Content

4.32 dividend per share
4.33 changes in net working capital
4.34 contingencies
4.35 payables from operating lease contracts
4.36 business combinations
4.37 disposal of subsidiaries
4.38 other changes in scope of consolidation
4.39 related party transactions
4.40 board and executives compensations
4.41 events after the balance sheet date

4.32 dividend per share

The dividends paid in 2010 and 2009 were in an amount of CHF 4,900,000 (CHF 2.50 per share) and CHF 15,680,000 (CHF 8.00 per share) respectively. A dividend in respect of the year ended at 31 December 2010 of CHF 4,900,000 (CHF 2.50 per share) is to be proposed to the shareholders at the Annual General Meeting to be held on 10 May 2011. These financial statements do not reflect this dividend payable.

4.33 changes in net working capital

The changes in the net working capital for the cash flow statement include the following positions in the balance sheet:

changes in the net working capital
in CHF '000
 2010 2009
Change in trade accounts receivable
 –7,254 755
Change in inventories
 5,833 654
Change in other receivables
 16,486 6,141
Change in trade payables
 –6,624 –911
Change in other liabilities
 –17,049 –5,924
Change in accruals net
 2,358 –4,687
Total change in net working capital
 –6,250 –3,972

4.34 contingencies

At 31 December 2010, the Group’s contingent liabilities for guarantees to third parties amounted to CHF 17,195,000 (2009: CHF 8,435,000). The rental guarantees are valid for the next two to nine years. They are subject to optional extensions.

contingencies
in CHF '000 at 31 December
 2010 2009
Advance payment guarantees
 13,025 4,241
Rental guarantees
 3,730 3,644
Bank guarantees
 440 550
Total contingencies
 17,195 8,435

4.35 payables from operating lease contracts

The Orell Füssli Group rents property, machinery and fixed assets by means of operational leases. Some lease contracts are non-cancellable; others have an option for cancellation of usually less than one year.

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

maturities of future aggregate minimum lease payments
in CHF '000 at 31 December
 2010 2009
No later than 1 year
 12,116 11,502
Later than 1 year and no later than 5 years
 42,097 30,308
Later than 5 years
 38,842 17,808
Total future aggregate minimum lease payments
 93,055 59,618

In 2010, future aggregate minimum lease payments have changed substantially in comparison to the previous period. The book retailing renewed several existing contracts with lease options and concluded new lease agreements in addition.

4.36 business combinations

SOFHA GmbH: The German subsidiary Atlantic Zeiser GmbH acquired 74.9% of the shares of Berlin-based Sofha GmbH effective from 1 January 2010. Sofha GmbH is a software systems company in the field of industrial digital printing solutions and is a member of the exclusive circle of Adobe Co.-Development Partners with extensive source code access. Through the acquisition of Sofha GmbH, Atlantic Zeiser aims to accelerate growth in high-resolution inkjet systems and to penetrate into new spheres of application.

The acquisition balance sheet in accordance with IFRS is stated below:

acquisition balance sheet of sofha gmbh, berlin at 1 January 2010

At 1 January 2010
 Fair value
in EUR '000		 Fair value
in CHF '000
Cash and cash equivalents
 725 1,077
Receivables
 638 948
Inventories
 106 157
Accrued income and deferred expenses
 11 16
Tangible assets
 47 70
Intangible assets
 2,421 3,596
Current liabilities
 –509 –756
Current provisions
 –154 –229
Accrued expenses and deferred income
 –118 –175
Deferred tax liabilities
 –677 –1,006
Net assets
 2,490 3,698
Goodwill
 2,850 4,233
Anticipated purchase price for 100 %
 5,340 7,931
Minority interests of 25.1 %
 –1,340 –1,990
Effective purchase price for 74.9 %
 4,000 5,941

The establishment of intangible assets took into account existing customer relationships with longer-term contracts on the one hand, while at the same time current licences and in-house developments were revalued. The difference relative to the purchase price paid reflects the expected future development of the acquired company’s business and the exploitation of synergies in the “Industrial Systems” sector.

The remaining minority interests amounting to 25.1% can be acquired from 2014 onwards. The Orell Füssli Group has therefore decided to recognise goodwill in full immediately and post any future differences directly to shareholders’ equity.

The costs incurred in connection with the purchase of SOFHA GmbH amount to EUR 30,000 (CHF 43,000). They have been posted directly to expenses and are included in the 2010 income statement.

In the first year following its acquisition, SOFHA GmbH contributed to the consolidated financial statements of the Orell Füssli Group with sales of EUR 2,915,000 (CHF 4,033,000) and a net result of EUR –393,000 (CHF –544,000). Earnings were severely depressed by depreciation on intangible assets taken on to the balance sheet upon acquisition.

The enterprise value of SOFHA GmbH was subjected to an impairment test at 31 December 2010. This identified the company’s cash flows as the smallest cash-generating unit (CGU). The calculation was made applying the discounted cash flow method on the basis of an updated forecast of cash provided by financing activities over the coming five years. The following assumptions were made in this context:

– average sales-growth of 7.5%
– a beta factor of 1.2
– a WACC of 11.0%
– a stable income tax rate of 29%
– calculation of the residual value with a 3.0% reduction in WACC, without additional growth

On the basis of these calculations the Orell Füssli Group identified no impairment requirement for the stated goodwill of SOFHA GmbH in the 2010 financial year.

An impairment requirement must be expected in the event of a change in the basis data, especially a reduction in expected gross profits or an increase in WACC. A 10% reduction in cash flows would, for example, result in an impairment charge of EUR 401,000, and a 20% reduction in a EUR 1,049,000 charge to goodwill. A 2.0% increase in WACC would result in a EUR 952,000 increase in the value adjustment charged to income.

Böwe Cardtec GmbH: Subsidiary Atlantic Zeiser GmbH acquired significant assets of the insolvent Böwe Cardtec GmbH, based in Paderborn (D), in September 2010. Böwe Cardtec was one of the leading manufacturers of hardware and software solutions for managing, personalising and mailing secure chip cards for government institutions, banks and mobile telephone service providers. The purchase price of EUR 1,500,000 (CHF 2,075,000) stands against assets assessed at fair value in the form of goods and inventories amounting to EUR 1,318,000 (CHF 1,824,000), tangible assets of EUR 100,000 (CHF 138,000) and intangible assets of EUR 82,000 (CHF 113,000). No goodwill arose from the acquisition.

4.37 disposal of subsidiaries

Photoglob Ltd: In March 2010 Management of the Group decided to dispose of its existing 71% majority interest in Photoglob Ltd in stages. On balance sheet date at 31 December 2010 this holding had been reduced to a level which no longer permitted its full consolidation, and Photoglob Ltd ceased to figure in the scope of consolidation. The Orell Füssli Group continues to include the remaining minority holding currently amounting to 34% under “Investments in associated companies”. Share sales to date have been made at fair value.

4.38 other changes in scope of consolidation

Atlantic Zeiser Malaysia: In the context of expanding existing sales markets and developing new ones, subsidiary Atlantic Zeiser GmbH formed a new company in Kuala Lumpur, Malaysia. This new company, Atlantic Zeiser SDN BHD, has been operational since 1 January 2010 and is included in the scope of consolidation of the Orell Füssli Group for the first time in reporting for 2010.

Storyworld GmbH: A new Internet book retailing platform, www.storyworld.ch, came online in summer 2010; this is managed by the newly formed Storyworld GmbH, based in Emmingen. Storyworld GmbH is included in the scope of consolidation of the Orell Füssli Group for the first time in the 2010 financial year as a subsidiary of Orell Füssli Buchhandlungs Ltd and is integrated in the Book Retailing Segment.

Rösslitor Bücher Ltd: The St Gall-based subsidiary was merged into parent company Orell Füssli Buchhandlungs Ltd in the first half of 2010.

4.39 related party transactions

The Orell Füssli Group sold goods and services to related companies in an amount of CHF 31,549,000 (2009: CHF 21,359,000). Goods and services were sold at related companies under normal commercial terms and conditions that would also be provided to third parties.

The Orell Füssli Group sold goods of associated and related companies in the amount of CHF 5,691,000 (2009: CHF 7,276,000).

At balance sheet date, the sale and purchase of goods and services to related companies resulted in receivables of CHF 6,398,000 (2009: CHF 2,858,000) and liabilities of CHF 261,000 (2009: CHF 1,004,000).

In 2010 and 2009, the Orell Füssli Group continued to sell books and publishing products to related parties and to employees at favourable rates.

No loans to related parties had been granted by the Group in the 2010 and 2009 financial years, and the Group did not receive any loans from related parties during that period.

4.40 board and executives compensations

The Orell Füssli Group assigned salaries and other current compensations to the Board of Directors and Executive Board of the Group in the amount of CHF 3,204,000 (2009: CHF 3,045,000) for the financial year 2010. The social insurance contribution amounted to CHF 392,000 (2009: CHF 407,000).

For the disclosures of the remunerations to the Board of Directors and Executive Board of the Group in connection with the transparency law reference is made to note 7.12 of the financial report of Orell Füssli Holding Ltd.

4.41 events after the balance sheet date

Announced by the Orell Füssli Group at 1. January 2011, Peter Crottogini was appointed Head Human Resources and Member of the Management.

In February 2011, Matti Schüsseler was appointed Head of the Publishing Division and Member of the Management Board of the Orell Füssli Group.

No other events occurred between the balance sheet date and the date when the Board of Directors approved the consolidated financial statements that add more information to any item in the consolidated financial statement, that could put into question the going concern of the Group or that are of material nature.