,888 Tax at the theoretical domestic rates

applicable to individual subsidiaries -2,819 -32.4 % -2,379 -34.5 % 1) 2)

Tax effect of non-deductible

or non-taxable items 101 1.2 % -1,157 -16.8 % 2)

Change in tax rates 207 2.4 % 391 5.7 %

Unrecognized tax losses -378 -4.4 % -49 -0.7 %

Non-recoverable withholding tax -147 -1.7 % -201 -2.9 %

Current income taxes previous years -234 -2.8 % 94 1.4 %

Others -103 -1.3 % 0 0.0 %

Total -3,373 -39.0 % -3,301 -47.9 % 1)

1) The prior year figures have been restated based on IFRIC 14. See note 15 Pension Benefits for reference.2) The prior year figures had been restated due to an error in presentation. This restatement had no impact


The difference between the expected tax rate 2008 of 32.4 % to previous years tax rate of

34.5 % is mainly due the different weighting of the tax rates of the different countries.

The following table shows the deferred income tax related to items charged or credited

directly to equity:

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Tax effect of costs related

to the issue of share capital 0 1,510

Total 0 1,510

1)

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Recognized Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities are attributable to the following items:

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Deferred tax assets by types of temporary differenceNon-current assets 1,382 2,087 1)

Inventories 1,208 1,429

Trade and other receivables 26 43

Provisions 0 27

Other non-current liabilities 108 0

Current liabilities and accruals 250 584

Tax losses 142 288

Total 3,116 4,458


Dec 31, 2007

Deferred tax liabilities by typesof temporary differenceNon-current assets 57,840 60,023 2)

Inventories 508 776

Trade and other receivables 420 550


Current liabilities and accruals 0 0

Non-recoverable withholding tax 508 361

Total 59,488 61,975 2)

Net tax assets / (liabilities) -56,372 -57,517Thereof recognized in the balance

sheet as deferred tax assets 2,031 2,940

Thereof recognized in the balance sheet

as deferred tax liabilities 58,403 60,457 2)

1) Including tax of CHF 1.5 million on costs related to the issue of share capital booked to equity and

capitalized for tax purposes.2) The prior year figures have been restated based on IFRIC 14. See note 15 Pension Benefits for reference.

The tax losses expire between 2010 and 2017 and have been recognized based on the assump-

tion that future taxable profits will be available against which the Group can offset these

deferred tax assets.

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Movements in Temporary Differences

The movements in temporary differences were as follows:

in CHF 1,000

Jan 1 –

Dec 31, 2008

Restated

Jan 1 –

Dec 31, 2007

Non-current assets 1,507 3,243 1)

Inventories 118 193

Trade and other receivables 119 -129

Provisions -26 -31


Current liabilities and accruals -298 -42

Non-recoverable withholding tax -147 -201

Tax losses -96 -711

Changes booked to income statement 1,340 2,773 1)

Tax on costs attributable to

the issue of share capital booked to equity 0 1,510

Changes booked to equity 0 1,510

Currency differences -195 -142

Reclassification non-recoverable withholding tax 0 -160

Other changes -195 -302

Total changes of deferred taxes 1,145 3,981 1)


Unrecognized Deferred Tax Assets

Based on a conservative evaluation of tax assets in the foreign subsidiaries deferred tax assets

amounting to CHF 418,000 (2007: 49,000) have not been recognized. These relate to tax loss-

es and temporary differences for which the Group does not expect to have any future taxable

profit to offset them against.

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17 Inventories

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Raw materials and supplies 1,467 2,367

Semifinished and finished goods 10,171 12,735

Work in progress 595 791

Total 12,233 15,893

The amount of write-down of inventories recognized as an expense in the income statement

in 2008 amounted to CHF 1.1 million (2007: 0.6) and is included in the income statement in

cost of goods sold. The total amount of inventories valued at fair value less cost to sell amounts

to CHF 0.o million (2007: 0.0).

18 Receivables Trade

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Accounts receivable trade 12,014 15,487

Bills receivable trade 221 716

Total 12,235 16,203

Accounts receivable trade as well as bills receivable trade are non-interest-bearing and are

generally on 30 to 90 days’ terms.

The carrying values of trade and bills receivables less the allowance for uncollectible amounts

are assumed to approximate their fair values due to the short-term nature of trade receivables.

The carrying amount of the Group’s trade receivables are denominated in the following

currencies:

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

CHF 7,842 12,451

USD 2,254 1,259

CNY 292 655

JPY 623 246

EUR 889 1,137

TRY 100 165

Other 235 290

Total 12,235 16,203

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The ageing of these receivables is as follows:

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Not overdue 9,018 11,479

Overdue 1 to 60 days 2,779 4,589

Overdue 61 to 90 days 379 67



Overdue more than 150 days 0 15

Total 12,235 16,203

Provisions for uncollectible amounts are established based upon the difference between the

receivable value and the estimated net collectible amount. Uster establishes its provision

for doubtful accounts receivable trade based on historical loss experiences.

The effective losses of accounts receivables recognized in 2008 amount to CHF 90,000 (2007:

CHF 44,000).

The following table summarizes the movements in the allowance for uncollectible

amounts:

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Balance at January 1 -918 -849

Amounts used 90 44

Reversals 136 42

Increases -161 -164

Translation adjustments 36 9

Balance at December 31 -817 -918

The creation and release of the valuation allowance is included in sales deductions in the

income statement.

19 Other Receivables

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

VAT receivables 767 1,630

Other financial receivables 332 674

Prepaid expenses 635 311

Total 1,734 2,615

They do hardly bear any risk and therefore no provision for impairment has been recognized

on these balances.

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20 Cash and Cash Equivalents

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Cash on hand 16 36

Time deposits 3,617 55

Bank accounts 3,857 5,292

Total 7,490 5,383

Cash on bank accounts earns interest at floating rates based on bank deposit rates. Time

deposits are made for varying periods of between one day and three months depending on

the immediate cash requirements of the Uster Group and earn interest at the respective

short-term deposit rates.

21 Share Capital and Reserves

21.1 Share Capital

Ordinary Share Capital


CHF 61.7 million and was fully paid up. It consisted of 6,560,000 registered shares with a

nominal value of CHF 9.40 each (December 31, 2007: share capital of CHF 65.6 million and

6,560,000 shares with a nominal value of CHF 10 each). For the nominal value reduction

please refer to note 21.3 Dividends.

Authorized Share Capital Increase

As of December 31, 2008, the authorized share capital increase amounted to CHF 8.93 million.

According to the articles of association of Uster Technologies Ltd, the Board of Directors is

authorized, at any time until October 4, 2009, to increase the share capital in an amount not

to exceed CHF 8.93 million through the issuance of up to 950,000 fully paid registered shares

with a nominal value of CHF 9.40 each. An increase in partial amounts is permitted.

Conditional Share Capital Increase

As of December 31, 2008, Uster Technologies Ltd had a conditional share capital increase

available, pursuant to which the share capital may be increased by a maximum aggregate

amount of CHF 3.008 million through the issuance of a maximum of 320,000 fully paid reg-

istered shares with a nominal value of CHF 9.40 each by the exercise of option rights which

the employees, the Management or Directors of Uster Technologies Ltd or another Group

company are granted according to the respective regulations of the Board of Directors.

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Development of Ordinary Shares

in 1,000 of shares 2008 2007

Balance at January 1 6,560 45,600

Balance after reverse share split n / a 4,560

Capital increase 0 2,000

Balance at December 31 6,560 6,560

21.2 Reserves

Other Reserves

Other reserves include the statutory reserves that have to be allocated from retained earnings

based on the regulations in the jurisdictions of the subsidiaries.

Currency Translation Differences

This reserve contains all currency differences arising from the translation of the financial

statements of foreign subsidiaries as well as from the translation of the intra-group loans

that are considered as a part of the net investment in foreign subsidiaries.

21.3 Dividends

The holders of registered shares are entitled to dividends and to one vote per share at the

Shareholders’ meetings of Uster Technologies Ltd.

On March 18, 2008, the general assembly decided to reduce the nominal value by CHF 0.60 per

share. By this 13 % of the adjusted net result 2007 was paid out to the shareholders (2007: nil).

22 Bank Loans

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Facility A 119,250 129,063

Facility B 34,786 39,732

Total non-current 154,036 168,795

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Current portion Facility A 10,000 10,000

Total current 10,000 10,000

Total 164,036 178,795

Facility A

The initial fair value of Facility A amounts to CHF 140.0 million and has been reduced by the

directly attributable transaction costs that are amortized using the effective interest method.

Facility A is unsecured. After yearly repayments of CHF 10.0 million in December, the re-

maining amount of CHF 100.0 million has to be repaid in full in December 2012.

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Facility B

The initial fair value of Facility B amounts to CHF 40.0 million and has been reduced by the

directly attributable transaction costs that are amortized using the effective interest method.

Facility B is unsecured. It is voluntarily repayable. The remaining amount has to be repaid

in full in December 2012. In June 2008 a voluntary repayment of CHF 5.0 million was made.

The effective interest rate and the maturity of the bank loans are as follows:

Interest Rates & Maturities

Effective Interest Rate Maturity

Facility A Libor + margin Dec 31, 2012

Facility B Libor + margin Dec 31, 2012

The margin applicable to the basic Libor interest rate on the bank loans ranges depending

on the covenants from 0.8 % to 3.5 %. These covenants focus on equity ratio, on EBITDA and

on free cash flow generated.

The Group met all loan covenants.

23 Provisions

in CHF 1,000 Restructuring

Provision

Warranty

Provisions

Other

Provisions

2007

Balance at January 1, 2007 0 3,963 1,643 5,606Amounts used 0 -1,758 -33 -1,791Reversals 0 0 -509 -509Increases 0 963 0 963Currency translation differences 0 -11 -1 -12Balance at December 31, 2007 0 3,157 1,100 4,257

Thereof Non-current 0 1,357 700 2,057Current 0 1,800 400 2,200

in CHF 1,000 Restructuring

Provision

Warranty

Provisions

Other

Provisions

2008

Balance at January 1, 2008 0 3,157 1,100 4,257Amounts used 0 -1,376 0 -1,376Reversals 0 -184 0 -184Increases 2,555 1,278 135 3,968Currency translation differences -9 -5 0 -14Balance at December 31, 2008 2,546 2,870 1,235 6,651

Thereof Non-current 0 1,850 885 2,735Current 2,546 1,020 350 3,916

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Restructuring Provisions

The Company announced on November 3, 2008, world wide operational measures to adjust

the cost base proactively addressing the current market situation. Total costs of these opera-

tional measures amount to CHF 2.8 million of which CHF 0.3 million have been paid in 2008.

The provision mainly consists of salaries for the period between company leave date and

contract termination date, the cost due to the social plan agreed on with the employee rep-

resentatives and related legal consulting cost. The pension expense due to the restructuring

is not included in this provision.

Warranty Provisions

The Uster Group generally grants a 12-month warranty period for its products. During this

period, products will be repaired or replaced free of charge. The provision is on the one hand

based on gross sales and past experience with warranty claims. On the other hand it also

considers the Group’s repairs and replacements made on a voluntary basis towards significant

clients. It is expected that the warranty costs provided for will be incurred within the next

three years.

Other Provisions

Other provisions include a provision for tax exposures that has been established based on a

review carried out by an external consulting firm. The amount provided for is supported by

an according quantification of the risk.

Additionally, it contains a provision with respect to an agent contract. In 2006, the Group

cancelled a contract with one of its agents and paid the open commissions due. The agent,

however, refused to sign a confirmation that all the outstanding balances are settled. Therefore,

the estimated possible risks for additional claims from the agent have been provided for.

24 Trade and Other Liabilities

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Accounts payable trade 3,647 6,621

Advance payments from customers 1,647 2,920

Other financial liabilities 1,983 3,164

Total 7,277 12,705

Accounts payable trade and other liabilities are non-interest-bearing and are generally on

30 to 60 days’ terms. Other liabilities include mostly payables to third parties that are not

related to trade activities such as payables for marketing, consulting activities or IT costs as

well as social cost payments.

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25 Accrued Liabilities

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Compensation related liabilities 6,604 8,595

Sales related liabilities 763 2,364

Liabilities from other operating activities 3,499 4,408

Financial liabilities 74 194

Total 10,940 15,561

Compensation Related Liabilities

This accrual includes liabilities for bonus payments to the employees and the management,

overtime, vacation, social costs, and a length of service compensation.

Sales Related Liabilities

Sales related liabilities include accruals for sales commission or discounts to be paid to agents

and clients.

Liabilities from Other Operating Activities

Comprised in this accrual are various liabilities with regards to the operating business such

as liabilities related to consulting, marketing, IT as well as research and development ser-

vices.

Financial Liabilities

The accrued financial liabilities are mainly related to accrued interest due on bank loans.

26 Operating Lease Commitments

Non-cancellable operating lease rentals are payable as follows:


Dec 31, 2008

Jan 1 –

Dec 31, 2007

Up to 1 year 3,563 3,885

2 to 5 years 9,375 12,423

Over 5 years 0 62

Total 12,938 16,370

The Group usually leases its premises. The only exception is the facility of Uster Technolo-

gies, Inc. in Knoxville which is owned by the Group. CHF 11.3 million (2007: CHF 14.1 million)

of the leasing expense above is attributable to the non-cancellable rental agreement for the

facilities of Uster Technologies Ltd in Switzerland.

During the year ended December 31, 2008, CHF -3.9 million was recognized in the income

statement as an expense with respect to operating leases (2007: CHF -4.1 million).

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27 Pledged Assets

As of December 31, 2008, none of the assets of the Uster Group have been pledged

(2007: none).

28 Related Parties

28.1 Parent and Ultimate Controlling Party

As of December 13, 2006, Hercules Holding Ltd, domiciled in Zug, acquired 100 % of the

154,500 shares of Uster Technologies Ltd with a nominal value of CHF 100 each.

On June 19, 2007, Uster Technologies Ltd was merged with Hercules Holding Ltd (retroac-

tively as of January 1, 2007). At the same time Hercules Holding Ltd changed its name to

Uster Technologies Ltd and moved its registered office from Zug to Uster.

With the initial public offering on October 19, 2007, the Uster Group opened itself to public

investors. The shares of Uster Technologies Ltd are since then listed on the main segment

of SIX Swiss Exchange.

966 shareholders were entered in the share register of Uster Technologies Ltd as of December

31, 2008 (2007: 780). Of those the following held more than 3.0 % of the total voting rights:

• Alcide Ltd 36.0 % (36.0 %)

• Board and Management Members 1) 9.5 % (10.22 %)

• Lombard Odier DH Fund Managers 6.9 % (–)

• T. Rowe Price International Inc. 5.5 % (5.5 %)

• Polar Capital LLP 4.0 % (4.0 %)

• Bär Marc Philipp 3.62 % (–)

1) The Board and Management Members do not act as a Group and are therefore not reported to SIX Swiss

Exchange as a significant shareholder.

28.2 Transactions with the Board of Directors and the Executive Committee

Compensation of the Members of the Board of Directors and the Executive Committee

The compensation of the Board of Directors and the Executive Committee comprised the

following:


Dec 31, 2008

Jan 1 –

Dec 31, 2007

Short-term employee benefits 3,287 5,596

Post-employment benefits 682 601

Total 3,969 6,197

In addition to their salaries, the Members of the Executive Committee have a company car at

their disposal.

For further information regarding the compensation of the Board of Directors and the Executive

Committee, please refer to note 11 Compensation of the Members of the Board of Directors and

the Executive Committee of the statutory financial statements of Uster Technologies Ltd.

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Other Transactions with Members of the Board of Directors

In his function of a Managing Partner of a consulting company, a Member of the Board of

Directors advises the Company on certain business issues related to China. Also another

Board Member delivers consulting services to the Company from time to time. However, the

scope of these consultancy services is not significant and on the same terms and conditions

as if they were delivered by third parties.

29 Subsidiaries

Company Country of

Incorporation

% Capital

Shareholdings

Dec 31, 2008 Dec 31, 2007

Uster Technologies de Mexico S.A. de C.V. Mexico 100 % 100 %

Uster Technologies GmbH Germany 100 % 100 %

Uster Technologies (India) Pvt. Ltd India 100 % 100 %

Uster Technologies K.K. Japan 100 % 100 %

Uster Technologies (Shanghai) Co. Ltd China 100 % 100 %

Uster Technologies (Suzhou) Co. Ltd China 100 % 100 %

Uster Technologies Sulamericana Ltda. Brazil 100 % 100 %

Uster Technologies (Thailand) Ltd Thailand 100 % 100 %

Uster Technologies, Inc. USA 100 % 100 %

Uster Teknoloji Ticaret A.S. Turkey 100 % 100 %

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Report of the Statutory Auditor on the Consolidated Financial Statements

To the General Meeting of Uster Technologies Ltd, Uster

Zurich, 17 February 2009

As statutory auditor, we have audited the accompanying consolidated financial statements

of Uster Technologies Ltd, which comprise the income statement, balance sheet, cash flow

statement, statement of changes in equity, and notes on pages 50 to 97 for the year ended

31 December 2008.

Board of Directors’ responsibility

The Board of Directors is responsible for the preparation and fair presentation of the

consolidated financial statements in accordance with International Financial Reporting

Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing,

implementing and maintaining an internal control system relevant to the preparation and

fair presentation of consolidated financial statements that are free from material misstate-

ment, whether due to fraud or error. The Board of Directors is further responsible for selecting

and applying appropriate accounting policies and making accounting estimates that are

reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated financial statements based

on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing

Standards and International Standards on Auditing (ISA). Those standards require that we

plan and perform the audit to obtain reasonable assurance whether the consolidated financial

statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the consolidated financial statements. The procedures selected depend on the

auditor’s judgment, including the assessment of the risks of material misstatement of the

consolidated financial statements, whether due to fraud or error. In making those risk

assessments, the auditor considers the internal control system relevant to the entity’s prep-

aration and fair presentation of the consolidated financial statements in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose of ex-

pressing an opinion on the effectiveness of the entity’s internal control system. An audit also

includes evaluating the appropriateness of the accounting policies used and the reasonable-

ness of accounting estimates made, as well as evaluating the overall presentation of the

consolidated financial statements. We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements for the year ended 31 December 2008

give a true and fair view of the financial position, the results of operations and the cash flows

in accordance with IFRS and comply with Swiss law.

98 Report of the Statutory Auditor on the Consolidated Financial Statements

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Report on other legal requirements

We confirm that we meet the legal requirements on licensing according to the Auditor Over-

sight Act (AOA) and independence (Art. 728 CO and Art. 11 AOA) and that there are no

circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we

confirm that an internal control system exists, which has been designed for the preparation

of consolidated financial statements according to the instructions of the Board of Directors.

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

Ernst & Young Ltd

Daniel Zaugg Peter Z. Egli

Licensed audit expert Licensed audit expert

(Auditor in charge)

Report of the Statutory Auditor on the Consolidated Financial Statements 99

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Uster Technologies Ltd – Financial Statements

Income Statement


Dec 31, 2008

Jan 1 –

Dec 31, 2007

Gross sales 134,543 161,229

Sales deductions -1,211 -3,042

Net sales 133,332 158,187

Other operating income 5,348 2,244

Operating income 138,680 160,431

Material expense -43,841 -54,895

Personnel expense -32,341 -31,592

Depreciation and amortization -15,386 -13,903

Other operating expense -27,864 -27,561

Operating expense -119,432 -127,951

Earnings before interest and tax (EBIT) 19,248 32,480



Finance result -9,201 -20,078

Earnings before tax 10,047 12,402

Taxes -3,568 -3,632

Net result 6,479 8,770

100 Uster Technologies Ltd – Financial Statements 2008

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Balance Sheet

in CHF 1,000 Dec 31, 2008 Dec 31, 2007

Organizational costs 10,528 13,140

Other intangible assets 297,429 307,885

Property, plant and equipment 4,293 2,296


Investments in subsidiaries 7,451 5,232

Loans to group companies 2,357 8,104

Non-current assets 322,064 336,666

Inventories 4,617 7,051

Receivables trade third parties 8,143 10,819

Receivables trade group companies 4,470 7,739

Other receivables third parties 768 1,714

Other receivables group companies 1,215 653

Prepaid expenses third parties 484 184

Prepaid expenses group companies 72 81

Cash and cash equivalents 5,267 1,742

Current assets 25,036 29,983

Assets 347,100 366,649

Share capital 61,664 65,600

Statutory reserve 98 0

Retained earnings 85,867 77,195

Net result 6,479 8,770

Shareholders’ equity 154,108 151,565

Bank loans 155,000 170,000

Provisions 2,735 2,550

Non-current liabilities 157,735 172,550

Bank loans 10,000 10,000

Derivative financial instruments 2,111 218

Payables trade third parties 3,748 7,864

Payables trade group companies 271 1,927

Other liabilities third parties 993 1,970

Other liabilities group companies 6,028 6,913

Accrued liabilities third parties 8,221 11,857

Accrued liabilities group companies 270 235

Provisions 3,615 1,550

Current liabilities 35,257 42,534

Liabilities 192,992 215,084

Shareholders’ equity and liabilities 347,100 366,649

Uster Technologies Ltd – Financial Statements 2008 101

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Uster Technologies Ltd – Notes to the Financial Statements

1 Statement of Compliance

The financial statements of Uster Technologies Ltd are prepared in compliance with the

Swiss Code of Obligations.

2 Company Information

Since the initial public offering on October 19, 2007, the shares of Uster Technologies Ltd

are listed on the main segment of SIX Swiss Exchange.

3 Shareholders’ Equity

1) The dividend has been paid by way of a nominal value reduction.

Ordinary Share Capital


CHF 61.7 million and was fully paid up. It consisted of 6,560,000 registered shares with a

nominal value of CHF 9.40 each (December 31, 2007: share capital of CHF 65.6 million and

6,560,000 shares with a nominal value of CHF 10 each).

Authorized Share Capital Increase

As of December 31, 2008, the authorized share capital increase amounted to CHF 8.93 million.

According to the articles of association of Uster Technologies Ltd, the Board of Directors is

authorized, at any time until October 4, 2009, to increase the share capital in an amount not

to exceed CHF 8.93 million through the issuance of up to 950,000 fully paid registered shares

with a nominal value of CHF 9.40 each. An increase in partial amounts is permitted.

in CHF 1,000 Share

Capital

Statutory

Reserves

Retained

Earnings

Total

Balance at January 1, 2007 45,600 0 -6,805 38,795Issue of share capital 20,000 0 84,000 104,000Net result 0 0 8,770 8,770Balance at December 31, 2007 65,600 0 85,965 151,565

Balance at January 1, 2008 65,600 0 85,965 151,565Dividend 1) -3,936 98 -98 -3,936Net result 0 0 6,479 6,479Balance at December 31, 2008 61,664 98 92,346 154,108

102 Uster Technologies Ltd – Notes to the Financial Statements 2008

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Conditional Share Capital Increase

As of December 31, 2008, Uster Technologies Ltd had a conditional share capital increase

available, pursuant to which the share capital may be increased by a maximum aggregate

amount of CHF 3.008 million through the issuance of a maximum of 320,000 fully paid reg-

istered shares with a nominal value of CHF 9.40 each by the exercise of option rights which

the employees, the Management or Directors of Uster Technologies Ltd or another Group

company are granted according to the respective regulations of the Board of Directors.

4 Pledged Assets

As of December 31, 2008, none of the assets of Uster Technologies Ltd were pledged

(2007: none).

5 Guarantee

As of December 31, 2008, Uster Technologies Ltd did not have any guarantees outstanding

(2007: none).

6 Fire Insurance Values of Property, Plant and Equipment

The fire insurance values of property, plant and equipment as of December 31, 2008, amounted

to CHF 14.5 million (2007: CHF 13.5 million).

7 Excess reserves

During the financial year 2008 excess reserves amounting to CHF 2.7 million have been

reversed (2007: nil).

8 Risk assessment

Risk management is part of the management process which is defined within the manage-

ment handbook. All risks / groups of risks are assigned to the process owners of the business

processes containing the specific risk. Strategic risks are directly assigned to the Executive

Management Team.

The process owners supervise the risks / group of risks and propose process changes if the

risks take unexpected developments. The process changes are approved by the Executive

Management Team.

The risk management process is reviewed at least once a year by the Board of Directors.

Uster Technologies Ltd – Notes to the Financial Statements 2008 103

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9 Significant Shareholders

966 shareholders were entered in the share register of Uster Technologies Ltd as of December

31, 2008 (2007: 780). Of those the following held more than 3.0 % of the total voting rights:

• Alcide Ltd 36.0 % (36.0 %)

• Board and Management Members 1) 9.5 % (10.22 %)

• Lombard Odier DH Fund Managers 6.9 % (–)

• T. Rowe Price International Inc. 5.5 % (5.5 %)

• Polar Capital LLP 4.0 % (4.0 %)

• Bär Marc Philipp 3.62 % (–)

1) The Board and Management Members do not act as a Group and are therefore not reported to SIX Swiss

Exchange as a significant shareholder.

10 Investments in Subsidiaries

As of December 31, 2008, Uster Technologies Ltd held the following investments:

Company % Capital

Shareholdings

Share Capital

Dec 31, 2008 in 1,000

Uster Technologies de Mexico S.A. de C.V.

(Tlalnepantla, MX) 100 % MXN 6,250

Uster Technologies GmbH

(Neuss, DE) 100 % EUR 26

Uster Technologies (India) Pvt. Ltd

(Bangalore, IN) 100 % INR 4,950

Uster Technologies K.K.

(Osaka-fu, JP) 100 % JPY 10,000

Uster Technologies (Shanghai) Co. Ltd

(Shanghai, CN) 100 % CNY 1,660

Uster Technologies (Suzhou) Co. Ltd

(Suzhou, CN) 1) 100 % CNY 20,185

Uster Technologies Sulamericana Ltda.

(Alphaville-Barueri SP, BR) 100 % BRL 650

Uster Technologies (Thailand) Ltd

(Bangkok, TH) 100 % THB 6,000

Uster Technologies, Inc.

(Knoxville, US) 100 % USD 100

Uster Teknoloji Ticaret A.S.

(Istanbul, TR) 100 % TRY 50

1) Captial Increase in 2008 of CNY 18,724


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11 Compensation of the Members of the Board of Directors and the Executive Committee

11.1 Loans and Other Payments

No loans to present or former Members of the Board of Directors or Executive Committee

were granted or outstanding as of December 31, 2008 (2007: none).

During 2008, payments for consulting services amounting to CHF 5,000 (2007: CHF 35,000)

and CHF 4,000 (2007: CHF 24,000) respectively have been made to Max-Ulrich Zellweger and

Barry Mulady.

11.2 Compensation

The compensation of the Board of Directors and the Executive Committee for the year ending

December 31, 2008, was as follows:

Board of Directors

1) Ulrich Geilinger left the Board of Directors at the Ordinary General Meeting held March 18, 2008.

2) Beat Lüthi was elected Member of the Board of Directors by the Ordinary General Meeting held at

March 18, 2008.

3) The compensation of the executive member of the Board of Directors is shown under the compensation

of the Executive Committee.

in CHF 2008 2007

Name Function Base

Compensation

(Cash)

Other

Social Costs

Total Base

Compensation

(Cash)

Other

Social Costs

Total

Max-Ulrich Zellweger Chairman 94,085 3,939 98,024 24,593 0 24,593Ulrich Geilinger Vice-Chairman 1) 17,747 1,083 18,830 22,496 757 23,253Beat Lüthi Vice-Chairman 2) 39,376 2,400 41,776 Barry James Mulady Member 58,002 3,535 61,537 18,510 3,954 22,464Harald Rönn Member 60,131 3,666 63,797 10,139 0 10,139Geoffrey Scott 3) Member

Total 269,341 14,623 283,964 75,738 4,711 80,449


Global Reports LLC

Executive Committee

1) Including board member fee of CHF 60,138 (2007; CHF 10,139).

11.3 Ownership of Uster Shares by the Board of Directors and the Executive Committee

As of December 31, the Members of the Board of Directors and the Executive Committee held

the following number of shares of Uster Technologies Ltd:

Board of Directors

Name Function Number of

Shares owned

2008

Number of

Shares owned

2007

Max-Ulrich Zellweger Chairman 20,000 10,148

Ulrich Geilinger 1) Vice-Chairman 0

Beat Lüthi 2) Vice-Chairman 0

Barry Mulady Member 10,148 10,148

Harald Rönn Member 7,000 0

Geoffrey Scott 3) Member

Total 37,148 20,296

1) Ulrich Geilinger left the Board of Directors at the Ordinary General Meeting held March 18, 2008.2) Beat Lüthi was elected Member of the Board of Directors by the Ordinary General Meeting held at

March 18, 2008.3) The ownership of shares of the executive member of the Board of Directors is shown under the

ownership of shares of the Executive Committee.

in CHF 2007

Name Function Base

Compensation

(Cash)

Bonus

(Cash)

Pension

Benefits

Other

Social Costs

Total

Geoffrey Scott CEO 500,109 841,916 77,863 59,956 1,479,844Other members 2,028,456 2,226,155 263,287 199,618 4,717,516Total 2,528,565 3,068,071 341,150 259,574 6,197,360

in CHF 2008

Name Function Base

Compensation

(Cash)

Bonus

(Cash)

Pension

Benefits

Other

Social Costs

Total

Geoffrey Scott CEO 571,900 151,000 77,134 64,193 864,227Other members 2,445,326 461,000 272,716 253,459 3,432,501Total 3,017,226 612,000 349,850 317,652 4,296,728


1)

Global Reports LLC

Executive Committee

Name Function Number of

Shares owned

2008

Number of

Shares owned

2007

Geoffrey Scott CEO 188,000 188,000

Barbara Müller-Junker 1) CFO 92,000

Thomas F. Dressendörfer 1) CFO 14,000

Naiming Wei Asian Operations 100,000 92,000

Harold Hoke Sales and Service 94,000 92,000

Hossein Ghorashi U.S. Operations 75,000 72,000

Renato Murk Order Fulfillment 73,400 72,000

Rafael Storz Research and Innovation 32,000 32,000

Richard Furter Textile Technology 5,000 5,000

Deniz Bütüner Marketing and

Business Development 5,000 5,000

Total 586,400 650,000

1) Barbara Müller-Junker left the Executive Committee as of September 30, 2008, and was succeeded

by Thomas F. Dressendörfer. As of this date she hold 92,000 shares.

12 Proposal for the Appropriation of Available Earnings

The Board of Directors proposes to appropriate the available earnings as follows:

in CHF Dec 31, 2008 Dec 31, 2007

Available unappropriated retained earningsBalance brought forward 1,866,270 -6,805,286

Net result of the year 6,479,158 8,769,781

Total available earnings 8,345,428 1,964,495

Appropriation retained earningsTransfer to legal reserve -323,958 -98,225

Balance to be carried forward 8,021,470 1,866,270


Global Reports LLC

Report of the Statutory Auditor on the Financial Statements

To the General Meeting of Uster Technologies Ltd, Uster

Zurich, 17 February 2009

As statutory auditor, we have audited the accompanying financial statements of

Uster Technologies Ltd, which comprise the income statement, balance sheet, and notes

on pages 100 to 107 for the year ended 31 December 2008.

Board of Directors’ responsibility

The Board of Directors is responsible for the preparation of the financial statements in

accordance with the requirements of Swiss law and the company’s articles of incorporation.

This responsibility includes designing, implementing and maintaining an internal control

system relevant to the preparation of financial statements that are free from material mis-

statement, whether due to fraud or error. The Board of Directors is further responsible for

selecting and applying appropriate accounting policies and making accounting estimates

that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those

standards require that we plan and perform the audit to obtain reasonable assurance whether

the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor’s

judgment, including the assessment of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those risk assessments, the auditor

considers the internal control system relevant to the entity’s preparation of the financial

statements in order to design audit procedures that are appropriate in the circumstances,

but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal

control system.

An audit also includes evaluating the appropriateness of the accounting policies used and

the reasonableness of accounting estimates made, as well as evaluating the over-all presen-

tation of the financial statements. We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements for the year ended 31 December 2008 comply with

Swiss law and the company’s articles of incorporation.

108 Report of the Statutory Auditor on the Financial Statements

Global Reports LLC

Report on other legal requirements

We confirm that we meet the legal requirements on licensing according to the Auditor

Over-sight Act (AOA) and independence (Art. 728 CO and Art. 11 AOA) and that there are

no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890,

we confirm that an internal control system exists, which has been designed for the prepa-

ration of financial statements according to the instructions of the Board of Directors.

We further confirm that the proposed appropriation of available earnings complies with

Swiss law and the company’s articles of incorporation. We recommend that the financial

statements submitted to you be approved.

Ernst & Young Ltd

Daniel Zaugg Peter Z. Egli

Licensed audit expert Licensed audit expert

(Auditor in charge)

Report of the Statutory Auditor on the Financial Statements 109

Global Reports LLC

Information for Investors

Share Information

Development of Share Price in CHF

Share Information and Key Figures

The table below shows the most important information regarding the shares of

Uster Technologies Ltd.

1) Proposal of the Board of Directors to the Shareholders’ meeting.

2008 2007

Share capitalNominal value per share CHF 9.40 10.00

Shares issued number 6,560,000 6,560,000

Issued share capital CHF 1,000 61,664 65,600

Free float 100 % 54.0 %

Market capitalization and dividendMarket capitalization CHF 1,000 61,730 324,720

as % of gross sales 39.9 % 174.0 %

as % of shareholders’ equity 38.7 % 223.4 %

Dividend per share, gross CHF 0.00 0.60 1)

Total dividend paid, gross CHF 1,000 0 3,936

Payout ratio 0.0 % 134.2 %

28.1

1.20

08

31.1

2.20

08

30.0

9.20

08

31.0

7.20

08

30.0

5.20

08

30.0

6.20

08

29.0

8.20

08

31.1

0.20

08

31.0

3.20

08

30.0

4.20

08

31.0

1.20

08

29.0

2.20

08

31.0

1.20

09

50,000

40,000

30,000

20,000

10,000


SPI, rebased

110 Information for Investors 2008

Global Reports LLC

2008 2007

Key figures per shareShare price at the end of the year CHF 9.41 49.50

Highest share price CHF 47.70 58.00

Lowest share price CHF 5.80 41.00

Dividend yield 0.0 % 1.2 %

Basic / Diluted earnings per share CHF 0.81 0.72

P / E ratio 11.6 83.9

Stock Exchange Information

SIX Swiss Exchange Ticker Symbol USTN

Swiss Security Number 3433153

ISIN CH0034331535

Shareholding Structure

The structure of the shareholders entered in the share register is as follows:

Shares Shareholders Shares

1 – 100 310 32.1 % 20,712 0.3 %

101 – 1,000 535 55.4 % 210,282 3.2 %

1,001 – 10,000 83 8.6 % 218,584 3.3 %

10,001 – 100,000 32 3.3 % 1,207,268 18.4 %

100,001 – 1,000,000 5 0.5 % 1,465,507 22.3 %

> 1,000,000 1 0.1 % 2,358,377 36.0 %

Not registered 1,079,270 16.5 %

Total 966 100.0 % 6,560,000 100.0 %

Important Dates

Publication of annual results 2008 March 2, 2009

Media and analyst conference March 2, 2009

Last day for inscription into the share register

before the Shareholders’ meeting 2009 March 24, 2009


Semiannual results 2009 July 21, 2009

Contact for Media, Investors and Analysts

Thomas F. Dressendörfer, CFO

Sonnenbergstrasse 10

CH-8610 Uster

Phone +41 43 366 36 06

Fax +41 43 366 36 54


Information for Investors 2008 111

Global Reports LLC


Dec 31, 2008

Jan 1 –

Dec 31, 2007

Jan 1 –

Dec31, 20061)

Jan 1 –

Dec31, 20051)

Consolidated Income Statement

Gross sales 154,893 100.0 % 186,666 100.0 % 163,900 100.0 % 143,651 100.0 %

Cost of goods sold / Sales

deductions -63,877 -41.2 % -79,299 -42.5 % -64,814 -39.5 % -61,268 -42.7 %

Gross profit 91,016 58.8 % 107,367 57.5 % 99,086 60.5 % 82,383 57.3 %

Sales and marketing

expenses -19,465 -12.6 % -21,433 -11.5 % -21,390 -13.1 % -22,404 -15.6 %

Research and develop-

ment expenses -19,857 -12.8 % -18,645 -10.0 % -15,313 -9.3 % -16,006 -11.1 %

Management and

administrative expenses -17,582 -11.4 % -15,930 -8.5 % -16,699 -10.2 % -13,450 -9.4 %

Other income & expenses -15,212 -9.8 % -17,606 -9.4 % 400 0.2 % -1,355 -0.9 %

Earnings before interest and tax (EBIT) 18,900 12.2 % 33,753 18.1 % 46,084 28.1 % 29,168 20.3 %

Amortization and

restructuring 19,645 0 18,631 0 109 0 1,561 0

Earnings before interest tax and amortization (EBITA) before restructuring 38,545 24.9 % 52,384 28.1 % 46,193 28.2 % 30,729 21.4 %

Restructuring cost incl.

pension expense -4,377 0 0 0 0 0 0 0

Earnings before interest tax and amortization (EBITA) after restructuring 34,168 22.1 % 52,384 28.1 % 46,193 28.2 % 30,729 21.4 %

Amortization -15,268 -18,631 -109 -1,561

Earnings before interest

and tax (EBIT) 18,900 12.2 % 33,753 18.1 % 46,084 28.1 % 29,168 20.3 %

Finance result -10,211 -6.6 % -26,865 -14.4 % -4,715 -2.9 % -3,750 -2.6 %

Earnings before tax 8,689 5.6 % 6,888 3.7 % 41,369 25.2 % 25,418 17.7 %

Income tax -3,373 -38.8 % -3,301 -47.9 % -11,412 -27.6 % -7,027 -27.6 %

Net result 5,316 3.4 % 3,587 1.9 % 29,957 18.3 % 18,391 12.8 %

Key Figures


Global Reports LLC


Dec 31, 2008

Jan 1 –

Dec 31, 2007

Jan 1 –

Dec 31, 2006 1)

Jan 1 –

Dec 31, 2005 1)

Consolidated Cash Flow StatementEarnings before tax 8,689 6,888 41,369 25,418

Adjustments for depreciation, amortization etc. 30,940 45,274 4,964 7,878

Change in working capital -2,256 -6,986 2,811 5,248

Income taxes paid -4,617 -5,951 -856 -2,581

Cash flow from operating activities 32,756 39,225 48,288 35,963

Purchase of non-current assets -3,735 -2,969 -3,097 -3,294

Disposal of non-current assets 124 828 157 328

Other movements in non-current assets 0 0 0 0

Interest received 264 125 296 286

Cash flow from investing activities -3,347 -2,016 -2,644 -2,680

Proceeds from loans 1 178,557 125,088 0

Repayments of loans -15,000 -296,100 -174,150 -34,000

Proceeds from issue of share capital 0 97,137 0 0

Nominal value reduction -3,936 0 0 0

Movements in treasury shares 0 0 815 -521

Interest paid -8,478 -19,321 -6,554 -2,077

Cash flow from financing activities -27,413 -39,727 -54,801 -36,598

Net change in cash and cash equivalents 1,996 -2,518 -9,157 -3,315

Operating cash flow generated in % of EBITA 95.9 % 74.9 % 104.5 % 117.0 %

1) Consolidated figures of Uster Technologies Ltd before the secondary buyout by the Management

and Alpha Beteiligungsberatung & Co. KG.


Global Reports LLC

1) Consolidated figures of Uster Technologies Ltd (formerly Hercules Holding Ltd) after the secondary

buyout by the Management and Alpha Beteiligungsberatung & Co. KG.2) Consolidated figures of Uster Technologies Ltd before the secondary buyout by the Management

and Alpha Beteiligungsberatung & Co. KG.

in CHF 1,000 2008 2007 2006 1) 2006 2) 2005

Balance sheetAssets 409,805 432,057 437,090 139,195 157,842

Non-current assets 375,321 391,189 392,967 99,543 109,884

as % of total assets 91.6 % 90.5 % 89.9 % 71.5 % 69.6 %

Current assets 34,484 40,868 44,123 39,652 47,958


Equity 159,542 158,594 44,738 51,545 21,930


Liabilities 250,263 273,463 392,352 87,650 135,912

Non-current liabilities 215,174 231,309 342,121 53,143 97,424


Current liabilities 35,089 42,154 50,231 34,507 38,488


Net debt 156,546 173,412 280,488 37,115 79,634

AR collection period 35 31 n / a 39 61

AP collection period 48 52 n / a 69 61

Capital expenditureIntangible assets -174 -446 0 -130 -8

Property, plant, and equipment -3,513 -1,991 0 -2,708 -2,788

Total -3,687 -2,437 0 -2,838 -2,796

EmployeesNumber of employees (FTE) 536 529 490 490 468

Gross sales per employee 288,979 352,866 n / a 334,490 306,947


Global Reports LLC


Global Reports LLC

Imprint

Content Concept and Editing

IRF Communications AG

Text


Design, Concept and Layout

TGG Hafen Senn Stieger

Printing

Ostschweiz Druck AG

Global Reports LLC


Gross Sales

154,893 34,1682008

EBITA

2008

Achievements 2008










2008

Net Result

3,587

5,316 2008

Free Cash Flow

29,409

Milestones



















Sonnenbergstrasse10


Phone +41433663636

Fax +41433663637




2006 163,900

143,651

140,961

186,6662007

2005

2004

46,193

30,729

29,205

52,384

2006

2007

2005

2004

2006

2007

2005

2004

2006

2007

2005

2004

45,348

37,084

32,997

25,724

29,957

18,391

-777


inCHF1,000

inCHF1,000


22.1 %

3.4 %

28.1 %

1.9 %

18.3 %

12.8 %

-0.6 %

28.2 %

21.4 %

20.7 %

Ust

er T

echn

olog

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Ann

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Global Reports LLC


i i i i i i


Process Step

USTER® Products










• USTERIzED®


• QualityProfiles



Portrait














Knoxville, USA

Uster, Switzerland

Istanbul, Turkey

Bangkok, Thailand

Coimbatore, India

Sao Paulo, Brazil












Technology Centers



Shanghai, China









Global Reports LLC


i i i i i i


Process Step

USTER® Products










• USTERIzED®


• QualityProfiles



Portrait














Knoxville, USA

Uster, Switzerland

Istanbul, Turkey

Bangkok, Thailand

Coimbatore, India

Sao Paulo, Brazil












Technology Centers



Shanghai, China









Global Reports LLC


Gross Sales

154,893 34,1682008

EBITA

2008

Achievements 2008










2008

Net Result

3,587

5,316 2008

Free Cash Flow

29,409

Milestones



















Sonnenbergstrasse10


Phone +41433663636

Fax +41433663637




2006 163,900

143,651

140,961

186,6662007

2005

2004

46,193

30,729

29,205

52,384

2006

2007

2005

2004

2006

2007

2005

2004

2006

2007

2005

2004

45,348

37,084

32,997

25,724

29,957

18,391

-777


inCHF1,000

inCHF1,000


22.1 %

3.4 %

28.1 %

1.9 %

18.3 %

12.8 %

-0.6 %

28.2 %

21.4 %

20.7 %

Ust

er T

echn

olog

ies L

td |

Ann

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Global Reports LLC

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