Leclanche brochure1

2008 Annual ReportLeclanché SA

LECLANCHÉ SA

Avenue des Sports 42

Case postale

1401 Yverdon-les-Bains

Tél. +41 (0)24 424 65 00

Fax +41 (0)24 424 65 01

www.leclanche.ch

Index

INDEX

Message from the Board of Directors 3 - 5

Corporate governance 6 - 11

Consolidated financial statements 2008 12 - 49

Report of the statutory auditor on the consolidated financial statements 50 - 51

Statutory financial statements 2008 52 - 56

Report of the statutory auditor 57 - 58

Message from the Board of Directors

3

MESSAGE FROM THE BOARD OF DIRECTORS

Dear shareholders,

Following the growth observed in 2007, a significant decline in revenues was measured in 2008 (-13.5%). Results for the second half of 2008 did not meet expectations. The underlying reason to this was the shifting by several months of important projects, and an unexpected contraction of the primary cell market in Switzerland. Additionally to that Leclanché supported extraordinary costs related to the move to its new leased building at the Avenue des Sports in Yverdon-les-Bains, as well as the finalization of the implementation of a new ERP system (Navision). Despite these setbacks, the overall 2008 result remained to a large extent positive. The impact of non-operational events, such as the real estate revalorization and the adoption of IAS 19 / IFRIC 14 concerning the valuation of the Group’s pension fund also affected by the turmoil of the international financial markets, had an important influence on the financial figures.

2008 was a pivotal year in the repositioning of the company in new fields of activity dealing with transport electrification and the battery development necessary for the expansion of renewable energies. The cornerstone of this repositioning was without any doubt the participation of Leclanché in two major German consortiums aiming at developing the next generation of batteries destined to power future electric vehicles. In addition to that Leclanché pursued its collaboration with solar module specialists for the development of lithium-ion batteries for the solar industry. This repositioning opens a window of opportunity for potentially large future revenues, as well as highlighting an achieved industrial recognition.

In order to coordinate the different technological developments of the Leclanché Group, a technical center has been created within the Leclanché headquarters in Yverdon-les-Bains.

Events shaping the outlook of 2008

Investment of CHF 2.4 million in machinery and equipment to increase the production capacity for small and large Lithium-ion cells to fulfill future customer orders and requirements. This achievement highlights the industrial capability and know-how of Leclanché in this new technology field.

Move to the new site at the Avenue des Sports in Yverdon-les-Bains in a modern building emphasizing and supporting the technological change and cultural renewal of Leclanché. This transfer allows Leclanché to generate liquidity through the sale of its real estate property.

A remaining unbuilt real estate property parcel of 9’012 sqm, rue Edouard-Verdan, Yverdon-les-Bains was sold to Jacques Leuba SA et consorts for an amount of CHF 4.225 million during the 2nd half of 2008.

Appointment of Dario Bello, 32, as new CFO. Dario Bello was Finance Controller of a manufacturing subsidiary of the Johnson & Johnson Group in Neuchâtel and worked previously with Syngenta AG at their headquarters in Basel, holding various positions within the Finance Department.


4

KEY FIGURES 2008

Leclanché SA

Consolidated key figures (CHF '000)

2008 2007

Revenue from continuing operations 13'119 15'171

EBIT from continuing operations 1'401 2'643

EBITDA from continuing operations 2'589 3'899

Profit / (loss) for the period from continuing operations 1'981 2'301

Profit / (loss) from a discontinued operation - 28

Profit / (loss) for the period 1'981 2'329

Equity 23'814 30'001 Equity % 80.4% 69.3%

Earning per share [CHF] 11.69 13.75

Number of Employees [FTE] 71.93 74.70

Note: The consolidated key figures have been extracted from the consolidated financial statements set out on pages 12 to 51 of the 2008 Annual Report. As indicated in note 1. (B) (a) of the consolidated financial statements, in 2008, the Group has adopted IFRIC 14, "IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction" and has at the same time elected to recognise the actuarial gains and losses directly in equity in a statement of recognised income and expenses (SORIE) as permitted by IAS 19, "Employee benefits". As a result, it has restated the 2007 comparatives accordingly. The details of this restatement are set out in note 1. (B) (a) of the consolidated financial statements. The Group has not reflected the adoption of IFRIC 14 and the SORIE method in its 30 June 2008 interim report. It will do so as part of its 30 June 2009 interim report.


5

OUTLOOK FOR 2009

In 2009, Leclanché expects a significant sales rebound. A military project will move to production and other major orders are expected in the defense industry.

Leclanché also expects an important increase in revenues from the lithium-ion polymer cells produced on the new manufacturing equipment based in Willstätt (Germany). These large format cells for capacity and power applications are mainly targeted at the electric vehicle industry and the solar energy market.

Leclanché will pursue its investments in order to develop its production and sales capacity of lithium-ion polymer cells.

Leclanché will reinforce significantly its technical staff, in Switzerland and in Germany, in order to sustain the growth of its manufacturing capacity as well as its technological development.

Leclanché will continue to look for a buyer of the remaining parcel of real estate.

Leclanché will celebrate its 100th anniversary.

To conclude, the Board of Directors would like to emphasize the high commitment of all its employees, in Switzerland and in Germany, and thank them for their work and dedication.

Sincerely yours,

Stefan Müller Dr. Raoul Sautebin Chairman CEO

Corporate governance

6

CORPORATE GOVERNANCE

This chapter is in conformity with the Corporate Governance directives of the SIX Swiss Exchange which came into force on 1st July 2002 and subsequent revisions up to 31st December 2008.

1. Company and Shareholders

The accounts relate to Leclanché SA, with its registered office at 1401 Yverdon-les-Bains and listed on the Swiss Exchange (SIX), as well as to the 100% participation in Leclanché Lithium GmbH in Willstätt (D).

At the end of the financial year, the principal shareholders are EnergyGroup Holding AG, St. Gallen, which holds 64.3 %, GermanIncubator Erste Beteiligungs GmbH, München, which holds 9.0%, Trecon AG, Cham, which holds 4.8 % and SVM Value Fund, Genève, which holds 3.8 %.

Leclanché SA has no cross-shareholdings.

2. Capital Structure

The share capital of Leclanché SA amounts to CHF 8’470’000, divided into 169’400 registered shares with a value of CHF 50 each. The registration of nominees is not provided for under the Articles of Association. Leclanché has no authorised share capital. The single change in capital brought about over the last three financial years was an increase in share capital by CHF 2’117’500 in March 2006. No convertible bonds, options, participation certificates or dividend-right certificates have been issued. A conditional share capital increase was decided at the General Meeting held on 16th March 2006 allowing an increase in share capital up to a maximum nominal value of CHF 1’700’000 by issuing in one or more blocks a maximum of 34’000 registered shares with a nominal value of CHF 50 each. This was to allow options reserved for EnergyGroup Holding AG in St. Gallen to be converted. Preferential subscription rights were accordingly cancelled for this block of shares in order to allow holders to exercise their conversion or option rights. This conditional share capital increase was restricted to the period up to 31st December 2007 and was not exercised.

3. Board of Directors (BoD)


6

CORPORATE GOVERNANCE

This chapter is in conformity with the Corporate Governance directives of the SIX Swiss Exchange which came into force on 1st July 2002 and subsequent revisions up to 31st December 2008.

1. Company and Shareholders

The accounts relate to Leclanché SA, with its registered office at 1401 Yverdon-les-Bains and listed on the Swiss Exchange (SIX), as well as to the 100% participation in Leclanché Lithium GmbH in Willstätt (D).

At the end of the financial year, the principal shareholders are EnergyGroup Holding AG, St. Gallen, which holds 64.3 %, GermanIncubator Erste Beteiligungs GmbH, München, which holds 9.0%, Trecon AG, Cham, which holds 4.8 % and SVM Value Fund, Genève, which holds 3.8 %.

Leclanché SA has no cross-shareholdings.

2. Capital Structure

The share capital of Leclanché SA amounts to CHF 8’470’000, divided into 169’400 registered shares with a value of CHF 50 each. The registration of nominees is not provided for under the Articles of Association. Leclanché has no authorised share capital. The single change in capital brought about over the last three financial years was an increase in share capital by CHF 2’117’500 in March 2006. No convertible bonds, options, participation certificates or dividend-right certificates have been issued. A conditional share capital increase was decided at the General Meeting held on 16th March 2006 allowing an increase in share capital up to a maximum nominal value of CHF 1’700’000 by issuing in one or more blocks a maximum of 34’000 registered shares with a nominal value of CHF 50 each. This was to allow options reserved for EnergyGroup Holding AG in St. Gallen to be converted. Preferential subscription rights were accordingly cancelled for this block of shares in order to allow holders to exercise their conversion or option rights. This conditional share capital increase was restricted to the period up to 31st December 2007 and was not exercised.

3. Board of Directors (BoD)

Members of the BoD as at 31st December 2008

Nationality Born Role Executive Member First Elected Elected

Until

MÜLLER Stefan Swiss 1954 President No 1998 2010 HERTIG Peter Swiss 1947 Director No 2006 2009 SAUTEBIN Raoul Swiss 1948 CEO Yes 2002 2011

WEILAND Armin German 1965 Director No 2006 2009


7

Biographies

Mr Stefan MÜLLER, from Näfels, born in 1954 in Lima/Peru where he lived until the age of eleven, is married, with two children. Upon returning to Switzerland he graduated with a MBA from the Hochschule für Wirtschafts-, Rechts- und Sozialwissenschaften (HSG) of the University of St. Gallen. Since 1987 Mr Müller has held several management roles in industrial corporations. Since 1st January 2004 he is the CEO of Fortis Lease Switzerland Ltd (formerly Dreieck Industrie Leasing SA).

Mr Peter HERTIG, from Oberhofen am Thunersee, born in 1947, is married, with three daughters. He is the former owner of the TOGO Group (today EMS-Eftec) in Romanshorn. He has been active as an investor and consultant on an international level (North America, South America, as well as Asia) within various industries. He is currently a Partner with GermanCapital and is a member of the BoD of EnergyGroup Holding AG.

Mr Raoul SAUTEBIN, from Mervelier, born in 1948 in Delémont, is married, with two children. He has a M.A. in Chemical Engineering and a Doctorate of Electrochemistry from the Ecole Polytechnique Fédérale de Lausanne (EPFL) and completed his education with a Corporate Management program at the IMD. He gained extensive professional experience in his executive leadership roles in corporations working in the heavy metal, hard metal and precious metals industry. He is experienced in corporate restructuring.

Mr Armin WEILAND, from Germany, born in 1965, is married, with four daughters. He has been active in the banking sector in Germany since 1992. He has vast experience in corporate finance transactions at both a national and international level. He is currently Managing Partner with GermanCapital.

Leclanché SA does not have any agreements for reciprocal representation on the BoDs of listed companies.

Under the company’s Articles of Association the Board of Directors is composed of three to seven members. Members are elected to the BoD during the Shareholders meeting for a three-year term of office. Members may be re-elected. Should a vacancy arise during the course of an administrative period, the Board of Directors has the power to temporarily replace one or more of its members until the next Shareholders meeting. As a temporary measure until the next Shareholders meeting, the BoD can also increase the number of its members up to the maximum provided by the Articles of Association.

There is no time limit applicable to the positions and the BoD works to ensure that the end of term for the directors’ positions are spread out.

Internal Organisation

The Board of Directors constitutes itself and it appoints amongst others a President and a Secretary. The latter can be nominated from outside the members of the BoD.

The Board of Directors can entrust some, or all of its powers, to one (a delegate) or several (a committee) of its members or to an Executive committee (EC). However the non-transferable and inalienable duties of the Board of Directors as set down in Article 716a of the Swiss Code of Obligations (CO) cannot be delegated.


8

As at 31st December 2008, Mr Sautebin is the only member of the BoD performing operational management tasks (degree of activity: 100%).

The general areas of responsibility and the non-transferable, inalienable duties of the BoD are indicated in the organizational regulations. These duties include:

Providing executive leadership to the corporation and establishing the necessary policies Establishment of corporate strategy and organisation Setting accounting and financial control principles Setting operating and capital budgets.

The Executive director must, among other things:

Execute decisions of the BoD Keep the BoD regularly informed on the company’s performance Ensure that corporate strategy is implemented.

The BoD supervises EC and monitors its performance by the process of establishing appropriate reporting and control systems. Regular reporting by the CEO should contain pertinent information and updates, including key data concerning the principal activities, finances, existing and potential risks, updates on the development of the principal markets as well as on the main competitors and any other significant developments.

In light of the number of directors the BoD has decided against establishing any committees.

4. Executive Committee

SAUTEBIN Raoul Swiss born in 1948 CEO

The Executive director is supported by an Executive Committee. As at 31st December 2008, the EC was composed of the following persons:

BELLO Dario Italian / Swiss born in 1976 CFO

BLANC Pierre Swiss born in 1970 CTO

DOUH Karima French born in 1975 Distribution Manager

EVARD Daniel Swiss born in 1948 Quality & Logistics Manager

MARZOLINI Fabrizio Italian born in 1969 Integration Manager

MÜHLEMANN Suzanne Swiss born in 1966 HR / Executive Assistant

Mr Sautebin does not exercise any role in the sense of point 4.2. of the SIX directives.

Leclanché SA has not entered into any significant management contracts with third parties (either corporations or individuals) which are not part of the Group (or who are not employees of the Group).

5. Compensations and Shareholdings

Each member of the Board of Directors receives a fixed allowance which may vary depending on specific activities requested by the corporation. The remuneration is independent of the financial performance of the corporation save for those members in operational roles.


9

The remuneration of the Directors and Executive Committee is divided into fixed and variable portions, and is subject to the attainment of quantitative and personal objectives set at the beginning of the year.

All remuneration is paid in cash to the exclusion of any payment in shares. The remuneration of the Board of Directors, of the Directors and of the members of the Executive Committee is set by the Board of Directors once a year, save in exceptional circumstances.

In 2008, Mr Sautebin, executive director, was the only member of the BoD with a full-time executive position.

The members of the Board of Directors in office as of 31st December 2008 held the following registered shares: - 6 shares for the executive member of the BoD and - 20 shares for the three non-executive members of the BoD.

Share options have not been allocated to members of the BoD or to senior management, neither during the last financial year nor during any previous financial periods.

No guarantees and/or loans, advances or credit have been granted to members of the Board of Directors, neither in 2008 nor in any previous financial period.

6. Shareholders’ Participation

Each registered share with a nominal value of CHF 50 inscribed into the share register entitles its holder to one vote.

In accordance with the Articles of Association a quorum is formed during the Shareholders meeting, independent of the number of shareholders present or of the number of voting rights represented.

As a general rule, the Shareholders meeting carries resolutions and makes appointments on an absolute majority of the voting rights represented. In a second round of voting, the relative majority is carried. If there is a split vote, the President has the casting vote.

Exceptions to this rule are the resolutions listed in Article 704 of the Swiss Code of Obligations, which require a minimum of two thirds of the votes represented and an absolute majority of the nominal values of the shares represented.

Any decision to modify, or to abrogate Article 4 of the Articles of Association (concerning the transmissibility of shares), or Article 14 (concerning resolutions and appointments) require a minimum of two thirds of the votes attached to the represented shares. The same two third majority is required to revoke more than one third of the Board of Directors.

7. Number of Shares and Market Capitalization

Leclanché SA’s shares are listed on the Swiss stock exchange, SIX Swiss Exchange, ISIN numberCH0016271550 (LECN).

The number of registered shares issued for a nominal value of at least CHF 50.00 each is 169’400.

Market Capitalisation (value at 31.12.2008 = CHF 195): CHF 33’033’000.


10

Convocation of the Shareholders meeting

The Shareholders meeting is convened by the Board of Directors, if necessary when requested by the auditors, or by a written request signed by one or more shareholders representing at least 10% of the share capital, specifying the subject to be tabled for discussion and the proposals to be put forward.

The Ordinary shareholders meeting is convened at least twenty days prior to its fixed date, through the placing of a notice in the Swiss Official Gazette of Commerce (FOSC) and is announced in writing to each member appearing on the register of shares.

An Extraordinary shareholders meeting can be convened by the Board of Directors, possibly also at the request of the auditors or of shareholders representing at least 10% of the share capital. This can be convened as often as deemed necessary in the interests of the corporation.

The Ordinary shareholders meeting can only consider items appearing on the agenda, with the exception of proposals to convene an Extraordinary Shareholders meeting or to set up a special audit. The inclusion of an item in the agenda can be requested in accordance with article 699 ff. of the Swiss Code of Obligations.

Admission cards will be printed for shares registered as of the 25th May 2009. Shareholders whose shares are registered before the register is closed will enjoy the right to vote attaching to registered security. Shareholders who sell all or part of their shares appearing on the admittance card prior to the Shareholders meeting must present their card for correction in the control office prior to the commencement of the Shareholders meeting.

In 2009, the register of shares will officially close from the 25th May through to 26th June 2009.

8. Changes of Control and Defence Measures

Leclanché SA’s Articles of Association do not provide for “opting out” or “opting up” within the meaning of Articles 22 and 32 of the LBVM (Federal Law on Stock Exchanges and Securities Trading). Consequently, a firm offer must be made where a shareholder, or a group of shareholders acting jointly, exceeds 33.3% of the capital shares issued at that time.

There is no provision for clauses concerning change of control (e.g., golden parachutes) included in agreements and schemes benefitting members of the Board of Directors and/or of the executive committee.

9. Auditors

Since 2008, PricewaterhouseCoopers SA, Lausanne, has been the statutory auditor of Leclanché SA. Mr Felix Roth, Swiss Certified Public Accountant, Partner, has been the lead auditor.

In 2008, the fees of PricewaterhouseCoopers SA for the audit of the consolidated and statutory financial statements of Leclanché SA amounted to CHF 95’000. In addition, for 2008, PricewaterhouseCoopers rendered other services for CHF 95’900.

PricewaterhouseCoopers SA has issued a comprehensive report on the results of the audit to the Board of Directors which also evaluates the performance of its external auditor.


11

10. Information Policy

Each shareholder registered on the register of shares receives the annual report, including the management report, the corporate accounts and their appendices. They receive a copy of the accounts prepared in line with IFRS accounting principles and their notes, as well as the fiduciary audit reports. Furthermore, shareholders receive information and explanations concerning the half-year reports. On top of this, Leclanché SA issues two to five press releases each year.

Leclanché SA has a website that shareholders can access at www.leclanche.ch. The Executive Director, responsible for public relations, can be reached at his email address: [email protected]. The corporate address, telephone and fax numbers appear at the end of the annual report.

12

Leclanché SA Consolidated financial statements 2008

Consolidated financial statements

13

Consolidated income statement for the year ended December 31, 2008

The accompanying notes form an integral part of the consolidated financial statements


14

Consolidated balance sheet at December 31, 2008



16

Consolidated statement of recognised income and expensefor the year ended December 31, 2008



15

Consolidated cash flow statement for the year ended December 31, 2008



16

Consolidated statement of recognised income and expensefor the year ended December 31, 2008



17

Notes to the consolidated financial statements 2008

CORPORATE INFORMATION

The consolidated financial statements of Leclanché SA (‘the Group’) for the year ended 31 December 2008 were authorised for issue in accordance with a resolution of the Board of Directors on 30 March 2009. They are still subject to formal approval by the annual general meeting. Leclanché SA is a limited company incorporated in Yverdon-les-Bains, Switzerland whose shares are publicly traded.

The principal activities of the Group are described in Note 3.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) Basis of preparation

The consolidated financial statements of Leclanché SA (“Group” or “company”) are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and its predecessor organization, the International Accounting Standards Committee (IASC).

The policies set out below are consistently applied to all the years presented. These consolidated financial statements were prepared under the historical cost convention, except for items to be recorded at fair value.

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. See note 2 for areas involving a higher degree of judgment and significant estimates.

The annual closing date of the individual financial statements of all Group companies is December 31.

(B) New and amended accounting standards and IFRIC interpretations

(a) Standards and Interpretation effective in the current period In the current year, the Group has adopted IFRIC14, 'IAS 19: - The limit on a defined benefit asset, minimum funding requirements and their interaction'. Following the introduction of IFRIC 14, the Group has elected to recognise actuarial gains and losses directly in equity in a Statement of Recognised Income and Expenses (SORIE), as permitted by IAS 19 Employees Benefits since 1 January 2006 and applied this reporting form for the first time in 2008. Therefore all additional information required has been provided, including restatement of the year 2007. The effect on the income statement and the balance sheet is shown in the following tables:


18

Consolidated income statement

1) Net benefit income from application of IFRIC 14 CHF 1'900'929, reversal of previously recorded net benefit expense CHF 441'613

2) Deferred income taxes on defined benefit pension asset CHF -228'581


19

Consolidated balance sheet

1) Reversal of asset ceiling

2) Deferred income tax liability

1) Relates mainly to defined benefit pension asset CHF 6’041’066, net benefit expense (note 11) CHF 1’900’929, actuarial losses (note 11) CHF 904’091, asset ceiling (note 11) CHF 936’213

2) Deferred income tax liability CHF 1’906’045 and deferred taxes on defined benefit pension asset CHF 228’581


20

Five Interpretations issued by the International Financial Reporting Interpretations Committee are effective for the current period. These are:

– IAS 39 (amended), Financial instruments: Recognition and measurement (effective 1 July 2008)

– IFRIC 11, Group and Treasury Share Transactions (effective from periods beginning on or after 1 March 2007)

– IFRIC 12, Service Concessions Arrangements (effective from periods beginning on or after 1 January 2008)

– IFRIC 13, Customer Loyalty Programmes (effective from periods beginning on or after 1 July 2008)

– IFRIC 16, Hedges of a net investment in a foreign operation (effective from 1 October 2008)

The adoption of these Interpretations has not led to any changes in the Group’s accounting policies.

(b) Standard and Interpretations in issue not yet adopted Certain new standards, amendments and interpretations to existing standards have been published that will be mandatory for the Group’s accounting periods beginning on or after 1 January 2009 or later periods but which the Group has chosen not early adopted:

– IAS 1 (amended), Presentation of financial statements (effective from 1 January 2009). It primarily affects the presentation of owner changes in equity and of comprehensive income. It does not change the recognition, measurement or disclosures of specific transactions and other events required by other IFRSs.

– IAS 23 (amended), Borrowing costs (effective from 1 January 2009). It requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs will be removed.

– IAS 27 (amended) (effective from 1 July 2009) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control. They will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value and a gain or loss is recognised in profit or loss. In addition, total comprehensive income must be attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

– IAS 32 and IAS 1 (amended) (effective from 1 January 2009). The amendment requires certain puttable financial instruments and some financial instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation to be classified as equity rather than as a liability.

– IFRS 2 (amended) (effective from 1 January 2009) deals with two matters. It clarifies that vesting conditions can be service conditions and performance conditions only. Other features of share-based payment are not vesting conditions. It also specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment.

– IFRS 3 (revised), Business combinations (effective 1 July 2009) requires significant changes in the application of the acquisition method to business combinations. All payments to purchase a business are to be recorded at fair value at the acquisition date, with some contingent payments subsequently remeasured at fair value through profit or loss. Goodwill may be calculated based on the parent’s share of net assets or it may also include goodwill related to the minority interest. All transaction costs will be expensed. The change may have a significant impact on the accounting for future business combinations.


21

– IFRS 8, Operating segments (effective from 1 January 2009). IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of the US standard SFAS 131, Disclosures about segments of an enterprise and related information. The new standard requires a management approach, under which segment information is presented on the same basis as that used for internal reporting purposes. This new standard may impact the manner in which the segments are reported such as the number of reportable segments and measures to be reported. The change may also require management to reallocate goodwill to the newly identified operating segments.

– IAS 39 (amended), Eligible hedged items (effective from 1 July 2009) - The amendment makes two significant changes: it prohibits designating inflation as a hedgeable component of a fixed rate debt; it also prohibits including time value in the one-sided hedged risk when designating options as hedges. The amendment will have retrospective application.

– IFRS 1 (amended) and IAS 27 (revised) (effective from 1 January 2009) - A dividend paid out form pre-acquisition reserves will not be automatically considered a return of investment. Rather, based on the amendments to IAS 27R, it may be an indicator of impairment unless there are clear indications that it is part of a return of investment.

– IFRIC 15, Agreements for the construction of real estate (effective from 1 January 2009). IFRIC 15 addresses two questions how and when revenue from the construction of real estate should be recognised. The interpretation gives guidance to determine if the accounting has to follow either IAS 11 Construction contracts or IAS 18 Revenue.

– IFRIC 17, Distributions of non-cash assets to owners (effective from 1 July 2009) clarifies how an entity should measure distributions of assets, other than cash, when it pays dividends to its owners. The Interpretation states that a dividend payable should be recognised when appropriately authorised and should be measured at the fair value of the net assets to be distributed. The difference between the fair value of the dividend paid and the carrying amount of the net assets distributed should be recognised in profit or loss. The interpretation applies prospectively for annual periods beginning on or after 1 July 2009. Early adoption is permitted.

– IFRIC 18, Transfers of assets from customers (effective 1 July 2009, prospective with some limited retrospective application permitted) clarifies the accounting for arrangements where an item of property, plant and equipment, which is provided by the customer, is used to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services. This is particularly relevant to the utility sector with the provision of the service being that of, for example, gas or electricity.

The Group is currently evaluating the potential impact if any that the adoption of this new or amended standards will have on the Group’s consolidated financial statements.

(C) Group accounting

(a) Subsidiaries Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally implying an ownership of more than one half of the voting rights, unless they are held on a temporary basis. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries also comprise companies in which the Group does not own, directly or indirectly, more than one half of the voting rights but exercises significant power to govern their financial and operating policies and bears an over-proportional responsibility for the main risks.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to


22

the acquisition. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets of the subsidiary acquired is recorded as goodwill. Inter-company transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(D) Foreign currencies

The consolidated financial statements of the Group are expressed in Swiss francs (“CHF”), which is the company’s presentation currency.

The local currency is generally used as the reporting currency throughout the world. In the respective entity financial statements, monetary assets and liabilities denominated in foreign currencies are translated at the rate prevailing at the balance sheet date. Transactions are recorded using the approximate exchange rate at the time of the transaction. All resulting foreign exchange transaction gains and losses are recognized in the subsidiary’s income statement.

Income, expense and cash flows of the consolidated companies have been translated into Swiss francs using average exchange rates. The balance sheets are translated using the year-end exchange rates. Translation differences arising from movements in the exchange rates used to translate equity, long-term internal financing deemed as net investment in a foreign operation and net income are allocated to translation reserves in equity.

(E) Revenue recognition

Revenue includes the fair value from the sale of goods and services, net of value-added tax, rebates, discounts and sales commissions and after eliminating sales within the Group.

(a) Sale of goods Sale of goods is recognized when delivery to the customer has occurred, the significant risks and rewards have been transferred to the buyer and collection of the related receivables is reasonably assured. Sale of goods may include delivery of batteries, rechargeable batteries, systems for electrical storage device and some accessories.

(b) Services rendered Revenue for services rendered includes various types of services such as system integration, specific developments and customization or maintenance. Revenue is recognised by reference to the stage of completion, based on quotations done at the beginning of the project. For larger projects revenue is recognised according to the stage of completion (contract milestone agreed in the quotation), for smaller project once the project is completed.

(c) Interest income Interest income is recognized as earned unless collectability is in doubt.

(d) Rental income Rental income is recognised as revenue in the period in which they have earned.

(F) Government grants

Government grants are recognised where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate.


23

(G) Taxes

Taxes reported in the consolidated income statements include current and deferred taxes on profit, as well as non reimbursable withholding taxes and tax adjustments relating to prior years. Income tax is recognized in the income statement, except to the extent that it relates to items directly taken to equity, in which case it is recognized in equity. Taxes on income are accrued in the same periods as the revenues and expenses to which they relate.

Deferred taxation is the tax attributable to the temporary differences that appear when taxation authorities recognize and measure assets and liabilities with rules that differ from those of the consolidated accounts. Deferred taxes are calculated using the comprehensive liability method at the substantially enacted rates of tax expected to prevail when the temporary differences reverse. Any changes of the tax rates are recognized in the income statement unless related to items directly recognized in equity.

Deferred tax liabilities are recognized on all taxable temporary differences. Deferred tax assets are recognized on all deductible temporary differences provided that it is probable that future taxable income will be available.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

(H) Tangible fixed assets

All property, plant and equipment are shown at cost, less subsequent depreciation and impairment, except for land and buildings, which are designed as investment properties and measured at fair value. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance expenditures are charged to the income statement during the financial period in which they are incurred. Financing costs associated with the construction of tangible fixed assets are not capitalized.

Depreciation is calculated on a straight-line basis over the useful life, according to the following schedule:

Useful life in years Machinery, equipment 5 – 8 Tools 3 – 5 Computers and information networks 3 – 5 Office furniture and equipment 5 – 8 Vehicles 5 Buildings 25

Buildings are older than 25 years, therefore fully depreciated, and generate no depreciation expenses anymore.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is impaired immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal or retirement of tangible fixed assets are determined by comparing the proceeds received with the carrying amounts and are included in the consolidated income statements.


24

(I) Investment properties

Investment properties are stated at fair value, which reflects market conditions at the balance sheet date. Gains or losses arising from changes in the faire values of investment properties are included in the profit or loss in the year in which they arise.

(J) Intangible assets

(a) Research and development costs Research costs are expensed as incurred. Development expenditure on an individual project is recognised as an intangible asset 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 development.

Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. During the period of development, the asset is tested for impairment annually.

(b) Patents The patents have been acquired as part of a business combination. The useful live (12 years) assigned to the patents are based on the maturity of the patents and the value was assessed based on estimated economic benefit that such patents rights can provide.

(K) Financial assets

Financial assets are identified as either one of the following categories: at fair value through profit or loss or as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date. Financial assets are recognised initially at fair value plus investment costs for trade and receivables. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

(a) Financial assets at fair value through profit or loss A financial asset is classified in this category if acquired principally for the purpose of settlement in the short-term or if so designated by management. Assets in this category are classified as current assets if they are expected to be settled within 12 months of acquisition.

Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets at fair value through profit or loss are subsequently carried at fair value.

Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss, including interest and dividend income, are presented in the income statement within «Financial income/costs», in the period in which they arise. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement loans and receivables are carried at amortised cost using the effective interest method, when maturity is over one year. Carrying amount is after consideration of an allowance for impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired.

Interest bearing loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently


25

measured at amortised cost using the effective interest method, if maturity exceeds 12 months. A financial liability is derecognised when the obligation is discharged or cancelled or expires.

(L) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average cost method. The cost of work in progress and manufactured finished goods comprises direct production costs and an appropriate proportion of production overheads and factory depreciation. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Furthermore, inventories which are no longer part of production and sales plans are directly written off from the gross value of inventories.

(M) Trade and other receivables

Trade accounts receivables are carried at invoiced amounts, less adjustments for doubtful receivables. A provision for impairment is made for doubtful receivables based on a review of all material outstanding amounts at the reporting date.

(N) Cash and short term deposits

Cash and cash equivalents include cash in hand and highly liquid investments with original maturities of three month or less. This position is readily convertible to known amounts of cash. Bank overdrafts are shown within short-term financial debt in current liabilities on the balance sheet.

(O) Marketable securities

Marketable securities consist of equity and debt securities which are traded in liquid markets. The Group has classified all its marketable securities as financial assets at fair value through profit or loss. All purchases and sales of marketable securities are recognized on the trade date, which is the date on which the Group commits to purchase or sell the asset.

(P) Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognized for future operating losses.

(Q) Employee benefits

Pension obligations The Group operates a defined pension plan for its Swiss employees, which is held in separate trustee-administered fund. The pension plan is funded by payments from employees and from the company, taking into consideration the recommendations of independent qualified actuaries. German employees of the Group are affiliated to a government pension plan that qualifies as a defined contribution plan.

The liability / asset recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised past-service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of highquality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in the statement of recognised income and expense (SORIE) in the period in which they arise.


26

Past-service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period. The Group’s contributions to the defined contribution plans are charged to the income statement in the year to which they relate.

2. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The Group’s principal accounting policies are set out in note 1 of the Group’s consolidated financial statements and conform to International Financial Reporting Standards (IFRS). Significant judgments and estimates are used in the preparation of the consolidated financial statements which, to the extent that actual outcomes and results may differ from these assumptions and estimates, could affect the accounting in the areas described in this section.

Impairment of non-financial assets The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected cash flows from the asset and choose a suitable discount rate.

Deferred income tax asset Deferred income tax assets are recognised for all unused tax losses only to the extent that it is probable that taxable profits will be available against which the losses can be utilised. Judgement is required from management to determine the amount of tax asset that can be recognised, based on forecasts and tax planning strategies. Given the uncertainty in the realization of future taxable profits, no additional tax asset has been recognized as of 31 December 2008. Had the Group estimated that all available tax losses of this entity could be used, the effect would have been an additional income of CHF 356’907 as of 31 December 2008.

A deferred income tax asset was recorded on the acquisition of Leclanché Lithium GmbH, capped to the limit of existing temporary deductible items (refer to note 5).

Pension benefits The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations. The independent actuary of the Group uses statistical based assumptions covering future withdrawals of participants from the plan and estimates on life expectancy. The actuarial assumptions used may differ materially from actual results due to changes in market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences could impact significantly the amount of pension income or expenses recognised in future periods.

The group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the group considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.

Other key assumptions for pension obligations are based in part on current market conditions.

Development costs Development costs are capitalised in accordance with the accounting policy of note 1(J). Initial capitalisation is based on management’s judgment that the technological and economical feasibility is confirmed, usually when a product development project is conducted based on concrete specification of a third party. In determining the amount to be capitalised, management makes assumptions


27

regarding the expected future cash flows, discount rate to be applied and expected period of benefits. In 2008 no development costs have been capitalized as the Group finalized its restructuring and reorganisation of the technology development in 2007. At the end of 2008 none of the capitalized development costs have been impaired based on the expected future cash flows. As of 31 December 2008, based on estimate, capitalised development costs amount to kCHF 2’253 (2007: kCHF 2'328) (refer to note 10).

Investment properties Investment properties are stated at fair value. The fair value represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable willing seller in an arm’s length transaction at the date of valuation. The fair value of kCHF 6'000 has been defined by a real estate expert who based his judgement on the real estate condition, the current market and by applying a prudent approach (refer to note 9).

3. SEGMENT INFORMATION

The primary segment reporting format is determined to be business units as the Group’s risks and rates of return are affected predominantly by differences in the products and services produced. Secondary information is reported geographically.

The operating business is organised in 3 segments (in 2007 4 segments including “Batteries”), each of them representing a strategic business unit that offers different products and services for different markets.

"Integration" conceives, develops and carries out turn-key solutions for storage of portable electric power calling upon innovating technologies for specific applications.

"Distribution" commercializes batteries, car batteries as well as accessories such as flashlights and small chargers.

“Lithium” produces lithium polymer cells for high end applications.

For geographically information: Sales are allocated based on where the client is located. Assets and capital expenditures are allocated based on location of the entity owning the assets.

3. S

EGM

ENT

INFO

RMAT

ION

(con

tinue

d)

28


27

regarding the expected future cash flows, discount rate to be applied and expected period of benefits. In 2008 no development costs have been capitalized as the Group finalized its restructuring and reorganisation of the technology development in 2007. At the end of 2008 none of the capitalized development costs have been impaired based on the expected future cash flows. As of 31 December 2008, based on estimate, capitalised development costs amount to kCHF 2’253 (2007: kCHF 2'328) (refer to note 10).

Investment properties Investment properties are stated at fair value. The fair value represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable willing seller in an arm’s length transaction at the date of valuation. The fair value of kCHF 6'000 has been defined by a real estate expert who based his judgement on the real estate condition, the current market and by applying a prudent approach (refer to note 9).

3. SEGMENT INFORMATION

The primary segment reporting format is determined to be business units as the Group’s risks and rates of return are affected predominantly by differences in the products and services produced. Secondary information is reported geographically.

The operating business is organised in 3 segments (in 2007 4 segments including “Batteries”), each of them representing a strategic business unit that offers different products and services for different markets.

"Integration" conceives, develops and carries out turn-key solutions for storage of portable electric power calling upon innovating technologies for specific applications.

"Distribution" commercializes batteries, car batteries as well as accessories such as flashlights and small chargers.

“Lithium” produces lithium polymer cells for high end applications.

For geographically information: Sales are allocated based on where the client is located. Assets and capital expenditures are allocated based on location of the entity owning the assets.


29

4. OTHER REVENUES AND EXPENSES

4.1 OTHER INCOME

Rental income: the Group is renting some of its empty spaces in the headquarter offices since 2006.

4.2 OTHER OPERATING EXPENSES

Previous year values have been adjusted for comparison purposes.

4.3 FINANCE COSTS

4.4 FINANCE REVENUE


30

4.5 DEPRECIATION, AMORTISATION

4.6 EMPLOYEE BENEFIT EXPENSES

For details on Pension cost refer to Note 11.

5. INCOME TAX EXPENSE

The major components of income tax expense for the years ended 31 December 2008 and 2007 are:

Reconciliation between tax expense and the product of accounting profit multiplied by domestic tax rate for the period for the years ended 31 December 2008 and 2007 is as follows:

*These percentages are based on rates prevailing in the different jurisdictions.


31

Deferred income tax at 31 December relates to the following:

The Group has tax losses which arose in Switzerland that are available until 2014 and in Germany which are not subject to expiry for offset against future taxable profits of the company in which the losses arose.


32

6. ASSETS HELD FOR SALE

6.1 DISCONTINUED OPERATIONS

On 1 December 2006 Leclanché SA announced the decision of Board of Directors to discontinue its operations in the manufacturing of lead batteries. Those activities were previously reported under the business unit Battery and were stopped in 2007.

The results of the business unit Battery for the year are presented below:

The major classes of assets and liabilities of the Battery business classified as held for sale as at 31 December 2006 are as follows:


33

The net cash flows incurred by the Battery business are as follows

6.2 DISPOSAL OF LAND & BUILDINGS

In late 2007, the Group had entered into final negotiation with a potential buyer for some land & buildings. Since the sale could be finalised in early 2008, the carrying value of the objects was transferred to assets held for sale for a total of CHF 12'000'000.-.

As of 31 December 2007, land & buildings with a carrying value of CHF 12'000'000 were pledged to secure Group's bank borrowings up to a maximum of CHF 5'000'000.

During 2008 another investment property for CHF 4’225’000 has been transferred to Assets of disposal group classified as held for sales and was disclosed as such as of 30 June 2008. The sale was realized in September 2008.


34

7. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

For computation of diluted earnings, denominator is the weighted average number of ordinary shares and the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

Share options had expired as of 31 December 2007.

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.

To calculate earnings per share amounts for the discontinued operations, the weighted average number of ordinary shares is as per the table above.


35

8. PROPERTY, PLANT & EQUIPMENT

There is no restriction on property plant and equipment as of 31 December 2008 (2007: idem).


36

9. INVESTMENT PROPERTIES

Investment properties are stated at fair value. The fair value represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable willing seller in an arm’s length transaction at the date of valuation.

As of 31 December 2007, land & buildings with a carrying value of CHF 3'377'000 were pledged to secure Group's bank borrowings up to a maximum of CHF 3'000'000 (2008: None).


37

10. INTANGIBLE ASSETS

Development costs: the Group has recognised 3 development projects to be capitalised as follows:

Project A: recognised at December 31, 2007: CHF 150’000 Availability for use: beginning 2008, useful live: 2 years

Project B: recognised at December 31, 2007: CHF 250’000 Availability for use: end of 2009, useful live: 5 years

Project C: recognised at December 31, 2007: CHF 1’927’792 Availability for use: beginning 2010, useful live: 6 years


38

11. PENSIONS AND OTHER POST-EMPLOYMENT BENEFIT PLANS

The Group has one defined benefit pension plan, covering all of its Swiss employees, which require contributions to be made to separately administrated funds. The following tables summarise the components of net benefit expense recognised in the income statement and amounts recognised in the balance sheet:


39

The Group expects to contribute CHF 348’085 to its defined benefit pension plan in 2009.

The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The principal assumptions used in determining pension benefit obligations for the Group's plan are shown below:

Amounts for the current and previous period are as follows:


40

12. INVENTORIES

The amount of write-down of inventories recognised as an expense is CHF 60'336 (2007: CHF 219'370) which is recognised in raw materials and consumables used.

13. TRADE AND OTHER RECEIVABLES (CURRENT)

Trade receivables are non-interest bearing and are generally on 30-90 days' terms.

As at 31 December 2008, trade receivables at nominal value of CHF 65'000 (2007: CHF 115'000) were impaired and fully provided for. Movements in the provision for impairment of receivables were as follows:

As at 31 December, the analysis of trade receivables that were past due but not impaired is as follows:

There is no significant default in the trade receivables past due but not impaired.


41

14. MARKETABLE SECURITIES

The fair value of the unquoted ordinary shares has been estimated using their tax value at year end.

The fair value of the quoted ordinary shares is determined by reference to published price quotations in an active market.

15. CASH AND SHORT-TERM DEPOSITS

Cash at banks earns interest at floating rates based on daily bank deposit rates.

Interest rate on the short-term deposits was 1.33% as of 31 December 2008.


42

16. ISSUED CAPITAL AND RESERVES

Conditional capital

The annual general meeting on 16 March 2006 agreed on a conditional capital increase of up to a maximal nominal amount of CHF 1'700'000, representing 34'000 shares of a nominal amount of CHF 50 each. The emission can be effected in one or several batches The conditional capital was created to secure the potential conversion of options by EnergyGroup Holding AG, St. Gallen. Preferential subscription right of the shareholders was cancelled as to allow for the beneficiaries to exercise their option or conversion rights.

The option expired at 31 December 2007 and was not exercised within the exercise period and is therefore not valid anymore.


43

Evolution issued capital and reserves

17. INTEREST-BEARING LOANS AND BORROWINGS


44

18. PROVISIONS

Environment: A provision is recognised based on the estimated potential costs to be incurred due to the pollution of soils and underground waters.

19. GOVERNMENT GRANTS

Government grants received from the EU and the German “Bundesministerium für Forschung”.


45

20. TRADE AND OTHER PAYABLES (CURRENT)

Terms and conditions of the above financial liabilities: - Trade payables are non-interest bearing and are normally settled on 60-day terms - Other payables are non-interest bearing and have an average term of six months

21. COMMITMENT AND CONTINGENCIES

a) Operating lease commitments – Group as a lessor The Group has entered into commercial leases on its investment property portfolio, consisting of the Group’s offices and manufacturing buildings at its old site. All leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions.

Future minimum rental receivables under not cancellable operating leases as of 31 December are as follows:

b) Operating lease commitments - Group as a lessee The Group has entered into commercial leases for the rent of offices and manufacturing areas in Switzerland and in Germany. All leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions.

Leclanché Lithium GmbH in Germany has entered into an IT leasing contract in 2007.

Future minimum rentals/leases payable under non-cancellable operating leases as at 31 December are as follows:

c) Guarantees The marketable securities and the cash on hand at bank were partially put in guarantee of the caution money by the Bank Piguet et Cie in favour of some customers (2008: KCHF 562.1, 2007: KCHF 582.4).


46

22. RELATED PARTY DISCLOSURES

The financial statements include the financial statements of Leclanché SA and the subsidiaries listed in the following table:

Leclanché SA is the ultimate Swiss parent entity.

For the consolidated financial statements, only those relations and transactions are to be reported according to IAS 24 which have not been consolidated. Transactions that constitute internal transactions from the view of the Group do not need to be reported.

Therefore, transactions between the Group and its subsidiary, which is a related party of the Group, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

In order to facilitate an understanding of the potential effects of the related parties on the profit or loss and financial position of the Group, the trading transactions with related parties that are not Group members, the loans to related parties, the key management personnel and its compensation as well as other related party transactions and outstanding balances and relationships are listed hereafter:

During the year 2008, the following persons were members of the board of directors:

Stefan Müller, Swiss, born 1954, president Raoul Sautebin, Swiss, born 1948, member and CEO of Leclanché SA Peter Hertig, Swiss, born 1947, member Armin Weiland, German, born 1965, member

Entity with significant influence over the Group: EnergyGroup Holding AG.

EnergyGroup Holding AG owns 64.32% of the shares in Leclanché SA (2007: 64.30%)

Related Party:


47

Compensation of key management personnel of the Group:

23. FINANCIAL INSTRUMENTS / RISK MANAGEMENT

Categories of financial instruments:

Financial assets are designed as either at fair value through profit and loss (FVTPL) or as Loan and receivables.

Set out below is a comparison by category of carrying amounts and fair values of all of the Group's financial instruments:

Market values have been used to determine the fair value of listed marketable securities. Due to their current nature, the carrying amount of trade receivables and financial liabilities is deemed to be representative of their fair value.


48

The implementation of the risk management has been delegated from the Board of Directors to the Executive Committee. The Executive Committee had the task to design and implement the risk management within Leclanché SA. The ultimate responsibility of the risk management is of the Board of Directors and a yearly review takes place during one of the Board of Directors meetings.

As a result of its operation with European partners, the Group is exposed to foreign currency risk on the Euro (EUR).

The following table demonstrate the sensitivity of reasonably possible changes in EUR exchange rate on the group net profit (operating activities), or on equity (translation of intercompany loans).

Bank term loans and overdraft bear floating rates and are repriced at intervals of less than one year. Those bearing fixed rate are fixed until the maturity of the instruments which is generally not running longer than 12 months.

The other financial instruments of the Group are not bearing interest and are therefore not subject to interest rate risk.

There are no hedging activities within the Group.

The Group exposure to the risk of change in market interest rates relates to its current bank borrowings. Due to the current nature of such borrowings the risk of change in interests is managed through a timely repricing at market rates. Based on existing financing at balance sheet date, a reasonably possible change in interest rates would have the following impact on Group profit before tax (there is no impact on the Group equity):


49

Group performs credit verification procedures on customers which trade on credit. In addition, receivables are monitored on an ongoing basis with the result that the Groups' exposure to bad debt is regarded as being not significant. The maximum exposure is the carrying amount of trade receivables as per note 13. Due to the large base of customers, there is no significant concentration of credit risk within the Group.

With respect to credit risk arising from the other financial assets, the Group's exposure to credit risk arising from the default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

The following table sets out the carrying amount, by maturity, of the Group's financial liabilities based on undiscounted payments.

Group's capital management aims to ensure that it maintains a healthy capital ratio (2008: 80% and 2007: 68%) in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may issue new shares, return capital to shareholders or adjust dividend payments. No changes were made in the objectives, policies or processes during the years ending 31 December 2007 and 2008. The Group frequently monitors the equity/debt ratio. The monitoring ensures that every single entity is provided with enough equity at any time to fulfil the legal and business requirements. A Group target equity/debt ratio has not been defined yet due to the early development phase of the Group.

Report of the statutory auditor on the consolidated financial statements

50


50


51


51

52

Leclanché SA Statutory financial statements 2008

Statutory financial statements

53

Balance sheet at December 31, 2008

2008 2007CHF CHF

ASSETSCurrent assetsCash & short-term deposits 3'763'654 760'595Trade receivables 2'397'966 2'136'297Bad debt allowance -65'000 -115'000Other receivables 766'596 264'596Intercompany receivables 3'192'554 1'929'495Intercompany receivables subordinated 2'857'048 1'798'716Inventories: Raw material 1'860'688 2'035'154 Work in progress & finished goods 780'662 214'117Marketable securities 563'141 592'131Investment in subsidiary 6'352'500 6'352'500Allowance on investment in subsidiary -1'723'000 -1'723'000Accruals 290'581 844'334

21'037'390 15'089'934

Non-current assetsFinancial asset 187'500 - Tangible assets: Machinery, furniture & equipment 3'416'875 829'064 Vehicles 72'209 101'398 Land & Buildings 2'178'073 7'943'175Intangible assets: Research & development 2'349'371 2'424'371

8'204'028 11'298'008

TOTAL ASSETS 29'241'418 26'387'942

EQUITY AND LIABILITIESCurrent liabilitiesTrade payables 1'636'778 1'431'352Intercompany payables 2'024'371 2'024'371Other payables 209'958 217'072Bank loans & borrowings - 5'759'119Accruals 375'458 325'238

4'246'564 9'757'152

Non-current liabilitiesProvisions 268'500 268'500

268'500 268'500

Total equityIssued share capital 8'470'000 8'470'000General reserve 3'350'000 3'350'000Additional paid-in capital 4'235'000 4'235'000Other reserves 13'550'000 13'550'000Accumulated losses -13'242'710 -12'624'822Profit/(Loss) of the year 8'364'063 -617'888

24'726'353 16'362'290

TOTAL EQUITY AND LIABILITIES 29'241'418 26'387'942


54

Income statement for the year ended December 31, 2008

2008 2007CHF CHF

Sale of goods 11'237'962 14'440'904

Other income 1'203'096 1'426'610

Revenue 12'441'058 15'867'514

Raw materials & consumables used -4'394'163 -6'361'376

Personnel costs -5'344'602 -5'928'927

Other operating expenses -3'982'681 -3'206'051

EBITDA -1'280'387 371'160

Depreciation -515'854 -582'413

EBIT -1'796'241 -211'253

Finance income, incl. exchange gains / (losses) -82'448 228'842

Finance costs -194'266 -202'582

Change in provisions 47'306 -200'000

Gain on disposal of land and buildings 10'459'898 -

Exceptionnal income & expenses -22'350 -174'896

Profit/(Loss) before tax 8'411'898 -559'888

Taxes -47'835 -58'000

Profit/(Loss) for the year 8'364'063 -617'888


55

Notes to the financial statements 2008

31.12.2008 31.12.2007 kCHF kCHF

1. Basis of preparation

The financial statements of Leclanché SA are prepared in accordance with the provisions of the Swiss Law and the Company's Articles of Incorporation.

2. Contingent liabilities

2.1 Warranties in favour of third parties Warranties given to special institution 248 439

2.2 Pledged assets 562 582

The marketable securities and the liquidity were partially put in guarantee of the caution money by Bank Piguet & Cie in favour of some customers.

3. Leasing commitment 3’272 222

Based on rental contract in Yverdon (ending 2013) and Haerkingen (ending 2011).

4. Fire insurance Building 25’863 40’835 Machines, furniture, etc. 3’750 44’000

5. Investment Leclanché Lithium GmbH, Willstätt ( D ), Social capital: EUR 270'600.- 100% 100% Activity: Manufacturing of lithium batteries

6. Significant shareholders In 2008 the organized Group, in the sense of article 15 OBVM-CFB, consisted of a shareholder group owning:

EnergyGroup Holding AG, St. Gallen 64.3% 64.3% GermanIncubator Erste Beteiligungs GmbH 9.0% 9.0%

7. Risk assessment The implementation of the risk management has been delegated from the Board of Directors to the Executive Committee. The Executive Committee had the task to design and implement the risk management within Leclanché SA. The ultimate responsibility of the risk management is of the Board of Directors and a yearly review takes place during one of the Board of Directors meetings.


56

Notes to the financial statements 2008 (continued)

8. Conditional capital A conditional increase of the share capital of a maximum nominal amount of CHF 1'700'000, by the emission, in one or several edges, of at most 34'000 shares of CHF 50 nominal each was decided during the annual general meeting of 16 March 2006. This was planned to allow the conversion of options reserved for EnergyGroup Holding AG in St.Gallen. To allow the beneficiaries to exercise their right of conversion or option, the preferential right of subscription was eliminated for this edge of shares.

The option expired at 31 December 2007 and was not exercised within the exercise period and is therefore not valid anymore.

9. Deviations from consistency in presentation

Balance sheet Bad debt allowance has been reclassified from “Provisions” to “Net trade receivables” and “Allowance on investment in subsidiaries” has been reclassified to “Net investment in subsidiary”.

10. Personnel costs Personnel costs have been reduced by kCHF 308 through the use of the reserve for pre-paid contributions (2007: kCHF 413).

11. Financial asset Financial asset amounting kCHF 188 is related to three months rent deposit for the premises at Avenue des Sports 42 in Yverdon-les-Bains.

12. Board of Directors and General Management compensation Amounts granted to the members of the executive committee and compensation paid to the members of the Board.

Please refer to note 22 of the consolidated financial statements.

Report of the statutory auditor

57


57


58


58

Notes

Notes

Notes

2008 Annual ReportLeclanché SA

LECLANCHÉ SA

Avenue des Sports 42

Case postale

1401 Yverdon-les-Bains

Tél. +41 (0)24 424 65 00

Fax +41 (0)24 424 65 01

www.leclanche.ch

Documents

Leclanche brochure1