Annual Report 2009

t 2009 r po e l R a Emmi Annu

A n n u a l R e p o r t 2009 Key Figures 2009

Net sales CHF 2,619.3 million

EBITDA CHF 208.3 million

Net profit CHF 75.3 million

Total assets CHF 1,654.7 million

Shareholders’ equity incl. minority interests CHF 915.8 million

Headcount (full-time equivalents) 3,525 Emmi group Annual report 2009

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

Emmi did well in 2009 and generated net sales of CHF 2,619.3 million. Despite a decline in sales, this result exceeds expectations. The decline was mainly due to significantly lower milk prices compared with the previous year that were passed on to customers. Net profit increased by 28.3 % to CHF 75.3 million, corresponding to a net profit margin of 2.9 % (prior year 2.2 %). This clear improvement in profit is due to a solid market performance and rigorous cost management. Emmi made various acquisitions in the year under review with the aim of strengthening the domestic market and achieving growth in key markets abroad.

SALES EBIT

in CHF million in CHF million as % of net sales

109.0 3,000 110

2,671 2,619 102.1 2,501 2,500 2,335 100

2,027 2,000 90

1,500 80 74.7 74.0 4.2 3.8 1,000 70 4.0 3.3 3.2 62.3 3.5

500 60 3.0 2.5 2.5

0 50 2.0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 KEY FIGURES EMMI GROUP

Amounts in CHF million 2009 2008 2007 2006 2005 Net sales 2,619 2,671 2,501 2,335 2,027 Earnings before interest, taxes, depreciation and amortization (EBITDA) 208.3 184.4 140.1 140.7 128.8 as % of net sales 8.0 6.8 5.6 6.0 6.4 Earnings before interest and taxes (EBIT) 109.0 102.1 62.3 74.0 74.7 as % of net sales 4.2 3.8 2.5 3.2 3.3 Net profit 75.3 58.7 41.3 54.0 51.4 as % of net sales 2.9 2.2 1.6 2.3 2.5 Investment in fixed assets (excl. acquisitions) 75.8 91.0 84.8 76.8 87.4 as % of net sales 2.9 3.4 3.4 3.3 4.3 Headcount (full-time equivalents) as at 31.12. 3,525 3,373 3,350 3,300 2,765 Net sales per employee CHF 000s 743 792 747 708 733 Volume of milk and cream processed in kg million 904 963 886 849 702

31.12.2009 31.12.2008 31.12.2007 31.12.2006 31.12.2005 Total assets 1,655 1,683 1,635 1,531 1,167 of which shareholder’s equity incl. minority interests and convertible bonds 916 835 784 754 682 as % of total assets 55.3 49.6 47.9 49.3 58.4

NET PROFIT NET SALES BY PRODUCT GROUP 2009 in CHF million as % of net sales

80 75.3

58.7 60 54.0 51.4 50 41.3 40

2.9 30 2.5 2.3 2.5 2.2 28.5% Dairy products 2.0 20 1.6 21.5 % Fresh products 1.5 35.1 % Cheese 1.0 10 5.2 % Fresh cheese 0.5 3.3 % Powder/concentrates 0 6.4% Other products and services 2005 2006 2007 2008 2009 Emmi is the largest Swiss milk processor and one of the most innovative premium dairies in Europe. In Switzerland, Emmi focuses on the development, production and marketing of a full range of dairy and fresh products as well as the production, ageing and trade of primarily Swiss cheeses. Outside Switzer- land, Emmi concentrates on brand concepts and specialities in European and North American markets. The primary focus in fresh products is on lifestyle, convenience and health products. In the cheese business, Emmi positions itself as the leading company worldwide for Swiss cheese. Emmi’s customers are primarily the retail trade, the food service sector and the food industry. CONTENTS 3

CONTENTS

annuaL REPORT 2009

4 Editorial 6 group Report Emmi Group – Key News at Group Level – Putting the Strategy into Effect – The Changing Company 16 value Chain 18 Product Highlights 2009 20 Corporate Responsibility Report – Tribute to Fritz Wyss 28 Corporate Governance

TIME TO ENJOY

43 Taste Sensations for Connoisseurs 45 great Taste Sensations Can be Shared 47 Every Moment is Unique 49 For Us, Only the Best is Good Enough 51 swiss – Delicious – Real 53 great Teamwork

FINANCIAL REPORT 2009

55 Contents 56 Financial Situation 58 Consolidated Financial Statements of the Emmi Group 78 Financial Statements of Emmi AG 87 share Information

88 Locations 4 Editorial

A good result – dividend increased

Dear Shareholders

Emmi did well in 2009, generating net sales of CHF 2,619.3 mil- sales and earnings targets but even managed to exceed them. lion. Although this corresponds to a slight decrease of 1.9 %, sales With the acquisition of Roth Käse USA Ltd., we were able to sig- were better than expected. In local currency terms, they declined nificantly reinforce our position in the strategically important by 1.0 %. On an organic basis, sales fell by 4.4 %. The main factor North American market. Roth is a leading company in the produc- behind this decrease in sales is the substantial drop in the price tion and marketing of domestic cheese specialities, with its main of milk compared with the previous year, which was passed on focus on the food service sector, whereas Emmi USA Inc. is ex- to customers in full. tremely well established in the retail sector with imported Swiss cheese. In order to further reinforce its core market positions, Dividend increased to CHF 3.00 Emmi acquired a minority 25 % stake in French cheese packaging Net profit rose by 28.3 % to CHF 75.3 million. At 2.9 % (prior year specialist Schöpfer at the beginning of 2010. Schöpfer is active 2.2 %), our net profit margin is in the upper range of expecta- in cheese portioning and packaging and specializes in packag- tions. Net profit per share thus increased to CHF 14.08 (prior year ing fresh cheese. At the same time, Emmi entered into a com- CHF 10.98). This clear improvement in earnings is due to a solid mercial collaboration with and acquired a minority 10 % stake in market performance and rigorous cost management. Against Italian cooperative Venchiaredo, which produces premium-quality this positive backdrop, a proposal will be submitted to the Gen- mozzarella and stracchino. Emmi increased its holding in Spain’s eral Meeting for an increase in the dividend per share from CHF Kaiku Corporación Alimentaria S.L. from 23 % to 43 % at the begin- 2.60 to CHF 3.00. ning of 2009, and the partnership with this company developed extremely well in the core markets of Spain and South America. Three-pillar strategy The Board of Directors and Group Management have defined The third pillar of the strategy is cost management. In 2009, we Emmi’s strategy on the basis of three pillars. We continued with successfully implemented further cost-saving programs involving the consistent pursuit of the first pillar of our strategy – the some CHF 5.0 million. This, coupled with the cost-saving measures strengthening of the domestic market – in 2009. On 8 July 2009, Emmi acquired a majority shareholding in Nutrifrais SA from Ge- “In 2010, our efforts will continue to focus neva-based LRG Groupe SA. Nutrifrais specializes in the production of yoghurts and on the targeted, sustainable strengthening desserts and has enabled Emmi to expand of our competitiveness in our core markets.” its presence in French-speaking Switzer- Konrad Graber land and strengthen its market position in yoghurt and flan. realized in 2008 which took full-year effect for the first time in the The second pillar of the strategy targets growth outside Swit- 2009 financial year, increased efficiency significantly. Particularly zerland. A major contributor to the strong result was the acqui- noteworthy are the streamlined product portfolio, the closure of sition in January 2009 of US firm Roth Käse USA Ltd., which, in Swedish subsidiary Emmi Nordic AB and a range of individual pro- a difficult economic environment, not only reached its revenue, grams at various production locations. A further milestone was the integration of the Thun cheese processing facility into the Langnau i.E plant, which was successfully completed at the end of 2009. This enabled us to optimize our cost base and strengthen our leading global position in the fondue segment. Editorial 5

We are confident that, with our strategy, we will continue to work to resolve the current problems, which are the result of a develop our company and expand our market positions in the still high level of milk production, and to formulate clear and fea- future. By pursuing our strategy rigorously, we will be able to sible long-term solutions for the structuring of the milk market. withstand the sustained market pressures generated by foreign discounters and by international competitors as they establish themselves in Switzerland, as well as “We aim to successively enhance our the more intensive price pressure this engenders in our performance for trade and consumers. domestic market. Our efforts are consistently focused ” Urs Riedener on increasing efficiencies, strengthening the Emmi brand and thereby maintaining our competitiveness over the long term. As Switzerland’s largest milk processor, we make a constructive contribution towards helping ensure a market-oriented solution. Sector must develop effective solutions With the abolition of milk quotas and the aforementioned pres- We would like to thank our producers, customers, suppliers, busi- sures from outside Switzerland, we must do all we can to lever- ness partners and shareholders for the trust they place in Emmi. age a competitive framework in order to preserve Swiss milk We also wish to thank all our employees, who work hard every producers’ share of their domestic market and ensure successful day for the success of our company. We are confident that, in exports in high value-added segments. Not only the milk sector 2010, Emmi will continue to successfully maintain its position in organization BOM, but the dairy industry as a whole needs to a challenging environment.

Konrad Graber urs Riedener Chairman of the Board CEO of Directors

Konrad Graber, Chairman of the Board of Directors, and Urs Riedener, CEO 6 Group Report

Forging ahead with the strategy

In the financial year 2009, Emmi achieved net sales amounting to CHF 2,619.3 million, corresponding to a slight (1.9 %) fall. Net profit for 2009 amounted to CHF 75.3 million, 28.3 % more than in 2008. Earnings before interest and taxes (EBIT) came in at CHF 109.0 million, resulting in an EBIT margin of 4.2 % (prior year 3.8 %). This clear improvement in earnings against the backdrop of a good prior year can be attributed to rigorous cost management and a solid market performance. Group Report 7

Forging ahead with the strategy

Key news at Group level Emmi’s sales in international markets, when adjusted for acquisitions, fell slightly (-1.5 % in local currencies) as a result of falling In the financial year 2009, Emmi achieved net sales amounting raw materials prices and poor consumer sentiment. However, to CHF 2,619.3 million. When compared with the sales figure for volumes sold abroad increased by 2.1 % in spite of this due to the previous year (CHF 2,670.8 million) this represents a fall in high powder exports which took the pressure off the Swiss milk sales of 1.9 %, but is still better than expected. Organic sales in market. The continuing considerable difference in milk prices local currencies were reduced by 4.4 % as a consequence of the between Switzerland and Europe – especially in the first half of lower raw material milk price and the difficult economic situation. the year – was not beneficial to exports.

In Switzerland, net sales fell by 4.9 % to CHF 1,944.1 million (prior year CHF 2,045.5 million). When adjusted for the acquisition of NET SALES Nutrifrais SA, Geneva, this corresponds to a fall of 5.4 %. Volumes

delivered fell by 2.5 %, which is largely attributable to the loss of in CHF million generic volume from a major Swiss customer. 3,000

2,671 2,619 -1.9% Emmi managed to increase its sales on international markets by 2,501 2,500 626 675 +7.9% 2,335 587 7.9 % to CHF 675.2 million (prior year CHF 625.3 million), which 509 2,027 2,000 corresponds to an increase of 12.3 % in local currencies. This was 444 2,045 1,914 1,944 -4.9% 1,826 largely a consequence of the acquisition of Roth Käse Ltd. in the 1,500 1,583 USA. 1,000

500

0 2005 2006 2007 2008 2009

Foreign Domestic

Net sales, Switzerland and international in CHF million Change in %

in local Change in 2009 2008 in CHF currency Organic volume Switzerland 1,944 2,045 -4.9 -4.9 -5.4 -2.5 International 675 626 7.9 12.3 -1.5 2.1 Group 2,619 2,671 -1.9 -1.0 -4.4 -1.7 8 Group Report

Product group trends across the Group lower (-23.7 %) prices, mainly through the expansion of exports Across the Group, individual product groups – with the exception to take the pressure off the Swiss milk market. In 2009, sales of of cheese – experienced negative sales trends. Factors in this were traditional dairy products such as milk, cream and butter fell by falling raw material milk prices, subdued consumer sentiment 6.3 % to CHF 745.8 million from the CHF 796.2 million achieved and the effects of foreign currencies. in 2008. Contributory factors in this were reduced prices for raw materials and the partial loss of the major customer already mentioned. Sales of other products and services fell by 11.2 % to CHF 169.5 million from the 2008 figure of CHF 190.9 million as a con- NET SALES BY PRODUCT GROUP 2009 sequence of the loss of distribution business and the refocused procurement strategy of a food service customer. In this division, Emmi focused on more profitable services.

NET SALES BY COUNTRY GROUP 2009

28.5% Dairy products 21.5 % Fresh products 35.1 % Cheese 5.2 % Fresh cheese 3.3 % Powder/concentrates 6.4% Other products and services

74.2% Switzerland 17.4 % Europe excluding Switzerland 7.7 % North and South America In cheese (both natural and processed), Emmi achieved net sales 0.7 % Asia/Pacific of CHF 919.4 million in 2009 (prior year CHF 872.7 million), corresponding to a 5.3 % growth. In its sales of natural cheese in Swit- zerland, Emmi managed to hold its share. Internationally, and especially in the USA, Emmi strengthened its position with a rise of An encouraging operating result 17.4 %, made possible by the acquisition of Roth Käse Ltd. In fresh Gross operating profit rose by 4.1 % to CHF 852.0 million (prior products, Emmi recorded a decline of 3.0 % in sales over the past year 818.3 million). This was due to the extension of the value financial year to CHF 564.0 million (prior year CHF 581.4 million), chain and the shift in the range towards products with more mainly due to lower raw materials prices that were passed on added value. to the customer. The loss of generic volume from a major Swiss customer led to an overall decrease. Growth from the succesful Caffè Latte concept, together with the new sugar and lactose- free Caffè Latte Zero, was again pleasing. Emmi Caffè Latte became increasingly popular both in Switzerland and abroad. Fresh cheese sales of CHF 135.3 million (prior year CHF 139.7 million), corresponding to a reduction of 3.2 %, were generated. The pleasing 3.5 % rise in volumes sold was unable to fully compensate for lower prices. Sales of powders/concentrates were reduced during 2009 by 5.0 %, falling to CHF 85.5 million (prior year CHF 89.9 million). However, Emmi did sell much larger quantities (18.7 %) at Group Report 9

Net profit margin on target The financial result of CHF -8.7 million (prior year CHF -26.0 mil- EBIT lion) was affected by the significantly lower interest expense in CHF million as % of net sales and the strong improvement in the foreign currency result. The reduced use of credit lines and the lower interest rate led to the 109.0 110 lower interest expense. At CHF 14.0 million, taxes were signifi- 102.1 cantly above the prior-year level (CHF 9.0 million) as a result of 100 improved profitability; however, at 13.8 %, the tax rate remains 90 very low thanks to the extraordinary impact of tax cuts. Minori ty interests increased by 13.3 % to CHF 12.0 million (prior year 80 74.7 74.0 4.2 CHF 10.6 million). 3.8 70 4.0 3.3 3.2 62.3 3.5

60 3.0 2.5 2.5

50 2.0 NET PROFIT 2005 2006 2007 2008 2009 in CHF million as % of net sales

80 75.3 By contrast, rigorous cost management in the 2009 financial year led to an increase of only 1.3 % in operating expenses to 70 58.7 CHF 645.2 million (prior year CHF 637.2 million). Due to acquisi- 60 54.0 tions, personnel expenses rose 3.0 % to CHF 324.0 million (prior 51.4 year CHF 314.4 million). Other operating expenses fell by 0.5 % 50 41.3 to CHF 321.2 million (prior year CHF 322.8 million), despite the 40 increase in advertising expenditure. As at the end of the year 2.9 under review, headcount had risen by 4.5 % to 3,525 employees 30 2.5 2.3 2.5 2.2 (prior year 3,373). 2.0 20 1.6 1.5 Earnings before interest, taxes, depreciation and amortization 10 1.0 0.5 (EBITDA) recorded a clear improvement to CHF 208.3 million (prior 0 year CHF 184.4 million), with the EBITDA margin increasing from 2005 2006 2007 2008 2009 6.8 % in the prior year to 8.0 % as a result.

Whilst the larger investment projects led to a slight increase in depreciation and amortization, write-backs of negative goodwill Net profit for the 2009 financial year amounted to CHF 75.3 mil- continued to fall, from CHF 6.6 million in 2008 to CHF 4.2 million. lion (prior year CHF 58.7 million), corresponding to an increase of 28.3 % and a net profit margin of 2.9 % (prior year 2.2 %). Earnings before interest and taxes (EBIT) amounted to CHF 109.0 million in the year under review, compared with CHF 102.1 million in the prior year, representing a pleasing increase of CHF 6.9 million, or 6.8 %. This led to a clear improvement in the EBIT margin to 4.2 % (prior year 3.8 %). 10 Group Report

Putting the strategy into effect

First pillar: Strengthening the domestic DAIRY PRODUCT SALES SWITZERLAND

Swiss market in CHF million Emmi’s strategy is based on the three pillars of “Strengthening

the domestic market”, “Growth abroad”, and “Optimizing costs”. 800 789 746 214 In Switzerland, Emmi is focused on the development, production 735 -6.8% 197 197 -8.0% 700 and marketing of a full range of natural and high-quality dairy and

fresh products, as well as on the production, ageing and trading of 600 Swiss speciality cheeses and cheese brand concepts. Over the past 284 270 283 -0.2% year, the company has continued to work consistently towards 500

the first pillar, strengthening the domestic market. Emmi has, for 400 example, acquired, with effect from 8 July 2009, a majority hold- 300 ing in Nutrifrais SA, formerly owned by the Geneva-based LRG 291 279 255 -12.3% Groupe SA. Nutrifrais specializes in the production of yoghurts 200 and desserts. The acquisition has enabled Emmi to significantly enhance its presence in Western Switzerland. The well-known 100 “TamTam” brand and the licence for “Yoplait” have enabled it to 0 build on its position in the yoghurt and flan markets. The success- 2007 2008 2009 ful completion, at the end of 2009, of the integration of the Thun processed cheese plant into the Langnau i.E. site strengthened Cream Butter and margarine Emmi’s position in the fondue market. The acquisition of custom- Milk ers of Kellenberger FS AG by Emmi Interfrais SA on 16 December also contributed to the strong market position.

Sales and product groups in the Swiss market This decline is attributable not only to price cuts to take account The impact on sales trends was as follows: Sales in Switzer- of lower raw material milk prices, but also to the loss of generic land amounted to CHF 1,944.1 million, compared with CHF volume from a major Swiss customer. Sales of fresh products re- 2,045.5 million in 2008, representing a fall of 4.9 %. If these mained virtually stable at CHF 357.7 million, compared with CHF figures are adjusted to take account of the acquisition of 358.7 million in 2008. In terms of volume, it was mainly brand Nutrifrais SA in Geneva, the fall in sales in Switzerland amounts concepts in milk-based drinks including Caffè Latte, Aktifit and to 5.4 %. In dairy products, a category including milk, cream and Benecol, as well as yoghurts, that performed well. Particular- butter, Emmi’s sales fell by 6.8 % to CHF 735.4 million (prior year ly pleasing was the 14 % increase in sales of Emmi Caffè Latte, CHF 788.8 million). which further built on the product’s excellent market position in Switzerland. This trend is due, among other things, to an advertising campaign in the second half of the year, as well as the newly launched Emmi Caffè Latte Zero, a blend of real espresso and fresh milk, but without sugar or lactose. The launch was successful and seems to have hit the mark for contemporary taste. A further campaign was run to launch the seasonal Emmi Energy Milk varieties (summer: pineapple/coconut, winter: caramel) onto the market. Another highlight was the reintroduction of the “Apple” flavour Yogi Drink which Emmi brought back into its range in response to a social media campaign on Facebook. The Emmi Ice Cream range continued to perform well, especially in the gastronomy sector. Group Report 11

FRESH PRODUCT SALES SWITZERLAND CHEESE SALES SWITZERLAND

in CHF million in CHF million

400 359 358 -0.3% 600 330 542 532 -2.0% 508 300 49 51 +4.5% 500 59 493 481 -2.6% 200 449 400

100 300

0 200 2007 2008 2009

100

0 Competition on the health and wellbeing market is becoming 2007 2008 2009 tougher as more foreign competitors move in. Even so, sales of the probiotic yoghurt drink Aktifit also increased last year. An- Processed cheese Natural cheese other product performing well was the yoghurt drink Benecol, which has a positive effect on cholesterol levels. However, Emmi- nent was taken off the Swiss and the Portuguese market, where it was being tested, after this highly innovative product failed to Increasing pressure from imports and the associated price pres- reach critical sales volumes over an extended period. sure were particularly noticeable in fresh cheese. Emmi was in fact able to increase sales by 4 % and strengthen its position In the cheese business, lower milk prices were also passed on, thanks to the widespread launch of Emmi brand mozzarella and albeit with the standard delay in line with the time taken to age marketing measures emphasizing “made in Switzerland”. At the the cheese. The fall of 2.6 % in natural cheese sales to CHF 480.5 same time, prices fell by 6.5 %, which overall led to a decline of million (prior year CHF 493.5 million) is largely attributable to the 2.5 % in sales to CHF 134.7 million. Emmi presented Gala Mousse lower milk price. The brand concepts performed well, particularly Swiss Alpine Chili, a light fresh cheese spread in a resealable tub, Kaltbach Le Gruyère AOC and the newly launched Luzerner Rahm- which was very well received by consumers. At CHF 65.0 million käse cheese slices. At CHF 51.1 million, sales of processed cheese (prior year CHF 78.1 million), sales of powder/concentrates could were slightly up on 2008. In an environment characterized by not be maintained due to massive price pressure. In other prod- sharp increases in imports (TSM statistics: imports increased by ucts and services, sales fell by 14.2 % to CHF 119.7 million from 37.2 % in 2009), Emmi succeeded in maintaining its sales volume. a 2008 figure of CHF 139.5 million. This decline is attributable to the aforementioned changes in the area of supplies to the food service markets. 12 Group Report

Second pillar: Growth abroad Emmi is planning to enter into further collaborations or purchase The second pillar of the strategy targets growth outside Swit- stakes in strategically interesting partners to focus on strengthen- zerland. Business in Europe and North America will be further ing its position in key markets. As such, Emmi purchased a minori expanded in the next few years with strategic brand concepts ty 25 % stake in the French cheese packaging specialist Schöpfer and specialities. A major contributor to the pleasing result in the at the start of 2010. The company is active in cheese portion- international business was the acquisition in January 2009 of US ing and packaging and specializes in packaging fresh cheese. At firm Roth Käse USA Ltd., which, in a difficult environment, not the same time, Emmi entered into a commercial collaboration only reached its revenue, sales and earnings targets but managed with and acquired a minority stake of 10 % in Italian cooperative to exceed them. With the acquisition of Roth Käse USA Ltd., Emmi Venchiaredo. Venchiaredo produces premium quality mozzarel- significantly reinforced its position in the strategically important la and Stracchino and is an excellent complement to the exist- North American market. Roth is a leading company in the producing product portfolio abroad. The partnership with the Spanish tion and marketing of domestic cheese specialities in the USA, company Kaiku Corporación Alimentaria S.L., in which Emmi in- with its main focus on the food service sector, whereas Emmi USA creased its holding from 23 % to 43 % at the beginning of 2009, Inc. is extremely well established in the retail sector with Swiss thus becoming by far the largest individual shareholder, also de- cheese. At the end of the year, the organizational structures of veloped extremely well in Spain and South America, in spite of Roth and the existing Emmi organization were merged and re- challenges. Kaiku opened a new cheese factory in Chile in mid- sponsibilities redefined. Emmi is thus able to supply the entire 2009, and further improved profitability during the year under product range, focusing on cheese specialities and expanded with review. Kaiku also founded the Yeo joint venture, in Toulouse in some speciality fresh products, from a single source. Thanks to 2009 with 3A, which specializes in yoghurt and which supplies an excellent positioning in the retail and food service distribu- Kaiku for the Spanish market. tion channels and a highly motivated team, the US organization is well positioned for the future. The collaboration with cheese Emmi aims to achieve further targeted expansion of its inter specialist Ambrosi S.p.A., whose products will increasingly be national business and is focusing primarily on markets and prod- marketed by foreign Emmi Group subsidiaries, is also developing ucts with appropriate growth and earnings potential. Germany, well. Since the consolidation of sales activities with the French Austria, Italy, the UK and the USA have been defined as key mar- location of Ambrosi at the end of 2007, Emmi has been able to kets. These countries also accounted for the largest share of in- increase exports of Swiss cheese specialities considerably thanks ternational marketing investments. Given this concentration on to the excellent market position of this company. key markets, Emmi decided to reduce expenditure in the Scan- dinavian markets in the future. As a result, the subsidiary Emmi Nordic AB in Gävle (Sweden) ceased operations at the end of Feb- ruary 2009. The region will now be covered by Emmi Nederland (Craamer & Co. B.V).

International sales and product groups In fresh products, Emmi achieved international sales of CHF 206.3 million (prior year CHF 222.7 million), which corresponds to a fall of 7.4 %. The main reason for the decline was the foreign currency effect of 6.8 %. In local currencies, sales only fell by 0.6 %, with the decline mainly due to price cuts. Emmi was even able to report slight growth in terms of volume.

In the key German market, the Swiss line performed well in 2009 with Swiss Müesli, a premium yoghurt with fresh fruit and high quality cereals. The TV campaign launched at the end of De- cember 2008 in Germany produced the desired results and had a positive effect on sales figures. Group Report 13

Emmi Caffè Latte grew by 5.8 % overall last year in terms of vol- 1.0 %. A number of Emmi brand concepts, Sbrinz, Appenzeller ume. The product performed particularly well in Germany, Austria and Emmentaler recorded increased sales, while exports of proc- and Spain. Sales of Emmi Caffè Latte in the USA, which began in essed cheese in slices and round boxes fell. Cooperation with Ital- October 2007 in a small number of test markets, were continued. ian cheese specialist Ambrosi was established for several other Due to current consumer sentiment in the USA, there has been European markets, as well as the USA and Canada in the year no broad-based launch to date. The distribution of locally pro- under review. duced premium-quality yoghurts in various US retail chains was expanded in the year under review. In Italy, the fresh product busi- The traditional Swiss dishes fondue and raclette were successfully ness of Emmi subsidiary Trentinalatte continued to perform well. launched in various markets with special offers, sales promo- tions and advertising campaigns; double-digit growth rates were achieved for these products in some of these markets.

FRESH PRODUCT SALES INTERNATIONAL Sales of powders/concentrates increased by 72.8 % to CHF 20.5

in CHF million million (prior year CHF 11.9 million). The increase is mainly due to exports of skimmed milk powder made to relieve pressure on

300 and stabilize the domestic milk market. In other products and

223 207 206 -7.4% services, sales were maintained at the prior year level at CHF 200 49.8 million, while those in fresh cheese fell to CHF 0.6 million.

100 As a result of these developments, the share of sales generated 0 2007 2008 2009 abroad in total sales increased from 23.4 % to 25.8 %.

CHEESE SALES INTERNATIONAL

in CHF million

400 388 +17.4% 58 -15.4% 330 311 68 330 +26.0% 300 60

251 262 200

100

0 2007 2008 2009

Processed cheese Natural cheese

The international cheese business generated a 17.4 % increase in sales to CHF 387.7 million (prior year CHF 330.3 million). This growth was primarily achieved in the key US market through the acquisition of Roth Käse Ltd. Adjusted for acquisitions and expressed in tonnes, the natural cheese business declined by 14 Group Report

Third pillar: Cost optimization The changing Company Emmi expects further market liberalization and thus continued to focus on reducing costs and increasing productivity and efficiency Realignment of sponsorship and in the year under review, successfully implementing further cost- marketing strategy cutting programs in 2009 with annually recurring savings in the The Emmi brand increased its visibility in 2009. Through the spon- order of CHF 5.0 million. This, coupled with the 2008 cost-saving sorship of international skiing events, Emmi seeks to further build measures which took full-year effect for the first time in the up and strengthen its brand. Competitive skiing, which has been 2009 financial year, increased efficiency significantly. Particularly a firm fixture in Switzerland for many years, the alpine backdrop noteworthy are the cost reductions achieved by streamlining and of course the strong emphasis on “made in Switzerland” the product portfolio and implementing a range of individual are excellent ways to spread the word about the Emmi brand measures in production, logistics and administration. A key indi- throughout Europe and overseas. Emmi wants to be synony- vidual measure was the closure of the Swedish subsidiary Emmi mous with genuine Swiss premium taste, thereby setting itself Nordic AB. The introduction of the Japanese work philosophy apart from the competition by providing top-quality services for Kaizen at the Kirchberg location was also significant. The poten retail and consumers. Through better marketing support and by tial of employees to optimize processes and procedures is har- building up the Emmi umbrella brand, the company will achieve nessed with simple, standardized methods. Taking on a high de- an even better strategic position. gree of personal responsibility, employees continually improve the daily processes and collaboration with other employees by Staffing changes establishing clear rules. Implementation of this method achieved The shareholders elected Konrad Graber (born 1958) as the new savings in the first year of more than CHF 1 million. A further Chairman of the Board of Directors of the Emmi Group at the project of strategic importance was the integration of the Thun 2009 General Meeting. Konrad Graber succeeded Fritz Wyss, processed cheese plant into the Langnau i.E. site, which was who managed Emmi’s fortunes for almost 18 intense years (see brought to a successful conclusion at the end of 2009. This con- page 26). Konrad Graber was elected to the Board of Directors centration of production will enable Emmi to further strengthen of Emmi AG in 2006 and has been Chairman of the Audit Com- its cost basis in the current year and further consolidate its lead- mittee of the Board of Directors since 2007. ing global position in fondue. Thomas Oehen-Bühlmann (born 1958) was elected to the Emmi A new, fully-automated high-rack warehouse was added to the Board of Directors also by the General Meeting. He succeeded Mittelland Molkerei in Suhr from the second half of 2009. With Peter Bühlmann, who did not stand for reelection. a capacity of some 5,000 pallet slots, the warehouse allows for a more efficient flow of goods. The harmonization of the IT plat- There were also a number of changes at Group Management form as part of the migration to J.D. Edwards EnterpriseOne also level. Matthias Kunz (born 1960) took over operational manage- made good progress and laid the foundations for more stream- ment of the entire international business at the start of 2009. As lined and efficient processes. Head of the International Cheese Division, he previously managed a large proportion of international activities. Robin Barraclough (born 1967) became Head of Marketing of the Emmi Group on 1 June 2009. He succeeded Erich Kienle, who left the company. Marc Heim (born 1967) filled the newly-created position of Head of Sales of the Emmi Group on 1 August. Herbert Dätwyler, Head of Sales Switzerland until May 2009, retired. On 1 September, Natalie Rüedi (born 1971) took over responsibility for Human Re- sources. She is a member of the extended Group Management and replaced Rolf Stocker, who left the company. Group Report 15

High milk volumes and falling Outlook for 2010 international prices Emmi is confident that the company has the right strategy to International milk prices fell again in the year under review, pri- continue to develop and expand its market positions in the fu- marily because of high levels of milk production, but also because ture. By pursuing this strategy rigorously, the company will be of slower growth in demand in the wake of the global economic able to withstand the persistent market and price pressure and crisis. In Switzerland too, raw material prices for dairy milk in strengthen long-term positions. Based on its anticipation of fur- 2009 were around 18 % lower than in the prior year. The milk ther market liberalization, Emmi is continuing to focus invest- price was cut twice within the space of a year (on 1 January by ments on measures to increase efficiency and strengthen the 9.2 centimes and on 1 July by a further 6 centimes). These price Emmi brand, thus securing long-term competitiveness. cuts were passed on to customers in full. Overall, Emmi processed somewhat less milk in 2009 than in the prior year (904 million kg The expansion of the Kaltbach cave (LU), where work is progress- as opposed to 963 million kg). ing well, is an example of the strengthening of the Emmi brand. The capacity of the cave is being doubled to meet the growing Continued high levels of milk production in Switzerland (remain- demand for the unique, cave-aged Kaltbach cheese specialities. ing at the prior-year level but approximately 5 % above that of The first cheeses will be stored there in spring 2010. 2007) posed great challenges to the milk industry and contributed to strong growth in butter stocks. In order to guarantee that all Emmi expects consumption to remain stable in Switzerland in milk produced was bought, financial support from the federal 2010. Given the lower prices over the course of 2009 and as a government and the Swiss Milk Producers (SMP) was needed to result of the partial loss of a major Swiss customer, the effects provide relief on the milk fat market. of which will still be apparent in the first half of the year, it also expects to see a slight decline in sales in 2010. Prices for the raw The raw materials handicap of Swiss milk products compared material milk are likely to be significantly below prior year levels in to European products was reduced at the end of 2009, but the the first half. By contrast, Emmi expects a slight increase in sales competitiveness of Swiss milk products on the export market and abroad as consumer sentiment should show some improvement. the liberalized domestic market is still negatively influenced by As a result, Emmi expects to maintain sales revenues at a similar the difference in milk prices, which remains high. level in the 2010 financial year, aiming for a net profit margin of 2.5 % to 3.0 %. Emmi will continue to pursue its strategy of fo- Emmi is a member of and receives support from the Swiss Milk cused investment in the further expansion of its international Association (BO Milch). Founded in spring 2009, BO Milch repre- business and strengthening its domestic market in 2010. sents an opportunity for the Swiss milk market. Firstly, it paves the way for clear and binding conditions for the liberalized market, and secondly, it gives the industry hope for stronger market orientation in terms of reconciling milk quantities and prices. 16 The value chain

FROM PROCUREMENT TO Distribution The value chain 17

Procurement Emmi works exclusively with raw milk from Swiss milk producers who satisfy the strict “ÖLN” requirements for sound ecological practice certification. This certification guarantees sound environmental and animal-friendly practices and prohibits the use of genetically modified ingredients. Emmi’s suppliers must commit to this.

Reception and quality control The milk is subject to the first round of quality testing immediately after receipt at the various production facilities. This ensures that only the best possible milk is used in processing. Quality controls are carried out throughout the entire production process.

Processing The Emmi production facilities are competence centres for the manufacturing of milk products of all types and process raw milk to produce cheese, fresh products, dairy products and powders. Alongside industrial milk processing, Emmi also sources ready- to-use products, such as commercially produced cheeses, and integrates them into the value chain.

Refining Just that little extra touch turns an ordinary product into a delicacy. This is Emmi’s credo, a credo which it “lives” with its cave-aged specialty cheeses from Kaltbach (LU), for example, where cheeses mature in a unique natural climate. Fresh products also benefit from that little extra touch of refinement. Emmi Caffè Latte, for example, is made exclusively using freshly brewed espresso.

Filling and packaging Today, almost all milk processing is carried out in closed systems, ensuring the highest possible level of hygiene and safety. Finished products are prepared for dispatch by logistics teams, in accordance with clients’ specific requirements and in line with Emmi’s role as service partner for the retail, industrial and catering sectors.

Logistics Goods shipments are coordinated by the logistics centres and deliveries dispatched to Switzerland, Europe, overseas and far-flung regions all over the world. 18 Product Highlights 2009

Growing range

Aktifit Packaging relaunch and new recipe (less sugar, more fruit). – Emmi CAFFÈ LATTE The jewel

in Emmi’s range was given a subtle new look: the packaging now has a more modern appeal and a premium

touch. There is also a new advertising campaign: Emmi’s coffee expertise is emphasized, the two models enjoy

the unique iced coffee drink and are refreshed. “Passion for fresh coffee. Ice cold.” In addition, Emmi launched CAFFÈ

LATTE Zero, with no added sugar or sweetener and lactose-free, with great success. – Emmi Dessert Töpfli

The latest dessert creation combines light mousses with crunchy biscuit. – Emmi ENERGY MILK

We expanded the existing Emmi ENERGY MILK range from April 2009 with the new seasonal pineapple and

coconut variety, our summer special, bringing summer, sun, sand and sea to the chiller cabinet. For the winter,

we introduced Emmi ENERGY MILK Caramel with a delicious caramel flavour. – Emmi Fondue

Successful TV campaign in the Netherlands. – Emmi Raclette Surchoix Emmi Raclette Surchoix is aged

for five months, significantly longer than the classic variety, for a more pronounced flavour. – GALA Mousse

Swiss Alpine Chili GALA Mousse Nature, which was successfully launched in 2008, has a new addition

to the family: the variety with real Swiss Alpine Chili is pleasantly spicy and suitable for cooking, dipping and

spreading. – Gerber Cheese The traditional processed cheese range has been expanded: Gerber Mild.

The packaging also has a new look. – KALTBACH Together with McDonald’s, KALTBACH scored Product Highlights 2009 19

a hit: The “Swiss weeks” with three different KALTBACH premium burgers were a huge success.

KALTBACH also launched an exclusive grated cheese mixture in 2009. In addition to all these activities,

the cave at Kaltbach (LU) is doubled in size and a visitor centre is built. Opening in October 2010. – LUZERNER

New image, new key visual. Now also available in slices. – Mozzarella “Simply perfect”.

This is Emmi’s new slogan to advertise Mozzarella. Made from Swiss milk guarantees the finest quality. Emmi

Mozzarella Maxi is now available in stores. – Swiss Milk A new dairy product line (milk, cream, butter) was

launched. Careful production with an especially light touch ensures full flavour. – SWISS MÜESLI

“Real Müesli, real Swiss, real Emmi.” A nation-wide TV campaign advertised SWISS MÜESLI in Germany. The

Müesli was voted “product of the year” by German consumers. – TamTam Through its majority

stake in Nutrifrais SA, the well-known brand TamTam is now also part of Emmi’s portfolio. – Tigre processed

cheese range TV campaign, TV sponsor for “Who wants to be a millionaire?”, numerous activities

and an own range (including club) for children – Tigre is a hit in Italy. – Toni yoghurt Redesign of the logo,

continuation of the successful taste campaign. Promotion with prize of “a year’s free Toni yoghurt”. – Yogi Drink

After seven years of abstinence, Emmi relaunched the popular “Apple” flavour Yogi Drink. The

large fan group on Facebook, which was able to actively vote for the relaunch, was a decisive factor. 20 Corporate Responsibility Report

Genuine Swiss premium taste

Emmi is the largest milk processor in Switzerland and a proven specialist in Swiss cheese and selected fresh products worldwide. With its strong position in its domestic market and the targeted expansion of its international business, Emmi aims to achieve long-term success as an independent company in open markets. Emmi intends to meet this challenge with a high degree of innovation performance, product quality and product safety, and through investments in a sustainable production chain and targeted training of employees. This requires great commitment from management and all employees, as well as a high degree of professionalism and above-average motivation. Corporate Responsibility Report 21

Emmi is the leading supplier of Swiss cheese worldwide. In Remaining successful in competitive markets Europe, Emmi has a leading position as a premium dairy thanks thanks to innovations to innovative brand concepts for its fresh products, while in its Innovative strength is a central component of Emmi’s corporate domestic market of Switzerland, it is the market leader with its culture, and a key success factor for the company. With the launch diverse range of dairy products. of a variety of new products, Emmi is one of Europe’s innovation leaders in the premium segment of milk products. In order Emmi aims to achieve long-term success as an independent com- to maintain this position in the future, Emmi constantly invests pany in open markets. It intends to achieve this through its strong in research and development. This enables Emmi to hone the position in its domestic market, targeted international growth, company’s competitive edge in an international environment and dedicated, long-term cost management. Using this strategy, and react to new needs in the food sector. Emmi aims to generate sales of CHF 4 billion, a net profit margin of 2 % to 3 %, and to maintain a solid equity capital structure of at Emmi’s development staff focus on major trends in their work, least 40 % shareholders’ equity in the next few years. namely taste, health and wellbeing and convenience. Through- out the product development cycle, Emmi also places special em- The Swiss market is increasingly competitive due to ongoing mar- phasis on ethics and sustainability. Research and development is ket liberalization. Emmi therefore not only has to outperform do- closely linked to product marketing, sales and management in mestic, but increasingly also foreign competition. As the largest order to be able to operate close to the market. Swiss milk processor and a reliable trading partner, the company has a strong regional base and will maintain this position going Emmi operates own expertise centres for the development of forward through quality and reliability. Thanks to targeted meas- cheese, fresh products, dairy products, ice cream, fondue and ures aimed at improving efficiency as well as strict cost manage- processed cheese, as well as fresh cheese and specialities. The ment, Emmi is developing productive structures that conform to R&D area reports directly to Group Management and has re- European standards to equip itself for the ongoing liberalization. course to a comprehensive network of internal and external ex- Through more efficient operational processes and optimization pertise. Emmi pursues mid-term and long-term projects togeth- of the range, Emmi aims to remain competitive operating from er with national and international partners such as customers, its Swiss base and strengthen the Swiss production location for industry, research establishments and academic institutions. the long term. With a high-performance development team of some 50 people, Emmi is able to quickly launch innovative products and respond Emmi plans to expand its international business in Europe and to emerging market trends. North America. Competing with the largest food groups also requires a steady stream of investments in the Emmi brand and Established as the largest milk processor a market-specific international strategy. Emmi is primarily fo- in Switzerland cusing its investments on those markets and products demon- The Emmi Group is Switzerland’s largest milk processor. In 2009, strating the highest growth and earnings potential. Its foreign it processed 833.8 million kilograms of milk, of which 80 million activities are currently primarily targeting the key markets of kilograms or around 10 % was organic milk, and 38.1 million kg Germany, Austria, Italy, the UK and the USA. In other markets, was cream. At Emmi’s two foreign production locations, Trenti- Emmi is selectively cultivating opportunities or working closely nalatte in Italy and Roth Käse in the USA, Emmi processed a fur- with strategic partners such as Spain’s Kaiku Corporación Alimen- ther 70.6 million kg of milk. taria S.L. for the Spanish and South American markets, or cheese specialist Ambrosi S.p.A. in France. Emmi sources Swiss milk from direct suppliers and selected pro- ducer organizations. The company is an important source of income and a reliable partner for some 6,500 milk producers. This partnership commits Emmi to, and anchors it in, Switzerland. 22 Corporate Responsibility Report

Quality and safety of paramount importance As a premium dairy, Emmi has a responsibility towards its cus- VOLUMES OF MILK AND CREAM PROCESSED tomers. High quality and food safety are of paramount impor- in Switzerland, in kg million tance for the company in producing and marketing its products.

1,000 The organization of quality management, areas of responsibility 83 53 41 880 38 and ongoing optimization processes are defined in “Emmi Proc- 800 833 834 808 ess Management”, which is certified by the Société Générale de 38 600 664 Surveillance SA (SGS) in accordance with ISO 9001 and the British Retail Consortium Global Standard Food (BRC). Process control 400 and documented quality assurance are important components 200 of this approach and Emmi makes effective use of the HACCP (Hazard Analysis and Critical Control Points) concept as a key ele- 0 20051) 20062) 2007 2008 20093) ment of the self-regulation process. Internal and external audits serve to review the required quality standards and their ongoing Cream optimization – from raw material to the end product. The Emmi Milk Group is also certified for producing organic products and bears 1) incl. Molkerei Biedermann the “Suisse Garantie” label. Based on the conviction that only 2) incl. Molkerei Mittelland as of 1 April 2006 the best is good enough for customers, Emmi deliberately goes 3) incl. Nutrifrais SA as of 8 July 2009 beyond legal requirements when drawing up and implementing quality and safety concepts.

Commitment to strong Swiss agriculture Natural products mean better quality Emmi maintains a constructive dialogue with authorities, asso- Emmi considers the processing of natural raw materials as a deci- ciations, government representatives and international commit- sive factor for success on international markets with Swiss dairy tees in addition to regular exchanges with customers, consum- products. This includes environmentally friendly production, and ers, shareholders, analysts and the media. At the forefront are rejection of genetically modified products and problematic ad- the ongoing agricultural liberalization, the agreed step-by-step ditives. Emmi aims to be synonymous with naturalness, quality reduction in market subsidies under Swiss agricultural policy and and safety. The company requires the same self-image from its developments in food legislation. suppliers. Swiss milk producers have to meet the strict requirements for sound environmental practice certification, and refrain Emmi has an inherent interest in strong, productive agriculture in from using any genetically modified animal feed. These are re- Switzerland. The group supports the Federal Council’s agricultural quirements to which Emmi’s suppliers must commit. policy, which aims to strengthen competition and liberalize markets. In this context, and despite the efficiency of market subsi- Furthermore, Swiss agriculture has introduced a common, stand- dies, Emmi has been pushing for a reduction in subsidies in favour ardized mark of origin for domestic agricultural products: “Suisse of WTO-compatible direct payments and hence for the abolition Garantie” means that Switzerland is the country of origin and of the system of payment processing via the processing industry. processing, that clear requirements are placed on production and processing methods, and that a well-run, independent control and certification system is guaranteed. Corporate Responsibility Report 23

Traceability throughout the entire production chain ELECTRICITY CONSUMPTION At Emmi, the entire path of milk products – from animal feed in kWh million for cows through production and processing to the milk product itself – is embedded in an integrated quality assurance and 140 control system. This ensures the traceability of products, giv- 122 118 ing consumers the greatest possible security as to the origin of 120 114 116 Emmi’s products. 100 90

Corporate culture committed to sustainability 80 Emmi’s corporate culture and values are based on the conviction 60 that trust, values and honesty are the key elements of long-term success. The company is therefore committed to moderate usage 40 of natural resources throughout the value chain – from sourcing through processing methods to distribution – and undertakes to 20 pursue environmentally-aware corporate management. 0 2005 2006 2007 2008 2009 An in-house environmental management team is responsible for defining environmental objectives, monitoring compliance and WATER CONSUMPTION documenting performance at regular intervals. Under this proc- in m3 million ess, Emmi complies with international standards. All Emmi locations in Switzerland are ISO 14001 certified and are audited on an 3.5 annual basis by the SGS (Société Générale de Surveillance SA) cer- 3.1 3.1 3.1 3 tification and assessment institution. Environmental objectives 2.8 and standards are also applied at production companies abroad. 2.5 2.3

The Emmi Group has been a member of the Energy Agency for 2 Industry (EnAW) since 2003. Emmi is working carefully towards 1.5 reaching the CO2 objectives agreed for 2010, which consist of reducing CO2 intensity to 79.18 % and increasing energy efficiency 1 by 12.18 % compared to 2000 levels. It will achieve the objectives 0.5 agreed with the Federal Council through various measures. As a result, the Federal Office for the Environment (FOEN) has ex- 0 2005 2006 2007 2008 2009 empted Emmi from its obligation to pay the CO2 levy.

With environmental objectives in mind, the company takes the latest technological and scientific developments into account Continuous measures for improving for new and replacement assets. Through further training and the ecobalance education, employees’ environmental awareness is continually In a drive to improve the Group’s ecobalance, a wide range of improved. measures aimed at saving water and energy as well as mini- mizing the creation of wastewater, rubbish and other emissions were introduced at production locations again in 2009. A new woodchip-fired steam power plant came on line at the Emmen production site in May 2009. Using this renewable energy source

will save 1.6 million litres of heating oil per year, and reduce CO2 emissions by 4,700 tonnes. Furthermore, the Mösli heat system in Ostermundigen was commissioned at the start of November 2009 in Ostermundigen. This project will save 700,000 litres of 24 Corporate Responsibility Report

One important tool of health management is supporting employ- WASTE TO INCINERATION PLANT ees who are on long-term absence from work through sickness or accident. Using professional, individually tailored case man- in kg million agement, the company aims for rapid reintegration according to the individual’s capacity. Sheltered workplaces and special job 3.5 creation schemes are important internal instruments that allow 3.0 3.0 3 2.9 2.9 successful reintegration. The average rate of absence was 3.7 %.

2.5 2.3 Recognize potential, provide prospects 2 The staff represent the company’s success. Emmi is committed to being an attractive employer where staff can develop and be- 1.5 come involved. In 2009, human resource management focused on

1 staff development and encouraging potential, alongside gaining qualified workers. Further training programmes are planned on 0.5 the basis of department goals and employee evaluation discus-

0 sions. Emmi supports external training, but also offers a wide 2005 2006 2007 2008 2009 range of internal courses. Most internal training is made available Group-wide to facilitate interaction and networking among the participants.

heating oil and 2,000 tonnes of CO2 emissions per year. The new heating plant, which provides energy to heat a nearby university Apart from training sessions for the workplace on topics of such hospital and school complex, for example, is fed up to 30 % by as hygiene, safety, the environment and processes, management surplus heat from Emmi’s cooling processes. The commune gen- courses are a main focus of internal training. The course selection erates the remaining energy from burning woodchips. is continually updated; it is modularly structured and enables managers to evaluate their own leadership positions on a regu- In distribution logistics, the delivery schedule is constantly being lar basis. A new “Management Practice” pilot project was imple- optimized in an effort to cut down on mileage and fuel consump- mented between September and December 2009. The project tion. Emmi is also constantly modernizing its vehicle fleet to refocused on encouraging employees’ potential with the aim of

duce CO2 and fine particle emissions. In 2009, 70 % of vehicles making Emmi management aware of achievement-oriented peo- complied with EURO5 emission requirements, with the remain- ple looking for career development, preparing such individuals ing vehicles complying with at least EURO3. Supported by eco- specifically for management roles, and evaluating individual po- driving courses and a new bonus system introduced in 2009 for tential for further training. In this context, the participants car- fuel-efficient driving, fuel consumption was reduced from 30.4 ried out actual management tasks. Fifteen employees took part to 29.8 litres per 100 kilometres. in the “Management Practice” project supported by internal and external coaches. Health and safety initiatives In the context of “Health and safety management”, the Emmi More apprenticeship places Group actively promotes safety at work and the health of its Emmi increased the number of apprenticeships it offers from employees on an ongoing basis using targeted measures. The 86 to 94 in 2009. The focus was on milk technologists, produc- “gsund&zwäg” project for all Emmi employees in Switzerland tion technologists and logisticians. Thirty-five apprentices began sponsored regular campaigns again in 2009 in the areas of nu- their basic vocational training at Emmi in August 2009. A newly trition, exercise and accident prevention at home and at work. designed induction was implemented for this year’s apprentices, Emmi aims through this is to increase employee protection and with the aim of familiarizing them with the company’s strategy maintain performance – both at work and at home. The number and organizational structure quickly, as well as with the challeng- of accidents at work remained stable in 2009 at 89 per 1,000 es of their training positions. In order to give apprentices optimal full-time employees. These were relatively minor accidents that support, the company attaches great importance to targeted resulted in short-term absences. development of vocational trainees. In 2009, discussions largely Corporate Responsibility Report 25

focused on young people in difficult circumstances and the adjustments to the legislation on apprenticeships. HEADCOUNT

In addition to basic vocational training, Emmi feels that it is im- Number of full-time employees portant that apprentices also develop in other areas of life. Emmi 4,000 therefore provides separate full-time practical and classroom 3,525 training, which gives apprentices more time for activities out- 3,500 3,373 3,300 3,350 459 320 side of work. 317 309 3,000 3,041 3,053 3,066 2,765 2,983 122 International support 2,500 2,643 As Emmi is a globally-positioned company, the willingness of indi- 2,000 vidual employees to work abroad is key. Emmi therefore actively promotes mobility of members of management and specialists in 1,500 moving abroad for long or short periods – from obtaining a visa to organizing the move. In 2009, the company primarily supported 1,000 expats in the key markets of the USA and Italy as the production 500 locations there required expertise from Switzerland. 0 2005 2006 2007 2008 2009 Established culture of dialogue at the sites

Staff in the Emmi Group have been represented on codetermina- Foreign tion issues by employee committees since 2004. Every site with at Domestic least 50 staff has its own employee committee representing the interests of staff with the management. Their most important ABSENCE RATE areas of influence of the employee committees are employment terms and conditions, measures vis-à-vis health and safety, and As a percentage of hours worked and restructuring processes. Location-specific proposals are dealt paid absences including long-term cases with in a series of four to six meetings a year. At least once a year, 5 a session is held with Emmi’s CEO and twice a year with the Head 4 4 3.8 of HR for Emmi, providing the opportunity to discuss general is- 3.7 3.7 3.7 sues such as business performance, ongoing company projects 3 and conditions of employment. 2

Strong regional base and international appeal 1 Sponsorship commitments contribute to the company’s inter- 0 action with society and increase public awareness of the Emmi 2005 2006 2007 2008 2009 brand. Emmi ended its international partnership with tennis play- er Roger Federer in 2009. Emmi is now sponsoring professional skiing both nationally and internationally. As a new partner for the FIS Alpine Ski World Cup events, Emmis is increasing its international visibility while staying true to Swiss values. The company is continuing its international partnership with the Swiss motor- cyclist Tom Lüthi. Emmi is also involved at local and regional levels by providing products to a range of cultural, sporting, community and social events and projects. On an annual basis, Emmi supports at least 1,000 sport and school camps and over 400 events with Emmi products, principally at its main production locations. 26 Corporate Responsibility Report

Tribute to Fritz Wyss

Delegate of the Board of Directors 1992–2003 Chairman of the Board of Directors 2003–2009

Fritz Wyss stepped down from the management of the Emmi Fritz Wyss’ next career step brought him closer to Emmi. As Direc- Group at the General Meeting of Emmi AG on 20 May 2009. After tor of Chocolat Frey AG, he was a customer of what was then the almost 18 years building up the company, he can look back on Lucerne Milk Association for ten years. He got to know, and clearly his life’s work with pride. He accomplished outstanding achieve- also value, the company as a reliable supplier of milk powder. ments and the Emmi Group was in an excellent position when he handed over control. As part of this year’s Annual Report, we In 1992, Fritz Wyss replaced Franz Jung, who passed away in 2008, would like to relive some of the highlights of his career. and became Managing Director of the Lucerne Milk Association. Fritz Wyss used the trust placed in him and the freedom to act After finishing his studies in food science at ETH Zurich and an he was given: he developed strategies and visions for how a re- advanced business program at IMD Lausanne, Fritz Wyss began gional milk association could be turned into a national, and later his career at the Alfa Laval Group. He had his first contact with an international, group. His sense of corporate implementation what is now the Emmi Group as a young director at Alfa Laval enabled him time and again to persuade the responsible com- Schweiz. Today, there are still Emmi facilities at the Ostermun- mittees that his steps were the right ones. digen site that Fritz Wyss coplanned and sold. At the same time, he understood how to motivate good, successful employees and give them the necessary scope to act so that Emmi could be kept on a dynamic growth course. He was not a “crisis or restructuring manager” by nature, but an entrepreneur committed to achieving growth. However, when necessary, he also knew how to implement strict cost-saving programs to bring the company back on track. In organizational terms, he managed Emmi as a holding structure. The Milk Association was the sole shareholder for a long time.

Emmi largely grew via acquisitions under Fritz Wyss. Key steps here were:

– entry into the international cheese business through the acquisition of Alfred Gerber AG and Farner AG. – the acquisition of the Kirchberg cheese centre, and in 2000, the dairy in Basel from Coop Schweiz. – the total acquisition of the Luzern Butterzentrale, and five years later, the Aargauer Zentralmolkerei. – the acquisition of the cheese business from Swiss Dairy Food and of the Ostermundigen site from its assets. – the acquisition of Trentinalatte in Italy. – and finally, the acquisition of Roth Käse Ltd. in the USA in 2009.

Strong growth and the target of 40 % shareholders’ equity could only be achieved thanks to creative steps in financing. In a first phase, various acquisitions were paid for with Emmi shares. In a second phase, the company negotiated a larger syndicated loan Corporate Responsibility Report 27

In addition to all his entrepreneurial achievements, we would Seven strategic milestones from the Wyss era also like to take this opportunity to note Fritz Wyss’ personal 1. The clear division into business functions and association func- qualities. As a member of the Executive Board, the Board of Di- tions and ultimately the separation of the Milk Association and the company. rectors, numerous committees, and in negotiations, he cultivated a culture of dialogue and respect for people and the opinions of 2. The awareness that with borders opening up, expansion abroad is vital for survival. his counterparts. His authority was based on his expertise and authenticity, together with the ability to maintain an overview 3. The vision to build the company up to be the clear no. 1 in the Swiss milk industry, a leading premium supplier in Europe and the and foresight. He was able to summarize complex connections undisputed benchmark in the cheese and fondue business abroad. in clear, convincing arguments. In 1992, Emmi was at best no. 3 or 4.

4. The creation of a strong “Emmi” brand and driving forward inno- Although he was committed to providing long-term financial vative product concepts with added value, particularly in the areas success for the company and adding value for shareholders, he of taste and health. always took the difficulties, expectations and concerns of the 5. The target of healthy financing with at least 40 % shareholders’ producers and employees into account. For all his success, he re- equity, which is consistently maintained despite strong growth. mained sincere, down-to-earth, humorous and sometimes self- 6. The will to grow organically and through acquisitions, both in deprecating. In short: a real Swiss-made “patron”! Switzerland and abroad.

7. The maxim of being and remaining an independent company. On behalf of all of the shareholders, employees, customers and milk producers, we would like to thank him for his highly successful entrepreneurship and work with us. The Emmi Group is now with a banking syndicate. Before its successful listing in 2004, an extremely important company for the Swiss food industry. Emmi issued a subordinated bond with a conditional conversion Fritz Wyss created lasting values. We are prepared to continue to right. After listing, a further bond was issued. work in the same spirit as he did, and hope that he will continue to be proud of “his Emmi” in the future. The market success of the Emmi Group under Fritz Wyss is impres- sive: from sales of well below CHF 500 million in 1992, continual growth led to a target of well over CHF 2.6 billion in 2009. This The Board of Directors of Emmi AG means that Emmi grew five-fold under Fritz Wyss. Over the same period, the number of employees increased four-fold from 866 to 3,373. This is attributable to a variety of innovations in particular, in addition to acquisitions.

Under Fritz Wyss, the Emmi Group transformed from a regional milk association with initially national and international customers into a national company with an international focus. He set the course for an international group based in Switzerland. Time and again, Fritz Wyss managed to demonstrate to milk producers with a great deal of persuasiveness that the path he was setting was the right one. He presented opportunities and risks openly Election as Honorary President and honestly, which is why the committees responsible always The Board of Directors appointed Fritz Wyss as Honorary President on 15 March 2010 due to his exceptional service in the development largely supported him. and expansion of Emmi. 28 Corporate Governance

Corporate Governance

The Emmi Group is committed to modern corporate governance principles and aims to provide all stakeholders with the greatest transparency possible. The following information complies with the current corporate governance guidelines of the SIX Swiss Exchange. Emmi’s corporate governance principles are also oriented to the guidelines of the Swiss Code of Best Practice for corporate governance. Unless indicated otherwise, all data relate to the balance sheet as at 31 December 2009. Corporate Governance 29

1. Group structure and shareholders 2. Capital structure

Group structure as at 31 December 2009 Share capital See Group structure below. Share capital amounts to CHF 53,498,100.

All investments in subsidiaries and associates are listed on pages Authorized and conditional capital in particular 75, 76 and 81 of the Financial Report together with the headquar- The company did not create any conditional or authorized capital ters, share capital and the size of the equity interest. The group in financial year 2009 and there is no conditional or authorized of consolidated companies contains only non-listed companies. capital from previous years.

Significant shareholders Changes in capital Shareholders holding more than 5 % of the voting rights as at An overview of changes in capital for the years 2006–2009 can 31 December 2009 are listed on page 82 of the Financial Report. be found on page 80 of the Financial Report. As a shareholder group with ZMP Invest AG, Lucerne, Zentral schweizer Milchkäuferverband (ZMKV), Lucerne, and MIBA Milch- Shares and participation certificates verband der Nordwestschweiz, Basel, are entitled to one repre- The share capital of the Emmi Group comprises 5,349,810 regis- sentative each on the Board of Directors of Emmi AG. tered shares (security no.: 1.282.989/ISIN Code: CH0012829898) with a par value of CHF 10 per share. Only one category of reg- Cross-shareholdings istered share exists. No participation certificates exist. Further No cross-shareholdings exist with other companies. information on shares can be found on page 87 of the Annual Report.

Group structure as at Konrad Graber 31 December 2009 Chairman of the Board

Urs Riedener Chief Executive Officer

Robert Muri Matthias Kunz Max Peter Reto Conrad Dairy products International Trade & Supply Finance & Controlling Chain Management

Othmar Dubach Robin Barraclough Alfons Knüsel 1) 2) Natalie Rüedi 1) Cheese Marketing Retail & Distribution Human Resources Logistics

Markus Willimann Marc Heim Industry Sales 1) Member of the extended Group Management 2) Until 31 March 2010 30 Corporate Governance

Dividend-right certificates Election and term of office No dividend-right certificates exist. Members are elected to the Board of Directors for a term of three years. Reelection is permitted. The members are elected by the Restrictions on transferability and nominee General Meeting, with the period between one General Meet- registrations ing and the end of the next deemed to be one year. The next There are no restrictions on the transfer of registered shares of ordinary reelection will take place at the 2012 General Meeting. Emmi AG. The only precondition for entry in the share register is The elections of the existing members of the Board of Directors a declaration on the part of the purchaser that the shares have put forward for reelection are carried out as a block election un- been acquired in his/her own name and for his/her account. No less at least one shareholder requests individual elections. The other registration restrictions exist. The registration of fiduciar- elections of the Chairman and of new members are carried out ies/nominees without voting rights is permitted. On request, the as individual elections. All votes and elections are carried out by Board of Directors shall decide on the registration of fiduciaries/ open ballot unless a majority requests a secret ballot. nominees with voting rights on a case-by-case basis. No fiduciaries/nominees with voting rights were entered during the year Internal organizational structure Allocation of under review, nor did the Board of Directors approve any other duties within the Board of Directors exceptions for entry in the share register. The Board of Directors has supreme decision-making power in the company, apart from in those matters which, according to Convertible bonds and options the law, are the reserve of the shareholders. It defines the busi- Emmi AG has neither convertible bonds nor options outstanding ness policy and business strategy and obtains information about to acquire ownership interests in Emmi AG. The same applies to business performance at regular intervals. The Board of Directors the other Group companies. designates one of its members as Vice-Chairman. Any member may convene a meeting of the Board of Directors, or request that an item be placed on the agenda. The Chairman determines the 3. Board of Directors individual agenda items for the Board meetings. The main task areas of the Board of Directors are as follows: Changes to the Board of Directors – business policy and business strategy of the company The Board of Directors elected Konrad Graber as Chairman of – annual and investment budget the Board of Directors of Emmi AG at the General Meeting held – investments, apart from budget, above CHF 0.5 million on 20 May 2009. He succeeded Fritz Wyss, who had announced – financial planning and liquidity in the course of 2008 that he would not stand for reelection at – appointment/discharge of the CEO the General Meeting in 2009. Peter Bühlmann did not stand for – group-relevant contracts and cooperation agreements reelection at the General Meeting held on 20 May 2009 either. – purchase and sale of properties, companies/business units The General Meeting elected Thomas Oehen-Bühlmann as and participations the successor to Peter Bühlmann as a member of the Board of – founding and closure of companies Directors. – proposals for election to the Boards of Directors (holding companies and relevant subsidiaries) at the respective General Other activities and interests Meetings With the exception of the functions already mentioned in the – compensation policy section “Members of the Board of Directors”, no members of – definition of signatory authorities the Board of Directors hold positions in governing or supervisory – organizational regulations of the Board of Directors and other bodies or perform long-term managerial or consulting functions Group-relevant regulations for important interest groups. – self-assessment Corporate Governance 31

Committees and councils of Committee for Personnel Matters the Board of Directors The Committee for Personnel Matters comprises two members The Board of Directors is supported in its duties by three com- of the Board of Directors and the Chairman, currently Konrad mittees and a council. Graber (Chairman), Stephan Baer and Moritz Erni. Depending on the topic, Urs Riedener (CEO) takes part as a representative of Controlling Committee Group Management. The Committee has decision-making pow- The Controlling Committee comprises three members of the ers regarding the compensation for the Chairman of the Board of Board of Directors and the Chairman, currently Konrad Graber Directors and Group Management and the election of members (Chairman), Hans Herzog, Alexander Jost and Hanspeter Müller. of Group Management (with the exception of the CEO). The Com- It has decision-making power with regard to directives concern- mittee generally meets two to three times each year. It held four ing its core duties (e.g. guidelines regarding the internal control- meetings, each lasting approximately two hours, in 2009. The ling system). It assesses the issues listed below and prepares main tasks of the Committee for Personnel Matters are: the individual company accounts and consolidated financial – agreeing the compensation for the Chairman of the Board of statements for approval by the Board of Directors. It has access Directors and Group Management to all financial data and generally meets four to six times each – recommending appropriate compensation for the remaining year. It held five half-day meetings in 2009. The meetings are at- members of the Board of Directors to the Board of Directors tended by members of Group Management Urs Riedener (CEO), – electing members of Group Management (not the CEO) Reto Conrad (CFO), member of Management Reto Müller (Head – fundamental handling of personnel matters and payroll policy of Group Controlling and Treasury) and, depending on the topic, at Board of Directors and Group Management level the head of internal auditing (Fabian Egger) and the auditor in – self-assessment charge (Matthias von Moos). The main tasks of the Controlling Committee are: Market Committee – assessing the effectiveness of auditing as well as the perform- The Market Committee comprises four members of the Board of ance, remuneration, and independence of the external auditors Directors and the Chairman, currently Alexander Jost (Chairman), – assessing the functional capacity of the internal control system Stephan Baer, Joseph Deiss, Konrad Graber and Josef Schmidli, – assessing the reports submitted by the internal and external with Urs Riedener (CEO) a regular participant from Group Man- auditors and monitoring management’s action plans based on agement. them The Committee has no decision-making powers. It generally – guaranteeing appropriate risk management. Further informa- meets two to three times each year. It held three half-day meet- tion see note 28 (risk management and internal controls) ings in 2009. The main tasks of the Market Committee are: – critically examining and approving the individual company ac- – monitoring Emmi’s most important markets counts and consolidated financial statements and the interim – managing and assessing new projects aimed at opening up financial statements, and reporting to the Board of Directors new markets – submitting a proposal to the Board of Directors concerning – assessing projects aimed at introducing new product ranges presentation of the individual company accounts and the con- – reviewing large projects in terms of sustainability solidated financial statements to the General Meeting, and – self-assessment making dividend recommendations – handling the annual and investment budget – assessing the company’s financial and liquidity planning and business relations with financial institutions – ensuring compliance with the law and business ethics: assessing legal proceedings and out-of-court settlement of disputes whose outcome may have implications for the financial situation of the company – self-assessment 32 Corporate Governance

Agricultural Council Definition of areas of responsibility between The Agricultural Council comprises between four and ten persons, the Board of Directors and the Group Management four of whom are members of the Board of Directors (Chairman of The Board of Directors entrusts the operational management of the Board of Directors and three further members), together with the company to the Chairman of Group Management (CEO), who other specialists from Emmi Group Management and from the is authorized to issue instructions to other members of Group dairy industry. Current representatives from the Board of Direc- Management. The members of Group Management manage day- tors are Konrad Graber (Chairman), Moritz Erni, Joseph Deiss and to-day business independently in accordance with the guidelines Thomas Oehen-Bühlmann. The members of Group Management and instructions relating to general business policy laid down by active on the Agricultural Council are Urs Riedener (CEO), Alfons the Board of Directors. The areas of competence and responsi- Knüsel (Head of Procurement) and Markus Willimann (Head of bility of the members of Group Management are determined, in Industry and Agricultural Policy). Manuel Hauser, Head of Milk particular, by the budget approved by the Board of Directors and Procurement and a member of Emmi Management, will replace by the agreed business strategy. Alfons Knüsel from 2010. The Council is assisted by the external specialists Albert Rösti (Managing Director, Swiss Milk Producers The Chairman of the Board of Directors devotes 30 % of his time SMP), the Managing Director of Central Switzerland Milk Produc- to the company and is provided with a corresponding level of de- ers ZMP (from 2010 Pirmin Furrer) and the Managing Director of tailed information. The Chairman of the Board of Directors also the MIBA Milchverband der Nordwestschweiz (from 2010 Chris- receives regular updates on business performance from the CEO. tophe Eggenschwiler). He also receives the minutes of Group Management meetings. At each meeting, the Board of Directors is informed by the CEO and The Council deals with matters such as the organization of the the CFO about key issues such as business performance, innova- milk industry, milk and cheese procurement, federal subsidies and tions, changes in market share, financial and liquidity planning, political issues. It has no decision-making powers and generally accounts, Group-relevant agreements and Group projects. The meets once or twice each year. No meetings were held in 2009 Controlling Committee is mandated by the Board of Directors as the milk producers and their organizations were completely to evaluate the reports of the internal and external auditors and reorganized due to the abolition of milk quotas. The Agricultural monitor the Group Management action plans that are based on Council also reconstituted itself as a result. these reports.

Work methods of the Board of Directors Information and control instruments and its committees vis-à-vis Group Management The Board of Directors holds between six and seven meetings The CEO and the CFO inform the Board of Directors about current a year (2009: six half-day meetings). Where necessary, it may also business performance and key projects at each board meeting. hold extraordinary meetings or pass resolutions by circular. Once The CEO provides the Chairman of the Board of Directors with a year, the Board of Directors meets for a strategy seminar, which information on an ongoing basis and meets him at least once in 2009 took place at a meeting held together with Group Man- every two weeks. The minutes of Group Management meetings agement. In addition to the members of the Board of Directors, are sent to the Chairman of the Board of Directors. All mem- the meetings are attended by the CEO, the CFO and, depending on bers of the Board of Directors may request to see the minutes the topic, individual members of Group Management. Project re- of Group Management meetings. The Controlling Committee ports on pending resolutions are sent to all members of the Board receives detailed information from the CFO on the quarterly and of Directors for perusal prior to the meeting. The majority of the annual results. The management information system (MIS) is members of the Board of Directors must be present to ensure structured as follows: a quorum. Minutes are taken at each meeting. Individual items – members of the Board of Directors receive detailed sales sta- on the agenda are handled exclusively within the Board of Direc- tistics on a monthly basis. tors, i.e. excluding all participants who are not members of the – on a quarterly basis, consolidated financial statements are Board of Directors. Separate minutes are taken for these items. prepared and the Board of Directors is provided with detailed documents showing the performance and financial situation of the company. Corporate Governance 33

– The members of the Controlling Committee receive the Group 5. Compensation, financial statements as well as the accounts of all subsidiaries participations and loans on a quarterly basis. – The Board of Directors is regularly informed (at least twice Content and definition process for each year) by Group Management about the development of compensation and share ownership programs relevant risks. The Board of Directors’ Committee for Personnel Matters is responsible for drawing up the compensation programs. Once All members of the Board of Directors may request to see any a year, the Committee defines the basic level of compensation information relevant to the company. for the Chairman of the Board of Directors and Group Manage- ment as well as the variable compensation of the members of Group risk analyses are conducted on a regular basis by the Con- Group Management, which is dependent on business perform- trolling Committee of the Board of Directors. The main risks are ance. It makes recommendations regarding the definition of the analyzed twice a year at Board of Directors level. compensation programmes for the members of the Board of Directors which are then submitted to the full Board of Direc- tors for decision. 4. Group Management The compensation paid to members of the Board of Directors Members of Group Management comprises a fixed component only, while that paid to members and their activities of Group Management comprises a fixed component, a variable The CEO is elected by the Board of Directors at the request of the component based on business performance and achievement Committee for Personnel Matters. of individual performance targets, and payments in kind (com- The other members of Group Management are elected by the pany car). The variable component makes up around one-third Committee for Personnel Matters. of the total compensation, and is based in equal parts on Group The members of Group Management also sit on the Boards of performance, business area performance and the achievement Directors of the Emmi Group’s subsidiaries. of individual performance targets. These individual performance targets are defined, for example, as the launch of a product in Change in Group Management a key market, the achievement of a specified market share in Erich Kienle, Head of Fresh Products International and Head of a certain market or the implementation of a project aimed at Marketing for the Emmi Group, left the company as at the end enhancing earnings in a particular product area. of January 2009. Robin Barraclough has been the new Head of Marketing for the No share or option plans exist for members of the Board of Direc- Emmi Group since 1 June 2009. tors or members of Group Management. Marc Heim took over as Head of Sales for the Emmi Group on 1 August 2009. Compensation to serving members of corporate bodies Other activities and interests Total compensation paid out to the ten non-executive members There are no other activities and interests. of the Board of Directors in 2009 amounted to CHF 819,975 (highest amount CHF 262,210). The individual earnings of the Board Management contracts of Directors and external experts on the Agricultural Council No management contracts exist. are given in the Financial Statements of Emmi AG on page 83 of the Financial Report. A fixed component of around 73 % and a variable component of around 27 % at a total compensation of CHF 4,867,864 was granted to the nine members of Group Management in the year under review. The individual earnings of the CEO are given in the Financial Statements of Emmi AG (page 83 of the Financial Report). 34 Corporate Governance

Compensation to former members 6. Shareholders’ rights of corporate bodies of codetermination No fees, salaries, credits, bonuses or non-cash benefits were paid to former members of corporate bodies in the year under review. Restrictions on voting rights and proxies The company’s Articles of Association contain no restrictions Share allocations in the year under review on voting rights and are in line with the law in respect of voting No shares were allocated to members of the Board of Directors proxies. The Articles of Association can be downloaded from the or members of Group Management and affiliated persons in the Group website at http://group.emmi.ch/deutsch/ueber-emmi/ year under review. governance/statuten/

Ownership of shares by governing bodies Statutory quorum As at 31 December 2009, the non-executive members of the Unless the law or the Articles of Association stipulate otherwise, Board of Directors and affiliated persons living in the same house- the General Meeting passes its resolutions and performs its elec- hold held a total of 32,434 shares in the company (detailed in- tions by an absolute majority of the voting rights represented, formation on page 84). not taking into account blank and invalid votes.

As at 31 December 2009, the members of Group Management Convening of the General Meeting and affiliated persons living in the same household held a total The Ordinary Shareholders’ Meeting takes place annually, at the of 297 shares in the company (detailed information on page 84). latest six months after the end of the financial year. It is convened by the Board of Directors. The procedure for convening Options Extraordinary General Meetings is governed by the applicable No option plan exists. legal provisions.

Additional fees and remuneration Agenda No additional fees or remuneration were paid out. Shareholders who represent shares with a par value of CHF 1 million can request that an item be placed on the agenda. Requests Loans extended to officers and directors for an item to be placed on the agenda must be submitted to the of the company Board of Directors in writing at least 45 days before the General As at 31 December 2009, the Emmi Group had not granted loans Meeting, citing the motions concerned. to nor acted as guarantors for any members of the Board of Di- rectors or to/for any members of Group Management or to/for Entries in the share register any persons affiliated to the same. The share register is usually closed ten days prior to the General Meeting. The Board of Directors may approve exceptional subse- Employee stock ownership and management quent entries on request. The effective closing date is published incentive programmes in good time in the financial calendar on the Emmi website at The Emmi Group currently has no stock ownership programs for http://group.emmi.ch/english/investor-relations/dates/. employees or management. At present there are no plans to in- troduce such programs. Corporate Governance 35

7. Change of control Auditor supervision and control mechanisms in respect of the auditors Obligatory offer The Board of Directors’ Controlling Committee assesses the per- The Articles of Association of Emmi AG do not include any obliga- formance, invoicing and independence of the external auditors tion to make a public purchase offer pursuant to Art. 32 para. 1 and provides the Board of Directors with corresponding recom- of the Federal Stock Exchange and Securities trading Act (SESTA) mendations. The auditors provide Group Management and the (opt-out clause). Committee with regular reports that set out the results of their work and recommendations. The Committee annually reviews Change-of-control clauses the scope of the external audit, the audit plans and the relevant No contractual agreements exist either for members of the Board procedures, and discusses the audit reports with the external of Directors or for members of Group Management in the event auditors. The external auditors attended four meetings of the of a change in the controlling majority stake. Controlling Committee in 2009.

8. Auditors 9. Information policy

Duration of mandate The company provides current and potential investors and the Auditors PricewaterhouseCoopers, Werftestrasse 3, P.O. Box, public with extensive information about the company, its strat- 6002 Lucerne, have acted as the statutory auditors and Group egy and business development. The company also publishes all auditors for Emmi AG since its incorporation on 1 January 1993. price-relevant facts on its website in accordance with the re- At the General Meeting on 20 May 2009, PricewaterhouseCoop- quirements of the guidelines on ad-hoc public disclosure. The ers, Lucerne, were reappointed for a further period of one year. company’s website also offers an electronic information tool that enables shareholders and other interested parties to be added Auditor in charge to an electronic distribution list (http://group.emmi.ch/english/ Matthias von Moos has been the auditor in charge since the Gen- investor-relations/news-service/). The aim is to provide rapid, eral Meeting convened in 2009. He replaced the previous chief real-time and transparent information about important company auditor in accordance with Art. 730a Swiss Code of Obligations developments. The Emmi Group publishes an income statement after a seven-year term of office. and balance sheet every six months. Shareholders are given information on the Group’s business performance at the General Audit fees Meeting, via the half-year report and, if necessary, through addi- The auditors charged total fees of CHF 927,567 for the 2009 re- tional channels. All registered shareholders receive an invitation porting year for the performance of their mandate as statutory to the General Meeting by mail. auditors (including audit of the Consolidated Financial State- ments).

Additional fees During the year under review, PricewaterhouseCoopers AG charged a total of CHF 462,335 for additional services beyond the scope of their statutory mandate in 2009. This fee includes CHF 296,000 for tax advice, CHF 29,114 for legal advice and CHF 137,221 for advice related to transactions. 36 Corporate Governance

Members of the Board of Directors

The Board of Directors is composed solely of non-executive members. The Joseph Deiss Board of Directors consisted of nine members as at 31 December 2009. 1946, Swiss national, elected until 2012 Member of the Board of Directors since 2007, Secretary to the Board of Directors: Member of the Market Committee and the Agricultural Council Ingrid Schmid-Slembrouck, since 1999 Following his studies in economics and sociology, Joseph Deiss obtained the title of Dr. rer. pol. in 1973 and proceeded to lecture in macroeconomics at the University of Fribourg. In 1984 he was appointed Professor of Konrad Graber Macroeconomics and Economic Policy at Fribourg. Now a former Federal Chairman of the Board of Directors Councillor, Joseph Deiss began his political career in 1981 in the can- 1958, Swiss national, elected until 2012 tonal council of Fribourg, of which he was Chairman in 1991. From 1982 Member of the Board of Directors since 2006, to 1996 he was the Mayor of Barberêche (FR) and from 1991 to 1999 a Chairman of the Controlling Committee, Chairman of the Committee Member of the National Council. From 1993 to 1996 he was Switzerland’s for Personnel Matters and of the Agricultural Council and member of price regulator, and in 1999 he was elected to the Federal Council as a the Market Committee representative of the CVP (Swiss Christian Democratic People’s party). After graduating in business administration in 1983, he worked in the From 1999 to 2002 he was head of the Federal Department of Foreign auditing department of KPMG until 1999, latterly in the capacity of di- Affairs, and in 2003 he moved to the Department of Economic Affairs. rector and partner. He completed part-time studies, qualifying as certi- Since his retirement from the Federal Council in 2006, Prof. Dr. Deiss has fied public accountant in 1988. Since 1999 he has been a partner at BDO been teaching a Masters course in Economic Policy at the University of AG in Lucerne. From 2005 until April 2009 he was also a member of the Fribourg. He is also a business consultant and a Member of the Board of company’s Switzerland-wide executive board, before being appointed Directors of various companies (Zurich Insurance Company South Africa; to the Board of BDO AG in April 2009. Konrad Graber is Chairman of the Zurich Insurance Company Ireland; OpenTV, San Francisco; RG Group, Board of Directors of the Lucerne Transport Corporation (vbl Verkehrsbe- La Chaux-de-Fonds; Clinique Générale, Fribourg). triebe Luzern AG) and a Member of the Board of Directors of the health insurer CSS Versicherungen. From 1987 to 2007 he was a Councillor for Hans Herzog the canton of Lucerne, and from 1997 to 2001 he served as Chairman of 1951, Swiss national, elected until 2012 the CVP in the canton of Lucerne. In 2007 Konrad Graber was elected to Member of the Board of Directors since 2002, the Council of States for the canton of Lucerne. Member of the Controlling Committee Since qualifying as a master farmer in 1977, he has worked as an in- Moritz Erni dependent farmer and a training instructor on his own dairy farm in 1952, Swiss national, elected until 2012 Beromünster. From 1992 to 2004 he was Chairman of the Central Swit- Vice-Chairman of the Board of Directors since 2006, zerland Association of Producers of Silage-Free Milk. Hans Herzog is a Member of the Board of Directors since 2003, Member of the Board of the Central Switzerland Milk Producers coop- Member of the Committee for Personnel Matters and erative (ZMP). the Agricultural Council Since qualifying as a master farmer in 1978, he has worked as an inde- Alexander Jost pendent farmer and a training instructor on his dairy farm in Ruswil. 1943, Swiss national, elected until 2012 From 1980 to 2003 he was a technical expert for apprentice and master Member of the Board of Directors since 2005, examinations. He obtained a diploma in agriculture from the Central Member of the Controlling Committee and Chairman of Switzerland Agricultural School in 1995. Moritz Erni has been Chairman of the Market Committee the Board of Central Switzerland Milk Producers cooperative (ZMP) since After studying law at the University of Zurich, he graduated with a doc- 2003 and Chairman of the Board of Directors of ZMP Invest AG since 2006. torate (Dr. iur.) in 1974. From 1968 to 1970 he served as Resident Manager He is also a Member of the Board of Swiss Milk Producers (SMP) in Berne, with Kuoni in East Africa. In 1973 he moved to Nestlé, where he worked a Member of the Agricultural Chamber of the Swiss Farmers’ Union, and until 2004. One of the positions he occupied there was country manager Chairman of the dairy cooperative for Hellbühl and the surrounding area. for the Asia, Africa and Europe regions. From 1999 to 2004 he was Manag- ing Director of Nestlé Suisse SA. He is Chairman of the Swiss Association Stephan Baer of Brand Articles, Promarca in Berne and Chairman of his family-owned 1952, Swiss national, elected until 2012 companies Casa del Mas AG, Switzerland, and Casamas SL, Spain. Member of the Board of Directors since 1999, Member of the Committee for Personnel Matters and the Market Committee After graduating with a degree in economics from the University of Zurich in 1979, he worked as a business analyst at OPM AG. In 1982 he moved to Baer AG in Küssnacht, where he was appointed Chief Executive Officer one year later and became Chairman of the Board of Directors in 1997. Since Baer AG was acquired by the Lactalis Group in 2008, Stephan Baer has worked as an independent management consultant. Corporate Governance 37

From left: Stephan Baer, Hans Herzog, Alexander Jost, Konrad Graber (Chairman), Hanspeter Müller, Moritz Erni, Josef Schmidli, Joseph Deiss and Thomas Oehen-Bühlmann

Hanspeter Müller neighbouring community of Hohenrain, among other activities, and has 1943, Swiss national, elected until 2012 been Mayor of Hohenrain since September 2008. Thomas Oehen has Member of the Board of Directors since 1999, been a Member of the Board of the Central Switzerland Milk Producers Member of the Controlling Committee cooperative (ZMP) since April 2009. After completing a commercial apprenticeship with the former Swiss Volksbank and gaining a Swiss federal accountancy diploma, he joined Josef Schmidli the MIBA Milchverband der Nordwestschweiz in 1970 as Head of Fi- 1957, Swiss national, elected until 2012 nance. From 1994 to 1998 he was a Member of the Board of Directors Member of the Board of Directors since 2003, of Toni Holding AG, Berne. From 1994 to 2003 he served as Managing Member of the Market Committee Director of MIBA. After receiving a commercial diploma, he qualified as a master cheesemaker in 1982. Since qualifying, he has worked as a cheesemaker in Thomas Oehen-Bühlmann Mühlau. Josef Schmidli has been the proprietor and CEO of Käserei 1958, Swiss national, elected until 2012 Schmidli GmbH since its foundation in 1998. Since 2002 he has been Member of the Board of Directors since 20 May 2009 and the Chairman of the Central Switzerland Milk Purchasers Association Member of the Agricultural Council in Lucerne and its pension fund. Josef Schmidli is also Vice-Chairman of Thomas Oehen is a qualified master farmer and works as an independ- Fromarte and President of the municipal power utility in Mühlau (can- ent farmer on his own dairy and arable farm in Lieli. For many years he ton of Aargau). acted as technical expert for apprentice and master examinations and was also Chairman of the Supervisory Committee. Thomas Oehen was head of the local branch of the CVP party in Lieli for a number of years and was a district councillor from 1996 until 2008, including ten years as head of the district council. He headed up the merger project with the 38 Corporate Governance

Group Management

From left: Robin Barraclough, Markus Willimann, Marc Heim, Natalie Rüedi, Reto Conrad, Urs Riedener, Othmar Dubach, Robert Muri, Max Peter, Matthias Kunz and Alfons Knüsel

Urs Riedener Reto Conrad 1965, Swiss national 1966, Swiss national CEO CFO After completing his marketing studies at St. Gallen University in 1992, After graduating with a degree in economics from the University of St. Urs Riedener was an Assistant Brand Manager at Jacobs Suchard in Gallen, Reto Conrad worked from 1990 to 1992 as a controller for UBS in Neuchâtel and latterly Group Brand Manager at Kraft Jacobs Suchard in Basel. From 1992 to 2001 he held various functions in the auditing de- Zurich. From 1995 to 2000 he held various management positions at Lindt partment of PricewaterhouseCoopers in Basel and San Francisco, quali- & Sprüngli, both in Switzerland and abroad, the most recent of which fying as a certified auditor in 1997. In 2001 he was appointed CFO of the was National Sales Manager and Member of the Board of Management, Bachem Group, which is headquartered in Bubendorf (canton of Basel- Switzerland. Until he joined the Emmi Group in March 2008, he was Head land). He joined the Emmi Group in 2005 as Head of Group Controlling, of Marketing and Member of the Executive Board of the Migros Coopera- and in 2006 was appointed CFO and a member of Group Management. tive in Zurich. In 2007 he completed the Executive Program at Stanford Since 2007 Reto Conrad has been a member of the technical commission Graduate School of Business, California. of Swiss GAAP ARR (Swiss Accounting and Reporting Recommendations).

Robin Barraclough Max Peter 1967, UK national 1954, Swiss national Head of Marketing Head of Retail and Supply Chain Management Robin Barraclough studied economics at the University of Southampton. After graduating from engineering school with a degree in engineering From 1991 to 2007, he performed various managerial marketing func- in 1977, Max Peter worked as a consultant for the company Zoller and tions at national and international level at Mars Incorporated. Robin subsequently from 1980 to 1987 as a project manager for Nestlé in Vevey. Barraclough was responsible, among other things, for the development He spent from 1987 to 1988 in a consulting and project management of the chocolate portfolio in both the CIS and in Switzerland. He later took capacity at Suter+Suter AG in Basel. In 1988 he moved to Coop Schweiz, over as manager of the dog care portfolio for the UK market. From 2000 initially as Head of the main department of Technical Planning (Logistics & onwards, as a Member of the Board of Management at Mars Incorporated Engineering) and later as Member of Management for Merchandising/CRS. (Switzerland), Robin Barraclough was responsible for the Animal Feed In 1999 he was appointed CIO and Member of Group Management for Division. From 2005 to 2007, he was the senior Member of the European Supply Chain Management of Bon Appétit Group AG in Volketswil. He Marketing Leadership Team at the European Masterfoods headquarters joined the Emmi Group in 2002 as Head of Corporate Development and in Bremen (Germany). Between 2008 and his joining the Emmi Group in became a member of Group Management at the same time. He has been June 2009, Robin Barraclough headed up Kraft Foods’ coffee business in responsible for Retail and Supply Chain Management since 2005. Max German-speaking Europe. Peter is a Member of the Board of Directors of GS 1 Switzerland, Berne, Vice-President of Schweizer Sporthilfe, Berne, and a member of the executive council of Swiss Olympic, Berne. Corporate Governance 39

Othmar Dubach Marc Heim 1958, Swiss national 1967, Swiss national Head of the Cheese Division Switzerland Head of Sales After graduating in 1981 with a degree in food science (specializing in Marc Heim studied economics, majoring in marketing, at the University dairy science and technology), Othmar Dubach worked as assistant to of St. Gallen. Between 1992 and 1999, he held various positions with the Prof. Bachmann at the Institute of Dairy Technology at the Swiss Fed- former Effems AG (now Mars Schweiz AG) in Zug, latterly as Senior Prod- eral Institute of Technology Zurich. In 1983 he moved to the Central uct Manager for the Snackfood Division, specifically for the Balisto brand. Switzerland Milk Association in Lucerne as Head of Dairy Controlling and From 1999 until 2004, he was Head of Sales and Marketing and a Mem- Advisory Services, where he also took on additional tasks in the areas of ber of the Board of Management at Swiss biscuit specialist Kambly SA in consulting for cooperatives and cheese factory structures. From 1989 Trubschachen. In addition to the Swiss market, he was also responsible to 1991 he completed a part-time MBA at the University of St. Gallen. for the entire export business and marketing. From 2004 until joining the He subsequently headed up the Emmi Group’s marketing activities for Emmi Group, Marc Heim was Managing Director of Halter Bonbons AG. a year before assuming responsibility for the Cheese Division Switzerland in 1993 as a member of Group Management. Markus Willimann 1956, Swiss national Matthias Kunz Head of Industrial Business 1960, Swiss national After graduating with a degree in food science from the Swiss Federal Head of the International Division Institute of Technology, Markus Willimann worked from 1982 to 1987 as After obtaining a degree in agro-economics from the Swiss Federal Insti- a technical assistant at the Swiss Breweries Testing Station. He obtained tute of Technology, Matthias Kunz was head of the department responsi- his doctorate from the Swiss Federal Institute of Technology in 1987. From ble for exports and economic affairs at what was then known as Central 1987 to 1990 he worked as a research and development project manager Switzerland Milk Producers (now known as Swiss Milk Producers, or SMP) at Jacobs-Suchard SA. From 1990 to 1998 he served as business unit head from 1988 to 1992. In 1992 he was the proprietor and Managing Director and Member of the Executive Board of UFAG AG in Sursee. He joined the of Tucano, Inc. Carmel, California. He completed an MBA in International Emmi Group in 1998 as a member of Group Management and Head of Marketing in 1994/95, then joined the Western Orient Trading Company, the Dairy Products Division. Markus Willimann assumed responsibility for which exports US agricultural products. After returning to Switzerland in Industrial Business, Development Coordination and Agricultural Policy 1997 he took over as Managing Director of the newly founded Toni Inter- within Group Management in 2004. Markus Willimann is Chairman of national AG. In 1999, following the merger between Toni and Säntis to the Swiss Dairy Industry Association and Member of the Board of Direc- form Swiss Dairy Food, he was appointed Head of the Cheese Division and tors of the Swiss Milk Sector Organization (BO Milch), the Swiss Butter a Member of Group Management. In 2002 he became Managing Direc- Sector Organization (BOB) and the Federation of Swiss Food Industries. tor of Top Cheese Switzerland AG (TCS) and took over as Head of Emmi’s International Cheese Division following the integration of TCS into the Natalie Rüedi* Emmi Group. In this capacity, and as Head of the new International Market 1971, Swiss national Division since 1 February 2009, he is a member of Group Management. Head of HR Following her training to be a primary school teacher at the cantonal Robert Muri teacher training college in Lucerne, she went on to teach at parish schools 1950, Swiss national in Kriens from 1992 to 2000. In 1996 she became head mistress. From Head of the Dairy Products Division, Deputy CEO 1998 to 2000 she completed a part-time business management course After graduating as an engineer in dairy farming in 1974 from the Swiss through the AKAD. In 2000 she joined the Emmi Group as an HR specialist. College of Agriculture, Robert Muri worked in sales for Falag International In 2004 she took over the enhancement and leadership of staff develop- AG in Langenthal. He later joined Roco Conserven AG in Rorschach as Head ment, becoming Head of HR at the Emmi Group on 1 September 2009. of Quality Control before becoming Head of Development at International Flavors & Fragrances (I.F.F.) in Reinach (canton of Aargau) from 1976 to Alfons Knüsel* 1980. In 1980 he moved to the Central Switzerland Milk Association in 1961, Swiss national Lucerne as Head of Production, going on to become Works Manager. From Head of Procurement and Logistics 1989 to 1991 he completed a part-time MBA program at the University of Having completed his training in agriculture at the agricultural school St. Gallen. He then took over responsibility for marketing and sales in the in Hohenrain between 1978 and 1982, Alfons Knüsel joined Emmi as Fresh Products Division of the Emmi Group. He was appointed Head of a freight forwarder in 1984. He completed an evening course at business the Fresh Products Division in 1996, becoming a member of Group Man- school in parallel. Between 1985 and 1997 he held various management agement at the same time. The Fresh Products and Dairy Products Divi- positions in Logistics. In 1992 he also completed his higher specialist train- sions were merged in 2004, with Robert Muri taking over as Head of the ing at TEKO. He has been Head of Procurement and Logistics since 1998. new Dairy Products Division. Robert Muri has also been Managing Direc- Alfons Knüsel will leave the Emmi Gruppe on 31 March 2010. tor of Mittelland Molkerei AG in Suhr since 2006. Since 2007 he has been Deputy CEO.

*Member of the extended Group Management

Time to enjoy 41

Time to enjoy

Emmi creates culinary experiences. With premium quality products, we inspire our clients and enhance their wellbeing. Taking time out to savour a delicious treat is precious: we are absorbed and leave our everyday concerns behind for a while.

Over the next few pages we take time out to explore this theme and have captured some glimpses of people relaxing, losing themselves to the moment and savouring great tastes. We also focus on the important elements in the value chain which com- bine to make up the unique added value Emmi brings. It is these elements that ensure the quality of our products and which make them and the pleasure they create so special. Because the quality is in the detail.

Time to enjoy 43

Taste sensations for connoisseurs

Exquisite raw materials, skill in handling them, a long-standing tradition and — quite simply — time: these are the secrets behind the art of refining. Kaltbach (LU) combines all these elements, to produce unique, cave-aged specialty cheeses. Only the best “young” cheeses, produced in accordance with strict standards, make their way into the sandstone cave, where they mature to perfection with humidity of 94 % and a temperature of between 10 oC and 12.5 oC.

The master cheese-makers cherish and nurture each individual cheese, bringing not only their skill and experience to bear but their secret, traditional recipes as well. This is what turns a good cheese into a great cheese. The quality of the refining process is unmistakeable and can be found in the fine, tangy aroma and the dark, appealing rind. These are the signs of the best possible quality and what makes the taste experience so unique.

Experience and craft: Andreas Graber, master cheesemaker in Kaltbach, keeps an eye on Kaltbach’s cheese specialities until they are perfectly ripe.

Time to enjoy 45

Great taste sensations can be shared

In the five large logistics centres in Emmen, Dierikon, Suhr, Kirch- berg and Ostermundigen, around 500 employees ensure that our products reach the big retailers’ distribution centres. Orders are processed by three to four shifts working round the clock. Depending on clients’ specific requirements, products are pre- packed and made ready. In logistics, too, it’s the details that count.

Client requirements have changed over recent years, as a growing number of companies have outsourced the warehousing process. Which is why Emmi has to ensure the permanent availability of its products at points of sale.

If products are to be at the right place at the right time, the entire logistics chain has to be harmonized. This is done using Group- wide goods management and picking systems, an operating fleet comprising around 60 vehicles and — in particular — the considerable dedication of the logistics teams.

Fast and punctual: retail, industry, hospitality – Emmi keeps all its customers supplied round-the-clock with dairy products.

Time to enjoy 47

Every moment is unique

It all starts with an idea. We are inspired by the major trends, such as “indulgence”, “health and wellbeing” and “convenience”. We ask our customers for their opinions, record their needs and then put our networked development and marketing teams to work. This is how we ensure product excellence.

Taking a product to market takes time. First, the development teams experiment with small volumes. Taste, consistency, how a product looks — everything has to be just right. Not every recipe we come up with is suitable for industrial production as well. That is why we trial new products in a pilot installation, which replicates the machines in the production halls on a smaller scale.

Innovation is just as important when it comes to a product’s packaging. We inspire our customers with appealing, practical packaging, which also adds value. And this is what allows us to produce a varied range of delicacies and the right taste experience for every moment.

A varied range for your enjoyment: Emmi’s development teams are always developing ideas and concepts for enjoyable fresh products and cheese specialities, in close cooperation with the marketing managers.

Time to enjoy 49

For us, only the best is good enough

For us, quality across the entire food production chain is not something we leave to chance. Stringent selection procedures and high quality standards are how we guarantee the safety of our products. Our top priority is the wellbeing of our clients.

We work exclusively with Swiss milk. Our suppliers are fully certified in line with the strict requirements of the “Suisse Garantie” label, which obliges them to use animal-friendly practices and prohibits the use of genetically modified animal feed.

We use regular internal and external audits to ensure compliance with international quality and hygiene standards. Controls such as these allow us to improve on a continual basis. Processes at all facilities are subject to a risk audit, risks are assessed in respect of food safety, and measures for improvements are drawn up. The results are also used in internal training programmes, and this ensures that not only production plants but processes and employees, too, are always fully up to date.

Enjoyment guaranteed: Martin Bühler tests fresh mozzarella at Dagmer sellen. This happens every morning to guarantee consistent quality.

Time to enjoy 51

Swiss – delicious – real

While premium taste knows no bounds, its roots are in Switzer- land. Our aim is to win over customers with high-quality, balanced milk specialities. The impeccable recipes, produced by skilled arti- sans and created using Swiss milk, form the basis of Emmi products. Products that inspire and provide the ultimate treat, such as Emmi Caffè Latte. And in order to keep creating new great taste sensations, we take a targeted approach to the development of our product ranges.

If new products are to survive in fiercely competitive markets, they have to convince and appeal. This is why we evaluate consumer needs so carefully, using such means as market surveys and monitoring of closely-related segments. These allow us to identify trends and react swiftly to gear our activities to them.

Before new products reach the shops, we always subject their marketability to thorough testing. Because, for us, a product is only “good” if it tastes good to customers.

Fresh ideas: the Emmi marketing team mulling over new concepts to provide customers with moments of real enjoyment. From the left: Isabelle Erne (junior brand manager), Corinne Krüsi (advertising support), Martin Urfer (international marketing manager) and Samuel Fueter (Head of Prod- uct Management).

Time to enjoy 53

Great teamwork

The premium quality of Swiss milk comes at a price. This obliges us to be at the cutting edge when it comes to productivity. We leverage our resources to capture synergies, network areas and exploit potential for improvements. Only in this way can we stay competitive at the international level.

Investments in productivity enhancements are indispensable. Beyond this, we aim to improve by systematically transferring the know-how available in our various areas. This allows us to benefit from each other across divisions and across national borders.

We consciously call our processes into question. And we involve our employees in a very targeted manner because they are the people who, through their daily activities, know their machines and workflows best. This gives us valuable insights which enable us to reduce operating costs, enhance quality and remain competitive over the long term.

Continual improvement: Employees and management are always striving to improve the company. Michel Lombard, production technologist is check- ing the small bottles coming out of the bottling machine in Emmen. 54 FINANCIAL REPORT FINANCIAL REPORT 55

CONTENTS

Comments

56 Financial Situation

Consolidated Financial Statements of Emmi Group

58 Consolidated Income Statement 59 Consolidated Balance Sheet 60 Consolidated Cash Flow Statement 61 Consolidated Statement of Shareholders’ Equity 62 Notes to the Consolidated Financial Statements 2009 – Principles of Consolidation – Principles of Valuation – Notes to the Consolidated Financial Statements – Composition of the Subsidiaries – Subsequent events 77 Auditors’ Report on the Consolidated Financial Statements

Financial Statements of Emmi AG Lucerne (Holding Company)

78 Income Statement 79 Balance Sheet 80 Statement of Shareholders’ Equity 81 Notes to Financial Statements 2009 85 Proposed Appropriation of Available Earnings 86 Auditors’ Report

87 Share Information 56 COMMENTS

FINANCIAL SITUATION

taxes, depreciation and amortization) further improved from Income statement 6.8 % to 8.0 %. Whilst the larger investment projects led to a slight increase in depreciation and amortization, write-backs of nega- Operating section tive goodwill continued to fall, from CHF 6.6 million in 2008 to Sales for 2009 exceeded expectations with a year-on-year de- CHF 4.2 million. This is largely attributable to the now virtually cline of 1.9 %. Still, there was a slight improvement in gross profit. complete integration of Mittelland Molkerei AG. A discordant Contributory factors included the extension of the value chain note was struck by the high level of impairments, which were through increased own-production of intermediates (e.g. fruit required for certain items of property and equipment. bases for yoghurts) and the shift in the range towards products with more added value. At the same time, further efforts were At CHF 109.0 million, earnings before interest and taxes (EBIT) undertaken with respect to operating expenses. Personnel ex- reached a new record value. Along with the significantly im- penses, for example, decreased by CHF 1.9 million adjusted for proved financial result, the increase in EBIT impacted directly acquisitions, with all business units achieving substantial produc- on net profit. tivity gains compared with the previous year. Marketing expenses fell overall, although the advertising component increased mark- Financial result edly, signalling Emmi’s move away from trade-oriented and to- The financial result improved significantly compared with the wards consumer-oriented expenditure. Other major energy cost previous year. reductions resulted from a marginal decline in consumption and considerable falls in crude oil and natural gas prices. The propor- All contributory factors had a positive impact on the interest tion of in-house services was ultimately extended in Logistics, and result. Due to the falling milk price and strict inventory and ac- this, combined with lower fuel prices, produced further savings. counts receivable management, net working capital was sig- Overall, this meant the EBITDA margin (earnings before interest, nificantly reduced. This meant the use of credit lines was lower compared with the previous year. In addition, further local financing arrangements were replaced by cheaper Group-wide credits in 2009. Very low interest rates also had a positive im- FOREIGN CURRENCY EXPOSURE pact onCASH the result.FLOW EMMI GROUP

Althoughin 000s the Swiss franc became even stronger against the major foreign 300currencies in 2009, exchange rates also made a positive contribution250 to the financial result. The sharp fall in the exchange

rates of200 the two main currencies, USD and EUR, impacted in particular on sales, which, translated into CHF, were ultimately lower 150 than budgeted. However, the valuation of balance sheet items in 100 foreign currencies and the completed currency transactions did not give 50rise to any losses overall. 0

Although-50 the foreign currency markets were still comparatively 55.7% EUR 5.6% GBP volatile in 2009, Emmi was able to achieve a significantly better 32.0% USD 0.8 % SEK -100 5.9% CAD impact on the financial result compared with the previous year -150 by making appropriate hedging arrangements. Proportion of the net position of a currency as a % of -200 the total net foreign currency positions 2005 2006 2007 2008 2009

Cash flow from operating activities Cash flow from investing activities Free cash flow Cash flow from financing activities COMMENTS 57

Taxes Further tax cuts were agreed in Switzerland in 2009. This had FOREIGN CURRENCY EXPOSURE CASH FLOW EMMI GROUP an impact on the provisions for deferred taxes at several Swiss subsidiaries. Owing to a generally good annual result, accruals in 000s for current taxes increased significantly compared with 2008. 300

However, overall the Group-wide tax rate remains very low at 250

13.8 % (prior year 11.5 %). The strategy of internationalization 200 will increase the tax rate in the medium term. 150

100

50 Cash flow and financing 0 -50 55.7% EUR 5.6% GBP Operating cash flow32.0% increased USD by 127.5 %0.8 t %o SEKCHF 259.2 million, -100 5.9% CAD a significant increase on the previous year. The improved net prof- -150 Proportion of the net position of a currency as a % of it made a decisive contribution in this respect, as in the previous -200 the total net foreign currency positions year. At the same time, net working capital was reduced. System- 2005 2006 2007 2008 2009 atic inventory management and lower prices for raw materials Cash flow from operating activities led to a substantial reduction in inventories versus 2008. Fur- Cash flow from investing activities thermore, the entire Group succeeded in reducing the accounts Free cash flow outstanding, devoting special efforts to incoming payments. Cash flow from financing activities However, the fall in sales due to raw materials prices ultimately had a positive impact on the accounts receivable situation too.

In 2009, the entire Emmi Group made further comprehensive Overall, notwithstanding the increased investment volume, net investments in fixed assets, a substantial proportion of which debt was reduced by 37.0 % to CHF 181.1 million. Consequently, was ultimately accounted for by the project to consolidate proc- given the cash and cash equivalents available at the end of 2009 essed cheese production in Langnau. The investment project and the unused credit lines, Emmi is ideally positioned for making with a total volume of around CHF 35 million was successfully further investments. At 55.3 % (prior year 49.6 %), the equity ratio completed by the end of the year. A further major project has was ultimately strengthened by the company’s good result. The progressed according to schedule in the form of the expansion of financing of the Emmi Group is extremely solid and creates the the cheese-ageing cave in Kaltbach. CHF 15 million will have been basis for the company’s future growth. invested at this location by the end of spring 2010 with a view to gradually increasing the volume of cheese ageing in Kaltbach from summer 2010. Other important investment projects were launched in 2009, or progressed further. These include, for example, the procurement of a new spraying tower in Dagmersellen, which will go into production in summer 2010 (investment volume of CHF 13.3 million) and the project to prepare fruit bases in Emmen (investment volume of CHF 14.5 million), which will make a further contribution to increasing vertical integration. Due to its acquisition of Roth Käse USA Ltd., a 60 % stake in Geneva-based Nutrifrais SA and the increase in its stake in Spanish firm Kaiku Corporación Alimentaria S.L. to 43 %, the Emmi Group invested more money in acquisitions in 2009 than in the previous year. 58 CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP

CONSOLIDATED INCOME STATEMENT

CHF 000s

Notes 2009 % 2008 % Total sales of products 1 2,586,532 2,637,914 Sales of services 1 32,720 32,855 Net sales 2,619,252 100.0 2,670,769 100.0

Changes to inventories of semi-finished and finished products 26,354 1.0 -11,788 -0.4 Cost of sales and outside services 1,740,864 66.4 1,864,237 69.8 Gross operating profit 852,034 32.6 818,320 30.6

Company-produced additions to plant and equipment 771 1,038 Gains on the disposal of fixed assets 704 0.0 2,270 0.1

Personnel expenses 323,970 12.4 314,418 11.8 Other operating expenses 2 321,238 12.2 322,772 12.1 Operating expenses 645,208 24.6 637,190 23.9

Earnings before interest, taxes, depreciation and amortization (EBITDA) 208,301 8.0 184,438 6.8

Depreciation of tangible assets 3 90,007 3.4 77,677 2.9 Amortization of intangible assets 3 13,495 0.5 11,232 0.4 Write-back of negative goodwill 4,204 0.1 6,566 0.3 Earnings before interest and taxes (EBIT) 109,003 4.2 102,095 3.8

Gains from associated companies 1,323 2,180 Financial result 4 -8,714 -25,954 Income before taxes 101,612 3.9 78,321 2.9

Extraordinary income/expenses 5 -307 -39 Earnings before taxes (EBT) 101,305 3.9 78,282 2.9

Taxes 6 14,006 8,989 Net profit before minority interests 87,299 3.3 69,293 2.6

Minority interests 11,975 10,568 Net profit 75,324 2.9 58,725 2.2

Net profit per share in CHF 7 14.08 10.98 Contributions for export and processing subsidies from private and state organizations are now fully shown as reductions in product costs; see the comments under Principles of consolidation (page 63). The previous year’s figures have been restated accordingly. CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP 59

CONSOLIDATED BALANCE SHEET

CHF 000s

Assets Notes 31.12.2009 % 31.12.2008 % Cash and cash equivalents 122,013 129,463 Securities 4,107 4,715 Trade accounts receivable 8 345,489 360,232 Other receivables 9 23,727 26,215 Inventories 10 248,936 283,500 Accrued income and prepaid expenses 8,221 13,002 Current assets 752,493 45.5 817,127 48.5

Associated companies 52,192 32,686 Loans and other receivables 11 11,922 16,436 Securities 2,910 3,213 Employer contribution reserves 19 1,589 1,589 Deferred tax assets 2,533 1,376 Total financial assets 71,146 55,300 Tangible assets 12 753,469 755,237 Intangible assets 13 77,582 55,467 Fixed assets 902,197 54.5 866,004 51.5 Total assets 1,654,690 100.0 1,683,131 100.0

Liabilities Bank overdrafts 25,908 4,381 Trade accounts payable 14 222,565 241,265 Leasing liabilities 320 1,329 Other current payables 27,086 17,207 Accrued expenses and deferred income 15 93,388 80,822 Provisions 17 7,343 6,578 Current liabilities 376,610 22.8 351,582 20.9

Bank overdrafts 16 149,360 270,557 Leasing liabilities 16 2,564 15,587 Loans 16 5,562 4,574 Accrued expenses and deferred income 2,799 – Bond 18 125,000 125,000 Provisions 17 7,767 7,274 Provisions for deferred taxes 17 69,229 73,389 Long-term liabilities 362,281 21.9 496,381 29.5

Liabilities 738,891 44.7 847,963 50.4

Share capital 53,498 53,498 Capital reserves 180,771 180,771 Retained earnings 562,662 502,001 Shareholders’ equity excl. minority interests 796,931 48.1 736,270 43.7

Minority interests 118,868 7.2 98,898 5.9 Shareholders’ equity incl. minority interests 915,799 55.3 835,168 49.6 Total liabilities 1,654,690 100.0 1,683,131 100.0 60 CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP

CONSOLIDATED CASH FLOW STATEMENT

CHF 000s

2009 2008 Net profit before minority interests 87,299 69,293 Net interest expenses 4,873 12,726 Gains on the disposal of fixed assets -704 -2,270 Write-back of negative goodwill -4,204 -6,566 Other positions with no impact on liquidity 3,022 13,182 Depreciation, impairments and amortization 103,502 88,909 Gains from associated companies -1,323 -2,180 Change in provisions -2,507 1,465 Tax expense 18,379 12,349 Operating cash flow 208,337 186,908

Change in inventories 48,392 -21,470 Change in trade accounts receivable 20,706 -17,369 Change in other receivables and prepaid expenses 7,886 -1,694 Change in trade accounts payable -25,004 2,983 Change in other payables and deferred income 11,608 -9,880 Interest paid -4,834 -15,103 Taxes paid -7,894 -10,429 Cash flow from operating activities 259,197 113,946

Investment in tangible assets -72,833 -83,162 Divestment of tangible assets 2,184 3,463 Investment in securities -1,244 -47 Divestment of securities 114 1,586 Investment in intangible assets -4,706 -7,839 Divestment of intangible assets – 6 Acquisition of/capital increase in associated companies -22,062 -826 Acquisition of equity interests/businesses (less cash and cash equivalents acquired) -25,202 -26,525 Sale of associated companies – 10,592 Sale of equity interests/businesses 10,500 7,500 Repayment/grant of loans receivable 495 -2,145 Dividends received 550 381 Interest received 1,137 2,183 Cash flow from investing activities -111,067 -94,833

Change in current financial liabilities 19,036 -31,335 Change in long-term financial liabilities -143,898 45,403 Change in other long-term liabilities -13,447 14,299 Dividend payments to shareholders -13,910 -13,910 Dividend payments to minority interests -2,600 -1,920 Cash flow from financing activities -154,819 12,537

Impact of currency translation -761 -1,533 Net change in cash and cash equivalents -7,450 30,117

Cash and cash equivalents at start of period under review 129,463 99,346 Cash and cash equivalents at end of period under review 122,013 129,463 Transactions with no impact on liquidity In 2009, the Group acquired tangible assets in the amount of CHF 3 million via finance leases. These are recognized in tangible assets under Plant/equipment and shown accordingly in the statement of fixed assets (Page 69). CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP 61

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

CHF 000s

Capital Accumulated Total Total excl. Total incl. reserves Retained exchange profit minority Minority minority Share capital (premium) earnings differences reserves interests interests interests Shareholders’ equity as at 31 Dec. 2007 53,498 180,771 468,978 -2,718 466,260 700,529 83,192 783,721

Changes (acquisitions/disposals) ––––– – 7,277 7,277 Net profit – – 58,725 – 58,725 58,725 10,568 69,293 Exchange differences – – – -9,074 -9,074 -9,074 -219 -9,293 Dividends –– -13,910 – -13,910 -13,910 -1,920 -15,830 Shareholders’ equity as at 31 Dec. 2008 53,498 180,771 513,793 -11,792 502,001 736,270 98,898 835,168

Changes (acquisitions/disposals) ––––– – 10,530 10,530 Net profit – – 75,324 – 75,324 75,324 11,975 87,299 Exchange differences – – – -753 -753 -753 65 -688 Dividends –– -13,910 – -13,910 -13,910 -2,600 -16,510 Shareholders’ equity as at 31 Dec. 2009 53,498 180,771 575,207 -12,545 562,662 796,931 118,868 915,799 5,349,810 registered shares with a par value of CHF 10 were issued as at 31 December 2009 (as at 31 December 2008: 5,349,810). The amount of accumulated non-distributable reserves stands at CHF 51,661,000. In the year under review the company acquired and then almost immediately disposed of 1,000 of its own shares. Given the non-recurring nature of this transaction, it is not reflected in the Statement of Shareholders’ Equity. Further details can be found in section 6 of the Notes to the Financial Statements of Emmi AG.

Authorized and conditional capital (CHF 000s) 2009 2008 2007 2006 2005 Conditional capital – – – 1,213 3,518 62 CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2009

Principles of consolidation for using the equity method. Minority holdings of less than 20 % are carried in the balance sheet at acquisition cost less any adjust- Accounting principles ments for impairment required by generally accepted accounting The consolidated financial statements are based on the annual principles. The consolidated companies are listed in the Notes to accounts for the Group companies for the year ending 31 Decem- the Consolidated Financial Statements. ber 2009, prepared on a uniform basis. The Group prepares its accounts in compliance with the existing guidelines of the Swiss Consolidation method GAAP ARR (Swiss Accounting and Reporting Recommendations) Capital has been consolidated using the Anglo-Saxon purchase using the historical cost principle. method. Assets and liabilities as well as expenses and income of the fully consolidated companies are included in their entirety. The consolidated financial statements are therefore based on Minority holdings in consolidated shareholders’ equity and Group economic values and present a true and fair view of the com- profit are shown separately. pany’s assets, financial position and results of operations. The annual financial statements are prepared under the assumption Companies and businesses acquired during the course of the year of a going concern. are revalued on their acquisition date on the basis of uniform group principles and consolidated as from that date. Any good- Consolidated companies will or negative goodwill remaining after this revaluation (the The consolidated financial statements include the annual ac- difference between the purchase price and the total sharehold- counts of Emmi AG as well as the Group companies in which ers’ equity reported) is recognized under assets or liabilities and Emmi AG directly or indirectly holds more than 50 % of the vot- written off through profit and loss over its useful life of generally ing rights or has a controlling influence by contractual agreement five to 20 years. A provision in the amount of negative goodwill (control principle). Investments of 50 % where the Group does not is written back over a maximum of five years. Companies sold hold sole management control (joint ventures) and investments during the year are excluded from the consolidated financial of between 20 % and 49 % (associated companies) are accounted statements from the date of sale.

Changes to the group of consolidated companies The following companies were consolidated for the first time:

Capital in Capital share Consolidated companies Currency thousands 31.12.2009 31.12.2008 Roth Käse USA Ltd., Monroe, Wisconsin, USA Acquired on 7.1.2009 USD 3 100 % 3 % HOLDING der Schweizerischen Milchproduzenten Münchenbuchsee Partially acquired on 27.1.2009 CHF 5,000 64 % 60 % Lesa Lataria Engiadinaisa SA, Bever Partially acquired on 6.5.2009 CHF 1,500 80 % 60 % Molkerei Biedermann GmbH, Konstanz, Germany Established on 26.5.2009 EUR 25 100 % – Nutrifrais SA, Plan-les-Ouates Acquired on 8.7.2009 CHF 4,000 60 % – SAS Emmi Ambrosi France E.A.F., Nice, France Established on 4.12.2009 EUR 100 51 % – Emmi Fondue AG, Langnau i.E. 1) Partially sold on 20.12.2009 CHF 15,000 59 % 73 %

1) Bongrain S.A. exercised a purchase option on 20 December 2009 and acquired a 14 % share of Emmi Fondue AG from Emmi AG.

Associated companies and joint ventures Big Red Cheese Company LLC, USA-Monroe (WI) Acquired on 7.1.2009 USD p.m. 50 % – Kaiku Corporación Alimentaria, S.L. E-San Sebastian Partially acquired on 1.4.2009 EUR 66,000 43 % 23 %

Mergers On 1 January 2009, S.I. Rochat-Golay S.A. (60 % stake) was integrated into Fromco S.A., Moudon. CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP 63

Translation of foreign currencies 1) Debt consolidation, intercompany Financial statements of consolidated companies in foreign cur- sales and profits rencies are translated as follows: current assets, fixed assets and All intercompany transactions and relations between the consoli- liabilities at year-end rates (rate on balance sheet date); share- dated companies are offset against each other and eliminated. holders’ equity at historical rates. The income statement and cash flow statement are translated at the average rate for the year. Any Profits on intercompany transactions are eliminated. resultant exchange differences are recognized in shareholders’ equity with no effect on the income statement. Cash flow statement Cash and cash equivalents the basis for the cash flow statement. The foreign currency items contained in the individual financial statements of the consolidated companies are translated as fol- Cash flow from operating activities is calculated using the indi- lows: foreign currency transactions at the rate on the date of the rect method. transaction (current rate); foreign currency balances are translated at year-end using the year-end rate (rate on the balance sheet date). The resultant exchange differences are recognized in profit and loss. Loans in foreign currencies that are part of Principles of valuation the net investment in a subsidiary are revalued through equity. Cash and cash equivalents Cash includes cash, balances in postal giro and bank accounts, 1) Currency exchange rates in CHF and short-term time deposits with a residual term of less than

Income Balance sheet three months. They are valued at their nominal value. Average rates Rates on balance sheet date 2009 2008 31.12.2009 31.12.2008 Securities 1 EUR 1.51 1.59 1.49 1.50 Listed securities, incl. OTC securities with a market price, are val- 1 GBP 1.70 1.99 1.65 1.60 ued at the market values prevailing on the balance sheet date. 1 USD 1.09 1.09 1.04 1.10 Unlisted securities are valued at acquisition cost at the most. 1 CAD 0.95 1.02 0.99 0.90 1 SEK 0.14 0.17 0.14 0.14 Trade accounts receivable These items include short-term receivables with a residual term Amendment of accounting principles of up to one year arising from ordinary operating activities. These Statement of export and processing subsidies receivables are valued at their nominal values. Any value adjust- Payments from private and state organizations for exported ments required by generally accepted accounting principles are goods are now fully shown as reductions in product costs, as made as appropriate. this corresponds to best practice in the sector. Figures from 2008 have been adjusted accordingly in line with the Swiss GAAP ARR Inventories concept: Goods manufactured by the company itself are valued at production cost. Any lower market value is taken into account (loss-free 2008 Restatement 2008 Restated CHF 000s CHF 000s CHF 000s valuation). Merchandise is valued using the lower of cost or mar- Net sales 2,693,576 -22,807 2,670,769 ket price. Other stocks of goods such as raw materials, packaging Changes to inventories of materials, heating oil, etc., are valued at the lower of cost or mar- semi-finished and ket price. Discounts are treated as reductions in purchase value. finished products -11,788 – -11,788 Cost of sales and outside services 1,887,044 -22,807 1,864,237 Gross operating profit 818,320 – 818,320 Net sales 30.4 – 30.6

The corresponding amounts totalled CHF 32.5 million in 2009. 64 CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP

Tangible assets Intangible assets Tangible assets are valued at purchase cost less any depreciation This item includes mainly EDP software, trademarks and good- required by generally accepted accounting principles. Company- will from acquisitions. Intangible assets are capitalized if they produced additions to plant and equipment are only capitalized if are clearly identifiable and the costs reliably determinable, and they are clearly identifiable and the costs reliably determinable, they bring a measurable benefit to the company over the course and they bring a measurable benefit to the company over the of several years. Intangible assets are valued at purchase cost course of several years. less any depreciation required by generally accepted accounting principles. Depreciation is charged on a straight line basis over the economic life of the fixed asset. The useful lives of assets have been deter- Depreciation is charged on a straight line basis. The useful life mined as follows: of EDP software and trademarks is 2 to 5 years. Goodwill from acquisitions is amortized over 5 to 20 years (see Principles of con- – Real estate no depreciation solidation). The expected useful life of other intangible assets – Administrative buildings and is determined on a case-by-case basis (generally 5 to 10 years). residential buildings 40 years – Industrial buildings, rock caves 25 to 40 years Negative goodwill – Installations and fittings 15 years After the values of the individual net assets acquired have been – Machinery and plant 10 to 15 years adjusted and the necessary restructuring provisions created, – Business infrastructure 5 to 10 years a provision in the amount of the negative goodwill is created – Vehicles 4 to 7 years and written back over a maximum of 5 years. The write-back – Company-produced additions to plant of negative goodwill takes into account the costs incurred for and equipment 5 years the integration. Negative goodwill is reported under long-term provisions. Impairment The value of non-current assets is assessed on the balance sheet Negative goodwill is shown under short or long-term provisions date for signs of impairment. If there is evidence of any lasting depending on when the write-back is scheduled. reduction in value, the realizable value is calculated (impairment test). If the book value exceeds the realizable value, the difference Provisions is recognized in profit and loss via extraordinary depreciation. A provision is a potential future obligation arising from an event which occurs before the balance sheet date and is of uncertain Financial assets timing and amount, but which can be reliably estimated. This Financial assets include securities held as long-term investments obligation constitutes a liability. and long-term loans as well as investments in unconsolidated companies. Listed and OTC securities are valued at the acquisi- Deferred taxes tion or lower market value prevailing on the balance sheet date. The accrual of deferred income taxes is based on a balance-sheet Securities without a market value and loans are valued at cost oriented approach and essentially takes all future income tax ef- less any value adjustments required by generally accepted ac- fects into account. The deferred income tax to be accrued annu- counting principles. ally is calculated on the basis of the future tax rate valid on the balance sheet date for the tax subject in question.

Deferred tax credit for loss carry-forwards is only established to the extent to which it is likely that future earnings with which loss carry-forwards can be offset will be available. As at the balance sheet date, no such deferred tax credit was capitalized. CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP 65

Derivative financial instruments Dissolution of interest rate swap Emmi Group uses derivative financial instruments to hedge its Due to the current market situation, Emmi decided to dissolve an currency and interest rate risks. They are included in the balance existing interest rate swap in June. As the swap was concluded sheet if they fulfil the definition of an asset or a liability. The in- at the same time as the issue of the bond on 13 September 2006 struments are disclosed in the notes. and had the same maturity (13 September 2013), the proceeds from the dissolution have been recognized as a liability and will Liabilities be released systematically over the residual term of the bond. All Group liabilities are stated at their nominal values. The effective interest rate on the bond is thus reduced from 3.0 % to 2.1 % per year. Employee benefit plan liabilities Employees and former employees receive various employee benefits and old age pensions which are provided in accordance with the laws of the countries in question.

All Swiss companies within the Emmi Group have either their own legally independent pension schemes or are members of collective occupational pension foundations provided by banks or insurance companies. These pension schemes are financed by employer and employee contributions.

With regard to the application of Swiss GAAP ARR 16 “Employee benefit obligations” we refer readers to note 19 in the notes to the Consolidated Financial Statements.

Net sales and revenue recognition Net sales include all goods and services sold to third parties which have been invoiced. Revenues are deemed to have been realized on delivery or provision of the service.

Research and development Research and development costs are fully charged to the income statement. These costs are included under “Personnel expenses” and “Other operating expenses”.

Contingent liabilities Contingent liabilities are valued on the balance sheet date. If an outflow of funds without simultaneous usable inflow of funds is likely, a provision is created. 66 CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CHF 000s

1 Breakdown of net sales

By product groups and Switzerland International Group Swiss market/international 2009 2008 2009 2008 2009 2008 Milk 254,746 290,512 288 306 255,034 290,818 Butter and margarine 283,566 284,032 2,577 58 286,143 284,090 Cream 197,095 214,241 7,483 7,033 204,578 221,274 Dairy products 735,407 788,785 10,348 7,397 745,755 796,182 As % of net sales 37.8 38.6 1.5 1.2 28.5 29.8

Fresh products 357,701 358,673 206,265 222,719 563,966 581,392 As % of net sales 18.4 17.5 30.6 35.6 21.5 21.8

Natural cheese 480,549 493,492 329,693 261,759 810,242 755,251 Processed cheese 51,114 48,900 57,994 68,526 109,108 117,426 Cheese 531,663 542,392 387,687 330,285 919,350 872,677 As % of net sales 27.4 26.5 57.4 52.8 35.1 32.7

Fresh cheese 134,650 138,089 618 1,603 135,268 139,692 As % of net sales 6.9 6.8 0.1 0.3 5.2 5.2

Powder/concentrates 64,978 78,070 20,477 11,852 85,455 89,922 As % of net sales 3.3 3.8 3.0 1.9 3.3 3.4

Other products 89,404 109,350 47,334 48,699 136,738 158,049 Sales of services 30,288 30,110 2,432 2,745 32,720 32,855 Other products and services 119,692 139,460 49,766 51,444 169,458 190,904 As % of net sales 6.2 6.8 7.4 8.2 6.4 7.1 Net sales 1,944,091 2,045,469 675,161 625,300 2,619,252 2,670,769 As % of group net sales 74.2 76.6 25.8 23.4 100.0 100.0

in % in % By country group 2009 Group 2008 Group Switzerland 1,944,091 74.2 2,045,469 76.6 Europe excl. Switzerland 455,943 17.4 471,505 17.7 North and South America 202,365 7.7 128,271 4.8 Asia Pacific 16,853 0.7 25,524 0.9 Total Group 2,619,252 100.0 2,670,769 100.0

Export and processing subsidies from private and state organizations are now shown as 100 % reductions in product costs; please refer to the information shown in “Principles of consolidation” (page 63). Prior-year figures have been restated accordingly. CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP 67

CHF 000s

2 other operating expenses 2009 2008 Advertising and marketing 105,131 108,300 Occupancy expense, maintenance and repair, leasing 61,738 57,063 Insurance, fees and HGV road tax 11,655 11,820 Energy, operating material and supplies 48,073 51,178 General administrative expense 27,610 23,289 Tools and cylinder costs 2,370 3,252 Transport logistics for outgoing goods 51,863 56,125 Other logistics expenses 10,430 8,597 Other operating costs 2,368 3,148 Total 321,238 322,772

3 depreciation and amortization 2009 2008 Ordinary depreciation of tangible assets 74,933 73,447 Unscheduled depreciation of tangible assets 15,074 4,230 Ordinary amortization of goodwill 4,691 3,638 Amortization of other intangible assets 5,572 6,148 Unscheduled amortization of other intangible assets 3,232 1,446 Total 103,502 88,909 Unscheduled depreciation of tangible assets relates firstly to impairments of properties which are no longer used (or will prospectively no longer be used) for operational purposes, and secondly to assets which are not utilized according to the original plan. In the case of properties, this specifically concerns value adjustments on land reserves in Kirchberg not utilized for operational purposes and a property in Thun which will prospectively no longer be utilized for operational purposes. In the case of assets this mainly concerns value adjustments on hardware components that need to be replaced earlier than planned, and on a production facility for fresh products in the US (CHF 7.4 million), as the test phase for marketing fresh products in the US was prolonged due to the economically driven difficult market conditions. The unscheduled depreciation of the other intangible assets relates mainly to development costs in IT. This affects projects whose implementation was delayed or which could not be implemented in the form planned. Value adjustments were also made on distribution rights as the corresponding sales plans were not achieved. In the previous year, unscheduled depreciation of tangible assets related to real estate not used for operating purposes; depreciation of tangible assets related essentially to IT development costs.

4 Financial result 2009 2008 Interest income 1,087 1,908 Other financial income 532 248 Total financial income 1,619 2,156

Interest expense 5,960 14,634 Other financial expenses 5,236 5,687 Total financial expenses 11,196 20,321

Financial income -9,577 -18,165 Currency income 863 -7,789 Total financial result -8,714 -25,954 The 2009 position “Other financial expenses” includes a value adjustment on fixed asset securities in the amount of CHF 1.4 million following a liquida- tion. The item also includes charges in connection with the release of a financial leasing arrangement in the amount of CHF 0.6 million as well as value adjustments on current asset securities in the amount of CHF 0.9 million. (2008: value adjustment on loans in respect of associated companies)

5 Extraordinary income and expenses 2009 2008 Extraordinary income 25 100 Extraordinary expenses -332 -139 Total -307 -39 68 CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP

CHF 000s

6 taxes 2009 2008 Current taxes on income and capital 18,379 12,349 Change in deferred taxes -4,373 -3,360 Total 14,006 8,989 Average tax rate 13.8 % 11.5 % Deferred taxes are calculated for every company using the actual tax rate applicable. As at 31 December 2009, the weighted average rate was 18.8 % (prior year: 21.6 %). In 2009, non-capitalized tax claims from loss carryforwards fell from CHF 10.1 million to CHF 9.6 million. Accruals for current taxes increased from CHF 13.6 million to CHF 21.1 million compared with the previous year.

7 profit per share 2009 2008 No. of shares on 1.1. 5,349,810 5,349,810 No. of shares on 31.12. 5,349,810 5,349,810 Ø No. of shares 5,349,810 5,349,810 Net profit in CHF 75,323,515 58,725,404 Net profit per share 14.08 10.98

8 trade accounts receivable 2009 2008 From third parties 345,594 358,829 From shareholders 707 765 From related parties 1) 8,493 8,863 Allowance for doubtful accounts -9,305 -8,225 Total 345,489 360,232

9 other receivables 2009 2008 From third parties 23,712 25,923 From related parties 1) 15 292 Total 23,727 26,215

10 inventories 2009 2008 Finished products 64,241 75,274 Merchandise 8,160 8,759 Raw materials, semi-finished products and packaging material 172,224 194,227 Other inventories 4,311 5,240 Total 248,936 283,500

11 loans and other receivables 2009 2008 From third parties 11,817 16,316 From related parties 1) 4,224 4,874 Value adjustments -4,119 -4,754 Total 11,922 16,436

1) Related parties denote associated companies and other related parties. CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP 69

CHF 000s

12 tangible assets Tangible fixed Real estate/ Plant/ assets in the Other Tangible assets 2009 Vacant land property equipment course of constr. tangible assets Total Purchase value at 1.1.2009 507 571,808 941,380 44,231 51,944 1,609,870 Reclassification 3,635 5,445 47,032 -58,030 1,627 -291 Change in group of consolidated companies – 10,193 34,014 – 1,611 45,818 Additions 30 7,516 12,760 51,882 3,645 75,833 Disposals -250 -4,191 -16,060 – -4,727 -25,228 Currency effects – -771 -1,122 -4 -37 -1,934 As at 31 December 2009 3,922 590,000 1,018,004 38,079 54,063 1,704,068

Accumulated depreciation at 1.1.2009 – 230,537 582,448 – 41,648 854,633 Reclassification 602 -715 -269 – 313 -69 Change in group of consolidated companies – 2,798 26,306 – 1,466 30,570 Ordinary depreciation – 12,674 59,109 – 3,150 74,933 Extraordinary depreciation 860 2,398 11,626 – 190 15,074 Disposals -190 -3,511 -15,790 – -4,257 -23,748 Currency effects – -143 -629 – -22 -794 As at 31 December 2009 1,272 244,038 662,801 – 42,488 950,599 Net book value at 31 December 2009 2,650 345,962 355,203 38,079 11,575 753,469 of which leasing – – 2,854 – – 2,854 The assets are checked on the balance sheet date for signs of impairment losses. Adjustments in value have been conducted according to Swiss GAAP ARR 20. These are included under “Extraordinary depreciation”. Tangible assets were subject to a comprehensive assessment with respect to categorization in the year under review. The reassessments for specific assets led to transfers between individual investment categories. These are included in the reclassification line.

Tangible fixed Real estate/ Plant/ assets in the Other Tangible assets 2008 Vacant land property equipment course of constr. tangible assets Total Purchase value at 1.1.2008 507 565,565 931,585 28,255 50,565 1,576,477 Reclassification – 13,829 42,142 -59,006 3,035 – Change in group of consolidated companies – – 517 – 411 928 Additions – – 5,534 74,982 2,646 83,162 Disposals – -3,037 -34,085 – -4,203 -41,325 Currency effects – -4,549 -4,313 – -510 -9,372 As at 31 December 2008 507 571,808 941,380 44,231 51,944 1,609,870

Accumulated depreciation at 1.1.2008 – 217,186 561,168 – 39,960 818,314 Reclassification – 615 -571 – -44 – Change in group of consolidated companies – – 390 – 349 739 Ordinary depreciation – 12,239 55,599 – 5,609 73,447 Extraordinary depreciation – 2,927 1,250 – 53 4,230 Disposals – -2,011 -34,042 – -3,963 -40,016 Currency effects – -419 -1,346 – -316 -2,081 As at 31 December 2008 – 230,537 582,448 – 41,648 854,633 Net book value at 31 December 2008 507 341,271 358,932 44,231 10,296 755,237 of which leasing – 27,587 – – – 27,587

2009 2008 Fire insurance values 2,002,933 1,791,814 70 CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP

CHF 000s

13 intangible assets Licences/ Goodwill Goodwill Other patents/ fully equity- Other Total intangible Intangible assets 2009 trademarks Software consolidated consolidated goodwill goodwill assets Total Purchase value at 1.1.2009 13,226 32,160 38,361 21,217 20,626 80,204 113 125,703 Reclassification – 291 ––––– 291 Change in group of consolidated companies 245 – 26,759 – – 26,759 – 27,004 Additions 314 4,392 – 2,817 1,000 3,817 – 8,523 Disposals – -923 ––––– -923 Currency effects -7 -25 – – – – -1 -33 As at 31 December 2009 13,778 35,895 65,120 24,034 21,626 110,780 112 160,565

Accumulated amortization 1.1.2009 10,598 16,903 20,613 2,796 19,271 42,680 55 70,236 Reclassification – 69 ––––– 69 Ordinary depreciation 360 5,189 2,936 1,169 586 4,691 23 10,263 Extraordinary depreciation 1,222 2,010 – – – – – 3,232 Disposals – -801 ––––– -801 Currency effects -5 -10 – – – – -1 -16 As at 31 December 2009 12,175 23,360 23,549 3,965 19,857 47,371 77 82,983 Net book value 31 December 2009 1,603 12,535 41,571 20,069 1,769 63,409 35 77,582 The assets are checked on the balance sheet date for signs of impairment losses. An impairment test is carried out on the goodwill in the balance sheet ir- respective of this, based on the calculated value in use. This is based on future cash flows for the next five years and the extrapolated values from the sixth year. The figures used are part of the multi-year financial planning approved by Group Management. All intangible assets were acquired. No self-created intangible assets were capitalized. Fixed assets were subject to a comprehensive assessment with respect to categorization in the year under review. The reassessments for specific assets led to a transfer from hardware to software. This is included in the Reclassification line.

Licences/ Goodwill Goodwill Other patents/ fully equity- Other Total intangible Intangible assets 2008 trademarks Software consolidated consolidated goodwill goodwill assets Total Purchase value at 1.1.2008 12,790 25,436 36,529 20,633 44,611 101,773 1,019 141,018 Change in group of consolidated companies 3,000 – 1,832 584 – 2,416 – 5,416 Additions 148 7,605 – – – – 86 7,839 Disposals -2,629 -821 – – -23,985 -23,985 -964 -28,399 Currency effects -83 -60 – – – – -28 -171 As at 31 December 2008 13,226 32,160 38,361 21,217 20,626 80,204 113 125,703

Accumulated amortization 1.1.2008 12,595 10,964 19,141 1,733 42,153 63,027 961 87,547 Change in group of consolidated companies – – – – – – – – Ordinary depreciation 509 5,560 1,472 1,063 1,103 3,638 79 9,786 Extraordinary depreciation 200 1,246 – – – – – 1,446 Disposals -2,629 -815 – – -23,985 -23,985 -964 -28,393 Currency effects -77 -52 – – – – -21 -150 As at 31 December 2008 10,598 16,903 20,613 2,796 19,271 42,680 55 70,236 Net book value 31 December 2008 2,628 15,257 17,748 18,421 1,355 37,524 58 55,467

14 trade accounts payable 2009 2008 To third parties 199,599 211,320 To shareholders 17,565 25,514 To related parties 1) 5,401 4,431 Total 222,565 241,265

1) Related parties denotes associated companies and other related parties. CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP 71

CHF 000s

15 Accrued expenses and deferred income 2009 2008 Interest 2,796 1,670 Income tax 22,475 13,578 Human Resources 21,428 23,254 Contractual discounts 22,356 18,539 Other 19,946 21,007 To shareholders 27 – To related parties 1) 4,360 2,774 Accrued expenses and deferred income 93,388 80,822

1) Related parties denotes associated companies and other related parties. Other accrued expenses and deferred income comprise invoices not yet received and relate specifically to reimbursements to customers, contributions to advertising costs, energy and contributions to relevant organizations and associations.

16 long-term financial liabilities In accordance with the terms of the credit agreement, the bank loans are linked to financial covenants. Of which secured Residual terms Residual terms by charges on real Interest rate Long-term financial liabilities 2009 2 to 5 years over 5 years Total property in % Bank loans 147,991 1,369 149,360 18,292 Leasing 1,275 1,289 2,564 – Loans from third parties 4,883 679 5,562 – Total 154,149 3,337 157,486 18,292 0.7–4.7 Long-term bank loans bear interest at actual rates of between 0.70 % and 2.75 %. Financing in the form of mortgages bears interest at rates between 4.10 % and 4.65 %.

Long-term financial liabilities 2008 Bank loans 269,130 1,427 270,557 19,548 Leasing 7,398 8,189 15,587 – Loans from third parties 4,537 37 4,574 – Total 281,065 9,653 290,718 19,548 2.4–4.1

17 provisions Current Negative Other Total restructuring goodwill provisions Deferred taxes provisions As at 1 January 2009 1,424 4,830 7,598 73,389 87,241 Created 493 1,452 6,416 1,628 9,989 Utilized -1,430 – -1,593 -5,756 -8,779 Released (income statement) – -4,204 -1,085 – -5,289 Change in group of consolidated companies – – 1,227 – 1,227 Currency effects 5 – -23 -32 -50 As at 31 December 2009 492 2,078 12,540 69,229 84,339 of which current provisions 492 1,236 5,615 – 7,343 Long-term provisions – 842 6,925 69,229 76,996 Other provisions include accruals for pending legal matters, (CHF 3.6 million), processing payments (CHF 2.5 million), liabilities for staff departures outside Switzerland as required by law (CHF 1.2 million), dismantling costs (CHF 0.5 million) as well as other risks where outflows of funds are likely. In all events, the likelihood of such events occurring has been assessed as being well above 50 %.

As at 1 January 2008 2,896 11,286 5,022 76,520 95,724 Created 1,051 110 3,306 4,303 8,770 Utilized -2,409 – -293 -7,663 -10,365 Released (income statement) – -6,566 -70 – -6,636 Change in group of consolidated companies – – – 442 442 Currency effects -114 – -367 -213 -694 As at 31 December 2008 1,424 4,830 7,598 73,389 87,241 of which current provisions 1,424 3,896 1,258 – 6,578 Long-term provisions – 934 6,340 73,389 80,663 72 CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP

CHF 000s

18 Bond Bond type Bond with reopening option Nominal amount CHF 125 million Securities number 2673417/ISIN CH0026734175 Interest rate 3.00 % Maturity 13 September 2006 to 13 September 2013 Redemption 13 September 2013 at par value

19 Employee benefit schemes Nominal Waiver of Other value Balance Balance Result from ECR value ECR usage adjustments Discount sheet sheet in personnel expenses Employer contribution reserve (ECR) 31.12.2009 31.12.2009 31.12.2009 31.12.2009 31.12.2009 31.12.2008 2009 2008 Pension schemes without excess/ insufficient cover(domestic) 1,589 – – – 1,589 – – – Pension schemes with insufficient cover (domestic) ––––– 1,589 – – Total 1,589 – – – 1,589 1,589 ––

Change vs. prior year or Excess/insufficient Economic taken to the Contributions cover as per Swiss benefit/obligation income state- limited Pension expenses Economic benefit/economic obligation GAAP ARR 26 for the company ment in the FY to the period 1) in personnel expenses and pension expenses (domestic) 31.12.2009 31.12.2009 31.12.2008 2009 2008 Welfare funds (domestic) 28,641 – – – 41 41 45 Pension schemes without excess/insufficient cover (domestic) – – – – 15,895 15,895 250 Pension schemes without excess/insufficient cover (foreign) – – – – 665 665 667 Pension schemes with excess cover (domestic) 460 – – – – – – Pension schemes with insufficient cover (domestic) -233 – – – 369 369 15,676 Total 28,868 – – – 16,970 16,970 16,638

1) Including result from employer contribution reserves or comparable items in connection with pension schemes abroad.

Domestic Foreign Total Breakdown of pension expenses 2009 2009 2009 Contributions to pension plans at cost to the companies 16,305 665 16,970 Contributions to pension plans from employer contribution reserves –– – = Total contributions 16,305 665 16,970 +/– change in ECR due to asset performance, value adjustments, discounting, etc. –– – Contributions and change to employer contribution reserves 16,305 665 16,970 Increase in economic benefit to the company due to excess cover –– – Reduction in economic obligations of the company due to insufficient cover –– – Total change in economic impact arising from excess/insufficient cover –– – = Pension expenses in personnel expenses for the period 16,305 665 16,970

Domestic Foreign Total Breakdown of pension expenses 2008 2008 2008 Contributions to pension plans at cost to the companies 15,971 667 16,638 Contributions to pension plans from employer contribution reserves –– – = Total contributions 15,971 667 16,638 +/– change in ECR due to asset performance, value adjustments, discounting, etc. –– – Contributions and change to employer contribution reserves 15,971 667 16,638 Increase in economic benefit to the company due to excess cover –– – Reduction in economic obligations of the company due to insufficient cover –– – Total change in economic impact arising from excess/insufficient cover –– – = Pension expenses in personnel expenses for the period 15,971 667 16,638 CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP 73

CHF 000s

20 Acquisitions The companies acquired by Emmi in 2009 reported the following main balance sheet items at the time of acquisition.

Roth Käse USA Ltd. Nutrifrais SA Cash 21 253 Inventories 13,083 1,935 Other current assets 7,509 2,032 Fixed assets 12,222 3,604 Bank borrowings 8,816 – Shareholders’ equity 2,605 5,102 Total assets 32,835 7,824 Through the acquisition of Roth Käse USA Ltd., which is primarily active in the production of speciality cheeses for the US food service market, the Emmi Group has been able to expand its offer on the US market and also increase its distribution channels. Nutrifrais SA is a production company in the area of fresh products with strong brands such as TamTam. The acquisition of a 60 % stake has enabled the Emmi Group to strengthen its presence in French- speaking Switzerland (see transactions listed under “Changes to the group of consolidated companies” on page 62).

21 outstanding derivative financial instruments 2009 2008 Change Positive Negative Change Positive Negative Interest instruments of value value value Purpose of value value value Purpose Swaps –– – – 7,043 3,662 222 Hedging Total assets and liabilities ––– – 7,043 3,662 222

Exchange rate instruments Foreign currency options -102 – 102 Hedging ––– Forward foreign currency transactions ––– – 840 – Hedging Total assets and liabilities -102 – 102 ––– Emmi also has options to acquire further stakes in its minority holdings. No derivative financial instruments are included in the balance sheet because they do not fulfil the definition of assets and liabilities.

22 Contingent assets and liabilities Emmi is currently involved in legal disputes in connection with ordinary operating activities. Although the outcome of the lawsuits cannot be predicted with certainty at present, Emmi assumes that that these legal disputes will have no major negative impact on business activity or the financial situation. Expected outgoing payments are provided for accordingly. At the date of the financial statements, the Group had no major contingent assets.

23 pledged assets and off-balance sheet leasing/rental liabilities

Pledged assets 2009 2008 Charges on real property, nominal values 221,467 221,505 of which as security for own liabilities 19,692 19,548 of which as security for third parties – –

Off-balance sheet leasing/rental liabilities 1 to 2 years 21,820 18,975 3 to 5 years 22,600 19,963 over 5 years 33,539 20,416 Total 77,959 59,354

24 investment obligations and off-balance sheet liabilities 2009 2008 Investment obligations in connection with previously concluded agreements 18,990 11,481 Cooperation agreements with suppliers/customers p.m. p.m. 74 CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP

CHF 000s

25 transactions with related parties Business transactions with related parties are based on standard contractual forms and conditions. All transactions are reported in the consolidated financial statements for 2009 and 2008, and consist of deliveries of products and raw materials as well as services to and from related parties. The corresponding net figures for receivables and payables are reported separately in the financial statements (see notes 8, 9, 11, 14 and 15). Other short-term amounts payable also include CHF 2.4 million in respect of current contributions for Emmi Pension Foundation.

Transactions with associated companies 2009 2008 Net sales 57,210 77,342 Product costs 41,269 51,624 Occupancy costs 204 236 Income from services 676 1,222 Services costs 1,612 2,890 Financial income 821 414 Financial expenses 138 –

Transactions with shareholders 2009 2008 Net sales 7,580 8,335 Product costs 218,219 289,615 Occupancy costs 335 335 Income from services 160 98 Services costs 25 49

Transactions with other related parties 2009 2008 Net sales 44 113 Product costs 5,660 2,967 Occupancy costs 460 485 Income from services 9 – Services costs 17 64 Milk purchases from main shareholders are included in sales costs under Transactions with shareholders. These are made under customary market conditions. Under Group VAT liability, the Emmi Group is jointly and severally liable for the corresponding liabilities of the Genossenschaft Zentralschweizer Milchproduzenten ZMP and ZMP Invest AG. In connection with the acquisition (2007) of a minority stake of 19% in CASP LLC in Penn Yan, USA, the Emmi Group granted the company financing in the form of a loan of USD 4.3 million, bearing interest at customary market conditions. The loan has been written down in full. Furthermore, via Emmi (USA) Inc., Emmi provides the plant with the facilities necessary for the production of CAFFÈ LATTE in return for a reduction in the purchase price. The Emmi Group has issued guarantees in the form of cooperation agreements in the amount of CHF 2.0 million annually for affiliated companies until 2010.

Other transactions The compensation paid to members of the Board of Directors and Group Management is disclosed in section 5 of the Corporate Governance Report as well as in the notes to the Financial Statements of Emmi AG, in compliance with Art. 663b bis Swiss Code of Obligations.

26 shareholders

Nominal capital 2009 % 2008 % ZMP Invest AG, Lucerne 1) 28,890 54.0 % 28,616 53.4 % Lombard Odier Darier Hentsch Fund Managers SA, Geneva 3,547 6.6 % 4,093 7.7 % Zentralschweizer Milchkäuferverband, Lucerne 1) 2,500 4.7 % 2,500 4.7 % MIBA Milchverband der Nordwestschweiz, Liestal 1) 1,931 3.6 % 1,932 3.6 % Emmi-Wohlfahrtsfonds, Lucerne (welfare foundation) 890 1.7 % 890 1.7 % Other 15,740 29.4 % 15,467 28.9 % Total 53,498 100.0 % 53,498 100.0 %

1) ZMP Invest AG, Lucerne, the Zentralschweizer Milchkäuferverband, Lucerne, and the MIBA Milchverband der Nordwestschweiz, Liestal, form a group in the sense of Article 20 of the SESTA. The Group owns 62.3 % (prior year 61.7 %) of the total voting rights. CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP 75

27 summary of consolidated and associated companies Capital in 000s Capital share Capital share Consolidated companies Head Office Function Currency 31.12.2009 31.12.2009 31.12.2008 Emmi AG Lucerne Holding CHF 53,498 100 % 100 % Emmi Schweiz AG Lucerne Service CHF 5,700 100 % 100 % Emmi International AG Lucerne Service CHF 5,000 100 % 100 % Emmi Frischprodukte AG Lucerne Production CHF 6,000 100 % 100 % Mittelland Molkerei AG Suhr Prod. and trade CHF 20,000 60 % 60 % Molkerei Biedermann AG 1) Bischofszell Prod. and trade CHF 1,010 80 % 70 % Nutrifrais SA Plan-les-Ouates Prod. and trade CHF 4,000 60 % 0 % Emmi Käse AG Lucerne Prod. and trade CHF 11,400 100 % 100 % Emmi Milch AG Lucerne Production CHF 4,000 100 % 100 % Emmi Pasticceria SA Lucerne Service CHF 500 100 % 100 % Emmi Butterzentrale AG Lucerne Service CHF 2,000 100 % 100 % MOPRO Luzern AG Lucerne Service CHF 120 100 % 100 % Emmi Logistik AG Lucerne Service CHF 2,000 100 % 100 % Emmi Interfrais SA Küssnacht SZ Trade CHF 1,000 61 % 61 % Swissexport, Aktiengesellschaft Schweizerischer Käseexporteure Berne Service CHF 100 69 % 69 % Emmi Fondue AG Langnau i.E. Production CHF 15,000 59 % 73 % S.I. Rochat-Golay SA 2) Moudon Service CHF 0 0 % 60 % Fromco S.A. Moudon Moudon Production CHF 2,100 60 % 60 % Lesa Lataria Engiadinaisa SA Bever Production CHF 1,500 80 % 60 % FDS Fromagerie de Saignelégier SA Saignelégier Production CHF 1,050 86 % 86 % Baumann Käse AG Zollikofen Trade CHF 100 100 % 100 % Walter Schmitt AG Märwil Trade CHF 150 100 % 100 % HOLDING der Schweizerischen Milchproduzenten Münchenbuchsee Service CHF 5,000 64 % 60 % Emmental AG Exportgesellschaft für Schweizer Käse Münchenbuchsee Prod. and trade CHF 4,000 64 % 60 % Burra AG Zurich Trade CHF 300 100 % 100 % Emmi Oesterreich GmbH Nüziders, Austria Trade EUR 2,800 100 % 100 % Emmi Nordic AB Gävle, Sweden Trade SEK 500 100 % 100 % Emmi Deutschland GmbH Essen, Germany Trade EUR 75 100 % 100 % Molkerei Biedermann GmbH Konstanz, Germany Trade EUR 25 100 % 0 % Emmi Lácteos España, S.L.U. Pamplona, Spain Trade EUR 50 100 % 100 % Emmi France S.A.S. Rungis, France Trade EUR 40 100 % 100 % SAS Emmi Ambrosi France E.A.F. Nice, France Holding EUR 100 51 % 0 % Emmental S.r.l. in Liq. Milan, Italy Trade EUR 520 64 % 60 % Emmi Italia S.p.A. Milan, Italy Trade EUR 500 100 % 100 % Trentinalatte S.p.A. Rovère della Luna, Italy Production EUR 520 100 % 100 % Emmi Holding Italia S.r.l. Milan, Italy Holding EUR 1,200 100 % 100 % Craamer & Co. B.V. Tiel, Netherlands Trade EUR 23 100 % 100 % Emmi Benelux B.V. Tiel, Netherlands Service EUR 18 100 % 100 % S.A. Haerten & Interimex N.V. Brussels, Belgium Trade EUR 500 100 % 100 % Emmi UK Limited Putney, UK Trade GBP p.m. 100 % 100 % Emmi Holding (USA) Inc. Wilmington, USA Holding USD p.m. 100 % 100 % Emmi (USA) Inc. New York, USA Trade USD 800 100 % 100 % Emmental Cheese Corp. New York, USA Trade USD 6 100 % 100 % Zingg + Co. Inc. New York, USA Trade USD 1 100 % 100 % Switzerland Cheese Marketing (USA) Inc. New York, USA Trade USD 1 69 % 69 % Switzerland Cheese Marketing Inc. Québec, Canada Trade CAD 1 69 % 69 % Emmi Canada Inc. Montreal, Canada Trade CAD p.m. 100 % 100 % Roth Käse USA Limited Monroe, USA Prod. and trade USD 3 100 % 3 %

1) No minority interests are shown, due to the obligation to purchase the remaining 20 %. 2) S.I. Rochat-Golay SA was integrated into Fromco S.A. Moudon on 1 January 2009. 76 CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP

Capital in 000s Capital share Capital share Associated companies and joint ventures Head Office Function Currency 31.12.2009 31.12.2009 31.12.2008 Vermo Tiefkühl Pool AG Lucerne Trade CHF 2,500 35 % 35 % Emmentaler Schaukäserei AG Affoltern i.E. Prod. and trade CHF 4,954 36 % 36 % BO Butter GmbH Bern Service CHF 500 33 % 33 % Thurgauische Käse-Reifungs AG Weinfelden Service CHF 2,000 25 % 25 % FDC Fromagerie de Courgenay SA Courgenay Service CHF 990 25 % 25 % Cetra Alimentari SA Lugano Trade CHF 250 34 % 34 % Sbrinz Käse GmbH Sursee Service CHF 180 24 % 24 % Kaiku Corporación Alimentaria, S.L. San Sebastián, Spain Prod. and trade EUR 66,000 43 % 23 % Ambrosi S.p.A. Brescia, Italy Prod. and trade EUR 10,000 25 % 25 % CASP LLC 1) Penn Yan, USA Production USD 135 19 % 19 % Carl Fr. Scheer GmbH & Co. KG Willstätt, Germany Trade EUR 500 25 % 25 % Scheer Verwaltungs u. Beteiligungs GmbH Willstätt, Germany Service EUR 26 25 % 25 % Big Red Cheese Company LLC Monroe, USA Trade USD p.m. 50 % 0 % 1) CASP LLC is accounted for using the equity method. Emmi exercises material influence based on its share of the votes, which is above 20 %.

28 Risk management and internal controls Group Management carried out a company-wide risk assessment in the year under review. As part of a formal process, significant business risks were assessed in group workshops and individual interviews according to the extent of the potential damage and their likelihood of occurrence. The causes of significant risks and measures to manage them were drawn from this assessment. The Board of Directors of Emmi AG approved the risk assessment and is monitoring the implementation of the defined measures by Group Management. No exceptional risks that went beyond normal limits were detected during the assessment. The process is repeated on an annual basis.

The following risks were identified as being the main risks to the Emmi Group: – Liberalization of the milk market: continuing deregulation in Switzerland will lead to new price relationships, with foreign competition increasing in the medium term. The Emmi Group is preparing for full liberalization of the milk market with its strategic objectives. The Group’s associated international expansion was also identified as a further main risk. As part of the deregulation, milk quotas were abolished in Switzerland with effect from 1 May 2009. There are still some uncertainties with regard to this change, which could mean that Emmi will not be able to purchase milk at the same attractive prices as its competitors. – Financing risk: planned growth, especially growth abroad, requires appropriate financing. The Emmi Group wants to present itself to the financial market as a reliable partner by adhering to clearly communicated financial targets, and involve existing shareholders at an early stage through proactive communication. – Failure of ERP system: in the event of a failure of the widely used Enterprise One system, the entire company would be affected, from receipt of orders to delivery. The risk of failures is therefore reduced through measures such as redundant power supply, backups, intensive tests when changes are made and integrated control mechanisms. – Contamination: contaminated food should not reach the customer under any circumstances as this would lead to financial losses and, in particular, to inestimable damage to Emmi’s reputation. This risk is minimized through highly-developed quality management, intensive training and widely implemented checks before delivery.

The Emmi Group is subject to various financial risks through its operating activities, including credit, liquidity and other market risks. Credit risks are managed by means of suitable, continual monitoring of day-to-day business and appropriate risk assessment when closing a transaction. Liquidity risk is controlled by means of central cash management, which ensures that the planned liquidity requirement is covered by corresponding finance agreements. Other market risks, such as currency and interest rate risk, are partially hedged using derivative instruments. The non-hedged part is consciously borne as a risk. The currencies which are of particular relevance to the Emmi Group are EUR, USD, CAD and GBP. To ensure that the consolidated financial statements are in accordance with the applicable accounting standards as well as accurate reporting, the Emmi Group has set up effective internal control and management systems, which are checked regularly. The accounting and valuation includes estimates and assumptions regarding the future. These are based on the knowledge possessed by the respective employees and are regularly examined with a critical eye. Where an item includes a significant risk or a significant fair value adjustment, this is stated accordingly in the notes. However, no risks that could lead to a significant correction to the company’s assets, financial position or results of operations as reported in the annual accounts were identified for the last financial year.

29 subsequent events From the accounting reference date until the consolidated financial statements were approved by the Board of Directors on 15 March 2010, no major events occurred which could adversely affect the validity of the annual financial statements for 2009 or which would have to be disclosed here. CONSOLIDATED FINANCIAL STATEMENTS OF EMMI GROUP 77

AUDITORS’ REPORT 78 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY)

INCOME STATEMENT

CHF 000s

2009 2008 Income from investments 24,197 34,047 Financial income 21,510 30,080 Other income 6,197 6,404 Total income 51,904 70,531

Personnel expenses 830 825 Financial expense 5,482 18,417 Administration expense 1,068 965 Total expenses 7,380 20,207

Ordinary profit before taxes 44,524 50,324 Tax expense 1,864 1,500 Profit from sale of companies 1,149 821 Loss from sale of companies – 506 Net profit 43,809 49,139 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY) 79

BALANCE SHEET

CHF 000s

Assets 31.12.2009 % 31.12.2008 % Cash and cash equivalents 185 115 Securities 261 171 Other receivables from third parties 1,243 90 Other receivables from related parties – 292 Accrued income and prepaid expenses 358 484 Current assets 2,047 0.3 1,152 0.1

Receivables from consolidated companies 588,999 670,710 Receivables from third parties – 1,075 Securities 67 1,168 Investment in subsidiaries and associates 180,348 184,318 Financial assets 769,414 857,271 Trademarks p.m. p.m. Intangible assets p.m. p.m. Fixed assets 769,414 99.7 857,271 99.9 Total assets 771,461 100.0 858,423 100.0

Liabilities Other current liabilities 2,188 2,254 Accrued expenses and deferred income 9,679 7,273 Current liabilities 11,867 1.5 9,527 1.1

Long-term bank overdrafts 130,000 250,000 Long-term loans 2,000 4,000 Accrued expenses and deferred income 2,799 – Bond 125,000 125,000 Long-term liabilities 259,799 33.7 379,000 44.2

Liabilities 271,666 35.2 388,527 45.3

Share capital 53,498 53,498 Legal reserves 189,863 189,863 Free reserves 200,000 160,000 Retained earnings as per 1.1. 12,625 17,396 Net profit 43,809 49,139 Retained earnings as per 31.12. 56,434 66,535 Shareholders’ equity 499,795 64.8 469,896 54.7 Total liabilities 771,461 100.0 858,423 100.0 80 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY)

STATEMENT OF SHAREHOLDERS’ EQUITY

CHF 000s

Legal Free Available Share capital reserves reserves earnings Total Shareholders’ equity as at 31 December 2005 49,982 168,264 60,000 54,560 332,806

Allocation – – 20,000 -20,000 – Dividends – – – -13,496 -13,496 Capital increase 2,305 14,160 – – 16,465 Net profit – – – 56,998 56,998 Shareholders’ equity as at 31 December 2006 52,287 182,424 80,000 78,062 392,773

Allocation – – 50,000 -50,000 – Dividends – – – -13,722 -13,722 Capital increase 1,211 7,439 – – 8,650 Net profit – – – 46,966 46,966 Shareholders’ equity as at 31 December 2007 53,498 189,863 130,000 61,306 434,667

Allocation – – 30,000 -30,000 – Dividends – – – -13,910 -13,910 Net profit – – – 49,139 49,139 Shareholders’ equity as at 31 December 2008 53,498 189,863 160,000 66,535 469,896

Allocation – – 40,000 -40,000 – Dividends – – – -13,910 -13,910 Net profit – – – 43,809 43,809 Shareholders’ equity as at 31 December 2009 53,498 189,863 200,000 56,434 499,795 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY) 81

NOTES TO THE FINANCIAL STATEMENTS 2009

CHF 000s

Notes pursuant to Art. 663b ff. Swiss Code of Obligations

1. Sureties granted and guarantees in favour of Group companies 31.12.2009 31.12.2008 Joint and several liability for loans of Group companies 20,660 20,810 of which drawn down by Group companies 1,905 1,045 Guarantees for Group companies 750 750 Emmi AG has subsidiary liability for outstanding lease liabilities of Burra AG to Zürcher Freilager AG.

2. Subordinated loans Long-term loans to Group companies include subordinated loans amounting to CHF 32.3 million (prior year CHF 32.9 million).

3. Summary of consolidated and associated companies Capital share Capital share Purpose Capital 31.12.2009 31.12.2008 Emmi Schweiz AG, Lucerne Service 5,700 100 % 100 % Emmi International AG, Lucerne Service 5,000 100 % 100 % Emmi Frischprodukte AG, Lucerne Production 6,000 100 % 100 % Molkerei Biedermann AG, Bischofszell Production and trade 1,010 80 % 70 % Nutrifrais SA, Plan-les-Ouates Production and trade 4,000 60 % 0 % Mittelland Molkerei AG, Suhr Production and trade 20,000 60 % 60 % Emmi Käse AG, Lucerne Production and trade 11,400 100 % 100 % Emmi Milch AG, Lucerne Production 4,000 100 % 100 % Emmi Butterzentrale AG, Lucerne Service 2,000 100 % 100 % Emmi Logistik AG, Lucerne Service 2,000 91 % 91 % Emmi Fondue AG, Langnau i.E. Production 15,000 49 % 63 % MOPRO Luzern AG, Lucerne Service 120 100 % 100 % Emmi Interfrais SA, Küssnacht SZ Trade 1,000 61 % 61 % Burra AG, Zurich Trade 300 100 % 100 % Baumann Käse AG, Zollikofen Trade 100 100 % 100 % HOLDING der Schweizerischen Milchproduzenten, Münchenbuchsee Service 5,000 64 % 60 % Fromco S.A. Moudon, Moudon Production 2,100 60 % 60 % Cetra Alimentari SA, Lugano Trade 250 34 % 34 % Vermo Tiefkühl Pool AG, Lucerne Trade 2,500 35 % 35 %

4. Bond

Bond type Bond with reopening option Nominal amount CHF 125 million Securities number 2673417/ISIN CH0026734175 Interest rate 3.00 % Maturity 13 September 2006 to 13 September 2013 Redemption 13 September 2013 at par value 82 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY)

CHF 000s

5. Shareholders

Nominal capital 2009 % 2008 % ZMP Invest AG, Lucerne 1) 28,890 54.0 % 28,616 53.4 % Lombard Odier Darier Hentsch Fund Managers SA, Geneva 3,547 6.6 % 4,093 7.7 % Zentralschweizer Milchkäuferverband, Lucerne 1) 2,500 4.7 % 2,500 4.7 % MIBA Milchverband der Nordwestschweiz, Liestal 1) 1,931 3.6 % 1,932 3.6 % Emmi Wohlfahrtsfonds, Lucerne (welfare foundation) 890 1.7 % 890 1.7 % Other 15,740 29.4 % 15,467 28.9 % Total 53,498 100.0 % 53,498 100.0 %

1) ZMP Invest AG, Lucerne, the Zentralschweizer Milchkäuferverband, Lucerne, and the MIBA Milchverband der Nordwestschweiz, Liestal, from a Group in the sense of Article 20 of the SESTA. The Group owns 62.3 % (prior year: 61.7 %) of the total voting rights.

6. Transactions in own shares

Emmi AG, Lucerne Date Number Price in CHF Value in CHF Opening balance 01.01.09 – – – Purchase of own shares 21.04.09 1,000 107 106,800 Redemption of own shares 20.05.09 1,000 107 106,800 Closing balance 31.12.09 – – –

7. Outstanding derivative financial instruments 2009 2008 Positive Negative Positive Negative Interest rate instruments values values values values Swaps – – 3,662 61 Total replacement values – – 3,662 61 The derivative financial instruments were used to hedge the risk of movements in interest rates.

Dissolution of interest rate swap Due to the current market situation, Emmi decided to dissolve an existing interest rate swap in June. As the swap was concluded at the same time as the issue of the bond on 13 September 2006 and had the same maturity (13 September 2013), the proceeds from the dissolution have been recognized as a liability and will be released systematically over the residual term of the bond. The effective interest rate on the bond is thus reduced from 3.0 % to 2.1 % per year.

8. Contingent liabilities Group VAT liability (all Group companies are jointly and severally liable). FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY) 83

CHF 000s

9. Compensations and participations of members of the Board of Directors, the Council and Group Management

Basic Variable Non-cash Other Total Total Board of Directors compensation compensation benefits compensation 2009 2008 Konrad Graber, Chairman (since 20 May 2009, previously member) 135 – – 1 136 55 Fritz Wyss, Chairman (until 20 May 2009) 77 – 138 47 262 271 Moritz Erni, Vice-Chairman 55 – – 13 68 65 Stephan Baer, member 50 – – 1 51 51 Peter Bühlman, member (until 20 May 2009) 16 – – 5 21 42 Joseph Deiss, member 36 – – 12 48 45 Hans Herzog, member 55 – – 13 68 61 Alexander Jost, member 40 – – 12 52 53 Hanspeter Müller, member 37 – – 11 48 47 Thomas Oehen, member (since 20 May 2009) 16 – – 5 21 – Josef Schmidli, member 35 – – 10 45 42 Total Board of Directors 552 – 138 130 820 732

Agricultural Council Benedikt Felder –– – – – 8 Jacques Gygax 1 – – – 1 9 Albert Rösti 4 – – – 4 9 Total Agricultural Council 5 – – – 5 26

Group Management Urs Riedener, CEO (from 1 March 2008) 645 267 3 162 1,077 855 Other members 2,201 943 25 622 3,791 3,314 Total Group Management 2,846 1,210 28 784 4,868 4,169

Not comparable to prior year due to various people joining and leaving.

Notes Basic and variable compensation is paid exclusively in cash. There are currently no share or option plans within the Emmi Group. The Board of Directors does not receive any variable compensation. The private share of company cars as well as parting gifts are shown under non-cash benefits, and social security contributions are included in other compensation. No severance payments were made during the year under review. As at 31 December 2009, the Emmi Group had not granted loans to any current or former members of the Board of Directors or Group Management or to any persons affiliated to the same. Furthermore, no loans were granted during the entire period under review. No compensation was paid to former members of the Board of Directors or Group Management. Equally, no compensations which deviate from standard commercial practice were paid to persons affiliated to current or former members of the Board of Directors or Group Management.

84 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY)

CHF 000s

Investment in subsidiaries and associates As at 31 December 2009, individual members of the Board of Directors, Agricultural Council and Group Management (including affiliated persons) held the following number of shares in the company.

No of shares No of shares Board of Directors 31.12.2009 31.12.2008 Konrad Graber, Chairman 950 550 Fritz Wyss, Chairman (until 20 May 2009) – 700 Moritz Erni, Vice-Chairman 100 100 Stephan Baer, member 30,000 30,000 Peter Bühlman, member (until 20 May 2009) – 170 Joseph Deiss, member 100 100 Hans Herzog, member 540 540 Alexander Jost, member 490 490 Hanspeter Müller, member – – Thomas Oehen, member (since 20 May 2009) 180 – Josef Schmidli, member 74 74

Agricultural Council Benedikt Felder 27 20 Jacques Gygax 10 10 Albert Rösti – –

Group Management Urs Riedener, CEO – – Robert Muri, Deputy CEO 50 50 Robin Barraclough, member (from 1 June 2009) – – Reto Conrad, member – – Othmar Dubach, member 176 176 Marc Heim, member (from 1 August 2009) – – Erich Kienle, member (until 30 January 2009) – 40 Matthias Kunz, member 27 27 Max Peter, member – – Markus Willimann, member 44 44 The members of the Board of Directors, the Agricultural Council and Group Management own a total of 32,768 shares (prior year 33,091 shares) and thus hold 0.6 % of the voting rights (prior year 0.6 %)

10. Risk management Emmi carried out a company-wide risk assessment in 2009. As part of a formal process, significant business risks were assessed in Group workshops and individual interviews according to the extent of the potential damage and their likelihood of occurrence. The causes of significant risks and measures to manage them were drawn from this assessment. The Board of Directors of Emmi AG approved the risk assessment and is monitoring the implementation of the defined measures by Group Management. No exceptional risks that went beyond normal limits were detected during the assessment.

Further details on risk management can be found in section 28 of the notes to the Consolidated Financial Statements. FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY) 85

PROPOSED APPROPRIATION OF AVAILABLE EARNINGS

CHF 000s

Available earnings 31.12.2009 31.12.2008 Available for distribution by the Shareholders’ Meeting prior year 66,535 61,306 Effective distribution of the dividend prior year 13,910 13,910 Allocation to free reserves 40,000 30,000 Carried forward to new account 12,625 17,396 Net profit 43,809 49,139 Available for distribution by the Shareholders’ Meeting 56,434 66,535

Appropriation of available earnings The Board of Directors proposes that the available earnings be used as follows: distribution of a dividend of CHF 3.00 (prior year CHF 2.60) gross per registered share for the financial year 2009 on 5,349,810 shares entitled to dividends. Dividends 16,049 13,910 Allocation to free reserves 35,000 40,000 Carried forward to new account 5,385 12,625 56,434 66,535 86 FINANCIAL STATEMENTS OF EMMI AG, LUCERNE (HOLDING COMPANY)

AUDITORS’ REPORT SHARE INFORMATION 87

SHARE INFORMATION

Stock exchange information 2009 2008 2007 2006 2005 Share price on 31.12. in CHF 128.50 99.00 150.00 144.90 120.00 Year’s high (end-of-day position) in CHF 130.00 150.90 172.00 169.80 128.40 Year’s low (end-of-day position) in CHF 100.10 98.00 146.00 120.30 111.00 Market capitalization on 31.12. in CHF million 687 530 802 758 600 Ø trading volume Units 2,598 2,393 4,246 5,007 5,797

Key share data Net profit per share in CHF 14.08 10.98 7.52 10.55 11.04 Net profit per share (diluted) in CHF 14.08 10.98 7.52 10.33 9.78 Shareholders’ equity per share in CHF 148.97 138.34 130.94 127.49 122.16 Return on shareholders’ equity 1) in % 10.96 11.10 5.01 7.28 9.20 Distribution in CHF 3.00 2.60 2.60 2.60 2.60 Distribution rate 2) in % 21.31 23.67 34.60 24.63 25.30 Return on dividends 3) in % 2.33 2.63 1.73 1.79 2.17

1) Profit per share/year-end closing price 2) Distribution per share/net profit per share 3) Distrubution per share/year-end closing price

Capital structure on 31.12 Share capital CHF 000s 53,498 53,498 53,498 52,287 49,982 divided into number of registered shares Units 5,349,810 5,349,810 5,349,810 5,228,710 4,998,200 Par value per registered share in CHF 10 10 10 10 10

Share ranking for dividends All Voting rights All registered shareholders have full voting rights Securities number 1.282.989 ISIN code CH0012829898 Ticker EMMN Common code 20592664 Issue price on 6.12.2004 CHF 100.00 Opening price on 6.12.2004 CHF 104.50 Traded in the SIX Local Caps segment on the SIX Swiss Exchange Index inclusion SPI, SPI Extra, SPI ex SLI, Swiss All Share Index

SHARE PRICE 2009 Opening price on 5.1. CHF 99.00 in CHF Closing price on 31.12 CHF 128.50

140.00

120.00

100.00

80.00 Price

60.00

40.00

20.00

0.00 Date 11/05/09 11/05/09 09/11/09 23/11/09 31/12/09 05/01/09 19/01/09 02/02/09 16/02/09 02/03/09 16/03/09 30/03/09 13/04/09 27/04/09 25/05/09 08/06/09 22/06/09 06/07/09 20/07/09 03/08/09 17/08/09 31/08/09 14/09/09 28/09/09 12/10/09 26/10/09 07/12/09 88 Locations

Emmi Switzerland Emmi International

Lucerne headquarters Austria Emmi, Habsburgerstrasse 12, 6002 Lucerne Emmi Österreich GmbH, Illweg 8, A-6714 Nüziders

Dagmersellen Belgium and Luxembourg Emmi, Stationsstrasse 21, 6252 Dagmersellen S.A. Haerten & Interimex N.V., Chaussée de la Hulpe 166, Section C, Production of powdered milk, fresh cheese B-1170 Watermael-Boitsfort Sales to industry Canada Emmen Emmi Canada Inc., 1370 rue Joliot-Curie, Boucherville (Québec), Emmi, Seetalstrasse 200, 6032 Emmen Canada J4B 7L9 Production and development of fresh products Production, pre-packaging and development of cheese Switzerland Cheese Marketing Inc., 1370 rue Joliot-Curie, Boucherville (Québec), Canada J4B 7L9 Kaltbach Emmi, Dorf, 6212 Kaltbach France Production of cheese specialities Ambrosi Emmi France S.A., 5 place de l’île de Beauté, F-06300 Nice KALTBACH cheese-ageing cave Germany Kirchberg Emmi Deutschland GmbH, Maxstrasse 64, D-45127 Essen Emmi, Winkelweg 4, P.O. Box 545, 3422 Kirchberg Pre-packaging of cheese Italy Export Emmi Holding Italia S.r.l., Corso Magenta 56, I-20123 Milano

Küssnacht Emmi Italia S.p.A., Corso Magenta 56, I-20123 Milano Emmi, Zugerstrasse 60, Fänn, 6403 Küssnacht Supplies to retail and catering trade Trentinalatte S.p.A., Via dell’Adige Vecchio 15, I-38030 Roverè della Luna (TN) Langnau Emmi, Bahnhofstrasse 32, 3550 Langnau i.E. Netherlands Production of fresh cheese, processed cheese and fondue Emmi Nederland, Zuiderhavenweg 4, NL-4004 JJ Tiel

Ostermundigen Spain Emmi, Milchstrasse 9, 3072 Ostermundigen Emmi Lácteos España, S.L., Calle Soto de Aizoain, E-31080 Pamplona Production of fresh products and ice cream UK Suhr Emmi UK Limited, 12 Blades Court, Deodar Road, Putney, Mittelland Molkerei AG, Obertelweg 2, 5034 Suhr London SW15 2NU, Great Britain Production of fresh and dairy products USA Emmi Holding (USA), Inc., 704 Executive Boulevard, Valley Cottage, Further Emmi locations NY 10989, USA

Distribution of cheese specialities: Emmi (USA), Inc., 704 Executive Boulevard, Valley Cottage, Zollikofen NY 10989, USA

Frozen warehouse: Roth Käse USA Ltd., 657 Second Street, Monroe, Wisconsin 53566, USA Kriens Switzerland Cheese Marketing (USA) Inc., 704 Executive Boulevard, Maturation: Valley Cottage, NY 10989, USA Gossau, Landquart, Lucerne, Moudon, St-Imier, Thun, Zollikofen

Packaging: Nüziders (Austria)

Production of cheese: Bever, Landquart, Saignelégier, Sarnen, Stein, various village cheeseries

Production of fresh products: Bischofszell, Geneva

Supply of dairy products to catering trade: Zurich Editing Emmi Group Communications, Lucerne

Concept, design and production Farner Consulting AG, Zurich

Photography Thomas Plain: title image, pages 42, 44, 46, 48, 52 Matthias Studer: pages 5, 17, 37, 38, 43, 45, 47, 49, 51, 53 Markus Bühler-Rasom: page 50 E.T. Studhalter: page 17

Translation CLS Communication AG, Basel

Printing Neidhart + Schön Group, Zurich

The Emmi 2009 Annual Report is available in German and English.

Emmi Annual Report 2009