The Board of Directors of HOCHDORF Holding Ltd approved these consolidated financial statements on 11 March 2021. They are subject to approval by the Annual General Meeting.

The consolidated financial statements are based on the annual financial statements of the Group companies as at 31 December 2021, prepared in accordance with uniform principles. The Group's financial statements are prepared in accordance with all the guidelines of the Swiss GAAP FER (Accounting and Reporting Recommendations) and the provisions of Swiss law. The valuation basis is formed by acquisition or production costs or current values. The income statement is presented in accordance with the overall cost procedure. The consolidated annual financial statements are based on business values and reflect the actual status of the asset, financial and revenue position. The financial statements are prepared on the assumption of the continuation of operational activities. The consolidated financial statements are prepared on the assumption of the continuation of operational activities.

The consolidated financial statements are prepared in Swiss francs (CHF). 

The consolidated annual financial statements of the HOCHDORF Group comprise the annual financial statements of HOCHDORF Holding Ltd holding company as well as all subsidiaries in which HOCHDORF Holding Ltd has a capital-relevant and vote-relevant majority or where control over the financial and business policy is exercised through contractual agreement. Assets and liabilities as well as expenses and revenue are recorded at 100% for the fully consolidated companies. Minority interests in the consolidated shareholders' equity and in the business results are shown separately. All intercompany transactions and relationships between consolidated companies are eliminated. Intercompany profits on such transactions are eliminated. The consolidated individual financial statements for the companies are adapted to the standard Group structure and evaluation regulations and entered in accordance with the full consolidation method.

Shareholdings in joint enterprises or shareholdings with 20% to 50% of the voting rights are accounted for using the equity method.

The capital consolidation is carried out according to the purchase method. Companies acquired during the year are consolidated from the date on which control is transferred. The net assets acquired in an acquisition are revalued at current values as at the acquisition date. The difference between the purchase price and the pro rata revalued net assets is offset against equity as goodwill/bad will. The acquisition of minority interests is also accounted for using the purchase method. Here, a purchase price allocation is waived. Accordingly, the difference between the purchase price and the pro rata equity capital is offset against equity capital as goodwill or bad will in accordance with Swiss GAAP FER.

Companies sold during the year are excluded from the consolidated financial statements from the date on which control is transferred. If shares in fully consolidated companies or companies accounted for using the equity method are sold, the difference between the disposal proceeds and the proportionate carrying amount, including goodwill/bad will, is recognised as a gain or loss on the income statement. Minority interests in subsidiaries with negative equity are also recognised proportionately with this negative equity.

The foreign currency transactions and items included in the individual financial statements of the consolidated companies are converted as follows: foreign currency transactions are translated into the book currency at the exchange rate of the transaction date (current rate). At the end of the year, monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss at the exchange rate prevailing on the balance sheet date. Foreign currency gains and losses from the valuation of intercompany loans of an equity nature are recognised in equity.

The consolidated financial statements are presented in Swiss francs. Assets and liabilities of Group companies with different currencies are translated at year-end rates (closing rates), equity at historical rates, and the income statement and cash flow statement at average rates for the year. The conversion differences incurred are recognised in equity without affecting net income.

The accumulated translation differences for the translation of the annual financial statements and intercompany loans recorded in equity for a foreign company are derecognised when the company is sold and recognised in the income statement as part of the gain or loss on disposal.

Cash and cash equivalents form the basis for the presentation of the cash flow statement. Cash flow from operating activities is calculated using the indirect method.

Cash and cash equivalents include cash and deposits on postal and bank accounts, as well as short-term time deposits with a remaining time of less than three months. They are balanced at nominal values.

Securities are measured at the market value on the balance sheet date. Unlisted securities are stated at cost less any value impairments. The securities are not of a participating nature and are short-term.

Accounts receivables from ordinary business activities include short-term receivables with a remaining term of up to one year. Accounts receivables are valued at nominal value. The operational default risks are taken into account by means of individual and general value adjustments. General value adjustments are made for items which have not already been subject to specific value adjustments. The general value adjustment is based on the assumption that the default risk rises as the receivable becomes increasingly overdue.

The operational default risk from receivables from deliveries and services to related and associated parties are taken into account through individual value adjustments.

Internally produced goods are valued at manufacturing cost. Any lower net market value is taken into account. Raw materials and supplies as well as merchandise are valued at the lower of cost or net market value.

Depending on the inventory turnover, value adjustments are taken into account. The value adjustments calculated in this way are adjusted accordingly for normal saleability or longer shelf life.

Fixed assets are measured at the acquisition cost less economically necessary depreciation and permanent value impairments. Own work is only capitalised if it is clearly identifiable and the costs can be reliably determined, and if it provides the company with a measurable benefit over several years. Depreciation is calculated on a straight-line basis over the useful life of the asset as shown in the table below.

Financial assets include long-term held securities, deferred tax assets as well as assets from pension funds, employer contribution reserves and long-term loans from third parties. Securities and loans are measured at purchase value less the economically necessary value adjustments. Employer contribution reserves are recognised at nominal value.

Intangible assets include software, patents, licences and brand values. These are accounted for at acquisition costs. They are depreciated on a straight-line basis over their useful economic life of 5-10 years and impaired if there are indications of impairment.

The recoverability of non-current assets is assessed at each balance sheet date. If there are indications of impairment, the recoverable amount is calculated (impairment test). The achievable value is the higher value of net market value utility value. If the book value exceeds the recoverable amount, an adjustment is made to the income statement through unscheduled depreciation.

For cash-generating units, an impairment test is performed annually based on value-in-use calculations, in case impairment indication is existing. These are based on the cash flows for the next five years as a rule and the extrapolated values from the sixth year onwards. The figures used are part of the multi-year plan approved by the Board of Directors.

Liabilities are measured at the nominal amount.

Provisions are recognised when there is a reasonable probable obligation as a result of a past event, the amount and/or timing of which is uncertain but can be estimated. The measurement of the provision is based on the estimate of the cash outflow to settle the obligation.

The accrual of deferred income tax is based on a balance sheet approach and generally takes into account all future income tax effects. The calculation of deferred income taxes to be accrued annually is based on the future tax rate applicable to the respective taxable entity as at the balance sheet date. Deferred income tax assets and deferred income tax liabilities are offset if they relate to the same taxable entity and are levied by the same taxation authority. Deferred tax assets on temporary differences and tax losses carried forward are only capitalised if it is probable that they can be offset against future taxable profits.

Own shares are recognised as a deduction from equity at cost. Profits and losses from transactions with own shares are recognised in capital reserves without affecting net income.

The hybrid bond is a perpetual subordinated bond. The hybrid bond has its first call date after five-and-a-half years (21.06.2023). This is the first possible call date in the case of the bond for HOCHDORF. If this is not exercised, the amount of interest payable increases (step-up of 2.5 % + 5-year mid swap rate with floor at zero).

The interest payments under the hybrid bond are in principle only due after the occurrence of a mandatory payment event, in particular after a resolution of the Annual General Meeting to pay a dividend. If no such event exists and no voluntary interest payments are made, the interest obligation is deferred until the occurrence of a mandatory event. The future obligations are only recognised as liabilities at the time of the occurrence of a corresponding condition (e.g. dividend resolution by the Annual General Meeting).

The mandatory convertible bond is a bond that does not give the bondholder any voting rights. The issuing costs are recognised in equity via the capital reserves. The mandatory convertible bond was converted on 30 March 2020.

The option described in Swiss GAAP FER 30 of offsetting goodwill/bad will against equity is exercised. The disclosure on the theoretical capitalisation of goodwill is shown in the notes to the consolidated income statement.

Employees and former employees of all companies receive different employee pension payments or old-age pensions corresponding to the legal requirements applicable in the countries where they are paid out.

The pension liabilities of HOCHDORF Holding Ltd and its subsidiary HOCHDORF Swiss Nutrition Ltd are governed by the legally independent pension fund of the HOCHDORF Group. The pension fund is a defined contribution plan. The costs resulting from the employee pension are charged to the income statement for the appropriate period. The actual economic effects of pension plans on the company are calculated on the balance sheet date. An economic benefit is carried as an asset if it is used for the company’s future pension expenses. A financial obligation is shown as a liability if the requirements for the creation of a provision are met. Existing employer contribution reserves are recognised as an asset under assets (financial assets).

Net sales include revenues from the sale of goods and services. Revenue from the sale of goods is recognised in the income statement when the risks and rewards of ownership of the products are transferred to the buyer. Revenue from services is recognised in the period in which the services are rendered. Sales deductions such as discounts, credit notes, rebates and sales taxes are deducted in the reported net sales.

In-house research and development costs are charged in full to the income statement. These costs are included in the items "Personnel expenses" and "Remaining operating costs".

The probability and amount of contingent liabilities are assessed and evaluated on the balance sheet date and disclosed in the notes.

Business relationships with related parties are conducted at arm's length. Related parties (natural or judicial) are defined as any party directly or indirectly able to exercise significant influence over financial or operating decisions of organisations. Organisations that are controlled directly or indirectly by the same related parties are also considered to be related.

Significant transactions in the 2021 business year
At the end of August 2021, the HOCHDORF Group announced the far-reaching restructuring of the group and its intention to concentrate production at the Sulgen site, with the corresponding sale of land and buildings in Hochdorf. As of December 2021, the HOCHDORF Group sold the land and buildings to the Hochdorf municipality.

A purchase price of CHF 50.2 million was agreed for the HOCHDORF Group's land and buildings in Hochdorf. The net revenue from the sale amounted to CHF 38.0 million after deduction of all costs incurred (see notes 17 and 19 in the Notes to the consolidated financial statements). At the same time the HOCHDORF Group signed a four-year operative rental agreement with the option of extending by a year. The annual rental price was set at CHF 3 million.

In connection with the concentration of production in Sulgen, the HOCHDORF Group recognised restructuring provisions of CHF 7.9 million (see note 14). In addition, assets at the Hochdorf site were impaired in the amount of CHF 5.7 million (see note 6).

As announced at the end of August 2021, the proceeds from the HOCHDORF Group sale will largely be used to reduce the Group's debt (see note 13).

Changes to the consolidation basis
In 2021, the following changes were made to the scope of consolidation of the HOCHDORF Group.

1. New company: registered on 28.06.2021
2. Share increased to 100% as of 21.10.2021; no further business activities
3. Merger BIMBOSAN AG with HOCHDORF Swiss Nutrition Ltd (absorbing entity) as of 01.01.2021; entry in the Commercial Register on 24.06.2021

For further information on the companies included in the scope of consolidation, see note 30.

Cash and cash equivalents are recognised at nominal value.

The accounts receivables from third parties do not contain any concentration of credit risk due to customer diversification. The bad debt item includes the value adjustment made in 2019 for a receivable in the amount of CHF 10.8 million from a customer that will still be carried under accounts receivables from third parties in 2020 and 2021.

Accounts receivables from related parties include outstanding invoices from deliveries of goods to Pharmalys Laboratories SA. The other accounts receivables mainly include receivables from government agencies (value added tax, Directorate General of Customs) and from social welfare organisations.

Other receivables to related parties include the short-term outstanding payments of Pharmalys Laboratories SA (previously Pharmalys Invest Holding AG). In 2021, the outstanding purchase price payment of CHF 30 million from the sale of Pharmalys Laboratories SA, Pharmalys Tunisie S.a.r.l and Pharmalys Africa S.a.r.l. was made. The other outstanding receivables such as the repayment of the loan and interest were classified as non-current (see note 7).

With regard to the recoverability of the accounts receivables and the other receivables from related parties, see the implementation of the going concern principle in note 31.

Value adjustment in 2021 mainly due to sales price devaluations for skimmed milk powder.

The accrued income is comprised of refunds not yet received as well as costs paid in advance. Significant items are receivables from the Directorate General of Customs due to milk export transactions and receivables for CO₂ refunds.

Disposals of CHF 12.3 million were recorded in connection with the sale of properties at the Hochdorf, Welschenrohr and Zittau sites. The impairments include a value adjustment of CHF 5.7 million on fixed assets at the Hochdorf site. We made this adjustment to account for the shortened useful economic life, as these assets will no longer be requried after the planned relocation of production to the Sulgen site by 31.12.2023.

1. New acquisitions are posted with project numbers under “current investment projects” as inward movements. After the start of operations, there is a transfer posting from the "current investment projects" account to the appropriate fixed asset account
2. The changes to the consolidation basis 2020 reflect the sale of ­Marbacher Ölmühle GmbH and Uckermärker Milch GmbH
3. Impairment of fixed assets in 2020 in connection with spray tower 9 and canning line 2 at the Sulgen site due to low capacity utilisation and the closure of the Welschenrohr site. Further impairment of real estate/land of Zifru Trockenprodukte GmbH (in liquidation)
4. Disposals due to the sale of real estate/buildings at the Welschenrohr and Hochdorf sites in Switzerland
5. Impairment on assets at the Hochdorf site, which will no longer be required after 1.1.2024 following the closure of the Hochdorf production site and relocation to Sulgen

The assets included in fixed assets under financial leasing relate to the leasing of laptops, computers and other equipment at Hochdorf Swiss Nutrition Ltd.

1. The long-term receivables from related parties among others from the sale of Pharmalys Laboratories SA, Pharmalys Tunesie S.a.r.l. and Pharmalys Africa S.a.r.l. in 2019 (repayment of loans, interest) have a long-term character since the adjusted agreement with Pharmalys Laboratories SA (formerly Pharmalys Invest Holding AG) of August 2021.

In the case of HOCHDORF Holding Ltd and HOCHDORF Swiss Nutrition Ltd, no deferred tax assets were formed on the loss carried forward, as it is not certain that they can be offset against future taxable profits within the next seven years

If the deferred tax assets were fully capitalised, including the losses carried forward at HOCHDORF Holding Ltd and Hochdorf Swiss Nutrition Ltd, there would be a deferred tax asset of TCHF 23,975 for federal tax (PY: TCHF 25,217) and a deferred tax asset of TCHF 16,246 for cantonal tax (PY: TCHF 17,975).

HOCHDORF Holding Ltd has retroactively waived the holding company privilege as early as 01.01.2019 and was taxed ordinarily.

The posting of interest from employer contribution reserves through pension plans appears as a credit in the financial revenues. Interest of 0% (PY: 1.7%) was calculated on the employer contribution reserves in 2021. Since 01.05.2019, employer contributions are no longer paid to the pension fund, but offset against the employer reserves. In 2021, the possibility of offsetting additional employee contributions against the employer's reserves has still been used on the basis of the Covid-19 regulation.

Intangible assets only cover acquired assets. The brand disposal relates to the liquidation of Snapz Food AG and thus the abandonment of the "Snapz" brand. Own brand names are not evaluated and not balanced on the balance sheet date.

Leasing liabilities include laptops, computers and other equipment at HOCHDORF Swiss Nutrition Ltd.

1. The largest items under "Other short-term liabilities" are payments from customers and the payments to the BOM (Swiss Milk Sector Organisation) for the fund contributions from milk suppliers collected in December

The accrued liabilities and deferred income mainly comprises accruals in the context of reimbursements and commissions as well as invoices not yet received for goods receipts and other supplier services (power, water, transport).

The financial liabilities are recorded and valued at the nominal value. The interest rate depends on the debt factor.

On 23 October 2019, the banking consortium extended and adjusted the syndicated loan for HOCHDORF Holding Ltd. The loan has a term until September 2023. The limit has been reduced to CHF 75 million (PY: CHF 120 million) due to the two partial cancellations carried out in 2021. As before, key financial indicators are the equity ratio and the debt factor. Due to the seasonal nature of the dairy business, the required financial key figure "debt factor" was suspended as of 30 June 2021 after approval by the syndicate banks. The debt factor is considered to be breached if it is greater than 4.0 x as at 30 June and 31 December. For the equity ratio, a ratio of 40% applies as of 31 December 2021. There was compliance with both financial indicators as of 31.12.2021.

In the event of a breach of the covenants, the credit agreement can be terminated extraordinarily (with immediate maturity of all liabilities) by the syndicate banks. The credit agreement only allows dividend payments if certain debt factors are met.

1. 2020: Sale of Marbacher Ölmühle und Uckermärker Milch GmbH
2. Various outstanding and impending legal disputes
3. Various in connection with settlement of a claim
4. Restructuring: In connection with the relocation of production from the Hochdorf site to Sulgen (incl. onerous contracts, social plan etc.); Various in connection with impending legal dispute
5. Mostly related to the liquidation of Snapz Food AG
6. Various: In connection with announcement of joint venture with Stellium AG (HOCHDORF Americas)

The share capital of HOCHDORF Holding Ltd of CHF 21,517,570 nominal (divided into 2,151,757 registered shares of CHF 10 each) as at 31 December 2021 is unchanged from the previous year. The mandatory convertible bond was finally converted on 30 March 2020.

In 2017 (payment 21.12) HOCHDORF Holding Ltd issued a public hybrid bond with a nominal value of CHF 125 million, net CHF 124.17 million. It is a perpetual subordinated bond which pays interest with a coupon rate of 2.5%. The hybrid bond has its first call date after five-and-a-half years (21.06.2023). If this is not exercised, the amount of interest payable increases (step-up of 2.5%). Securities number 39,164,798; ISIN CH0391647986.

The interest payments under the hybrid bond are essentially optional and HOCHDORF Holding Ltd can choose whether to make the interest payments annually or defer them. The interest payments become payable upon the occurrence of certain events, e.g. when HOCHDORF Holding Ltd declares and pays dividends on its shares. In 2021, HOCHDORF Holding Ltd exercised its voting rights and suspended the interest payments.

The hybrid bond is treated as a compound financial instrument and consists of a debt and an equity component. The debt component includes all contractually owed and unavoidable payments. This included the interest payments until 21.06.2020, the interest date after conversion of the mandatory convertible bond. The effective interest payments were taken from the corresponding financial liabilities and were not charged to the income statement. Only the accrued interest of the relevant business year was recognised in interest costs. As at 31 December 2021 there was no longer a liability (PY: CHF 0).

The following explanatory remarks are given to supplement the income statement, structured in accordance with the total cost of expenditure method (production income statement). For the sake of comparability, it should be noted that in 2020 Uckermärker Milch GmbH was sold as of 28.02.2020 and Marbacher Oelmuehle GmbH was sold as of 31.12.2020 and they were thus included in the consolidated results in the 2020 income statement.

No material provisions for bad debts were made in 2021 and 2020.

The Baby Care division includes the infant formula product group and products from other groups.

1. Net revenues with Pharmalys Laboratories SA are also reported under Middle East/Africa 
2. The remaining turnover comprises deliveries to customers who export the goods and where the destination country is not separately recorded

As a result of possible competitive disadvantages compared to non-listed and large listed competitors, customers and suppliers, presentation of the segment results was waived, pursuant to Swiss GAAP FER 31/8. The Swiss milk market is small and tightly knit with few key companies and providers. The supplier side (milk producers) is organised within several milk producer organisations. On the processing side, the market is dominated by the cheese dairies and four large dairies. On the customer side, the chocolate industry segment is predominant, likewise with just a few large producers. In the area of infant formula (based on milk), only one other firm produces infant formula for the Swiss and international market, apart from the HOCHDORF Group.

The book profits include profits from the sale of real estate at the Hochdorf and Welschenrohr locations of Hochdorf Swiss Nutrition Ltd and Zifru GmbH. Various other operating income includes the rental of storage space and insurance benefits as major items.

The incidental personnel costs 2021 include expenses in connection with the closure of production and relocation from Hochdorf to Sulgen (including social plan). As at 31.12.2021, the HOCHDORF Group reported a headcount of 387 (31.12.2020: 391).

Facilities expenditure 2021 includes provisions for the rental obligation at the Hochdorf site ("onerous contract"). The administration and IT expenditure 2021 include the expenses in connection with the sale of the property and buildings at the Hochdorf site.

1. The interest income contains mainly interest from Pharmalys Laboratories SA.

The non-operating income consists of expenses and rental income from non-operating properties.

Valuation of deferred taxes occurs in line with the tax rates that are actually expected in meeting future tax liability or in the realisation of future receivables (liability method). For HOCHDORF Swiss Nutrition Ltd this is 12.60%.

In the case of HOCHDORF Holding Ltd and HOCHDORF Swiss Nutrition Ltd, no deferred tax assets were formed on the loss carried forward, as it is not certain that they can be offset against future taxable profits within the next seven years. If the possible deferred tax assets for HOCHDORF Holding Ltd and for HOCHDORF Swiss Nutrition Ltd were offset, and taking into account the maximum possible capitalisation for the other companies, the weighted average tax rate would be 12.60%. In the previous year, this was stated at 13.20%.

Capital taxes are reported separately in other operating costs.

To determine the net profit per share, the earnings attributable to the shareholders of the HOCHDORF Group for the current year are divided by the average number of outstanding shares. The treasury shares held are not included in the calculation (status: 31.12.2021: 29,738: 31.12.2020: 29,738).

As at 31.12.2021, HOCHDORF Holding held 29,738 treasury shares. No transactions with treasury shares took place in 2021. There is no share-based compensation for either the Board of Directors or the Group Management.

The unrecognised leasing debts are for the leasing contracts for plant, cars and operating equipment in the previous year.

There is no liability to the pension fund; all obligations in 2021 have been settled and paid.

Following the discontinuation of the Cereals and Ingredients division in 2019, the companies Zifru Trockenprodukte GmbH (D) and Snapz Foods AG (CH) remained in liquidation proceedings in 2021. At Zifru Trockenprodukte GmbH, land and buildings were sold in the first half of 2021. The liquidation proceedings at Snapz Food AG have been formally concluded; removal from the commercial register is still pending.

1. For the jointly acquired companies in 2014, Uckermärker GmbH and Ostmilch GmbH, there was a total net bad will of TCHF 1,084, which was not shown in the calculation of goodwill until 2020. After the divestment of Uckermärker Milch GmbH and the derecognition of the bad will in 2020, the allocated goodwill of TCHF 3,969 for Ostmilch Handels GmbH was reactivated 

This is shown based on a linear depreciation over 5 years (pro rata).

The effects of theoretical capitalisation on the income statement and balance sheet are shown in the following tables.

The business transactions with related persons and companies are based on standard commercial contracts and conditions. All transactions are reported in the financial statements 2020 and 2021. These cover deliveries of goods and raw materials as well as services to and from related companies. This is shown separately in the corresponding balance sheet items.

Associated: Ostmilch Handels GmbH, Uckermärker Milch GmbH (sale of directly held 60% share in Ostmilch Handels GmbH); see also note 30 of the notes to the financial statements.

Related parties: Pharmalys Laboratories AG and formerly Pharmalys Invest Holding AG (see also note 31 of the HOCHDORF Group annual financial statements on the recoverability of outstanding receivables from Pharmalys companies).

HOCHDORF becomes involved in legal disputes as part of its normal business. Although the outcome cannot be conclusively assessed at the present time, HOCHDORF assumes that it will not have any significant negative impact on its business activities or financial position. Anticipated payments to be made are set aside. There were no material contingent liabilities as at the balance sheet date.

1. New company: registered on 28.06.2021
2. Share increased to 100% as of 12.10.2021; no further business activities
3. Merger BIMBOSAN AG with HOCHDORF Swiss Nutrition Ltd (absorbing entity) as of 01.01.2021; entry in the Commercial Register on 24.06.2021
4. In liquidation

1. Indirectly associated; Uckermärker Milch GmbH has been 100% owned by Ostmilch Handels GmbH since 28.02.2020

HOCHDORF's Board of Directors and Group Management take the view that, depending on how the situation develops, the material uncertainties highlighted below may raise significant doubts about the Group's ability to continue as a going concern, but that despite these material uncertainties, HOCHDORF's ability to continue as a going concern is not in question at this time.

• Recoverability of receivables from Pharmalys Group companies (as at 31 December 2021: CHF 45.1 million from the supply business and CHF 10.9 million from the sale of shares in the Pharmalys company, repayment of loan outstanding and interest).
• Ensuring solvency and compliance with the covenant from the credit agreement.

Assessment by the Board of Directors
Recoverability of receivables from Pharmalys Group companies
At present, the Board of Directors and the Group Management assume that the receivables from Pharmalys companies, which have been reduced from CHF 72.7 million (31.12.2020) to CHF 56.1 million (31.12.2021) as a result of incoming payments, continue to be recoverable. Based on the payments received from Pharmalys companies of CHF 65 million in 2021, the Board of Directors of HOCHDORF continues to assume that there will be no default in payment or any associated value adjustment of the receivables.

In the course of the 2021 business year, the Board of Directors and the Group Management intensified the cooperation with Pharmalys Laboratories SA resulting in greater transparency regarding the contractual basis and agreed payment terms between Pharmalys Laboratories SA and its customers and thus regarding expected incoming payments. The common goal is to reduce payment terms to an industry-standard level for the North Africa and Middle East regions supplied by Pharmalys Laboratories SA.

Ensuring solvency and compliance with the covenants from the credit agreement
The key financial indicators to be complied with under the loan agreement continue to be the equity ratio and the debt factor (net debt in relation to EBITDA). In 2021 HOCHDORF succeeded in substantially reducing its net debt from CHF 87.6 million to CHF 32.9 million. On account of the rise in raw material prices in 2021 and the related pressure on the product margin, the Board of Directors is concentrating on faster implementation of the agreed strategy focussing on innovation and smart nutrition in order to make inroads into areas with higher added value. In this context, cooperation opportunities with partners are also being explored. Based on current information, the Board of Directors and Group Management considers achievement of the covenants to be a realistic prospect if these plans are implemented.

HOCHDORF also has a free credit line at its disposal of CHF 11 million (as at: 08.03.2022), which can be used in the advent of a further delay in payment. The 12-month liquidity plan shows that this credit line would be sufficient in case of realisation of the operating business and in case of assumed massive payment delays by the Pharmalys companies. However, this credit line would not be able to compensate for a complete default of the Pharmalys Group's outstanding payments.

After the balance sheet date, the following events occurred with respect to the risks described:

• Since 31 December 2021 there has been a cumulative payment receipt from Pharmalys Laboratories SA of EUR 2.0 million (as at: 08.03.2022).
• Emmi Schweiz AG and HOCHDORF have agreed a cooperation in the area of speciality powders, for both milk-based and vegan products. HOCHDORF will produce semi-finished and finished products with special requirements in powder form for Emmi. This operational cooperation is contractually structured as contract manufacturing.

The following events occurred after the balance sheet date and until the approval of the consolidated financial statements by the Board of Directors:

• As of 21.01.2022, the CEO, Dr Peter Pfeilschifter, decided to leave the HOCHDORF Group with immediate effect. Mr Ralph Siegl has taken over the Group Management as a Delegate of the Board of Directors with immediate effect.
• As a result of the invasion of Ukraine by the Russian army, sanctions have been imposed on Russian banks by the EU and USA, which severely affect payment transactions between Russia and other countries. As of 31 December 2021, HOCHDORF had TCHF 563 in outstanding trade receivables from Russian customers, all of which are 100% covered by credit insurance. As a result, we only envisage a low risk of complete payment default.

Otherwise, no significant events have occurred since the balance sheet date of 31.12.2021 that could affect the informational value of the 2021 annual financial statements or that would have to be disclosed here.

The financial information in the annual financial statements includes certain non-GAAP indicators that are not defined by Swiss GAAP FER. These measures are used by management to set targets and assess HOCHDORF's performance. The non-GAAP indicators used may differ from similar measures used by other companies and should not be considered a substitute for the Swiss GAAP FER indicators.

Operating income
The operating income includes net revenues (gross revenues less sales deductions) plus other operating income.

Gross operating profit
The gross operating profit includes net revenues (gross revenues less sales deductions) plus other operating income and changes in inventories less cost of materials.

EBITDA
The EBITDA result comprises the gross operating profit less personnel expenses and other operating expenses.

EBIT
Earnings before interest and taxes (EBIT) comprise EBITDA less amortisations on tangible assets and intangible assets as well as impairment of investments..

Free cash flow
Free cash flow includes cash flow from working capital less changes in net working capital and cash flow from investing activities.