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Annual Report 2016

The Cham Paper Group is a leading manufacturer of coated speciality papers. Surface finishing lends papers properties

that generate value added for its customers. The company, which was founded in 1657, has three sites, one in Switzerland

(Cham) and two in Italy (Carmignano and Condino), and a global sales network.

The decision to focus on development and sales and discontinue paper manufacturing in Switzerland has made way for a

new project on the factory site in the centre of Cham. The Cham Paper Group is developing an eleven-hectare quarter

there called the Papieri site.

The Cham Paper Group (ticker symbol: CPGN) is listed on the SIX Swiss Exchange

Overview and key figures 3

Letter to the shareholders 4

The Cham Paper Group’s markets 6Business development paper division

The Papieri site 10Business development real estate division

The Cham Paper Group’s shares 14

Corporate Governance 16

Compensation Report 24

Consolidated financial statements 30Notes to the consolidated financial statements

Financial statements of Cham Paper Group Holding AG 51Notes to the financial statements of Cham Paper Group Holding AG

The Cham Paper Group

Table of Contents

3

Overview and key figures

Net revenue up by 2.1% to CHF 198.4 million

Profitability boosted by efficiency improvements in production and a return to normal raw material prices

EBIT margin within the target range at 5.3%

Local residents in Cham give clear backing to development at the Papieri site

Net profit for the year of CHF 8.6 million for the Group and payment of a dividend of CHF 4.00 per share

in CHF million, unless otherwise specified 2016 2015

Sales in tonnes 150,408 146,274

Net revenue 198,365 194,258

EBITDA 18,704 9,187

As a % of net revenue 9.4% 4.7%

EBIT before restructuring 10,498 627

As a % of net revenue 5.3% 0.3%

Restructuring income 0 1,795

EBIT after restructuring 10,498 2,422

Profit 8,590 480

Earnings per share (in CHF) 11.53 0.65

Dividend per share (in CHF) 4.00 3.00

Free Cash Flow 6,676 –5,695

Shareholders’ equity 108,118 102,088

As a % of total assets 55.4% 50.6%

Net cash / (Net debt) 3,248 –1,432

Investments in tangible and intangible assets 11,603 12,073

Number of employees (FTEs) 375 389

Overview and key figures

4

Dear Shareholders

The Cham Paper Group enjoyed a largely pleasing financial year in 2016. The Group has returned to growth following a lengthy and challenging period of transformation for the paper division, achieving EBIT margin at the lower end of its target range for the first time. The paper division benefited from effi-ciency improvements in production and from a return to normal raw material prices in what was a slightly weaker market environment. The clear backing from voters in Cham to the redevelopment of the Papieri site proved key to activities in the real estate division. A planning process that had lasted over four years was thus brought to a successful conclusion, paving the way for the creation of the town’s new quarter.

The Cham Paper Group increased revenue by 2.1% to

CHF 198.4 million in 2016 (previous year: CHF 194.3

million), achieving growth for the first time in five years.

Even more pleasing were the 46% increase in gross prof-

it, which rose from CHF 18.1 million to CHF 26.3 million,

and the marked rise in operating profit (EBIT) to CHF 10.5

million (previous year: CHF 2.4 million). The Group gener-

ated a net profit for the year of CHF 8.6 million (previous

year: CHF 0.5 million).

Paper division enjoys major improvement in resultsAfter 2015, which was challenging in a number of re-

spects, the 2016 financial year proved distinctly kinder

despite a weaker market environment. Operating work-

flows stabilised following the end of many years of trans-

formation and raw material prices returned to normal lev-

els, enabling a slight increase in revenue to CHF 196.9

million (previous year: CHF 193.4 million) and a significant

improvement in operating profit (EBIT) to CHF 9.9 million

(previous year: CHF 0.7 million before the release of re-

structuring provisions). This equates to a return on sales

of 5.1%, within the target EBIT margin range of 5–12%.

The efficiency improvements made by concentrating pro-

duction in Italy and a further fall in fixed costs mean that

the mills are now in a sound position. Initial results from

the measures to optimise processes on the extensively

modernised production systems are also coming through

and are sending out positive signals for the future of the

paper business. Innovations and efficiency gains will con-

tinue to enhance the competitiveness of Cham Paper

Group’s solutions in 2017 as well.

Real estate division on track The development plan for the Papieri site was completed.

Following the preliminary review by the cantonal offices,

the planning dossiers were made public in the spring. On

25 September 2016, voters in the municipality of Cham

approved the development plan and the associated partial

change to the building regulations and the zoning plan.

This marked the end of a planning phase which had lasted

over four years and in which the authorities and residents

of Cham had been actively involved.

Letter to Shareholders

5

In October, Specialized became the first company to

move into the renovated former workshop building as a

permanent commercial tenant, ensuring a steady rise in

rental income together with the more than 70 other ten-

ants making interim use of the site. This pushed the real

estate division’s revenue up by 64% to CHF 2.3 million

in the year under review (previous year: CHF 0.8 million).

This also includes the sale of a relatively small building

from the portfolio for just over CHF 0.5 million. The divi-

sion’s operating profit (EBIT) came to CHF 769,000 (previ-

ous year: CHF 244,000).

Balance sheet remains strongThe Cham Paper Group still has a healthy balance sheet.

Concentrating production in Italy enabled inventories to

be cut by 20%, reducing total assets and liabilities. The

investment made in the conversion of the workshop

building in Cham increased the value of the Group’s tangi-

ble fixed assets by nearly 4%. The equity ratio amounted

to 55.4% at the end of the year (end of 2015: 50.6%)

and the Group held cash and cash equivalents totalling

CHF 42 million. The site in Cham is currently still valued

at acquisition cost.

Increased dividendThe Cham Paper Group’s healthy operating profit means

that it can propose a higher payout to its shareholders.

The intention is to increase the dividend from CHF 3

(2015) to CHF 4 per share, once again to be paid in the

form of a distribution from capital reserves, which will be

tax-free for private investors. The Board of Directors will

also propose to the General Meeting of Shareholders that

all its members be re-elected.

Positive outlook across all divisionsThe Board of Directors and the Executive Board believe

that the Group has a bright future. The paper division will

be in a position to generate additional growth over the

next few years. Leveraging potential efficiency and pro-

ductivity gains should ensure that profitability remains at

between 5 and 12% of EBIT margin over the long term,

i.e. within the target range previously announced. The real

estate division will be implementing the first phase of its

construction project in 2017, which will deliver a signifi-

cant increase in rental income from 2020 onwards.

We would like to thank our shareholders, customers and

business partners for their trust and our employees for all

their hard work in the service of the Cham Paper Group.

Philipp Buhofer

Chairman of the Board of Directors

Susanne Oste

Delegate of the Board of Directors

Letter to Shareholders

The Cham Paper Group’s markets

Consumer GoodsThe consumer goods solutions of the Cham Paper Group

consist of papers for flexible packaging and label printing.

The base papers protect the packaged content, present

the product and provide information about it. As a quality

supplier in the consumer goods segment, the Chamber

Paper Group provides brand manufacturers with innova-

tive paper solutions that stand out for their efficiency and

safety in all production processes. The excellent proper-

ties of the paper guarantee superb printing results, ena-

bling brand items to be shown to their best.

A European consumer survey* shows that consumers

love paper. 87% of the surveyed consumers prefer paper

packaging, 93% consider paper the most environmentally

friendly packaging solution and 87% like paper because it

is easy and safe to handle.

* Ipsos consumer survey, carried out in the UK, France, Germany,

Poland, Sweden, Belgium and Spain in 2006

Industrial Release The range in the industrial release segment comprises

base papers for release liners, process liners and face

stock papers. These papers are specially designed for

technical and industrial uses, for the automotive and the

construction industry and for labels and have excellent

release properties. The Cham Paper Group meets spe-

cific customer requirements with tailored solutions that

provide impressive efficiency, reliability and quality in all

production and processing steps.

Paper is an important raw material in the self-adhesive

industry. 70% of all release liners, i.e. the liners of

adhesive foils, adhesive tapes and self-adhesive labels,

and 65% of all labels used worldwide are made from

paper.

Digital Imaging As a leading supplier on the global market for digital imag-

ing papers, the Cham Paper Group supplies inkjet papers

for large-format digital printing and industrial inkjet printing.

The range includes sublimation papers for digital textile

printing. The inkjet papers are suitable for both indoor and

outdoor use and boast maximum colour saturation. The

sublimation papers for textile printing have excellent feed

and transfer properties. The Cham Paper Group tests its

products at its own application centre under real conditions

and provides training courses to customers.

Digital printing continues to gain in importance in relation

to offset printing. Some 10 to 15% of the global printing

volume is digitally printed. The advantages of digital print-

ing include customization, time savings and the ability to

print short runs.

Consumer Goods

Food

Non-Food

Tobacco

Beverages & Liquids

Industrial Release

Release Liner Tapes

Release Liner Labels

Process Liners

Facestock (Labels)

Digital Imaging

Large Format Inkjet Graphics

Sublimation Print / Textile Graphics

8

Performance of the paper division

After 2015, which was challenging in a number of respects, the 2016 financial year proved dis-

tinctly kinder despite a weaker market environment. Operating workflows stabilised following the

end of many years of transformation and raw material prices returned to normal levels. This ena-

bled a significant improvement in the operating profit to CHF 9.9 million (previous year: CHF 2.5

million), while revenue also increased, albeit only slightly (+2%) due to currency effects, to end

the year at CHF 196.9 million. Initial results from the measures to optimise processes on the

extensively modernised production systems are also coming through and are sending out positive

signals for the future of the paper business. Innovations and efficiency gains will further enhance

the competitiveness of Cham Paper Group’s solutions in 2017.

Although conditions on the market were largely positive

across the board at the start of 2016, they deteriorated

somewhat as the financial year went on. A stagnating

consumer goods business was offset by an increase in

deliveries in the industrial release and digital imaging seg-

ments.

Shifts in the revenue mix for consumer goodsThe Cham Paper Group faced a fall in orders received for

flexible packaging (food/non-food segment), which cus-

tomers attributed mainly to lower demand amongst end

users. The lost volumes were made up through higher

sales of inner liners (tobacco) to China. Demand from

Europe’s tobacco industry is declining, while the sales

opportunities for these products also appears to have

peaked in Asia too. Revenue in the wet glue labels seg-

ment remained steady. Sales volumes in the consumer

goods segment kept more or less at last year’s levels

overall, while revenue fell slightly due to the changes to

the product mix.

Strong market position benefits industrial releaseRevenues from products for industrial applications (indus-

trial release segment) were significantly higher year on

year. In Europe particularly, the Cham Paper Group ben-

efited from good market demand and its well-known

name. For instance, sales in the facestock product group

witnessed double-digit growth thanks to the leading mar-

ket position enjoyed by speciality papers for metallised

labels. The tapes, industrial productions and labels prod-

uct group also reported an above-average increase in rev-

enue thanks not least to a marked improvement in the

quality of the glassine products, which are now setting

the standard in the industry. A new automatic process

for exchanging information was introduced, meaning

that customers can now spot and fix paper faults imme-

diately. This guarantees them flawless material for their

production requirements at all stages of the process,

reducing the reject rate for damaged end products (e.g.

smartphones and laptops). This resulted in a 5% increase

in both volume and revenue.

Digital imaging returns to growthThis sector is the Group’s smallest yet also its fast-

est-growing. It was able to shift its focus entirely back

to cultivating its markets following the challenging step

of transferring digital imaging products to Italy. Accord-

ingly, volumes sold increased by 8% following last year’s

period of stagnation. In particular, sublimation papers for

the textile market enjoyed a steady growth in demand.

The rising popularity of digital printing on textiles meant

higher volumes but also fiercer competition, keeping rev-

enue down at the previous year’s level. However, thanks

to an optimised production method, targeted process

support for customers and innovative products such as

the TRANSJET® Industrial and TRANSJET® Eco II, the

Business development paper division

Cham Paper Group has carved out a clear competitive

edge for itself that will prove a major boon in the future.

Progress at the millsThe relocation of production activities and the extensive

modernisation of the factories in Italy were completed

successfully at the start of the year. Following the chal-

lenging period spent converting the paper machine in

Carmignano and transferring the digital imaging prod-

ucts, investments fell back to a normal level and are

now focused on improving quality and efficiency on the

production side. Output from the mills rose by some 3%

in 2016 to 150,408 tonnes. This figure also includes the

base papers for much of the digital imaging sector, which

the Cham Paper Group has been producing completely in

house since mid-2016 as an effective way of absorbing

its fixed costs. Shifting production to Italy delivered sub-

stantial benefits in terms of manufacturing costs. Com-

bined with an improved product mix, this enabled the

price pressure in the digital imaging sector to be handled

successfully. The investments made to convert paper

machine 4 have allowed the Group once again to manu-

facture flexible packaging papers with higher grammages

at competitive prices.

Potential for efficiency gains far from exhaustedThere is still some scope left for optimising production

processes and the capacity utilisation of machinery, which

will be the main focus of efforts at the factories over the

next two years. Leveraging synergy effects, optimising

processes and streamlining the product range will further

expand mill capacity and cut manufacturing costs, strength-

ening the market position enjoyed by Cham Paper Group’s

solutions over the long term. The workforce in Italy has

also been making a key contribution in this regard. Increas-

ing the maximum number of production days has boosted

flexibility in production as well as increasing capacity at the

two mills by around 5%. The total headcount fell by some

15 full-time posts in 2016 to 370.6.

Stepping up market cultivationThe move to make the Group’s products and factories

more competitive is being accompanied by a drive to

refocus and step up market cultivation. The correct appli-

cation of the solutions developed by the Cham Paper

Group has a major influence on the efficiency of the cus-

tomer’s processes and the quality of their end product.

In turn, the customer’s ordering and purchasing patterns

have a significant impact on production efficiency at the

mills. Fine-tuning this partnership brings competitive

advantages for both sides: customers appreciate sup-

plementary services such as order flexibility, after-sales

support and collaborative product enhancements. The

Cham Paper Group is determined to redouble its efforts

to exploit these synergy effects and product innovations

going forward.

Speciality papers sales markets

of Cham Paper Group

The Papieri site

A factory site is becoming a new quarterAfter relocating its paper production to its Italian mills, the

Cham Paper Group is focusing on research and develop-

ment work, product sales and holding company activities

in Cham. This has created space for a new project on its

former factory site, an area steeped in tradition that makes

up a sizeable portion of Cham town centre. The company

has envisioned a new quarter in conjunction with the com-

munity of Cham. The Cham Paper Group laid the founda-

tions for the redesign of the Papieri site in March 2012,

when it submitted its application for rezoning, which the

municipal council endorsed. Representatives of the land-

holder and the local authorities in Cham then worked

closely together to design the 120,000-square-metre site.

Key interest groups and local residents were also involved

in the process. Voters in Cham backed the plans for rede-

veloping the Papieri site in autumn 2016, with a ruling on

approving the development and rezoning plans expected

from Zug cantonal council in spring 2017.

Homes, offices and spaces for public useRedeveloping the Papieri site is all about architectural

variety. Iconic buildings are being repurposed, preserving

the area’s links to its former life housing a paper mill. An

attractive mix of homes, offices and spaces for public use

will make it a popular meeting point for the entire Cham

community. Energy efficiency is another key criterion,

with the reconditioned hydraulic power station planned

to meet a portion of the energy needs in the new quarter.

Interim use proves popular and the first permanent tenant moves inIt will be some time yet before the first residents begin

living on the Papieri site. Until conversion and construc-

tion work gets under way, a host of temporary tenants

are making use of the space that has been made avail-

able. More than 70 commercial tenants from all kinds of

different sectors are now based on the premises. The

income from this interim use is covering much of the pro-

ject planning costs for the site’s redevelopment. The first

permanent commercial tenant moved into the completely

refurbished workshop building in autumn 2016.

Stucture plan

Existing buildings

Planned new buildings

12

Performance of the real estate division

The clear backing that voters in Cham gave the plans to rezone and redevelop the Papieri site on

25 September 2016 marks the triumphant end to a planning phase that lasted over four years.

Approval from Zug cantonal council is still pending and is expected in spring 2017. The project to

redevelop the Papieri site will see the real estate division evolve into the second key pillar of the

Cham Paper Group over the next ten years.

Following a preliminary examination by the cantonal

offices, the planning dossiers were made available to the

public in spring 2016. This led to 13 objections being filed

with the municipal authorities, several of which were with-

drawn following various hearings. The project met with

lively discussions in the run-up to the vote and the debate

received extensive coverage in the local media. The result

reflects the broad support enjoyed by the redevelopment

project for the Papieri site, with 63% of voters in Cham

approving the necessary partial change to the building reg-

ulations and the zoning plan and 57% endorsing the devel-

opment plan. Zug cantonal council, which has received one

objection to the development plan from the Zug branch

of the Swiss Association for Transport and Environment

( Verkehrs-Club der Schweiz – VCS), is expected to issue

its ruling on approval in April 2017.

New European headquarters on the Papieri siteRight on schedule, the site’s first permanent commercial

tenant moved into the converted workshop building on

the banks of the Lorze on 1 October 2016. Specialized,

a prestigious manufacturer of bicycles and accessories,

has set up its new European headquarters on the Papieri

site, including a large research and development depart-

ment employing some 40 people. The work to convert

the nearly 2,500 square metres of space was tailored to

Specialized’s requirements. Of the around CHF 7.5 mil-

lion invested in planning and refurbishment, 70% of the

orders went to companies based in Cham and neighbour-

ing municipalities.

Business development real estate division

2016

2019

2018

2017

2020

2021

Vote on development plan and rezoning

Construction of sub-stage 1A starts

Sub-stage 1A occupied

Two study contract procedures for

sub-stages 1A and 1B

2022

Sub-stage 1B occupied

Construction permits requested for

sub-stages 1A and 1B

Development of the Papieri site

Construction of sub-stage 1B starts

Construction phase

Construction phase

13

Interim use generating a steady rise in incomeOver 70 commercial tenants from all kinds of different

sectors are now based on the site and the income from

this interim use is covering much of the project-planning

costs. More interested parties are still being sought for

additional offices, laboratories, commercial premises,

warehouses and the large event hall, all of which have

now also been made available (www.zwischennutzun-

gen-papieriareal.ch).

Operating profitThe real estate division posted a 64% increase in revenue

to CHF 2.3 million in the year under review, which also

includes the sale of a relatively small building from the

portfolio for just over CHF 0.5 million. Rental income rose

by around 25% to CHF 1.8 million, while operating profit

(EBIT) stood at CHF 769,000 in the year under review

(previous year: CHF 244,000).

OutlookWork in 2017 will focus solely on the next steps in the

planning process and especially on laying the groundwork

for the first stage of construction. Rental income from

interim use and leasing the workshop building will also

continue to increase.

Residential useCommercial/services use Public use

Investment propertiesCham Paper GroupFreehold apartmentsfor sale

Percentage usePlanned ownership structures

72%

25%

3%

75%

25%

14

I. Key figures

Number of shares at 31 December 2016 2015 2014 2013 2012

Number of registered shares 745,000 745,000 745,000 745,000 745,000

Nominal value per registered share (in CHF) 65.00 65.00 65.00 65.00 65.00

Treasury shares 0 11 0 5,746 41,655

Number of outstanding registered shares 745,000 744,989 745,000 739,254 703,345

Key figures at 31 December 2016 2015 2014 2013 2012

Earnings/Loss (–) per share (in CHF) 11.53 0.65 2.48 0.55 –1.76

Shareholders’ equity per share (in CHF) 145.12 137.03 144.83 145.76 143.38

Gross dividend (in CHF) 4.00 1) 3.00 3.00 3.00 3.00

Dividend yield (in %) 1.22 1.16 1.24 1.34 1.91

1) Proposal to the general assembly of 3 May 2017

Stock exchange price in CHF per share 2016 2015 2014 2013 2012

Highest 340 261 274 245 188

Lowest 243 222 209 167 148

Year end price 327 259 241 224 157

Average of traded shares per day 249 305 482 822 514

Market capitalisation year end (in MCHF) 243 193 179 167 117

Cham Paper Group Holding AG is listed on the SIX Swiss Exchange in Zurich. The registered shares are included in the

SPI (Swiss Performance Index).

Swiss Security Number: 193185 / ISIN-Code: CH0001931853

Ticker: CPGN / Bloomberg: CPGN SW Equity / Reuters: CPGN.S

Share price development in CHF

The Cham Paper Group’s shares


200

220

240

260

280

300

320

340

380

360

Jan 16 Mar 16 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17

Cham Paper GroupSPI

15

II. Shareholder structure

Major shareholders

Shareholder group Buhofer (BURU Holding AG, Philipp Buhofer, Heinz Buhofer, all Hagendorn)

41.12%

LB (Swiss) Investment AG, Zurich 8.53%

Free float (according to SIX-Definition) 59.29%

Overview

Registered shareholders 887

Registered shares 633,685

Not registered shares 111,315

Shareholders with 1–500 shares 793

Shareholders with 501–5,000 shares 85

Shareholders with more than 5,000 shares 9

III. Dividend policy

The Cham Paper Group follows a result-oriented dividend

policy. Normally, 25 to 35% of the operational net profit

is distributed to the shareholders (details see page 17).

IV. Information policyThe Annual Report of the Cham Paper Group is published

in electronic form in German and in English, the Half-year

Report in German only. From FY 2014 a short version of

the annual report is available in printed form and mailed

out to the shareholders. It is always the full version of the

report in German which is legally binding. Facts relevant

for the share price are announced by way of ad-hoc pub-

lications (German and English).

For continuously updated information on the company,

shares, analyst opinions, media articles, dates and FAQs,

please refer to the Investor Relations section at www.

cham-group.com. On our website you can also subscribe

to the e-newsletter so that you, at the same time as the

media, are kept abreast of results and new develop-

ments.

V. Contact

Share register

areg.ch ag

Fabrikstrasse 10

4614 Hägendorf

Phone +41 62 209 16 60

Media & IR-contact

Edwin van der Geest

[email protected] oder

[email protected]

Phone +41 43 268 32 32

VI. Financial Calendar

General assembly3. May 2017, Lorzensaal, Cham

Financial reportingHalf-year report 2017: 17. August 2017

Annual report 2017: 26. March 2018


16

The Cham Paper Group is committed to contemporary corporate governance. The statements below comply with the current Direc-tive on Information Relating to Corporate Governance (DCG) of the SIX Swiss Exchange and describe the principles and regulations relating to the organisation, management and monitoring of Cham Paper Group Holding AG and its subsidiaries as at 31 December 2016. These principles are contained in the Articles of Association and in the Organisational Regulations of the Board of Directors.

1. Group structure and shareholders

1.1 Group structureCham Paper Group Holding AG, with its headquarters in 6330 Cham, is a public limited company organised according to the laws of Switzerland. In its capacity of a holding company it holds, either directly or indirectly, all companies belonging to the Group. The scope of consolidation does not include any listed companies. The unlisted companies that are part of the scope of consolidation of Cham Paper Group Holding AG are presented on page 50 of the consolidated financial statements with details of each company, its registered office, share capital and shareholdings. The Group’s operational management structure as at 1 January 2017 is shown in the organisational chart below.

Corporate Governance


* Member of the Executive Board

Management structure

Cham Paper Group Holding AG

Board of Directors

Delegate of theBoard of Directors

Susanne Oste*

Division Real Estate

Andreas Friederich*

Division Paper

Luis Mata*

CPG Schweiz AG

CPG Italia S.p.A.

17

1.2 Significant shareholdersAs of 31 December 2016, 887 shareholders were entered in the share register of Cham Paper Group Holding AG (2015: 863 share-holders). The following shareholders and shareholder groups, known to Cham Paper Group Holding AG from the share register and from the disclosures of participating interests in the Swiss Official Gazette of Commerce, each held more than three per cent of the share capital as at 31 December 2016 and 2015:

2016 2015

BURU shareholder group (BURU Holding AG, Philipp Buhofer, Heinz Buhofer, all Hagendorn) 41.12% 41.12%

LB (Swiss) Investment AG, Zurich 8.53% 7.95%

As far as Cham Paper Group Holding AG is aware, the significant shareholders of the company have not entered into any sharehold-ers’ agreements among themselves nor have they entered into any agreements regarding the exercise of voting rights or other rights related to the shares of Cham Paper Group Holding AG.

1.3 Cross-shareholdingsCham Paper Group Holding AG does not have any cross-share-holdings in other companies exceeding the maximum limit of 5% in terms of capital or voting rights.

2. Capital structure

2.1 Share capitalThe nominal share capital of Cham Paper Group Holding AG was CHF 48,425,000 as at 31 December 2016. The share capital is divided into 745,000 fully paid-up registered shares with a par val-ue of CHF 65.00 per share. All shares have the same voting rights and are entitled to the same dividend. There is only one category of registered shares.

The shares of Cham Paper Group Holding AG are listed on the SIX Swiss Exchange and are traded in the small & mid caps segment (securities number: 193185, ISIN code: CH0001931853, ticker symbol: CPGN). For further information about the shares of Cham Paper Group Holding AG, please refer to pages 14 and 15.

As of 31 December 2016 Cham Paper Group Holding AG held no registered shares in the company’s own holdings (31 December 2015: 11 registered shares in the company’s own holdings). This corresponds to 0.00% of the share capital of Cham Paper Group Holding AG.

2.2 Conditional and approved capitalThere is no conditional or approved capital.

2.3 Changes in capitalIn FY 2016 and 2015 no changes were made to the company’s cap-ital. As of 31 December 2016 and 2015 the nominal share capital of Cham Paper Group Holding AG amounted to CHF 48,425,000. The par value of the registered shares amounted to CHF 65.00.

For further information about the development of the share capital structure of Cham Paper Group Holding AG during the last two years, please refer to the tables on page 54 of the financial state-ments of Cham Paper Group Holding AG.

2.4 Participation and dividend right certificatesCham Paper Group Holding AG has not issued any participation certificates or dividend right certificates.

2.5 Restrictions on transferability and nominee entriesTransfer of the registered shares of Cham Paper Group Holding AG is not subject to any restrictions. The only requirement for entry in the share register is a declaration that the shareholder has acquired the shares in his or her own name and on his or her own account. Otherwise there are no other entry restrictions.

2.6 Convertible bonds and optionsCham Paper Group Holding AG has no outstanding convertible bonds nor has it issued any tradable options.

2.7 Dividend policy and appropriation of available earningsCham Paper Group Holding AG normally pursues a dividend poli-cy according to which 25% to 35% of the net operating profit is designated for distribution. The proposal made by the Board of Directors to the General Meeting of Shareholders pertaining to the appropriation of the available earnings always takes account of the company’s current financial situation.


* Member of the Executive Board

18

3. Board of Directors

3.1 Members of the Board of DirectorsThe Board of Directors of Cham Paper Group Holding AG is composed of four non-executive members and one executive member. With the exception of Urs Ziegler, who was working as a Delegate in the Executive Board of the Group from 5 December 2012 to 4 May 2016 and Susanne Oste, who was appointed as a Delegate and elected to the Group as a member of the Executive Board on 4 May 2016, none of the serving members of the Board of Directors belonged to the Executive Board of Cham Paper Group Holding AG or that of any of its subsidiaries or engaged in any significant business relations with any of its subsidiaries during any of the three financial years preceding the reporting period.

Name Position

Election to the Board of Directors End of term Audit Committee

Compensation and Nomination Committee

Philipp Buhofer Chairman 2004 2017 Member Chairman

Felix Thöni Vice Chairman 2008 2017 Chairman Member

Susanne Oste Delegate 2016 2017 – –

Urs Ziegler Member 2007 2017 Member –

Niklaus Peter Nüesch Member 2012 2017 – –

Name

Year of birth, nationality

Position

Professional background

Education

Activities in governing and

supervisory bodies

Name


Position


Education


supervisory bodies

Philipp Buhofer

1959, Swiss citizen

Chairman of the Board of Directors since 2006Member of the Board of Directors since 2004

Since 1997: independent businessman and Board of Directors member 1987–1997: EPA AG, Zurich, Group Head Purchasing and Sales, overall responsibility for procurement, Executive Management Board member, Delegate and Chairman of the Board of Directors 1984–1987: Purchasing, Metro International, Baar, Switzerland, Düsseldorf, Germany, and Hong Kong

Bachelor of Economics & Business Administration, HWV Lucerne

Chairman of the Board of Directors, Kardex AG, ZurichChairman of the Board of Directors, Rapid Holding AG, DietikonChairman of the Board of Directors, DAX Holding AG, HagendornChairman of the Board of Directors, Lorzengrund Immobilien AG, HagendornDelegate of the Board of Directors, BURU Holding AG, HagendornMember of the Board of Directors, Schaffner Holding AG, LuterbachBoard member in various SMEs

Felix Thöni

1959, Swiss citizen

Vice Chairman of the Board of Directors since 2013Member of the Board of Directors since 2008

Since 2010: Member of Board of Directors / Management Consultant2003–2009: Charles Vögele Group, Pfäffikon, CFO1992–2002: Gavazzi Group, Steinhausen, CFO1988–1991: Schindler Management AG, Ebikon, Area Controller

Equivalent of PhD of Economics, University of St. Gallen

Vice Chairman of the Board of Directors Kardex AG, ZurichMember of the Board of Directors, Renergia Zentralschweiz AG, Perlen/Root


19

Name


Position


Education

Susanne Oste

1968, Swiss-German double citizen

Delegate of the Board of Directors since 2016Member of the Board of Directors since 2016

2004–2015: Ziegler Papier AG, Grellingen1998–2004: Sihl AG, Zürich1994–1998: Papierfabriken Biberist und Utzenstorf, Biberist

MBA City University Seattle, USABachelor of Science (Engineer for pulp and paper production) Paper technologist

Name


Position


Education

Urs Ziegler

1948, Swiss citizen

Member of the Board of Directors since 2007

1980–2009: Ziegler Papier AG, Grellingen, CEO1975–1980: Eldag AG, Zurich, Director of Customer Projects and Consultancy1975–1980: COC AG, Zurich, Director of Business Management and IT Organisation1973–1975: Eldag AG, Basel, Financial Accounting

Equivalent of MA in Economics, University of St. Gallen

Name


Position


Education


supervisory bodies

Niklaus Peter Nüesch

1953, Swiss citizen

Member of the Board of Directors since 2012

Since 2013: Nüesch Development (Asia) Ltd. CEO Since 2009: Planner Empredimentos Ltda., Sao Paolo, Brazil, managing partnerSince 1996: Nüesch Development AG, St. Gallen, partnerSince 1988: Management Consultant1979–1982: GLP Guhl+Lechner+Philipp, Architects and Planners, Zurich, project manager in urban development and residential construction projects

Equivalent of MSc Architecture from the Swiss Federal Institute of Technology, Zurich (ETHZ)MBA, INSEAD, Fontainebleau, France

Board chairman, Nüesch Development AG, St. GallenBoard member, Rapid Holding AG, DietikonBoard member, Schindler Aufzüge AG, EbikonBoard member in various SMEs


20

3.2 Other activities and interestsWith the exception of the positions mentioned under 3.1, the members of the Board of Directors are not engaged in any activities in executive management and supervisory bodies or permanent management and consultancy functions for significant interest groups.

3.3 Elections and term of officeMembers of the Board of Directors and its chair are elected by the shareholders at the General Meeting of Shareholders for a term of one year, one year being the period from one General Meeting of Shareholders to the close of the next. If elections are held to elect replacements for board members mid-term, those so elected complete the term of office of the members they are replacing. Elections take place on an individual basis. Re-election is permis-sible. There is no limit to the number of terms of office that any one member may serve. However, upon reaching the age of 70 Board of Directors members must lay down their office at the next General Meeting of Shareholders. The shareholders have the right to vote Board of Directors members out of office at the General Meeting of Shareholders. The number of Board of Directors mem-bers is limited to and seven. The average time the present Board of Directors members have served is approximately seven and a half years, their average age being ca. 60.

The Board of Directors elects a vice-chair from among its own members. His role is to act as a deputy to the chair in the event of the chair’s inability to attend or non-availability.

3.4 Internal organisation

3.4.1 Allocation of responsibilities within the Board of DirectorsThe Board of Directors has the ultimate authority to make deci-sions except where this is reserved to shareholders by operation of the law or the Articles of Association. The Board of Directors is responsible for the overall direction, supervision and control over executive management. It enacts guidelines for the company’s business policy and informs itself regularly about the company’s performance and business situation. The main responsibilities of the Board of Directors are:• Defining the Group’s organisational and strategic direction• Ultimate supervision of the Group’s business operations and

monitoring of its performance• Approval of significant acquisitions and disposals• Establishing systems and procedures for the Group’s account-

ing and financial control and planning• Establishing the Group’s business policy, in particular its invest-

ment and financial policy• Approval of budgets including investments and financial plans• Drafting the Compensation Report and the Annual Report,

preparation and conducting of the General Meeting of Share-holders, and the implementation of the resolutions adopted by it

• Establishing the key principles of corporate governance and guidelines for the Group’s information and communication policy

• Appointment and dismissal of persons charged with the man-agement and representation of the Group and designating au-thorised signatories

• Appointing the members of the Board of Directors for subidiaries

• Establishing the organisation and monitoring of the internal con-trol system

• Informing the competent authorities in the event of excess liabilities over assets

3.4.2 Board of Director committeesThe Board of Directors has established three permanent commit-tees from among its members, the Audit Committee, the Compen-sation and Nomination Committee and the Real Estate Commit-tee, to deal with clearly defined subject areas. These committees primarily have an advisory and monitoring function and they report to the Board of Directors so as to enable it to prepare its decisions or exercise its supervisory function.

Audit CommitteeThe Audit Committee assists the Board of Directors in performing its duties of ultimate financial supervision of the company and in managing its interactions with the external auditors. The members of the Audit Committee are appointed by the Board of Directors from among its own members. The main tasks of the Audit Com-mittee are:• Auditing the financial statements and the half-year reports of

Cham Paper Group Holding AG in tandem with the Executive Board and the external auditors

• Evaluating the appropriateness and effectiveness of the ac-counting and reporting principles used for consolidation

• Assessing the presence of an effective internal control system including risk management

• Evaluating and selecting external auditors to be nominated for election by the General Meeting of Shareholders

• Assessing the performance of the external auditors and verify-ing their independence

• Reviewing the fees of the external auditors and the compatibil-ity of their auditing activities with any other consulting activities in which they may be engaged

• Reviewing information concerning corporate governance for compliance with the guidelines of the SIX Swiss Exchange

• Deciding whether the Board of Directors can be recommended to submit the consolidated financial statements and the financial statements of Cham Paper Group Holding AG to the General Meeting of Shareholders for adoption by it.

The Audit Committee has no decision-making authority, but it rath-er assesses the aforementioned matters and prepares the indi-vidual and consolidated financial statements for approval by the Board of Directors. Meetings are attended by the Delegate of the Board, the Head of Finance & Administration and as necessary, by representatives of the external auditors. The Audit Committee meets at least once every six months, more frequently as may prove necessary. In FY 2016 three meetings were held, each last-ing approximately half a day. Representatives of the external audi-tors attended all three meetings.

The Audit Committee consists of Dr. Felix Thöni (Chairman), Philipp Buhofer and Urs Ziegler. Because of their professional background, the members of the Audit Committee have sufficient experience and competency in accounting and financial manage-ment to be able to perform their responsibilities.


21

Compensation and Nomination CommitteeThe members of the Compensation and Nomination Committee are elected by the General Meeting of Shareholders. The Com-pensation and Nomination Committee establishes the principles for compensation of the Board of Directors, the Delegate of the Board and members of the Executive Board. It also establishes the guidelines for the selection of candidates for membership on the Board of Directors and the Executive Board. The main tasks of the Compensation and Nomination Committee are:• Establishing the compensation principles for the Board of Direc-

tors, the Delegate of the Board and the Executive Board mem-bers

• Establishing the financial compensation for the Board of Direc-tors, the Delegate of the Board and the Executive Board mem-bers

• Determining the total amount as well as the additional amount of compensation for the members of the Board of Directors and the Management Board,

• Drafting of the Compensation report,• Evaluating the performance of the Delegate of the Board• Evaluating the performance of the Board of Directors• Establishing the principles for the selection of candidates for

election to the Board of Directors and selecting candidates• Establishing the principles for the selection of the successor to

the Delegate of the Board, Executive Board members and se-lecting candidates

• Reviewing the status of the pension fund of Cham Paper Group Holding AG and its subsidiaries

The Compensation and Nomination Committee has no decision- making authority, but it rather assesses the aforementioned mat-ters and prepares them for approval by the Board of Directors. The Compensation and Nomination Committee meets at least once every six months, and more frequently as may prove necessary. The Compensation and Nomination Committee consists of Philipp Buhofer (Chairman) and Felix Thöni. In FY 2016, five meetings were held, each lasting about half a day.

Real Estate CommitteeThe Real Estate Committee consists of two members of the Board of Directors and may be increased by between one and a maxi-mum of three experts who are not part of the Board of Directors. Under the leadership of the Chairman of the Board of Directors, the Real Estate Committee discusses and monitors the Executive Board in the area of real estate and all aspects associated with the planning and implementation of the "Papieri" project.

The Real Estate Committee receives regular reports on the course of business in the real estate sector and has the professional au-thority to review management in the real estate sector. It reports to the Board of Directors. The Organisational Regulations indicate the form in which information is prepared and applications or deci-sions in this committee are taken.

The Committee is made up of Philipp Buhofer, Niklaus Peter Nüesch and as external real estate experts Claude Ebnöther, Dölf Biasotto and Andreas Binkert

Ten meetings and one workshop were held in FY 2016, each last-ing about half a day.

3.4.3 Functioning of the Board of Directors and its committeesThe Board of Directors meets at the invitation of the Chairman as often as the conduct of business demands, however at least once every quarter. In addition, extraordinary meetings or decisions by way of circular also take place as required. The Board of Directors meets once a year for a strategy seminar. Decisions are made by the entire Board of Directors. The Chairman generally chairs the Board of Directors meetings and casts the tie-breaking vote in the event of ties. He also plans and runs these meetings. Meetings of the Board of Directors and their agendas are prepared by the Chairman in consultation with the Delegate of the Board.

Each member of the Board of Directors may convene a meeting or request that an item be placed on the agenda. The members of the Board of Directors are sent the agendas and documenta-tion in advance of the meetings. Apart from the Board of Directors members, meetings are also attended by the Head of Finance & Administration and, depending on the agenda, by other members of the Management Teams.

Depending on the matter being discussed, the Board of Direc-tors may also invite other third parties to be present at meet-ings. When dealing with matters that relate only to Cham Paper Group Holding AG or that are of a particularly confidential nature, only Board of Directors members are in attendance. Minutes are taken of the deliberations and decisions of the meetings. In 2016 the Board of Directors held five meetings, of which one was a half-day meeting and four were full-day meetings. One of these meetings was convened as an extraordinary meeting.

3.4.4 Delegation of Authority within the Board of Directors and the Executive BoardThe Board of Directors of Cham Paper Group Holding AG dele-gates operational management completely to the Delegate of the Board. By the same token, the Delegate of the Board is respon-sible for operational management. She is assisted in carrying out this task by members of the Management Teams in Switzerland and Italy who report directly to her. The authorities and responsi-bilities of the Delegate are determined in particular by the budget approved by the Board of Directors, the Organisational Regulations and the established strategy. The Organisational Regulations can be consulted on the website, under Investor Relations/Corporate Governance1).

1) http://ir.champaper.ch/cgi-bin/show.ssp?id=770&companyName=cham-

paper&language=English


22

3.4.5 Information and control instrumentsThe Board of Directors exercises its ultimate supervision of the Executive Board by way of a structured reporting system as well as management accounting and budgeting processes. Generally, the Head of Finance & Administration also attends the meetings of the Board of Directors. At meetings he presents and comments on day-to-day business, provides a detailed view of finances, and informs the Board of Directors regarding current operative issues in the core businesses. Together with the Delegate, he also re-ports on developments in key markets and projects and draws the Board of Directors’ attention to existing and imminent risks. Apart from materials on the course of business, financial results, market developments and other significant events in the Group, the Board of Directors also receives the following compre-hensive written reports on a periodical basis, these items being provided to the Board in a timely manner prior to its meetings:

• Finance Report monthly• Quarterly Report quarterly• Half-year Report bi-annually• Annual Report annually• Business Plan Report annually• Budget Report annually• Forecast Report twice per year (in July and October)

The monthly financial report contains an overview including com-ments and a variance analysis on the current-year budget and prior-year figures with regard to the balance sheet, income state-ment, cash flow statement, net working capital, and key produc-tion and sales figures for Cham Paper Group Holding AG and its subsidiaries (Cham Paper Group Schweiz AG, Cham Paper Group Italia S.p.A.).

The Board of Directors committees meet regularly with the Dele-gate, the Head of Finance & Administration and external consult-ants, including representatives of the external auditors. The exter-nal auditors are accountable to the Audit Committee, the Board of Directors, and ultimately to the shareholders. Upon completing an audit, the external auditors submit the financial report and the compensation report to the Audit Committee and discuss its find-ings with it. The auditors report in a comprehensive manner to the Board of Directors, in so doing assessing reporting and accounting, the internal control system, and the performance and results of the audit.

As a general principle, no Board of Directors members take part in meetings of the Management Teams exept the Delegate of the Board of Directors. However, the Chairman of the Board of Direc-tors and individual Board members regularly consult with the Dele-gate of the Board and, as needed, with individual members of the Management Teams. Additionally, once a year a joint workshop is conducted with the Board of Directors and the Executive Board at which the strategy and business plan for the next three years is discussed and established.

3.4.6 Risk assessment and internal control system for financial reportingIn view of article 728a of the Swiss Code of Obligations, which went into effect on 1 January 2008, the Group introduced a uni-form internal control system (ICS) for financial reporting. In this context, fundamental relevant accounting and reporting risks were identified and analysed with regard to their probability of occur-rence and damage potential. Key internal controls were identified and documented for the risks identified in this risk assessment as having a high probability of occurrence and posing a high damage potential. The key controls identified were documented both at the level of the overall company and at the level of the various business processes and systems of the subsidiaries. Key controls relate to control activities in the allocation of authority and the reg-ulation of control measures. Key controls must be documented at minimum by process descriptions and by details pertaining to the control objectives and control and risk descriptions. Assessment of the effectiveness of controls, identification of weaknesses and the adoption of corrective measures are carried out by the Man-agement Teams. The Head of Finance & Administration reports regularly to the Audit Committee on the effectiveness of the in-ternal control system. The external auditors perform verification of the existence of an internal control system and report in a compre-hensive manner to the Audit Committee or the Board of Directors, assessing the internal control system and the auditors’ findings. These principles for establishing and implementing the internal control system and performing risk assessment are contained in the Board of Directors’ regulations governing the internal control system.

In addition to the internal control system, the Cham Paper Group has had a risk management system since September of 2009 that is updated by the Delegate and the Management Teams in the course of their annual risk assessment. The system contains a risk matrix in which identified risks are entered in accordance with their probability of occurrence and the potential possible extent of damage or loss posed by them. The risk matrix forms the basis for the risk catalogue, also contained in the manual, which describes the individual risks in detail and possible actions for mitigating them. The most significant risks for the year under review and the actions that have been adopted and initiated to counteract these risks are described in the Notes of the consolidated financial state-ments on page 49 and 50.


23 Corporate Governance

4. Executive Board

4.1 Chief Executive Officer

Name


Position


Education

Susanne Oste

1968, Swiss-German double citizen

Delegate of the Board of Directors since 2016Member of the Board of Directors since 2016

2004–2015: Ziegler Papier AG, Grellingen1998–2004: Sihl AG, Zürich1994–1998: Papierfabriken Biberist und Utzenstorf, Biberist

MBA City University Seattle, USABachelor of Science (Engineer for pulp and paper production) Paper technologist

4.2 Head of Paper Division

Name


Position


Education

Luis Mata

1981, Spanish citizen

Head of Paper DivisionMember of Executive Board since July 2015

2012–2015: Cham Paper Group, Cham, Head of Finance & Controlling2010–2012: Cham Paper Group Schweiz AG, Cham, Head of Finance & Controlling2008–2010: Cham Paper Group Schweiz AG, Cham, Head of Finance Team2000–2008: Cham Paper Group Schweiz AG, Cham, Deputy to Head of Finance & Controlling

MA Controlling, IFZ ZugBachelor of Economics & Business Administration, HWZ Zurich

4.3 Head of Real Estate Division

Name


Position


Education

Andreas Friederich

1975, Swiss citizen

Head of Real Estate DivisionMember of Executive Board since July 2015

2011–2014: Ernst Basler + Partner, Zurich, Deputy site development2007–2011: Ernst Basler + Partner, Zurich, Project Manager 2004–2007: Project Manager in several architecture firms

Equivalent of MSc Architecture, ETH ZurichMAS in Real Estate, University Zurich


4.4 Other activities and interestsWith the exception of the positions mentioned under 4.1, Execu-tive Board members do not engage in any other activities or asso-ciated interests.

4.5 Management contractsCham Paper Group Holding AG has not entered into any manage-ment contracts with third parties.

5. Compensation report

ContentA description of the principles of the compensation system of the Cham Paper Group is provided below, including details on the compensation of the Board of Directors and the Executive Board for FY 2015 and 2016. The report satisfies the provisions of the Or-dinance Against Excessive Compensation in Publicly Listed Com-panies (VegüV), which entered into force on 1 January 2014, and the associated provisions of the Swiss Code of Obligations. The report substantially follows the recommendations of the Swiss Code of Best Practice for Corporate Governance issued by econo-miesuisse and the Directive on Information Relating to Corporate Governance (DCG) published by SIX Swiss Exchange Ltd.

5.1 Content and method for establishing compensation and shareholding schemes

Compensation philosophy and principles set out in the Group’s articles of associationThe Cham Paper Group endeavours to pursue a compensation policy which provides for the transparent compensation of the members of its Board of Directors and Executive Board that is in line with fair market conditions. In establishing the amount of com-pensation, the company’s size and the complexity of the demands made on members of staff are to be duly taken into account.

Board of DirectorsFor their work the members of the Board of Directors receive a fixed compensation that can be disbursed in cash or in shares (cf. section 5.2 Employee share ownership scheme) plus a lump-sum expense allowance. The compensation principles and the amount of compensation payable to the members of the Board of Directors are reviewed annually by the HR and Compensation Committee and established by the Board of Directors acting on a proposal from the Committee (cf. section 3.4.2 Board of Directors committees). The individual members have the right to be involved in the amount of compensation established for them. Salary com-parisons or benchmarks are not systematically taken into account. No external consultants were involved in the drafting of the com-pensation principles currently in force.

Additional compensation for tasks exceeding the regular Board of Directors mandate is granted by the board in plenum and requires the consent of a majority of the members. Such tasks are clearly defined and are limited in time.

The chairman currently receives a base salary including flat-rate expenses of TCHF 120, the vice-chairman receiving a base sal-ary including lump-sum expenses of TCHF 40. The other board members receive a base salary of TCHF 30, which also includes a lump-sum expense allowance. The lump-sum expense allowance compensates the board members for travel and other necessary out-of-pocket expenses incurred by them in going about their work on behalf of the board. The attendance fees vary according to the number of meetings of the Board of Directors and its committees. For each board member, the attendance fees amount to TCHF 3 for an all-day meeting and TCHF 1.5 for a half-day meeting. For the committee meetings, the chairman receives an attendance fee of TCHF 4 for an all-day meeting and TCHF 2 for a half-day meeting. The attendance fees for the other committee members are equal to those of the Board of Directors meetings. The overall amount of compensation of the members of the Board of Directors and the compensation disbursed to current and former members of the Executive Board for FY 2015 and 2016 are stated in section 5.5 Compensation of the Board of Directors and the Executive Board on page 26 and 27.

Chief Executive Officer / Executive BoardFor attending to her operative tasks, the CEO receives a month-ly base salary in cash whose amount is proposed by the HR and Compensation Committee and is subject to the approval of the Board of Directors. As provided for in the articles of association, part of the annual salary of the CEO and the Executive Board can be variable. The variable portion may not be higher than the fixed base salary.

The performance incentive compensation includes a bonus plan under which annual performance bonuses may be paid to the members of the Executive Board. The current regulations on the payment of bonuses contains the following provisions on the form and establishment of bonuses: the amount of these bonuses de-pends on the achievement of general corporate targets and indi-vidual targets, both of which are established in advance. The tar-gets include quantitative and qualitative factors. The performance incentive bonus is established for each member who is entitled to a bonus as a percentage of their base salary, the target bonus generally amounting to a maximum of 30% of the base salary in case of 100% target achievement.

The general quantitative performance target is based on the achievement of the target EBIT. It is limited by an upper and lower cap and weighted at minimum 70%. If the target achievement falls below 80% of the quantitative goal, no bonus is payable. In case of a target achievement of 150% or more a maximum bonus of 50% of the base salary is disbursed.


The individual targets extend to performance goals that may be of a quantitative or qualitative nature and must be accompanied by clearly measurable criteria. They are accorded a maximum 30% weighting in the calculation of the bonus. The performance incen-tive bonuses are paid out in April of the following year in cash or optionally in the form of shares (cf. section 5.2, Employee share ownership scheme).

For the year under review bonuses in the amount of TCHF 209 were defined and will be paid in the following year. For details on the compensation of the CEO and the Executive Board for FY 2015 and 2016, please refer to section 5.5 Compensation of the Board of Directors and the Executive Board on page 26 and 27.

5.2 Employee share ownership scheme During FY 2010, an employee share ownership scheme was in-troduced for the members of the Board of Directors and the Ex-ecutive Board. To date, the shares for this programme have been issued from the company’s own treasury holdings.

Under the employee share ownership scheme, the members of the Board of Directors establish at the beginning of the financial year what portion of their compensation they would like to receive in shares for the current year (25%, 50%, 75% or 100%). This portion may be changed during the course of the year, this apply-ing to the remainder of the year. The allocation of shares usually takes place on 31 December of the respective year. The portion of their compensation designated by the members of the Board of Directors multiplied by a factor of 1.2 is used as the basis for calculating the number of shares to be allocated to them. The share price applicable to the allocation of shares is based on the weighted average price in effect during the preceding month, gen-erally November. Upon allocation, the shares remain blocked for one year, but the share owners are entitled to voting rights and dividends. All Board of Directors members are eligible for partici-pation in the scheme who have worked on a full-time basis during the respective financial year. The portion of compensation drawn in cash is subject to disbursement on a semi-annual basis.

The members of the Executive Board have the option of receiving the performance bonuses due them, insofar as these have been agreed, in the form of shares, either in whole or in part (25%, 50%, 75% or 100%). The allocation of shares usually takes place on 30 April of the subsequent year. The amount of the respective per-formance incentive bonus multiplied by a factor of 1.2 is used as the basis for calculating the number of shares to be allocated. The share price applicable to allocation is based on the weighted aver-age price in effect during the preceding month, generally March. Upon allocation, the shares remain blocked for one year. During this blocking period the share owners are entitled to voting rights and dividends. All members of the Executive Board are eligible for participation who are in the company’s employ on 31 March of the subsequent year.

The figures reported in section 5.5 already contain a factor of 1.2, the withholding tax of 5.66% is not taken into account. The shares are valued at the price in effect at the end of the year.

5.3 Allocation of shares during the year under review During the year under review, 55 shares of Cham Paper Group Holding AG were allocated to members of the Board of Directors. 50 shares were allocated to members of the Executive Board dur-ing the reporting year.

5.4 Employment contracts and severance pay No employment contracts with notice periods of more than twelve months have been agreed with members of the Board of Directors or the Executive Board, nor have any agreements on severance pay or any other payments associated with departure. Nor was any such compensation paid during the year under review.

26

5.5. Compensation of the Board of Directors and Executive Board members

This section is subject to review by the auditors (cf. Article 17 of the Ordinance Against Excessive Compensation in Publicly Listed Com-panies (VegüV)).

Compensation of the Board of Directors Compensation disbursed to current and former members of the Board of Directors in FY 2015 and 2016:

Compensation Board of Directors 2016 Position

Base salary 1)

TCHF

Attendance fee 1)

TCHF

Consulting fee 2)

TCHF

Employee benefits

TCHFTotalTCHF

Thereof in shares 3)

Number of shares 3)

Philipp Buhofer Chairman 120 32 68 0 220 0% 0

Felix Thöni Vice Chairman 42 28 10 6 86 25% 55

Susanne Oste (since GSM 2016) Delegate 20 11 0 2 33 0% 0

Niklaus Peter Nüesch Member 30 14 22 0 66 0% 0

Peter Schmid (until GSM 2016) Member 10 9 37 1 57 0% 0

Urs Ziegler Member 30 11 140 12 193 0% 0

Total Board of Directors 252 105 277 21 655 – –

Compensation Board of Directors 2015 Position

Base salary 1)

TCHF

Attendance fee 1)

TCHF

Consulting fee 2)

TCHF

Employee benefits

TCHFTotalTCHF

Thereof in shares 3)

Number of shares 3)

Philipp Buhofer Chairman 120 23 56 0 199 0% 0

Felix Thöni Vice Chairman 42 17 3 4 66 25% 61

Niklaus Peter Nüesch Member 30 9 20 0 59 0% 0

Peter Schmid Member 31 22 22 3 78 25% 54

Urs Ziegler Member 30 15 0 1 46 0% 0

Total Board of Directors 253 86 101 8 448 – –

1) Gross amounts (including employee contributions) including the share portion with a factor 1.2 valued at the year-end price of CHF 326.50, (see section

5.2 Employee share ownership scheme)2) The additional services relate to general legal advice and compensation for fixed-term engagements associated with projects.

Urs Ziegler was Head of Digital Imaging ad interim from GSM 2016 to 31 December 2016.3) The share portion and the number of shares are in relation to the total of the base salary plus attendance fees.

The compensation paid to the members of the Board of Directors was slightly higher in FY 2016 as in 2015, due to more meetings and special projects.

The following total amounts for the compensation of the Board of Directors and senior management were approved at the 2016 annual general meeting:Total to Board of Directors: CHF 750,000 Total to senior management: CHF 1,150,000



Compensation of Senior ManagementThe compensation of senior management in the financial years 2016 and 2015 was as follows:

Compensation senior management 2016 PositionBase salary 1)

TCHF

Bonuses and other remune-ration sums 2)

TCHF

Payments to pension funds

TCHFTotalTCHF

Maximum remuneration, Luis Mata COO 212 84 46 342

Total to other Members 3) 4) 422 125 84 631

Total to senior management 634 209 130 973

Compensation senior management 2015 PositionBase salary 1)

TCHF

Bonuses and other remune-ration sums 5)

TCHF

Payments to pension funds

TCHFTotalTCHF

Maximum remuneration, Urs Ziegler 4) Delegate 288 0 20 308

Total to other Members 187 57 31 275

Total to senior management 475 57 51 583

1) Gross amounts (including employee contributions)2) Bonus for the work as senior management members3) Urs Ziegler (CEO) until GSM 2016, Susanne Oste (CEO) since GSM 2016 (pro rata bonus), Andreas Friederich (Head of Real Estate Division)4) The compensation for the work as members of the Board of Directors is included in the table Compensation Board of Directors.

The compensation paid to senior management was higher compared to 2015 because in FY 2016 senior management consisted of three members. Senior management was extended from 1 to 3 members after 1 July 2015.

The content and method of determining compensation and shareholding schemes are described on page 24 f.

Loans and creditsNo loans or credits were granted to active or former members of the Board of Directors or the Executive Board or to persons related to them, and as of 31 December 2016 none are outstanding

28

6. Shareholders’ rights of participation

The shareholders’ rights of participation are defined in the Articles of Association of Cham Paper Group Holding AG. The following remarks refer to the Articles of Association of Cham Paper Group Holding AG. A full version of the Articles of Association can be con-sulted on the website, under Investor Relations/Corporate Govern-ance/Articles of Association2.

6.1 Restrictions on voting rights and representationEach registered share entitles to one vote at the General Meet-ing of Shareholders of the company. This notwithstanding, voting rights may be exercised only by persons whose registered shares are entered in the share register of Cham Paper Group Holding AG as having voting rights. According to Swiss corporate law, registra-tion is subject to a declaration that the shareholder has acquired the shares in his or her own name and on his or her own account. According to the Articles of Association, the Board of Directors may refuse to make an entry with voting rights in the share regis-ter only under the following circumstances:• provided that, and for as long as, acceptance of the applicant as

a shareholder with voting rights might hinder the company in providing evidence of Swiss control as required by Swiss feder-al law, in particular the Federal Law on the Acquisition of Real Estate by Non-Residents, or

• where the applicant, despite having been requested by the com-pany to do so, does not expressly declare himself or herself to be acquiring the shares in his or her own name and on his or her own account.

No restrictions on voting rights of this kind were made in 2016 and 2015.

The shareholder can be represented at the General Meeting of Shareholders by an authorised legal representative, another share-holder entitled to vote or the independent proxy elected by the General Meeting of Shareholders. The independent proxy is re-quired to cast the votes entrusted to him by shareholders accord-ing to their instructions.

6.2 Voting quorumsThe Articles of Association of Cham Paper Group Holding AG do not stipulate any special quorums that go beyond the provisions of Swiss corporate law.

2 http://ir.champaper.com/cgi-bin/show.ssp?id=730&companyName=

champaper&language=English

6.3 Convocation of the General Meeting of ShareholdersThe General Meeting of Shareholders is convened in accordance with statutory requirements.

6.4 AgendaShareholders who represent shares with a par value of at least one million Swiss francs may make written requests for proposals for items to be placed on the agenda. Such proposals must be sub-mitted in writing to the Board of Directors at least sixty days prior to the General Meeting of Shareholders.

6.5 Entry in the share registerShareholders may request that they be entered in the share re gister at any time. As a general rule, shareholders may be entered in the share register up to two week before the General Meeting of Shareholders.

7. Change of control and defense measures

7.1 Obligation to submit a bidThere are no provisions in the Articles of Association concerning the obligation to submit a bid. Legal provisions apply in this regard.

7.2 Change-of-control clauseThere are no change-of-control clauses with members of the Board of Directors or with members of the Executive Board.

8. Auditors

8.1 Retainership and term of office of the lead auditorPriceWaterhouseCoopers, Zug, has been retained as the statutory auditors and Group auditors since 2010. Norbert Kühnis, the re-sponsible lead auditor, assumed his office in the same year (2010). The retainership of the auditors is decided each year and must be renewed annually. The Group auditor and the statutory auditors are re-elected each year by the General Meeting of Shareholders.


29

8.2 Auditing fees and additional feesThe following fees were invoiced by PriceWaterhouseCoopers, Zug, for its services rendered as Group auditors and statutory audi-tors of Cham Paper Group Holding AG and its subsidiaries:

2016 TCHF

2015 TCHF

Ordinary audits 157 155Additional fees 28 47Total 185 202

Fees for audit services cover those services which must be per-formed every year in order to render an assessment on the consol-idated financial statements and to draw up reports on the financial statements of the subsidiaries as required by local law.

Additional fees cover other advisory services by the auditors that do not necessarily have to be provided by the Group auditor.

8.3 Information tools of the external auditorsThe auditors normally attend the meetings of the Audit Commit-tee. They report orally and in writing on the findings of their au-dits. Evaluation and monitoring of the auditors is performed by the Audit Committee, which makes recommendations to the Board of Directors. In particular, the Audit Committee evaluates the per-formance, fees, and independence of the statutory auditors. In 2016, the auditors attended a total of three half-day meetings of the Audit Committee.

9. Information policy

The Annual Report of the Cham Paper Group is published in elec-tronic form in German and in English, the Half-year Report in Ger-man only. From FY 2014 a short version of the annual report is available in printed form and mailed out to the shareholders. It is always the full version of the report in German which is legally binding. Facts relevant for the share price are announced by way of ad-hoc publications (German and English).

For continuously updated information on the company, shares, analyst opinions, media articles, dates and FAQs, please refer to the Investor Relations section at www.cham-group.com. On our website you can also subscribe to the e-newsletter so that you, at the same time as the media, are kept abreast of results and new developments.

10. Contact addresses and calendar

Share register

areg.ch agFabrikstrasse 104614 HägendorfTelefon +41 62 209 16 60

Media and Investor RelationsEdwin van der [email protected] [email protected]: +41 (43) 268 32 32

General Meeting of Shareholders3. May 2017, Lorzensaal, Cham

Financial reportingHalf-year Results 2017: 17. August 2017Annual Report 2017: 26. March 2018


30 Consolidated financial statements

Cham Paper Group – Consolidated financial statements

Consolidated income statement

1 January – 31 December Notes2016

TCHF2015

TCHFChange

%

Net revenue 3 198,365 194,258 2.1%

Cost of goods and services sold –172,025 –176,195 –2.4%

Gross profit 26,340 18,063 45.8%

Administrative and general expense –8,852 –9,328 –5.1%

Marketing, sales, research and development expense –7,825 –8,784 –10.9%

Other operating expense 6 –296 –570 –48.1%

Other operating income 6 1,131 1,246 –9.2%

Operating profit (EBIT) before restructuring 10,498 627 1,574.3%

Restructuring expenses 7 – 1,795 n.a.

Operating profit (EBIT) after restructuring 10,498 2,422 333.4%

Financial result 8 –544 –568 –4.2%

Foreign currency effects 375 –1,142 –132.8%

Net income before taxes 10,329 712 1,350.7%

Income taxes 9 –1,739 –232 649.6%

Net gain for the year for the Group 8,590 480 1,689.6%

Earnings per share Notes2016CHF

2015CHF

Gain per share, undiluted / diluted 10 11.53 0.65

Total 10 11.53 0.65

The Notes form an integral part of the consolidated financial statements. This annual report is issued in German and English. The German

version is binding. The report of the statutory auditor (PricewaterhouseCoopers AG, Zug) on the consolidated financial statements is

available on page 52 f. of the German version.


Consolidated balance sheet

Notes31.12.2016

TCHF31.12.2015

TCHF

Assets

Cash and cash equivalents 11 41,886 41,462

Trade accounts receivable 12 36,903 37,671

Other current receivables 13 2,412 4,240

Inventories 14 28,036 35,139

Accrued income and prepaid expenses 352 203

Total current assets 109,589 118,715

Tangible fixed assets 15 85,360 82,177

Intangible assets 16 307 734

Financial assets 55 55

Deferred tax assets 9 0 63

Total non-current assets 85,722 83,029

Total assets 195,311 201,744

LiabilitiesTrade accounts payable 25,604 33,849

Current financial liabilities 17 27,124 33,129

Other current liabilities 4,209 2,525

Current provisions 18 691 2,077

Accrued expenses and deferred income 8,436 6,631

Total current liabilities 66,064 78,211

Non-current financial liabilities 17 11,514 9,765

Deferred tax liabilities 2,228 2,589

Pension plan obligations 19 3,200 3,548

Non-current provisions 18 4,187 5,543

Total non-current liabilities 21,129 21,445

Total liabilities 87,193 99,656

Share capital 20 48,425 48,425

Capital reserves 38,220 38,220

Treasury shares 20 0 –2

Retained earnings 21,473 15,445

Total shareholders’ equity 108,118 102,088






Consolidated cash flow statement


TCHF2015

TCHF

Gain 8,590 480

Depreciation 5 8,206 8,560

Impairments / (reversal of impairments) 0 –1,505

(Gain) from disposal of property and equipment 6 –253 –241

(Decrease) in provisions (including deferred taxes) –3,003 –4,531

(Decrease) in pension plan obligations 19 –321 –219

Other non-cash items 209 571

Decrease / (increase) in trade accounts receivable 433 –5,275

Decrease in inventories 6,882 3,657

Decrease / (increase) in trade accounts payable –8,056 6,646

Decrease / (increase) in other receivables, accrued income and prepaid expenses 1,680 –1,438

Increase / (decrease) in other liabilities, accrued expenses and deferred income 3,590 –2,263

Cash flow from operating activities 17,957 4,442

Purchase of tangible fixed assets 15 –11,533 –11,878

Proceeds from the disposal of tangible fixed assets 15 322 1,936

Purchase of intangible assets 16 –70 –195

Cash flow from investment activities –11,281 –10,137

(Repayment) / increase of current financial liabilities –11,924 6,996

Increase of non-current financial liabilities 8,030 4,355

Acquisition of treasury shares –43 –1,100

Disposal of treasury shares 0 1,179

Cash dividend –2,235 –2,225

Cash flow from financing activities –6,172 9,205

Translation effects on cash and cash equivalents –80 –22

Increase / (decrease) in cash and cash equivalents 504 3,510

Cash and cash equivalents as at 1 January 41,462 37,974

Cash and cash equivalents as at 31 December 41,886 41,462

Free Cash Flow Notes2016

TCHF2015

TCHF

Total Cash flow from operating activities 17,957 4,442

Total Cash flow from investment activities –11,281 –10,137

Free Cash Flow 6,676 –5,695





Shareholders’ equity statement

Retained earnings reserves

Share capitalTCHF

Capital reserves

TCHF

Treasury sharesTCHF

Translation effects

TCHF

Fair value reserves

TCHF

Retained earnings

TCHFTotal

TCHF

Balance as at 1 January 2015 48,425 38,051 0 –8,759 0 30,183 107,900

Net profit for the year for the Group 0 0 0 0 0 480 480

Dividend 0 0 0 0 0 –2,225 –2,225

Acquisition of treasury shares 0 0 –1,100 0 0 0 –1,100

Disposition of treasury shares 0 159 1,020 0 0 0 1,179

Employee share ownership scheme 0 10 78 0 0 0 88

Translation effects 0 0 0 –4,234 0 0 –4,234

Balance as at 31 December 2015 48,425 38,220 –2 –12,993 0 28,438 102,088

Retained earnings reserves

Share capitalTCHF

Capital reserves

TCHF

Treasury sharesTCHF

Translation effects

TCHF

Fair value reserves

TCHF

Retained earnings

TCHFTotal

TCHF

Balance as at 1 January 2016 48,425 38,220 –2 –12,993 0 28,438 102,088

Cash Flow Hedges

Profit recorded in equity 0 0 0 0 161 0 161

Net profit for the year for the Group 0 0 0 0 0 8,590 8,590

Dividend 0 0 0 0 0 –2,235 –2,235

Acquisition of treasury shares 0 0 –43 0 0 0 –43

Compensation related to shares 0 0 45 0 0 0 45

Translation effects 0 0 0 –488 0 0 –488

Balance as at 31 December 2016 48,425 38,220 0 –13,481 161 34,793 108,118




34 Notes to the consolidated financial statements

Notes to the consolidated financial statements

1. Valuation and accounting methods

1.1 General remarksThe consolidated financial statements of Cham Paper Group Hold-ing AG and its subsidiaries (“Group” or “Cham Paper Group”) have been prepared in accordance with Swiss Financial Reporting Standards (Swiss GAAP FER) and comply with the requirements of Swiss law. The internal structuring, valuation and disclosure regulations drafted on this basis have been applied consistently. The consolidated financial statements provide a true and fair view of the company’s net assets and financial and earnings situation. They are based on historical costs with the exception of certain items such as derivative financial instruments and securities, which are carried on the balance sheet at their current value. In preparing these consolidated financial statements, all Swiss GAAP FER standards relevant for the Cham Paper Group were applied that are valid for the reporting periods from 1 January 2016.

The consolidated financial statements of the Cham Paper Group were approved by the Board of Directors on 24 March 2017 and are subject to approval by the general meeting of shareholders on 3 May 2017.

1.2 Scope and method of consolidationThe consolidated financial statements of the Cham Paper Group are composed of the consolidated financial statements of Cham Paper Group Holding AG and its subsidiaries. The subsidiaries forming the scope of consolidation are listed in Note 25.

Subsidiaries are companies that are directly or indirectly controlled by Cham Paper Group Holding AG. “Control” refers to the possi-bility of exercising control over financial and operational business activities so as to be able to accordingly derive a benefit from it. This is usually the case when Cham Paper Group Holding AG di-rectly or indirectly owns more than 50% of the voting rights of a company. The minority shareholder interests in the net assets and the operating result are reported separately. Companies acquired or sold during the financial year are included in the consolidated financial statements from or until the date of transfer of control. The purchase method is used for the consolidation of capital. When a company is acquired, net assets are valued at their cur-rent market value. Any surplus result from the difference between the purchase costs and the revalued net assets of the company acquired is designated as “goodwill”. Goodwill is offset against shareholders’ equity at the time of acquisition without any impact on income. The effects of theoretical capitalisation are shown in the Notes to the consolidated financial statements.

Internal Group transactions and relationships and intercompany gains are eliminated.

Investments in associates on which Cham Paper Group Holding AG has only a significant influence (usually with voting rights between 20% and 50%) but over which it does not exercise any control are recognised on the balance sheet according to the equity method and reported as investments in associates. The share of Cham Paper Group Holding AG in the results of the associates is reported, less the respective taxes, in a separate item in the income statement. Minority stakes of less than 20% are shown at historical cost less impairments.

1.3 Foreign currency translationThe individual subsidiaries prepare their financial statements in local currencies. The local currency (functional currency) corres-ponds to the currency of the primary economic environment in which the company operates.

Transactions in foreign currencies at subsidiaries are translated at the daily exchange rate prevailing at the time of the transaction. Gains and losses from foreign currency transactions and from adjustments to foreign currency holdings on the reporting date are recognised in income. Foreign currency effects on long-term inter-nal Group loans of an equity nature are recognised in shareholders’ equity without any impact on income.

The reporting currency in the consolidated financial statements is the Swiss franc. The financial statements of the foreign subsidia-ries in foreign currencies are translated into Swiss francs as fol-lows: balance sheet items are translated at the year-end exchange rate, whilst shareholders’ equity is translated at historical rates and items in the income statement and cash flow statement are translated at the average rate for the year.The translation effects resulting from the translation of the balance sheet and income statement are recognised in shareholders’ equity. When a com-pany is sold, the cumulative translation effects are recognised in the income statement as part of the gain or loss from the sale of the company.

For the major currencies, the following exchange rates are used:

Exchange rates

Year-end exchange rates applicable to balance sheet

Average exchange rates for the year applicable to

income statement and cash flow statement

CHF for 2016 2015 2016 2015

1 EUR 1.07 1.08 1.09 1.07

1 USD 1.03 0.99 0.99 0.96

1 GBP 1.26 1.47 1.34 1.47


1.4 Recognition of revenueRevenue consists of all the proceeds from sales derived from the delivery of products and services to third parties less price reduc-tions and rebates, discounts, transport costs and value added tax. As a general principle, proceeds from sales are recognised in the income statement as soon as products have been shipped and the associated benefits and risks have passed to the purchaser or the service has been provided. Revenues that reduce the cost of goods and services sold are offset against the respective item.

1.5 Cash and cash equivalentsCash and cash equivalents comprise cash on hand, cash in bank accounts and postal accounts as well as short-term bank deposits such as call money and time-deposit investments with an original time to maturity of three months or less and which are convertible to known amounts of cash at any time. This definition is also used for the consolidated cash flow statement. Cash and cash equiva-lents are reported at nominal values.

1.6 Derivative financial instruments and hedging transactionsThe Group uses derivative financial instruments primarily to hedge risks related to changes in interest rates, foreign currencies and pulp prices. Derivative financial instruments primarily comprise for-ward exchange contracts, interest futures and pulp swaps.

Derivative financial instruments are differentiated according to var-ious motives: Derivatives held for trading purposes are reported at the value prevailing on the reporting date. The changes in value since the last valuation are recognised in the result for the peri-od. Derivatives held for hedging purposes are also valued at fair values. The changes in value of derivatives classified as hedging instruments for future cash flows are recognised in shareholders’ equity in the “Fair value reserves” item without any impact on income. The changes in value of the hedging transaction recog-nised in shareholders’ equity are recognised in the income state-ment for the period in which the cash flow from the hedged under-lying transaction is recognised.

1.7 Trade accounts receivableTrade accounts receivable are recognised at the original invoiced amounts less allowances for bad debts. Allowances for bad debts are established for receivables when there is an objective indica-tion that they cannot be recovered. The carrying amount of trade accounts receivable is reduced by the allowances, and the respec-tive projected loss is expensed to net revenue in the consolidated income statement. Trade accounts receivable that are uncollecti-ble are derecognised via allowances or via the income statement.The company insures receivables of the paper division with a credit insurance to minimise the risk of default.

1.8 InventoriesInventories are carried at the lower of acquisition or production cost or net market value. The measurement is based on the average value method. The production costs of work in progress and finished goods include raw and ancillary materials, direct la-bour costs, other directly allocatable costs as well as production overheads associated with manufacturing. Financing costs are not included in production costs. Discounts are recognised as procure-ment price reductions. The net market value is the estimated sales proceeds less the product’s costs of completion and sale. The val-ues of inventories that are difficult to sell and inventories with a lower net market value are adjusted. The Group determines the value adjustments for inventories that are difficult to sell using past experience. The corresponding expected loss is expensed to the “cost of goods and services sold” item in the consolidated income statement. If it is foreseeable that the value-adjusted inventories can be used, their value is retroactively adjusted by writing up the inventory asset to the lower of the estimated net market value or the original acquisition or production cost.

Prepayments received from customers for inventories are re-ported under “other current liabilities”. Prepayments effected for the delivery of inventory asset items are recognised under “ inventories”.

1.9 Financial assetsFinancial assets are shown at historical cost less impairments. Impairments are recognised in the period result in income.

1.10 Tangible fixed assetsTangible fixed assets are carried at their acquisition or production cost less depreciation and any impairments. Tangible fixed assets are depreciated on a straight-line basis over the following estimat-ed useful lives:

Years Years

Buildings and plants 25 Plant equipment 5

Machinery, equipment 10 Vehicles 5

Production machinery 20 Hardware 5

Land and undeveloped properties are not depreciated. They are not land reserves held for profitability purposes. Where tangible fixed assets consist of significant components that have different useful lives, the components are depreciated separately. Repair and main-tenance costs are expensed as incurred without increasing the pre-vious market value or value-in-use. An expenditure that increases the market value or useful life of a tangible fixed asset is capitalised and depreciation over a maximum period of ten years.


Leases of tangible fixed assets in which the Group essentially assumes all the risks and rewards of ownership are classified as finance leases. Tangible fixed assets acquired by means of finance leases are capitalised at the inception of the lease at the lower of acquisition cost or net market value of the leased property or the present value of the future lease payments, and are subsequently depreciated over the shorter of the lease term or their expected useful life. The corresponding lease obligations, net of any financing charges, are included in the current or non-current portion of finan-cial liabilities depending on when they fall due.

1.11 Goodwill and intangible assetsGoodwill arising from acquisitions is offset against shareholders’ equity at the time of acquisition without any impact on income. The effects of theoretical capitalisation are shown in the Notes to the consolidated financial statements.

Acquired intangible assets include software, trademark rights and licenses and are recognised where they yield a measurable economic benefit for the company over more than one year. Re-porting is done at acquisition cost less straight-line depreciation over a maximum of five years, taking any value impairments into account. Intangibles associated with the acquisition of a company are reported as intangible assets at their fair value as at the date of acquisition. They are amortised on a straight-line basis over the respective useful life of a maximum of five years, taking any value impairments into account. The respective estimated useful life of intangible assets is reviewed on a regular basis.

1.12 ImpairmentAll assets are subjected to an impairment test on each reporting date. If there are indications of a possible impairment of the value of an asset, the recoverable amount of the asset value is deter-mined and an evaluation of the impairment is undertaken. If the estimated recoverable amount of the asset value – which repre-sents the higher of either the net market value or value-in-use – is less than the carrying amount, then the carrying amount of the asset value is effectively reduced to the estimated recoverable amount in the same period in which the adjustment of the value takes place. The net market value is the price that can be realised in an arm’s length transaction less associated sales expenses. The value-in-use is calculated on the basis of the estimated future cash flow expected to result from the use of the asset, including any cash flow at the end of the asset’s useful life, and discounted us-ing an appropriate long-term interest rate.

1.13 Liabilities and financial liabilitiesLiabilities are measured at their nominal value. Current financial liabilities are either due or renewable within one year unless the Group has an unrestricted right to extend the maturity by more than twelve months beyond the balance sheet reporting date.

1.14 Current valuesThe current value (fair value or net market value) is the amount for which an asset, liability or financial instrument could be exchanged between knowledgeable and willing parties in an arm’s length transaction. The current value of publicly traded and tradable finan-cial instruments is determined on the basis of their stock exchange prices. The current value of financial instruments not publicly trad-ed is determined using recognised valuation methods such as the discounted cash flow method. It is assumed that the amortised costs of financial assets and liabilities with a residual life of less than one year roughly approximate their current value.

1.15 TaxesIncome taxes comprise all current and deferred taxes levied on the subsidiaries’ taxable results in accordance with local tax regu-lations including the withholding tax payable on profit distributions within the Group. Income taxes are recognised in the income state-ment except for deferred taxes on transactions that are recognised directly in shareholders’ equity. Capital and real estate taxes are reported under “other operating expense”.

The assets and liabilities for deferred income taxes are recorded for the effects under income tax law of all temporary differences arising between the tax base of assets and liabilities and their carry-ing amounts for financial reporting purposes to the Group. Deferred income taxes are determined using the tax rates that apply, or have been announced, on the balance sheet date in the countries where the Group operates. Future tax savings from offsettable losses car-ried over will not be carried as assets. The benefit of these loss carryovers will be posted upon realisation.

Assets and liabilities from current and deferred income taxes are offset against one other as long as the corresponding income taxes are levied by the same tax authority and a legally enforceable right for offsetting exists.


1.16 ProvisionsProvisions are established when a legal or constructive obligation exists as a result of past events where the obligation will likely lead to a cash outflow and a reliable estimate of this outflow can be made. The provisions established constitute the best possible esti-mate of the final obligation. Non-current provisions are discounted to their present value to the extent that their effects are material. Restructuring provisions are recorded if the Group has a detailed formal restructuring plan and the Board of Directors has made a decision to implement it. The breakdown into current and non-cur-rent provisions is based on the assumption that their utilisation is probable within one year or later.

1.17 Contingent liabilitiesPotential liabilities whose existence has yet to be confirmed by future events, or obligations whose amount cannot be reliably esti-mated are disclosed as contingent liabilities in the Notes. Valuation is done on the basis of probability and the amount of the future claims and costs.

1.18 Pension plan obligationsThe employee benefit obligations of the subsidiaries for retire-ment, death and disability are in accordance with statutory require-ments and provisions in the respective countries. The majority of the Group’s employees are covered by defined benefit or defined contribution pension plans. The Swiss organisations of the Group have legally independent pension institutions that are financed by way of employer and employee contributions. Any actual econom-ic impact on the company exerted by pension funds is calculated on the reporting date. Any economic benefit is capitalised provided that this is used for the company’s future provident expenses. An economic obligation is recognised as a liability where the require-ments for creating a provision are satisfied. Where freely dispos-able employer contribution reserves exist, they are recognised as an asset. The economic impacts of overfunding and underfunding in the pension funds on the Group and the change in any employer contribution reserves are recognised in personnel expense in addi-tion to the contribution accrued to the period.

The Italian subsidiaries have pension plans without assets of their own (benefits due after termination of the employment re-lationship ’TFR’) and are valued as long-term liabilities (pension plan obligations) or treated as defined contribution plans. Until a pension reform took effect, which introduced new regulations for benefits due after termination of the employment relationship as of 1 January 2007, any forms of compensation payable were clas-sified and recognised as defined benefit plans. As of 1 January 2007, the plans have been considered as defined contribution plans, which are not treated in accordance with Swiss GAAP FER 16. The liabilities accrued up to 31 December 2006 are recognised within the pension plan obligations in accordance with Italian law, whereby annual revaluations are recognised in personnel expense.

1.19 Treasury sharesTreasury shares are recognised as a reduction in shareholders’ equity. The purchase costs, proceeds from a resale and other movements are presented as a change in shareholders’ equity. Treasury shares are non-voting shares and are not entitled to div-idends.

1.20 Research and developmentResearch and development costs are recognised in full in income. These costs are contained in the “Marketing, sales, research and development expense” item.

2. Changes in the scope of consolidation

The scope of consolidation is uncharged to 31 December 2015.

38

3. Segment reporting

January – December 2016Speciality paper

TCHFReal Estate

TCHFHolding

TCHFEliminations

TCHFTotalTCHF

Net revenues, third party 1)

– Europe 150,884 1,504 – – 152,388

– Americas 12,270 – – – 12,270

– Asia 28,550 – – – 28,550

– Rest of world 5,157 – – – 5,157

Total net revenues, third party 196,861 1,504 – – 198,365

Net revenues, with other segments – 816 – –816 –

Total net revenues 196,861 2,320 – –816 198,365

Operating profit (EBIT) 9,944 769 8,785 –9,000 10,498

– In % of net revenues 5.1% 33.1% 5.3%

January – December 2015Speciality paper

TCHFReal Estate

TCHFHolding

TCHFEliminations

TCHFTotalTCHF

Net revenues, third party 1)

– Europe 148,356 813 – – 149,169

– Americas 12,871 – – – 12,871

– Asia 25,645 – – – 25,645

– Rest of world 6,573 – – – 6,573

Total net revenues, third party 193,445 813 – – 194,258

Net revenues, with other segments – 600 1,048 –1,648 –

Total net revenues 193,445 1,413 1,048 –1,648 194,258

Operating profit (EBIT) before restructuring 715 244 –332 – 627

– In % of net revenues 0.4% 17.3% 0.3%

1) Allocated according to sales destination

4. Personnel expense

2016TCHF

2015TCHF

Wages and salaries –22,096 –21,925

Employee benefits (incl. pension plan expense) –6,285 –6,267

Restructuring expenses 0 290

Other personnel expense –416 –535

Total personnel expense excluding travel expenses –28,797 –28,437

Personnel expense is included in the consolidated income statement in the costs of the respective items. As of 31 December 2016, the Group had a headcount of 374.5 FTEs (2015: 388.8 FTEs). As from annual report 2016 restructuring expenses due to personnel are recorded in personnel expense. There was no expense in the year under review (2015: restructuring income TCHF 290).




5. Depreciation and amortisation

2016TCHF

2015TCHF

Depreciation of tangible fixed assets –7,709 –7,640

Amortisation of intangible assets –497 –920

Total depreciation and amortisation –8,206 –8,560

Depreciation and amortisation are included in the consolidated income statement in the costs of the respective items.

6. Other operating income/expenses

2016TCHF

2015TCHF

Net gains on disposal of tangible fixed assets 258 244

Contract manufacturing 0 155

Other income 873 847

Total other operating income 1,131 1,246

Capital and real estate taxes –291 –567

Net losses on disposal of tangible fixed assets –5 –3

Total other operating expense –296 –570

7. Restructuring expenses

2016TCHF

2015TCHF

Reversal of impairment of tangible fixed assets 0 1,505

Reversal of restructuring provisions 0 290

Total restructuring expenses 0 1,795

In FY 2015 a reversal of impairment was booked due to the sale of tangible fixed assets, which had been value adjusted in 2011. The assets were sold at a value of TCHF 1,505.

Restructuring provisions in the amount of TCHF 290 were reversed in connection with the restructuring operations in FY 2015.

8. Financial income and expense

2016TCHF

2015TCHF

Interest income from cash and cash equivalents 26 44

Gains on interest rate derivatives, net 0 9

Other financial income 54 71

Total financial income 80 124

Interest expense of bank loans and mortgage notes –216 –312

Impairment of financial assets –9 0

Other financial expense –399 –380

Total financial expense –624 –692

Financial result –544 –568

40

9. Income taxes

2016TCHF

2015TCHF

Current income taxes –1,997 292

Deferred income taxes 258 –524

Total income taxes –1,739 –232

The expected tax rate applied to the calculation of the deferred income taxes items is based on the pre-tax profit of the individual sub-sidiaries, amounting to 14.92% in 2016 (2015: 14.92%) for the companies in Switzerland and 26.09% (2015: 27.93%) for the companies in Italy.

There were no deferred tax assets as of 31 December 2016 (2015: TCHF 63, which contained no capitalised tax loss carryovers).

Deferred tax claims from tax loss carryovers are not carried as assets. The benefit of these loss carryovers will be posted upon realisation.

As of 31 December 2015, the Group had tax-deductible loss carryovers of TCHF 88,329 (2015: TCHF 93,253). The tax-deductible loss carryovers expire as follows:

Tax loss carryovers

2016TCHF

Tax effect2016

TCHF

Tax loss carryovers

2015TCHF

Tax effect2015

TCHF

Within 1 year 0 0 0 0

Between 1 and 5 years 81,721 12,193 79,761 11,901

After 5 years 6,608 1,060 13,492 2,383

Total tax-deductible loss carryovers 88,329 13,253 93,253 14,284

In FY 2016 no tax-deductible loss carryovers expired (2015: none).

The weighted average tax rate applied is based on the operating result for the period and is influenced by the change of loss carryovers as follows:

2016TCHF

2015TCHF

Expected average tax rate 27.9% 18.8%

Operating result for the period 10,329 712

Income taxes at expected tax rate –2,879 –134

Non-recognition of tax loss carryovers 0 –809

Use of unrecognised tax loss carryovers 885 53

Effect from tax deductable expenses and income –428 805

Tax effect from extraordinary tax rates 57 9

Tax effect from change in tax rates 150 0

Tax effect from adjustments of income tax from previous periods 390 455

Other effects 86 –611

Total income tax expense –1,739 –232

Effective income tax rate 16.8% 32.6%



10. Earnings per share

The undiluted earnings per share are calculated by dividing the net income as of the reporting periods ended on 31 December 2016 and 2015 allocatable to the shareholders by the weighted average number of dividend-bearing shares outstanding during these periods. In doing so, the average number of treasury shares held by Cham Paper Group Holding AG and blocked shares are deducted from the number of shares issued.

2016 2015

Weighted average number of registered shares outstanding 744,993 742,865

Results share of shareholders of Cham Paper Group Holding AG (in TCHF) 8,590 480

Earnings per share, undiluted (in CHF) 11.53 0.65

There were no diluting effects in 2016 and 2015.

11. Cash and cash equivalents

2016TCHF

2015TCHF

Cash on hand, cash in bank accounts and in postal accounts 41,709 41,373

Derivative financial instruments 177 89

Total cash and cash equivalents 41,886 41,462

Derivative financial instruments The Group uses derivative financial instruments as part of its Group-wide risk management. The derivative financial instruments are reported at their current values. The following table shows the market value (gross) of the derivative financial instruments as at 31 December 2016 and 2015 by type of contract and asset category:

2016

Contract or nominal value not recognised

TCHF

Positive market value recognised

TCHF

Negative market value recognised

TCHF

Held for trading purposes

Foreign currency derivatives – forward exchange contracts 1,832 16 0

Held for hedging purposes

Interest rate derivatives – interest rate futures 2,412 2

Raw material swaps – pulp swaps 16,820 159

Total derivative financial instruments 21,064 177 0

2015

Contract or nominal value not recognised

TCHF

Positive market value recognised

TCHF

Negative market value recognised

TCHF

Held for trading purposes

Interest rate derivatives – interest rate futures 3,248 10

Foreign currency derivatives – forward exchange contracts 36,158 79 9

Total derivative financial instruments 39,406 89 9

Contract or nominal values show the outstanding transaction volume as at the balance sheet date.

42

12. Trade accounts receivable

2016TCHF

2015TCHF

Trade accounts receivable from product deliveries, gross 40,008 41,098

Allowances for bad debts –3,105 –3,427

Total trade accounts receivable, net 36,903 37,671

Insured receivables 34,393 31,815

13. Other current receivables

2016TCHF

2015TCHF

VAT receivables 1,814 1,745

Social security receivables 271 100

Other receivables 327 2,395

Other current receivables 2,412 4,240

14. Inventories

2016TCHF

2015TCHF

Raw materials 9,095 10,395

Work in progress and finished goods 14,065 19,688

Consumables and supplies 1,412 1,439

Spare parts 3,464 3,617

Total inventories 28,036 35,139

The values of inventories that are difficult to sell and inventories with a lower net market value are adjusted. The Group determines the value adjustments for inventories that are difficult to sell using past experience. The value adjustment of finished goods as at 31 Decem-ber 2016 amounted to TCHF 2,424 (2015: TCHF 2,269).



15. Tangible fixed assets

2016

Land and buildings

TCHF

Machinery, equipment and

vehicles TCHF

Production equipment

TCHF

Construction in progress

TCHFTotal TCHF

Acquisition costs as at 1 January 90,623 178,533 123,924 2,864 395,944

Transfers between categories 293 403 0 –696 0

Additions 4,979 4,314 11 2,229 11,533

Disposals –550 –7,153 0 0 –7,703

Exchange differences –251 –1,496 –423 –42 –2,212

Acquisition costs as at 31 December 95,094 174,601 123,512 4,355 397,562

Cumulative depreciation as at 1 January –58,904 –147,424 –107,439 0 –313,767

Depreciation –642 –5,600 –1,467 0 –7,709

Impairments 0 0 0 0 0

Reversal of Impairment 0 0 0 0 0

Disposals 526 7,109 0 0 7,635

Exchange differences 131 1,206 302 0 1,639

Cumulative depreciation as at 31 December –58,889 –144,709 –108,604 0 –312,202

Carrying amount as at 31 December 36,205 29,892 14,908 4,355 85,360

Carrying amount as at 1 January 31,719 31,109 16,485 2,864 82,177

2015

Land and buildings

TCHF

Machinery, equipment and

vehicles TCHF

Production equipment

TCHF

Construction in progress

TCHFTotal TCHF

Acquisition costs as at 1 January 93,761 196,733 185,202 9,572 485,268

Transfers between categories 0 7,578 –1 –7,577 0

Additions 1,268 8,542 253 1,815 11,878

Disposals –1,632 –20,451 –56,851 0 –78,934

Exchange differences –2,774 –13,869 –4,679 –946 –22,268

Acquisition costs as at 31 December 90,623 178,533 123,924 2,864 395,944

Cumulative depreciation as at 1 January –61,264 –174,085 –165,740 0 –401,089

Depreciation –629 –5,540 –1,471 0 –7,640

Reversal of Impairment 0 0 1,505 0 1,505

Disposals 1,498 20,395 55,346 0 77,239

Exchange differences 1,491 11,806 2,921 0 16,218

Cumulative depreciation as at 31 December –58,904 –147,424 –107,439 0 –313,767

Carrying amount as at 31 December 31,719 31,109 16,485 2,864 82,177

Carrying amount as at 1 January 32,497 22,647 19,462 9,572 84,178

There were no signs of impairments on tangible fixed assets in FY 2016 (2015: TCHF 0). There were no reversals of impairments in FY 2016 (2015: TCHF 0).

As at 31 December 2016 the carrying values of the pledged tangible fixed assets for financial liabilities amount to TCHF 51,982. (2015: TCHF 52,506).

44

16. Intangible assets

2016Software

TCHFTotalTCHF

Acquisition costs as at 1 January 10,620 10,620

Additions 70 70

Disposals –345 –345

Exchange differences –14 –14

Acquisition costs as at 31 December 10,331 10,331

Cumulative amortisation as at 1 January –9,886 –9,886

Amortisation –497 –497

Disposals 345 345

Exchange differences 14 14

Cumulative amortisation as at 31 December –10,024 –10,024

Carrying amount as at 31 December 307 307

Carrying amount as at 1 January 734 734

2015Software

TCHFTotalTCHF

Acquisition costs as at 1 January 10,797 10,797

Additions 195 195

Disposals –215 –215

Exchange differences –157 –157

Acquisition costs as at 31 December 10,620 10,620

Cumulative amortisation as at 1 January –9,310 –9,310

Amortisation –920 –920

Impairments 0 0

Disposals 215 215

Exchange differences 129 129

Cumulative amortisation as at 31 December –9,886 –9,886

Carrying amount as at 31 December 734 734

Carrying amount as at 1 January 1,487 1,487

In FY 2016 there were no signs of impairment on intangible fixed assets. (2015: TCHF 0).

Effects of theoretical capitalisation of goodwillAs per 11 September 2008 the company has offset a goodwill of TCHF 2,322 against shareholder’s equity without any impact on income.If goodwill were depreciated over five years, it would have no theoretical impact on the result before taxes in the year under review.



17. Financial liabilities

2016TCHF

2015TCHF

Short-term bank loans 27,124 33,129

Total current financial liabilities 27,124 33,129

Long-term bank loans 7,896 0

Mortgage notes 3,618 9,765

Total non-current financial liabilities 11,514 9,765

Total amount of secured financial liabilities 20,386 18,647

Contractual maturity repayment2016

TCHF2015

TCHF

Within 1 year 27,124 33,129

Between 1 to 5 years 11,514 9,765

Total financial liabilities 38,638 42,894

Average interest rates for financial liabilities 2016 2015

Within 1 year 0.364% 0.520%

Between 1 to 5 years 0.965% 1.111%

The financial liabilities are denominated in the following currencies2016

TCHF2015

TCHF

EUR 38,638 42,894

Total financial liabilities 38,638 42,894

The financial liabilities are secured by mortgage notes or liens on land, buildings and production equipment.

There were no finance lease liabilities as at 31 December 2016 and 31 December 2015.

In the year under review as well as in the preceding year no financial liabilities existed, which included elements of shareholder’s equity as well as liabilities.

46

18. ProvisionsRestructuring

2016

Redundancy welfare plans

TCHF

Clearing and deconstruction

TCHFDecontamination

TCHFTax provisions

TCHFTotalTCHF

As at 1 January 1,280 2,156 3,633 551 7,620

Additions 0 0 0 0 0

Reversals 0 0 0 –359 –359

Utilisation –1,046 –1,000 –156 –185 –2,387

Exchange differences 0 0 0 4 4

As at 31 December 234 1,156 3,477 11 4,878

Shown on the consolidated balance sheet as:

Current provisions 0 661 30 0 691

Non-current provisions 234 495 3,447 11 4,187

Restructuring

2015

Redundancy welfare plans

TCHF

Clearing and deconstruction

TCHFDecontamination

TCHFTax provisions

TCHFTotalTCHF

As at 1 January 3,124 5,054 3,633 962 12,773

Additions 0 0 0 0 0

Reversals –290 0 0 –311 –601

Utilisation –1,554 –2,898 0 0 –4,452

Exchange differences 0 0 0 –100 –100

As at 31 December 1,280 2,156 3,633 551 7,620

Shown on the consolidated balance sheet as:

Current provisions 1,080 862 135 0 2,077

Non-current provisions 200 1,294 3,498 551 5,543

Various restructuring expenses were incurred in 2011 and 2014 in connection with the restructuring of the Cham Paper Group. The three main categories (redundancy welfare plans, clearing, deconstruction and decontamination) are shown separately as from annual report 2016. The previous year was adjusted to this structure as well.

The tax provisions recognised in 2016 and 2015 pertain to potential back tax demands.

In all cases the probability of occurrence is estimated at over 50%.



19. Pension plan obligations

Economic benefit / economic obligation and pension plan expense

Over-funding/

underfunding

Economic share of organisation

Change as com-

pared to previous

year or recog-nised

Changes without

any impact on income 1)

Amounts accrued

during period

Pension plan expense share of

personnel expense

31.12.16TCHF

31.12.16TCHF

31.12.15TCHF

2016TCHF

2016 TCHF

2016 TCHF

2016TCHF

2015TCHF

Pension funds with overfunding (Switzerland) 1,206 0 0 0 0 342 342 443

Pension plans without assets of their own (Italy) 0 –3,200 –3,548 71 –419 0 71 73

Total 1,206 –3,200 –3,548 71 –419 342 413 516

1) Retirements and currency effects

The calculations are based on provisional interim financial statements of the pension scheme in accordance with Swiss GAAP FER 26. The pension scheme will conduct a partial liquidation in 2016 as a result of the restructuring of the company. This had no impact on the economic benefit or obligation of the organisation.

No employer contribution reserves existed in 2016 and 2015.

As at 31 December 2016 there were obligations toward pension plans in the amount of TCHF 64 (2015: TCHF 66).

20. Share capital and treasury shares

2017

Registered shares

Number

Nominal amount per share

CHFShare capital

TCHFTreasury shares

NumberTreasury shares

TCHF

As at 1 January 2016 745,000 65 48,425 11 2

Acquisition – – – 144 43

Disposal – – – –155 –45As at 31 December 2016 745,000 65 48,425 0 0

2015

Registered shares

Number

Nominal amount per share

CHFShare capital

TCHFTreasury shares

NumberTreasury shares

TCHF

As at 1 January 2015 745,000 65 48,425 0 0

Acquisition – – – 5,000 1,100

Disposal – – – 4,989 1,098As at 31 December 2015 745,000 65 48,425 11 2

At the 104th general meeting of shareholders on 4 May 2016, the shareholders of Cham Paper Group Holding AG approved the distribu-tion of a cash dividend of CHF 3.00 per share payable from the capital contribution reserves. The cash dividend totalling TCHF 2,235 was distributed to the shareholders.

At the 103rd general meeting of shareholders on 29 April 2015, the shareholders of Cham Paper Group Holding AG approved the distri-bution of a cash dividend of CHF 3.00 per share payable from the capital contribution reserves. The cash dividend totalling TCHF 2,225 was distributed to the shareholders.

The non-distributable reserves required by law or reserves stipulated in the Group’s articles of association amounted to TCHF 15,897 as at 31 December 2016 (2015: TCHF 15,768).

48

Treasury sharesNumber of treasury shares as at 31 December 2016 and 2015:

2016 2015

Holdings as at 1 January 11 0

Compensation related to shares –155 –353

Purchases 144 5,000

Sales 0 –4,636

Holdings as at 31 December 0 11

In FY 2016, 144 treasury shares were purchased at an average price of CHF 295.28 (2015: 5,000 at an average purchase price of CHF 220.00). No treasury shares were sold (2015: 4,636 at an average sale price of CHF 254.41). 50 treasury shares were allocated to members of senior management/senior employees at an average price of CHF 279.00 instead of bonuses (2015: 238 treasury shares at a price of CHF 247.00). On the basis of the employee share ownership scheme, members of the Board of Directors were allocated 55 treasury shares instead of compensation in FY 2016 (2015: 115) at the average share price in the month of November 2016 of CHF 321.00 (2015: CHF 251.00). Members of senior management were allocated 50 treasury shares on the basis of the employee share ownership scheme at the average share price in the month of March 2016 of CHF 254.10 (2015: none).

21. Non-recognised commitments and contingencies

Operating lease commitmentsThe subsidiaries hold numerous contracts for operating leases, mainly for equipment and vehicles as well as for the lease of an external warehouse. Total expenses in FY 2016 for operating leases amounted to TCHF 478 (2015: TCHF 560). Future minimum payments under non-cancellable operating leases are due as follows:

2016TCHF

2015TCHF

Within 1 year 313 311

Between 1 and 5 years 322 160

Total 635 471

Capital commitmentsAs part of ordinary business operations, the subsidiaries entered into various contractual commitments for the purchase of tangible fixed assets and intangible assets as follows:

2016TCHF

2015TCHF

Capital commitments for tangible fixed assets 0 222

Total 0 222

Guarantee obligationsAs at 31 December 2016, guarantees given as part of ordinary business operations amounted to TCHF 128 (2015: TCHF 207).



22. Related party transactions

Subsidiaries and associatesAn overview of subsidiaries and associates is set out in Note 25. Transactions between the parent company and the subsidiaries as well as those between the subsidiaries of the Group have been eliminated in the consolidated financial statements.

Share ownershipFor information on the employee share ownership scheme of the Board of Directors and the Executive Board, please refer to the Notes of the financial statements of the Cham Paper Group Holding AG on page 55.

Employee share ownership schemeFor information on the employee share ownership scheme of the Board of Directors and the Executive Board, please refer to the Notes of the financial statements of the Cham Paper Group Holding AG on page 26 and 27.

Compensation of the Board of Directors and the Executive BoardThe members of the Board of Directors can determine at the beginning of the year whether they would like to receive 25%, 50%, 75% or 100% of their compensation in shares. The portion of their compensation designated by the members of the Board of Directors multiplied by a factor of 1.2 is used as the basis for calculating the number of shares to be allocated to them. The allocation of shares usually takes place on 31 December of the respective year. The share price applicable to the allocation of shares is based on the weighted average price in effect during the preceding month, generally November. The blocking period of the allocated shares is one year, during which the shares are entitled to voting rights and dividends. All Board of Directors members are eligible for participation in the scheme who have worked on a full-time basis during the respective financial year.

Due to the employee share ownership scheme, members of the Board of Directors were allotted 55 treasury shares in 2016 (2015: 115) at the average share price in effect in November 2016 of CHF 321.00 (2015: CHF 251.00).

The members of the Executive Board have the option of receiving the performance bonuses due them, insofar as these have been agreed, in the form of shares, either in whole or in part (25%, 50%, 75% or 100%). The allocation of shares usually takes place on 30 April of the subsequent year. The amount of the respective performance incentive bonus multiplied by a factor of 1.2 is used as the basis for calculating the number of shares to be allocated. The share price applicable to allocation is based on the weighted average price in effect during the preceding month, generally March. The blocking period of the allocated shares is one year, during which the shares are entitled to voting rights and dividends. All members of the Executive Board are eligible for participation who are in the company’s employ on 31 March of the subsequent year.

Members of the senior management were allotted 50 treasury shares in FY 2016 at the average share price in effect in March 2015 of CHF 254.10 (2015: no remuneration in the form of shares).

23. Risk management

Risk management is a fundamental element of business practice as well as an integral part of the Group’s business planning. In order to sustainably achieve corporate objectives, the Group uses various risk management and control systems that are set up not only for the early identification and analysis of risks but also for taking appropriate countermeasures. Strategic and operative risks are considered. Risk management, the internal control system and quality management are closely linked and coordinated. A formal, enterprise-wide risk assessment is performed by the Executive Board at least once a year. Significant operational risks are defined in a detailed risk catalogue and risk matrix and analysed according to their probability of occurrence and possible extent of damage or loss. This assessment enables the causes and suitable measures per risk to be derived for the purpose of mitigating or eliminating the risk.

In the current risk assessment the following significant risks among others were identified:

Currency risk: Over the last years the exchange rate of EUR/CHF and USD/EUR have developed to the detriment of the Cham Paper Group. The weakness of the Euro against the Swiss Franc minimises the margin of the Group’s unit in Switzerland. In addition, the reporting currency of the consolidated financial statements is the Swiss Franc, which was negatively impacted by the decision of the SNB (Swiss National Bank) to discontinue the minimum exchange rate for the Euro at the beginning of 2015. The strength of the US Dollar against the Euro makes raw material prices more expensive in Italy since pulp is traded in US Dollars. The company banks on natural hedging by offsetting purchases and sales against one another in the principal currencies USD and EUR. In addition, production operations have been transferred to the euro zone during the past couple of years so that currency neutrality can be maintained in the reporting of production costs.

50

Raw materials: in the past few years, the prices for pulp, chemicals and energy have been very volatile. There is also an increased risk of sporadic shortages of resources. In order to avoid limitations like these, the Cham Paper Group is striving to establish several supplier relationships for any given product if possible. Annual agreements are being reached to cover the demand for the medium term and to fix prices. In terms of energy, the Cham Paper Group is pursuing the strategy of keeping prices constant and predictable through long-term contracts or by generating its own energy. Derivative financial instruments such as pulp swaps are also being used to smooth any price volatility. This involves paying contractually agreed prices for contractually guaranteed quantities of pulp and, in return, variable payments are effected based on the market price for the contractually agreed quantities of pulp. The scope and timescale for the scheduled future pulp purchases hedged in this way are based on the delivery quantities and deadlines contractually agreed with individual customers who require the pulp for their manufacturing operations.

Market / economy: The earnings situation of the Cham Paper Group is subject to cyclical fluctuations in the world economy which may lead to sales revenues drops, unrecoverable debts and overcapacity in markets. Factors like these make it difficult for the company to pass on increases in energy and raw materials costs to customers completely or in the near term. The Cham Paper Group seeks to mini-mise these risks by systematically diversifying its customer portfolio and continuously monitoring markets. In order to respond to changes in the market in a timely manner, the Group maintains an early warning system featuring an integrated contingency plan to address critical scenarios. The company observes an increased activity of other market participants. The Cham Paper Group is trying to antagonize their market entry with new process technologies and innovation.

Environment: Central Italy has experienced several serious earthquakes in the year under review. Cham Paper Group thereupon exam-ined both their factories in Northern Italy with regard to the risks related to earthquakes. Selective measures have been taken in order to reduce the risk of an interruption in production caused by the effects of earthquakes.

The Board of Directors of Cham Paper Group Holding AG has approved the risk assessment and monitors the implementation of the actions defined in the catalogue of measures by the Executive Board. In the event of the emergence of unexpected individual risks, the Board of Directors is also immediately informed of these risks and the actions taken and processes implemented by the Executive Board to mitigate or eliminate them.

24. Events after the reporting date

After the balance sheet reporting date and until the approval of the consolidated financial statements by the Board of Directors on 24 March 2017 there were no significant events that would negatively impact the statements made in the 2016 financial statements or that would have to be disclosed here.

25. Subsidiaries

Company as at 31 December 2016Registered office Activity Currency Share captial

TCHF

Directholding

in %

Indirect holding

in %

Cham Paper Group Schweiz AG CH Cham s l n CHF 21,000 100% –

Cham Paper Group Italia S.p.A. IT Carmignano s l n EUR 25,000 100% –

Condino Energia S.r.l. IT Condino n EUR 2,000 – 100%

Cham Paper Group Asia Pte Ltd. SG Singapore l SGD 0 100% –

s Holding company, financing, real estate and servicesn Research, development and productionl Sale and distribution

No changes in Group structure on the previous year.

All companies are fully consolidated.


51Financial statements of Cham Paper Group Holding AG

Financial statements of Cham Paper Group Holding AG

Income statement


TCHF2015

TCHF

Royalties 0 1,048

Interest income from subsidiaries 444 342

Financial income 4 208

Other income 0 99

Gewinn aus Verkauf von Anlagevermögen 2 9,200 0

Personnel expenses –423 –371

Depreciation 3 0 –800

Other financial expense –793 –1,108

Financial expense –9 –28

Net gain / (net loss) before taxes 8,423 –610

Direct taxation 0 0

Net gain / (net loss) 8,423 –610

The Notes form an integral part of the financial statements. This annual report is issued in German and English. The German version is

binding. The report of the statutory auditor (PricewaterhouseCoopers AG, Zug) on the financial statements is available on page 62 f. of

the German version.

52 Financial statements of Cham Paper Group Holding AG

Balance sheet

As at 31 December, prior to appropriation of available earnings Notes31.12.2016

TCHF31.12.2015

TCHF

Assets

Cash and cash equivalents 27,861 35,859

Short-term receivables from third parties 81 115

Short-term receivables from subsidiaries 0 106

Accrued income and prepaid expenses 21 18

Total current assets 27,963 36,098

Loans to subsidiaries 28,000 12,000

Participations 4 62,691 62,691

Intangible assets 0 800

Total non-current assets 90,691 75,491

Total assets 118,654 111,589

Liabilities

Trade accounts payable to third parties 154 177

Short-term liabilities to third parties 718 0

Short-term liabilities to subsidiaries 78 0

Accrued expenses and deferred income 328 226

Current provisions 730 730

Total current liabilities 2,008 1,133


Shareholders’ equity

Share capital 48,425 48,425

Statutatory capital reserves (capital contribution reserves) 15,180 17,415

Statutatory retained earnings 22,815 22,815

Unrestricted reserves 21,479 21,479

Retained earnings brought forward 324 934

Net income for the year 8,423 –610

Treasury shares 5 0 –2

Total shareholders’ equity 6 116,646 110,456

Total liabilities and shareholders’ equity 118,654 111,589

The Notes form an integral part of the financial statements. This annual report is issued in German and English. The German version is

binding. The report of the statutory auditor (PricewaterhouseCoopers AG, Zug) on the financial statements is available on page 62 f. of

the German version.

53Notes to the Financial Statements of Cham Paper Group Holding AG

GENERAL REMARKS

The financial statements of Cham Paper Group Holding AG, Fabrikstrasse, 6330 Cham, Switzerland, have been prepared in accordance with the provisions governing commercial accounting in the Swiss Code of Obligations. The key balance sheet items are accounted for as follows

VALUATION PRINCIPLES

Cash and cash equivalents are reported at nominal values. Securities and treasury shares are reported at the lower of acquisition cost or market value. All other assets, including participations and loans, are posted at acquisition cost less suitable value adjustments. All liabilities are valued at nominal values. Assets and liabilities denominated in a foreign currency are translated into Swiss francs at year-end exchange rates except for participations, which are translated at historical rates. Transactions in foreign currencies during the year are carried out at the exchange rates prevailing on the transaction dates. Exchange rate gains and losses are posted on the income statement with the exception of unrealised gains, which are set aside.

DETAILS TO SINGLE POSITIONS

1. Participation income

In 2016 no participation income was realised (2015: none).

2. Gain from disposal of non-current assets

In FY 2016 the brand “Cham Paper Group” was sold to the subsidiary Cham Paper Group Schweiz AG, generating a gain of TCHF 9,200 (2015: no gain from disposal of non-current assets).

3. Depreciations and impairments on non-current assets

In FY 2016 no depreciations were carried out on intangible assets (2015: TCHF 800).Intangible assets are generally being amortised over five to ten years.

4. Participations

Company as at 31 December 2016Registered office Activity Currency Share captial

TCHF

Directholding

in %

Indirect holding

in %

Cham Paper Group Schweiz AG CH Cham s l n CHF 21,000 100% –

Cham Paper Group Italia S.p.A. IT Carmignano s l n EUR 25,000 100% –

Condino Energia S.r.l. IT Condino n EUR 2,000 – 100%

Cham Paper Group Asia Pte Ltd. SG Singapore l SGD 0 100% –

s Holding company, financing, real estate and servicesn Research, development and productionl Sale and distribution

No changes in Group structure on the previous year.

Notes to the Financial Statements of Cham Paper Group Holding AG

54 Notes to the Financial Statements of Cham Paper Group Holding AG

5. Treasury shares

In FY 2016, 144 treasury shares were purchased at an average price of CHF 295.28 (2015: 5,000 at an average purchase price of CHF 220.00). No treasury shares were sold (2015: 4,636 at an average sale price of CHF 254.41). 50 treasury shares were allocated to members of senior management/senior employees at an average price of CHF 279.00 instead of bonuses (2015: 238 treasury shares at a price of CHF 247.00). On the basis of the employee share ownership scheme, members of the Board of Directors were allocated 55 treasury shares instead of compensation in FY 2016 (2015: 115) at the average share price in the month of November 2016 of CHF 321.00 (2015: CHF 251.00). Members of senior management were allocated 50 treasury shares on the basis of the employee share ownership scheme at the average share price in the month of March 2016 of CHF 254.10 (2015: none).

As at 31 December 2016 the Cham Paper Group held no treasury shares (2015: 11).

6. Changes in shareholders’ equity

Share capital

TCHF

Statutatory capital

reserves TCHF

Statutatory retained earnings

TCHF

Unrestricted reserves

TCHF

Retained earnings brought forward

TCHF

Treasury shares TCHF

Total TCHF

Balance as at 1 January 2015 48,425 19,640 22,815 21,479 934 – 113,293

Treasury shares – – – – – –2 –2

Reversal of legal capital contribution reserves – –2,225 – – 2,225 – –

Cash dividend – – – – –2,225 – –2,225

Net income for the year – – – – –610 – –610

Balance as at 31 December 2015 48,425 17,415 22,815 21,479 324 –2 110,456

Balance as at 1 January 2016 48,425 17,415 22,815 21,479 324 –2 110,456

Treasury shares – – – – – 2 2

Reversal of legal capital contribution reserves – –2,235 – – 2,235 – –

Cash dividend – – – – –2,235 – –2,235

Net income for the year – – – – 8,423 – 8,423

Balance as at 31 December 2016 48,425 15,180 22,815 21,479 8,747 – 116,646

As at 31 December 2016 and 31 December 2015, the share capital of Cham Paper Group Holding AG consisted of 745,000 registered shares with a par value of CHF 65.00 each.

Number of full-time positionsOn average the number of FTEs was below 10 (2015: <10).

Liabilities towards pensions plansAs at 31 December 2016 receivables from pension plans totalled TCHF 15 (as at 31 December 2015: liabilities of TCHF 16).

Significant shareholdersAccording to the information available, the following shareholders held more than 3% of the shares of Cham Paper Group Holding AG as at 31 December 2016: BURU shareholder group (BURU Holding AG, Philipp Buhofer, Heinz Buhofer, all Hagendorn) with 41.12% (2015: 41.12%) and LB (Swiss) Investment AG, Zurich, with 8.53% (2015: 7.95%).

Cham Paper Group Holding AG is not aware of any shareholders’ agreements or other arrangements between the significant share-holders of the company regarding the registered shares of Cham Paper Group Holding AG held by them or regarding the exercise of shareholders’ rights.

55Notes to the Financial Statements of Cham Paper Group Holding AG

Share ownership of Board of Directors and Executive Board membersAs at 31 December 2016, the Board of Directors members and their related parties owned a total of 325,608 registered shares of Cham Paper Group Holding AG (31 December 2015: 328,061 registered shares). Related parties are spouses, children under 18 years of age and, as applicable, other close relatives, companies belonging to or controlled by these persons, and legal entities or individuals acting as their trustees. Direct and indirect share ownership by current Board of Directors members is set out below:

Name Function31 December 2016Number of shares

31 December 2015Number of shares

Philipp Buhofer 1) Chairman 306,317 306,317

Felix Thöni Vice Chairman 5,125 5,070

Niklaus Peter Nüesch Member 0 0

Peter Schmid until GSM 2016 Member – 2,508

Susanne Oste since GSM 2016 Member 0 –

Urs Ziegler 2) Member 14,166 14,166

Luis Mata Management Member 948 898

Andreas Friederich Management Member 0 0

1) Of which 303,262 (2015: 303,262) registered shares held via BURU Holding AG and 2,894 (2015: 2,894) registered shares held by relatives2) Of which 1 (2015: 0) registered share held by relatives

Additional disclosures, cash flow statement and financial reportThe Cham Paper Group opts not to provide additional disclosures, the cash flow statement and the financial report in accordance with article 961d (1) of the Swiss Code of Obligations, since the Group prepares consolidated accounts in accordance with recognised accounting standards.

56 Proposed appropriation of available earnings

Proposed appropriation of available earnings

2016CHF

2015CHF

Retained earnings brought forward from previous year 324,018 933,968

Net income for the year 8,423,104 –609,950

Reversal of legal capital contribution reserves 2,980,000 2,234,988

Total available earnings 11,727,122 2,559,006

Appropriation of available earnings

Dividend –2,980,000 –2,234,988

Balance to be carried forward to new account 8,747,122 324,018

Total distributed as dividend 2,980,000 2,234,988

Minus portion consisting of the capital contribution reserves –2,980,000 –2,234,988

Portion consisting of other reserves and available earnings – –

The Board of Directors proposes that the general meeting of shareholders should approve a distribution from the capital contribution reserves of CHF 4.00 per share.

Treasury shares are not entitled to dividends. The Cham Paper Group Holding AG held no treasury shares as at 31 December 2016.

The share capital with dividend entitlement can vary owing to purchases and/or sales of treasury shares between 1 January 2017 and the record date, thus the dividends paid out may vary likewise. The profit appropriation of the previous year was adjusted to the actual dividend payout.

Publishing details

This annual report is issued in German and English. The German version is binding.

Publisher– Cham Paper Group Holding AG, Cham

Idea, design, copy and production– Dynamics Group AG, Zurich

DisclaimerMany of the statements made in this annual report are for-ward-looking statements relating to future events and/or future performance, including without limitation, statements regarding expectations, beliefs, intentions or future strategies that are signi-fied by the words “expects”, “anticipates”, “intends”, “believes”, “plans” or similar language. These forward-looking statements are only predictions and estimates regarding future events and circum-stances. Actual results may differ substantially from those antici-pated in these forward-looking statements.

Cham Paper Group Holding AGFabrikstrasse

CH-6330 Cham

Phone +41 41 785 33 33

Internet www.cham-group.com

E-mail [email protected]

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