Annual Report 2012 - Investor Relations

4The Cham Paper Group at a glanceThe Cham Paper Group at a glanceCham mill infrastructure1 paper machine; width: 320 cm2 off-line coating machines1 curtain coater1 super calenderCondino mill infrastructure1 paper machine; width: 330 cm1 film press2 super calendersCarmignano mill infrastructure2 paper machines; width: 330 cm2 in-line coating machines1 off-line coating machine2 super calendersThe speciality paper marketThe speciality paper market offers higher margins than the commodity paper segment dueto made-to-measure practicality respectively increased customer convenience. The pricesin the speciality paper market are also more solid as a result of the often close interactionsbetween development, supply and production processes with the clients.• Operating margins• Customer loyaltyMarket size:USD 22 billionLow cyclicalityMarket size:USD 288 billionTotal market size:382 MTPA (USD 310 billion)Commodity paper361.1 MTPAPremium paper5.3 MTPASpeciality paper5.3 MTPACyclicality

8Letter to ShareholdersA challenging year characterisedby reorganisationPhilipp BuhoferChairman of the Board of DirectorsDear Shareholders,For Cham Paper Group, the 2012 financial yearwas characterised mainly by the significant challengesthat had to be overcome during the first oftwo transition years, in order to be able to implementthe Group’s transformation process, whichwas introduced at the end of 2011. In addition to theformidable internal processes, it was vital to focussimultaneously on market cultivation and innovationmanagement. Despite a difficult economic environmentthe Group succeeded in remaining on course.In 2012, as a result of its reduction of capacity, theCham Paper Group’s net turnover fell by 9.6% toCHF 279.9 million, however it made encouraginggains in all core product groups. Due to the sharp risein energy costs and considerably higher purchasingprices for chemicals, which could not be passed ondirectly to customers in the form of price increases,the gross margin fell from 33.9% to 33.3%. The operatingresult (EBIT) amounted to CHF 3.2 million, thenet result to CHF –1.2 million. Thanks to the free cashflow of CHF 8.1 million achieved, the Group’s cashreserves remained unchanged at 49.0 million despitea reduction of bank loans by CHF 8.0 million and thebalance sheet remained stable.The 2012 financial year was extremely challenging for theManagement and employees of the Cham Paper Group.The company, which is undergoing a transformation process,had to simultaneously overcome many challenges,particularly at the site in Cham: the planning and introductionof socially acceptable staff cuts, the orderly withdrawalfrom the CCK markets of the Industrial Releasesegment, the preparation of the transfer of entire productgroups (Innerliner in particular) to Carmignano, the evaluationof raw paper suppliers for products, which shouldstill be coated in Cham, and the stepping up of developmentand marketing activities.Industrial Release: Growth in glassines and orderlywithdrawal from CCKWith an increase in turnover of 12.5%, the demand forglassine products made good progress and accountedfor another peak in the sales quantity of Condino mill. Inthe case of silicone-based papers for Release Liners fromCham, where the Group is withdrawing from the productionand sale of the CCK division (Clay Coated Kraft) forreasons of cost-effectiveness, the turnover in 2012 fellby 11% compared to the previous year, as expected. Forthose customers who had not yet found new suppliers byJuly 2012, supplies were produced, in order to be able toguarantee the contractually agreed deliveries until 2013.In February 2013, a cooperation agreement was concludedwith the Austrian speciality paper manufacturer Brigl& Bergmeister. This company will take over the technologicalknowledge and experience for part of this productgroup and will supply customers from the second half ofthe year.Consumer Goods: Continuing positive developmentof demandThe Consumer Goods product sector continued to makegood progress, despite the increasing pricing pressure,and provided a less cyclical, more solid base within theGroup. Our packaging solutions and tobacco papers meethigh standards and continue to set the benchmark for the

Letter to Shareholders9Urs ZieglerDelegate of the Board of DirectorsFelix ThöniMemberindustry. Sales were particularly encouraging in the foodpackaging sector, where they increased by 10%.Despite the increase in sales of core products, the marginswere unsatisfactory in these two areas of business.It was not possible in 2012 to offset the rise in energycosts (gas), which have risen in Italy by up to 50%, andthe increase in chemical prices, which have gone up byaround 10%, through higher sale prices.Digital Imaging consolidates servicesThe Cham-based business area of Digital Imaging whichis still small but is showing strong margins continued tobe successful, especially in the case of Transjet papersfor textile sublimation printing. Sales in this product segmentincreased once again by over 20%. In the textile industry,digital printing technology is increasingly also beingused in large volumes (cf. page 24). In this customersector, the demand for consulting services is also growing.For this purpose, the Group operates a Departmentfor Application Technology in Cham, which was systematicallyenlarged during the first six months of the year.BARnamic on the cusp of market introductionThe smooth introduction of BARnamic is of crucial importancein order to confirm the success of the developmentactivities of the Cham Paper Group. Thanks tothese innovative barrier papers, which are produced inSwitzerland, the Cham Paper Group should be in possessionof a unique selling point in the future. During the secondhalf of the year, the Group won an innovation prizeawarded by the Swiss Canton of Zug for BARnamic. Atthe same time, however, the company had to deal witha few setbacks during test runs with selected key costumers,which led to delays. In the first quarter of 2013,the first sales were achieved. Naturally, it will take a fewyears before this innovative product solution will be demandedin large volumes. The Development Team is currentlyworking under considerable pressure to developthe BARnamic product family further.Solid balance sheet and a lower net working capitalThe net working capital has fallen during the reportingyear by CHF 6 million to CHF 68 million. At the sametime, the Group generated a positive free cash flow ofCHF 8.1 million (previous year: CHF –4.2 million). Fixedofftake contracts are in place with the relevant customersfor the (increased) warehouses in the Industrial Releasearea. With the closure of the second paper machine inCham and the outflow of goods from the warehouses,the net working capital will continue to decrease in 2013.The net debt fell further during the reporting period, toCHF 18.0 million (previous year: CHF 25.9 million). Furthermore,better terms and conditions were achieved forsome of the credit agreements. By the end of the year,the Group had a cash position of CHF 49.0 million. Theequity ratio as at 31 December 2012 was a healthy 41%(previous year: 39.3%).Orderly staff cutsIn February, representatives for Management and Labourin Cham adopted a comprehensive redundancy package,which defines the framework conditions for socially acceptablestaff cuts of 212 jobs in total by 2014. The supportmeasures offered, such as the job centre set up bythe company and various training opportunities, were appreciatedand put to good use. By the end of the year,the Group’s staff was downsized to 544.5 employees

12Markets of the Cham Paper GroupConsumer GoodsFoodNon-FoodTobaccoBeverages & LiquidsIndustrial ReleaseRelease Liner TapesRelease Liner LabelsProcess LinersFacestock (Labels)Digital ImagingLarge Format Inkjet GraphicsSublimation Print /Textile GraphicsTranspromo Print

Markets of the Cham Paper Group13Our consumer goods range includes paper for flexible packagingand label printing. The base papers serve to protectthe contents of the package as well as illustrating the productand providing information.Consumers today demand easily understandable, functionaland environment-friendly packaging. One survey* hasshown that 87 % of European consumers prefer paperpackaging. For 93 % of respondents, paper is the most environment-friendlyform of packaging. No fewer than 87 %like paper packaging because it is simple and safe to handle.As a quality supplier in the consumer goods sector, we offerbrand name manufacturers innovative paper solutions notedfor their efficiency and safety at all stages of the productionprocess. The outstanding properties of our papers ensurebrilliant printing results and highly effective presentation ofbrand name goods.* IPSOS consumer survey 2006, in the UK, France, Germany, Poland,Sweden, Belgium and Spain.Our industrial release solutions consist of the base papersfound in release liners for films, tapes and self-adhesivelabels. These are complemented by papers for process linersin industrial production as well as facestock papers for theself-adhesive industry.The products are used in technical applications, in the automobileand construction industries, and for labels. The backingpapers were developed exclusively for these specificapplications and provide the basis for outstanding releaseproperties.Paper is an important raw material in the self-adhesive industry.Around 70 % of all release liners and 65 % of all thelabels used worldwide are made of paper.Our team of professionals liaise closely with our customersto develop tailor-made solutions. These guarantee efficiency,reliability and consistent quality at all stages of productionand finishing.The Cham Paper Group commands a leading position in theworld digital imaging market. We supply inkjet papers forlarge format digital imaging and industrial inkjet printing. Ourrange also includes sublimation papers for digital textileprinting.The large format inkjet papers are suitable for indoor andoutdoor applications, while coatings for specific purposesguarantee colours of maximum brilliance. Our sublimationpapers have excellent runnability and transfer qualities.Compared with offset printing, digital imaging is becomingincreasingly important. Around 10 to 15 % of the world’sprinting is accounted for by digital imaging and the trend isupward. The advantage of this printing process is its abilityto personalise communications and to produce advertisingtools in small runs at very short notice.We test our products in the company’s own applicationscentre under authentic conditions and offer training coursesfor our customers.

Why has Gloria Wegmüller suddenlybecome interested in labels?Consumer Goods

16Consumer GoodsGloria Wegmüller,Gianni Greco and abottle of olive oilAfter reading an article in the newspaper, Gloria Wegmüller isworried; labels on olive oil bottles contain a questionable chemical.But this need not be the case, as she learns after a visit to anItalian speciality shop.Gloria Wegmüller carefully folds the daily newspaper andputs it on the coffee table. “Another chemical that we believewe need, but is hazardous to health,” she reflects.She has just read that Perfluorooctanoic acid (PFOA), atoxic substance used in many industrial and consumergoods, can be harmful to humans. The chemical is mainlyused for its water and grease-resistant properties in themanufacture of food packaging, cookware and upholstery.Gloria goes on to wonder, “A takeaway pizza boxthat can withstand the greasy pizza, butter packagingand oil bottle labels – are they all packed with PFOA?” Isthere an alternative? Concerned by this, she decides toget to the bottom of the issue.A visit to Gianni GrecoThe following Saturday, Gloria and her husband, Florian,go to Greco’s – an Italian speciality shop – known acrossthe region for its excellent wines and cheese, freshhomemade pasta, and a wide selection of high-qualityolive oils. All of these products are sourced by GianniGreco, the owner, from handpicked suppliers whom hemostly knows personally. “Ciao Gloria. Ciao Florian,”Gianni calls out cheerfully as the couple enter the spaciousdelicatessen. “What will it be today?” “Hi Gianni,”Florian Wegmüller replies. “The Ravioli of the Weeklooks delicious. We’ll have a kilo please. And 300 gramsof Parma ham and a small pack of homemade Amaretti.”Gianni Greco gives the couple a nod, goes to the counterand scoops a generous amount of lemon and basil ravioliinto a paper bag.LabelsMeanwhile, with a scowl on her face, Gloria Wegmüller isexamining the copious bottles of olive oil, neatly stockedin rows on a fine wooden shelf. She runs her fingerover a particularly elegant label that reads ’Extra Virgin’in bold, shiny gold capital letters, next to an embossedgreen olive branch. She suddenly turns around to faceGianni Greco. “Hey, Gianni, did you know that these labelscontain a dangerous chemical?” Gianni Greco looksat her with horror. “A dangerous chemical?” he repeatsquestioningly. “Exactly. It’s called Perfluorooctanoic acid,a substance that is clearly needed so that the greasy oildoesn’t damage the label. Could you maybe ask one ofyour suppliers whether there really is no alternative?”Gianni Greco hands Florian Wegmüller the paper bagwith his purchases and accompanies his regulars to thedoor. The usually cheerful man now looks rather serious.“I’ll do that right away,” he says. “As soon as I find outmore, you’ll hear from me.”

Consumer Goods17The good news and the bad newsAs Gloria Wegmüller is leaving the office where sheworks as a solicitor on Tuesday evening, her mobilerings. “Wegmüller.” “Buona sera, Gloria. It’s GianniGreco. I still owe you an answer.” “Hi Gianni,” Gloria replies.“Have you found out any more?” Gianni proudlyresponds, “Ma certo. I rang my most important supplierin Tuscany and I’ve got three bits of news for you, onebad and two good. Which would you like first?”“The bad news first, of course,” replies Gloria. “Youwere right,” Gianni says, “PFOA is used very often inmanufacturing packaging and labels that must be waterand grease-resistant. But now here’s the good news,”Gianni rejoices. “My supplier was aware of the problemquite early on. He uses an innovative paper from theCham Paper Group that doesn’t contain the chemical, butstill retains the desired properties. The so-called CarcoatRepella paper will soon come into use more and more.And that brings us on to the second piece of good news:from the end of 2014, the use of PFOA will be banned inmany countries!” “That really is good news,” says a delightedGloria and warmly thanks Gianni Greco. After theconversation over the phone, she puts her mobile awayand makes her way jauntily towards the train station.Carcoat Repella O4Thanks to its streamlined structures, its proximityto the market and an innovative research anddevelopment department, the Cham Paper Grouphas managed to replace the chemical Perfluorooctanoicacid (PFOA) more rapidly than other suppliers,with its Carcoat Repella O4 speciality paper.Carcoat Repella O4 is mainly used for labels onre-usable bottles for drinks and oils. And crucially,the paper can be printed on, metallised, coated,stamped and embossed.“Our supplier uses an innovative paper from the Cham PaperGroup that doesn’t contain the harmful chemical.”

What has speciality papergot to do with aircraft?Industrial Release

20Industrial ReleaseAn informative visitto the airportAnna Wegmüller is mad about planes. On a visit to ZurichAirport, she amazes her dad, Florian, with her knowledge. Butthe role that paper plays in assembling aircraft was somethingthat the young expert couldn’t explain.“Passport, check. Credit Card, check. Cash, check.Phone, check.” Gloria Wegmüller smiles at her husband,Florian, and daughter, Anna, and looks towards the passportinspection point. “I’d better be off then.” The solicitoris looking forward to a conference in London. Florianand Anna have accompanied her to Zurich Airport. Annadidn’t have to be asked twice. Even from a young age,she has been fascinated by planes and can recite thecharacteristics of the main passenger aeroplanes. Sheused to spend hours lovingly and patiently building modelplanes, which are still on display in her bedroom to thisday, albeit a little dusty, next to a number of books andmagazines on aviation.Speciality paper in industrySpeciality papers from the Cham Paper Groupare a vital part of industry. They are used in theproduction processes of carbon fibres, road signsor insulation foils as a base material. In mostcases, these papers are the product of individualdevelopments.Planes made from paper?After the three have said their goodbyes, dad and daughtermake their way to the visitors’ terrace with just onething in mind: catching a glimpse of the Airbus A380. “It’sthe biggest civilian passenger aircraft of all time,” Annaannounces, “and has a wingspan of 80 metres. Theyare built in Toulouse and Hamburg, and it made its firstpassenger flight in October 2007.” Florian Wegmüllersmirks. He is happy to see his daughter so enthusiastic,and knowing how much Anna likes reciting facts aboutaeroplanes, he decides to really test her knowledge.“Which airline was the first to purchase an A380?” heasks. “Singapore Airlines”, replies Anna, without hesitation.“And how heavy is the beast?” “That really dependson its interior fittings and payload. Its maximum weightis 560 tonnes.” “How many passengers does it hold?”“Over 800, depending on the seating configuration.”

Industrial Release21The father and daughter go into a detailed conversationas they linger on the visitors’ terrace. Suddenly, apaper aeroplane lands at Anna’s feet. She picks it up andgives it back to the small boy who made it. Paper… asa Purchasing Manager for a company that specialises inhigh-quality self-adhesive sheets of paper for an array ofindustries, Florian is constantly dealing with specialitypapers, which are indispensable when it comes to producingsheets. The paper plane reminds him of another,less well-known use for the material. “Did you know,”he asks Anna, “that paper also plays an important rolein constructing aircraft?” Anna stands up straight. “Youmean there’s paper inside that?” she asks with a feignedlook of horror, pointing towards a Boeing.Planes made from carbon!“No, not inside,” says Florian, correcting her. “But paperis important, since it is needed for manufacturing andtransporting carbon mats, which are then used to makethe aircraft’s fuselage, for example. The carbon matsare made from fibres that are set on speciality paperand bonded together with resin. Siliconised paper is particularlywell suited to this, because it doesn’t stick tothe resin, doesn’t melt under the subsequent heat andcan be easily detached from the mats.” Anna is now impressed.“I didn’t know that! The manufacturer of thisspeciality paper should be pleased with itself.” “Why isthat?” “Carbon is being used more and more in aircraftbecause it’s lighter than aluminium, and it’s more stableat the same time. In the A350, for example, one of themore modern Airbuses, the entire fuselage is made outof carbon.” “Another point to you,” jokes Florian andpoints to the runway, where an A380 is taking off. Impressedwith each other, the father and daughter watchthe plane as it slowly lifts away from the runway.“Paper is an important component for manufacturing andtransporting carbon mats, which are used to make an aircraftfuselage, for example.”

How did the Wegmüller family learn alittle something about printing processes?Digital Imaging

24Digital ImagingA scarf as individualas its ownerThe Wegmüller family is spending the Easter holidays inHamburg. Quite the opposite of what was forecast, there isan unpleasantly frosty wind blowing. As the family of four setout to buy some warm coats in a sports shop, they discoverthat modern printing processes are helping to createsurprisingly individual products.In Hamburg, at just after 8 o’clock, Tim Wegmüller wakesup in his hotel room and opens his eyes. The previousevening, he had arrived by train with his sister Anna,father Florian and mother Gloria. The week’s holiday innorthern Germany is a reward for passing his probationaryperiod at the grammar school. Tim jumps out of bedwith excitement and pulls the curtains open. Instead ofseeing the blue skies and warm rays of springtime sunshinethat he had hoped for, he scowls in disappointmentat the dreary clouds. After a glance around at the swayingbirch trees in the hotel courtyard, his suspicions are confirmed:it’s still rather gusty outside. “If only I’d packedmy warm jacket,” he thinks.Half an hour later, he meets his family in the breakfastroom. “I’ve got a bad feeling that the weather forecastfor pleasantly warm weather was merely a ploy by thetourist board,” says Gloria Wegmüller. “I’ve just been fora walk around the hotel, and it’s extremely cold.” FlorianWegmüller takes a sip of his coffee. “We don’t have theright clothes for this kind of weather. I think we’ll have tosort out something a bit more appropriate.” “Fortunately,having to go clothes shopping isn’t the worst thing in theworld,” Gloria jokes, winking at her daughter. And so, theWegmüllers set off for the shops.Scarves of all coloursA short walk later, the family comes across a large sportsshop. But before they get to the warm jackets, Tim turnshis attention to a shelf stocked with multi-functional,tube-shaped scarves. “These are so in right now,” heshouts. “All my friends at school have a scarf like this,even the English teacher.” “Mine too!” says Anna. “Youcan wear these scarves in lots of different ways, like ascarf or a bandana. My friend Martina wears hers as ahairband. We could all do with a scarf with this wind.”Gloria and Florian briefly look at each other in agreement.“You can both pick one out of them,” says Gloria, adding“but if everyone’s wearing one, doesn’t it get boring?”“Not at all. Look, Mum. There are so many colours anddesigns – no two are the same,” explains Tim. Suddenly,Florian starts to take an interest. As a Purchasing Manager,he knows how important production output is tothe price of a product. “How can the manufacturer offersuch diversity but sell them at an attractive price?” hewonders.

Digital Imaging25Digital printing brings benefits for customers andretailersA member of staff at the sports shop, who overheardthe family’s conversation, comes over. “It’s to do withthe printing,” he explains. “These products are printedusing what’s known in the industry as a digital sublimationprocess; this helps to create a large range of diverseproducts in small quantities. For us as a retailer, thismeans we don’t need to keep as much stock and canorder more very quickly if there is high demand. And asyou can see, customers benefit from an extraordinarilywide range.” “When I think of ’printing’, I think of paper,not textiles,” says Gloria sceptically. The sales assistantreplies, “You’re not far off. Actually, so-called sublimationpaper is used in the process – the pattern is printedonto this paper and then transferred to the material usingheat.” “Clearly, digital printing is now conquering the textileindustry,” Florian Wegmüller concludes, and thanksthe knowledgeable assistant.Digital sublimation printingWith digital sublimation printing, a design ismirror-inverted and printed on sublimation paperusing special inks and an inkjet process. Theprinted paper, together with the material to beprinted on (polyester fabric or polyester-coatedhard substrates), is subsequently inserted into atransfer press. At a temperature of between 160and 210°C, the printing process turns the ink intogas. The dyestuffs are released from the paperand fuse with the polyester fibres. The result is apermanent, colourfast, razor-sharp printed image,without a colour application that is noticeable tothe touch.In the meantime, Tim and Anna have picked out a scarfeach. “Come on Florian, let’s get one too,” says Gloria,choosing two designs for herself and her husband. A fewminutes later, the Wegmüller family leaves the sportsshop – complete with new warm coats and a cool scarfeach around their necks.“We can offer our customers maximum diversity, while keepingstock levels low, thanks to efficient digital printing processes.”

Table of contents27Table of contents28 Sustainability ReportCorporate management based on sustainabilityCustomers: Engineering innovation in concert withour customersEnvironment and eco facts & figuresEmployees: Fostering CPD and creating prospectsfor our employeesSociety: Focussing on our social environment inthe future34 Corporate Governance48 Consolidated financial statementsNotes to the consolidated financial statementsReport of the statutory auditors on the consolidatedfinancial statements71 Financial statements ofCham Paper Group Holding AGNotes to the consolidated financial statementsof Cham Paper Group Holding AGReport of the statutory auditors on thefinancial statements

28Sustainability ReportSustainability ReportCorporate management based on sustainabilityThe executive management of the Cham Paper Group looks tosustainable decisions especially in times of change and transformation.Our excellent reputation in the global market and our regionalroots in Switzerland and Italy are important to us. That iswhy everything we do in our day-to-day business operations at oursites in Cham (Switzerland) and Carmignano and Condino (Italy) iscatered to the needs of our stakeholders: customers, employees,the environment and residents in the surrounding area. With oursustainability approach our goal is to balance the key factors ofsuccess and secure them in the long term: competitiveness in themarketplace, resource efficiency and responsible environmentalmanagement, innovative products and production, social acceptanceand motivated employees.Clear-cut principles pertaining to quality, innovation, safety and environmentalperformance are securely anchored in all of our businesspractices. Complying with quality, environmental and occupationalhealth & safety standards ISO 9001, ISO 14001 and OHSAS18001 and employing environmental and quality seals of approvalmeans that these principles are continuously verified in a transparentmanner. Our commitment to sustainability is also a key componentof our Vision 2015, which we continue to pursue despiteundergoing the transformation process.In this section we report on the successes that we have achievedand the challenges that we have yet to overcome in the course ofimplementing our strategy. In addition, we also report on the goalsand initiatives that we have planned for the future.Our sustainability report is based on the guidelines of the GlobalReporting Initiative (GRI) (version G3) for the second time. The GRIis the leading international standard for sustainability reporting enablingcomparisons to be drawn with regard to economic, ecologicaland social aspects (www.globalreporting.org). By applying theseguidelines the Cham Paper Group seeks to inform its stakeholdergroups about the company’s sustainability orientation in a comprehensiveand transparent manner. The annual report, togetherwith the detailed GRI content index (see www.cham-group.com/de/nachhaltigkeitsbericht.html), complies with application level C,which has been reviewed and assured by the GRI.Vision 2015In its Vision 2015 the Cham Paper Group makes the following commitments:(basis of the mean values for 2005–2009)Energy and water• Achieve 8% overall reduction in energy consumption by 2015.• Achieve 15% overall reduction in waste water output by 2015.• Achieve 30% overall reduction in sludge output by 2015.Sustainable forest management / chain of custody• Establish and certify the chain of custody for all plants (FSC).• For pulp: FSC-controlled wood in all plants.Sustainable products – Grüne Linie (“Green Line”)• Catalogue of criteria / differentiators established for defining “sustainability”.• First such products launched.• Sustainability evidenced, e.g. by way of Life Cycle Assessment (LCA).Occupational health & safety management• Achieve 40% overall reduction in accident frequency by 2015.• Contacts for occupational safety (KOPAS) active in all plants.• Achieve 15% reduction in absence rate by 2015.• Workplace health management active in all plants.Walking the talk – The credibility of what we say• Key figures reviewed for compliance with corporate governance and performance rules (ICS).

Sustainability Report29Customers: Engineering innovation in concert with our customersThe challenges posed by our customers are an incentive for us toachieve peak performance every year. In keeping with our motto“More than paper” we perceive our commitment to our customersto be an exchange among partners enabling potential to betapped on both sides. The concrete needs of our customers andthe open feedback provided by them in communicating theseneeds enable us to develop further and continuously improve. Weutilise as much as possible the resulting innovative power in linewith our quality and environmental objectives.Quality and safety for high-performance, efficient productsIn the manufacture of speciality papers we harness 350 years’ oftraditional paper-making experience and combine it with the R&Dprowess of leading-edge paper innovations. We seek to use ourbroad experience to best advantage for our customers by providingeffective, high-performance and eco-friendly products for the ConsumerGoods, Industrial Release and Digital Imaging segments.Each of our products is systematically analysed and optimised withregard to quality and safety through all development, productionand disposal phases. The fundamentals for this are the requirementsof ISO 9001, ISO 14001 and OHSAS 18001 according towhich the Cham Paper Group is certified and which we supplementwith our own integrated management system. This enablesus to guarantee a uniform standard of quality throughout the group.In 2012 no cases were reported in which any rules or regulationsrelating to quality and safety were violated.We continued to closely follow development trends and were ableto show improvements in all product divisions. In 2012, many ofour customers again availed themselves of our value-added SupplyChain Management and Value Chain Management services. Asthe result of close cooperation with them our latest product, theBARnamic barrier paper, was successfully adapted to their respectiveprotection and machinery requirements. This monomaterialfor flexible packaging can be used directly for protecting packagedproducts such as ice cream or chocolate, while serving as a substratefor product presentation and information.Shaping the future through dialogueThe demands we place on ourselves are exacting: we measurethe quality of our products and services by the satisfaction of ourcustomers. Their direct feedback is the best yardstick of our performanceand a key driver of future development. That is why wepurposely sought a direct dialogue in 2012 and conducted a customersurvey. 80 customers – evenly distributed across all customersegments – were surveyed on selected topics such as theCham Paper Group’s strategic realignment, value for money, qualityof service, and sustainability. Customer satisfaction was shownto be favourable in all areas. We were particularly pleased at thehigh degree of customer loyalty, attributable throughout all customergroups to the high quality of our products and services. Inthe future we seek to improve in our communication pertaining toour realignment. We also plan to provide more information to ourcustomers about our innovation processes and new products. Wewill stay on the path we have chosen with our services. However,we would like to adapt our Consumer Goods product line evenmore to customer requirements, further optimise our deliverytimes – particularly in the Digital Imaging segment –, and furtherexpand the range of value-added services, one example of this beingour targeted marketing support. An analysis conducted by ushas shown that sustainability is “significant” to “very significant”for 85.3% of our customers. To them “sustainability” means firstand foremost constant quality and a responsible approach in usingresources. For us this is confirmation to continue on the path wehave chosen and communicate our sustainability activities evenmore strongly.We engage in constant dialogue with our customers and specificallyseek personal interaction and exchanges of ideas with themat tradeshows, forums and other venues. The feedback gleanedby us from various sources was particularly key in our decision torelocate production between our mills. This enabled us to respondto questions of our customers and to seek new solutions whereneeded. The HACCP hygiene management system introduced atthe beginning of 2013 in response to customer queries has beenshown to be successful and is already an integral component ofproduction operations in Italy.In responding to customer complaints, providing information andtaking immediate appropriate action are key. In 2012, we again underwentsupplier evaluations by customers who categorise us asA suppliers. We always utilise the findings of these evaluations toimprove our products and services. During the year under review,no complaints were lodged due to data protection breaches.We, too, perform supplier evaluations since the quality of ourproducts and services is ultimately dependent on the quality ofthe products and services of our suppliers. The evaluations areconducted every other year and cover the ten suppliers accountingfor the highest volume. No supplier evaluations were conducted in2012 since it was an off year.

30Sustainability ReportEnvironmentThe judicious use of resources is a central component of our philosophyfor preserving an intact environment. Critical environmentalconsiderations in the production of paper are: first and foremostthe output of waste water and the consumption of energyand chemicals relevant for environmental pollution. In order tominimise these factors, we have invested substantially in the innovationand development of new products and in improving ourproduction processes. We intend to expand and fortify our innovativecapability in the future and in doing so additionally strengthenour environmental performance. In order to send a clear signalwith regard to climate protection and energy efficiency, we havedeveloped target agreements in concert with the Swiss EnergyAgency for Industry (EnAW) on reducing power consumption andCO2 emissions and in 2012 successfully had our environmentalmanagement system recertified to ISO 14001.Products that contribute to a smaller ecological footprintIn all product categories we work hand in glove with specialists andin our laboratories to constantly improve compliance with ecologicalrequirements. For example, where possible we use renewableraw materials for the BARnamic product line in order to producepapers with barrier properties that protect against the action of watervapour and/or oxygen. Replacing aluminium or using halogenfreepackaging materials (e.g. PVdC) enables additional energy savingsto be achieved and the environment to be protected. Cham’sflexible BARnamic packaging solution was the recipient of the ZugInnovation Prize in 2012. With LeafKraft we have also been able todevelop a new generation of flexible packaging material that is fullybiodegradable and compostable. In the area of sublimation papers,by changing over to FSC input stock in the Transjet product familywe are also able to make a contribution to forest management thatis more eco-friendly, socially acceptable and sustainable.Resource-efficient productionA key basic requirement for products that are truly sustainable isminimised material and resource consumption. We utilise our existingpotential and optimise our operational processes with thegoal of minimising our ecological footprint. In the production ofour products we recycle the resulting paper waste back into theproduction process. This makes sense from both an ecological andeconomic point of view and is very successfully practiced withinthe Cham Paper Group.The 2012 financial year at Cham was characterised by restructuringand redimensioning. The shutdown of the first production plantfor the manufacture of base paper took front and centre stage. Thisshutdown was instrumental in reducing our energy consumptionand green gas emissions. The following developments also had apositive impact on our environmental performance: the replacementof our air conditioning system with an adsorption coolingsystem powered by the heat given off in the production process,the installation of a roll transport system for shortening transportdistances, and the reduction of leakage in the compressed air network.On the whole, electrical energy consumption was successfullyreduced by 7,718 MWh and thermal energy consumption by69,352 MWh. CO2 emissions dropped by 5,747 tonnes.By virtue of downsizing operations at Cham, we will be forced tofurther optimise production so as to ensure continued efficient energyuse in the future. Our goals will remain ambitious and areaimed at an annual reduction of 1% of specific fuel (20 kWh/t) andpower consumption (9 kWh/t).Sustainable production and information policyAll of Cham’s products feature information on safety and acceptability.All the raw materials and process materials used in theConsumer Goods segment are carefully inspected and tested andverified as being food safe and suitable for direct contact withfoodstuffs and complying with the respective product requirements.The Cham Paper Group provides additional information toall those interested in the form of technical factsheets, which areavailable for all of Cham’s products. Specific responses to customerqueries about BfR 1 or FDA 2 approval can be backed up bythe relevant documents. Queries with regard to REACH 3 or theGerman Packaging Ordinance (transposition of the EU PackagingDirective) are responded to by us in writing. For special productswe provide information on request pertaining to the source of theindividual components. As for innerliners we abide by our contractualobligation to disclose the product composition. The FSC logoon our orders of materials, delivery slips, invoices and the productsthemselves point to our adherence to environmental aspects..1German Federal Institute for Risk Assessment2U.S. Food and Drug Administration3EU Chemicals Directive

Sustainability Report31Eco facts & figuresEco facts & figures table 2012 2011Materials in tonnes (t) 248,715 253,072Sourced raw materials in tonnes (contained directly in the final product)FSC-controlled wood pulp 153,290 160,730FSC-certified pulp 16,281 8,080Chemicals 78,050 83,909Sourced semi-finished products in tonnes (contained directly in the final product)Sourced base paper (at Cham only) 1,094 353Energy consumption in MWh 750,996 828,066Fuels (natural gas) 571,480 640,832Electricity 179,516 187,234Renewable portion % 36 37CO 2emissions in tCO 2e 176,916 182,663Scope 1 (consumption of natural gas) 1) 115,529 129,422Scope 2 (electricity) 2) 61,387 53,241Consumption of water in thousand m 3 6,217 19,444Industrial and process water 3,834 6,451Cooling water 2,314 12,902Drinking water 70 91Waste water in thousand m 3 4,411 5,326Via the company’s own treatment plant 3) 4) 4,411 5,326Waste according to type and disposal method in tonnes 18,860 9,472Waste for reuse/recycling 309 2,939Sludge 6,339 6,124Non-hazardous landfill waste 12,137 336Special waste total 75 731)Direct green gas emissions in CO 2equivalents coming from the company’s own sources2)Indirect green gas emissions in CO 2equivalents associated with the generation of electricity3)Cooling water at the Carmignano (Italy) site is disposed of via the company’s own waste water treatment plant4)Waste water at the Cham site is conducted into the municipal sewage treatment system after undergoing treatment in the company’s own waste water treatmentplant.

32Sustainability ReportEmployees: Fostering CPD and creating prospects for our employeesThe composition of our workforce changed in 2012. This changemeans opportunities and challenges alike that we are seeking toseize and master in concert with our employees. In an industry likethe paper industry that is based primarily on technological and innovativeprowess, our expertise is our capital and potential. In orderto preserve our technological and innovative capability in the future,we are seeking to secure the transfer of existing expertise withinthe company and more strongly integrate the up-and-coming generationof professionals. To this end we are banking on targetedCPD and clear-cut reporting lines.New composition of Cham’s workforceThe length of service of the Cham Paper Group’s workforce isabove-average. The employees’ sense of identification with thecompany is equally pronounced. However, due to the shutdownof base paper production in Cham there will be sizeable changesin the composition of Cham’s workforce. The shutdown of the firstpaper machine as of mid-June 2012 is already perceptible in theanalysis. As of the reporting date, the combined workforce amountedto 574 employees, of whom 248 were located in Switzerlandand 326 in Italy. The share of women was 11.5%. A total of 31employees were employed part time and 32 had a fixed-term employmentcontract.At 35.2% the fluctuation rate was very high for 2012, particularlyin Switzerland. By contrast, in Italy it was 5.7% which is lower ascompared to the previous year. The reason for the higher numberof departures during the year under review was the restructuringthat took place at the Cham site. This resulted in voluntary departuresand terminations caused by redundancies. In order to bridgetemporary manpower shortages caused as a result, personnel washired on a fixed-term basis via a placement agency. Employees affectedby termination were provided comprehensive assistanceunder a carefully crafted redundancy scheme. The executive managementlevel was also included in the reorganisation. At the endof 2012 it was announced that there would no longer be any GroupCEO. The supreme executive governing body is now the ExecutiveCommittee, headed by a delegate of the Board of Directors.New perspectives by virtue of goals and participationWe are characterised by our employees and as such their confidenceand trust in us is key. That is why we seek to open up newprospects for them in our role as employer and foster each andevery employee according to his or her needs. Due to the realignmentof operations at Cham in 2012 this proved to be a difficultproposition and frequently created considerable uncertainty. A participativeleadership style and a clearly defined human resourcespolicy are designed to counteract this. We continue to perceive thelatter to be a strategic core issue and are endeavoured to bring theneeds and perceptions of employees in line with Cham’s corporateobjectives. Human resource topics are regularly discussed at themonthly meetings of the Executive Committee and are monitoredby the Board of Directors. Consequently, the inclusion of our employeeson an equitable basis in accordance with fair and equal principlesis also a principle of our communication philosophy.CPD opportunities through training and continuing educationWe afford all our employees the opportunity to discover somethingnew and engage in personal development. At Cham we are facedwith the particular challenge of preserving the sizable know-how ofCham’s workforce in the company and equipping ourselves withnew knowledge for dealing with the future. What is needed is agood leadership style, intriguing development goals and making theright choices when it comes to recruiting new employees. In Italycomputer-aided performance management is already a reality. AtCham the focus in 2012 was on individually drafted developmentplans for fostering talented employees.Health and safetyOur goal is to provide optimal guidance to our employees whenit comes to health and safety. Workplace health management ensuresthat health-promoting measures such as absence management,assistance to employees who have fallen ill or suffered anaccident, establishing sheltered workplaces, and reintegration inthe work process are promptly implemented by way of targetedactions.The work and safety contacts (KOPAS) are responsible for the directexchange of key topics between employees and managementas is a core team tasked to this end, the team composed of managementmembers from the various technical areas. Owing to therestructuring at Cham there will be a slight change in the organisationof the core team. The high significance of health and safetycontinues unabated. In 2012 there were no work-related fatalities.Our safety efforts are not restricted only to our personnel manningthe machinery. We also seek to appropriately include the thinkersworking at their desks in our health and safety efforts. Properly assessinghazards and risks is the first step to this end. We conducta three-phase risk assessment so as to gauge potential risks in aspecific, economic and comprehensive manner. The three phasesconsist of conducting tours and inspections on site, collecting andperforming assessments of incidents and accidents, and conductingrisk analyses for new construction, conversion and retrofittingprojects.By the same token, we attach importance to the health of our employees,both physical and mental. In order to achieve the rightwork-life balance we enable our employees to take advantage ofa flexitime model in daytime work. Health is writ large on the “vitamindays” on which we distribute information sheets on healthynutrition throughout the company and distribute fruit from localgrowers free of charge. With our annual “Bike to work” initiativewe are also actively on the go while promoting our employees’enjoyment in engaging in outdoor exercise.

Sustainability Report33Society: Focussing on our social environment in the futureBeing a company we perceive ourselves as part of society as awhole. We maintain and foster the network with our suppliers justas we liaise with the municipalities and neighbours at our sitesin Italy and Switzerland. Led by open dialogue we take part in infrastructureprojects and are involved locally in clubs and associations.We seek to find solutions wherever our paper-making mightpose a burden to surrounding residents. Adherence to complianceguidelines is an established part of our day-to-day business culture.Good corporate citizenshipIn producing paper water is required that we treat subsequent tousing it. In Cham complaints used to be frequently lodged by localresidents on account unpleasant odour emissions that were producedby our waste water treatment plant. Completely encasingthis area is not practicable on account of its size and the remainingperiod the plant will remain in operation. In order to remedy thesituation, we have masked the odours using pine scented oil. Thefeedback of residents living in the immediate vicinity is positiveand we are happy to have found a good solution until the secondpaper machine is shut down at the end of the first quarter of 2013.A task yet to be mastered is adapting the infrastructure in Cham.Although shutting down the large paper machines means thatnoise emissions and unpleasant odours will be a thing of the past,nevertheless the entire site has to be adapted to the new productionconditions. Currently various projects are being realised tocoordinate the supply of steam, electric power and water to futurerequirements. In addition, we are engaged in close cooperationwith the operator of the municipal waste water treatment plantto ensure that waste water produced by us is properly treated inthe future.The topic of emissions is also being dealt with centrally in Italy aswell. In order to comply with local and national laws and regulations,measurements of noise and odour emissions are taken on aregular basis. In an effort to reduce emission rates we are presentlylooking into the construction of a biomass plant at the Condinosite. The cooperative venture with the neighbouring sawmills andthe region’s forest management service would create additionaljobs. It is currently being investigated whether financial supportwould be forthcoming from the Province of Trento.Clubs and sponsoringWe also provide backing at our various locations in the form ofsponsoring and other benefits. In Italy we enable the volunteer firebrigade to conduct training exercises on our factory premises. Inaddition, the paper mill also sponsors the local volleyball and footballteam and a local magazine. At Cham our sponsoring efforts arecurrently focussed on our employees. We support the company’schess club in conducting internal chess tournaments. Another exampleis the specific support we afford one of our employees.Being a professional hockey player for the Zug Ice Hockey Clubhis training is demanding and expensive. We attempt to aid himby enabling him to pursue a commercial training programme despitehis daily training demands. Another athletics project pursuedby us is our four-year partnership with the Cham Sports Club inwhich we support young athletes. During the year under reviewthe Cham Paper Group’s contribution was earmarked for new juniordresses, training material, maintenance work to the juniors busand a special advertising panel.ComplianceCompliance is an established part of our corporate thinking andfirmly anchored in clearly formulated governance guidelines thatapply throughout the company. With these guidelines we seek toensure that a culture is lived at the Cham Paper Group that embodiesequitable and fair treatment among all employees at all levelsand that our actions are guided by respect and trust. The values setout in our governance guidelines are integrated in the general employmentterms as an obligatory element and are binding on eachand every employee. A separate code of practice is in the planningstage in Italy and will be enacted by mid-2013.Guidance is key in our day-to-day work so that we maintain compliancewith statutory requirements and regulatory standards andlive up to our own values. Other cornerstones for securing our basicvalues are: expense regulations and guidelines, organisationalregulations and our internal regulations. They contain detailed practicalspecifics of our leadership and communication approach, ourauthority matrix and guidance for dealing with insider information.The content of our organisational regulations is freely accessibleon our website. Additionally, we provide internal guidance pertainingto compliance issues. In doing so, we ensure that all the employeesof the Cham Paper Group are thoroughly acquainted withour compliance culture and that they abide by it in relations withcustomers and suppliers. In 2012 no legal action was initiated foranti-competitive behaviour or anti-trust or monopoly practices. Exceptfor minor fines imposed upon the Condino mill, no sanctionsor fines were imposed on the company by government authoritiesor courts for non-compliance with statutory provisions or environmentalregulations and targets. Fines were imposed in Condinobecause the company neglected to provide advance notificationto the authorities of the dates on which water sampling was to beconducted.New developments under our roofIn the course of restructuring our Swiss mill its role in the municipalityhas gained another dimension: we have made the officesthat were vacated available for use by others and now share ouroffice building with local businesses. This has already resulted ina lively mix of different people in the old administrative building:artists, consultants and property management companies now rubshoulders with our own employees under the same roof. In doingso, this historical building on the Lorze – which has already writtena significant chapter of industrial history – will continue to be openfor commercial use in the future.

34Corporate GovernanceCorporate GovernanceThe Cham Paper Group is committed to contemporary corporategovernance. The statements below comply with the current Directiveon Information Relating to Corporate Governance (DCG) of theSIX Swiss Exchange and describe the principles and regulationsrelating to the organisation, management and monitoring of ChamPaper Group Holding AG and its subsidiaries as at 31 December2012. These principles are contained in the Articles of Associationand in the Organisational Regulations of the Board of Directors.1.2 Significant shareholdersAs of 31 December 2012, 887 shareholders were entered in theshare register of Cham Paper Group Holding AG (2011: 1,078shareholders). The following shareholders and shareholder groups,known to Cham Paper Group Holding AG from the share registerand from the disclosures of participating interests in the SwissOfficial Gazette of Commerce, each held more than three per centof the share capital as at 31 December 2012 and 2011:1. Group structure and shareholders1.1 Group structureCham Paper Group Holding AG, with its headquarters in 6330Cham, is a public limited company organised according to the lawsof Switzerland. In its capacity of a holding company it holds, eitherdirectly or indirectly, all companies belonging to the Group. Thescope of consolidation does not include any listed companies. Theunlisted companies that are part of the scope of consolidation ofCham Paper Group Holding AG are presented on page 68 of theconsolidated financial statements with details of each company,its registered office, share capital and shareholdings. The Group’soperational management structure as at 1 January 2013 is shownin the organisational chart below.2012 2011Buhofer shareholder group (BURUHolding AG, Philipp Buhofer, HeinzBuhofer, all Hagendorn 40.89% 40.41%LB (Swiss) Investment AG, Zurich 5.61% 4.80%Cham Paper Group Holding AG, Cham 5.59% 5.95%In the notification to the SIX Swiss Exchange of 3 November 2009,Philipp Buhofer was disclosed as acting jointly or as an organisedgroup in concert with BURU Holding AG (Buhofer shareholdergroup). His personal holding as of 31 December 2012 amountedto 0.93% of the share capital of Cham Paper Group Holding AG.Cham Paper GroupHolding AGBoard of DirectorsDelegate of theBoard of DirectorsUrs Ziegler*Head of Finance &ControllingLuis MataCorp. Communications &ServicesFranziska StöckliManaging DirectorCPG Schweiz AGPeter Müller*Managing DirectorCPG Italia S.p.A.Marcello Di Giacomo*Mill Manager CarmignanoMarcello Di Giacomo*Mill Manager CondinoGerold Zuegg*

Corporate Governance35In the notification to the SIX Swiss Exchange of 9 April 2010, HeinzBuhofer was disclosed as acting jointly or as an organised group inconcert with BURU Holding. As such, he belongs to the Buhofershareholder group. His personal holding as of 31 December 2012amounted to 0.39% of the share capital of Cham Paper GroupHolding AG. In the notification of 9 April 2010, the shareholders ofBURU Holding AG that are not shareholders of Cham Paper GroupHolding AG were disclosed to the SIX Swiss Stock Exchange 1 .As far as Cham Paper Group Holding AG is aware, the significantshareholders of the company have not entered into any shareholders’agreements among themselves nor have they entered intoany agreements regarding the exercise of voting rights or otherrights related to the shares of Cham Paper Group Holding AG.1.3 Cross-shareholdingsCham Paper Group Holding AG does not have any cross-shareholdingsin other companies exceeding the maximum limit of 5%in terms of capital or voting rights.2. Capital structure2.1 Share capitalThe nominal share capital of Cham Paper Group Holding AG wasCHF 48,425,000 as at 31 December 2012. The share capital is dividedinto 745,000 fully paid-up registered shares with a par valueof CHF 65.00 per share. All shares have the same voting rightsand are entitled to the same dividend. There is only one categoryof registered shares.The shares of Cham Paper Group Holding AG are listed on the SIXSwiss Exchange and are traded in the small & mid caps segment(securities number: 193185, ISIN code: CH0001931853, tickersymbol: CPGN). For further information about the shares of ChamPaper Group Holding AG, please refer to pages 6 and 7.Cham Paper Group Holding AG suspended the share buy-backprogram initiated in FY 2008 in April of 2009. The Group did not acquireany other shares via this share buy-back program in FY 2012.The treasury shares acquired as part of this program have not beenvoided. As of 31 December 2012, Cham Paper Group Holding AGheld 41,655 registered shares in the company's own holdings (31December 2011: 44,302 registered shares in the company’s ownholdings). This corresponds to 5.59% of the share capital of ChamPaper Group Holding AG.2.3 Changes in capitalIn FY 2012 and 2011 no changes were made to the company’s capital.As of 31 December 2012 and 2011 the nominal share capitalof Cham Paper Group Holding AG amounted to CHF 48,425,000.The par value of the registered shares amounted to CHF 65.00.At the 98th General Meeting of Shareholders on 29 April 2010, andbased on the specially qualified auditor's report, the shareholdersdecided to reduce the share capital of Cham Paper Group HoldingAG of CHF 57,737,500 by CHF 9,312,500 to CHF 48,425,000by reducing the par value of the 745,000 registered shares fromCHF 77.50 to CHF 65.00 per share, to use the reduction amountof CHF 12.50 per share as a disbursement to shareholders, and toamend the Articles of Association accordingly.For further information about the development of the share capitalstructure of Cham Paper Group Holding AG during the last twoyears, please refer to the tables on page 74 of the financial statementsof Cham Paper Group Holding AG.2.4 Participation and dividend right certificatesCham Paper Group Holding AG has not issued any participationcertificates or dividend right certificates.2.5 Restrictions on transferability and nominee entriesTransfer of the registered shares of Cham Paper Group Holding AGis not subject to any restrictions. The only requirement for entry inthe share register is a declaration that the shareholder has acquiredthe 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 convertiblebonds nor has it issued any tradable options.2.7 Dividend policy and appropriation of available earningsCham Paper Group Holding AG pursues a dividend policy accordingto which 25% to 35% of the net operating profit is designatedfor distribution. This ensures that profits are largely plowed backinto the company for financing its long-term growth. The proposalmade by the Board of Directors to the General Meeting of Shareholderspertaining to the appropriation of the available earningsalways takes account of the company’s current financial situation.2.2 Conditional and approved capitalThere is no conditional or approved capital.1 The individual disclosure notifications published during the year are publiclyaccessible at www.six-exchange-regulation.com/publications/published_notifications/major_shareholders_en.html.

36Corporate Governance3. Board of Directors3.1 Members of the Board of DirectorsThe Board of Directors of Cham Paper Group Holding AG is composed of five non-executive members and one executive member. Noneof the serving members of the Board of Directors belonged to the Executive Management Board of Cham Paper Group Holding AG orthat of any of its subsidiaries or engaged in any significant business relations with any of its subsidiaries during any of the three financialyears preceding the reporting period.NamePositionElectionto the Board ofDirectors End of term Audit CommitteeCompensationand NominationCommitteePhilipp Buhofer Chairman 2004 2013 Member MemberUrs Ziegler Vice Chairman and Delegate 2007 2013 – MemberFelix Thöni Member 2008 2013 Chairman –Hans Schaller Member 2009 2013 Member ChairmanPeter J. Schmid Member 2011 2013 Member –Niklaus Peter Nüesch Member 2012 2013 – –NamePhilipp BuhoferYear of birth, nationality1959, Swiss citizenPositionChairman of the Board of Directors since 2006Member of the Board of Directors since 2004Professional backgroundSince 1997: independent businessman and Board of Directors member1987–1997: EPA AG, Zurich, Group Head Purchasing and Sales, overall responsibility for procurement,Executive Management Board member, Delegate and Chairman of the Board of Directors1984–1987: Purchasing, Metro International, Baar, Switzerland, Düsseldorf, Germany,and Hong Kong1978–1981: professional pilot in Louisiana, South Carolina, USAEducationBusiness Economics degree from the School of Economics and Administration of LucerneActivities in governing andsupervisory bodiesChairman of the Board of Directors, Kardex AG, ZurichChairman of the Board of Directors, Rapid Holding AG, DietikonDelegate of the Board of Directors, BURU Holding AG, HagendornCo-owner of DAX Holding AG, HagendornBoard member in various SMEs

Corporate Governance37NameUrs ZieglerYear of birth, nationality1948, Swiss citizenPositionMember of the Board of Directors since 2007Vice Chairman and Delegate of the Board of Directors since 2012Professional background1980–2009: CEO, Ziegler Papier AG, Grellingen1975–1980: Director of Customer Projects and Consultancy, Eldag AG, Zurich1975–1980: Director of Business Management and IT Organisation, COC AG, Zurich1973–1975: Financial Accounting, Eldag AG, BaselEducationEquivalent of MA in Economics, University of St. GallenNameFelix ThöniYear of birth, nationality1959, Swiss citizenPositionMember of the Board of Directors since 2008Professional backgroundSince 2010: Member of Board of Directors / Management Consultant2003–2009: CFO, Charles Vögele Group, Pfäffikon1992–2002: CFO, Gavazzi Group, Steinhausen1988–1991: Area Controller, Schindler Management AG, EbikonEducationEquivalent of PhD of Economics, University of St. GallenActivities in governing andsupervisory bodiesDelegate of the Board of Directors Kardex Group, ZurichMember of the Board of Directors, Renergia Zentralschweiz AG, Perlen/RootNameHans SchallerYear of birth, nationality1944, Swiss citizenPositionMember of the Board of Directors since 2009Professional background2003–2009: CEO, Chemie+Papier Holding, Perlen1996–2002: CEO, Perlen Group, Perlen1983–1996: CEO, Gipsunion AG, Holderbank1980–1982: CFO, Gipsunion AG, Holderbank1978–1980: Business Controller Europe, Kontron AG, Zurich1973–1978: Project Manager Consultancy, Hayek Engineering AG, Zurich1970–1973: Market Research Manager, British American Tobacco, GenevaEducationEquivalent of MA in Economics, University of St. GallenActivities in governing andsupervisory bodiesDelegate of the Board of Directors, Breitschmid Group AG, KriensMember of the Board of Directors, Curaden AG, KriensMember of the Board of Directors, Curaden International AG, Kriens

38Corporate GovernanceNamePeter J. SchmidYear of birth, nationality1961, Swiss citizenPositionMember of the Board of Directors since 2011Professional backgroundSince 2004: attorney-at-law with own law firm (Schmid Rechtsanwälte)1992-2003: attorney-at-lawEducationCompletion of legal education at the Universities of Geneva and BernMaster of Laws in International Trade and Finance (Tulane University, New Orleans, Louisiana, USA)Activities in governing andsupervisory bodiesChairman of the Board of Directors of Immark AGChairman of the Board of Directors of Helvetic Trust Estates AGMember of the Board of Directors of AZAD Fine Chemicals AGMember of the Board of Directors of ASATONA AGNameNiklaus Peter NüeschYear of birth, nationality1953, Swiss citizenPositionMember of the Board of Directors since 2012Professional backgroundSince 2009: Planner Empredimentos Ltda., Sao Paolo, Brazil, managing partnerSince 1996: Nüesch Development AG, St. Gallen, CEO and partnerSince 1988: various consultancy briefs in fiduciary real estate development; corporate identity andstrategic development, organisation and family succession planning in the machinery, construction,pharmaceuticals, textiles and sporting goods industries, banking sector and athletics/cultural services1984-1988: McKinsey & Company, Senior Project Manager. Projects in Switzerland, The Netherlands,USA and Japan involving strategic development, marketing, organisation, logistics and R&D for thepharmaceuticals, electronics, construction supplier and machinery industries, insurance sector andpublic sector entities1979-1982: GLP Guhl+Lechner+Philipp, Architects and Planners, Zurich, project manager in urbandevelopment and residential construction projectsEducationEquivalent of MSc Architecture from the Swiss Federal Institute of Technology, Zurich (ETHZ)MBA, INSEAD, Fontainebleau, FranceActivities in governing andsupervisory bodiesBoard chairman, NZ Investments Ltd., Hong KongBoard chairman, Nüesch Development AG, St. GallenDeputy chairman of the board, Nüssli Invest AG, HüttwilenBoard chairman, 4it Holding AG, Wil SGChairman of the advisory committee, Nordeck Holding GmbH & Co. KG, Hanover (Germany)Board member, Zymtech Holding AG, ZugBoard member, Diener Syz Holding AG, SwitzerlandBoard member, Auto-i-Dat AG, ZurichBoard member, N2 Development LLC, Muscat (Oman)Board member, Rapid Holding AG, DietikonBoard member, Groba AG, BrütisellenBoard member, Hess Investment AG, AmriswilBoard member, Blumer Lehmann Holzbau AG, Gossau SGBoard member, Schindler Aufzüge AG, Ebikon

Corporate Governance393.2 Other activities and interestsWith the exception of the positions mentioned under 3.1, themembers of the Board of Directors are not engaged in any activitiesin executive management and supervisory bodies or permanentmanagement and consultancy functions for significant interestgroups.3.3 Elections and term of officeMembers of the Board of Directors are elected by the shareholdersat the General Meeting of Shareholders for a term of one year,one year being the period from one General Meeting of Shareholdersto the close of the next. If elections are held to elect replacementsfor board members mid-term, those so elected completethe term of office of the members they are replacing. Electionstake place on an individual basis. Re-election is permissible. Thereis no limit to the number of terms of office that any one membermay serve. However, upon reaching the age of 70 Board ofDirectors members must lay down their office at the next GeneralMeeting of Shareholders. The shareholders have the right to voteBoard of Directors members out of office at the General Meetingof Shareholders. The number of Board of Directors members islimited to between five and seven. The average time the presentBoard of Directors members have served is approximately fourand a half years, their average age being ca. 59.3.4 Internal organisation3.4.1 Allocation of responsibilities within theBoard of DirectorsThe Board of Directors has the ultimate authority to make decisionsexcept where this is reserved to shareholders by operationof the law or the Articles of Association. The Board of Directors isresponsible for the overall direction, supervision and control overexecutive management. It enacts guidelines for the company’sbusiness policy and informs itself regularly about the company’sperformance and business situation. The main responsibilities ofthe Board of Directors are:• Defining the Group’s organisational and strategic direction• Ultimate supervision of the Group’s business operations andmonitoring of its performance• Approval of significant acquisitions and disposals• Establishing systems and procedures for the Group’s accountingand financial control and planning• Establishing the Group’s business policy, in particular its investmentand financial policy• Approval of budgets including investments and financial plans• Drafting the Annual Report, preparation and conducting of theGeneral Meeting of Shareholders, and the implementation ofthe resolutions adopted by it• Establishing the key principles of corporate governance andguidelines for the Group’s information and communicationpolicy• Appointment and dismissal of persons charged with the managementand representation of the Group and designating authorisedsignatories• Establishing the organisation and monitoring of the internal controlsystem• Informing the competent authorities in the event of excessliabilities over assets3.4.2 Board of Director committeesThe Board of Directors is assisted by two committees.Audit CommitteeThe Audit Committee assists the Board of Directors in performingits duties of ultimate financial supervision of the company andin managing its interactions with the external auditors. The maintasks of the Audit Committee are:• Auditing the consolidated financial statements and the financialstatements of Cham Paper Group Holding AG in tandem withthe Executive Management Board and the external auditors• Evaluating the appropriateness and effectiveness of the accountingand reporting principles used for consolidation• Assessing the presence of an effective internal control systemincluding risk management• Evaluating and selecting external auditors to be nominated forelection by the General Meeting of Shareholders• Assessing the performance of the external auditors and verifyingtheir independence• Reviewing the fees of the external auditors and the compatibilityof their auditing activities with any other consulting activitiesin which they may be engaged• Reviewing information concerning corporate governance forcompliance with the guidelines of the SIX Swiss Exchange• Deciding whether the Board of Directors can be recommendedto submit the consolidated financial statements and the financialstatements of Cham Paper Group Holding AG to the GeneralMeeting of Shareholders for adoption by it.The Audit Committee has no decision-making authority, but itrather assesses the aforementioned matters and prepares theindividual and consolidated financial statements for approval bythe Board of Directors. Meetings are attended by the Delegate ofthe Board, the Head of Finance & Controlling and as necessary,by representatives of the external auditors. The Audit Committeemeets at least once every six months, more frequently as mayprove necessary. In FY 2012 three meetings were held, each lastingapproximately half a day. Representatives of the external auditorsattended all three meetings.The Audit Committee consists of Dr. Felix Thöni (Chairman),Philipp Buhofer, Hans Schaller and Peter J. Schmid. Because oftheir professional background, the members of the Audit Committeehave sufficient experience and competency in accounting andfinancial management to be able to perform their responsibilities.

40Corporate GovernanceCompensation and Nomination CommitteeThe Compensation and Nomination Committee establishes theprinciples for compensation of the Board of Directors, the Delegateof the Board and members of the Executive Committee. Italso establishes the guidelines for the selection of candidates formembership on the Board of Directors and the Executive Committee.The main tasks of the Compensation and Nomination Committeeare:• Establishing the compensation principles for the Board of Directors,the Delegate of the Board and the Executive Committeemembers• Establishing the financial compensation for the Board of Directors,the Delegate of the Board and the Executive Committeemembers• 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 forelection to the Board of Directors and selecting candidates• Establishing the principles for the selection of the successor tothe Delegate of the Board, Executive Committee members andselecting candidates• Reviewing the status of the pension fund of Cham Paper GroupHolding AG and its subsidiariesThe Compensation and Nomination Committee has no decisionmakingauthority, but it rather assesses the aforementioned mattersand prepares them for approval by the Board of Directors. TheCompensation and Nomination Committee meets at least onceevery six months, and more frequently as may prove necessary.The Compensation and Nomination Committee consists of HansSchaller (Chairman), Philipp Buhofer and Urs Ziegler. In FY 2012,three meetings were held, each lasting about half a day.3.4.3 Functioning of the Board of Directors and itscommitteesThe Board of Directors meets at the invitation of the Chairman asoften as the conduct of business demands, however at least onceevery quarter. In addition, extraordinary meetings or decisions byway of circular also take place as required. The Board of Directorsmeets once a year for a strategy seminar. Decisions are made bythe entire Board of Directors. The Chairman generally chairs theBoard of Directors meetings and casts the tie-breaking vote in theevent of ties. He also plans and runs these meetings. Meetings ofthe Board of Directors and their agendas are prepared by the Chairmanin consultation with the Delegate of the Board. Each memberof the Board of Directors may convene a meeting or request thatan item be placed on the agenda. The members of the Board of Directorsare sent the agendas and documentation in advance of themeetings. Apart from the Board of Directors members, meetingsare also attended by the Head of Finance and Controlling and, dependingon the agenda, by other Executive Committee members.Depending on the matter being discussed, the Board of Directorsmay also invite other third parties to be present at meetings. Whendealing with matters that relate only to Cham Paper Group HoldingAG or that are of a particularly confidential nature, only Board ofDirectors members are in attendance. Minutes are taken of thedeliberations and decisions of the meetings. In 2012 the Board ofDirectors held eight meetings, of which five were half-day meetingsand three were full-day meetings. One of these meetings wasconvened as extraordinary meeting.The Board of Directors has established two permanent committeesfrom among its members, the Audit Committee and the Compensationand Nomination Committee, to deal with clearly definedsubject areas. These two committees primarily have an advisoryand monitoring function and they report to the Board of Directorsso as to enable it to prepare its decisions or exercise its supervisoryfunction. The members of both committees are appointed bythe Board of Directors.The Board of Directors is a constituent body; it elects the Chairmanand Vice Chairman from among its members. The Vice Chairman'srole is to represent the Chairman if he is unable to attend or isotherwise engaged.3.4.4 Delegation of Authority within the Board of Directorsand the Executive CommitteeThe Board of Directors of Cham Paper Group Holding AG delegatesoperational management completely to the Delegate of theBoard. By the same token, the Delegate of the Board is responsiblefor operational management. He is assisted in carrying out thistask by members of the Executive Committee who report directlyto him. The authorities and responsibilities of the Executive Committeeare determined in particular by the budget approved by theBoard of Directors, the Organisational Regulations and the establishedstrategy. The Organisational Regulations can be consultedon the website, under Investor Relations/Corporate Governance 2 .3.4.5 Information and control instrumentsThe Board of Directors exercises its ultimate supervision of theExecutive Committee by way of a structured reporting system aswell as management accounting and budgeting processes. Generally,the memebers of the Executive Committee also attend themeetings of the Board of Directors. At meetings they present andcomment on day-to-day business, provide a detailed view of finances,and inform the Board of Directors about current operativeissues in the core businesses. They also report on developmentsin key markets and projects and draw the Board of Directors’ attentionto existing and imminent risks. Apart from materials on thecourse of business, financial results, market developments andother significant events in the Group, the Board of Directors alsoreceives the following comprehensive written reports on a periodicalbasis, these items being provided to the Board in a timelymanner prior to its meetings:2 http://ir.champaper.ch/cgi-bin/show.ssp?id=770&companyName=champaper&language=English

Corporate Governance41• Finance Report• Quarterly Report• Half-year Report• Annual Report• Business Plan Report• Budget Report• Forecast Reportmonthlyquarterlybi-annuallyannuallyannuallyannuallythree times per year(in April, July and October)The monthly financial report contains an overview including commentsand a variance analysis on the current-year budget and prioryearfigures with regard to the balance sheet, income statement,cash flow statement, net working capital, and key production andsales figures for Cham Paper Group Holding AG and its subsidiaries(Cham Paper Group Management AG, Cham Paper GroupSchweiz AG, Cham Paper Group Italia S.p.A.).The Board of Directors committees meet regularly with membersof the Executive Committee and external consultants, includingrepresentatives of the external auditors. The external auditors areaccountable to the Audit Committee, the Board of Directors, andultimately to the shareholders. Upon completing an audit, the externalauditors submit the financial report to the Audit Committeeand discuss its findings with it. The auditors report in a comprehensivemanner to the Board of Directors, in so doing assessingreporting and accounting, the internal control system, and the performanceand results of the audit.As a general principle, no Board of Directors members take partin meetings of the Executive Committee exept the Delegate ofthe Board of Directors. However, the Chairman of the Board ofDirectors and individual Board members regularly consult with theDelegate of the Board and, as needed, with other Executive Committeemembers. Additionally, once a year a joint workshop is conductedwith the Board of Directors and the Executive Committeeat which the strategy and business plan for the next three years isdiscussed and established.3.4.6 Risk assessment and internal control systemfor financial reportingIn view of article 728a of the Swiss Code of Obligations, whichwent into effect on 1 January 2008, the Group introduced a uniforminternal control system (ICS) for financial reporting. In thiscontext, fundamental relevant accounting and reporting risks wereidentified and analysed with regard to their probability of occurrenceand damage potential. Key internal controls were identifiedand documented for the risks identified in this risk assessment ashaving a high probability of occurrence and posing a high damagepotential. The key controls identified were documented both atthe level of the overall company and at the level of the variousbusiness processes and systems of the subsidiaries. Key controlsrelate to control activities in the allocation of authority and the regulationof control measures. Key controls must be documented atminimum by process descriptions and by details pertaining to thecontrol objectives and control and risk descriptions. Assessmentof the effectiveness of controls, identification of weaknesses andthe adoption of corrective measures are carried out by the ExecutiveCommittee. The Head of Finance & Controlling reports regularlyto the Audit Committee on the effectiveness of the internalcontrol system. The external auditors perform verification of theexistence of an internal control system and report in a comprehensivemanner 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 internalcontrol system and performing risk assessment are contained inthe Board of Directors’ regulations governing the internal controlsystem.In addition to the internal control system, the Cham Paper Grouphas had a risk management manual since September of 2009 thatis updated by the Executive Committee in the course of its annualrisk assessment. The manual contains a risk matrix in whichidentified risks are entered in accordance with their probability ofoccurrence and the potential possible extent of damage or lossposed by them. The risk matrix forms the basis for the risk catalogue,also contained in the manual, which describes the individualrisks in detail and possible actions for mitigating them. The mostsignificant risks for the year under review and the actions that havebeen adopted and initiated to counteract these risks are describedin the Notes of the consolidated financial statements on page 67.

42Corporate Governance4. Executive Committee4.1 Members of the Executive CommitteeAs of 31 December 2012, the members of the Executive Committee of the Cham Paper Group were as follows:NameUrs ZieglerYear of birth, nationality1948, Swiss citizenPositionVice Chairman and Delegate of the Board of Directors since 2012Member of the Board of Directors since 2007Professional background1980–2009: CEO, Ziegler Papier AG, Grellingen1975–1980: Director of Customer Projects and Consultancy, Eldag AG, Zurich1975–1980: Director of Business Management and IT Organisation, COC AG, Zurich1973–1975: Financial Accounting, Eldag AG, BaselEducationEquivalent of MA in Economics, University of St. GallenNamePeter MüllerYear of birth, nationality1971, German citizenPositionManaging Director, Cham, SwitzerlandProfessional backgroundSince 2012: Managing Director, Cham Paper Group Schweiz AG, ChamSince 2009: Mill Manager, Cham Paper Group Schweiz AG, ChamSince 2007: Head of Production and Engineering, Papierfabriken Cham-Tenero AG, Cham2003–2007: Head of Paper Manufacture, Papierfabriken Cham-Tenero AG, Cham2002–2003: Production Manager, Hunsfos Fabrikker AS, Norway2001: Hired into the Cham Paper GroupEducationEquivalent of PhD in Chemistry, Technical University, Darmstadt, GermanyMBA, City University, Bellevue, Washington, USAActivities in governing andsupervisory bodiesChairman of the board of Gesellschaft für Erdgastransporte Schweiz (GETS) AG

Corporate Governance43NameMarcello Di GiacomoYear of birth, nationality1962, Italian citizenPositionManaging Director Cham Paper Group Italia S.p.A.Professional backgroundSince 2012: Managing Director, Cham Paper Group Italia S.p.A.2011–2012: Plant Manager, Kimberly Clark, Alanno (IT)2008–2011: Production Manager, Kimberly Clark, Romagnano Sesia (IT)2006–2008: European Lean Levelling Production Implementation, Kimberly Clark (EU)2001–2006: European Strategic Planning, Kimberly Clark, Reigate (UK)1999–2001: Regional Tactical Planning, Kimberly Clark, Turin (IT)1989–1999: Mill Planning, Operation Shift Leader, Logistic Manager, Kimberly Clark, Alanno (IT)1983–1989: Accounting, Payroll, Budgeting, IT Manager, Apell S.p.A.EducationDiploma in Accountancy, ITC “F. Galiani”, Chieti (IT)NameGerold ZueggYear of birth, nationality1949, Italian citizenPositionMill Manager, Condino, ItalyProfessional backgroundSince 1992: Mill Manager, Cham Paper Group Italia S.p.A., Condino1985–1992: Production Manager, Cartiera di Carmignano S.p.A., Condino1981–1985: Head Coating and Reeling & Cutting, Cartiera del Garda (Bertelsmann Group)1977–1981: Production Manager, Cartiera di Carmignano S.p.A., CarmignanoEducationPaper Engineering, University of Applied Sciences, Munich, Germany

44Corporate Governance4.2 Other activities and interestsWith the exception of the positions mentioned under 4.1, ExecutiveCommittee members do not engage in any other activities orassociated interests.4.3 Management contractsCham Paper Group Holding AG has not entered into any managementcontracts with third parties.5. Compensation, shareholdings and loans5.1 Content and method of determining compensation andshareholding schemesBoard of DirectorsThe compensation principles and the amount of compensationpayable to Board of Directors members are revised annually by theCompensation and Nomination Committee and determined by theBoard of Directors acting on a proposal from the Compensationand Nomination Committee. Salary comparisons or benchmarksare not systematically taken into account. No external consultantswere involved in the drafting of the compensation principles currentlyin force. The amount of compensation payable to Board ofDirectors members was last adjusted in July 2009. Consultancybriefs for members of the Board of Directors subject to additionalcompensation are granted by the entire Board of Directors and requirethe consent of a majority of the members. Such consultancybriefs are clearly defined and limited in time.The members of the Board of Directors receive an annual compensationin keeping with their duties on the Board. The annualcompensation is based on a base salary including an expense allowanceas well as attendance fees. The base salary depends onthe individual’s position on the Board of Directors. The Chairman ofthe Board of Directors receives a base salary including an expenseallowance of CHF 170,000. The Vice Chairman of the Board ofDirectors receives a base salary including an expense allowance ofCHF 40,000. The other members of the Board of Directors receivea base salary of CHF 30,000, which also includes an expense allowance.The expense allowances compensate the members ofthe Board of Directors for travel and other necessary out-of-pocketexpenses incurred in the performance of their activities on theBoard. The attendance fees vary according to the number of meetingsof the Board of Directors and its committees. For each memberof the Board of Directors, the attendance fees amount to CHF3,000 for an all-day meeting and CHF 1,500 for a half-day meeting.For the committee meetings, the attendance fees amount to CHF4,000 for an all-day meeting and CHF 2,000 for a half-day meeting.The attendance fees for the other committee members are equalto those of the Board of Directors meetings. The overall amount ofcompensation of the members of the Board of Directors and thecompensation of current and former members of the Board of Directorsfor FY 2012 and 2011 are stated on page 75 of the financialstatements of Cham Paper Group Holding AG.Delegate of the BoardThe Delegate of the Board of Directors receives for the performanceof his operative tasks a monthly base salary in cash whoseamount is proposed by the Compensation and Nomination Committeeand subject to the approval of the Board of Directors. Fordetails on the compensation of the Delegate of the Board, pleaserefer to page 75 of the financial statements of Cham Paper GroupHolding AG.Other Executive Committee membersThe principles of compensation of the other Executive Committeemembers are annually revised and established by the Compensationand Nomination Committee. Salary comparisons orbenchmarks are not systematically taken into account. No externalconsultants were involved in the drafting of the compensation principlescurrently in force. The Board of Directors has the ultimatedecision with regard to compensation principles and the amountof compensation payable. This applies equally to the performancebonuses for the other members of the Executive Committee thatare established annually by the Compensation and NominationCommittee and submitted to the Board of Directors for approval.They are valid for one financial year. Once the financial year hasended, target achievement is determined and assessed by thesame people who set the targets. The performance bonuses arepaid out in April of the following financial year and/or optionally inthe form of shares (cf. section 5.2, Shareholding plan). It also fallswithin the discretion and remit of the Board of Directors to rewardmembers of the Executive Committee for out-of-the-ordinary tasksperformed by them (e.g. conducting of strategic projects) by wayof one-off special bonuses. As in the case of performance-basedbonuses, the general conditions for awarding special bonuses areformulated in the Compensation and Nomination Committee andare approved by the Board of Directors.Compensation of the other Executive Committee members consistsof a base salary and a performance bonus. The base salarycomprises a gross salary (compensation before deduction of employeesocial security contributions), expense allowances and remunerationin kind (company car). Annual performance bonusesare paid to the Executive Committee members under a bonus plan.The amount of these bonuses depends on the achievement of thecorporate targets and individual targets, both of which are establishedin advance. The performance bonus is determined for eachExecutive Committee member as a percentage of that member’sgross salary. It amounts to a maximum of 30% of the gross salaryof the Executive Committee members. The maximum bonus isdisbursed for a target achievement of 130% or more. No bonusis paid where the degree of target achievement falls short of theminimum of 70%. The targets include quantitative and qualitativeperformance targets, the quantitative performance target having aweighting of 70% and the qualitative performance target a weightingof 30%. During the year under review the quantitative performancetargets (corporate targets) were based on the achievementof the following targets: operating profit, key net working capitalfigures and sales targets for selected strategic segments. As a

Corporate Governance45general rule, the qualitative targets (individual targets) are in referenceto the functional area of the respective Executive Committeemember and are comprised of performance targets with clear-cutmeasurable criteria. The performance bonuses are paid out in Aprilof the following year or optionally in the form of shares (cf. section5.2, Shareholding plan).Due to the unusual situation in which the company found itself duringthe year under review, the Board of Directors decided to suspendthe bonus plan for the Executive Committee in favour of thefollowing arrangement: the members of the Executive Committeewere offered the prospect of compensation amounting to a maximumof 25% in excess of their base salary, payment to be dividedinto two equal parts and comprised of 50% in shares (for the proceduresused to calculate the allocation of shares, please refer tosection 5.2, Shareholding plan). The first part of this compensationwas not made subject to any conditions and was disbursed to allmembers of the Executive Committee in September of 2012 whowere in the company’s employ at this time. The Board of Directorswill decide on the payment of the second part in March of 2013,this portion also to be 50% in cash and 50% in shares. Payment isdependent on the achievement of selected quantitative corporatetargets. Those entitled to receive this are the Executive Committeemembers who were still in the company’s employ as of theend of December 2012.The total amount of compensation of Executive Committee members,compensation of former Executive Management Boardmembers and the highest compensation paid to any one memberof the Executive Committee and the Executive ManagementBoard respectively for FY 2012 and 2011 are stated on page 75ff ofthe financial statements of Cham Paper Group Holding AG.5.2 Shareholding planDuring FY 2010, a shareholding plan was introduced for the membersof the Board of Directors and the Executive Committee. Theshares for this program are issued from the company’s own holdings.Under the shareholding plan, the members of the Board of Directorsestablish at the beginning of the financial year what share oftheir compensation they would like to receive in the form of sharesfor the current year (25%, 50%, 75% or 100%). This share maybe changed during the course of the year, this applying to the remainderof the year. The allocation of shares usually takes place on31 December of the respective year. The share price applicable tothe allocation of shares is based on the weighted average price ineffect during the preceding month, generally November. Upon allocation,the shares remain blocked for one year. During this vestingperiod the share owners are precluded from exercising theirvoting rights for the shares being vested. All Board of Directorsmembers are eligible for participation in the plan who have workedon a full-time basis during the respective financial year. The portionof compensation drawn in cash is subject to disbursement on aquarterly basis.The members of the Executive Committee have the option of receivingthe performance bonuses due them in the form of shares,either in whole or in part (25%, 50%, 75% or 100%). The allocationof shares usually takes place on 30 April of the following year.The share price applicable to the allocation of shares is based onthe weighted average price in effect during the preceding month,generally March. Upon allocation, the shares remain blocked forone year. During this vesting period the share owners are precludedfrom exercising their voting rights for the shares being vested.All members of the Executive Committee are eligible for participationwho are in the company’s employ on 31 March of the followingyear.5.3 Allocation of shares during the year under reviewDuring the year under review, 2,311 shares of Cham Paper GroupHolding AG were allocated to members of the Board of Directorsor related parties. During the same period 336 shares 3 were allocatedto members of the Executive Committee or related parties.5.4 Termination benefitsDuring the year under review, no termination benefits were disbursedor agreed.6. Shareholders’ rights of participationThe shareholders’ rights of participation are defined in the Articlesof Association of Cham Paper Group Holding AG. The followingremarks contain extracts from the Articles of Association of ChamPaper Group Holding AG. A full version of the Articles of Associationcan be consulted on the website, under Investor Relations/Corporate Governance/Articles of Association 4 .6.1 Restrictions on voting rights and representationEach registered share entitles to one vote at the General Meetingof Shareholders of the company. This notwithstanding, votingrights may be exercised only by persons whose registered sharesare entered in the share register of Cham Paper Group Holding AGas having voting rights. According to Swiss corporate law, registrationis subject to a declaration that the shareholder has acquiredthe shares in his or her own name and on his or her own account.According to the Articles of Association, the Board of Directorsmay refuse to make an entry with voting rights in the share registeronly under the following circumstances:• provided that, and for as long as, acceptance of the applicant asa shareholder with voting rights might hinder the company inproviding evidence of Swiss control as required by Swiss federallaw, in particular the Federal Law on the Acquisition of RealEstate by Non-Residents, or3 Thereof 240 to members who left office during the reporting period4 http://ir.champaper.com/cgi-bin/show.ssp?id=730&companyName=champaper&language=English

46Corporate Governance• where the applicant, despite having been requested by the companyto do so, does not expressly declare himself or herself tobe acquiring the shares in his or her own name and on his or herown account.No restrictions on voting rights of this kind were made in 2012and 2011.A shareholder may be represented at the General Meeting ofShareholders only by an authorised legal representative, anothershareholder entitled to vote, Cham Paper Group Holding AG as thestatutory representative, an independent voting representative ora custodial representative.6.2 Voting quorumsThe Articles of Association of Cham Paper Group Holding AG donot stipulate any special quorums that go beyond the provisions ofSwiss corporate law.6.3 Convocation of the General Meeting of ShareholdersThe General Meeting of Shareholders is convened in accordancewith statutory requirements.6.4 AgendaShareholders who represent shares with a par value of at least onemillion Swiss francs may make written requests for proposals foritems to be placed on the agenda. Such proposals must be submittedin writing to the Board of Directors at least sixty days prior tothe General Meeting of Shareholders.6.5 Entry in the share registerShareholders may request that they be entered in the share registerat any time. As a general rule, shareholders may be enteredin the share register up to one week before the General Meetingof Shareholders.7. Change of control and defense measures7.1 Obligation to submit a bidThere are no provisions in the Articles of Association concerningthe 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 theBoard of Directors or with members of the Executive ManagementBoard.8. Auditors8.1 Retainership and term of office of the lead auditorPriceWaterhouseCoopers, Zug, has been retained as the statutoryauditors and Group auditors since 2010. Norbert Kühnis, the responsiblelead auditor, assumed his office in the same year (2010).The retainership of the auditors is decided each year and must berenewed annually. The Group auditor and the statutory auditorsare re-elected each year by the General Meeting of Shareholders.8.2 Auditing fees and additional feesThe following fees were invoiced by PriceWaterhouseCoopers,Zug, or Ernst & Young AG, Zurich (in 2010), for its services renderedas Group auditors and statutory auditors of Cham PaperGroup Holding AG and its subsidiaries:2012TCHF2011TCHFOrdinary audits 164 171Audit-related fees 23 –Tax advisory services – –Total 187 171Fees for audit services cover those services which must be performedevery year in order to render an assessment on the consolidatedfinancial statements and to draw up reports on the financialstatements of the subsidiaries as required by local law.Fees for audit-related services cover other verification services bythe auditors that do not necessarily have to be provided by theGroup auditor.Fees for tax services extend to all services that are provided bythe tax section of the Group auditor apart from those related to theaudit itself. Tax services cover compliance with tax legislation, taxplanning and tax advice.8.3 Information tools of the external auditorsThe auditors normally attend the meetings of the Audit Committee.They report orally and in writing on the findings of their audits.Evaluation and monitoring of the auditors is performed by theAudit Committee, which makes recommendations to the Boardof Directors. In particular, the Audit Committee evaluates the performance,fees, and independence of the statutory auditors. In2012, the auditors attended a total of three half-day meetings ofthe Audit Committee.

Corporate Governance479. Information policyThe Cham Paper Group provides information about its half-yearand annual results in the form of a half-year report and an annualreport that are available in printed and electronic form. The reportsare mailed out upon express request only, otherwise they are availableonly electronically for the purpose of economic and environmentalefficiency. Facts relevant for the share price are announcedby 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 tothe Investor Relations section at www.cham-group.com. An up-tothe-minuteinvestor handbook also provides an in-depth look at thestrategy, markets and competitor environment of the Cham PaperGroup. On our website you can also subscribe to the e-newsletterso that you, at the same time as the media, are kept abreast ofresults and new developments.10. Contact addresses and calendarShare registerFranziska StöckliFabrikstrasse, CH-6330 Chamaktienregister@cham-group.comPhone: +41 (41) 785 34 03Media and Investor RelationsEdwin van der Geest / Philippe Blangeymedia@cham-group.com orinvestor@cham-group.comPhone: +41 (43) 268 32 32General Meeting of Shareholders1 May 2012, Lorzensaal, ChamFinancial reporting2013 Half-year Results: 23 August 20132013 Annual Report: 19 March 2014

48Consolidated financial statementsCham Paper Group – Consolidated financial statementsConsolidated income statement1 January – 31 DecemberNotes2012TCHF2011TCHFChange%Net revenue 3 279,737 309,276 –9.6Cost of goods and services sold –253,703 –284,904 –11.0Gross profit 26,034 24,372 6.8Administrative and general expense –14,507 –18,522 –21.7Marketing, sales, research and development expense –13,293 –15,647 –15.0Other operating expense 6 –514 –1,035 –50.3Other operating income 6 3,003 2,757 8.9Operating profit / loss (–) (EBIT) before restructuring 723 –8,075 n/aRestructuring expenses 7 2,484 –80,448 n/aOperating profit / loss (–) (EBIT) after restructuring 3,207 –88,524 n/aFinancial result 8 –2,149 –2,342 –8.2Foreign currency effects –648 204 n/aNet income / loss (–) before taxes 410 –90,662 n/aIncome taxes 9 –1,644 –1,424 15.4Net loss for the year for the Group –1,234 –92,086 –98.7Earnings / (loss) per share, undilutedNotes(Loss) per share, undiluted 10 –1.76 –131.83Total 10 –1.76 –131.832012CHF2011CHFThe Notes form an integral part of the consolidated financial statements.

Consolidated financial statements49Consolidated balance sheetNotes31.12.2012TCHF31.12.2011TCHFAssetsCash and cash equivalents 11 49,010 48,751Trade accounts receivable 13 54,563 61,801Other current receivables 15 5,337 7,478Inventories 14 51,259 44,543Accrued income and prepaid expenses 1,067 2,086Total current assets 161,236 164,659Tangible fixed assets 16 82,847 90,530Intangible assets 17 3,054 3,435Financial assets 620 635Deferred tax assets 9 250 942Total non-current assets 86,771 95,542Total assets 248,007 260,201LiabilitiesTrade accounts payable 38,147 32,305Current financial liabilities and derivative financial instruments 18 35,745 39,434Other current liabilities 19 3,838 5,049Current provisions 20 9,697 10,663Accrued expenses and deferred income 12,425 12,144Total current liabilities 99,852 99,595Non-current financial liabilities 18 31,307 35,821Other non-current liabilities 150 498Deferred tax liabilities 2,260 2,108Pension plan obligations 21 4,143 4,326Non-current provisions 20 9,449 15,960Total non-current liabilities 47,309 58,443Total liabilities 147,161 158,038Share capital 22 48,425 48,425Capital reserves 41,462 42,062Treasury shares 22 –12,596 –13,610Retained earnings 23,555 25,286Total shareholders’ equity 100,846 102,163Total liabilities 248,007 260,201The Notes form an integral part of the consolidated financial statements.

50Consolidated financial statementsConsolidated cash flow statementNotes2012TCHFNet loss (–) –1,234 –92,086Depreciation 5 13,937 19,762Impairments 6 – 54,073Net loss from disposal of property and equipment 7 – 230Decrease / (increase) in provisions (including deferred taxes) –6,338 26,319(Decrease) in pension plan obligations 21 –144 –368Other non-cash items –2 313Decrease / (increase) in trade accounts receivable 6,882 –1,703Increase / (decrease) in inventories –6,921 14,678Increase / (decrease) in trade accounts payable 6,052 –4,469Decrease / (increase) in other receivables, accrued income and prepaid expenses 3,146 –737Decrease / (increase) in other liabilities, accrued expenses and deferred income –852 1,547Cash flow from operating activities 14,526 17,559Purchase of tangible fixed assets 16 –6,036 –19,4622011TCHFProceeds from the disposal of tangible fixed assets 16 – 329Purchase of intangible assets 17 –431 –2,662Cash flow from investment activities –6,467 –21,795Free cash flow 8,059 –4,238Repayment (–) of current financial liabilities –14,049 –9,200Increase in non-current financial liabilities 6,624 4,000Repayment (–) of other non-current liabilities –348 –Cash dividend – –3,482Cash flow from financing activities –7,773 –8,682Translation effects on cash and cash equivalents –27 –78Increase / (decrease) in cash and cash equivalents 286 –12,918Cash and cash equivalents as at 1 January 48,751 61,747Cash and cash equivalents as at 31 December 49,010 48,751The Notes form an integral part of the consolidated financial statements.

Consolidated financial statements51Shareholders’ equity statementShare capitalTCHFCapitalreservesTCHFTreasurysharesTCHFTranslationeffectsTCHFRetained earnings reservesFair valuereservesTCHFRetainedearningsTCHFBalance as at 1 January 2012 48,425 42,062 –13,610 –8,244 0 33,530 102,163Cash flow hedgesChanges in fair value recognisedin equity – – – – 47 – 47Realised gains transferred to incomestatement – – – – –344 – –344Net loss for the year for the Group – – – – – –1,234 –1,234Employee share ownership scheme – –600 1,014 – – – 414Translation effects – –200 – – –200Balance as at 31 December 2012 48,425 41,462 –12,596 –8,444 –297 32,296 100,846TotalTCHFShare capitalTCHFCapitalreservesTCHFTreasurysharesTCHFTranslationeffectsTCHFRetained earnings reservesFair valuereservesTCHFRetainedearningsTCHFBalance as at 1 January 2011 48,425 42,682 –14,630 –7,400 –309 129,098 197,866Cash flow hedgesChanges in fair value recognisedin equity – – – – 3,938 – 3,938Realised gains transferred to incomestatement – – – – –3,629 – –3,629Net loss for the year for the Group – – – – – –92,086 –92,086Dividend – – – – – –3,482 –3,482Employee share ownership scheme – –620 1,020 – – – 400Translation effects – – – –844 – – –844Balance as at 31 December 2011 48,425 42,062 –13,610 –8,244 – 33,530 102,163TotalTCHFThe Notes form an integral part of the consolidated financial statements.

52Notes to the consolidated financial statementsNotes to the consolidated financial statements1. Valuation and accounting methods1.1 General remarksThe consolidated financial statements of Cham Paper Group HoldingAG and its subsidiaries (“Group” or “Cham Paper Group”)have been prepared in accordance with Swiss Financial ReportingStandards (Swiss GAAP FER) and comply with the requirementsof Swiss law. The internal structuring, valuation and disclosureregulations drafted on this basis have been applied consistently.The consolidated financial statements provide a true and fair viewof the company’s net assets and financial and earnings situation.They are based on historical costs with the exception of certainitems such as derivative financial instruments and securities,which are carried on the balance sheet at their current value. Inpreparing these consolidated financial statements, all Swiss GAAPFER standards relevant for the Cham Paper Group were appliedthat are valid for the reporting periods from 1 January 2012.The consolidated financial statements of the Cham Paper Groupwere approved by the Board of Directors on 19 March 2013 andare subject to approval by the general meeting of shareholders on1 May 2013.1.2 Scope and method of consolidationThe consolidated financial statements of the Cham Paper Groupare composed of the consolidated financial statements of ChamPaper Group Holding AG and its subsidiaries. The subsidiariesforming the scope of consolidation are listed in Note 27.Subsidiaries are companies that are directly or indirectly controlledby Cham Paper Group Holding AG. “Control” refers to the possibilityof exercising control over financial and operational businessactivities so as to be able to accordingly derive a benefit from it.This is usually the case when Cham Paper Group Holding AG directlyor indirectly owns more than 50% of the voting rights of acompany. The minority shareholder interests in the net assets andthe operating result are reported separately. Companies acquiredor sold during the financial year are included in the consolidatedfinancial 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 currentmarket value. Any surplus result from the difference betweenthe purchase costs and the revalued net assets of the companyacquired is designated as “goodwill”. Goodwill is offset againstshareholders’ equity at the time of acquisition without any impacton income. The effects of theoretical capitalisation are shown inthe Notes to the consolidated financial statements.Internal Group transactions and relationships and intercompanygains are eliminated.Investments in associates on which Cham Paper Group HoldingAG has only a significant influence (usually with voting rights between20% and 50%) but over which it does not exercise anycontrol are recognised on the balance sheet according to the equitymethod and reported as investments in associates. The shareof Cham Paper Group Holding AG in the results of the associatesis reported, less the respective taxes, in a separate item in theincome statement. Minority stakes of less than 20% are shown athistorical cost less impairments.1.3 Foreign currency translationThe individual subsidiaries prepare their financial statements inlocal currencies. The local currency (functional currency) correspondsto the currency of the primary economic environment inwhich the company operates.Transactions in foreign currencies at the subsidiaries are translatedat the daily exchange rate prevailing at the time of the transaction.Gains and losses from foreign currency transactions and from adjustmentsto foreign currency holdings on the reporting date arerecognised in income. Foreign currency effects on long-term internalGroup loans of an equity nature are recognised in shareholders’equity without any impact on income.The reporting currency in the consolidated financial statements isthe Swiss franc. The financial statements of the foreign subsidiariesin foreign currencies are translated into Swiss francs as follows:balance sheet items are translated at the year-end exchangerate, whilst shareholders’ equity is translated at historical ratesand items in the income statement and cash flow statement aretranslated at the average exchange rate for the year. The translationeffects resulting from the translation of the balance sheet andincome statement are recognised in shareholders’ equity. When acompany is sold, the cumulative translation effects are recognisedin the income statement as part of the gain or loss from the saleof the company.For the major currencies, the following exchange rates are used:Exchange ratesYear-end exchange ratesapplicable to balance sheetAverage exchange ratesfor the year applicable toincome statement and cashflow statementCHF for 2012 2011 2012 2011EUR 1.00 1.21 1.22 1.21 1.23USD 1.00 0.91 0.94 0.94 0.89GBP 1.00 1.48 1.46 1.49 1.42

Notes to the consolidated financial statements531.4 Recognition of revenueRevenue consists of all the proceeds from sales derived from thedelivery of products and services to third parties less price reductionsand rebates, discounts, transport costs and value added tax.As a general principle, proceeds from sales are recognised in theincome statement as soon as products have been shipped andthe associated benefits and risks have passed to the purchaseror the service has been provided. Revenues that reduce the costof goods and services sold are offset against the respective item.1.8 Trade accounts receivableTrade accounts receivable are recognised at the original invoicedamounts less allowances for bad debts. Allowances for bad debtsare established for receivables when there is an objective indicationthat they cannot be recovered. The carrying amount of tradeaccounts receivable is reduced by the allowances, and the respectiveprojected loss is expensed to net revenue in the consolidatedincome statement. Trade accounts receivable that are uncollectibleare derecognised via allowances or via the income statement.1.5 Cash and cash equivalentsCash and cash equivalents comprise cash on hand, cash in bankaccounts and postal accounts as well as short-term bank depositssuch as call money and time-deposit investments with an originaltime to maturity of three months or less and which are convertibleto known amounts of cash at any time. This definition is also usedfor the consolidated cash flow statement. Cash and cash equivalentsare reported at nominal values.1.6 SecuritiesThe securities of current assets are reported at fair value. For listedsecurities, this corresponds to the stock market price on thebalance sheet reporting date. Non-listed securities of current assetsare presented at acquisition cost less any value adjustments.Changes in value are shown in the result for the period.1.7 Derivative financial instruments and hedging transactionsThe Group uses derivative financial instruments primarily to hedgerisks related to changes in interest rates, foreign currencies andpulp prices. Derivative financial instruments primarily comprise forwardexchange contracts, interest futures and pulp swaps.Derivative financial instruments are differentiated according to variousmotives: Derivatives held for trading purposes are reportedat the value prevailing on the reporting date. The changes in valuesince the last valuation are recognised in the result for the period.Derivatives held for hedging purposes are also valued at fairvalues. The changes in value of derivatives classified as hedginginstruments 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 recognisedin shareholders’ equity are recognised in the income statementfor the period in which the cash flow from the hedged underlyingtransaction is recognised.1.9 InventoriesInventories are carried at the lower of acquisition or productioncost or net market value. The measurement is based on the averagevalue method. The production costs of work in progress andfinished goods include raw and ancillary materials, direct labourcosts, other directly allocatable costs as well as production overheadsassociated with manufacturing. Financing costs are not includedin production costs. Discounts are recognised as procurementprice reductions. The net market value is the estimated salesproceeds less the product’s costs of completion and sale. The valuesof inventories that are difficult to sell and inventories with alower net market value are adjusted. The Group determines thevalue adjustments for inventories that are difficult to sell using pastexperience. The corresponding expected loss is expensed to the“cost of goods and services sold” item in the consolidated incomestatement. If it is foreseeable that the value-adjusted inventoriescan be used, their value is retroactively adjusted by writing up theinventory asset to the lower of the estimated net market value orthe original acquisition or production cost.Prepayments received from customers for inventories are reportedunder “other current liabilities”. Prepayments effected for thedelivery of inventory asset items are recognised under “inventories”.1.10 Financial assetsFinancial assets are shown at historical cost less impairments. Impairmentsare recognised in the period result in income.

54Notes to the consolidated financial statements1.11 Tangible fixed assetsTangible fixed assets are carried at their acquisition or productioncost less depreciation and any impairments. Tangible fixed assetsare depreciated on a straight-line basis over the following estimateduseful lives:Tangible fixed assets Years Tangible fixed assets YearsBuildings and plants 25 Plant equipment 5Machinery, equipment 10 Vehicles 5Production machinery 20 Hardware 5Land and undeveloped properties are not depreciated. They are notland reserves held for profitability purposes. Where tangible fixedassets consist of significant components that have different usefullives, the components are depreciated separately. Repair and maintenancecosts are expensed as incurred without increasing the previousmarket value or value-in-use. An expenditure that increasesthe market value or useful life of a tangible fixed asset is capitalisedand depreciation over a maximum period of ten years.Leases of tangible fixed assets in which the Group essentially assumesall the risks and rewards of ownership are classified as financeleases. Tangible fixed assets acquired by means of financeleases are capitalised at the inception of the lease at the lower ofacquisition cost or net market value of the leased property or thepresent value of the future lease payments, and are subsequentlydepreciated over the shorter of the lease term or their expecteduseful life. The corresponding lease obligations, net of any financingcharges, are included in the current or non-current portion of financialliabilities depending on when they fall due.1.12 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 tothe consolidated financial statements.Acquired intangible assets include software, trademark rights andlicenses and are recognised where they yield a measurable economicbenefit for the company over more than one year. Reportingis done at acquisition cost less straight-line depreciation overa maximum of five years, taking any value impairments into account.Intangibles associated with the acquisition of a companyare reported as intangible assets at their fair value as at the dateof acquisition. They are amortised on a straight-line basis over therespective useful life of a maximum of five years, taking any valueimpairments into account. The respective estimated useful life ofintangible assets is reviewed on a regular basis.1.13 ImpairmentAll assets are subjected to an impairment test on each reportingdate. If there are indications of a possible impairment of the valueof an asset, the recoverable amount of the asset value is determinedand an evaluation of the impairment is undertaken. If theestimated recoverable amount of the asset value – which representsthe higher of either the net market value or value-in-use – isless than the carrying amount, then the carrying amount of theasset value is effectively reduced to the estimated recoverableamount in the same period in which the adjustment of the valuetakes place. The net market value is the price that can be realisedin an arm’s length transaction less associated sales expenses. Thevalue-in-use is calculated on the basis of the estimated future cashflow expected to result from the use of the asset, including anycash flow at the end of the asset’s useful life, and discounted usingan appropriate long-term interest rate.1.14 LiabilitiesLiabilities are measured at their nominal value. Current financialliabilities are either due or renewable within one year unless theGroup has an unrestricted right to extend the maturity by morethan twelve months beyond the balance sheet reporting date.1.15 Current valuesThe current value (fair value or net market value) is the amountfor which an asset, liability or financial instrument could be exchangedbetween knowledgeable and willing parties in an arm’slength transaction. The current value of publicly traded and tradablefinancial instruments is determined on the basis of their stockexchange prices. The current value of financial instruments notpublicly traded is determined using recognised valuation methodssuch as the discounted cash flow method. It is assumed that theamortised costs of financial assets and liabilities with a residuallife of less than one year roughly approximate their current value.1.16 TaxesIncome taxes comprise all current and deferred taxes levied on thesubsidiaries’ taxable results in accordance with local tax regulationsincluding the withholding tax payable on profit distributions withinthe Group. Income taxes are recognised in the income statementexcept for deferred taxes on transactions that are recognised directlyin shareholders’ equity. Capital and real estate taxes are reportedunder “other operating expense”.

Notes to the consolidated financial statements55The assets and liabilities for deferred income taxes are recorded forthe effects under income tax law of all temporary differences arisingbetween the tax base of assets and liabilities and their carryingamounts for financial reporting purposes to the Group. Deferredincome taxes are determined using tax rates that apply, or havebeen announced, on the balance sheet date in the countries wherethe Group operates. Deferred tax assets from tax loss carryoversare recognised only when it appears highly probable that future taxableprofits will be available against which the tax loss carryoverscan be offset.Assets and liabilities from current and deferred income taxes areoffset against one other as long as the corresponding income taxesare levied by the same tax authority and a legally enforceable rightfor offsetting exists.1.17 ProvisionsProvisions are established when a legal or constructive obligationexists as a result of past events where the obligation will likely leadto a cash outflow and a reliable estimate of this outflow can bemade. The provisions established constitute the best possible estimateof the final obligation. Non-current provisions are discountedto their present value to the extent that their effects are material.Restructuring provisions are recorded if the Group has a detailedformal restructuring plan and the Board of Directors has made adecision to implement it. The breakdown into current and noncurrentprovisions is based on the assumption that their utilisationis probable within one year or later.1.18 Contingent liabilitiesPotential liabilities whose existence has yet to be confirmed byfuture events, or obligations whose amount cannot be reliably estimatedare disclosed as contingent liabilities in the Notes. Valuationis done on the basis of probability and the amount of the futureclaims and costs.1.19 Pension plan obligationsThe employee benefit obligations of the subsidiaries for retirement,death and disability are in accordance with statutory requirementsand provisions in the respective countries. The majority ofthe Group’s employees are covered by defined benefit or definedcontribution pension plans. The Swiss organisations of the Grouphave legally independent pension institutions that are financed byway of employer and employee contributions. Any actual economicimpact on the company exerted by pension funds is calculatedon the reporting date. Any economic benefit is capitalised providedthat this is used for the company’s future provident expenses. Aneconomic obligation is recognised as a liability where the requirementsfor creating a provision are satisfied. Where freely disposableemployer contribution reserves exist, they are recognised asan asset. The economic impacts of overfunding and underfundingin the pension funds on the Group and the change in any employercontribution reserves are recognised in personnel expense in additionto the contribution accrued to the period. The pension plan forthe subsidiaries in Italy are also valued as provisions or are treatedas a defined contribution plan.1.20 Treasury sharesTreasury shares are recognised as a reduction in shareholders’ equity.The purchase costs, proceeds from a resale and other movementsare presented as a change in shareholders’ equity. Treasuryshares are non-voting shares and are not entitled to dividends.1.21 Research and developmentResearch and development costs are recognised in full in income.These costs are contained in the “Marketing, sales, research anddevelopment expense” item.2. Changes in the scope of consolidationThe companies below were liquidated in 2012. The percentagesshown in brackets show the share voting rights in the company.– Cham Paper Group (Deutschland GmbH) Düsseldorf,Germany (100%)– Cham Paper Group (France) S.à.r.l., Paris, France (100%)– Cham Paper Group (UK) Ltd., Forest Row, UK (100%)

56Notes to the consolidated financial statements3. Segment reportingThe Group develops, produces and sells speciality papers. The Group’s geographical segments are structured on the basis of the locationof the countries and the similarities of the economic environment. This results in four regions: Europe, the Americas, Asia, and Rest ofthe World.Total2012 Europe Americas Asia Rest of worldTCHFNet revenue with third parties 1) 214,085 14,524 44,240 6,888 279,737Total2011 Europe Americas Asia Rest of worldTCHFNet revenue with third parties 1) 231,359 19,374 50,892 7,651 309,2761)Allocated according to sales destination.4. Personnel expenseWages and salaries –40,899 –46,171Employee benefits (incl. pension plan expense) –10,034 –10,924Other personnel expense –1,026 –956Total personnel expense excluding travel expenses –51,959 –58,0502012TCHF2011TCHFPersonnel expense is included on the consolidated income statement in the costs of the respective items. As of 31 December 2012, theGroup had a headcount of 544.5 FTEs (2011: 651 FTEs).5. Depreciation and amortisationDepreciation of tangible fixed assets –13,128 –18,114Amortisation of intangible assets –809 –1,648Total depreciation and amortisation –13,937 –19,7622012TCHF2011TCHFDepreciation and amortisation are included in the consolidated income statement in the costs of the respective items.

Notes to the consolidated financial statements576. Other operating income/expensesDisbursed insurance benefits 491 863Net gains from disposal of tangible fixed assets – 66Reversal of provisions 700 –Grants and subsidies – 626Other income 1,814 1,202Total other operating income 3,005 2,7572012TCHF2011TCHFCapital and real estate taxes –514 –345Net losses on disposal of tangible fixed assets – –296Other expense – –394Total other operating expense –514 –1,0357. Restructuring expensesImpairment of tangible fixed assets – –51,097Impairment of intangible assets – –2,976Value adjustment of inventories – –1,393Restructuring provisions 2,484 –24,983Restructuring expenses 2,484 –80,4492012TCHF2011TCHFIn FY 2012 restructuring provisions of TCHF 2,484 were reversed for redundancy schemes and expenses incurred in connection with thepremature termination of contracts.In 2011 restructuring expenses totalling TCHF 80,449 arose in connection with the reorientation of the Cham Paper Group. The impairmentof tangible fixed assets of TCHF 51,097 is the result of discontinuing base paper production and changing over to surface coatingonly, and the repurposing of the factory buildings at the Cham site. The impairment of intangible assets of TCHF 2,976 is the result of thechange in use of the software applications by redimensioning the production sites. The impairment of inventories of TCHF 1,393 was alsoa result of discontinuing base paper production at the Cham site. Restructuring will take up to approx. two years and affect 212 employees.The restructuring provisions of TCHF 24,983 include costs for redundancy welfare plans, clearing and disposal work, and expensesincurred in connection with the premature termination of contracts.

58Notes to the consolidated financial statements8. Financial income and expenseInterest income from cash and cash equivalents 118 136Other financial income 67 4Total financial income 185 1632012TCHF2011TCHFInterest expense of bank loans and mortgage notes –1,858 –2,298Losses and gains on interest rate derivatives, net 271 283Other financial expense –747 –490Total financial expense –2,334 –2,505Financial result –2,149 –2,3429. Income taxesCurrent income taxes –801 –37Deferred income taxes –843 –1,387Total income taxes –1,644 –1,4242012TCHF2011TCHFThe expected tax rate applied to the calculation of the deferred income taxes items is based on the pre-tax profit of the individual subsidiaries,amounting to 15.56% in 2012 (2011: 15.84%) for the companies in Switzerland and 31.40% (2011: 31.40%) for the companiesin Italy.As of 31 December 2012, the deferred tax assets amounted to TCHF 250 (2011: TCHF 942), which contained no capitalised tax losscarryovers (2011: CHF 0).Deferred tax assets from tax loss carryovers are recognised only when it appears highly probable that future taxable profits will beavailable against which the tax loss carryovers can be offset. As of 31 December 2012, the Group had tax-deductible loss carryovers ofTCHF 150,894 (2011: TCHF 151,827). The tax-deductible loss carryovers expire as follows:Tax loss carryovers2012TCHFTax effect2012TCHFTax loss carryovers2011TCHFTax effect2011TCHFTotal tax-deductible loss carryovers 150,894 24,336 151,827 23,890Recognised as deferred tax assets – – – –Non-recognised tax-deductible loss carryovers 150,894 24,336 151,827 23,890Non-capitalised tax-deductible loss carryovers according to due date:Within 1 year 58,901 9,165 – –Between 1 and 5 years 5,330 829 62,862 9,957After 5 years 86,663 14,342 88,965 13,933Total non-recognised tax-deductible loss carryovers 150,894 24,336 151,827 23,890No tax-deductible loss carryovers expired in FY 2012 (2011: TCHF 783).

Notes to the consolidated financial statements5910. Earnings / loss (–) per shareThe undiluted (basic) earnings per share are calculated by dividing the net income as of the reporting period ended on 31 December 2012and 2011 allocatable to the shareholders by the weighted average number of dividend-bearing shares outstanding during this period.In doing so, the average number of treasury shares held by Cham Paper Group Holding AG and blocked shares are deducted from thenumber of shares issued.2012 2011Weighted average number of registered shares outstanding 700,782 698,497Results share of shareholders of Cham Paper Group Holding AG) (in TCHF) –1,234 –92,086Earnings / loss (–) per share, undiluted (in CHF) –1.76 –131.83There were no diluting effects in 2012 and 2011.11. Cash and cash equivalentsCash on hand, cash in bank accounts and in postal accounts 49,010 48,751Short-term bank deposits – –Total cash and cash equivalents 49,010 48,7512012TCHF2011TCHF12. Derivative financial instrumentsDerivative financial instrumentsThe Group uses derivative financial instruments as part of its Group-wide risk management. The derivative financial instruments arereported at their current values. The following table shows the market value (gross) of the derivative financial instruments as at 31 December2012 and 2011 by type of contract and asset category:2012Contract or nominalvalue not recognisedTCHFPositive marketvalue recognisedTCHFNegative marketvalue recognisedTCHFHeld for trading purposesInterest rate derivatives – interest futures – – –Foreign currency derivatives – forward exchange contracts 17,495 – 6Held for hedging purposesRaw materials derivatives – pulp swaps 31,924 – 297Total derivative financial instruments 49,419 – 3032011Contract or nominalvalue not recognisedTCHFPositive marketvalue recognisedTCHFNegative marketvalue recognisedTCHFHeld for trading purposesInterest rate derivatives – interest futures 10,092 – 274Foreign currency derivatives – forward exchange contracts 21,879 16 –Held for hedging purposesRaw materials derivatives – pulp swaps – – –Total derivative financial instruments 31,971 16 274

60Notes to the consolidated financial statementsContract or nominal values show the outstanding transaction volume as at the balance sheet date.Raw materials derivatives hedge the cash flow risks of future planned pulp purchases by means of swap transactions. The amount andthe timeline of the hedged future planned pulp purchases are based on contractually agreed delivery quantities and dates for specialitypapers over a planned timeframe of a maximum of twelve months. As of 31 December 2012, the Group had hedged future planned pulppurchases totalling 18,000 tons (2011: none) by way of two contracts.The net loss from hedging transactions recognised in the consolidated income statement under “cost of goods and services sold”amounted to TCHF 344 in FY 2012 (2011: net gain TCHF 3,629).13. Trade accounts receivableTrade accounts receivable from product deliveries, gross 58,234 65,912Allowances for bad debts –3,671 –4,111Total trade accounts receivable, net 54,563 61,8012012TCHF2011TCHFInsured receivables 46,136 53,08014. InventoriesRaw materials 15,561 11,745Work in progress and finished goods 31,017 27,865Consumables and supplies 1,848 1,957Spare parts 2,833 2,749Advanced payments to suppliers – 227Total inventories 51,259 44,543The values of inventories that are difficult to sell and inventories with a lower net market value are adjusted. The Group determines thevalue adjustments for inventories that are difficult to sell using past experience. The value adjustment of finished goods as at 31 December2012 amounted to TCHF 2,855 (2011: TCHF 2,126).2012TCHF2011TCHFIn the course of restructuring the Cham Paper Group, consumables & supplies and spare parts in the amount of TCHF 1,393 were valueadjustedin 2011.15. Other current receivablesVAT receivables 2,838 2,622Social security receivables 219 802Other receivables 2,280 4,054Other current receivables 5,337 7,4782012TCHF2011TCHF

Notes to the consolidated financial statements6116. Tangible fixed assets2012UndevelopedpropertiesTCHFLand andbuildingsTCHFMachinery,equipmentand vehiclesTCHFProductionequipmentTCHFConstructioninprogressTCHFAcquisition costs as at 1 January – 92,301 204,754 189,105 2,539 488,699Transfers between categories – – 2,757 55 –2,812 –Additions – 320 3,975 219 1,522 6,036Disposals – – –4,236 – – –4,236Exchange differences – –242 –1,163 –430 –27 –1,862Acquisition costs as at 31 December – 92,379 206,087 188,949 1,222 488,637Cumulative depreciation as at 1 January – –58,732 –176,504 –162,933 – –398,169Depreciation – –1,219 –7,421 –4,488 – –13,128Impairment – – – – – –Disposals – – 4,236 – – 4,236Exchange differences – 121 928 222 – 1,271Cumulative depreciation as at 31 December – –59,830 –178,761 –167,199 – –405,790Carrying amount as at 31 December – 32,549 27,326 21,750 1,222 82,847Carrying amount as at 1 January – 33,569 28,250 26,172 2,539 90,530TotalTCHF2011UndevelopedpropertiesTCHFLand andbuildingsTCHFMachinery,equipmentand vehiclesTCHFProductionequipmentTCHFConstructioninprogressTCHFAcquisition costs as at 1 January 478 82,760 201,755 199,411 3,296 487,700Transfers between categories –47 47 3,402 2,044 –5,446 –Additions – 10,109 4,624 1 4,728 19,462Disposals –431 –21 –2,148 –11,277 – –13,877Exchange differences – –594 –2,879 –1,074 –39 –4,586Acquisition costs as at 31 December – 92,301 204,754 189,105 2,539 488,699Cumulative depreciation as at 1 January – –45,590 –159,953 –139,851 – –345,394Depreciation – –1,874 –9,240 –7,000 – –18,114Impairment – –11,565 –11,716 –27,816 – –51,097Disposals – – 2,125 11,193 – 13,318Exchange differences – 297 2,280 541 – 3,118Cumulative depreciation as at 31 December – –58,732 –176,504 –162,933 – –398,169Carrying amount as at 31 December – 33,569 28,250 26,172 2,539 90,530Carrying amount as at 1 January 478 37,170 41,802 59,560 3,296 142,306The assets were examined on the balance sheet reporting date for any signs of impairment as provided for in Swiss GAAP FER 20. Noimpairments were applied for 2012. (Impairments in the amount of TCHF 51,097 were applied in 2011 in association with the restructuringof the Cham Paper Group.)TotalTCHFThe carrying values of the pledged tangible fixed assets for financial liabilities amount to TCHF 42,954 (2011: TCHF 48,403).The fire insurance value of tangible fixed assets amounts to TCHF 715,458 (2011: TCHF 766,347). Tangible fixed assets are insured attheir reinstatement value.

62Notes to the consolidated financial statements17. Intangible assets2012 SoftwareTCHFAcquisition costs as at 1 January 14,595 14,595Transfers between categories – –Additions 431 431Disposals –2,259 –2,259Exchange differences –13 –13Acquisition costs as at 31 December 12,754 12,754Cumulative amortisation as at 1 January –11,160 –11,160Depreciation –809 –809Impairment – –Disposals 2,259 2,259Exchange differences 10 10Cumulative amortisation as at 31 December –9,700 –9,700Carrying amount as at 31 December 3,054 3,054Carrying amount as at 1 January 3,435 3,435TotalTCHF2011 SoftwareTCHFAcquisition costs as at 1 January 11,959 11,959Additions 2,662 2,662Disposals – –Exchange differences –26 –26Acquisition costs as at 31 December 14,595 14,595Cumulative amortisation as at 1 January –6,560 –6,560Depreciation –1,648 –1,648Impairment –2,976 –2,976Disposals – –Exchange differences 24 24Cumulative amortisation as at 31 December –11,160 –11,160Carrying amount as at 31 December 3,435 3,435Carrying amount as at 1 January 5,399 5,399TotalTCHFThe assets were examined on the balance sheet reporting date for any signs of impairment as provided for in Swiss GAAP FER 20. Noimpairments were applied for 2012. (Impairments in the amount of TCHF 2,976 were applied in 2011 in association with the restructuringof the Cham Paper Group.)

Notes to the consolidated financial statements63Effects of theoretical capitalisation of goodwillIf goodwill were capitalised and depreciated over five years by way of regular amortisation, the following theoretical values would resultunder Swiss GAAP FER:Goodwill at the time of acquisition (11.09.2008) 2,322 2,322Cumulative theoretical depreciation –2,010 –1,546Theoretical impairment – –Theoretical closing balance, goodwill, 31 December 312 7762012TCHF2011TCHFTheoretical effect on pre-tax result –464 –46418. Financial liabilitiesShort-term bank loans 28,745 31,486Short-term portion of long-term bank loans 7,000 7,674Derivative financial instruments – 274Total current financial liabilities 35,745 39,4342012TCHF2011TCHFLong-term bank loans – –Mortgage notes 31,307 35,821Total non-current financial liabilities 31,307 35,821Total amount of secured financial liabilities 42,954 48,403The financial liabilities are secured by mortgage notes or liens on land, buildings and production equipment.Finance lease liabilitiesThere were no finance lease liabilities as of 31 December 2012 or 31 December 2011.19. Other current liabilitiesVAT liabilities 207 559Social security liabilities 419 2,089Tax liabilities 267 146Other current liabilities 2,945 2,255Total other current liabilities 3,838 5,0492012TCHF2011TCHF

64Notes to the consolidated financial statements20. Provisions2012RestructuringTCHFAs at 1 January 24,953 1,400 26,353Additions – – –Reversals –2,483 –700 –3,183Utilisation –3,998 – –3,998Exchange differences –26 – –26As at 31 December 18,446 700 19,146OtherTCHFTotalTCHFShown on the consolidated balance sheet as:Current provisions 8,997 700 9,697Non-current provisions 9,449 – 9,4492011RestructuringTCHFAs at 1 January – 1,400 1,400Additions 24,983 – 24,983Reversals – – –Utilisation – – –Exchange differences –30 – –30As at 31 December 24,953 1,400 26,353OtherTCHFTotalTCHFShown on the consolidated balance sheet as:Current provisions 10,663 – 10,663Non-current provisions 14,290 1,400 15,690Various restructuring expenses were incurred in 2011 in restructuring the Cham Paper Group. This extends in particular to costs forredundancy welfare plans, clearing and disposal work, and expenses incurred in connection with the premature termination of contracts.The other provisions contain accruals for construction measures.

Notes to the consolidated financial statements6521. Pension plan obligationsThe majority of the Group’s employees are covered by pension plans that are co-financed by the subsidiaries. As a rule, the pension plansare financed through employee and employer contributions to foundations that are independent of the Group. The benefits from these plansvary depending on the legal, tax and economic situations of the country in which the employees are hired. The Group’s occupational pensionscheme in Switzerland is a legally independent pension fund. In addition to the legally regulated social insurance plans, within the Group inItaly there is an independent post-employment benefit plan. A liability is reported on the consolidated balance sheet since this pension planhas no separate assets to cover its obligations.Economic benefit / economicobligation and pension plan expenseOverfunding/underfunding31.12.12TCHFEconomic share oforganisation31.12.12TCHF31.12.11TCHFChange ascomparedto previousyear orrecognisedin incomeduring FY2012TCHFAmountsaccruedduringperiod2012TCHFPension planexpense share ofpersonnel expenseCorporate welfare funds / corporate pension funds – – – – – – –Pension funds without any overfunding/underfunding – – – – 1,571 1,571 1,772Pension funds with overfunding – – – – – – –Pension funds with underfunding – – – – – – –Pension plans without assets of their own – –4,143 –4,326 144 – 179 201Total – –4,143 –4,326 144 1,571 1,750 1,9732012TCHF2011TCHFIn 2012 and 2011 there was no overfunding / underfunding or changes recognised in income. The contributions accrued to the periodamounted to TCHF 1,571 in 2012 (2011: TCHF 1,772).No employer contribution reserves existed in 2012 or 2011.As of 31 December 2012, there were no obligations toward pension plans (2011: TCHF 0).22. Share capital and treasury shares2012Number ofregistered sharesPar valueper shareCHFCarrying valueTCHFTotal registered shares issued 745,000 65.00 48,425Total treasury shares 41,655 65.00 –12,596Total shares outstanding 703,345 65.00 –2011Number ofregistered sharesPar valueper shareCHFCarrying valueTCHFTotal registered shares issued 745,000 65.00 48,425Total treasury shares 44,302 65.00 –13,610Total shares outstanding 700,698 65.00 –In 2012 there was no reduction in the share capital nor was a cash dividend distributed.At the 99th general meeting of shareholders on 27 April 2011, the shareholders of Cham Paper Group Holding AG approved the distributionof a cash dividend of CHF 5.00 per share payable from the capital contribution reserves. The cash dividend totalling TCHF 3,482 wasdistributed to the shareholders.The non-distributable, statutory or legal reserves amounted to TCHF 16,753 as of 31 December 2012 (2011: TCHF 16,739).

66Notes to the consolidated financial statementsTreasury sharesNumber of treasury shares as at 31 December 2012 and 2011:2012 2011Holdings as at 1 January 44,302 46,772Employee share ownership scheme –2,647 –2,470Purchases – –Sales – –Holdings as at 31 December 41,655 44,30223. Non-recognised commitments and contingenciesOperating lease commitmentsThe subsidiaries hold numerous contracts for operating leases, mainly for equipment and vehicles as well as for the lease of an externalwarehouse. Total expenses in FY 2012 for operating leases amounted to TCHF 835 (2011: TCHF 805). Future minimum payments undernon-cancellable operating leases are due as follows:Within 1 year 868 771Between 1 and 5 years 1,131 1,016Total 1,999 1,7872012TCHF2011TCHFCapital commitmentsAs part of ordinary business operations, the subsidiaries entered into various contractual commitments for the purchase of tangible fixedassets and intangible assets as follows:Capital commitments for tangible fixed assets 1,084 1,109Capital commitments for intangible assets 20 –Total 1,104 1,1092012TCHF2011TCHFGuarantee obligationsAs of 31 December 2012, guarantees given as part of ordinary business operations amounted to TCHF 300 (2011: TCHF 868).24. Related party transactionsSubsidiaries and associatesAn overview of subsidiaries and associates is set out in Note 27. Transactions between the parent company and the subsidiaries as wellas those between the subsidiaries of the Group have been eliminated in the consolidated financial statements.Share ownershipFor information on the share ownership of the Board of Directors and their related parties and the Executive Committee, please refer tothe Notes of the financial statements of Cham Paper Group Holding AG on page 76.Employee share ownership schemeFor information on the employee share ownership scheme of the Board of Directors and the Executive Committee, please refer to theNotes of the financial statements of the Cham Paper Group Holding AG on page 73.

Notes to the consolidated financial statements67Compensation of the Board of Directors and Executive CommitteeFor information on the compensation of the Board of Directors and the Executive Committee, please refer to the Notes of the financialstatements of the Cham Paper Group Holding AG on page 75.25. Risk managementRisk management is a fundamental element of business practice as well as an integral part of the Group’s business planning. In order tosustainably achieve corporate objectives, the Group uses various risk management and control systems that are set up not only for theearly identification and analysis of risks but also for taking appropriate countermeasures. Strategic and operative risks are considered. Riskmanagement, the internal control system and quality management are closely linked and coordinated.A formal, enterprise-wide risk assessment is performed by the Executive Committee at least once a year. Significant operational risks aredefined in a detailed risk catalogue and risk matrix and analysed according to their probability of occurrence and possible extent of damageor loss. This assessment enables the causes and suitable measures per risk to be derived for the purpose of mitigating or eliminatingthe risk.In the risk assessment of 2012 the following significant risks among others were identified:Exchange rate risk: Since 2009 the exchange rate of the Swiss franc against the euro has developed to the detriment of the Cham PaperGroup. The Swiss mill in particular is confronted with deteriorating margins and the imminent loss of market share because sales pricescannot be downwardly adjusted any further in many cases. In order to minimise the impact of brief exchange rate fluctuations, the Grouphas developed and implemented a hedging concept. In addition, “natural” hedging has been established during the past couple of yearsand purchases made in the currency in which sales are made, where possible. In view of the increasing strength of the Swiss franc ascompared to the euro, the Group Executive Board was forced in the second half of 2011 to initiate restructuring within the Group andgradually shift base paper production to the Italian mills.Market / economy: The earnings situation of the Cham Paper Group is subject to cyclical fluctuations in the world economy that maylead to sales revenues drops, unrecoverable debts and overcapacity in markets. Factors like these make it impossible for the company topass on increases in energy and raw materials costs to customers entirely or in the near term. The Cham Paper Group seeks to minimisethese risks by systematically diversifying its customer portfolio and continuously monitoring markets. In order to respond to changes inthe market in a timely manner, the Group maintains an early warning system featuring an integrated contingency plan to address possiblescenarios. Furthermore, capacities in the Group were adapted in line with sales possibilities during the year under review.Raw materials: The past few years have seen substantial increases in the prices of raw materials such as pulp, chemicals and energy. Thehazard is also increasingly posed of resources intermittently becoming scarce. In order to prevent these bottlenecks, the Group makesevery effort to establish and vet several suppliers for a product, where possible. Annual supply contracts are also concluded to coverrequirements in the medium term. In order to address its energy requirements, the Group pursues a strategy of keeping prices stableand plannable by way of long-term agreements and the Group’s own energy generation capability. Where useful, the Group resorts toderivative financial instruments like pulp swaps to cushion the volatility of prices. In doing so, it pays contractually fixed prices for contractuallyfixed quantities of pulp and in return receives variable payments according to the market price of the contractually fixed quantitiesof pulp. The amount and the timeline of future planned pulp purchases hedged in this manner are based on delivery quantities and datescontractually agreed with individual customers for whose production operations the pulp is required.The Board of Directors of Cham Paper Group Holding AG has approved the risk assessment and monitors the implementation of the actionsdefined in the catalogue of measures by the Executive Committee.In the event of the emergence of unexpected individual risks, the Board of Directors is also immediately informed of the risks identifiedand the actions taken and processes implemented by the Executive Committee to mitigate or eliminate them.

68Notes to the consolidated financial statements26. Events after the reporting dateAfter the balance sheet reporting date and until the approval of the consolidated financial statements by the Board of Directors on19 March 2013 there were no significant events that would negatively impact the statements made in the 2012 financial statements orthat would have to be disclosed here.27. SubsidiariesRegistered office Activity CurrencySharecaptialDirectholdingIndirectholdingCompany as at 31 DecemberTCHFin %in %Financial holding companyIndustrieverwaltungsgesellschaft Cham AG CH Cham s CHF 50 100% –Cham Paper GroupCham Paper Group AG CH Cham s CHF 10,000 100% –Cham Paper Group Schweiz AG CH Cham l n CHF 21,000 – 100%Cham Paper Group Immobilien AG CH Cham s CHF 5,000 – 100%Cham Paper Group Italia S.p.A. IT Carmignano s l n EUR 25,000 – 100%Cham Paper Group Management AG CH Cham s l CHF 100 – 100%Condino Energia S.r.l. IT Condino n EUR 2,000 – 100%In 2012 Cham Paper Group (Deutschland) GmbH, Cham Paper Group (France) S.à.r.l. and Cham Paper Group (UK) Ltd. were liquidated.s Holding company, financing, real estate and servicesn Research, development and productionl Sale and distributionAll companies are fully consolidated.

Report of the statutory auditor on the consolidated financial statements69Report of the statutory auditoron the consolidated financial statementsReport of the statutory auditorto the general meeting ofCham Paper Group Holding AGChamReport of the statutory auditor on the consolidated financial statementsAs statutory auditor, we have audited the consolidated financial statements of Cham Paper GroupHolding AG, which comprise the income statement, balance sheet, cash flow statement, shareholders’equity statement and notes (pages 48 to 68), for the year ended 31 December 2012.Board of Directors’ ResponsibilityThe Board of Directors is responsible for the preparation and fair presentation of the consolidatedfinancial statements in accordance with Swiss GAAP FER and the requirements of Swiss law. Thisresponsibility includes designing, implementing and maintaining an internal control system relevantto the preparation and fair presentation of consolidated financial statements that are free from materialmisstatement, whether due to fraud or error. The Board of Directors is further responsible for selectingand applying appropriate accounting policies and making accounting estimates that are reasonablein the circumstances.Auditor’s ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on ouraudit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Thosestandards require that we plan and perform the audit to obtain reasonable assurance whether theconsolidated financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the consolidated financial statements. The procedures selected depend on the auditor’s judgment,including the assessment of the risks of material misstatement of the consolidated financial statements,whether due to fraud or error. In making those risk assessments, the auditor considers theinternal control system relevant to the entity’s preparation of the consolidated financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control system. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness of accountingestimates made, as well as evaluating the overall presentation of the consolidated financialstatements. We believe that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion.OpinionIn our opinion, the consolidated financial statements for the year ended 31 December 2012 give a trueand fair view of the financial position, the results of operations and the cash flow in accordance withSwiss GAAP FER and comply with Swiss law.PricewaterhouseCoopers AG, Grafenauweg 8, Postfach, 6304 ZugTelephone: +41 58 792 68 00, Facsimile: +41 58 792 68 10, www.pwc.chPricewaterhouseCoopers AG ist Mitglied eines globalen Netzwerks von rechtlich selbständigen und voneinander unabhängigen Gesellschaften.

70Report of the statutory auditor on the consolidated financial statementsReport on other legal requirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act(AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstancesincompatible with our independence.In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirmthat an internal control system exists which has been designed for the preparation of consolidatedfinancial statements according to the instructions of the Board of Directors.We recommend that the consolidated financial statements submitted to you be approved.PricewaterhouseCoopers AGNorbert KühnisAudit expertAuditor in chargeDaniel WyssAudit expertZug, 19 March 20131

Financial statements of Cham Paper Group Holding AG71Financial statements of Cham Paper Group Holding AGIncome statement1 January – 31 DecemberNotes2012TCHFDividend and participation income 3 – 5,561Income from securities and financial investments, net – 4Interest income from cash and cash equivalents 83 104Interest income from subsidiaries 1,669 1,511Gains from treasury shares 262 –Total income 2,014 7,180Interest expense due subsidiaries –22 –Value adjustments for treasury shares 5 – –1,178Disposal loss on treasury shares – –617Other financial expense –8 –16Administrative expense –1,178 –3,292Impairment of participations 4 – –130,000Tax expense – 680Total expense –1,208 –134,423Net income / loss (–) for the year 806 –127,2432011TCHFThe Notes form an integral part of the financial statements.

72Financial statements of Cham Paper Group Holding AGBalance sheetAs at 31 December, prior to appropriation of available earningsNotes31.12.2012TCHF31.12.2011TCHFAssetsCash and cash equivalents 34,838 36,329Treasury shares 5 6,540 6,690Short-term receivables 32 1,983Short-term receivables subsidiaries 1,763 791Prepaid expenses 24 35Total current assets 43,197 45,828Participations 4 13,745 13,745Loans to subsidiaries 6 65,000 68,094Total non-current assets 78,745 81,839Total assets 121,942 127,667LiabilitiesAmounts due third parties 4 27Liabilities to subsidiaries 552 4,323Loans from subsidiaries – 2,677Accrued expenses 814 874Total liabilities 1,370 7,901Shareholders’ equityShare capital 48,425 48,425Legal capital contribution reserves 23,983 23,983Other legal reserves 22,815 22,815Reserves for treasury shares 12,596 13,610Free reserves 8,883 127,869Retained earnings brought forward 3,064 10,307Net income / loss (–) for the year 806 –127,243Total shareholders’ equity 7 120,572 119,766Total liabilities and shareholders’ equity 121,942 127,667The Notes form an integral part of the financial statements.

Notes to the Financial Statements of Cham Paper Group Holding AG73Notes to the Financial Statementsof Cham Paper Group Holding AG1. IntroductionThe financial statements of Cham Paper Group Holding AG, Fabrikstrasse, 6330 Cham, Switzerland, comply with the requirements of theSwiss Code of Obligations.2. Valuation and accounting methodsSecurities (with the exception of treasury shares) are reported at the lower of acquisition cost or market value. All other assets, includingparticipations and loans, are posted at acquisition cost less suitable value adjustments. All liabilities are valued at nominal values. Assets andliabilities denominated in a foreign currency are translated into Swiss francs at year-end exchange rates except for participations, which aretranslated at historical rates. Transactions in foreign currencies during the year are carried out at the exchange rates prevailing on the transactiondates. Exchange rate gains and losses are posted on the income statement with the exception of unrealised gains, which are set aside.3. Participation incomeIn 2012 no participation income was realised (2011: dividends from subsidiaries of TCHF 5,561).4. ParticipationsThe participations of Cham Paper Group Holding AG in subsidiaries are listed in Note 27 of the consolidated financial statements.As of 31 December 2012 no impairment of the participations had been applied (2011: negative value adjustment of TCHF 130,000).5. Treasury sharesIn FY 2012 and 2011, no treasury shares were purchased or sold.Due to the employee share ownership scheme, members of the Board of Directors were allotted 2,311 treasury shares in 2012 (2011:2,067) at the average share price in effect in November 2012 of CHF 157.00 (2011: CHF 153.00). The members of the Executive Committeeand the Executive Management Board respectively were allotted 336 (2011: 403) treasury shares at the average share price in effectin November 2012 of CHF 157.00 (2011: CHF 210.00, at the average share price in effect in March).In 2012 and 2011 treasury shares were adjusted to their market value.The number of treasury shares as at 31 December 2012 was 41,655 (2011: 44,302). The number of treasury shares held by Cham PaperGroup Holding AG was determined in accordance with the requirements of Article 659b of the Swiss Code of Obligations. Treasuryshares are not entitled to dividends.6. Subordinated loanA subordinated loan of TCHF 3,000 (2011: TCHF 3,000) is reported under “loans to subsidiaries”.

74Notes to the Financial Statements of Cham Paper Group Holding AG7. Changes in shareholders’ equityShare capitalTCHFCapitalcontributionreservesTCHFGeneral legalreservesTCHFReservesfor treasurysharesTCHFFreereservesTCHFRetainedearningsbroughtforwardTCHFBalance as at 1 January 2012 48,425 23,983 22,815 13,610 127,869 –116,936 119,766Allocation to free reserves – – – – –120,000 120,000 –Adjustment of reserves for treasury shares – – – –1,014 1,014 – –Net income for the year – – – – – 806 806Balance as at 31 December 2012 48,425 23,983 22,815 12,596 8,883 3,870 120,572TotalTCHFAs of 31 December 2012 and 31 December 2011, the share capital of Cham Paper Group Holding AG consisted of 745,000 registeredshares with a par value of CHF 65.00 each.Balance as at 1 January 2011 48,425 27,465 22,815 14,630 86,849 50,307 250,491Allocation to free reserves – – – – 40,000 –40,000 –Adjustment of reserves for treasury shares – – – –1,020 1,020 – –Reversal of legal capital contribution reserves – –3,482 – – – 3,482 –Cash dividend – – – – – –3,482 –3,482Net loss for the year – – – – – –127,243 –127,243Balance as at 31 December 2011 48,425 23,983 22,815 13,610 127,869 –116,936 119,7668. Significant shareholdersAccording to the information available, the following shareholders held more than 3% of the shares of Cham Paper Group Holding AGas at 31 December 2012: Buhofer shareholder group (BURU Holding AG, Philipp Buhofer, Heinz Buhofer, all Hagendorn) with 40.89%(2011: BURU Holding AG, Philipp Buhofer, Heinz Buhofer, all Hagendorn, with 40.41%), LB (Swiss) Investment AG, Zurich, with 5.61%(2011: 4.80%).Cham Paper Group Holding AG is not aware of any shareholders’ agreements or other arrangements between the significant shareholdersof the company regarding the registered shares of Cham Paper Group Holding AG held by them or regarding the exercise of shareholders’rights.9. Compensation of the Board of Directors and the Executive Management BoardCompensation of Board of Directors membersCompensation of current and former members of the Board of Directors in FY 2012 and 2011:Compensation of Board of Directors members in 2012 FunctionBase salary 1)TCHFAttendancefees 1)TCHFConsultancyfees 2)TCHFCompensationofExecutiveCommitteeTCHFTotalTCHFPhilipp Buhofer Chairman 200 32 49 – 281René Furler (until 2012 AGM) Vice Chairman 14 7 – – 21Urs Ziegler (from 2012 AGM) Vice Chairman 42 31 24 17 114Niklaus Peter Nüesch (from 2012 AGM) Member 21 10 – – 31Hans Schaller Member 33 29 3 – 65Peter Schmid Member 34 26 15 – 75Felix Thöni Member 34 26 19 – 79Total paid to Board of Directors members 378 161 110 17 666

Notes to the Financial Statements of Cham Paper Group Holding AG75Compensation of Board of Directors members in 2011FunctionBase salary 1)TCHFAttendancefees 1)TCHFConsultancyfees 2)TCHFCompensationofExecutiveCommitteeTCHFPhilipp Buhofer Chairman 202 31 96 – 329René Furler Vice Chairman 46 35 – – 81Hans Schaller Member 33 28 7 – 68Peter Schmid Member 23 23 127 – 173Felix Thöni Member 33 31 115 – 179Urs Ziegler Member 35 24 3 – 62Total paid to Board of Directors members 372 172 348 – 8921)The Board of Directors has the option of receiving part of its compensation (0%–100%) in the form of shares, a premium of 20% being granted for thesubscription of shares. The shares are blocked for one year.2)The consultancy fees relate to compensation for projects, fixed-term engagements and general legal advice.TotalTCHFCompensation of Executive Management BoardTotal compensation of the Executive Committee and the Executive Management Board respectively in FY 2012 and 2011:Currentmembers 1)TCHFMembersresigningduring FY 2)TCHFBase salary 515 659 1,174 1,400Bonuses including one-off special bonuses 90 122 212 254Payments to pension plans 108 43 151 177Total compensation of the Executive Committee 713 824 1,537 1,831Total2012TCHFTotal2011TCHF1)The remuneration paid to executive members of the Board of Directors is contained in the compensation of the Board members.2)After resigning, two members of the Executive Management Board received the contractually agreed base salary of TCHF 180 until the end of the year.This amount is not included above.The content and method of determining compensation and shareholding schemes are described on page 44f.The highest compensation paid to an Executive Management Board member in FY 2012 was TCHF 417 to Peter Studer, CEO of ChamPaper Group (2011: Peter Studer, CEO of Cham Paper Group, TCHF 468).In the course of FY 2012, compensation totalling TCHF 824 (2011: TCHF 300) was paid to resigning members of the Executive ManagementBoard. No severance benefits were disbursed or agreed in 2012 or 2011.No loans were granted to members of the Board of Directors or the Executive Committee (Executive Management Board) in FY 2012 or2011.

76Notes to the Financial Statements of Cham Paper Group Holding AG10. Share ownership of Board of Directors and Executive Management Board membersAs of 31 December 2012, the Board of Directors members and their related parties owned a total of 321,887 registered shares of ChamPaper Group Holding AG (31 December 2011: 318,485 registered shares). Related parties are spouses, children under 18 years of ageand, as applicable, other close relatives, companies belonging to or controlled by these persons, and legal entities or individuals acting astheir trustees. Direct and indirect share ownership by current Board of Directors members is set out below:NameFunction31 December 2012Number of registered shares31 December 2011Number of registered sharesPhilipp Buhofer 1) Chairman 304,676 301,049René Furler (until 2012 AGM) Vice Chairman n.a. 848Urs Ziegler (from 2012 AGM) Vice Chairman 13,679 13,610Niklaus Peter Nüesch (from 2012 AGM) Member – n.a.Hans Schaller Member 470 278Peter Schmid Member 2,323 2,141Felix Thöni Member 739 5591)Of which 294,859 (2011: 292,613) registered shares held via BURU Holding AG and 2,914 (2011: 2,894) registered shares held by relatives.As of 31 December 2012, the Executive Committee and Executive Management Board members respectively and their related partiesowned a total of 406 registered shares of Cham Paper Group Holding AG (31 December 2011: 633 registered shares). Share ownershipis set out below:NameFunction31 December 2012Number of registered shares31 December 2011Number of registered sharesPeter Studer (until Dec. 2012) CEO n.a. 184Patrick Schmid (until Sept. 2012) CFO n.a. 189Peter Müller Managing Director CPG Schweiz AG 376 230Marcello di Giacomo Managing Director CPG Italia SpA – n.a.Gerold Zuegg Mill Manager Condino 30 3011. Information about risk assessmentThe Board of Directors of Cham Paper Group Holding AG evaluates corporate risk applying a systematic risk identification and analysisprocess. Based on detailed risk catalogues and risk matrices, specific risks are defined and evaluated by the Executive ManagementBoard and a corresponding catalogue of countermeasures developed. The Board of Directors of Cham Paper Group Holding AG hasapproved the risk assessment and monitors the implementation of the actions defined in the catalogue of countermeasures by theExecutive Management Board. In the event of the emergence of unexpected individual risks, the Board of Directors is also immediatelyinformed of the risks identified and the actions taken and processes implemented by the Executive Committee to mitigate or eliminatethem.

Notes to the Financial Statements of Cham Paper Group Holding AG77Proposed appropriation of available earningsRetained earnings brought forward from previous year 3,063,119 10,306,893Net income / loss (–) for the year 806,483 –127,243,774Reversal of legal capital contribution reserves 2,110,035 –Total available earnings / loss (–) 5,979,637 –116,936,8812012CHF2011CHFAppropriation of available earningsReversal of free reserves – 120,000,000Dividend –2,110,035 –Balance to be carried forward to new account 3,869,602 3,063,119Total distributed as dividend 2,110,035 –Minus portion consisting of the capital contribution reserves –2,110,035 –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 contributionreserves of CHF 3.00 per share.

78Report of the statutory auditor on the financial statementsReport of the statutory auditoron the financial statementsReport of the statutory auditorto the general meeting ofCham Paper Group Holding AGChamReport of the statutory auditor on the financial statementsAs statutory auditor, we have audited the financial statements of Cham Paper Group Holding AG,which comprise the income statement, balance sheet and notes (pages 71 to 77), for the year ended31 December 2012.Board of Directors’ ResponsibilityThe Board of Directors is responsible for the preparation of the financial statements in accordancewith the requirements of Swiss law and the company’s articles of incorporation. This responsibilityincludes designing, implementing and maintaining an internal control system relevant to the preparationof financial statements that are free from material misstatement, whether due to fraud or error.The Board of Directors is further responsible for selecting and applying appropriate accounting policiesand making accounting estimates that are reasonable in the circumstances.Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conductedour audit in accordance with Swiss law and Swiss Auditing Standards. Those standards requirethat we plan and perform the audit to obtain reasonable assurance whether the financial statementsare free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers the internal control system relevant tothe entity’s preparation of the financial statements in order to design audit procedures that are appropriatein the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity’s internal control system. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of accounting estimates made, as well as evaluating theoverall presentation of the financial statements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the financial statements for the year ended 31 December 2012 comply with Swiss lawand the company’s articles of incorporation.PricewaterhouseCoopers AG, Grafenauweg 8, Postfach, 6304 ZugTelephone: +41 58 792 68 00, Facsimile: +41 58 792 68 10, www.pwc.chPricewaterhouseCoopers AG ist Mitglied eines globalen Netzwerks von rechtlich selbständigen und voneinander unabhängigen Gesellschaften.

Report of the statutory auditor on the financial statements79Report on other legal requirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act(AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstancesincompatible with our independence.In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirmthat an internal control system exists which has been designed for the preparation of financial statementsaccording to the instructions of the Board of Directors.We further confirm that the proposed appropriation of available earnings complies with Swiss law andthe company’s articles of incorporation. We recommend that the financial statements submitted to yoube approved.PricewaterhouseCoopers AGNorbert KühnisAudit expertAuditor in chargeDaniel WyssAudit expertZug, 19 March 20131

80Sustainability Report – GRI StatementSustainability Report – GRI Statement

Publishing detailsThis annual report is issued in German and English. The Germanversion is binding.Publisher– Cham Paper Group Holding AG, ChamIdea, design, copy and production– Dynamics Group AG, ZurichConsulting Sustainability Report– Sustainserv, Zurich and BostonPhotography– Scanderbeg Sauer Photography, Zurich– Marc Wetli, Zurich– Iris C. Ritter, Zurich– Hugo Raeber, ChamWe thank Vini Vergani, Zurich, Transa, Zurich andZurich Airport for their support in the realisation ofthe large-format photographs.Printing and productionPrinted with a net zero carbon footprintat Neidhart & Schön Group AGDisclaimerMany of the statements made in this annual report are forwardlookingstatements relating to future events and/or future performance,including without limitation, statements regarding expectations,beliefs, intentions or future strategies that are signifiedby the words “expects”, “anticipates”, “intends”, “believes”,“plans” or similar language. These forward-looking statementsare only predictions and estimates regarding future events andcircumstances. Actual results may differ substantially from thoseanticipated in these forward-looking statements.

Cham Paper Group Holding AGFabrikstrasseCH-6330 ChamPhone +41 41 785 33 33Internet www.cham-group.comE-mail investor@cham-group.com