Financial Report 2003 (english) PDF • 287.26 KB - Kuoni Group

kuoni

Financial Report 2003 (english) PDF • 287.26 KB - Kuoni Group

Financial Report 2003

and Corporate Governance

+++ Kuoni Group +++

Kuoni Group

+++ Kuoni Travel Holding

Kuoni Travel

Ltd.

Holding Ltd.

+


Kuoni Group++


Kuoni Group

6 Financial Statements

6 Income Statement

7 Balance Sheet

8 Cash Flow Statement

9 Changes in Shareholders’ Equity

10 Annex to the Financial Statements

10 Group Accounting Principles

15 Notes

42 Principal Subsidiaries and Associates

46 Report of the Group Auditors

48 Six-Year Summary of Key Data

Kuoni Travel Holding Ltd.

52 Financial Statements

52 Income Statement

53 Balance Sheet

54 Board of Directors’ Proposal for the Appropriation

of Retained Earnings

55 Notes

59 Report of the Auditors

Corporate Governance

62 Group Structure and Shareholders

63 Capital Structure

66 Board of Directors

69 Group Executive Board

70 Compensation, Shares, Options and Loans

73 Shareholders’ Right to Participate

75 Changes of Control and Defence Measures

75 Auditors

76 Information Policy

Contents

KUONI Financial Report 2003

3


6

Financial Statements

Income Statement

CHF 1000 Notes 2003 % 2002 %

Turnover (5) 3 295 436 100.0 3 739 298 100.0

Direct costs –2 363 928 –71.7 –2 758 513 –73.8

Gross profit (6) 931 508 28.3 980 785 26.2

Personnel expense (7) –464 221 –14.1 –477 468 –12.8

Marketing and advertising expense –89 750 –2.7 –105 401 –2.8

Other operating expense (8) –222 901 –6.8 –220 397 –5.9

Depreciation (9) –52 269 –1.6 –56 859 –1.5

Earnings before interest, taxes and

amortisation of goodwill (EBITA) (10) 102 367 3.1 120 660 3.2

Amortisation of goodwill (11) –41 231 –1.2 –45 647 –1.2

Earnings before interest and taxes (EBIT) 61 136 1.9 75 013 2.0

Financial income (12) 17 952 0.5 19 080 0.5

Financial expense (12) –23 324 –0.7 –30 888 –0.8

Gain from sale of discontinuing operations (4) 52 798 1.6 0 0.0

Result before taxes 108 562 3.3 63 205 1.7

Income taxes (13) –42 621 –1.3 –34 565 –0.9

Result after taxes 65 941 2.0 28 640 0.8

Minority interest –1 296 –0.0 –2 419 –0.1

Net result (14) 64 645 2.0 26 221 0.7

Pre-goodwill earnings 105 876 3.2 71 868 1.9

Basic earnings per registered share B in CHF (14) 21.86 8.90

Diluted earnings per registered share B in CHF (14) 21.85 8.90


Balance Sheet

Assets

Kuoni Group

CHF 1000 Notes 31 Dec 2003 % 31 Dec 2002 %

Non-current assets

Tangible fixed assets (15) 337 391 18.3 382 750 19.5

Intangible assets (15) 6 824 0.4 7 035 0.4

Goodwill (15) 342 942 18.6 467 777 23.9

Investments in associates (15) 3 770 0.2 9 780 0.5

Other financial assets (15) 145 931 8.0 162 122 8.3

Total non-current assets 836 858 45.5 1 029 464 52.6

Current assets

Cash and cash equivalents (16) 557 997 30.3 544 836 27.8

Time deposits and securities (17) 58 729 3.2 50 240 2.6

Accounts receivable (18) 109 475 6.0 137 103 7.0

Other receivables (33) 225 202 12.2 121 018 6.2

Prepaid expenses and accrued income 51 311 2.8 74 092 3.8

Total current assets 1 002 714 54.5 927 289 47.4

Total assets 1 839 572 100.0 1 956 753 100.0

Liabilities and Shareholders’ Equity

CHF 1000 Notes 31 Dec 2003 % 31 Dec 2002 %

Shareholders’ equity

Share capital (19) 160 000 8.7 160 000 8.1

Treasury shares (19) –11 944 –0.6 –12 541 –0.6

Reserves (19) 464 842 25.2 430 153 22.0

Total shareholders’ equity 612 898 33.3 577 612 29.5

Minority interest 1 916 0.1 8 107 0.4

Liabilities

Provisions (20) 73 986 4.0 106 269 5.4

Deferred taxes (21) 40 458 2.2 46 116 2.4

Financial debts (22) 287 511 15.7 308 069 15.7

Total long-term liabilities 401 955 21.9 460 454 23.5

Bank debts (23) 8 079 0.4 2 291 0.1

Accounts payable (24) 299 470 16.3 324 052 16.6

Advance payments by customers 256 224 13.9 267 637 13.7

Accrued expenses (24) 259 030 14.1 316 600 16.2

Total short-term liabilities 822 803 44.7 910 580 46.6

Total liabilities 1 224 758 66.6 1 371 034 70.1

Total liabilities and shareholders’ equity 1 839 572 100.0 1 956 753 100.0

KUONI Financial Report 2003

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8

Financial Statements

Cash Flow Statement

CHF 1000 Notes 2003 2002

Cash flow from operating activities

Net result (14) 64 645 26 221

Minority interest 1 296 2 419

Depreciation and amortisation of goodwill (9/11) 93 500 102 506

Changes in provisions and deferred taxes (20/21) –19 774 –20 839

Gain from partial repurchase of convertible bond 0 –3 049

Non-cash effective interest on convertible bond 4 942 5 274

Gain from sale of subsidiaries (3/4/12) –52 264 0

Loss from investments in associates (net) (12) 5 218 11 660

Other non-cash expenses and income 2 684 –852

Changes in net working capital

– Accounts receivable 7 107 –12 657

– Other receivables/prepaid expenses and accrued income 23 531 –2 703

– Accounts payable/accrued expenses –55 111 33 703

– Advance payments by customers –1 406 17 508

Net cash from operating activities (cash flow) 74 368 159 191

Cash flow from investing activities

Purchase of tangible fixed assets and intangible assets (15) –28 047 –32 548

Acquisition of subsidiaries, net of cash and cash equivalents acquired (3) –2 559 –14 751

Purchase price adjustment Scandinavia (15) 29 499 0

Disposal of tangible fixed assets (15) 3 380 2 267

Disposal of subsidiaries, net of cash and cash equivalents transferred (3) –17 396 –835

Increase in time deposits and securities (net) (17) –8 686 69 954

Increase in investments in associates –90 –898

Increase in other financial assets (net) –1 552 –11 125

Net cash used in investing activities –25 451 12 064

Cash flow from financing activities

Repayment of borrowings (22/23) –18 066 –11 735

Use of treasury shares (19) 2 778 1 285

Contributions to minorities –2 404 –1 737

Dividend payout (19) –8 874 0

Net cash used in financing activities –26 566 –12 187

Effects of exchange rate changes on cash and cash equivalents –9 190 –18 290

Net increase in cash and cash equivalents 13 161 140 778

Cash and cash equivalents at beginning of year 544 836 404 058

Cash and cash equivalents at end of year 557 997 544 836

For further details, see note 28.


Changes in Shareholders’ Equity

Kuoni Group

Share Treasury Capital Retained Exchange Hedging Fair value Total sharecapital

shares reserves earnings differences reserve reserve holders’

CHF 1000 equity

Shareholders’ equity

as at 1 January 2002 160 000 –12 752 157 965 311 462 –871 –4 094 2 623 614 333

Net result 26 221 26 221

Profits distributed 0 0

Use of treasury shares

Realised gains or losses on

financial instruments transferred to

211 1 074 1 285

income statement

Recognised gains or losses

4 611 –254 4 357

on financial instruments –22 673 –1 740 –24 413

Translation differences –44 171 –44 171

Shareholders’ equity

as at 31 December 2002 160 000 –12 541 159 039 337 683 –45 042 –22 156 629 577 612

Net result 64 645 64 645

Profits distributed –8 874 –8 874

Use of treasury shares

Realised gains or losses on

financial instruments transferred to

597 2 181 2 778

income statement

Recognised gains or losses

23 111 –55 23 056

on financial instruments –26 093 1 143 –24 950

Translation differences –21 369 –21 369

Shareholders’ equity

as at 31 December 2003 160 000 –11 944 161 220 393 454 –66 411 –25 138 1 717 612 898

In the year under review, the gains and losses recognised directly in equity amounted to CHF –23.3 million (2002: CHF –64.2 million).

The cumulative charges recognised directly in equity (exchange differences, hedging reserve and fair value reserve) amounted to

CHF 89.8 million (2002: CHF 66.6 million).

For information on the share capital see note 19.

KUONI Financial Report 2003

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10

Annex

Group Accounting Principles

Basis of Accounting

The consolidated financial statements of the Kuoni Group have

been prepared in accordance with International Financial Reporting

Standards (IFRS) and comply with Swiss law.

Consolidation Principles

The consolidated accounts include the accounts of Kuoni Travel

Holding Ltd., Zurich, and all the companies under its direct or

indirect control. Control is the power to govern the financial and

operating policies of an enterprise so as to obtain benefits from

its activities. This is the case where the Group holds more than

50% of the voting rights of an enterprise or where it has been

granted management of the enterprise contractually or is exercising

such de facto. The share of minority interests in shareholders’equity

and in group profit is reported separately. All intragroup

transactions and balances have been eliminated in the

course of the consolidation. Newly-acquired companies are consolidated

with effect from the actual date of their acquisition

using the purchase method. Subsidiaries that have been sold are

deconsolidated as of the date on which control was transferred.

Minority shareholdings in associated companies (generally speaking,

stakes entailing 20% to 50% of voting rights) are accounted

for using the equity method. Their net assets and profit or loss for

the year are taken on the basis of the associated company’s

accounting policies if it is not possible to align these with the

Group’s policies.

Foreign Currency Transactions

Transactions in foreign currencies are translated using the exchange

rate on the date of transaction. Exchange gains or losses arising

on foreign currency transactions are recognised as income or

expense for the period. Monetary assets and liabilities denominated

in foreign currencies on 31 December are translated at

year-end rates. Exchange gains or losses arising on translation of

these items are taken to the income statement.

Consolidation of Foreign Entities

The consolidated accounts are presented in Swiss francs (CHF).

Assets (including goodwill) and liabilities in balance sheets prepared

in foreign currencies are translated at year-end rates,

income and expenses and monetary flows at the average rate

for the year. Translation differences arising from the application

of different exchange rates to balance sheet and income statement

positions are credited or debited to group reserves.

Valuation Policies and Definitions

The consolidated accounts are prepared on the basis of uniform

valuation policies for all group companies, which have been

applied consistently. In particular, this means that

– the accounts give a true and fair view of the Group’s net

assets and income.

– valuation policies are applied consistently. If there is any

change in valuation, the effect is reflected in the result for

the period.

– assets are stated at historical cost. Exceptions to this are derivative

financial instruments and financial assets available for sale

and/or held for trading purposes which are valued on the basis

of the replacement value (fair value).

– income and expenses are accrued, that is, recognised as they

are earned or incurred and attributed to the period to which

they relate (“accrual and matching principles”).

– the reporting periods of all important subsidiaries and associates

close at the end of December.


Turnover

The Group renders a wide range of travel services. The revenue

from rendering these services is recognised in the income

statement at the time when the significant risks and rewards

are transferred to the customer. This is generally the case on

the date of departure or in the case of Incoming activities on the

date of arrival.

Turnover comprises net sales revenues from the Tour Operating

business (after deduction of sales taxes, discounts and commis-

sions) as well as commissions received from Leisure and Business

Travel retailing.

Retirement Benefits

In the majority of countries in which the Group operates there

are retirement benefits provided by the states. Additionally,

the Group has set up a number of legally independent retirement

benefit plans or insurance schemes in the following countries:

Defined benefit plans: Switzerland, the United Kingdom

and Germany

Defined contribution plans: Switzerland, the United Kingdom,

Germany, Italy, France, Sweden,

Denmark, Norway, the Netherlands,

Austria, the USA, India and Japan

They are funded by the Group’s subsidiaries (employer) and

the employees. Contributions to defined contribution plans are

recognised as expense when incurred.

The Group’s net obligation in respect of defined benefit pension

plans is calculated separately for each plan by qualified actuaries

using the projected unit credit method. To the extent that any

cumulative unrecognised gain or loss of a plan exceeds 10% of

the greater of the present value of the defined benefit obligation

and the fair value of plan assets, that portion is recognised in

the income statement over the expected average remaining

working lives of the employees participating in the plan. Where

actuarial calculations result in a surplus, this is only recognised

to the extent that the Group derives a future economic benefit

in the form of a reduction in plan contributions or a refund.

Kuoni Group

Due to local regulations, the Group maintains certain unfunded

retirement benefit plans. The present value of the defined

benefit obligation of unfunded plans is recognised as provision

for employee benefits.

Income Taxes

Income tax on the profit or loss for the year comprises current and

deferred taxes, calculated using tax rates enacted or substantially

enacted at the balance sheet date. Income tax is recognised

in the income statement except to the extent that it relates to

items recognised directly in equity, in which case it is recognised

in equity.

Current tax is the expected tax payable on the taxable income

for the year and any adjustment to tax payable in respect of

previous years.

Deferred tax is provided using the balance sheet liability method,

providing for temporary differences between the carrying

amounts of assets and liabilities for financial reporting purposes

and the amounts used for taxation purposes. Differences

relating to investments in subsidiaries are not provided for to the

extent that they will probably not reverse in the foreseeable

future. Deferred tax liabilities on undistributed profits of subsidiaries

are recognised, unless dividends to the ultimate Group

holding company are not planned for the foreseeable future. A

deferred tax asset is recognised only to the extent that it is probable

that future taxable profits will be available against which the

asset can be utilised. Deferred tax assets are reduced to the

extent that it is no longer probable that the related tax benefit

will be realised.

KUONI Financial Report 2003

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12

Annex

Tangible Fixed Assets

Tangible fixed assets are stated at cost less accumulated depreciation

and impairment losses.

Leases in terms of which the Group assumes substantially all the

risks and rewards of ownership are classified as finance leases.

Tangible fixed assets acquired by way of finance lease are stated

at an amount equal to the lower of their fair value and the

present value of the minimum lease payments at inception, less

accumulated depreciation and impairment losses. The related

liabilities are contained in long- or short-term financial liabilities.

The interest expense component of finance lease payments

is recognised in the income statement using the effective interest

rate method.

Expenditure incurred to replace a component of an item of

tangible fixed assets that is accounted for separately, including

major inspection and overhaul expenditure, is capitalised. Other

subsequent expenditure is capitalised only when it increases

the future economic benefits embodied in the item of tangible

fixed assets. All other expenditure is recognised in the income

statement as an expense as incurred.

Depreciation is charged to the income statement on a straightline

basis over the estimated useful lives of items of tangible

fixed assets (owned assets and assets under finance lease), and

major components that are accounted for separately. Land

is not depreciated. The estimated useful lives are as follows:

Buildings in Switzerland 50 years

Buildings outside Switzerland 20 years

Ships 30 years

Aircraft, 10% residual value 15 years

Fixtures and equipment 10 years

Fixtures and equipment at points of sale 8 years

EDP hardware, office equipment and vehicles 5 years

Personal computers and office machines 3 years

Sport equipment and aircraft installations 2 years

Intangible Assets

Intangible assets comprise software acquired from third parties,

licences, trademarks and similar rights. These assets are stated at

cost less accumulated depreciation and impairment losses. They

are depreciated straight-line over their expected useful lives but

not longer than five years.

Goodwill

Goodwill arising on an acquisition represents the excess of the

cost of the acquisition over the fair value of the net identifiable

assets acquired. Goodwill arising on acquisitions made after

1 January 1995 is recognised as an asset and amortised on a

straight-line basis over the estimated useful life, not exceeding

20 years, and is reduced by impairment losses. Before 1995

goodwill was written off directly against equity. In respect of associates,

the carrying amount of goodwill is included in the

carrying amount of the investment in the associate.

Financial Assets

Financial assets comprise investments in associates, long-term

investments in equity securities (minority shareholdings),

loans and advances as well as prepaid pension costs from defined

benefit retirement plans.

Investments in associates are accounted for using the equity

method. Other minority shareholdings are originally stated

at cost. After initial recognition they are stated at fair value in

accordance with the accounting principles described hereafter

for securities available for sale (see money market investments

and securities). Minority shareholdings that do not have a

quoted market price in an active market and whose fair value

cannot be reliably measured are stated at cost less any impairment

losses. Loans and advances are measured at amortised cost

using the effective interest rate method.


Cash and Cash Equivalents

Cash and cash equivalents contains cash balances, postal giro

and bank current accounts as well as time deposits and money

market investments with a term not exceeding 90 days from

acquisition.

Money Market Investments and Securities

Securities consist of easily realisable investments in debt and

equity securities for which an active market exists as well

as time deposits with a term exceeding 90 days from acquisition.

The Group does not hold investments for trading purposes.

All securities held by the Group are classified as being availablefor-sale

and any unrealised gains and losses are recognised

directly in equity. When the investment is sold, collected or

otherwise disposed of, or when the carrying amount of the

investment is impaired, the cumulative gain or loss recognised

in equity is transferred to the income statement.

Accounts Receivable

Accounts receivable relate to travel services provided. They are

stated at their cost less impairment losses. Impairment and uncollectability

is measured for individual receivables and on a portfolio

basis for groups of similar receivables.

Prepayments by customers for future travel services are shown

separately.

Impairment

The carrying amounts of the Group’s assets, other than deferred

tax assets and pension assets (see separate accounting policies),

are reviewed at each balance sheet date to determine whether

there is any indication of impairment. If any such indication

exists, the asset’s recoverable amount is estimated. An impairment

loss is recognised in the income statement whenever the

carrying amount of an asset or its cash-generating unit exceeds

its recoverable amount.

Provisions

Kuoni Group

A provision is recognised in the balance sheet when the Group has

a legal or constructive obligation as a result of a past event,

when it is probable that an outflow of economic benefits will

be required to settle the obligation and when a reliable estimate

can be made of the amount of the obligation. If the effect is

material, provisions are determined by discounting the expected

future cash flows at a pre-tax rate that reflects current market

assessments of the time value of money and, where appropriate,

the risks specific to the liability. A provision for onerous contracts

is recognised when the expected benefits to be derived by

the Group from a contract are lower than the unavoidable cost

of meeting its obligations under the contract.

Financial Debts

Interest-bearing borrowings are recognised initially at cost, less

attributable transaction costs. Subsequent to initial recognition,

interest-bearing borrowings are stated at amortised cost with

any difference between cost and redemption value being recognised

in the income statement over the period of the borrowings

using the effective interest method.

Convertible bonds that can be converted to share capital at the

option of the holder, where the number of shares issued does not

vary with changes in their fair value, are accounted for as com-

pound financial instruments, net of attributable transaction costs.

The equity component of the convertible bonds is calculated

as the excess of the issue proceeds over the present value of the

future interest and principal payments, discounted at the market

rate of interest applicable to similar liabilities that do not have a

conversion option. The interest expense recognised in the income

statement is calculated using the effective interest rate method.

In the same way, when repurchasing part of the convertible

bond, the purchase price is allocated proportionally to the debt

and equity components in line with market conditions.

KUONI Financial Report 2003

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14

Annex

Short-term Liabilities

These are liabilities due for payment or renewal within one year

at the most.

Segments

The segment reporting by Business Area reflects the management

structure implemented within the Kuoni Group. This results in

the breakdown of leisure travel activities based on the geographic

location of the revenue-generating group company, which in

turn largely corresponds to where customers are based. Such a

geographic breakdown based on the location of the group company

would be relatively meaningless for the activities Incoming

(services provided at the holiday destination) and Business

Travel (involving several countries/regions).

Derivative Financial Instruments

The Group uses derivative financial instruments, in particular to

hedge its exposure to foreign exchange risks arising from

operational, financing and investment activities. The following

derivative financial instruments are used: forward exchange

contracts, currency options and currency swaps. In accordance

with its treasury policy, the Group does not hold or issue derivative

financial instruments for trading purposes. However, derivatives

that do not qualify for hedge accounting are accounted

for as trading instruments.

All derivative financial instruments are recognised initially at cost,

including transaction costs. Subsequent to initial recognition,

derivative financial instruments are stated at fair value and presented

within other receivables or other payables, respectively.

Recognition of any resultant gain or loss depends on the nature

of the item being hedged (see hedging). The fair value of the

instruments used is the calculated amount that the Group would

receive or pay to terminate the contracts at the balance sheet

date, based on quotes from independent counterparties.

Hedging

Where a derivative financial instrument is designated as a hedge

of the variability in cash flows of a recognised liability, a firm

commitment or a highly probable forecasted transaction, the

effective part of any gain or loss on the derivative financial

instrument is recognised directly in equity.

When the firm commitment or forecasted transaction results in

the recognition of an asset or liability, the cumulative gain or

loss is removed from equity and included in the initial measurement

of the asset or liability. Otherwise the cumulative gain

or loss is removed from equity and recognised in the income

statement at the same time as the hedged transaction. The

ineffective part of any gain or loss is recognised in the income

statement immediately.

If the hedged transaction is no longer probable or the hedging

instrument no longer effective, the cumulative unrealised gain

or loss recognised in equity is recognised in the income statement

immediately.

Where a derivative financial instrument is used to economically

hedge the foreign exchange exposure of a recognised monetary

asset or liability, no hedge accounting is applied and any gain

or loss on the hedging instrument is recognised in the income

statement.

Earnings per Share (EPS)

Earnings per share are calculated by dividing the group result

by the weighted average number of shares entitled to dividends

during the year under review.

Diluted earnings per share take into account any dilution effect

resulting from the exercise of option or conversion rights.


Notes

1. Exchange Rates

The following exchange rates were used for the most important currencies of the Group:

Kuoni Group

Year-end rates Average rates for the year

Currency Unit 2003 2002 2003 2002

USD 1 1.236 1.393 1.345 1.555

GBP 1 2.202 2.232 2.199 2.333

EUR 1 1.559 1.457 1.521 1.467

DKK 100 20.94 19.62 20.47 19.74

NOK 100 18.51 19.99 19.01 19.55

SEK 100 17.17 15.91 16.69 16.01

HKD 1 0.159 0.179 0.173 0.199

INR 1 0.027 0.029 0.029 0.032

KES 1 0.016 0.018 0.018 0.020

2. Changes in the Group of Consolidated Companies

The group of consolidated companies has changed in the year under review as a result of acquisitions and disposals.

The most important of these were the following:

– Allround Travel International Ges.m.b.H., Vienna (100% sold 1 January 2003)

– Select Tours AS, Oslo (100% acquired 1 July 2003)

– Stop Over AB, Gothenburg (100% acquired 1 July 2003)

– Vacances Fabuleuses SA, Paris (100% acquired 1 July 2003)

– P&O Travel (Singapore) Pte Ltd., Singapore (100% sold 31October 2003)

– Intens Travel AG, Cham (100% acquired 1November 2003)

– Sale of discontinuing segment Business Travel (sold 31December 2003, see note 4):

Kuoni Geschäftsreisen AG, Urdorf (100%)

Kuoni Beteiligungsgesellschaft mbH, Cologne (100%)

Euro Lloyd Reisebüro GmbH & Co KG, Cologne (100%)

Euro Lloyd MAN Reisebüro GmbH, Oberhausen (50%)

Euro Lloyd DFB Reisebüro GmbH, Frankfurt a. M. (51%)

Reisebüro A.L.R. Atlantik-Luft-Reederei GmbH, Bonn (90%)

Euro Lloyd Breuninger Reisebüro GmbH & Co KG, Stuttgart (51%)

Euro Lloyd Reisebüro GmbH, Augsburg (100%)

BTO24 GmbH, Hamburg (100%)

Bavaria-Lloyd Reisebüro GmbH, Munich (49%)

W.E.L.T. Reisebüro GmbH, Munich (49%)

Kuoni Geschäftsreisen GmbH, Vienna (100%)

Kuoni Utazási Iroda Kft., Budapest (100%)

In addition, we increased our equity holding in the following company during the year under review:

– P&O Travel Ltd., Hong Kong (from 50% to 100%)

KUONI Financial Report 2003

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16

Annex

3. Acquisition / Sale of Consolidated Companies

2003 2003 2003 2002

CHF million acquired sold net net

Cash and cash equivalents 2.2 –18.2 –16.0 1.7

Time deposits and securities 0.2 –0.1 0.1 0.0

Other current assets 10.2 –66.1 –55.9 9.8

Tangible fixed assets 0.1 –8.3 –8.2 –1.6

Intangible assets 0.0 –0.8 –0.8 0.7

Goodwill 4.1 –45.0 –40.9 22.8

Financial assets 0.2 –17.2 –17.0 0.1

Short-term liabilities –14.7 58.5 43.8 –23.7

Long-term liabilities –0.3 17.9 17.6 4.7

Minority interest 0.0 1.1 1.1 –1.4

Gain from sale of subsidiaries –52.3 –52.3 0.0

Transfer to investments in associates 0.0 0.0 –1.5

Acquisition / Sales price 2.0 –130.5 –128.5 11.6

Cash and cash equivalents acquired / transferred –2.2 18.2 16.0 –1.7

Increase in equity holdings 2.8 2.8 5.7

Sales price not received yet 129.7 129.7 0

Net cash outflow 2.6 17.4 20.0 15.6

The increase in equity interests held in already fully consolidated companies did not result in any goodwill

(2002: CHF 4.4 million).

4. Information on Sale of Discontinuing Operations (BTI Central Europe)

Income Statement of Ordinary Activity

CHF 1000 2003 2002

Turnover / Gross profit 153 771 178 973

Personnel expense –105 469 –109 343

Marketing and advertising expense –2 157 –2 247

Other operating expense –34 035 –36 042

Depreciation –5 862 –6 310

Earnings before interest, taxes and amortisation of goodwill (EBITA) 6 248 25 031

Amortisation of goodwill –9 364 –9 070

Financial result –2 574 –2 349

Income taxes –3 337 –5 818

Minority interest –1 661 –1 938

Result after taxes –10 688 5 856

Sales Profit

CHF 1000 2003 2002

Gain from sale of discontinuing operations 52 798 0

Income taxes thereon –8 729 0

Gain from sale of BTI Central Europe, net of tax 44 069 0


5. Turnover

Kuoni Group

Kuoni Travel Holding Ltd. sold its division Business Travel – BTI Central Europe to Hogg Robinson plc. of the UK in

December 2003 and deconsolidated the division as of 31 December 2003. The division includes Kuoni Geschäftsreisen

AG in Switzerland (plus Liechtenstein), Euro Lloyd Reisebüro GmbH & Co. KG in Germany and its subsidiaries, Kuoni

Geschäftsreisen Ges.m.b.H. in Austria and Kuoni Utazási Iroda Kft. in Hungary. The effective selling price may be subject

to change under the terms of the contract and agreed warranties. The German leisure travel activity, which trades under

the name Euro Lloyd Urlaubsreisen, will remain with the Kuoni Group.

The results of the business travel division, which is qualified above as a discontinuing operation, are included in the

Group’s income statement for the entire year. However, its assets and liabilities no longer appear on the consolidated

balance sheet as at 31 December 2003 (note 3). The prior-year figures essentially correspond to the assets and liabilities

of Business Travel as reported in note 25.

The net cash from operating activities (cash flow) at BTI Central Europe amounted to CHF 2.6 million in 2003, while net

cash used in investing activities was CHF 0.6 million and in financing activities CHF 14.9 million.

Turnover is down CHF 444 million or –11.9% on the prior year. The negative exchange rate impact was –1.5% and

acquisitions accounted for +0.5%.

The Novair Airbus A330 decommissioned in 2001 was leased occasionally to third parties. The resulting turnover amounted

to CHF 9.6 million.

Breakdown of Turnover by Business Area

2003 % 2002 % Change

CHF million of total CHF million of total in %

Switzerland 870 26.4 1 005 26.9 –13.4

Scandinavia 501 15.2 554 14.8 –9.6

Europe 488 14.8 486 13.0 +0.4

United Kingdom & North America 756 23.0 893 23.9 –15.3

Incoming & Asia 551 16.7 647 17.3 –14.8

Business Travel 167 5.1 193 5.2 –13.5

Less revenues generated between segments –38 –1.2 –39 –1.1 +2.6

Total 3 295 100.0 3 739 100.0 –11.9

Breakdown of Turnover by Activity

2003 % 2002 % Change

CHF million of total CHF million of total in %

Leisure Travel 2 711 82.3 3 066 82.0 –11.6

Incoming 469 14.2 539 14.4 –13.0

Business Travel 167 5.1 193 5.2 –13.5

Less revenues generated between segments –52 –1.6 –59 –1.6 +11.9

Total 3 295 100.0 3 739 100.0 –11.9

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Annex

6. Gross Profit

Gross profit comprises turnover less all directly allocable airline, ship, rail, hotel and car rental costs etc. In addition,

gross profit includes the currency gains or losses realised by the individual subsidiaries in the course of the operations.

In this particularly challenging business year, the gross profit margin was 28.3% compared with 26.2% in the previous

year. This increase was due to the rigorous pricing policies we applied in numerous markets as well as to the renegotiation

of contracts with our suppliers.

Breakdown of Gross Profit by Business Area

2003 % of % 2002 % of %

CHF million turnover of total CHF million turnover of total

Switzerland 248.1 28.5 26.7 274.2 27.3 28.0

Scandinavia 145.1 29.0 15.6 116.7 21.1 11.9

Europe 99.8 20.5 10.7 88.2 18.1 9.0

United Kingdom & North America 159.3 21.1 17.1 191.5 21.4 19.5

Incoming & Asia 112.1 20.3 12.0 117.0 18.1 11.9

Business Travel 167.1 100.0 17.9 193.2 100.0 19.7

Total 931.5 28.3 100.0 980.8 26.2 100.0

Breakdown of Gross Profit by Activity

2003 % of % 2002 % of %

CHF million turnover of total CHF million turnover of total

Leisure Travel 681.8 25.1 73.2 701.8 22.9 71.6

Incoming 82.6 17.6 8.9 85.8 15.9 8.7

Business Travel 167.1 100.0 17.9 193.2 100.0 19.7

Total 931.5 28.3 100.0 980.8 26.2 100.0


7. Personnel Expense

Kuoni Group

Personnel expense fell by a total of – 2.8%, with – 0.1% due to currency movements and +0.3% attributable to

acquisitions.

2003 2002 Change

CHF 1000 CHF 1000 in %

Salaries 365 156 380 317 –4.0

Pension costs 43 392 40 547 +7.0

Other social security costs 34 943 35 444 –1.4

Other personnel costs 20 730 21 160 –2.0

Total 464 221 477 468 –2.8

Number of Staff (full-time equivalents) by Business Area

Average number Number of staff

of staff Change at year-end Change

2003 2002 in % 2003 2002 in %

Switzerland 1 610 1 680 –4.2 1 531 1 634 –6.3

Scandinavia 652 687 –5.1 648 678 –4.4

Europe 886 921 –3.8 902 925 –2.5

United Kingdom & North America 830 823 +0.8 849 847 +0.2

Incoming & Asia 2 283 2 115 +7.9 2 312 2 147 +7.7

Business Travel 1 645 1 654 –0.5 158 1 679 –90.6

Corporate 25 27 –7.4 25 28 –10.7

Total 7 931 7 907 +0.3 6 425 7 938 –19.1

Average number of staff: average number of full-time and part-time staff converted to full-time equivalents.

Number of staff at year-end: number of full-time and part-time staff at year-end converted to full-time equivalents.

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Defined Benefit Retirement Plans

The Group incurs costs for retirement benefit plans in accordance with prevailing regulations in the countries in which

it operates. The benefits paid to insured employees are generally calculated as a percentage of their expected final salary

prior to retirement.

The following assumptions (weighted averages) used in actuarial calculations were adjusted to take account of the

economic situation in the country concerned:

2003 2002

Discount rate 3.80% 3.70%

Return on investment 4.60% 4.50%

Salary increases 1.70% 1.80%

Where funded retirement plans exist, the costs of occupational pension coverage are transferred in accordance

with the legislation in force in the respective country. The surpluses/deficits of the major defined benefit plans are

shown below:

CHF 1000 31 Dec 2003 31 Dec 2002

Plan assets of independent retirement plans at fair value 317 567 309 165

Projected benefit obligations (PBO) of the funded pension plans –290 153 –303 264

Surplus 27 414 5 901

Projected benefit obligations (PBO) of the unfunded pension plans –1 698 –9 374

Cumulative, unrecognised actuarial and investment loss (net) 24 548 63 242

Balance sheet amount 50 264 59 769

The projected benefit obligations of the unfunded pension plans relate to German companies. The retirement plans do

not hold shares of Kuoni Travel Holding Ltd., Zurich.

The balance sheet amount (prepaid pension cost and long-term provisions recognised in the balance sheet; net) has

developed as follows:

CHF 1000 2003 2002

Balance sheet amount (net) 1 January 59 769 58 584

Translation differences –723 –80

Pension expenses –13 465 –6 741

Employer’s contributions 11 451 11 690

Benefits paid out 182 157

Unrecognised additional employer contributions –119 –3 841

Changes in the group of consolidated companies –6 831 0

Balance sheet amount (net) 31 December 50 264 59 769

The above stated actuarially determined retirement benefit costs are set against the Group’s contributions to retirement

benefit plans.


Kuoni Group

In previous years, the Group had considerable surpluses at its disposal. The net pension assets of CHF 50.3 million

(2002: CHF 59.8 million) recorded in the balance sheet pursuant to IAS 19 are carried as other financial assets

(CHF 52.0 million, 2002: CHF 69.2 million) or as long-term provisions (CHF 1.7 million, 2002: CHF 9.4 million).

Gains were made on the investment of plan assets primarily due to the improved stock market performance last year,

increasing the surplus of the funded retirement plans to CHF 27.4 million as of 31 December 2003. The recorded pension

assets of CHF 52.0 million are nevertheless only partially covered by the corresponding surpluses. To the extent that

the cumulative, actuarial losses exceed 10% of the pension benefit obligations or the plan assets, they are charged to the

income statement on a straight-line basis over the residual period of service pursuant to the provisions of IAS 19. In the

2003 financial year, the amortisation of actuarial losses amounted to CHF 6.7 million.

The following table gives a calculation of the pension costs of the Group’s major defined benefit plans:

CHF 1000 2003 2002

Current service cost 16 435 15 136

Interest on obligation 12 640 12 800

Expected return on plan assets –15 951 –17 474

Amortisation of actuarial losses 6 746 2 429

Employees’ contributions –6 405 –6 150

Pension expenses 13 465 6 741

Unrecognised additional employer contributions 119 3 841

Recognised defined benefit plan costs 13 584 10 582

Other pension costs (defined contribution plans) 29 808 29 965

Total pension costs 43 392 40 547

In 2003, the actual return on plan assets amounted to CHF 29.5 million (2002: CHF –42.2 million).

8. Other Operating Expense

2003 2002 Change

CHF 1000 CHF 1000 in %

Rent and utilities 49 374 46 240 +6.8

Aircraft leasing 52 230 50 544 +3.3

Administrative and other expenses 121 297 123 613 –1.9

Total other operating expense 222 901 220 397 +1.1

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9. Depreciation

10. EBITA

Depreciation by Type of Asset

2003 2002 Change

CHF 1000 CHF 1000 in %

On buildings 4 031 4 641 –13.1

On aircraft and ships 16 273 17 382 –6.4

On other tangible fixed assets 27 017 28 932 –6.6

On intangible assets 4 948 5 904 –16.2

Total 52 269 56 859 –8.1

Depreciation by Business Area

2003 2002 Change

CHF 1000 CHF 1000 in %

Switzerland 28 509 31 953 –10.8

Scandinavia 1 351 1 317 +2.6

Europe 4 143 4 036 +2.7

United Kingdom & North America 6 072 6 545 –7.2

Incoming & Asia 5 240 5 618 –6.7

Business Travel 6 132 6 573 –6.7

Corporate 822 817 +0.6

Total 52 269 56 859 –8.1

Breakdown of EBITA by Business Area

2003 % of 2002 % of Change

CHF 1000 turnover CHF 1000 turnover in %

Switzerland 29 717 3.4 40 501 4.0 –26.7

Scandinavia 9 048 1.8 –14 192 –2.6 +163.4

Europe 8 288 1.7 3 859 0.8 +112.8

United Kingdom & North America 70 363 9.3 82 093 9.2 –14.3

Incoming & Asia 2 604 0.5 4 977 0.8 –48.0

Business Travel 1 921 1.1 21 852 11.3 –91.3

Corporate –19 574 n. a. –18 430 n. a. –5.4

Total 102 367 3.1 120 660 3.2 –15.2


Breakdown of EBITA by Activity

2003 % of 2002 % of Change

CHF 1000 turnover CHF 1000 turnover in %

Leisure Travel 117 598 4.3 114 881 3.7 +2.4

Incoming 2 422 0.5 2 357 0.4 +2.8

Business Travel 1 921 1.1 21 852 11.3 –91.3

Corporate –19 574 n. a. –18 430 n. a. –5.4

Total 102 367 3.1 120 660 3.2 –15.2

11. Amortisation of Goodwill

12. Financial Result

2003 2002 Change

CHF 1000 CHF 1000 in %

Switzerland 2 954 2 719 +8.6

Scandinavia 9 339 12 669 –26.3

Europe 3 489 3 295 +5.9

United Kingdom & North America 9 074 9 740 –6.8

Incoming & Asia 7 011 8 154 –14.0

Business Travel 9 364 9 070 +3.2

Total 41 231 45 647 –9.7

Financial Income

Financial income comprises income from securities amounting to CHF 1.0 million (2002: CHF 4.1 million), interest

income in the amount of CHF 15.4 million (2002: CHF 14.9 million), non-operational exchange differences of

CH 1.1 million (2002: CHF 2.5 million debit) as well as investment income from associates and third parties amounting

to CHF 0.5 million (2002: CHF 0.1 million).

Financial Expense

Kuoni Group

This position contains interest expense, the financial costs of the convertible bond and finance lease costs in the amount

of CHF 17.1 million (2002: CHF 16.7 million) as well as investment expenses relating to associates and third parties of

CHF 6.2 million (2002: CHF 11.7 million).

The financial costs of the convertible bond include the additional interest charge of CHF 4.9 million (2002: CHF 5.3 million)

and the reversal of the discount effect on the provision for onerous contracts (aircraft leasing) of CHF 2.5 million

(2002: CHF 3.3 million). Neither of these positions has an effect on cash.

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Annex

13. Income Taxes

CHF 1000 2003 2002

Current taxes 40 440 34 801

Deferred taxes 2 181 –236

Total 42 621 34 565

Tax expense can be broken down as follows:

CHF 1000 2003 2002

Tax expense at the average weighted group tax rate (net) 18 320 14 312

Non-tax-deductible expenses 6 978 7 949

Tax-free income –820 –4 839

Utilisation of tax loss carry-forwards, not recognised in the balance sheet –2 919 –1 979

Tax effect from current losses, not eligible for recognition as assets 21 675 27 228

Effect of changes in tax legislation 648 –4 617

Tax income for earlier periods –1 261 –3 489

Tax expense reported 42 621 34 565

Given the different taxable profits and losses reported by the subsidiaries, the weighted average tax rate of the Group

for the year under review is 17%. Non-tax-deductible expenses consist mainly of goodwill amortisation. The positive

effect last year of changes in tax legislation resulted primarily from tax relief at our US subsidiaries.

Depending on the country involved, distributions have varying tax consequences, the extent of which cannot be

estimated.

The Group has the following tax loss carry-forwards.Their positive tax effect is not recognised as an asset because the

probability of it being realised in the future is uncertain:

2003 2002

Expiring CHF 1000 CHF 1000

Up to 1 year 225 1 118

1 to 5 years 16 283 36 001

Over 5 years 37 907 31 376

Unlimited 232 147 263 800

Total 286 562 332 295

Positive tax effect (maximum) 91 581 115 365


14. Earnings per Share (EPS)

Kuoni Group

2003 2002

Basic earnings per registered share B in CHF 21.86 8.90

Net result in CHF million 64.6 26.2

Weighted average number of shares outstanding 2 957 496 2 946 926

Diluted earnings per registered share B in CHF 21.85 8.90

Theoretical net result assuming all options and conversion rights were exercised 64.6 n. a.

Weighted average number of shares after dilution 2 958 668 n. a.

The dilution effect is solely attributable to the outstanding options with a strike price below the average share price. The

convertible bond is not taken into account as its impact would be anti-dilutive.

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Annex

15. Schedule of Fixed Assets/Investments

Other Total Intan- Other

Land and Aircraft tangible tangible gible Investments financial

CHF 1000

Purchase cost

buildings and ships fixed assets fixed assets assets Goodwill in associates assets Total

1 January 2002 161 184 310 486 207 932 679 602 30 278 888 406 20 829 165 216 1 784 331

Additions 766 5 937 22 584 29 287 4 734 27 239 2 008 27 987 91 255

Disposals –128 –156 –28 471 –28 755 –7 332 0 –12 770 –21 482 –70 339

Translation differences

Changes in the group of

–3 491 –22 843 –8 412 –34 746 –1 270 –64 427 –287 –1 192 –101 922

consolidated companies

Purchase cost

0 0 2 006 2 006 3 879 0 0 93 5 978

31 December 2002 158 331 293 424 195 639 647 394 30 289 851 218 9 780 170 622 1 709 303

Whereof leasing 0 41 612 4 450 46 062 0 46 062

Purchase cost

1 January 2003 158 331 293 424 195 639 647 394 30 289 851 218 9 780 170 622 1 709 303

Additions 218 4 731 17 555 22 504 5 543 4 147 496 16 878 49 568

Disposals –1 525 –2 823 –22 434 –26 782 –5 619 –29 499 –5 624 –17 021 –84 545

Translation differences

Changes in the group of

–1 013 –13 011 1 013 –13 011 273 –25 217 –127 223 –37 859

consolidated companies

Purchase cost

0 0 –28 561 –28 561 –2 906 –104 174 –755 –16 271 –152 667

31 December 2003 156 011 282 321 163 212 601 544 27 580 696 475 3 770 154 431 1 483 800

Whereof leasing 0 36 922 0 36 922 0 36 922

The tangible fixed assets at present include non-cash-effective finance leases and capitalised lease incentives.

Following the conclusion of arbitration proceedings, the previous owner of Apollo Resor (since renamed Kuoni Scandinavia AB) granted

a backdated discount on the purchase price. This resulted in a CHF 29.5 million decrease in goodwill for 2003.


Kuoni Group

Other Total Intan- Other

Land and Aircraft tangible tangible gible Investments financial

CHF 1000

Accrued depreciation

buildings and ships fixed assets fixed assets assets Goodwill in associates assets Total

1 January 2002 52 384 70 907 127 639 250 930 22 303 366 033 0 8 500 647 766

Depreciation 4 641 17 382 28 932 50 955 5 904 45 647 0 0 102 506

Disposals –76 –156 –27 018 –27 250 –7 168 0 0 0 –34 418

Translation differences

Changes in the group of

–1 820 –5 904 –5 888 –13 612 –1 034 –28 239 0 0 –42 885

consolidated companies

Accrued depreciation

0 0 3 621 3 621 3 249 0 0 0 6 870

31 December 2002 55 129 82 229 127 286 264 644 23 254 383 441 0 8 500 679 839

Whereof leasing 0 21 140 1 654 22 794 0 22 794

Accrued depreciation

1 January 2003 55 129 82 229 127 286 264 644 23 254 383 441 0 8 500 679 839

Depreciation 4 031 16 273 27 017 47 321 4 948 41 231 0 0 93 500

Disposals –76 –2 823 –20 765 –23 664 –5 449 0 0 0 –29 113

Translation differences

Changes in the group of

–716 –3 509 503 –3 722 124 –11 979 0 0 –15 577

consolidated companies

Accrued depreciation

0 0 –20 426 –20 426 –2 121 –59 160 0 0 –81 707

31 December 2003 58 368 92 170 113 615 264 153 20 756 353 533 0 8 500 646 942

Whereof leasing 0 19 444 0 19 444 0 19 444

Net book value

31 December 2002 103 202 211 195 68 353 382 750 7 035 467 777 9 780 162 122 1 029 464

Whereof leasing 0 20 472 2 796 23 268 0 23 268

Net book value

31 December 2003 97 643 190 151 49 597 337 391 6 824 342 942 3 770 145 931 836 858

Whereof leasing 0 17 478 0 17 478 0 17 478

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Annex

Fire Insurance Values

CHF 1000 31 Dec 2003 31 Dec 2002

Buildings 170 386 169 733

Furniture, fixtures and equipment 147 948 200 969

Other Financial Assets

Other financial assets comprise minority shareholdings, loans and advances as well as prepaid pension cost of funded

pension plans (see note 7). Loans in the amount of CHF 31.6 million were made to associates (2002: CHF 30.7 million).

Capital Expenditure by Business Area

CHF 1000 2003 2002

Switzerland 12 822 11 056

Scandinavia 3 127 1 884

Europe 6 052 8 557

United Kingdom &North America 6 545 12 085

Incoming & Asia 4 417 24 855

Business Travel 704 5 308

Corporate and unallocated investments 15 901 27 510

Total 49 568 91 255

Investment Obligations

There are no significant investment obligations.

16. Cash and Cash Equivalents

CHF 1000 31 Dec 2003 31 Dec 2002

Cash holdings and bank current accounts 264 040 216 681

Time deposits and money market investments 293 957 328 155

Total 557 997 544 836

Cash and cash equivalents are mainly denominated in the following currencies:

CHF 1000 31 Dec 2003 31 Dec 2002

CHF 169 001 149 529

GBP 187 105 222 350

EUR 46 896 37 175

USD 95 463 74 076

Other 59 532 61 706

Total 557 997 544 836


17. Time Deposits and Securities

18. Accounts Receivable

CHF 1000 31 Dec 2003 31 Dec 2002

Money market investments and time deposits with a term exceeding 90 days 58 729 50 240

Bonds 0 0

Equities 0 0

Total 58 729 50 240

Time deposits are mainly denominated in the following currencies:

CHF 1000 31 Dec 2003 31 Dec 2002

CHF 0 30 000

GBP 15 418 0

EUR 402 957

USD 30 471 6 036

Other 12 438 13 247

Total 58 729 50 240

The average interest rates were:

2003 2002

CHF 0.7% 2.4%

GBP 3.7% 4.0%

EUR 2.2% 3.4%

USD 1.2% 1.6%

Accounts receivable contain open amounts due from clients with departure dates either before or on 31 December.

This balance includes a provision for doubtful debts amounting to CHF 19.2 million (2002: CHF 19.3 million).

No receivables are due from associates (2002: CHF 0.3 million).

19. Shareholders’ Equity

Composition of Share Capital

Type of share Registered share A Registered share B Total

Number 1000 000 3 000 000 4 000 000

Par value in CHF 10 50 –

Share capital

CHF 10 000 000 150 000 000 160 000 000

in% 6.25 93.75 100.00

Voting rights

Kuoni Group

Number 1000 000 3 000 000 4 000 000

in% 25.00 75.00 100.00

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Annex

Conditional Capital

Conditional capital issuable via the exercise of conversion rights and/or warrants linked to bonds or similar debt issued

by Kuoni Travel Holding Ltd. or any of its subsidiaries in the domestic or international capital markets and/or via the

exercise of options granted to shareholders amounts to a maximum of CHF 19.2 million, with a further maximum of

CHF 4.8 million reserved for employee stock option plans.

Authorised Capital

There is no authorised capital.

Principal Shareholders

The following principal shareholders are known to us:

Kuoni and Hugentobler Foundation, Zurich

31 December 2003: 1000 000 registered shares A = 25.00% of the voting rights

13 600 registered shares B = 0.34% of the voting rights

31 December 2002: 1000 000 registered shares A = 25.00% of the voting rights

13 600 registered shares B = 0.34% of the voting rights

Silchester International Investors Limited, London

31 December 2003: 302 072 registered shares B = 7.55% of the voting rights

31 December 2002: 262 471 registered shares B = 6.56% of the voting rights

Treasury Shares

CHF Book value

Held on 1 January 2002 255 043 registered shares B at par value CHF 50 12 752 150

Sold 4 225 registered shares B at par value CHF 50 –211 250

Held on 31 December 2002 250 818 registered shares B at par value CHF 50 12 540 900

Sold 11 928 registered shares B at par value CHF 50 –596 400

Held on 31 December 2003 238 890 registered shares B at par value CHF 50 11 944 500

Of these, 216 462 registered shares B are set aside as cover for the 1% convertible bond 2000–2005. The remaining

treasury shares are reserved for the share purchase and stock option plans of the Executive Board and Management. The

treasury shares sold in 2003 and 2002 consist of the registered shares B received by the Board of Directors, Executive

Board and Management.


Options

Kuoni Group

A performance-related bonus plan exists for the members of the Group Executive Board. In addition to a cash payment

component of 50% to 58% of the bonus, 40% of the bonus must be taken in shares, using the taxable value of the

share at the close of the financial year, while 2% to 10% of the bonus must be taken in options. The combined option

and exercise price is also equal to the taxable value of the share at the close of the financial year. The taxable value is

charged to personnel expense. Options are financed by the members of the Group Executive Board themselves.

Number of options 1999 2000 2001 2002 2003 Total

Held on 1 January 2002 9 329 6 244 4 734 20 307

Issued 2 089 2 089

Exercised 0

Lapsed 0

Held on 31 December 2002 9 329 6 244 4 734 2 089 22 396

Issued 6 326 6 326

Exercised –1 494 –1 494

Lapsed –1 882 –1 882

Held on 31 December 2003 7 447 6 244 4 734 2 089 4 832 25 346

Type of options 1) 2) Blockage period Exercise price Exercise period

Issued 1999 no blockage period CHF 507.79 until 31 December 2005

Issued 2000 no blockage period CHF 600.55 until 31 December 2006

Issued 2001 no blockage period CHF 621.90 until 31 December 2007

Issued 2002 no blockage period CHF 400.05 until 31 December 2006

Issued 2003 no resp. 1–2 years CHF 234.90 until 31 December 2007

1) Secured by treasury shares of Kuoni Travel Holding Ltd.

2) Subscription ratio one-for-one.

The conversion periods for options issued in the years 1999 to 2001 were extended by two years. To compensate for

this theoretical added value, all the options of the respective holders were capped. If the options are exercised at

a higher share price, the exercise price increases accordingly.

Retained Earnings

Only a limited amount of retained earnings are available for distribution:

– the free reserves of the holding company subsequent to the approval of a resolution to this effect;

– the reserves of subsidiaries in accordance with local fiscal and legal provisions provided they are distributed

first to the parent company.

Translation Differences

Translation differences in the year under review resulted in a charge of CHF 21.4 million (2002: CHF 44.2 million)

against shareholders’ equity. The largest translation differences in 2003 came from the conversion of the assets and

liabilities of group companies reporting in USD and from intra-group loans of an equity capital nature denominated

in USD.

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Hedging Reserve

The hedging reserve corresponds to the positive or negative fair value of currency and fuel contracts classified as a

cash flow hedge. In the year under review, CHF 26.1 million (2002: CHF 22.7 million) was charged to the hedging

reserve, while the amount of CHF 23.1 million (2002: CHF 4.6 million) was taken out of equity.

Fair Value Reserve

Fair value adjustments of CHF 1.2 million (2002: CHF 1.7 million debit) were charged to the fair value reserve for financial

assets available for sale in the year under review, while realised gains in the amount of CHF 0.1 million (2002:

CHF 0.3 million) were taken out of equity and credited to the income statement.

20. Long-term Provisions

Long-term provisions have changed as follows:

Income Employee Direct Onerous

CHF 1000 taxes benefits costs contracts Other Total

Provisions as at 1 January 2003 2 632 20 491 15 493 64 457 3 196 106 269

Additions 1 082 3 535 174 2 451 703 7 945

Used –2 010 –1 497 –3 905 –17 447 –1 276 – 26 135

Released 0 –2 465 –1 291 0 –9 –3 765

Translation differences 9 1 341 17 0 218 1 585

Changes in the group of consolidated companies –25 –12 033 145 0 0 –11 913

Provisions as at 31 December 2003 1 688 9 372 10 633 49 461 2 832 73 986

The provisions for retirement benefit obligations relate to retirement benefit obligations for unfunded plans

(CHF 1.7 million, 2002: CHF 9.4 million) as well as to termination benefits to be paid out in accordance with the law

and other retirement benefit obligations (CHF 7.7 million, 2002: CHF 11.1 million).

Provisions for direct costs include amounts payable to service providers which are uncertain as to their due dates or size.

They also include litigation.

The provision for onerous contracts covers the loss anticipated in connection with excess flight capacity at the

Scandinavian charter airline Novair resulting from the leasing agreement for an Airbus A330. The aircraft could only be

leased occasionally to other airlines for certain periods and at the current low rates prevailing in the market. The

leasing agreement runs until autumn 2007.

Fixed costs of CHF 17.4 million (2002: CHF 19.4 million) for this aircraft were charged to the provision for onerous contracts

in the year under review. The reversal of the discount effect resulted in an increase of the provision, which was charged

to financial expense.


21. Deferred Taxes

22. Financial Debts

The provisions for deferred taxes have changed as follows:

Kuoni Group

CHF 1000 2003 2002

Deferred taxes as at 1 January 46 116 54 470

Changes recognised in the income statement 2 181 –236

Changes not recognised in the income statement –1 334 –6 519

Translation differences –837 –1 599

Changes in the group of consolidated companies –5 668 0

Deferred taxes as at 31 December 40 458 46 116

On the balance sheet date, cumulative deferred taxes recognised directly in shareholders’ equity amounted to

CHF –9.1 million (2002: CHF –7.7 million).

The deferred taxes derive from revaluations of the following balance sheet items:

CHF 1000 31 Dec 2003 31 Dec 2002 Change

Current assets 90 2 767 –2 677

Tangible fixed assets 13 542 18 493 –4 951

Other financial assets 20 677 22 547 –1 870

Prepaid expenses and provisions 1 520 –830 +2 350

35 829 42 977 –7 148

Tax effect on retained earnings of subsidiary companies 4 629 3 139 +1 490

Total 40 458 46 116 –5 658

CHF 1000 31 Dec 2003 31 Dec 2002

Bank debts 93 630 109 419

Convertible bond 173 034 168 092

Financial leases 19 406 23 191

Other 1 441 7 367

Total 287 511 308 069

The financial debts are due as follows:

CHF 1000 31 Dec 2003 31 Dec 2002

2003 19 263

2004 14 632 16 159

2005 232 838 227 879

2006 81 0

Thereafter or with no defined repayment date 39 960 44 768

Total 287 511 308 069

The figures quoted above for financial debts must be interpreted with caution due to the early repayment of bank debts

totalling CHF 70.2 million in February 2004.

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23. Bank Debts

The financial debts are denominated in the following currencies:

CHF 1000 31 Dec 2003 31 Dec 2002

CHF 263 234 272 297

EUR 4 074 9 866

USD 19 405 22 079

Other 798 3 827

Total 287 511 308 069

The average interest rates were:

2003 2002

CHF 3.8% 3.9%

EUR 3.0% 3.6%

USD 2.4% 2.6%

The bank debts primarily comprise loans to finance two Airbus A320-200 for Edelweiss Air. In this aircraft financing

transaction, Kuoni has agreed loan covenants with the bank (undertaking to maintain certain key financial data). The

financial debts also include the finance lease for two ships chartered by Intrav and the debt component of the convertible

bond. In February 2000, Kuoni Travel Holding Ltd. issued a 1% convertible bond in the amount of CHF 204.8 million,

convertible into registered shares B. The bond will run for 5 years until 2 February 2005. The conversion price is

CHF 946.19 per registered share B, resulting in a conversion ratio of 5.2843 registered shares per convertible bond of

par value CHF 5 000. The effective rate of interest applied remains unchanged at 3.52%.

In the year 2002, Kuoni bought back part of the convertible bond in the market for a nominal CHF 26.2 million. The

amount outstanding is thus nominal CHF 178.6 million.

Bank debts consist of the debit balances on the bank accounts of subsidiaries on the balance sheet date.

24. Accounts Payable and Accrued Expenses

The reported amount contains taxes owed but not yet paid amounting to CHF 41.5 million (2002: CHF 53.9 million)

and finance lease liabilities amounting to CHF 0.2 million (2002: CHF 1.9 million).


25. Segment Assets and Liabilities by Business Area

31 Dec 2003 31 Dec 2002 Change

Assets CHF 1000 % CHF 1000 % in %

Switzerland 466 347 30.5 468 545 25.9 –0.5

Scandinavia 202 129 13.2 272 606 15.0 –25.9

Europe 113 905 7.4 116 997 6.4 –2.6

United Kingdom & North America 507 507 33.2 520 964 28.8 –2.6

Incoming & Asia 233 810 15.3 251 887 13.9 –7.2

Business Travel 5 817 0.4 180 443 10.0 –96.8

1 529 515 100.0 1 811 442 100.0 –15.6

Corporate and unallocated assets 310 057 145 311

Total assets 1 839 572 1 956 753

31 Dec 2003 31 Dec 2002 Change

Liabilities CHF 1000 % CHF 1000 % in %

Switzerland 176 294 22.2 184 396 20.1 –4.4

Scandinavia 156 803 19.8 194 488 21.2 –19.4

Europe 118 796 15.0 116 703 12.7 +1.8

United Kingdom & North America 203 411 25.7 214 750 23.5 –5.3

Incoming & Asia 122 704 15.5 124 853 13.6 –1.7

Business Travel 14 341 1.8 81 187 8.9 –82.3

792 349 100.0 916 377 100.0 –13.5

Corporate and unallocated liabilities 432 409 454 657

Total liabilities 1 224 758 1 371 034

Kuoni Group

The reported assets and liabilities of Business Travel as at 31 December 2003 include those of the German leisure travel

activity, which remains with the Group after the sale of BTI Central Europe.

KUONI Financial Report 2003

35


36

Annex

26. Derivative Financial Instruments

In the normal course of its business, the Group is exposed to market, credit, interest rate, currency and fuel price risks.

To manage these risks, various derivative financial instruments are used. While these are subject to the risk of

market rates changing subsequent to acquisition, such changes are generally offset by opposite effects on the items

being hedged.

Credit Risk

Exposure to credit risk is monitored on an ongoing basis and covered by appropriate value adjustments on accounts

receivable and prepayments made.

The counterparties to transactions in securities, derivative financial instruments and cash are carefully selected financial

institutions. Given their high credit ratings, management does not expect any counterparty to fail to meet its obliga-

tions. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, except for

foreign currency options.

Interest Rate Risk

The Group is exposed to interest rate risk as a result of movements in interest rates in the capital market. Generally, all

long-term financial liabilities are fixed-interest bearing liabilities. Consequently, changes in interest rates can result in fluc-

tuations in the fair value of such financial liabilities. This would not have any impact on net result or future cash flow,

however. No such derivatives were outstanding as at the balance sheet date.

Foreign Currency Risk

The Group incurs foreign currency risk primarily on purchases and borrowings denominated in a currency other than

the measurement currency of the respective subsidiary. Significantly smaller is the amount of sales denominated in

a currency other than the measurement currency of the respective subsidiary. On a consolidated basis, the Group is also

exposed to currency fluctuations between the Swiss franc and the local measurement currencies of its subsidiaries.

The major currencies giving rise to currency risk are the euro, pound sterling and US dollar.

The Group uses forward exchange contracts, currency options and swaps to hedge its foreign currency risk. Most hedging

contracts have maturities of up to 12 months. Where necessary, the forward exchange contracts are rolled over at

maturity. The Group does not hedge for its net investment in foreign entities and the related foreign currency translation

of local earnings.

The currency hedging contracts outstanding on the balance sheet date are summarised in the following table. Gains and

losses on hedge contracts qualifying as cash flow hedges are expected to be removed from shareholders’ equity within

12 months. Changes in the fair value of forward exchange contracts, currency options and swaps that economically

hedge monetary assets and liabilities in foreign currencies and for which no hedge accounting is applied are recognised

in the income statement. Both the changes in fair value of the forward contracts and the foreign exchange gains and

losses relating to the monetary items are reported under direct costs.


Fuel Price Changes

The Group’s two airlines, Edelweiss and Novair, are exposed to changes in fuel prices. They use standardised forward

fuel contracts, which are to be settled net. Accordingly, these contracts qualify as cash flow hedges and are summarised

in the table below.

Derivative Financial Instruments

Positive Negative Fair

fair fair Contract values Contract

values values values (net) values

CHF 1000

Cash flow hedges

Currency-related forward contracts,

31 Dec 2003 31 Dec 2003 31 Dec 2003 31 Dec 2002 31 Dec 2002

swaps and options 9 575 –47 630 1 076 089 –33 562 797 543

Commodity options (aviation fuel) 3 702 0 24 335 3 622 31 961

Other derivative financial instruments

Currency-related forward contracts,

swaps and options 1 346 –12 948 85 012 –4 168 117 677

Total 14 623 –60 578 1 185 436 –34 108 947 181

The fair value is the (higher or lower) value at which a derivative contract could be concluded on the balance sheet date.

The fair values calculated on the balance sheet date should not be looked at in isolation but together with the calculated

value of anticipated future transactions and hence in the context of the aggregate reduction in the Group’s exposure to

currency movements. Positive or negative fair values of derivative financial instruments are carried on the balance sheet

under other receivables or accounts payable.

Derivative financial instruments by currency:

Positive Negative Fair

fair fair Contract values Contract

values values values (net) values

CHF 1000 31 Dec 2003 31 Dec 2003 31 Dec 2003 31 Dec 2002 31 Dec 2002

EUR 5 904 –1 768 340 002 289 253 407

USD 2 334 –49 063 656 274 –34 687 499 122

THB 54 –934 21 052 –2 641 26 992

Other currencies 2 629 –8 813 143 773 –691 135 699

Commodity options (aviation fuel) 3 702 0 24 335 3 622 31 961

Total 14 623 –60 578 1 185 436 –34 108 947 181

Maturities of the derivative financial instruments:

Kuoni Group

Positive Negative Fair

fair fair Contract values Contract

values values values (net) values

CHF 1000 31 Dec 2003 31 Dec 2003 31 Dec 2003 31 Dec 2002 31 Dec 2002

2003 –34 113 938 839

2004 14 240 –56 639 1 146 553 5 8 342

2005 383 –3 939 38 883 0 0

2006 0 0 0

Total 14 623 –60 578 1 185 436 –34 108 947 181

KUONI Financial Report 2003

37


38

Annex

27. Free Cash Flow

CHF 1000 2003 2002

Cash flow from operating activities 74 368 159 191

Purchase of tangible fixed assets –22 504 –27 814

Purchase of intangible assets –5 543 –4 734

Disposal of tangible fixed assets 3 380 2 267

Free cash flow 49 701 128 910

28. Additional Information on Cash Flow Statement

29. Related Parties

CHF 1000 2003 2002

Interest and dividends received 15 637 14 966

Interest paid –9 800 –8 242

Income taxes paid –50 148 –24 749

The term “related parties” refers to Directors, members of the Group Executive Board and major shareholders as well as

companies controlled by these parties. Transactions with related parties are priced on an arm’s length basis.

Kuoni and Hugentobler Foundation, Zurich

In the interest of the company, Kuoni Travel Holding Ltd. has pledged time deposits as security to the bank in the

amount of CHF 15.4 million to cover a bank loan to the Kuoni and Hugentobler Foundation. Pursuant to an agreement

between the parties, which remains in effect until 30 December 2005, the following assets of the Kuoni and Hugentobler

Foundation serve as collateral for this business transaction:

1000 000 registered shares A of Kuoni Travel Holding Ltd., Zurich, with a par value of CHF 10 per share

13 600 registered shares B of Kuoni Travel Holding Ltd., Zurich, with a par value of CHF 50 per share

These shares pledged as security to Kuoni Travel Holding Ltd. have been deposited with the bank. In the event that the

closing quotation of the registered share B on the SWX Swiss Exchange (or a successor exchange) falls below CHF 100

per registered share B, Kuoni Travel Holding Ltd. shall be authorised to exercise a call option on this pledge and to

realise the pledged shares in the open market (placement or share repurchase). The exercise of the call option as well

as the realisation of the pledged shares lie within the authority of the Board of Directors of Kuoni Travel Holding Ltd.

At a stock market price of CHF 100 per registered share B and an assumed proportional price of CHF 20 per registered

share A (without any surplus value for voting rights), the value of the shares pledged as security amounts to a total

of CHF 21.4 million. For providing the pledged collateral, Kuoni Travel Holding Ltd. receives a commission at market rate

of 0.2% p.a.


On the basis of the share price of CHF 414 for the registered share B at the end of 2003, the theoretical value (registered

share A converted at the proportional price of registered share B) of the pledged shares totals CHF 88.4 million. The

pledged shares equal 25.3% of the voting rights and 6.7% of the share capital. The pledging of the shares does not in

any way impact the shareholder rights (voting right, dividend right, etc.) of the Kuoni and Hugentobler Foundation.

Other Related Parties

Transactions with related parties are priced on an arm’s length basis. In the year under review the sales volume of the

Kuoni Group to associated companies amounted to CHF 52.0 million (2002: CHF 48.9 million), while purchases from

associated companies came to CHF 12.9 million (2002: CHF 16.5 million). Accounts receivable and payable and loans

are reported in the relevant balance sheet positions. Interest on loans is charged at market rates. Profits distributed by

associates amounted to CHF 0.2 million (2002: CHF 0.1 million).

30. Contingent Liabilities, Assets Pledged

Kuoni Group

CHF 1000 31 Dec 2003 31 Dec 2002

Contingent liabilities to associates 233 3 507

Contingent liabilities to third parties 42 309 9 243

Assets pledged 194 920 212 952

The contingent liabilites to third parties consist of exclusive rights held by subsidiaries and secured via bank guarantees

(CHF 6.2 million, 2002: CHF 9.2 million), as well as sureties and guarantees for the sold business division BTI Central

Europe (CHF 36.1 million). The former liabilities will cease to apply in 2006 at the latest, the latter have in the meantime

been transferred.

The amount of assets pledged was primarily used to secure a bank loan for two of the Edelweiss Airbus A320-200 as

well as the finance lease of two ships chartered by Intrav. This item also contains a time deposit in the amount of

CHF 15.4 million pledged to the bank as security for a bank loan to the Kuoni and Hugentobler Foundation (see note 29).

KUONI Financial Report 2003

39


40

Annex

31. Leasing Liabilities

Finance Lease

Principal Interest

CHF 1000 31 Dec 2003 31 Dec 2003 31 Dec 2003 31 Dec 2002

Liabilities payable up to 1 year 185 391 576 2 515

Liabilities payable 1 to 5 years 742 1 525 2 267 3 429

Liabilities payable over 5 years 18 664 6 935 25 599 34 630

Total 19 591 8 851 28 442 40 574

Interest –8 851 –15 469

Total leasing liabilites recognised

in the balance sheet at present value 19 591 25 105

The above leasing liabilities primarily relate to two ships chartered by Intrav. The leasing agreements are denominated

in USD, with the bulk of capital being repaid upon expiry of the agreements.

Operating Lease

CHF 1000 31 Dec 2003 31 Dec 2002

Liabilities payable up to 1 year 77 240 88 230

Liabilities payable 1 to 5 years 220 667 212 354

Liabilities payable over 5 years 38 556 57 961

Total leasing liabilites recognised in the balance sheet 336 463 358 545

Amount recognised in the income statement in current year 89 858

This position mainly relates to leasing liabilities of Edelweiss and Novair for certain aircraft and to lease contracts for

buildings.

32. Liabilities to Pension Funds

CHF 1000 31 Dec 2003 31 Dec 2002

Total liabilities of the Group to pension funds 162 155

33. Post-Balance-Sheet Events

The consolidated financial statements of the Kuoni Group were approved by the Board of Directors on 17 March 2004.

Final approval is subject to acceptance by the General Meeting of Shareholders, which will take place on 28 April 2004.

The selling price for BTI Central Europe, recognised in the balance sheet under other assets, was paid in full on

30 January 2004.

The Kuoni Group prematurely repaid bank debts amounting to CHF 70.2 million on 17 February 2004.

No events have occurred since 31 December 2003 that would either necessitate an adjustment to the carrying values of

the Group’s assets and liabilities or need to be disclosed here.


42

Annex

Principal Subsidiaries and Associates

Europe

Switzerland

Paid-in Investment Consoli-

Activity Currency share capital in % dation

Kuoni Reisen AG, Zurich L/I CHF 7 000 000 100 C

Edelweiss Air AG, Zurich-Airport L CHF 3 500 000 100 C

Manta Reisen AG, Zurich L CHF 50 000 100 C

PRZ AG, Zurich L CHF 200 000 100 C

Railtour Suisse SA, Berne L CHF 1 600 000 93 C

TUI (Suisse) Holding AG, Zurich L CHF 3 600 000 49 E

Brava Holiday-Club AG, Berne L CHF 1 500 000 35 E

Austria

Reisebüro Kuoni Ges.m.b.H., Vienna L EUR 36 336 100 C

Kuoni Incoming Services Ges.m.b.H.& Co. KG, Vienna I EUR 218 382 100 C

Restplatzbörse Ges.m.b.H., Vienna L EUR 36 336 100 C

Denmark

Kuoni Danmark A/S, Virum L DKK 6 000 000 100 C

Kuoni Scandinavia AB, Copenhagen L DKK 0 100 C

Kuoni Travel (Scandinavia) A/S, Copenhagen I DKK 600 000 100 C

France

Voyages Kuoni SA, Paris L/I EUR 507 000 100 C

Vacances Fabuleuses SA, Paris L EUR 457 000 100 C

Germany

Kuoni Reisen GmbH, Friedrichshafen L EUR 511 292 100 C

Greece

Hellenic Tours SA, Athens I EUR 1 660 000 100 C

Hellenic Island Services Heraklion Ltd., Heraklion I EUR 240 000 50 C

Hellenic Island Services Rhodos Ltd., Rhodes I EUR 88 041 55 C


Europe

Hungary

Kuoni Group

Paid-in Investment Consoli-

Activity Currency share capital in % dation

Kuoni Incoming Services Utazási Iroda Kft., Budapest I HUF 3 000 000 100 C

Italy

Kuoni Gastaldi Tours S.p.A., Genoa L EUR 1 200 000 100 C

Kuoni Incoming S.p.A., Rome I EUR 1 548 000 100 C

Netherlands

Kuoni Travel Nederland BV, Amsterdam L EUR 226 890 100 C

Travel Keys BV, Amsterdam L EUR 18 303 100 C

Kuoni Incoming (Benelux) BV, Amsterdam I EUR 55 815 100 C

Kuoni Finance BV, Amsterdam EUR 20 000 100 C

Norway

Kuoni Scandinavia AB, Oslo L NOK 0 100 C

Spain

Viajes Kuoni SA, Madrid L/I EUR 2 764 600 100 C

Sweden

Kuoni Scandinavia AB, Stockholm L SEK 23 000 000 100 C

Nova Airlines AB, Stockholm L SEK 15 000 000 100 C

United Kingdom

Kuoni Travel Ltd., Dorking L/I GBP 1 500 000 100 C

The House of Specialists, London L GBP 5 000 000 100 C

Voyages Jules Verne Ltd., London L GBP 100 100 C

Alp Air Holdings Ltd., Jersey CHF 95 000 000 100 C

Activities:

L = Leisure

I = Incoming

Consolidation:

C = consolidated

E = consolidated using the equity method

KUONI Financial Report 2003

43


44

Annex

Overseas

British Virgin Islands/Caribbean

Paid-in Investment Consoli-

Activity Currency share capital in % dation

Kuoni (Caribbean Hotels) Ltd., Tortola L USD 2 000 000 100 C

Hawksbill Ltd., Antigua L XCD 6 730 839 100 C

Discovery Bay Beach Hotel, Barbados L BSD 50 000 100 C

Hong Kong

P&O Travel Ltd., Hong Kong L HKD 4 800 000 100 C

India

Kuoni Travel (India) Ltd., Mumbai L/I INR 83 500 000 100 C

Fastrack Visa Facilitation Services Pvt. Ltd., Mumbai L INR 5 000 000 100 C

Japan

Kuoni Japan Kabushika Kaisha, Tokyo I JPY 50 000 000 100 C

Kenya

Private Safaris (E.A.) Ltd., Nairobi I KES 62 500 000 80 C

Korea

Kuoni Travel (Korea) Ltd., Seoul I KRW 100 000 000 100 C

Mauritius

Kuoni Asian Investments (Mauritius) Ltd., Port Louis USD 1 000 000 100 C

Nepal

Sita World Travel (Nepal) Pvt. Ltd., Kathmandu I NPR 2 250 000 50 E

Singapore

Kuoni Travel (Singapore) Ltd., Singapore I SGD 100 000 100 C


Overseas

South Africa

Kuoni Group

Paid-in Investment Consoli-

Activity Currency share capital in % dation

Kuoni Private Safaris (Pty) Ltd., Cape Town I ZAR 500 000 100 C

Thailand

P&O Regale Travel Co Ltd., Bangkok L THB 2 000 000 25 E

Kuonissimo (Thailand) Ltd., Bangkok I THB 2 000 000 49 C

USA

Kuoni Holding Delaware, Inc., Wilmington USD 1 100 C

Intrav, Inc., St. Louis I USD 0.01 100 C

AlliedTPro, Inc., New York I USD 50 000 100 C

Kuoni Travel (Atlanta) Inc., Atlanta I USD 50 000 100 C

Activities:

L = Leisure

I = Incoming

Consolidation:

C = consolidated

E = consolidated using the equity method

KUONI Financial Report 2003

45


46

Report of the Group Auditors

Report of the Group Auditors to the General Meeting of Shareholders of Kuoni Travel Holding Ltd., Zurich.

As auditors of the Group, we have audited the consolidated financial statements of Kuoni Travel Holding Ltd., Zurich for the year ended

31 December 2003, as set out on pages 6 to 45 of this report. The financial statements of the UK and certain other subsidiaries included

in the consolidated financial statements were audited by other auditors.

These consolidated financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on

these consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional

qualification and independence.

Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession and with the International Standards

on Auditing (ISA), which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated

financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts

and disclosures in the consolidated financial statements. We have also assessed the accounting principles used, significant estimates

made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements give a true and fair view of the financial position, the results of operations and the

cash flows in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.

We recommend that the consolidated financial statements submitted to you be approved.

KPMG Fides Peat

Günter Haag Lukas Marty

Swiss Certified Accountant Swiss Certified Accountant

Auditor in Charge

Zurich, 17 March 2004


48

Six-Year Summary of Key Data

CHF million 2003 2002 2001 2000 1999 1998

Turnover 3 295 3 739 4 065 4 113 3 515 2 896

Switzerland 870 1 005 1 058 1 035 937 1) 869 1)

Scandinavia 501 554 623 191 153 1) 40 1)

Europe 488 486 569 970 914 1) 863 1)

United Kingdom & North America 756 893 1 030 1 091 918 1) 599 1)

Incoming & Asia 551 647 642 675 425 1) 367 1)

Business Travel 167 193 186 184 168 1) 158 1)

EBITA 102.4 120.7 –19.1 174.7 152.8 118.4

Switzerland 29.7 40.5 46.2 47.6 38.5 31.9

Scandinavia 9.0 –14.2 –130.9 –8.8 –1.1 1.1

Europe 8.3 3.9 –18.3 5.5 18.2 15.6

United Kingdom & North America 70.4 82.1 86.0 106.7 92.2 72.6

Incoming & Asia 2.6 5.0 8.9 21.7 4.5 1.3

Business Travel 1.9 21.9 10.6 19.2 15.5 9.6

Corporate –19.5 –18.5 –21.6 –17.2 –15.0 –13.7

EBIT 61.1 75.0 –279.5 134.4 122.7 100.6

Net result 64.6 26.2 –281.7 115.1 87.1 99.8

Investments in tangible and intangible assets 28.0 34.0 47.7 87.2 168.9 111.9

Depreciation 52.3 56.9 66.4 54.7 42.5 28.2

Cash flow (net cash from operating activities) 74.4 159.2 43.8 189.9 99.3 159.4

Non-current assets 837 1 030 1 137 1 242 922 537

Current assets 1 003 927 843 1 009 884 866

Shareholders’ equity 613 578 614 920 700 558

Equity ratio in % 33.3 29.5 31.1 40.9 38.8 39.8

Long-term liabilities 402 460 497 407 284 147

Short-term liabilities 823 911 860 913 799 677

Total assets 1 840 1 957 1 980 2 251 1 806 1 403

Invested capital 2) 1 194.3 1 197.7 1 254.9 913.7 526.8 320.0

ROIC in % 3) 5.6 7.1 –2.3 14.5 21.1 30.3

Average number of personnel (FTE) 7 931 7 907 8 301 7 669 6 528 6 008

Switzerland 1 610 1 680 1 820 1 839 1 714 1 690

Scandinavia 652 687 751 218 140 132

Europe 886 921 995 1 235 1 100 1 062

United Kingdom & North America 830 823 919 952 964 742

Incoming & Asia 2 283 2 115 2 143 1 848 1 101 991

Business Travel 1 645 1 654 1 647 1 550 1 484 1 366

Corporate 25 27 26 27 25 25


Kuoni Group

CHF 2003 2002 2001 2000 1999 1998

Cash flow (net cash

from operating activities)

Per registered share A 5.03 10.80 2.98 12.94 6.93 4) 9.96 4)

Per registered share B 25.15 54.02 14.88 64.72 34.66 4) 49.82 4)

Net result

Per registered share A 4.37 1.78 –19.15 7.85 6.08 4) 6.24 4)

Per registered share B 21.86 8.90 –95.74 39.24 30.42 4 ) 31.19 4 )

Shareholders’ equity

Per registered share A 41.45 39.20 41.76 62.73 48.92 4) 34.91 4)

Per registered share B 207.24 196.00 208.78 313.65 244.59 4) 174.54 4)

Dividend

Per registered share A 1.40 5) 0.60 0 2.40 2.20 4) 2.20 4)

Per registered share B 7.00 5 ) 3.00 0 12.00 11.00 4 ) 11.00 4 )

Total dividend payout 20 727 770 6) 8 873 376 0 35 339 484 32 293 030 35 200 000

Payout ratio 32.1% 6) 33.8% 0 30.7% 35.7% 34.1%

Dividend yield 1.69% 1.15% 0 1.71% 1.57% 1.90%

Registered share A

(Nominal value CHF 10)

Number outstanding 1 000 000 1 000 000 1 000 000 1 000 000 100 000 100 000

Number entitled to dividend 1 000 000 1 000 000 1 000 000 1 000 000 100 000 100 000

Stock market prices not listed not listed not listed not listed not listed not listed

Registered share B

(Nominal value CHF 50)

Number outstanding 3 000 000 3 000 000 3 000 000 3 000 000 300 000 300 000

Number entitled to dividend 2 761 110 6) 2 757 792 2 747 403 2 744 957 273 573 300 000

Stock market prices high 448 580 795 970 721 4) 945 4)

low 220 175 205 645 537 4) 391 4)

at year-end 414 261 441 700 702 4 ) 579 4 )

Annual trading volume 558 million 619 million 1 299 million 2 083 million 1 330 million 1 331 million

Stock market capitalisation

31 December 1 325 million 835 million 1 411 million 2 240 million 2 115 million 1 744 million

1) Figures for 1998–1999 are after intersegmental eliminations.

2) Invested capital is the sum of all net current assets, fixed assets, goodwill and other net assets (not including interest-bearing assets) at the beginning of the period

under review and includes goodwill actually paid (gross). Goodwill amortisation is not taken into account in operating profit.

3) ROIC is defined as follows: the ratio of NOPLAT to invested capital.

NOPLAT represents after-tax operating profit (EBITA) after adjusting taxes to a cash basis.

4) Adapted in line with the new capital structure.

5) Proposal of the Board of Directors to the General Meeting of Shareholders.

6) As at 31 December 2003. Subject to definitive approval by the General Meeting of Shareholders.

KUONI Financial Report 2003

49


Kuoni Group

+ Kuoni Travel

Holding Ltd. +++

KUONI Financial Report 2003

51


52

Financial Statements

Income Statement

CHF Notes 2003 2002

Income

Financial income (8) 9 993 610 10 414 100

Income from investments in subsidiaries (9) 83 841 369 68 118 198

Other operating income 1 083 060 1 255 275

Total income 94 918 039 79 787 573

Expenses

Personnel expense 10 751 803 11 434 436

Administrative expense 8 276 853 7 812 713

Expenses related to investments in subsidiaries (10) 19 685 490 26 037 909

Other expenses 4 965 293 3 390 336

Depreciation 832 815 709 129

Financial expense 2 708 075 2 881 979

Income taxes 339 530 674 544

Total expenses 47 559 859 52 941 046

Net result 47 358 180 26 846 527


Balance Sheet

Assets

Kuoni Travel Holding Ltd.

CHF Notes 31 Dec 2003 % 31 Dec 2002 %

Non-current assets

Financial assets

– Investments in subsidiaries (4) 583 739 191 49.7 675 088 309 56.9

– Loans to group companies 279 519 104 23.8 280 275 963 23.6

– Loans to associates and third parties 22 837 823 1.9 25 271 085 2.1

– Other financial assets 22 515 707 1.9 31 765 169 2.7

Tangible fixed assets

– Land and buildings (2) 8 060 001 0.7 8 760 001 0.8

– Furniture, fixtures and equipment (2) 1 0.0 1 0.0

Total non-current assets 916 671 827 78.0 1 021 160 528 86.1

Current assets

Cash and cash equivalents 137 639 482 11.7 128 908 806 10.9

Securities (3) 33 364 145 2.8 33 960 545 2.9

Accounts receivable

– from third parties (12) 86 312 595 7.3 418 058 0.0

– from group companies 696 000 0.1 514 000 0.0

Prepaid expenses 717 830 0.1 1 538 320 0.1

Total current assets 258 730 052 22.0 165 339 729 13.9

Total assets 1 175 401 879 100.0 1 186 500 257 100.0

Liabilities and Shareholders’ Equity

CHF Notes 31 Dec 2003 % 31 Dec 2002 %

Shareholders’ equity

Share capital (11) 160 000 000 13.6 160 000 000 13.4

Legal reserves

– General reserves 8 000 000 0.7 8 000 000 0.7

– Share premium reserve 146 295 416 12.5 144 115 274 12.1

– Reserve for treasury shares (6) 11 944 500 1.0 12 540 900 1.1

Other reserves 242 596 400 20.6 225 603 127 19.0

Retained earnings

– Profit carried forward 1 576 278 0.1 0 0.0

– Net result 47 358 180 4.1 26 846 527 2.3

Total shareholders’ equity 617 770 774 52.6 577 105 828 48.6

Liabilities

Provisions 265 606 443 22.6 257 987 007 21.7

Convertible bond (3) 204 815 000 17.4 204 815 000 17.3

Accounts payable

– to third parties 2 690 794 0.2 701 372 0.1

– to group companies 49 606 143 4.2 110 158 026 9.3

Accrued expenses 34 912 725 3.0 35 733 024 3.0

Total liabilities 557 631 105 47.4 609 394 429 51.4

Total liabilities and shareholders’ equity 1 175 401 879 100.0 1 186 500 257 100.0

KUONI Financial Report 2003 53


54

Financial Statements

Board of Directors’ Proposal for the Appropriation

of Retained Earnings

CHF 2003 2002

Profit carried forward from previous year 1 576 278 0

Net result for the year 47 358 180 26 846 527

Retained earnings 48 934 458 26 846 527

Dividends:

Per registered share A gross CHF 1.40 1 400 000 600 000

Per registered share B gross CHF 7.00

– on 2 761 110 shares entitled to dividends as at 31 December 2003

– on 216 462 treasury shares, set aside for the exercise of

19 327 770 8 273 376

conversion rights from the 1% convertible bond 1 515 234 1) – on 22 428 treasury shares, set aside for the share and stock

0

option plans of the Executive Board and Management 156 996 2) 0

Total dividends 22 400 000 8 873 376

Allocation to other reserves 26 403 600 16 396 873

Appropriation of profit 48 803 600 25 270 249

To be carried forward to new account 130 858 1 576 278

Retained earnings 48 934 458 26 846 527

1) Dividends on treasury shares in respect of which the conversion rights have not been exercised on the date of the dividend payment will be added

to retained earnings.

2) Dividends on treasury shares which have been set aside for the executive and management share purchase and stock option plans and which are in

our possession on the date of the dividend payment will also be added to retained earnings.


Notes

Introduction

In legal terms, Kuoni shareholders are shareholders of Kuoni Travel Holding Ltd., which controls the companies listed

at the end of the consolidated accounts. From an economic standpoint, the shareholders of Kuoni Travel Holding Ltd.

are invested in the entire Group, and for this reason the consolidated accounts are of primary importance.

The accounts of Kuoni Travel Holding Ltd. are drawn up in conformity with Swiss company law.

1. Contingent Liabilities, Assets Pledged

2. Fire Insurance Values

3. Convertible Bond

CHF 31 Dec 2003 31 Dec 2002

Contingent liabilities 685 096 000 794 066 000

Assets pledged 15 400 000 15 400 000

Contingent liabilities consist of sureties and guarantees for consolidated subsidiaries, associates and BTI Central Europe.

The latter have in the meantime been transferred.

In the interests of the company, Kuoni Travel Holding Ltd. has pledged time deposits as security to the bank in the amount

of CHF 15.4 million to cover a bank loan of Kuoni and Hugentobler Foundation, Zurich. For further details, see note 29

(pages 38 / 39) of the financial accounts.

CHF 31 Dec 2003 31 Dec 2002

Buildings 8 222 000 8 327 000

Furniture, fixtures and equipment 600 000 600 000

In February 2000, Kuoni Travel Holding Ltd. issued a 1% convertible bond in the amount of CHF 204.8 million,

convertible into registered shares B. The bond will run for 5 years until 2 February 2005. The conversion price is

CHF 946.19 per registered share B, resulting in a conversion ratio of 5.2843 registered shares per convertible

bond of par value CHF 5 000.

The repurchased securities of the convertible bond in a nominal amount of CHF 26.2 million are carried as securities

in the balance sheet.

4. Investments in Subsidiaries

We refer to the information on principal subsidiaries and associates on pages 42–45.

Kuoni Travel Holding Ltd.

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56

Annex

5. Principal Shareholders

6. Treasury Shares

7. Related Parties

The following principal shareholders are known to us:

Kuoni and Hugentobler Foundation, Zurich

31 December 2003: 1000 000 registered shares A = 25.00% of the voting rights

13 600 registered shares B = 0.34% of the voting rights

31 December 2002: 1000 000 registered shares A = 25.00% of the voting rights

13 600 registered shares B = 0.34% of the voting rights

Silchester International Investors Limited, London

31 December 2003: 302 072 registered shares B = 7.55% of the voting rights

31 December 2002: 262 471 registered shares B = 6.56% of the voting rights

CHF Book value

Held on 1 January 2002 255 043 registered shares B at par value CHF 50 12 752 150

Sold 4 225 registered shares B at par value CHF 50 –211 250

Held on 31 December 2002 250 818 registered shares B at par value CHF 50 12 540 900

Sold 11 928 registered shares B at par value CHF 50 –596 400

Held on 31 December 2003 238 890 registered shares B at par value CHF 50 11 944 500

Of these, 216 462 registered shares B are set aside as cover for the 1% convertible bond 2000–2005. The remaining

treasury shares are reserved for the share purchase and stock option plans of the Executive Board and Management.

The Kuoni and Hugentobler Foundation received a dividend payment of CHF 0.6 million from Kuoni Travel Holding Ltd.

in the year under review.

Please refer to the agreement with the Kuoni and Hugentobler Foundation described in note 29 (pages 38 / 39) of the

consolidated financial statements.


8. Financial Income

Financial income comprises interest income of CHF 7.9 million (2002: CHF 10.0 million), securities income of

CHF 0.4 million (2002: CHF 0.2 million) as well as foreign exchange gains of CHF 1.7 million (2002: CHF 0.2 million).

9. Income from Investments in Subsidiaries

Income from investments in subsidiaries consists of dividends received as well as income from the disposal of subsidiaries.

As in the preceding year, all wholly-owned subsidiaries were charged management fees to cover Group

overheads.

10. Expenses Relating to Investments in Subsidiaries

This item relates to support given to subsidiaries as well as to currency-related value adjustments and provisions. Where

necessary, losses incurred by subsidiaries were either offset by direct subsidies from the holding company or appropriate

allocations were made to provisions earmarked for that purpose.

11. Shareholders’ Equity

Kuoni Travel Holding Ltd.

Share Legal Other Retained

Total

shareholders’

CHF

Shareholders’ equity

capital reserves reserves earnings equity

as at 1 January 2001 160 000 000 159 759 353 345 757 870 103 700 872 769 218 095

Net result –189 124 331 –189 124 331

Appropriation of retained earnings 67 153 545 –102 493 029 –35 339 484

Use of treasury shares 4 033 193 396 951 4 430 144

Shareholders’ equity

as at 31 December 2001 160 000 000 163 792 546 413 308 366 –187 916 488 549 184 424

Net result 26 846 527 26 846 527

Appropriation of retained earnings –187 916 488 187 916 488 0

Use of treasury shares 863 628 211 249 1 074 877

Shareholders’ equity

as at 31 December 2002 160 000 000 164 656 174 225 603 127 26 846 527 577 105 828

Net result 47 358 180 47 358 180

Appropriation of retained earnings 16 396 873 –25 270 249 –8 873 376

Use of treasury shares 1 583 742 596 400 2 180 142

Shareholders’ equity

as at 31 December 2003 160 000 000 166 239 916 242 596 400 48 934 458 617 770 774

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Annex

The share capital is composed of the following:

1 000 000 registered shares A at par value CHF 10 CHF 10 000 000

3 000 000 registered shares B at par value CHF 50 CHF 150 000 000

Total share capital CHF 160 000 000

Conditional Capital

Conditional capital amounts issuable via the exercise of conversion rights and/or warrants linked to bonds or similar debt

issued by Kuoni Travel Holding Ltd. or any of its subsidiaries in the domestic or international capital markets, and/or via

the exercise of options granted to shareholders amounts to a maximum of CHF 19.2 million, with a further maximum of

CHF 4.8 million reserved for employee stock option plans.

Authorised Capital

There is no authorised capital.

Restricted Transferability Provisions

The articles of association stipulate that no more than 3% of the total share capital and voting rights may be entered

in the name of any one shareholder.

Opting Out/Opting Up

12. Accounts Receivable

There is no opting out or opting up clause in the articles of association.

This position includes the selling price for BTI Central Europe which was paid in full in January 2004.


Report of the Auditors

Report of the Auditors to the General Meeting of Shareholders of Kuoni Travel Holding Ltd., Zurich.

Kuoni Travel Holding Ltd.

As statutory auditors, we have audited the accounting records and the financial statements of Kuoni Travel Holding Ltd. for the year

ended 31 December 2003, as set out on pages 52 to 58 of this report.

The financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on the financial

statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.

Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession, which require that an audit be

planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement.

We have examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also assessed

the accounting principles used, significant estimates made and the overall financial statement presentation. We believe that our audit

provides a reasonable basis for our opinion.

In our opinion, the accounting records, the financial statements and the proposed appropriation of retained earnings comply with

Swiss law and the company’s articles of incorporation.

We recommend that the financial statements submitted to you be approved.

KPMG Fides Peat

Günter Haag Lukas Marty

Swiss Certified Accountant Swiss Certified Accountant

Auditor in Charge

Zurich, 17 March 2004

KUONI Financial Report 2003

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Kuoni Travel Holding Ltd. · Neue Hard 7 · CH-8010 Zurich · www.kuoni.com

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