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					Emotion
     in fashion 2003
        Communication
        is part of
        our business
1   Meteospots
2   Modeblatt
3   Adverts
4   Billboards
5   Stores
Charles Vögele Group
Activity Report 2003
Contents




            4 Highlights 2003
            6 Share Information
            7 Group Key Operating Figures
           10 Board of Directors’ Report to the Shareholders
           12 Group Management Report
           18 Strategy and Supply Chain Management
           24 Sales Organization in Switzerland
           26 Sales Organization in Germany
           28 Sales Organization in Austria
           30 Sales Organizations in Belgium and The Netherlands




                                                                    Contents
           34 Information for Investors
           42 Sustainability, Employees and Social Responsibility    3

           50 Corporate Governance
                                                                                             2
                                                                                          Inventories
Activity Report 2003 of the Charles Vögele Group




                                                                                          of current and
                                                                                          previous sea-
                                                                                          sons lowered
                                                                                          by more than
                                                                                          CHF 65 million


                                                   Highlights 2003
    4

                                                                         1
                                                                     Net debt reduced
                                                                     by CHF 149 mil-
                                                                     lion and at lowest
                                                                     level since 1999
                               5
                           Group equity
                           considerably
                           improved from
                           32% to 41%




                                           Highlights 2003
                                             5
                    4
                Group earnings
                of CHF 37.5 mil-
                lion more
                than doubled
    3
Ongoing
improvement
of gross
profit margin
tops 58%
                                                   Share Information

                                                                                                                Price Development of the Charles Vögele Holding AG Shares
                                                                                                                at SWX Swiss Exchange in Zurich from January 1st, 2003, to February 27th, 2004
                                                                                                                in CHF
                                                                                                     100


                                                                                                       90
Activity Report 2003 of the Charles Vögele Group




                                                                                                       80


                                                                                                       70


                                                                                                       60


                                                                                                       50


                                                                                                       40


                                                                                                       30


                                                                                                       20
    6

                                                                                                       10




                                                                                                                                                                                                                                                   27. 02. 04
                                                                                                                                                                           30. 06. 03




                                                                                                                                                                                                  30. 09. 03
                                                                                                                                         31. 03. 03




                                                                                                                                                                                                                              31. 12. 03
                                                                                                                01. 01. 03




                                                                                                                Compared to SPI                       Listed at: SWX Swiss Exchange, Zürich   Abbreviation: VCH
                                                                                                                Closing Price of CV Shares            Swiss securities number: 693 777        Bloomberg: VCH SW
                                                                                                                                                      ISIN-code: CH 000 693 777               Reuters: VCHZ.S



                                                         Indicative Figures
                                                                                                                                                                                                                         31. 12. 2003           31. 12. 2002

                                                         Bearer shares, nominal value CHF 10                                                                                                                   Number    8 800 000              8 800 000
                                                         Share price as per closing date                                                                                                                         CHF         78.90                     31.00
                                                         Share price: high                                                                                                                                       CHF         80.80                     72.80
                                                                      low                                                                                                                                        CHF         13.30                     24.55
                                                         Average trading volume per day                                                                                                                        Number      36 000                 25 000
                                                         Free float                                                                                                                                                %                100                         100



                                                         Earnings per share                                                                                                                                      CHF            4.28                            1.81
                                                         P/E ratio                                                                                                                                              Factor                     18                    17
                                                         EV/EBITDA                                                                                                                                              Factor                      6                     4
                                                         Stock capitalization                                                                                                                   CHF million                         694                         273
                                                         Book value per share                                                                                                                                    CHF                       50                    43
                                                         Dividend 1)                                                                                                                                             CHF                        1                     0
                                                    1)   Proposal to the Annual Shareholder’s Meeting on April 6th, 2004
Key Operating Figures


                                                                                                          Change
          in CHF million                                                          2003           2002       in %

          Net sales                                                          1 414.6        1 498.6          –6
          Change in gross sales adjusted for expansion in %                      – 7.5         – 11.8
          Gross profit                                                          825.7          834.0         –1




                                                                                                                   Share Price Development and Key Operating Figures
          Gross profit in % of net sales                                          58.4           55.7
          EBITDA 1)                                                             171.9          165.4        +4
          EBIT 2)                                                                 99.7           97.2       +3
          Net income                                                              37.5           15.9     + 136


          Cash flow from operating activities                                   190.5          198.9         –4
          Net cash used in investing activities                                  (18.5)         (30.5)     – 39
          Free cash flow                                                        172.0          168.4        +2



          Number of stores at year-end                                            779            775        +1
          Sales area at year-end in m2                                      583 340        581 323            0
          Net sales per m2 sales area 3)                                        2 437          2 647         –8

                                                                                                                          7
          Number of employees at year-end 4)                                    7 845          8 287         –5
          Average number of full-time employees on an annual basis 4)           5 312          5 689         –7
          Net sales per average number of full-time employees in CHF 4)     266 297        263 413          +1


          Number of clothing articles sold in 1000                            68 208         69 878
          Average net sales per article in CHF                                  20.74          21.45
          Range share in % – women’s                                                56             57
                               – men’s                                              31             30
                               – children’s                                         13             13


                                                                                                          Change
          in CHF million                                                    31. 12. 2003   31. 12. 2002     in %

          Net debt                                                              282.0          431.8       – 35
          Shareholders’ equity                                                  442.9          380.2       + 16
          Balance sheet total                                                1 075.4        1 182.2          –9
     1) Earnings before depreciation and amortization, interest and taxes
     2) Earnings before interest and taxes
     3) Calculated on the basis of average m2 sales area per month
     4) Excluding apprentices
Emotionalizing price and service
 Charles Vögele Group has positioned
 itself as a provider of modern
 fashions at attractive prices. This
 interplay of price and product
 is also the main focus of our commu-
 nications activities, constantly re-
 minding customers what the company
 stands for. The verbal exchanges
 between the actual products and their
 prices generate sympathy and
 emotion, thus personalizing both
 elements. The coming double-
 spread images show how Vögele
 conveys these emotions and
 how customers can come across
 this fresh dialogue at vari-
 ous moments during the day.




                                                 Friendly and knowledgeable!




                                                 Have you already visited




                                Always nearby!



                                                              Attractive prices!
                                            Fashion for the
                                              whole family!

    The latest fashions!




us...?




                           Great quality!
                                                   Board of Directors’ Report to Shareholders
                                                   Well on the Way
                                                   to a Successful Future


                                                                                        During the 2003 financial year, the Charles Vögele Group further im-
                                                                                        proved its business performance, consolidated its structures and
                                                                                        its long-term position in target markets, and won back its stakeholders’
                                                                                        confidence in the future of the company. This was far from easy in
Activity Report 2003 of the Charles Vögele Group




                                                                                        a market environment that was once again characterized by extremely
                                                                                        cautious private consumption. The fact that we were able to achieve
                                                                                        these interim goals in our strategy implementation process was due mainly
                                                                                        to our employees at every level and to the resolute leadership of Group
                                                                                        Management. Our employees deserve the Board of Directors’ gratitude for
                                                                                        their outstanding commitment in a very demanding period.
                                                                                     Operational progress
                                                                                        The year under review was one of the most challenging financial years in
                                                                                        the history of the Charles Vögele Group. Several aspects of the com-
                                                                                        pany’s strategic focus had to be adjusted quickly and decisively, a difficult
                                                                                        process that had to be tackled at a time when textile retailers in our
                                                                                        main markets of Switzerland and Germany were suffering from extremely
10                                                                                      depressed sentiment and weak growth.
                                                                                        Nevertheless, we were able to make some good operational progress last
                                                                                        year. The most important task was to strengthen our earnings power while
                                                                                        simultaneously reducing indebtedness. We were able to achieve this aim.
                                                                                        Despite these advances, we still have a lot of hard work to do if we are to
                                                                                        secure a sustainable future for our company. In particular, we have to
                                                                                        master numerous challenging projects in the value creation process over
                                                                                        the next two years.
                                                                                     Strategy implementation on schedule
                                                                                        This makes it all the more important that we forge ahead quickly and
                                                                                        rigorously with the implementation of the corporate strategy signed
                                                                                        off by the Board of Directors a year ago. We are currently right in the
                                                                                        middle of this implementation process. One of the crucial strategic
                                                                                        pillars is supply chain management – i.e. the optimization of the whole
                                                                                        value creation chain in our flow of goods. We embarked upon this
                                                                                        major challenge along with several other projects last year and are pleased
                                                                                        to say that the initial results are promising.
                                                                                  and Social Resp. Governance
                                                                                  Sustainability   Corporate
                                                                                                Investors
Competent management




                                                                                                Countries
  The strategy for achieving our corporate aims was signed off by the Board
  of Directors in 2002. Implementation of this strategy is in good hands.
  The new management team has performed very well on every level, and we
  can boast lean management structures and optimized decision-making
  processes. The management team led by Daniel Reinhard has quickly re-




                                                                                                Strategy
  vitalized the corporate culture and cultivated a confident underlying
  mood among staff at every level of the company. It is a great pleasure for
  the Board of Directors to witness and experience such a strong feeling




                                                                                  Management
  of new beginnings, driven by such enormous verve and dynamism in the
  daily working life of the whole company.




                                                                                  Report
  The Board has also noted with satisfaction that Pricewaterhouse-
  Coopers AG, chosen as our new auditors at the last general meeting of
  shareholders, has carried out a comprehensive audit of the Group’s




                                                                                                Board Report
  processes and IT-systems, and judged the Group’s internal control system
  as very well developed.
Proposed dividend                                                                             11
  The success achieved during the year under review, as well as the improved
  financial and earnings situation, has prompted the Board of Directors to
  propose to the forthcoming General Meeting that the company distribute
  a dividend in accordance with the defined dividend policy of CHF 1.00
  per share.
Cautious outlook
  For all the success we have enjoyed during the year under review, we must
  not get ahead of ourselves. The Charles Vögele Group has managed to
  steer itself into safer waters, but the rough climate still poses major chal-
  lenges for our company.
  Board and Management are, however, confident that despite the hesitant
  start to the economic recovery, they will be able to live up to their prom-
  ises in the current financial year, too, and keep the Charles Vögele Group
  firmly on the road to success.




  Carlo Vögele
  Chairman of the Board of Directors
                                                   Group Management Report
                                                   Operational Targets Met and
                                                   Group Result Improved


                                                                                The Charles Vögele Group’s main priorities during the 2003 financial year
                                                                                were the implementation of the strategy set out in 2002, and the exe-
                                                                                cution of measures derived from this strategy across all business areas.
                                                                                The company also worked on completing its management structure.
Activity Report 2003 of the Charles Vögele Group




                                                                                And from February 2003, it tackled the supply chain management pro-
                                                                                ject. This project involved an analysis, completed in June, which iden-
                                                                                tified potential savings and showed where improvements could be made
                                                                                in terms of processes and competitiveness. The relevant action is now
                                                                                being taken and will have an effect on results from the 2005 financial year
                                                                                onwards. Various legal disputes about branding rights and third-party
                                                                                claims were successfully concluded during the year under review, which
                                                                                should significantly reduce future latent process risks.
                                                                                These jobs had to be carried out in parallel with ongoing market develop-
                                                                                ment activities, which in the light of the challenging operating environ-
                                                                                ment and increasingly tough competition required us continually to adapt
                                                                                operational measures to the local market situation in individual coun-
12                                                                              tries. Our objectives were only met thanks to the exemplary dedication
                                                                                and exceptional motivation of all employees. Group Management would
                                                                                like to thank them for their outstanding commitment.
                                                                             Significant rise in Group earnings
                                                                                Improving returns remained the top priority during the year under re-
                                                                                view. Owing to the sales situation, nominal gross profits were down
                                                                                slightly on the previous year’s CHF 834.0 million at CHF 825.7 million,
                                                                                but the gross profit margin went up from 2002’s 55.7% to 58.4%.
                                                                                The rigorously implemented savings drive, the long-term reduction of
                                                                                process costs, and the extremely focused deployment of communica-
                                                                                tions expenditure led to a year-on-year increase in earnings (EBITDA) of
                                                                                CHF 171.9 million (previous year CHF 165.4 million).

                                                                                Earnings before interest and taxes (EBIT) of CHF 99.7 million were also
                                                                                better than in the previous year (CHF 97.2 million).
                                                                                This pleasing performance resulted in more than a doubling of Group
                                                                                earnings from CHF 15.9 million in 2002 to CHF 37.5 million. Another
                                                                                positive aspect was the operational performance of the sales organiza-
                                                                                tions, all of which were able to maintain and in some cases even improve
                                                                                on the high levels achieved in the previous year.
                                                                                                                            and Social Resp. Governance
                                                                                                                            Sustainability   Corporate
                                                                                                                                          Investors
                            Slightly slower fall in sales revenues




                                                                                                                                          Countries
                                   Despite the focus on profitability, the deliberately restrictive discounting
                                   policy and the sale of ten branches in The Netherlands, the fall in net
                                   sales revenues was not quite as steep as in the previous year. The initial
                                   boost given by an improved collection, as well as by our decision to
                                   present merchandise by colour range and fashion trend, made a positive




                                                                                                                                          Strategy
                                   impression, especially in the second half of the year. During the
                                   year under review, net sales reached CHF 1 414.6 million (previous year
                                   CHF 1 498.6 million) which represents a decline of – 5.6% (previous




                                                                                                                            Management
                                   year – 8.1%).
                            Cash flow still at a high level




                                                                                                                            Report
                                   At CHF 190.5 million (previous year CHF 198.9 million), cash flow from
                                   operating activities was once again at a high level. This was fuelled
                                   by the constant very healthy EBIT result, which came to CHF 99.7 million




                                                                                                                                          Board Report
                                   (previous year CHF 97.2 million), and from the further reduction in
                                   inventories.
                                   As in 2002, expansion activities were concentrated on successful mar-                                13
                                   kets; new branch openings were subjected to a rigorous examination
                                   of specific local potential. Net cash used in investment activities reached
                                   CHF – 18.5 million (previous year CHF – 30.5 million), an extremely
                                   low level compared with previous years. Overall this resulted in free cash
                                   flow of CHF 172.0 million (previous year 168.4 million).




                                      Number of employees                                          Sales locations
                                      per Sales Organization                                       per Sales Organization




                      Austria 1207
                                                                                     Austria 132




Belgium and The Netherlands 1373        Germany 2 717          Belgium and The Netherlands 138          Germany 353




                           Switzerland 2 308                                          Switzerland 156
                                                                       Reduction of net debt ahead of schedule
                                                                           Thanks to the continuing positive free cash flow trend, during the year
                                                                           under review, we were able to reduce net debt by CHF 149.8 mil-
                                                                           lion from 2002’s CHF 431.8 to CHF 282.0 million, thus greatly exceed-
                                                                           ing the target set at the start of 2002, which was to reduce net debt
Activity Report 2003 of the Charles Vögele Group




                                                                           by CHF 100.0 million. All loan tranches due in the year under review
                                                                           were repaid early. In addition, the amortization of CHF 75.0 million
                                                                           planned for the financial year 2004 had already been achieved by the
                                                                           end of December 2003. This means that all loan repayments agreed
                                                                           until the end of the contract have already been repaid in full. A total of
                                                                           CHF 177.5 million in bank debts was paid back during the year under
                                                                           review. Net debt thus reached its lowest level since 1999.
                                                                           The company’s equity capital base also improved considerably in 2003.
                                                                           Thanks to operating profits, but also to positive currency influences,
                                                                           it went up from 32% in the previous year to 41%.
                                                                       Continued successful reduction in merchandise inventory
14
                                                                           The systematic integration of existing merchandise into the design of the
                                                                           new seasonal collections has allowed us to reduce inventories of the
                                                                           current and previous seasons from CHF 314.0 million to 248.3 million
                                                                           within a year, a reduction of CHF 65.7 million. Furthermore, it has
                                                                           to be taken into consideration that inventories at the end of 2003 already
                                                                           included new items for the 2004 spring/summer collection worth
                                                                           CHF 57.1 million or 72% more than last year’s CHF 33.2 million. The
                                                                           significant reduction in inventories from 44.1 million to 36.0 million
                                                                           items has produced a massive improvement in the inventory structure,
                                                                           and allowed us to give notice on external storage space rented from
                                                                           other companies.




                                                                                      Net sales 2003
                                                                                      in % by country




                                                   Belgium and The Netherlands 10.5



                                                                 Austria 17.5
                                                                                        Switzerland 36.9




                                                                       Germany 35.1
                                                                                and Social Resp. Governance
                                                                                Sustainability   Corporate
                                                                                              Investors
Outlook




                                                                                              Countries
  The top priority for the 2004 financial year is to initiate a turnaround
  in sales revenues. The Charles Vögele Group aims to achieve this goal
  by improving its market performance. Despite the signs of economic re-
  covery, Group Management does not believe that private households
  will find themselves with higher disposable income, or that consumer sen-




                                                                                              Strategy
  timent will improve significantly. In 2004, the unresolved issues of
  government debt, unemployment, and pension provision will continue to
  unsettle people and affect the mood of consumers in all the markets




                                                                                Management
  where the Charles Vögele Group is active.
  As long as there are no unexpected market developments this year, we




                                                                                Report
  should be able to maintain the level of operating earnings (EBITDA)
  seen in 2003. This performance will be driven by more aggressive market
  development activities, an improved process chain, and further boosts




                                                                                              Board Report
  from collection design and the presentation of merchandise at the point
  of sale. The Charles Vögele Group continued with its selective expansion
  policy in 2004, focusing primarily on new locations in profitable markets.
                                                                                            15
  In parallel with the improvement in sales trends and the strengthening of
  corporate results, the activities of all employees are focused on imple-
  menting the fifty or so sub-projects that are currently running as part of
  the supply chain management project. Most of these should be com-
  pleted this year. Realizing the measures we have defined is the key to mak-
  ing the company strong enough to develop the market successfully and
  thus to master the challenges to come.




  Daniel Reinhard
  Chief Executive Officer
Weather creates awareness
 Vögele has sponsored the weather
 forecast on SFDRS, Switzerland’s
 main television station, since 1996,
 which has helped to push
 awareness of the brand throughout
 Switzerland up to 91.45%.
 This level of awareness forms
 a solid foundation for all our
 communications activities, ensuring
 that all the different target
 groups are constantly reminded
 of the company. This is where
 the image of a company providing
 clothes for the whole family is
 born and developed. Sponsorship
 of the weather forecast in                   In your
 Switzerland was adapted to the
 new communications concept             evening program...
 at the beginning of 2004, and since
 then has also been used in
 Austria as a traditional TV ad.




                                                          “Uh oh...”




                                        “Right, time
                                         for some fun.”
                                                             “Phew!”


“Uh oh...”                         “Uh oh...”




                               “I’ve missed
                                the football”

             “How romantic!”                                     “How romantic!”




                                          “What about me?”
                                                   Strategy and Supply Chain Management
                                                   On-Schedule Implementation Brings
                                                   First Signs of Success


                                                                                     Implementation of the strategy approved in 2002 went ahead at full
                                                                                     speed during the 2003 financial year. Numerous measures have already
                                                                                     been carried out and we are beginning to see the first positive effects.
                                                                                     Some projects, especially those of a strategic nature, are still underway.
Activity Report 2003 of the Charles Vögele Group




                                                                                     The aim is to complete most of these by the end of 2004.
                                                                                  Completion of management structure
                                                                                     On January 1st, 2003, the new Chief Financial Officer, Dr. Felix Thöni,
                                                                                     took up his post as a member of Charles Vögele’s Group Man-
                                                                                     agement. The new Head of Supply Chain, Dr. Andreas Stockert, began
                                                                                     work as a member of the second tier of management on February 1st,
                                                                                     2003. These new appointments completed the establishment of a man-
                                                                                     agement structure tailored to the Group’s current needs. Together,
                                                                                     the first and second tiers of management comprise 23 people who have
                                                                                     worked together very well during the year under review and already
                                                                                     formed a real team.

18
                                                                                  Buying and collections
                                                                                     In order to further improve the consistency of the collections, the buying
                                                                                     department has set up 12 new teams that work closely together
                                                                                     on collection design. This structure ensures improved know-how transfer,
                                                                                     guarantees the continuity of the collection in terms of fit, pricing and
                                                                                     quality, and thus contributes to sustained product improvement. Closer
                                                                                     cooperation also produces buying synergies and greater potential for
                                                                                     innovation.
                                                                                 and Social Resp. Governance
                                                                                 Sustainability   Corporate
                                                                                               Investors
                                                                                               Countries
 The first collection put together by the newly organized buying depart-
 ment was the 2003 autumn/winter collection, in which the positive
 influences of the new management structure are already apparent. The
 centerpiece of the new approach was the introduction of modular
 buying plans that allow individual adjustment of the collection to suit




                                                                                               Strategy
 the needs of different branch sizes and sales markets. In order to take
 better account of our target client groups’ needs, the number of own la-
 bels was also reduced. This has helped to improve consistency with




                                                                                 Management
 regard to fashion, fit and pricing within a label. It has also made it easier
 for clients to find the fashions that they feel comfortable with. By in-




                                                                                 Report
 creasing customer confidence, this helps to turn shoppers into regular cus-
 tomers. The number of external brands was also reduced and is now
 limited to carefully selected strategic complements. This concentration




                                                                                               Board Report
 has allowed us to present the brands more professionally and has
 helped round out the upper end of our range.
 By reducing the number of suppliers to fewer than 400 and thus cutting
 the number of supplier countries, we streamlined the buying process                         19

 and simplified procedures. The reduction in numbers is based on a new
 evaluation system that measures qualitative and quantitative aspects
 such as product quality and process reliability, as well as specific social
 criteria on the suppliers’ side.
Communication and presentation
 With the launch of the 2003 spring/summer collection, the Charles Vögele
 Group also introduced a new communications campaign, which aims
 to emotionalize the price and to position the Group as a provider of mod-
 ern fashions at attractive prices. This message is visualized in an actual
 dialogue between product and price and consistently implemented in all
 communications platforms (including the image concept for this Annual
 Report). Alongside this adjustment to the marketing message, the portfolio
 of communications tools was optimized to suit the company’s new
 requirements. The content and design of our “Modeblatt” advertising
 brochure, for example, was revised, and billboard advertising was intro-
 duced as a new instrument in Switzerland. Owing to their great success
 in the company’s home market, in 2004 billboards will also be added to
 the communications mix in other countries where Vögele is active.
                                                     A detailed new concept has been worked out for another core marketing
                                                     instrument: the presentation of goods in branches. This concept goes
                                                     right down to the level of individual groups of goods and has been under
                                                     test in 20 pilot branches since September 2003. This pilot project,
Activity Report 2003 of the Charles Vögele Group




                                                     covering five branches in each of four countries, is running until the end
                                                     of April 2004. Using a basic layout for each type of branch, rules are
                                                     laid down for which groups of goods can be displayed on which stands,
                                                     and how these stands can be arranged in the branches. In order to
                                                     give customers more ideas about how different items could be combined,
                                                     the displays are now arranged by fashion theme and colour combi-
                                                     nation. The new concept is being put into practice in two stages. Once
                                                     the test results have been evaluated and any corrections made, the
                                                     plan is to gradually convert our 779 branches. 15% of branches will be
                                                     given the new layout in 2004, about 60% in 2005, and the remaining
                                                     25% in 2006.
                                                   Supply chain management
20                                                   The supply chain management project was launched in February 2003.
                                                     It analyzes not only transportation logistics, but every single process
                                                     from the production of the initial outline collection plan to the way goods
                                                     are displayed at the point of sale. This central project is of strategic im-
                                                     portance to the Charles Vögele Group because it encompasses the entire
                                                     company, focuses on the way all departments work together, and re-
                                                     views all the major processes. The analysis phase, completed in mid-2003,
                                                     has revealed considerable potential for savings. This improved effi-
                                                     ciency will feed through to the profit and loss account from the 2005 fi-
                                                     nancial year onwards. The investments required to implement these
                                                     savings are one-off costs. The qualitative improvements that will result
                                                     from a revised supply chain are equally important: better collections,
                                                     less complex processes, and greater punctuality with regard to deadlines
                                                     will all have a positive effect on product marketing and thus deliver
                                                     additional impetus.
                                                                               and Social Resp. Governance
                                                                               Sustainability   Corporate
                                                                                             Investors
                                                                                             Countries
The first concrete result of this revision of the supply chain is the reduc-
tion in suppliers to fewer than 400. The relocation of the central storage
warehouse from Rotterdam (The Netherlands) to Lehrte (Germany)
was also made possible by this project. This move reduced the external
service costs previously incurred in Rotterdam while simultaneously




                                                                                             Strategy
achieving better utilization of existing storage capacity in Lehrte. The
Group also benefited from another new service in the form of central-
ized quality assurance. On the wider front, the supply chain pro-




                                                                               Management
gramme is seeing projects implemented in the following areas: outline
collection planning, buying and supply, logistics and point-of-sale.




                                                                               Report
All of these projects are running to a precise timetable and will be 70%
complete by the end of 2004.




                                                                                             Board Report
                                                                                           21
“Modeblatt” generates frequency
 The “Modeblatt” advertising
 brochure is the Charles Vögele
 Group’s main advertising tool.
 Every week 11.2 million copies are
 distributed to house-holds in
 Switzerland, Austria, Germany, The
 Netherlands and Belgium. Every
 week it tells people about the latest
 collections, bargains and sea-
 sonal trends. This means that cus-
 tomers can react immediately
 and go to their nearest store to take
 a closer look at whatever has
 caught their eye.




                                         Fashionable
                                            SPRINGTIME!

                                               Suede jacket


                                             only   39 90
                                              Jacket




          Taslan jacket


          59 90            Striped pullover


                          only   19      90        Blouson
                                                             Jacket




       Jackets for
WIND & WEATHER




   In your mail...
                                                   Sales Organization in Switzerland
                                                   Results Maintained at a High Level




                                                                                          Consumer sentiment in Switzerland remained depressed for the whole of
                                                                                          2003, and even reached record lows at the start of the year and during the
                                                                                          hot summer months. This inevitably had an impact on market perform-
                                                                                          ance: as in the previous year, revenues for the clothing industry as a whole
Activity Report 2003 of the Charles Vögele Group




                                                                                          continued to fall. The aggressive pricing introduced by some companies
                                                                                          in 2002 persisted in the year under review.
                                                                                          In this difficult environment, the Swiss sales organization posted net sales
                                                                                          revenues of CHF 522.5 million, which is 7.8% down on the previous
                                                                                          year (CHF 566.8 million). This was due to three main factors: firstly, the
                                                                                          deterioration of the market as a whole; secondly, our strategic focus on
                                                                                          profitability rather than pure revenue growth; and thirdly, the clear-out of
                                                                                          remaining old stock. Sales patterns exactly matched the price policy
                                                                                          chosen for the market. While most of the falls in sales came during dis-
                                                                                          counting periods, recoveries were regularly staged during periods when
                                                                                          prices were at their normal levels. Within the Swiss sales organization, the
                                                                                          second half performance was better than the first.
24
                                                                                                  Average net sales




                                                                                                                            in CHF million




                                                                                                                                                             in CHF 1 000




                                                                                                                                                                                                  in CHF 1 000
                                                                         articles sold
                                                                         Number of




                                                                                                  per article




                                                                                                                            Net sales
                                                                         in 1 000




                                                                                                                                                             EBITDA
                                                                                                  in CHF




                                                                                                                                                                                                  EBIT




                                                                30 000                      30                        720                          120 000
                                                                                                       26.61
                                                                                 24 973




                                                                                                    25.20

                                                                                                   24.92
                                                                                                  24.44




                                                                                                                                606
                                                                                                  24.28




                                                                                                                               600
                                                                              23 831




                                                                                                                                                                                90 414
                                                                            22 748




                                                                                                                            567
                                                                                                                            560




                                                                25 000                      25                        600                          100 000
                                                                          21 379
                                                                         21 040




                                                                                                                                             523




                                                                                                                                                              79 523
                                                                                                                                                             77 124



                                                                                                                                                                                         77 079




                                                                                                                                                                                                                     70 515




                                                                20 000                      20                        480                           80 000
                                                                                                                                                                       61 390




                                                                                                                                                                                                  59 353
                                                                                                                                                                                                  58 452



                                                                                                                                                                                                                              56 917




                                                                15 000                       15                       360                           60 000
                                                                                                                                                                                                            32 924




                                                                10 000                       10                       240                           40 000


                                                                 5 000                       5                        120                           20 000


                                                                    0                        0                          0                               0
                                                                         99
                                                                         00
                                                                         01
                                                                         02
                                                                         03




                                                                                                  99
                                                                                                  00
                                                                                                  01
                                                                                                  02
                                                                                                  03




                                                                                                                            99
                                                                                                                            00
                                                                                                                            01
                                                                                                                            02
                                                                                                                            03




                                                                                                                                                             99
                                                                                                                                                             00
                                                                                                                                                             01
                                                                                                                                                             02
                                                                                                                                                             03


                                                                                                                                                                                                  99
                                                                                                                                                                                                  00
                                                                                                                                                                                                  01
                                                                                                                                                                                                  02
                                                                                                                                                                                                  03
                                                                                               and Social Resp. Governance
                                                                                               Sustainability   Corporate
                                                                                                             Investors
                                                                                                             Countries
                   Thanks to our concentration on profitability, an improved process
                   chain and rigorous cost management, the fall in operating earnings
                   (EBITDA) was kept within bounds despite the decline in sales revenues.
                   At CHF 77.1 million, EBITDA was below the previous year’s record
                   figure of CHF 90.4 million. Inventories in Switzerland were down by a




                                                                                                             Strategy
                   hefty 15%, reaching 9.4 million items by the end of the year under
                   review (previous year 11.0 million items).
                   As part of the firm’s expansion, one branch each was opened in




                                                                                               Management
                   Collombey, Frauenfeld and Belp. The Sursee branch was relocated and
                   its sales area expanded. This means that Vögele now has 156 stores




                                                                                               Report
                   in Switzerland. Sales area increased from 123 848 m2 in the previous year
                   to 126 467 m2. Billboard advertising was used in Switzerland for the
                   first time during the year under review, adding a powerful new tool to




                                                                                                             Board Report
                   our range of communications instruments. The campaigns launched
                   at the beginning of each season enjoyed high recognition rates right from
                   the start, and will be intensified this year.
                                                                                                           25
                   The number of employees fell from 2 500 to 2 308 in the wake of the or-
                   ganizational optimizations begun in the previous year. Total full-time
                   equivalents also fell 10.9% from 2002’s 1 576 to 1 405. Vögele is a major
                   provider of training places in all of Switzerland’s regions. During the
                   year under review, 308 apprentices were employed in many different parts
                   of the company (previous year: 349).
                           Number of
                           employees
      of stores
      Number




180                3 000
                                          2 654
                                          2 637
             156




                                       2 500
            153
          148




                           2 370



                                   2 308
        142




150                2 500
      133




120                2 000


 90                1 500


 60                1 000


 30                 500


  0                   0
      99
      00
      01
      02
      03




                           99
                           00
                           01
                           02
                           03
                                                   Sales Organization in Germany
                                                   Significant Improvement
                                                   in Operating Performance


                                                                                                 Although people were already talking about 2002 as “the worst year since
                                                                                                 the Fifties” for the German retail sector, the trend in consumer markets
                                                                                                 got even worse during the year under review. A lack of belief in the eco-
                                                                                                 nomic upswing combined with rising unemployment, living costs and
Activity Report 2003 of the Charles Vögele Group




                                                                                                 pension contributions to create widespread unease in the population, and
                                                                                                 thus to reduce disposable income. With consumption at such a low
                                                                                                 level, the market for textiles suffered, leading to closures, insolvency and
                                                                                                 the cancellation of expansion plans throughout the sector.
                                                                                                 Our German sales organization felt the pressure too, posting net sales rev-
                                                                                                 enues of CHF 496.8 million, which was 5.6% down on the previous year’s
                                                                                                 CHF 526.2 million. For the sector as a whole, including Vögele, the long
                                                                                                 heat-wave in the summer led to a decline in the frequency of shopping
                                                                                                 trips to town centers and discount stores. As a result, at the beginning of
                                                                                                 the second half-year, the already intense competitive environment be-
                                                                                                 came even tougher. Nevertheless, performance figures for the second six
                                                                                                 months were better than for the first. Once again there was a difference
26                                                                                               between developments in southern Germany and those in the north of the
                                                                                                 country. While the high level of old merchandise and the sub-optimal
                                                                                                 collection design hurt sales in northern Germany; southern Germany con-
                                                                                                 tinued to perform satisfactorily.
                                                                                                         Average net sales




                                                                                                                                   in CHF million




                                                                                                                                                               in CHF 1 000




                                                                                                                                                                                                   in CHF 1 000
                                                                        articles sold
                                                                        Number of




                                                                                                         per article




                                                                                                                                   Net sales
                                                                        in 1 000




                                                                                                                                                               EBITDA
                                                                                                         in CHF




                                                                                                                                                                                                   EBIT




                                                               36 000                              30                        720                      45 000
                                                                                        30 060




                                                                                                                                               579
                                                                                  26 666




                                                                                                                                                                  21 384
                                                                                  26 490




                                                               30 000                              25                        600                      30 000
                                                                                 25 517




                                                                                                                                            531
                                                                                                              21.68




                                                                                                                                                               17 023
                                                                                                                                          526
                                                                                                                                         497
                                                                                                           20.05




                                                                                                                                                                                                   13 240
                                                                                                          19.73
                                                                                                         19.47
                                                                                                         19.26




                                                                                                                                                                                           8 170




                                                               24 000                              20                        480                      15 000
                                                                        17 833




                                                                                                                                   387




                                                                                                                                                                                                            812
                                                                                                                                                                                     137




                                                               18 000                              15                        360                          0
                                                                                                                                                                                                                                 – 14 792




                                                               12 000                              10                        240                     –15 000
                                                                                                                                                                           –14 827




                                                                                                                                                                                                                            –21 782




                                                                6 000                               5                        120                     –30 000
                                                                                                                                                                                                                  –34 022




                                                                   0                                0                          0                     –45 000
                                                                        99
                                                                        00
                                                                        01
                                                                        02
                                                                        03




                                                                                                         99
                                                                                                         00
                                                                                                         01
                                                                                                         02
                                                                                                         03




                                                                                                                                   99
                                                                                                                                   00
                                                                                                                                   01
                                                                                                                                   02
                                                                                                                                   03




                                                                                                                                                               99
                                                                                                                                                               00
                                                                                                                                                               01
                                                                                                                                                               02
                                                                                                                                                               03


                                                                                                                                                                                                   99
                                                                                                                                                                                                   00
                                                                                                                                                                                                   01
                                                                                                                                                                                                   02
                                                                                                                                                                                                   03
                                                                                                         and Social Resp. Governance
                                                                                                         Sustainability   Corporate
                                                                                                                       Investors
                                                                                                                       Countries
                          Thanks to the systematic reduction of inventories, as well as to cost-
                          savings and efficiency gains generated by the merger of the two German
                          businesses in October 2002, there was a further improvement in oper-
                          ating performance. EBITDA was CHF 8.2 million – considerably better
                          than the previous year’s CHF 0.1 million. The opening of the Group’s




                                                                                                                       Strategy
                          new distribution center in Lehrte also helped to boost profitability. Since
                          July 2003, all supplies from overseas have been delivered to the new
                          center. More extensive logistics and quality assurance services are also be-




                                                                                                         Management
                          ing carried out for the whole Group at Lehrte. Inventories in Germany
                          were down by about 17% to reach 15.6 million items by the end of the




                                                                                                         Report
                          year under review (previous year 18.9 million items).
                          During the year under review, twelve branches were opened in Germany,
                          mainly in the south of the country, and five closed, thus giving Vögele




                                                                                                                       Board Report
                          353 German outlets. The sales area rose from 259 896 m2 to 264 850 m2.
                          Despite expansion the number of employees fell from 2 788 in the pre-
                          vious year to 2 717. Total full-time equivalents dropped to 1 941 (previous
                          year 2 093). The number of apprentices employed in Germany rose                            27
                          from 78 in the previous year to 111.
                                  Number of
                                  employees
      of stores
      Number




420                       3 600
                                               2 940
                    353
                    346




                                            2 788
                  330




                                          2 717
                                          2 703




350                       3 000
            291




280                       2 400
                                  1 931
      205




210                       1 800


140                       1 200


 70                         600


  0                           0
      99
      00
      01
      02
      03




                                  99
                                  00
                                  01
                                  02
                                  03
                                                   Sales Organization in Austria
                                                   Higher Sales and Better Results




                                                                                                 Although Austria has seen more resilient consumer sentiment than
                                                                                                 the other European markets targeted by the Charles Vögele Group, the
                                                                                                 year 2003 was still an extremely difficult one from a purely Austrian
                                                                                                 perspective. According to OECD surveys, there was an increase in the sav-
Activity Report 2003 of the Charles Vögele Group




                                                                                                 ing rate among Austrian private households, and in terms of private
                                                                                                 consumption there was a discernible shift towards spending on sport and
                                                                                                 leisure, which led to a general decline in the clothing sector.
                                                                                                 Net sales revenues for the Austrian sales organization went up from
                                                                                                 CHF 243.4 million in the previous year to CHF 247.4 million, represent-
                                                                                                 ing a rise of 1.6%. This success is all the more notable for having been
                                                                                                 achieved in a declining market and an increasingly hard-fought competi-
                                                                                                 tive environment. Owing to expansion and intensive market devel-
                                                                                                 opment measures, operating costs were up slightly on the previous year.



28
                                                                                                         Average net sales




                                                                                                                                   in CHF million




                                                                                                                                                               in CHF 1 000




                                                                                                                                                                                               in CHF 1 000
                                                                         articles sold
                                                                         Number of




                                                                                                         per article




                                                                                                                                   Net sales
                                                                         in 1 000




                                                                                                                                                               EBITDA
                                                                                                         in CHF




                                                                                                                                                                                               EBIT




                                                                18 000                             30                        300                      42 000
                                                                                                                                                247

                                                                                                                                               247
                                                                                                                                               243




                                                                                                                                                               32 165
                                                                                                                                                               31 962




                                                                15 000                             25                        250                      35 000
                                                                                                              22.05




                                                                                                                                         227
                                                                                        12 750
                                                                                       12 503




                                                                                                            21.01




                                                                                                                                                                                                28 170
                                                                                     12 066




                                                                                                                                                                                               27 533
                                                                                                          20.17




                                                                                                                                                                                      26 976
                                                                                                         19.76

                                                                                                         19.41




                                                                                                                                   194
                                                                                 10 790




                                                                                                                                                                                  24 525




                                                                12 000                             20                        200                      28 000
                                                                                                                                                                                                                   20 938
                                                                                                                                                                                                                  20 107
                                                                         8 797




                                                                 9 000                             15                        150                      21 000
                                                                                                                                                                         15 958




                                                                                                                                                                                                         11 475




                                                                 6 000                             10                        100                      14 000


                                                                 3000                               5                         50                       7 000


                                                                    0                               0                          0                          0
                                                                         99
                                                                         00
                                                                         01
                                                                         02
                                                                         03




                                                                                                         99
                                                                                                         00
                                                                                                         01
                                                                                                         02
                                                                                                         03




                                                                                                                                   99
                                                                                                                                   00
                                                                                                                                   01
                                                                                                                                   02
                                                                                                                                   03




                                                                                                                                                               99
                                                                                                                                                               00
                                                                                                                                                               01
                                                                                                                                                               02
                                                                                                                                                               03


                                                                                                                                                                                               99
                                                                                                                                                                                               00
                                                                                                                                                                                               01
                                                                                                                                                                                               02
                                                                                                                                                                                               03
                                                                                                          and Social Resp. Governance
                                                                                                          Sustainability   Corporate
                                                                                                                        Investors
                                                                                                                        Countries
                              In Austria, as elsewhere, our rigorous concentration on profitability led
                              to a further improvement in operating performance, with EBITDA going
                              up from CHF 24.5 million in the previous year to CHF 27.0 million.
                              A total of eight new stores were opened, while four were closed. With
                              its 132 branches in the country, Vögele further expanded its leading




                                                                                                                        Strategy
                              position in Austria as measured by sales space. Available sales space was
                              increased during the year under review to 95 563 m2 (previous year
                              91 600 m2). Inventories were down by 23% to reach 4.8 million items




                                                                                                          Management
                              by the end of the year under review (previous year 6.2 million items).
                              Despite expansion, the number of employees actually fell slightly to




                                                                                                          Report
                              1 207 (previous year 1 249), but full-time equivalent posts went
                              up from 882 to 896. The number of people in training went up sharply
                              in the year under review from 83 in 2002 to 99. The increase in new




                                                                                                                        Board Report
                              apprenticeships from 30 to 45 per year is the largest in the company’s
                              history and underlines the desire to offer young apprentices a posi-
                              tion even when economic conditions are difficult. With its comprehen-
                              sive presence in Austria, Vögele takes a leading role in professional                   29
                              training for young people in the textiles retail sector.
                                      Number of
                                      employees
      of stores
      Number




180                           1 800


150                           1 500
                        132




                                                   1 249
                       128




                                                 1 207
                                               1 156
                 117




                                            1 073




120                           1 200
           106




                                      903
      88




 90                            900


 60                            600


 30                            300


  0                              0
      99
      00
      01
      02
      03




                                      99
                                      00
                                      01
                                      02
                                      03
                                                   Sales Organizations in Belgium and The Netherlands
                                                   Inventory Reduced,
                                                   Operational Structure and Results Improved


                                                                                                   Economic conditions in Belgium and especially The Netherlands deterio-
                                                                                                   rated during the year under review. In the third quarter, the Dutch
                                                                                                   economy recorded its worst decline in years. Unemployment continued
                                                                                                   to rise in both countries. These conditions inevitably had an effect on
Activity Report 2003 of the Charles Vögele Group




                                                                                                   textile retailers, which as a group suffered from falling sales figures and
                                                                                                   sinking prices. While some of our rivals in The Netherlands closed
                                                                                                   branches, in Belgium there was a discernible trend away from town-
                                                                                                   center shopping to suburban shopping center locations.
                                                                                                   Implementation of its strategy led the Charles Vögele Group to sell ten
                                                                                                   Dutch branches that did not fit into the business model owing to
                                                                                                   their size. These disposals were cost-neutral and the new owners took
                                                                                                   on nearly all the staff employed in the stores concerned. One of our
                                                                                                   main achievements in The Netherlands was to optimize our organiza-
                                                                                                   tional and branch structure, thus facilitating a further improvement
                                                                                                   in profitability. This involved terminating several external logistics and
                                                                                                   service agreements that were made unnecessary by the successful
30                                                                                                 reduction of inventories and the relocation of our distribution center to
                                                                                                   Lehrte (Germany). There were no significant changes in the branch
                                                                                                   structure in Belgium.
                                                                                                           Average net sales




                                                                                                                                              in CHF million




                                                                                                                                                                                  in CHF 1 000




                                                                                                                                                                                                                   in CHF 1 000
                                                                        articles sold
                                                                        Number of




                                                                                                           per article




                                                                                                                                              Net sales
                                                                        in 1 000




                                                                                                                                                                                  EBITDA
                                                                                                           in CHF




                                                                                                                                                                                                                   EBIT




                                                               18 000                                 30                                240                              75 000
                                                                                                                                                          198




                                                               15 000                                 25                                200                              50 000
                                                                                  12 311




                                                                                                            20.52
                                                                                                           19.89




                                                                                                                                                                  162
                                                                                                                                19.29




                                                                                                                                                                148




                                                               12 000                                 20                                160                              25 000
                                                                                                                            17.27
                                                                                                                    16.11
                                                                                           8 562
                                                                                           8 398




                                                                9 000                                 15                                120                                  0
                                                                                                                                                                                       –8 949




                                                                                                                                                                                                                       –10 381
                                                                                                                                                                                                        – 18 493
                                                                                                                                                                                  –19 760




                                                                                                                                                                                                                   –21 851




                                                                6 000                                 10                                 80                             –25 000
                                                                                                                                                                                                      –24 318




                                                                                                                                                                                                                                            – 29 568
                                                                                                                                                    56




                                                                                                                                                                                                                                           –34 778
                                                                          2 829




                                                                                                                                              45




                                                                                                                                                                                                –41 011
                                                                        2 204




                                                                3 000                                  5                                 40                             –50 000
                                                                                                                                                                                                                                 –54 518




                                                                   0                                   0                                  0                             –75 000
                                                                        99
                                                                        00
                                                                        01
                                                                        02
                                                                        03




                                                                                                           99
                                                                                                           00
                                                                                                           01
                                                                                                           02
                                                                                                           03




                                                                                                                                              99
                                                                                                                                              00
                                                                                                                                              01
                                                                                                                                              02
                                                                                                                                              03




                                                                                                                                                                                  99
                                                                                                                                                                                  00
                                                                                                                                                                                  01
                                                                                                                                                                                  02
                                                                                                                                                                                  03


                                                                                                                                                                                                                   99
                                                                                                                                                                                                                   00
                                                                                                                                                                                                                   01
                                                                                                                                                                                                                   02
                                                                                                                                                                                                                   03
                                                                                                     and Social Resp. Governance
                                                                                                     Sustainability   Corporate
                                                                                                                   Investors
                                                                                                                   Countries
                         Net sales revenues for the Belgian and Dutch sales organizations
                         reached CHF 147.9 million, which is 8.7% down on the previous year’s
                         figure of CHF 162.0 million. This decline can be attributed to the sale
                         of the branches, but also to the deterioration of the market. A further
                         reason was the exceptionally high proportion of old merchandise on




                                                                                                                   Strategy
                         the sales floors, which was in turn a by-product of the rigorous reduc-
                         tion of inventories. Despite this accelerated reduction in stock, the
                         gross profit margin was improved. Thanks to the introduction of the




                                                                                                     Management
                         2004 spring/summer collection, our stores are now carrying mainly
                         new items.




                                                                                                     Report
                         At CHF – 18.5 million, EBITDA was 23.9% better than the previous year’s
                         CHF – 24.3 million. The key factors in this development were the sub-
                         stantial reduction in inventories, rigorous cost management, productivity




                                                                                                                   Board Report
                         gains, and the structural optimizations mentioned earlier. Overall,
                         inventories in Belgium and The Netherlands fell by about 23% to reach
                         6.1 million items by the end of the year under review (previous year
                         7.9 million items).                                                                     31

                         Across the two sales organizations, one branch was opened and eleven
                         were closed or sold. Consequently, the Charles Vögele Group now
                         has 138 outlets in Belgium and The Netherlands (previous year 148), with
                         a total sales area of 96 460 m2 (previous year 105 979 m2). Owing to
                         the sale of branches, the number of employees has fallen again. During
                         the year under review 1 373 people were employed (previous year
                         1 505), giving an equivalent of 857 full-time posts (previous year 934).
                                 Number of
                                 employees
      of stores
      Number




180                      1 800
                                               1 584
                                            1 505
                   149
                   148




                                        1 373




150                      1 500
                138




120                      1 200


 90                       900
                                 546
                                 535




 60                       600
           37
      31




 30                       300


  0                         0
      99
      00
      01
      02
      03




                                 99
                                 00
                                 01
                                 02
                                 03
Advertisements give flexibility
on the market
  It is extremely important for us
  to be able to react quickly to market
  developments, and few other
  marketing tools can match newspaper
  and magazine advertisements
  for speed of implementation and pre-
  cision targeting of specific customer
  groups. Depending on the weather it
  could be a pullover or a t-shirt, de-
  pending on the target group it could
  be a blouse or a formal shirt,
  depending on the season it could be
  the latest collection or the latest
  bargain. Above all, however, press
  ads are seen when someone is
  already in a positive frame of mind:
  the customer has already de-
  cided to do something nice and
  read their magazine.




                                                                                      “That must be fun.”




                                           While reading your
                                          favourite magazine...

                                                                   “It is with me.”




                                                                  24 90
                                 “Dressed to kill.”


“Lovely, light and airy.”
                                                                             “You hardly
                                                                          notice I’m there.”




                             “Prices to die for.”




     “And I won’t
   weigh you down.”
                            99 90                     “Do you mean me?”




19          90                                           29 90
                                                   Information for Investors
                                                   The Company and Its Orientation



                                                                                              The Charles Vögele Group is the largest retailing company for fashion
                                                                                              garments in its established segment in Switzerland and also occupies
                                                                                              a leading position in Europe. The Charles Vögele Group appeals to cus-
                                                                                              tomers who take their line from established fashion trends and look
                                                                                              for good-quality, value for money garments. The Group is thus positioned
Activity Report 2003 of the Charles Vögele Group




                                                                                              in the value for money segment, a segment it is convinced will con-
                                                                                              tinue to grow as a result of the continuing polarization of demand toward
                                                                                              the high- and low-price segments.
                                                                                               The company’s strategies are primarily based on:
                                                                                             – a clear focus on the value for money customer segment
                                                                                             – a standardized basic product range with refinements for each country
                                                                                             – uniform, centralized purchasing
                                                                                             – standardized shop-fitting and merchandizing
                                                                                             – a centralized and decidedly lean management structure
                                                                                              The Charles Vögele Group operates a total of 779 branches in Switzerland,
                                                                                              Germany, Austria, Belgium, and The Netherlands. For the next two
34
                                                                                              years expansion activities will concentrate on existing markets to consoli-
                                                                                              date the company’s position and to dynamize and further standardize
                                                                                              business processes. The possibility of opening up new markets will be ex-
                                                                                              amined again as soon as the Group has finished consolidating and
                                                                                              ensuring sustainable profitability in all the markets in which it operates.
                                                                                                       Number of
                                                                                                       employees
                                                                         of stores
                                                                         Number




                                                                  900                         12 000
                                                                                       779
                                                                                       775
                                                                                     744




                                                                  750                         10 000
                                                                                                                           8 543
                                                                                                                          8 287
                                                                                                                       7 845
                                                                               576




                                                                                                               7 098




                                                                  600                          8 000
                                                                                                       5 900
                                                                         457




                                                                  450                          6 000


                                                                  300                          4 000


                                                                  150                          2 000


                                                                    0                             0
                                                                         99
                                                                         00
                                                                         01
                                                                         02
                                                                         03




                                                                                                       99
                                                                                                       00
                                                                                                       01
                                                                                                       02
                                                                                                       03
                                                                                                                                                                                 and Social Resp. Governance
                                                                                                                                                                                 Sustainability   Corporate
                                                                                                                                                                                               Investors
     Condensed Group Income Statement

     in CHF 1 000                                                                                                                                             2003        2002




                                                                                                                                                                                               Countries
     Net sales                                                                                                                                           1 414 572   1 498 555


     Gross profit                                                                                                                                         825 709     834 009
     In % of net sales                                                                                                                                        58.4        55.7




                                                                                                                                                                                               Strategy
     EBITDA1)                                                                                                                                             171 906     165 424
     In % of net sales                                                                                                                                        12.2        11.0




                                                                                                                                                                                 Management
     EBIT 2)                                                                                                                                               99 695      97 169
     In % of net sales                                                                                                                                         7.0         6.5




                                                                                                                                                                                 Report
     Earnings before taxes                                                                                                                                 80 448      57 669
     In % of net sales                                                                                                                                         5.7         3.8




                                                                                                                                                                                               Board Report
     Net income                                                                                                                                            37 469      15 898
     In % of net sales                                                                                                                                         2.6         1.1
     Earnings per share (undiluted)                                                                                                                           4.28        1.81               35
                                        (diluted)                                                                                                             4.16        1.76
1)   Earnings before depreciation and amortization, interest and taxes
2)   Earnings before interest and taxes
                       in CHF million




                                                    in CHF million




                                                                               in CHF million




                                                                                                       in CHF million




                                                                                                                              in CHF million
                                                    Gross profit




                                                                                                                              Net income
                       Net sales




                                                                               EBITDA




                                                                                                       EBIT




          2 500                                                          250
                                                                                206
                                                                               202




          2 000                                                          200
                                 1 631




                                                                                                 172
                                                                                                 165



                                                                                                        159
                              1 499




                                                                                                       152
                            1 415


                            1 415




          1 500                                                          150
                        1 186




                                                                                           127




                                                                                                                              103
                                                                                                                        100
                                                                                                                        97
                                                        834
                                                       826




          1 000                                                          100
                                                      780




                                                                                                                                    81
                                                     737
                                                    644




                                                                                                                   49




            500                                                           50
                                                                                                                                                    37
                                                                                                                                               16
                                                                                                                                          1




               0                                                           0
                        99
                        00
                        01
                        02
                        03


                                                    99
                                                    00
                                                    01
                                                    02
                                                    03




                                                                               99
                                                                               00
                                                                               01
                                                                               02
                                                                               03


                                                                                                       99
                                                                                                       00
                                                                                                       01
                                                                                                       02
                                                                                                       03


                                                                                                                              99
                                                                                                                              00
                                                                                                                              01
                                                                                                                              02
                                                                                                                              03
                                                   Condensed
                                                   Group Balance Sheet
                                                   in CHF 1 000                                                                        31.12. 2003    31.12. 2002

                                                   Assets
                                                   Total current assets                                                                461 022        528 027
                                                   Total long-term assets                                                              614 420        654 145
Activity Report 2003 of the Charles Vögele Group




                                                   Total assets                                                                       1 075 442      1 182 172


                                                   Liabilities and shareholders’ equity
                                                   Total current liabilities                                                           178 095        261 462
                                                   Total long-term liabilities                                                         454 418        540 488
                                                   Total shareholders’ equity                                                          442 929        380 222


                                                   Total liabilities and shareholders’ equity                                         1 075 442      1 182 172




36
                                                                    as of December 31st




                                                                                                            operating activities
                                                                                                            Cash flow from
                                                                    in CHF million




                                                                                                            in CHF million
                                                                    Net debt




                                                            900                                       240
                                                                                                                              198.9
                                                                                                                            190.5




                                                            750                                       200
                                                                              597.1




                                                            600                                       160
                                                                                      431.8
                                                                      419.1
                                                                    380.3




                                                            450                                       120
                                                                                              282.0




                                                                                                                  67.7




                                                            300                                        80
                                                                                                                 60.5




                                                            150                                        40
                                                                                                            3




                                                              0                                         0
                                                                    99
                                                                    00
                                                                    01
                                                                    02
                                                                    03




                                                                                                            99
                                                                                                            00
                                                                                                            01
                                                                                                            02
                                                                                                            03
                                                                                                                                              and Social Resp. Governance
                                                                                                                                              Sustainability   Corporate
                                                                                                                                                            Investors
Condensed
Group Cash Flow Statement
in CHF 1 000                                                                                                            2003          2002




                                                                                                                                                            Countries
Cash flow from operating activities                                                                               190 462        198 930


Net cash used in investing activities                                                                              (18 509)       (30 450)


Net cash (used in)/received from financing activities                                                             (187 748)       (83 962)




                                                                                                                                                            Strategy
Net increase/(decrease) in cash and cash equivalents                                                               (15 795)        84 518




                                                                                                                                              Management
Net cash and cash equivalents at the beginning of the period                                                      147 909          67 965
Effect of exchange rate changes                                                                                      (8 662)       (4 574)




                                                                                                                                              Report
Net increase/(decrease) in cash and cash equivalents                                                               (15 795)        84 518
Net cash and cash equivalents at the end of the period                                                            123 452        147 909




                                                                                                                                                            Board Report
                                                                                                                    Valuation
Statement of Changes in Group Equity                                                          Share    Retained      financial
in CHF 1 000                                        Share capital   Treasury shares premium reserve    earnings   instruments         Total

Balance 1.1. 2001                                       88 000              (533)       173 789       164 489               0    425 745
Net income 2001                                                                                           808                         808                 37
Effect of exchange rates                                                                              (11 573)                    (11 573 )
Dividends paid                                                                                        (26 355)                    (26 355 )
Reserve for valuation of financial instruments                                                                       (4 030 )      (4 030 )
Balance 31.12. 2001                                     88 000              (533)       173 789       127 369        (4 030 )    384 595
Net income 2002                                                                                        15 898                      15 898
Effect of exchange rates                                                                               (5 954)                     (5 954 )
Dividends paid                                                                                                                           0
Recognized through income statement                                                                                   1 964         1 964
Recognized through purchase of goods                                                                                  2 066         2 066
Reserve for valuation of financial instruments                                                                     (18 315 )      (18 315 )
Acquisition of treasury shares                                                (32)                                                    (32 )
Balance 31.12. 2002                                     88 000              (565)       173 789       137 313      (18 315 )     380 222
Net income 2003                                                                                        37 469                      37 469
Effect of exchange rates                                                                               20 357                      20 357
Dividends paid                                                                                                                           0
Recognized through income statement                                                                                     943           943
Recognized through purchase of goods                                                                                17 372         17 372
Reserve for valuation of financial instruments                                                                       (8 512 )      (8 512 )
Acquisition of treasury shares                                            (4 922)                                                  (4 922 )
Balance 31.12. 2003                                     88 000            (5 487)       173 789       195 139        (8 512 )    (442 929 )
                                                         Price Development of the Charles Vögele Holding AG Shares
                                                         at SWX Swiss Exchange in Zurich from January 1st, 2003, to February 27th, 2004
                                                         in CHF
                                                   100


                                                    90


                                                    80
Activity Report 2003 of the Charles Vögele Group




                                                    70


                                                    60


                                                    50


                                                    40


                                                    30


                                                    20


38                                                  10




                                                                                                                                                                                                                                    27. 02. 04
                                                                                                                            30. 06. 03




                                                                                                                                                                   30. 09. 03
                                                                                    31. 03. 03




                                                                                                                                                                                                          31. 12. 03
                                                         01. 01. 03




                                                         Compared to SPI                          Listed at: SWX Swiss Exchange, Zürich               Abbreviation: VCH
                                                         Closing Price of CV Shares               Swiss securities number: 693 777                    Bloomberg: VCH SW
                                                                                                  ISIN-code: CH 000 693 777                           Reuters: VCHZ.S


                                                         Price Development of the Charles Vögele Holding AG Shares
                                                         at SWX Swiss Exchange in Zurich from December 31st, 1999, to February 27th, 2004
                                                         in CHF
                                                   400


                                                   350


                                                   300


                                                   250


                                                   200


                                                   150


                                                   100


                                                    50


                                                     0
                                                                                                                                                                                                                       31. 12. 03
                                                                                                                                                      30. 06. 02




                                                                                                                                                                                             30. 06. 03
                                                                       30. 06. 00




                                                                                                               30. 06. 01




                                                                                                                                                                                                                                    27. 02. 04
                                                         31. 12. 99




                                                                                                                                                                                31. 12. 02
                                                                                                 31. 12. 00




                                                                                                                                         31. 12. 01




                                                         Compared to SPI
                                                         Closing Price of CV Shares
                                                                                  and Social Resp. Governance
                                                                                  Sustainability   Corporate
                                                                                                Investors
Dividend policy and appropriation of profits




                                                                                                Countries
   Charles Vögele Holding AG pursues a dividend policy under which 25% to
   30% of net income are to be distributed. This ensures that profits are
   primarily used to finance the company’s long-term growth. The motion the
   Board of Directors puts to the Annual Shareholders’ Meeting, how-
   ever, always takes due account of the company’s current financial position.




                                                                                                Strategy
   The success achieved during the year under review, as well as the improved
   financial and earnings situation, has prompted the Board of Directors to
   propose to the forthcoming General Meeting that the company distribute




                                                                                  Management
   a dividend in accordance with the defined dividend policy of CHF 1.00
   per share.




                                                                                  Report
Investor Relations
   Charles Vögele Holding AG maintains direct relations and a frank, open




                                                                                                Board Report
   dialogue with investors, analysts, and the financial media. Its manage-
   ment regards contact with all interested parties as an investment in the
   future. Each discussion serves not only to provide information about
   the company but also as an opportunity to make use of direct feedback                      39
   from the market and to strengthen the financial community’s confi-
   dence in the company.
   In addition to the analysts meetings held on publication of the annual
   and interim results, personal discussions with investors are always possible
   under the “Charles Vögele Group guidelines on the problem of insider-
   trading” (please refer to our “Insider trading regulations” on page 61 of
   this Activity Report).
Contact: Investor Relations
   Renzo Radice
   Head Corporate Communications & Investor Relations
   Charles Vögele Trading AG
   Gwattstrasse 15
   CH-8808 Pfäffikon, Switzerland
T +41 55 416 71 11
F +41 55 410 12 82
E renzo.radice @voegele-mode.com
   Latest share price information: www.voegele-mode.com
Forthcoming events:
 – Annual Shareholders’ Meeting 2003: April 6th, 2004
 – Analysts’ and media conference on
   the 2004 half-year report: August 31st, 2004
 – Analysts’ and media conference on
   the 2004 year-end results: March 8th, 2005
 – Annual Shareholders’ Meeting 2004: April 13th, 2005
 – Analysts’ and media conference
   on the 2005 half-year report: August 30th, 2005
Posters talk to people on the move
  In today’s society, people spend
  a lot of time getting from one place
  to another, and they often see this
  time as a break between whatever ac-
  tivities they are engaged in – time
  to look around and lose them-
  selves in their thoughts. In this re-
  laxed state people are receptive
  to new messages that can be absorbed
  without them having to do any-
  thing. In 2003 the Charles Vögele
  Group launched its first ever bill-
  board campaign to complement the
  communications mix. We will
  be using this successful tool in other
  markets as well this year.



                       “I match the
                      spring colours.”


                                           “And I match
                                           your budget.”




                                                            “I was exactly
                                                           what he wantend.”




                                                           “I’am fashionable
                                                            and practical.”




                                                              “But I’m still modest.”
                                                                     On your way home...




                                                                           “I’m a hot tip.”

                  “And I’m exactly what
                    his mum wanted.”                                                                                         “I’m a pretty
                                                                                                                              cool price.”




                     “High on colour.”


                                                                                              “I match the spring
                                                                                               flowers perfectly.”




                                                          “I dress her
                                                       in trendy White.”




                                                                                                           “What about
                                                                                                        a bouquet for me?”
                                            “And I make sure
“Low on price.”                           she doesn’t see red.”
                                                   Sustainability, Employees and
                                                   Social Responsibility


                                                                        Respect for the environment
                                                                           In its 779 stores the Charles Vögele Group mainly sells its own collec-
                                                                           tions, which are produced by external suppliers under contract. The com-
                                                                           pany works with a global network of supplier organizations, which is
                                                                           why it has traditionally afforded such a high priority to sustainability and
Activity Report 2003 of the Charles Vögele Group




                                                                           social responsibility. This concern encompasses the manufacture, trans-
                                                                           portation and sale of our products as well as the safety of our clothing for
                                                                           consumers.
                                                                              Transportation and sales
                                                                           The Charles Vögele Group’s collections are manufactured in various
                                                                           countries, with around 60% originating in South East Asia and 40% in
                                                                           Europe in 2003. These proportions will change slightly in future in the
                                                                           wake of our revised strategy and new collection design, with fewer lines
                                                                           being produced in South East Asia and more in Eastern Europe and
                                                                           Mediterranean countries. The finished clothes are nearly always trans-
                                                                           ported to Europe by sea. Containers are shipped by external logistics
                                                                           partners from the various ports of departure in South East Asia directly
42                                                                         to the Charles Vögele Group’s distribution center in Lehrte (Germany).
                                                                           Once there, the goods are cleared for customs before distribution to the
                                                                           local sales organizations, which are responsible for delivery by road or
                                                                           rail to the individual stores.
                                                                           Of the Charles Vögele Group’s 779 stores, 14 are housed in the com-
                                                                           pany’s own buildings (all in Switzerland) while all of the rest occupy prem-
                                                                           ises on long-term rents. This means that the Charles Vögele Group has
                                                                           very little opportunity to influence environmental aspects when buildings
                                                                           are being constructed. The company’s environmental efforts thus focus
                                                                           primarily on operations and maintenance, and especially on energy con-
                                                                           sumption. For example, we always use the latest and most energy-effi-
                                                                           cient lighting systems in our stores. In Switzerland and Germany energy
                                                                           consumption in individual branches is subject to strict internal bench-
                                                                           marking to ensure that hidden or excessively high sources of energy con-
                                                                           sumption can be replaced as quickly as possible. Over the next few
                                                                           years this system will gradually be introduced in our other sales organi-
                                                                           zations.
                                                                                  Governance
                                                                                  Corporate
                                                                                  Sustainability
                                                                                  and social
                                                                                         Investors
      Material flows




                                                                                         Countries
   The Charles Vögele Group uses its finely knit distribution network not
   only to get the clothes into its branches and distribute consumables
   and marketing material; the company also uses this logistics system in a
   targeted manner to set up material flows that help it to recycle waste.
   Internal transportation materials and interim packaging such as boxes,




                                                                                         Strategy
   plastic crates and clothes hangers are made in such way that they
   can be used as many times as possible within this flow. Plastic covers and
   other disposable packaging are taken back to the sales organization’s




                                                                                  Management
   central warehouse where they are prepared for appropriate disposal. As
   part of the supply chain management project, a comprehensive analy-




                                                                                  Report
   sis of logistics processes and the current optimization of these processes
   should lead to further improvements in this area.




                                                                                         Board Report
      Security for people and the environment
   All the suppliers that produce clothing on behalf of the Charles Vögele
   Group have to follow strict, clearly defined guidelines with regard to
   their manufacturing methods, the materials they use and their compli-
   ance with local environmental protection rules. These guidelines,                    43
   based on the new version of Germany’s consumer protection legislation
   of December 23rd, 1997, form an integral part of the suppliers’ hand-
   book and are binding on all our supplier organizations. In addition, the
   safety and content of all products are regularly spot-tested by inde-
   pendent laboratories.
Social responsibility
      Employees
   The Charles Vögele Group employed 7 845 people during the year under
   review, which represents a decrease of 5.3% on the previous year’s 8 287.
   The number of full-time posts also fell from 2002’s 5 689 to 5 312. This
   reduction is primarily due to the sale of branches in The Netherlands and
   to process optimizations that were decided in 2002 and implemented
   last year.
   The Charles Vögele Group feels that it is important to help young
   people embark upon a career in the clothing industry and to encourage
   talent in a targeted manner. During the year under review, 576 young
   people completed a relevant training programme (previous year 534).
   Many graduates of these programmes achieved impressive results
   and have earned all the more respect given the fact that they performed
   so well in an intense working environment. The following achieve-
   ments deserve special mention:
 – Switzerland: 26 trainees (25% of graduates) scored higher than a 5
   (out of a possible 6).
 – Austria: six trainees (23% of graduates) achieved a “pass with distinction”.
 – Germany: the Prime Minister of Thüringen, Dieter Althaus, presented
   an award for outstanding achievement in a final apprenticeship exam.
                                                     Consolidated Value-Added Statement
                                                     in CHF 1 000                                                                                          2003         2002

                                                     Net sales                                                                                        1 414 572    1 498 555
                                                     Other operating income                                                                             34 897       35 963
                                                     Other financial income                                                                              1 054        1 259
                                                     Group services                                                                                   1 450 523    1 535 777
Activity Report 2003 of the Charles Vögele Group




                                                     Purchased materials and services                                                                  (972 708) (1 055 011)
                                                     Gross value added                                                                                 477 815      480 766
                                                     Depreciation and amortization                                                                      (72 211)     (68 255)
                                                     Net value added                                                                                   405 604      412 511


                                                     Distribution of net value added
                                                     Employees                                                                                         304 933      314 155
                                                     Government                                                                                         42 979       41 771
                                                     Lenders                                                                                            20 223       40 687
                                                     Shareholders (based on proposed appropriation of earnings by Board of Directors)                    8 800             0
                                                     Company                                                                                            28 669       15 898


                                                     Total                                                                                             405 604      412 511
44




                                                                                  2003                                                   2002



                                                                    Shareholders 2% Company 7%                            Lenders 10%    Company 4%
                                                                     Lenders 5%
                                                   Government 11%                                           Government 10%




                                                                          Employees 75%                                          Employees 76%
                                                                                                                   Governance
                                                                                                                   Corporate
                                                                                                                   Sustainability
                                                                                                                   and social
                                                                                                                          Investors
                            Training and development programmes




                                                                                                                          Countries
                                 The vast majority of the Charles Vögele Group’s employees are in direct
                                 daily contact with our clients. Our people on the sales floor are thus
                                 the company’s real calling cards. Their friendliness when serving customers
                                 and their accommodating and competent approach to client care turn
                                 a visit to a Vögele store into a special shopping experience. This is why the




                                                                                                                          Strategy
                                 company puts such emphasis on permanent training and development
                                 for its employees, viewing this task as a core investment in the future of
                                 the Group. Training and development help employees to reach their




                                                                                                                   Management
                                 personal objectives and ensure that there is well-qualified young manage-
                                 ment talent throughout the company.




                                                                                                                   Report
Training days and participants
                                                                                                2003       2002




                                                                                                                          Board Report
Number of participants                                                                          993        981
Number of training days                                                                         145        127


                                    Vögele Code of Vendor Conduct
                                 The Charles Vögele Group works all over the world to ensure socially                    45
                                 fair production methods. To this end the company has produced binding
                                 guidelines for suppliers on social matters (Vögele Code of Vendor Con-
                                 duct). These strict guidelines, which form a fixed part of the supply con-
                                 tract, demand minimum social standards as laid out in Social Standard
                                 SA8000 (see the section Social Standard SA8000 on page 46 for details).
                                 The Code of Vendor Conduct is based on the principle that companies
                                 that produce goods for Vögele must follow all the laws and regulations
                                 that apply in their country. In particular, the Code contains detailed
                                 contractual stipulations covering the environment, discrimination, forced
                                 labour, child labour, working hours, wages, working conditions,
                                 accommodation, and freedom of assembly (for more information please
                                 also visit www.voegele-mode.com).
                                 As part of the implementation of our new strategy, the number of sup-
                                 pliers was reduced during the year under review to fewer than 400. By
                                 doing this, the Charles Vögele Group also aims to intensify and improve
                                 its cooperation with suppliers. Of these supply companies, a group of
                                 key suppliers has been identified using special evaluation criteria. As a first
                                 step towards ensuring compliance with the Vögele Code of Vendor Con-
                                 duct within the new group of suppliers, all key supplier companies from
                                 abroad have been sent a core questionnaire. This will help identify
                                 which direct suppliers need to be reviewed with regard to their adherence
                                 to the Vögele Code of Vendor Conduct. The second step, in 2004, will
                                 be to look in detail at how well the foreign production partners that have
                                 been identified in this way actually apply the Vögele Code of Vendor
                                 Conduct.
                                                      Member of the Foreign Trade Association (FTA)
                                                   The Charles Vögele Group has been an official member of the Foreign
                                                   Trade Association (FTA) since January 1st, 2004. The company was
                                                   already working with the FTA in 2003 as it prepared for the launch of an
                                                   international platform for monitoring social standards: the “Business
Activity Report 2003 of the Charles Vögele Group




                                                   Social Compliance Initiative” (BSCI). The Charles Vögele Group played
                                                   a significant part in drafting these guidelines. The aim of the initiative
                                                   is to avoid multiple auditing of suppliers that work for several producers.
                                                   Participating companies have agreed on a joint questionnaire which
                                                   is founded on the conventions of the International Labour Organization
                                                   (ILO) and which forms the basis for testing. The data thus acquired is
                                                   recorded by the FTA and then made accessible to its members. This pro-
                                                   cedure creates a rational, uniform basis for testing and allows both the
                                                   manufacturers and their client firms to save valuable resources.
                                                   The conditions laid down in the questionnaire are to a large extent based
                                                   on the SA8000 guidelines, but they also set out a two-stage procedure
                                                   for their implementation. In the first step, compliance with comprehensive
46                                                 minimum social standards is checked, while the second stage allows
                                                   a firm to attain full SA8000 certification.
                                                   This step-by-step approach acknowledges the fact that in practice, many
                                                   smaller and medium-sized manufacturers find it difficult to achieve
                                                   SA8000 certification all at once. The newly developed BSCI initiative will
                                                   thus give small and medium-sized businesses a chance to pass a test
                                                   of compliance with minimum social standards and thus earn a recognized
                                                   certificate.
                                                      Social Standard SA8000
                                                   The Charles Vögele Group has been an official member of the New York
                                                   based human rights organization Accountability International (SAI) since
                                                   2001. This organization publishes and administrates the internationally
                                                   recognized Social Accountability 8000 Social Standard. SA8000 aims to
                                                   improve working conditions right along the production chain and is
                                                   based on ILO conventions and the UN Universal Declaration of Human
                                                   Rights. The social standard was developed in 1997 in collaboration
                                                   with representatives of commerce, the labour unions, manufacturing in-
                                                   dustry and several international non-governmental organizations (NGOs).
                                                   The Charles Vögele Group’s membership of the SAI allowed the firm to
                                                   award SA8000 certification to an initial six direct suppliers in India,
                                                   the pilot country for the scheme, in 2002 and 2003. All its other direct
                                                   suppliers in India are currently in training, and some of them will be
                                                   ready for certification in 2004. To make it easier for suppliers to take this
                                                   step, the Charles Vögele Group pays the training costs and gives the
                                                   companies financial support to help them implement social projects that
                                                   directly benefit local employees. Achievement of the SA8000 standard
                                                   is examined and confirmed by third-party audit.
                                                                                                Governance
                                                                                                Corporate
                                                                                                Sustainability
                                                                                                and social
                                                                                                       Investors
                  Social projects




                                                                                                       Countries
               In addition to its commitment to SA8000, the Charles Vögele Group sup-
               ports social projects in supplier countries that either benefit one sup-
               plier directly or help a regional community where several suppliers are
               located. Working with local NGOs and employee organizations, the
               company evaluates and supports health promotion and occupational train-




                                                                                                       Strategy
               ing projects, as well as kindergartens and schools. We pay particularly
               attention here to the sustainability of our commitment: we mainly support
               projects that will have self-supporting structures after the start-up phase




                                                                                                Management
               and that will be able to survive on their own in the longer run. During the
               year under review, the Charles Vögele Group made possible several




                                                                                                Report
               social projects at four suppliers in India in the areas of healthcare, school
               education, and occupational training for employees and their families.




                                                                                                       Board Report
                  Donations in 2003
               For years now the Charles Vögele Group has also been committed to
               charitable projects in the countries where its clothes are made as well as
               in the markets where they are sold. Donations have focused in par-
               ticular on institutions that help families and children. Our strategy of long-         47
               term collaboration allows our partner organizations to develop sustain-
               able programs. People in need thus get a chance to improve their situation
               on a continuous basis. Annual donations depend on corporate profits
               and are distributed evenly in all the markets in which the Charles Vögele
               Group is active. Partners currently receiving support are as follows:
Switzerland     Kovive – Vacations for Children in Need
Germany         Westfälisches Kinderdorf – Children’s Village in the German state of
                Westphalia
                Albert-Schweitzer-Kinderdorf Hessen e.V. – Children’s Village in the
                German state of Hessen
Austria         Cliniclowns – raising the spirits of children in hospital
                Red Nose Clown Doctors – raising the spirits of retired persons in hospital
The Netherlands Hoefijzer – horse-riding for the disabled
Belgium         Médecins sans frontières – aid programme for the homeless
International   Kantha Bopha children’s hospital run by Dr. Beat Richner
The circle is completed in the store
  The aim of all the external communi-
  cations activities is to generate
  interest in the collections and encour-
  age a visit to a Vögele store. Once
  customers have found their way to
  a store, they want to find the latest
  collection and the advertised offers as
  quickly as possible. Customers
  welcome directions to different parts
  of the store and suggestions for
  colour combinations and fashion
  themes because these things help
  them make a choice. Vögele is testing
  the new store design concept in
  20 pilot branches and once the re-
  sults have been evaluated the
  company plans gradually to intro-
  duce the concept in all 779 stores.
                          From our
                         advertising

 From our
advertising




              While you are
               shopping...
                                                   Corporate Governance



                                                                                              1 Group Structure and Shareholders
                                                                                                       1.1 Group structure


                                                                                                            Charles Vögele Holding
                                                                                                               Pfäffikon (Canton Schwyz)
                                                                                                               Share capital CHF 88 000 000
Activity Report 2003 of the Charles Vögele Group




                                                          Charles Vögele                                    Charles Vögele                                     Charles Vögele
                                                          Mode AG                                           (Netherlands) B.V.                                 Trading AG
                                                             Pfäffikon (Canton Schwyz)                         Utrecht                                            Pfäffikon (Canton Schwyz)
                                                             Share capital CHF 20 000 000                      Equity capital € 2 268 901                         Share capital CHF 10 000 000


                                                          Charles Vögele                                    Charles Vögele Fashion                             Charles Vögele
                                                          Deutschland GmbH                                  (Netherlands) B.V.                                 Import GmbH
                                                             Sigmaringen                                       Utrecht                                            Lehrte, Germany
                                                             Equity capital € 15 340 000                       Equity capital € 1 000 000                         Equity capital € 25 000


                                                          Charles Vögele                                    Charles Vögele                                     Prodress AG
                                                          (Austria) AG                                      (Belgium) B.V. B.A.                                   Pfäffikon (Canton Schwyz)
                                                             Kalsdorf                                          Turnhout                                           Share capital CHF 100 000
50                                                           Share capital € 1 453 457                         Equity capital € 644 523


                                                          Holding company
                                                                                                                                                               Cosmos Mode AG
                                                          Sales organizations                                                                                     Pfäffikon (Canton Schwyz)
                                                          Service organizations                                                                                   Share capital CHF 100 000
                                                          As of December 31st, 2003




                                                                              Information on listing and stock market capitalization as at December 31st, 2003, can be found
                                                                              on page 6 of the activity report along with other key figures relating to the company’s shares.

                                                                              Charles Vögele Holding AG is the holding company for all of the Group’s companies.
                                                                              Charles Vögele Trading AG is responsible for all Group-wide services such as purchasing, IT,
                                                                              communications, treasury, accounts, financial control, and risk management. Prodress AG
                                                                              is an advertising agency that works exclusively for the Charles Vögele Group. Cosmos Mode
                                                                              AG is responsible for the administration of licenses. Until the end of 2002, Charles Vögele
                                                                              Store Management AG encompassed the Group activities of sales management. Following the
                                                                              reorganization of sales management, this company has not performed any operational
                                                                              functions since January 1st, 2003. Segment information is on page 14 section 2 of the financial
                                                                              report, and the overview of all consolidated companies is on page 36 section 33 of the
                                                                              financial report.
                                                                              During the year under review the former Charles Vögele Beteiligungen AG was absorbed into
                                                                              Charles Vögele Holding AG. Charles Vögele Import GmbH, Lehrte, which is responsible
                                                                              for operational functions (storage logistics and quality control) at the distribution center in
                                                                              Lehrte (DE), was established on May 22nd, 2003.



                                                                                                       1.2 Significant shareholders
                                                                                                  According to the information supplied to the company under statutory
                                                                                                  stock exchange regulations, as of March 28th, 2002, the Classic
                                                                                                  Global Equity Fund (Braun, von Wyss & Müller AG’s asset management
                                                                                                  arm) held 6.2% of the company’s capital. In addition, as per March 1st,
                                                                                                  2004, The Capital Group Company’s Inc. held 5.07% of the company’s
                                                                                                  share capital.
                                                                                                       1.3 Cross-shareholdings
                                                                                                  There are no cross-shareholdings with other companies.
                                                                                Governance
                                                                                Corporate
                                                                                Sustainability
                                                                                and social
                                                                                       Investors
2 Capital Structure
     2.1 Share capital




                                                                                       Countries
 The share capital of Charles Vögele Holding AG is CHF 88 000 000 and is
 made up of 8 800 000 fully paid-up bearer shares (securities number:
 693 777/ISIN-Code: CH000 693 777) with a par value of CHF 10 each.
 As at December 31st, 2003, the Charles Vögele Group held 117 285
 of its own shares (as of December 31st, 2002: 18 314 shares), which




                                                                                       Strategy
 are earmarked for the existing employee option plan. Detailed informa-
 tion on purchases and sales of shares and on the relevant opening and
 closing totals can be found on page 43 section 8 of the financial report.




                                                                                Management
     2.2 Authorized and conditional capital




                                                                                Report
 Charles Vögele Holding AG’s articles of association include a provision
 authorizing the Board of Directors to increase the company’s equity capi-
 tal by a maximum of CHF 2.64 million, excluding shareholders’ sub-




                                                                                       Board Report
 scription rights, through the issue of 264 000 shares with a par value of
 CHF 10 each. This authorization lasts for an indefinite period of time.
 These shares are to be used exclusively for share option programmes. The
 persons entitled to benefit are defined in the current share option pro-             51
 gramme. Subscription conditions and other details are defined at the time
 of issue. (Please also refer to section 5.6 “Options” on page 61)
     2.3 Changes in capital
 An overview of changes to the company’s capital during the financial
 years 2001–2003 can be found on page 37 of the activity report.
     2.4 Shares and participation certificates
 Charles Vögele Holding AG’s share capital consists of 8 800 000 fully paid-
 up bearer shares (securities number: 693 777/ISIN-Code: CH000 693 777)
 with a par value of CHF 10 each. This share capital is fully paid up. There
 are no restrictions on the transfer of shares. As stipulated in Art. 659a of
 the Swiss Code of Obligations, every share entitles the holder to dividends
 and to vote at the Annual Shareholders’ Meeting. There are no partici-
 pation certificates.
     2.5 Bonus participation certificates
 There are no bonus participation certificates.
     2.6 Restrictions on transferability and nominee registrations
 There are no restrictions on transferability or nominee registrations.
     2.7 Convertible bonds and options
 There are no convertible bonds. The only options are those associated
 with the employee option programme, which is described in section 5.6
 “Options” on page 61.
                                                                                                                                               3 Board of Directors
                                                                                                                                                                   3.1 Members of the Board of Directors
                                                                                                                                               Carlo Vögele
                                                                                                                                                 1957, Chairman, Swiss citizen
                                                                                                                                                 Term of office 2002–2005, first elected in 1998;
                                                                                                                                                 Management training at the University of California, San Diego; businessman.
                                                                                                                                                 Carlo Vögele was full-time Chairman of the Board of Directors from January 1999 to
Activity Report 2003 of the Charles Vögele Group




                                                                                                                                                 October 2001. From 1993 onwards he was a member of the Board of Directors
                                                                                                                                                 of the former Group holding company. Until the end of 1997 he held a number of
                                                                                                                                                 executive management positions within the company.
                                                                                                                                               Alfred M. Niederer
                                                                                                                                                 1941, Vice-Chairman, Swiss citizen
                                                                                                                                                 Term of office 2001–2004, first elected in 1999;
                                                                                                                                                 Masters graduate in engineering from the Swiss Federal Institute of Technology in
                                                                                                                                                 Zurich. Owner of Compatex Holding AG and board member of several listed
                                                                                                                                                 companies. From 1986 to 1992 he was Chairman of Bally International AG and
                                                                                                                                                 from 1992 to 1995, Vice Chairman of Bata Europe.
                                                                                                                                               Bernd H. J. Bothe
                                                                                                                                                 1944, German citizen
                                                                                                                                                 Term of office 2002–2005, first elected in 2002;
                                                                                                                                                 graduate in business administration. Senior Partner in DIC Deutsche Investors’
                                                                                                                                                 Capital AG, Droege & Comp. GmbH, Düsseldorf. Until the end of March 2002,
                                                                                                                                                 Chairman and Chief Executive Officer Metro Cash & Carry GmbH, Düsseldorf.
                                                                                                                                               Dr. Felix R. Ehrat
52                                                                                                                                               1957, Swiss citizen
                                                                                                                                                 Term of office 2003–2006, first elected in 1997;
                                                                                                                                                 Doctorate in law from the University of Zurich, attorney, LL.M. University of
                                                                                                                                                 the Pacific, McGeorge School of Law. Managing Partner of Bär & Karrer law firm,
                                                                                                                                                 Zurich, Geneva, Lugano, Zug, London.
                                                                                                                                               Daniel J. Sauter
                                                                                                                                                 1957, Swiss citizen
                                                                                                                                                 Term of office 2003–2006, first elected in 2002;
                                                                                                                                                 Financial specialist. From 1976 to 1983, various functions in a number of banks
                                                                                                                                                 including Bank Leu AG, Zurich; from 1983 to 1998 Senior Partner and CFO of
                                                                                                                                                 Glencore International AG, Baar; from 1994 to 2001, CEO and Managing Director
                                                                                                                                                 of the publicly quoted firm Xstrata AG, Zug.

                                                                                                                                                           During the year under review none of the members of the Board of Directors worked in any executive
                                                                                                                                                           functions within the Group. Unless otherwise stated, the non-executive members of the Board of
                                                                                                                                                           Directors have no other significant links with the Group. With regard to the other business relationships
                                                                                                                                                           and interests that link members of the Board of Directors to the company, please refer to section 5.7
                                                   Pfäffikon, Thursday, December 19th, 2002, 12.15 hours




                                                                                                                                                           “Additional fees and remuneration” on page 61.
                                                                                                                          Alfred M. Niederer




                                                                                                                                                                                                Dr. Felix R. Ehrat
                                                                                                                                               Bernd H. J. Bothe




                                                                                                                                                                                                                                       Daniel J. Sauter
                                                                                                           Carlo Vögele
                                                                                Governance
                                                                                Corporate
                                                                                Sustainability
                                                                                and social
                                                                                       Investors
   Changes to the Board of Directors 2003




                                                                                       Countries
During the year under review, William Slee left the company’s Board of
Directors at the Annual Shareholders’ Meeting of April 29th, 2003. He did
not put himself up for re-election after his term of office came to an end.
   3.2 Other activities and interests
Under the Corporate Governance Directive, the other activities and inter-




                                                                                       Strategy
ests of the members of the Board of Directors only have to be listed if
they are significant or substantial. The company believes that the activi-
ties of the present members of the Board of Directors are significant




                                                                                Management
only if they relate to their work on management or supervisory bodies
of Swiss or listed foreign companies, or unlisted Swiss or foreign gar-




                                                                                Report
ment trading companies. The members of the Board of Directors are not
involved in any other substantial activities or interests.




                                                                                       Board Report
   Carlo Vögele
No other Board positions in listed companies or garment trading
companies.
   Alfred M. Niederer                                                                 53
Chairman of the Board of Directors of Von Roll Holding AG; Vice
Chairman of the Board of Directors of Calida Holding AG; and member
of the Board of Directors of Micronas AG.
   Bernd H. J. Bothe
Member of the Supervisory Boards of Gardena AG, Ulm, and of Spar
Österreichische Warenhandels-AG, Salzburg; Non-Executive Director of
Synoptik Holding AG, Copenhagen.
   Dr. Felix R. Ehrat
Member of the Boards of Directors of Julius Baer Holding Ltd. and
Bank Julius Bär & Co. AG.
   Daniel J. Sauter
Chairman of the Boards of Directors of Alpine Select AG, Zug,
and of EIC Electricity SA, Geneva; member of the Boards of Directors
of Sulzer AG, Sika AG, and Shape Capital AG.

In addition to these activities, some members of the Board of Directors
are involved in activities outside their fields of responsibility in corpora-
tions, institutions, and private and public-sector foundations, as well
as long-term executive and advisory functions for major Swiss and for-
eign interest groups, official functions and political offices, none of
which, however, are of major significance to Charles Vögele Holding AG.
                                                      3.3 Cross-involvement
                                                   There are no cross-involvements.
                                                      3.4 Elections and terms of office
                                                   The Board of Directors of Charles Vögele Holding AG consists of at least
Activity Report 2003 of the Charles Vögele Group




                                                   three and no more than nine members, who have to be shareholders in
                                                   the company or represent a legal entity that holds shares. Its members are
                                                   elected by the Annual Shareholders’ Meeting for a term of office not ex-
                                                   ceeding three years, a “year in office” being defined as the period between
                                                   two Annual Shareholders’ Meetings. According to this regulation, each
                                                   member’s first term of office is defined in such a way that the terms of of-
                                                   fice of all the members do not expire simultaneously at one Annual
                                                   Shareholders’ Meeting. Re-election is permitted. If a member departs be-
                                                   fore the end of his or her term of office, his or her successor takes over
                                                   for the remainder of the departing member’s term of office. The Board of
                                                   Directors designates a chairman and a secretary, who need not to be
                                                   shareholders or members of the Board of Directors (details of initial ap-
                                                   pointment and term of office are included in section 3.1 “Members of
54                                                 the Board of Directors” on page 52).
                                                      3.5 Internal organization
                                                   The Board of Directors passes resolutions on all matters affecting the
                                                   company that the law, the articles of association or the Organizational
                                                   Regulations do not place under the responsibility of another of the
                                                   company’s official bodies. In particular, the Board of Directors’ respon-
                                                   sibilities include the stipulation and review of the company’s strategy,
                                                   the appointment and dismissal of persons to whom the overall manage-
                                                   ment of the company is entrusted (especially the CEO), the organiza-
                                                   tional structure, and the financial and accounting system. The Board of
                                                   Directors is also responsible for supervising the people charged with
                                                   management of the company to ensure that their actions comply with
                                                   the law, the articles of association, the regulations and directives. The
                                                   Board of Directors is responsible for producing the annual report, as well
                                                   as for reporting to the Annual Shareholders’ Meeting and implementing
                                                   its resolutions. It is authorized to prepare and execute the resolutions and
                                                   to delegate the supervision of business to the committees of the Board
                                                   of Directors or to individual Board members. It can assign the manage-
                                                   ment of the company’s business in whole or in part to individual Board
                                                   members or to other people.
                                                                              Governance
                                                                              Corporate
                                                                              Sustainability
                                                                              and social
                                                                                     Investors
                                                                                     Countries
 According to the Organizational Regulations, the Board of Directors
 meets as often as business requires but always at least six times in
 each financial year. Six meetings and a two-day strategy seminar were
 held during the year under review. Meetings normally last one full
 day. The CEO and the CFO are in principle always present at the meet-




                                                                                     Strategy
 ings; other members of company management, department heads
 and other employees or third parties are present as required. Since the
 beginning of the year under review the Board of Directors has had




                                                                              Management
 a permanent secretary whose responsibilities include minuting meetings
 of the Board of Directors and its committees. The secretary is not a




                                                                              Report
 member of the Board of Directors.
    Chairman of the Board of Directors
 The Chairman of the Board of Directors is always appointed by the Board




                                                                                     Board Report
 at the end of the Annual Shareholders’ Meeting for a one-year term
 of office. The Chairman ensures good co-operation between the Board
 of Directors, its committees, and the CEO. Together with the CEO
 he or she monitors implementation of the Board of Directors’ resolutions.          55

    Board of Directors committees
 The Board of Directors of Charles Vögele Holding AG generally takes
 all its decisions collectively. Specific tasks and projects are delegated
 to committees that deal with defined fields of activity and prepare recom-
 mendations, which are submitted to the full Board of Directors for
 decision. The Committees meet as required, but always at least twice
 a year for at least three hours, and are made up as follows:
– Audit Committee
  Daniel J. Sauter (Chairman), Dr. Felix R. Ehrat, Alfred M. Niederer
  The Audit Committee helps the Board of Directors to supervise the ac-
  counting and financial reporting systems, and to monitor compliance
  with the law by the company and by the Group companies that it directly
  or indirectly controls. It supervises internal control structures and
  external auditing procedures, and also monitors adherence to statutory
  rules and regulations by ordering regular reports from management.
  The Audit Committee also monitors the content and formal correctness
  of external communications on all financial matters. It normally meets
  three to four times a year for between half a day and a whole day. The
  CEO, the CFO and the Group auditors and other members of Group
  Management are invited as required.
 During the year under review, the Audit Committee commissioned
 and monitored a comprehensive audit of the company’s processes and
 IT systems by the newly selected external audit company
                                                    PricewaterhouseCoopers AG. It also commissioned an analysis and
                                                    cataloguing of the main business risks for 2004. The reports produced
                                                    have been analyzed. In addition, the Audit Committee reviewed price
                                                    models for internal billing and proposed the creation of a new “Internal
Activity Report 2003 of the Charles Vögele Group




                                                    Audit” unit at Group level. This became operational on January 1st,
                                                    2004 (see also section 3.7 “Information and control instruments for Group
                                                    Management” on page 57). The options plan proposed for 2003
                                                    was reviewed by the Audit Committee and recommended to the Board
                                                    of Directors for approval. In 2003 five meetings were held.
                                                   – Compensation Committee
                                                     Alfred M. Niederer (Chairman), Carlo Vögele, Bernd H. J. Bothe
                                                     The Compensation Committee, in collaboration with Group Manage-
                                                     ment, evaluates any potential new members of the top level of man-
                                                     agement and submits relevant proposals to the Board of Directors. It also
                                                     submits proposals to the Board of Directors on total remuneration for
                                                     Group Management and the Board of Directors. The Board of Directors
56                                                   delegates the Compensation Committee to be Group Management’s
                                                     point of contact for all major human resources issues in the Charles Vögele
                                                     Group. It meets two to three times a year for between a half and a full
                                                     day. The CEO and the Head of Human Resources are asked to attend as
                                                     required. In 2003 two meetings were held.
                                                   – Strategy Committee
                                                     Bernd H. J. Bothe (Chairman), Carlo Vögele, Alfred M. Niederer
                                                     The Strategy Committee periodically reviews Group strategy and the
                                                     implementation by Group Management of the Board of Directors’ strat-
                                                     egic guidelines. Working in close collaboration with Group Management
                                                     it submits proposals to the Board of Directors on changes to Group strat-
                                                     egy as well as on major new additional business activities for the Group
                                                     and/or the relinquishment of existing activities. It meets two or three times
                                                     a year for at least a half or a full day. The CEO is asked to attend as re-
                                                     quired. In 2003 two meetings were held.
                                                                               Governance
                                                                               Corporate
                                                                               Sustainability
                                                                               and social
                                                                                      Investors
   3.6 Division of responsibilities between the Board of Directors
   and Group Management




                                                                                      Countries
The division of responsibilities between the Board of Directors and Group
Management is defined in the Organizational Regulations of Charles
Vögele Holding AG. The Board of Directors entrusts the CEO – who is
given authority to issue directives to the other members of Group
Management – and Group Management with operational management




                                                                                      Strategy
of the company and transfers to it all management responsibilities
and powers that are not expressly reserved for itself. Group Management
has the authority to make decisions on the transactions assigned




                                                                               Management
to it, although certain transactions require the consent of the Board of
Directors. In particular, Group Management shall submit the budget




                                                                               Report
to the Board of Directors for approval.
   3.7 Information and control instruments for Group Management
Group Management submits a monthly report to the Board of Directors




                                                                                      Board Report
and informs it about the current course of business at each of its meetings.
This report is based on the budget approved by the Board of Directors,
which is compared every month against the latest business performance.
Investments are approved en masse as part of the budget process,                     57
though single investments of more than CHF 1.5 million must be approved
by the Board of Directors on an individual basis before definitive im-
plementation. Any two members of the Board of Directors and the Group
Management have collective signing powers.
During the year under review, the Group “Internal Audit” unit was
created as a new instrument for Group Management. It has been
operational since January 1st, 2004, and was formed out of the Accounting
Department’s former “Branch Audit” unit. Internal Audit reports to
Group Management in organizational terms, but has a direct functional
link to the Audit Committee. Internal Audit’s tasks continue to include
branch audits, control functions relating to stocktaking, and training for
branch heads. In addition it is now also responsible for process con-
trolling with regard to procurement, distribution logistics and purchasing.
Concrete audit tasks are also resulting from the implementation of
the ongoing supply chain management project, and these are being de-
fined in detail.
Furthermore, since 1996 the Charles Vögele Group has used a Code of
Vendor Conduct, which all garment suppliers have to sign as a framework
contract. This regulates compliance with minimum social standards and
includes production guidelines relating to the use of chemical substances
(see also page 45 of the activity report and www.voegele-mode.com).
                                                                                                                              4 Group Management
                                                                                                                                Group Management is responsible for the operational management
                                                                                                                                of the Charles Vögele Group. During the year under review, Group
                                                                                                                                Management consisted of the Chief Executive Officer (Daniel Reinhard),
Activity Report 2003 of the Charles Vögele Group




                                                                                                                                the Chief Financial Officer (Dr. Felix Thöni) and the Purchasing
                                                                                                                                Manager (Serge Brugger). In his capacity as CEO, Daniel Reinhard heads
                                                                                                                                Group Management with authority to issue directives, and also man-
                                                                                                                                ages the Sales and IT divisions at Group level.
                                                                                                                                                4.1 Members of present Group Management
                                                                                                                              Daniel Reinhard
                                                                                                                                1953, Chief Executive Officer (CEO) since December 1st, 2001, as well as Head of
                                                                                                                                Sales and IT; Swiss citizen, graduate of the Business and Administration Academy;
                                                                                                                                from 1998 to 2001, Chairman of the Management Board of Salamander AG, having
                                                                                                                                been a member of that Board from 1994 to 1998. From 1991 to 1993, General
                                                                                                                                Manager and from 1986 to 1991 CFO of Bally in Germany and Austria and of
                                                                                                                                Grüterich GmbH.
                                                                                                                              Dr. Felix A. Thöni
                                                                                                                                1959, Chief Financial Officer (CFO) since January 1st, 2003; Swiss citizen, doctorate
58                                                                                                                              in economics from the University of St Gallen; from 1992 to 2002, CFO of the
                                                                                                                                Gavazzi Group. From 1988 to 1991 Area Controller of Schindler Management AG.
                                                                                                                              Serge Brugger
                                                                                                                                1952, Purchasing Manager since November 11th, 2002; Swiss citizen, graduate
                                                                                                                                in business economics. Member of the European Group Management of C&A from
                                                                                                                                1999 to 2002.

                                                                                                                                   As per December 31st, 2003
                                                             Thursday, December 12th, 2002, 14.30 hours




                                                                                                          Dr. Felix A.Thöni
                                           Daniel Reinhard




                                                                                                                                Serge Brugger
                                                                                   Governance
                                                                                   Corporate
                                                                                   Sustainability
                                                                                   and social
                                                                                          Investors
    Changes in Group Management




                                                                                          Countries
 Dr. Felix A. Thöni has been a new member of Group Management and
 CFO since January 1st, 2003. On January 31st, 2003, Marcus Arnoczky,
 until then member of Group Management and Logistics and IT Manager,
 left the company. On February 1st, 2003, management of the Supply
 Chain division was allocated to the second level of management and the




                                                                                          Strategy
 IT division was placed directly under the management of Daniel Reinhard.

    4.2 Other activities and interests
 The members of Group Management do not conduct any major addi-




                                                                                   Management
 tional activities outside their areas of responsibility in corporations, insti-
 tutions, or foundations organized under private or public law. Neither




                                                                                   Report
 do they have any permanent executive or advisory functions in any major
 Swiss or foreign companies, interest groups, or political parties.




                                                                                          Board Report
    4.3 Management contracts
 There are no management contracts in existence.

5 Compensation, shareholdings and loans                                                  59
    5.1 Remuneration and profit-sharing programmes: content and procedures
 The Board of Directors’ Compensation Committee is responsible for
 formulating the compensation and profit-sharing programmes. The
 Committee recommends the levels at which compensation and profit
 shares should be set and submits these recommendations for decision
 by the Board of Directors. Compensation for the members of the Board
 of Directors and Group Management is composed of a fixed portion
 and a variable portion, with the variable portion making up between 20%
 and 50% of total compensation depending on function. (Please refer to
 the Compensation Committee part of section 3.5 “Internal Organization”
 on page 56 as well as to section 5.6 “Options” on page 61 for further
 information.)
                                                        5.2 Remuneration for current company officers
                                                        Fees and salaries, 2003 and 2002
                                                   in CHF                                                                                           2003              2002

                                                   Board of Directors’ emoluments, cumulative                                                  967 500           850 000
                                                   each year                                                                                  (5 people)        (6 people)
                                                   Highest fee per year on Board of Directors
                                                                                                                                              367 500           330 000
Activity Report 2003 of the Charles Vögele Group




                                                   Salaries of Group management, cumulative                                                 2 792 000         5 256 000
                                                   each year                                                                                 (3 people)        (6 people)

                                                   Members of the Board of Directors of Charles Vögele Holding AG do not perform any executive functions in the company.
                                                   See also page 35 section 31 of the financial report.


                                                        Severance compensation
                                                   No agreements exist with the Board of Directors or Group Management
                                                   of Charles Vögele Holding AG regarding severance compensation.
                                                   Accordingly, no such compensation was paid during the year under review.
                                                        5.3 Compensation to former directors and officers
                                                   No fees or salaries were paid or credit notes or other benefits granted
                                                   during the year under review to any former members of the Board
                                                   of Directors or Group Management who had left the company prior to
60                                                 the year under review, i.e. before December 31st, 2002.
                                                        5.4 Allocation of shares in the year under review
                                                   During the year under review no shares were allocated to members of
                                                   the Board of Directors or of Group Management, nor to any persons
                                                   closely associated with any of these persons. For the IPO in June 1999 a
                                                   share participation plan was prepared for the then middle manage-
                                                   ment and Group Management. Employees who qualified were each of-
                                                   fered a package of 4 032 shares at their par value subject to a ban on
                                                   resale for the next five years, although from 2000 onwards each recipient
                                                   was permitted to sell a maximum of 20% of his or her package. During
                                                   the year under review a total of 6 620 shares were issued at par value to
                                                   eight middle managers as part of this participation plan.
                                                        5.5 Share ownership by company directors and officers
                                                   in shares                                                                                  31.12. 2003       31.12. 2002

                                                   Members of the Board of Directors                                                           262 420           261 840
                                                                                                                                              (5 people)        (6 people)
                                                   Members of Group Management                                                                  42 700            31 500
                                                                                                                                              (3 people)        (3 people)
                                                                                                                           Governance
                                                                                                                           Corporate
                                                                                                                           Sustainability
                                                                                                                           and social
                                                                                                                                  Investors
     5.6 Options                                                                            Allocation        Allocation
in options                                                                                     in 2003             2002




                                                                                                                                  Countries
Share options, Board of Directors                                                            22 500           30 000
                                                                                           (5 people)       (6 people)
Share options, Group Management                                                              31 500           32 000
                                                                                           (3 people)       (3 people)

Members of the Board of Directors of Charles Vögele Holding AG do not perform any executive functions in the company.




                                                                                                                                  Strategy
The Option Plan, which was defined in 2002 for members of the Board
of Directors, Group Management and members of the second level
of management, is based on the company’s own shares and conditional




                                                                                                                           Management
capital. The allocation of options is proposed by the Compensation
Committee and approved by the Board of Directors. Each option carries




                                                                                                                           Report
the right to subscribe to one share. The exercise price of options issued
in 2002 was calculated as the average share price at the time of allocation
on November 18th, 2002, and amounts to CHF 29.50 per option. The




                                                                                                                                  Board Report
term to maturity is five years and sale is prohibited for three years. The
tax value is CHF 6.55 per option. The exercise price of options issued
in the year under review was calculated as the average share price at the
time of allocation on August 28th, 2003, and amounts to CHF 54.55                                                                61
per option. The term to maturity is five years and sale is prohibited for
three years. The tax value is CHF 9.30 per option (see also page 31
section 27 of the financial report.)
     Insider trading regulations
The “Vögele Group Regulations on Insider Trading” apply to all mem-
bers of the Board of Directors, Group Management, the second level
of management as well as any other employees whose work gives them
access to price-sensitive information. These regulations are more com-
prehensive than the legal standards currently in force and also form part
of the contracts of employment of the aforementioned persons. They
are constantly updated to keep them in line with the latest requirements.
     5.7 Additional fees and remuneration
Dr. Felix R. Ehrat, a member of the Board of Directors, is also a senior
partner in the law firm of Bär & Karrer. During the year under review
this firm provided legal services to various Group companies for which it
received a total fee of CHF 602 500.
     5.8 Loans granted to directors and officers
No loans to directors or officers of the company are outstanding.
     5.9 Highest total remuneration
The member of the Board of Directors with the highest total remuneration
received director’s emoluments of CHF 367 500 during the year under
review, as well as 4 500 options with an exercise price of CHF 54.55 each
and a tax value of CHF 9.30 each. (Please refer to section 5.6 “Options”
on page 61 for details of how options can be exercised.)
                                                   6 Shareholders’ rights
                                                        6.1 Voting rights: restrictions and representation
                                                    The company’s articles of association contain no restrictions on voting
                                                    rights and comply with the law with regard to proxy voting.
                                                        6.2 Statutory quorums
Activity Report 2003 of the Charles Vögele Group




                                                    The Annual Shareholders’ Meeting passes resolutions and conducts votes,
                                                    unless mandatory statutory regulations or the provisions of the articles
                                                    of association dictate otherwise, by an absolute majority of the sharehold-
                                                    ers’ votes legally represented and validly cast, excluding spoilt votes and
                                                    regardless of the number of shareholders present and the number of votes
                                                    they represent. Each share entitles the holder to one vote at the Annual
                                                    Shareholders’ Meeting.
                                                        6.3 Calling the Annual Shareholders’ Meeting
                                                    The Annual Shareholders’ Meeting takes place no later than six months
                                                    after the end of each company financial year. It is called by the Board
                                                    of Directors. Shareholders are called to the meeting by an invitation pub-
                                                    lished in the daily and financial media and are requested to submit any
62
                                                    items they may wish to propose for the agenda.
                                                        6.4 Agenda items
                                                    Shareholders who between them represent shares with a total par value of
                                                    at least CHF 1 million can make a request no later than 45 days prior
                                                    to the day of the meeting for items to be added to the agenda. The request
                                                    has to be made in writing and state the motion that is to be put to the
                                                    vote. One or more shareholders who between them represent at least 10%
                                                    of the share capital can call an Extraordinary Shareholders’ Meeting
                                                    between annual meetings.
                                                        6.5 Entries in the share register
                                                    The share capital of Charles Vögele Holding AG consists exclusively of
                                                    bearer shares, and accordingly no share register is maintained.

                                                   7 Changes in control and defensive measures
                                                     There are no provisions (such as opting-out or opting-up clauses), either
                                                     in the articles of association or in contracts of employment, or in any
                                                     other agreements or plans, that relate to changes in control of the com-
                                                     pany or defensive measures to prevent such a change.

                                                   8 Auditors
                                                        8.1 Duration of mandate and term of office of the lead auditors
                                                    The new auditor for the Charles Vögele Group and Charles Vögele
                                                    Holding AG is PricewaterhouseCoopers AG (PwC). It was selected
                                                    as statutory and Group auditor for one year at the Annual Shareholders’
                                                    Meeting of April 29th, 2003, and replaces the previous auditor
                                                    Arthur Andersen AG. Since April 29th, 2003, the mandate to audit
                                                    the Charles Vögele Group and Charles Vögele Holding AG
                                                    has been managed by Matthias von Moos, partner at PwC, Zug.
                                                                                Governance
                                                                                Corporate
                                                                                Sustainability
                                                                                and social
                                                                                       Investors
     8.2 Audit fee




                                                                                       Countries
 The Group auditor and auditor of Charles Vögele Holding AG is paid
 a fee totalling CHF 600 000 plus another CHF 40 000 for audit-related
 services plus expenses for carrying out the statutory audit mandate.
 The audit contract is for one year, and the appointment of Charles Vögele
 Holding AG’s Group auditor and auditor must be approved by the




                                                                                       Strategy
 Annual Shareholders’ Meeting.
     8.3 Additional fees
 The Group auditor for the Charles Vögele Group and the auditor for




                                                                                Management
 Charles Vögele Holding AG is involved exclusively in audit work. It has
 not been given any additional consultancy mandates. Consequently




                                                                                Report
 no additional consulting fees have been paid during the year under review.
     8.4 Supervisory and control instruments for the auditors




                                                                                       Board Report
 The work of the external auditors is assessed and examined by the Audit
 Committee. Meetings are called and other means employed as required.

9 Information policy                                                                  63
  The Charles Vögele Group pursues a transparent and open communica-
  tions policy and is committed to a policy of ad-hoc publicity. Shareholders
  are regularly and continually kept informed by the following means:
– Annual Report and Accounts in German and English: these are published
  in accordance with statutory provisions no later than 20 days prior to
  the Annual Shareholders’ Meeting, and are held at the company’s regis-
  tered offices.
– Half-Year Report and Accounts in German and English: these are usually
  published in August each year.
– Annual Report media and analysts’ conference: this accompanies the
  presentation of the annual results, usually in March; there is also a con-
  ference on the interim results in August.
– Ad-hoc media releases as necessary.
– The media releases are published on the Internet at
  www.voegele-mode.com under the “Media Lounge” link.
 Detailed information on the company is always available to
 shareholders and other interested members of the public at our website
 www.voegele-mode.com.
 An overview of contact addresses and the relevant timetable for share-
 holder information can be found on page 64 of the activity report.
                                    Publisher                          Contact address
The Annual Report of the              Charles Vögele Holding AG           Charles Vögele Holding AG
Charles Vögele Group is published     CH-8808 Pfäffikon                   Investor Relations
in English and German.                                                    P. O. Box 58
                                    Graphic Design
The original language is German.                                          Gwattstrasse 15
                                      Gottschalk+Ash Int’l
                                                                          CH-8808 Pfäffikon SZ
                                    Photography
                                                                       T + 41 55 416 71 00
                                      Portraits:
                                                                       F + 41 55 410 12 82
                                      Peter Gunti, Solothurn
                                                                       E investor-relations@voegele-mode.com
                                      Fashion pictures:
                                                                          www.voegele-mode.com
                                      Charles Vögele Group
                                                                       Forthcoming events
                                    Typesetting and Printing
                                                                         – Annual Shareholders’ Meeting 2003: April 6th, 2004
                                      Neidhart + Schön Group, Zurich
                                                                         – Analysts’ and media conference on
                                                                           the 2004 half-year report: August 31st, 2004
                                                                         – Analysts’ and media conference on
                                                                           the 2004 year-end results: March 8th, 2005
                                                                         – Annual Shareholders’ Meeting 2004:
                                                                           April 13th, 2005
                                                                         – Analysts’ and media conference
                                                                           on the 2005 half-year report: August 30th, 2005
Transparency
          through facts 2003
Charles Vögele Group
Financial Statements 2003
Charles Vögele Group
Contents Consolidated Financial Statements



                        4 Consolidated Income Statement
                        5 Consolidated Balance Sheet
                        6 Consolidated Cash Flow Statement
                        7 Consolidated Statement of Changes in Group Equity




                                                                              Contents Consolidated Financial Statements
                        8 Notes to the Consolidated Financial Statements
                       37 Report of the Group Auditors




                                                                                    3
                                                             Consolidated Income Statement
                                                             from January 1st to December 31st




                                                             in CHF 1 000                                                        Note        2003         2002

                                                             Gross sales                                                           3    1 615 983    1 709 933
                                                             Reductions in sales                                                   4     (201 411)    (211 378)
                                                             Net sales                                                             3    1 414 572    1 498 555
                                                             Cost of sales                                                               (588 863)    (664 546)
                                                             Gross profit                                                                825 709      834 009
                                                             In % of net sales                                                               58.4         55.7
                                                             Personnel expenses                                                    5     (304 933)    (314 155)
                                                             Rental expenses                                                       6     (193 472)    (183 549)
                                                             Advertising and promotion expenses                                           (92 534)    (103 882)
Financial Statements 2003 of the Charles Vögele Group




                                                             Operating and administration expenses                                 7      (92 815)     (98 843)
                                                             Operating real estate income, net                                     8        1 764        1 709
                                                             Operating financial income                                                   27 029       30 135
                                                             Other operating income                                                9        1 158            0
                                                             Total operating expenses                                                    (653 803)    (668 585)
                                                             EBITDA 1)                                                                   171 906      165 424
                                                             In % of net sales                                                               12.2         11.0
                                                             Depreciation                                                         10      (57 043)     (53 429)
                                                             Amortization of goodwill                                             20      (15 168)     (14 826)
                                                             EBIT 2)                                                                      99 695       97 169
                                                             In % of net sales                                                                7.0          6.5
                                                             Other financial income                                               11        1 054        1 259
                                                             Other financial expenses                                             12      (24 974)     (32 156)
                                                             Exchange gains/(losses), net                                                   4 751       (8 531)
     4                                                       Non-operating real estate income, net                                            (78)         (72)
                                                             Earnings before taxes                                                        80 448       57 669
                                                             In % of net sales                                                                5.7          3.8
                                                             Taxes                                                                13      (42 979)     (41 771)
                                                             Net income                                                                   37 469       15 898
                                                             In % of net sales                                                                2.6          1.1
                                                             Earnings per share (undiluted)                                       14         4.28         1.81
                                                                                      (diluted)                                   14         4.16         1.76
                                                        1)   Earnings before depreciation and amortization, interest and taxes
                                                        2)   Earnings before interest and taxes
Consolidated Balance Sheet
as of December 31st




in CHF 1 000                                     Note    31.12. 2003    31.12. 2002

Assets
Current assets




                                                                                               Auditors
Cash and cash equivalents                         15     123 452        147 909
Receivables and advance payments                  16       31 957         32 707
Inventories                                       17     305 613        347 411
Total current assets                                     461 022        528 027


Long-term assets
Tangible assets: Land and buildings               18     201 280        203 309




                                                                                               Notes
                    Equipment                            220 383        239 893
Total tangible assets                                    421 663        443 202
Financial assets: Investments                     19           170            170




                                                                                      Changes in Equity
                    Other financial assets                  1 461          1 403




                                                                                      Cash Flow and
Total financial assets                                      1 631          1 573
Intangible assets                                 20     167 650        178 019
Deferred tax assets                               13       23 476         31 351
Total long-term assets                                   614 420        654 145
Total assets                                            1 075 442      1 182 172




                                                                                      and Balance Sheet
                                                                                      Income Statement
Liabilities and shareholders’ equity
Current liabilities
Short-term financial liabilities                  21        8 383       106 059
Trade payables                                             62 203         44 584
Other liabilities and accruals                    22       78 962         84 468                5

Current tax liabilities                                    28 547         26 351
Total current liabilities                                178 095        261 462


Long-term liabilities
Lease liabilities                                 23       59 036         63 919
Provisions                                        24        9 822         15 877
Deferred tax liabilities                          13       47 524         50 940
Mortgages                                         25       67 300         67 600
Loans                                             26     270 736        342 152
Total long-term liabilities                              454 418        540 488


Shareholders’ equity
Share capital                                              88 000         88 000
Treasury shares                                            (5 487)           (565)
Share premium reserve                                    173 789        173 789
Reserve for valuation of financial instruments             (8 512)       (18 315)
Retained earnings                                        195 139        137 313
Total shareholders’ equity                               442 929        380 222
Total liabilities and shareholders’ equity              1 075 442      1 182 172
                                                        Consolidated Cash Flow Statement
                                                        from January 1st to December 31st




                                                        in CHF 1 000                                                              Note       2003        2002

                                                        Earnings before interest and taxes (EBIT)                                         99 695      97 169
                                                        Adjustments: Depreciation and amortization                                        72 211      68 255
                                                                       Profit on disposal of assets                                        (1 158)       (400)
                                                        Change in long-term provisions                                                     (6 707)      5 144
                                                        Operating profit before changes in working capital                               164 041     170 168
                                                        Change in short-term receivables, advance payments and prepaid expenses            (1 735)      7 648
                                                        Change in inventories                                                             59 574      95 229
                                                        Change in current liabilities                                                     23 787      (12 249)
                                                        Operating profit after changes in working capital                                245 667     260 796
Financial Statements 2003 of the Charles Vögele Group




                                                        Financial income received                                                           1 062       1 259
                                                        Financial expenses paid                                                           (21 636)    (38 068)
                                                        Taxes paid                                                                        (34 715)    (25 147)
                                                        Non-operating income received/(paid)                                                  84          90
                                                        Cash flow from operating activities                                              190 462     198 930
                                                        Investments in intangible assets                                                   (1 476)     (2 051)
                                                        Investments in tangible assets                                                    (20 344)    (34 319)
                                                        Disposals of tangible assets                                                        3 311       5 815
                                                        Investments in financial assets                                                         0         (95)
                                                        Disposals of financial assets                                                           0        200
                                                        Net cash used in investing activities                                             (18 509)    (30 450)
                                                        Change in bank loans: Additions                                                   30 000     452 500
                                                                                Repayments                                               (207 500)   (526 664)
                                                        Change in finance lease liabilities                                                (5 026)     (4 966)
     6                                                  Purchase of treasury shares                                                        (4 922)        (32)
                                                        Change in mortgages                                                                  (300)     (4 800)
                                                        Net cash (used in)/received from financing activities                            (187 748)    (83 962)
                                                        Net increase/(decrease) in cash and cash equivalents                              (15 795)    84 518


                                                        Net cash and cash equivalents at the beginning of the period                     147 909      67 965
                                                        Effect of exchange rate changes                                                    (8 662)     (4 574)
                                                        Net increase/(decrease) in cash and cash equivalents                              (15 795)    84 518
                                                        Net cash and cash equivalents at the end of the period                           123 452     147 909
Consolidated Statement
of Changes in Group Equity

                                                                                                                   Valuation
                                                                                   Share premium      Retained      financial
in CHF 1 000                                     Share capital   Treasury shares           reserve    earnings   instruments       Total

Balance 1.1. 2002                                   88 000                (533)       173 789        127 369        (4 030)     384 595
Net income 2002                                                                                       15 898                     15 898




                                                                                                                                                    Auditors
Effect of exchange rates                                                                              (5 954)                    (5 954)
Dividends paid                                                                                                                        0
Recognized through income statement                                                                                  1 964        1 964
Recognized through purchase of goods                                                                                 2 066        2 066
Reserve for valuation of financial instruments                                                                    (18 315)      (18 315)
Acquisition of treasury shares                                             (32)                                                     (32)
Balance 31.12. 2002                                 88 000                (565)       173 789        137 313      (18 315)      380 222




                                                                                                                                                    Notes
Net income 2003                                                                                       37 469                     37 469
Effect of exchange rates                                                                              20 357                     20 357
Dividends paid                                                                                                                        0




                                                                                                                                           Changes in Equity
Recognized through income statement                                                                                    943         943




                                                                                                                                           Cash Flow and
Recognized through purchase of goods                                                                               17 372        17 372
Reserve for valuation of financial instruments                                                                      (8 512)      (8 512)
Acquisition of treasury shares                                         (4 922)                                                   (4 922)
Balance 31.12. 2003                                 88 000             (5 487)        173 789        195 139        (8 512)     442 929




                                                                                                                                           and Balance Sheet
                                                                                                                                           Income Statement
    Share capital                                                      Treasury shares
The share capital of Charles Vögele Holding AG                    As of December 31st, 2003, treasury shares com-
consists of 8 800 000 fully paid-in bearer shares at              prise 117 285 shares (December 31st, 2002:
a par value of CHF 10 each.                                       18 314 shares) held by the Charles Vögele Group
                                                                  and expected to be used for additional man-
The articles of Charles Vögele Holding AG include                                                                                                    7
                                                                  agement participation in the Charles Vögele Group.
a provision authorizing the Board of Directors
to make a conditional increase in the share capital by                 Dividend
up to CHF 2.64 million, divided into 264 000 fully                At the Annual Shareholders’ Meeting held on
paid-in bearer shares with a par value of CHF 10 each,            April 29th, 2003, it was decided not to distribute
without giving rise to any pre-emptive rights to                  a dividend for the financial year 2002.
existing shareholders. The shares relating to this in-
                                                                  At the Annual Shareholders’ Meeting held on
crease in conditional capital may only be used for
                                                                  May 16th, 2002, it was decided not to distribute
existing or future share option plans for the Manage-
                                                                  a dividend for the financial year 2001.
ment (see Note 27 concerning incentive and share
ownership plans).                                                      Value fluctuation on financial instruments
                                                                  With the implementation of IAS 39 effective
                                                                  January 1st, 2001, changes in the fair value
                                                                  of a highly effective cash flow hedging instru-
                                                                  ment are recognized directly in shareholders’
                                                                  equity (refer to note on financial instruments).
                                                                  The valuation as of December 31st, 2003,
                                                                  comprises the change in fair value of the open
                                                                  cash flow hedges amounting to CHF 10.0 mil-
                                                                  lion (December 31st, 2002: CHF 21.2 million) less
                                                                  deferred taxes of CHF 1.5 million (December 31st,
                                                                  2002: CHF 2.9 million).
                                                         Notes to the Consolidated
                                                         Financial Statements

                                                        1 Basis of consolidation
                                                             1.1 General                                            1.3 Scope of consolidation
                                                         The consolidated financial statements are based         Changes in 2003: In June 2003, Charles Vögele
                                                         on the individual financial statements of the Group     Holding AG was merged with Charles Vögele
                                                         companies, prepared in accordance with Group            Beteiligungen AG, with retrospective effect from
                                                         guidelines, as of December 31st, 2003.                  January 1st, 2003. As a result all assets and
                                                                                                                 liabilities of Charles Vögele Beteiligungen AG were
                                                         The consolidated financial statements have been pre-
                                                                                                                 transferred to Charles Vögele Holding AG. In
                                                         pared in accordance with the International Finan-
                                                                                                                 May 2003, a new Group company, Charles Vögele
                                                         cial Reporting Standards (IFRS) 2003 issued by the
                                                                                                                 Import GmbH, was founded in Lehrte, Germany.
                                                         International Accounting Standard Board (IASB).
                                                                                                                 The company is fully included in the consolidated
Financial Statements 2003 of the Charles Vögele Group




                                                             1.2 Basis of consolidation                          financial statements, since Charles Vögele Holding
                                                         The consolidated financial statements comprise the      AG holds 100% of its partnership capital. This
                                                         financial statements of Charles Vögele Holding AG       company renders purchasing logistics services in
                                                         and its Swiss and international subsidiaries.           connection with the centralized warehousing
                                                                                                                 facility in Lehrte.
                                                         Consolidation is performed using the purchase
                                                         method.                                                 Changes in 2002: As of October 1st, 2002, Charles
                                                                                                                 Vögele Deutschland (Süd) GmbH, Sigmaringen,
                                                         Assets and liabilities as well as the income and ex-
                                                                                                                 was merged with Charles Vögele Deutschland
                                                         penses of the companies in which Charles Vögele
                                                                                                                 (Nord) GmbH, Lehrte, and renamed Charles Vögele
                                                         Holding AG has a direct or indirect interest ex-
                                                                                                                 Deutschland GmbH, Sigmaringen.
                                                         ceeding 50% of the voting rights of a company’s
                                                         share capital or another form of controlling interest      1.4 Segment reporting
                                                         are fully included in the consolidated financial        The Group operates through the segments of “sales
                                                         statements. The interest of the minority shareholders   organizations,”“central services” and “holding
     8                                                   in the net assets and the net income is disclosed       company.” The “sales organizations” segment in-
                                                         separately in the consolidated balance sheet and in-    cludes the branches and related sales logistics.
                                                         come statement.                                         The centralized services of the Group relating to the
                                                                                                                 fashion trade are summarized in the “central serv-
                                                         Associated companies, minority shareholdings
                                                                                                                 ices” segment. The major centralized Group services
                                                         between 20 and 50% of the voting rights, or
                                                                                                                 include purchasing and purchasing logistics, infor-
                                                         investments under significant influence by man-
                                                                                                                 mation technology, finance, accounting, controlling,
                                                         agement of the Charles Vögele Group, are ac-
                                                                                                                 treasury, internal and external communications,
                                                         counted for using the equity method. The share of
                                                                                                                 advertising and brand managment.
                                                         net assets allotted to the Charles Vögele Group
                                                         is recorded in the balance sheet under investments.     The Charles Vögele Group is a centrally managed
                                                         The share of net income of such investments is          group with a flat organizational structure oper-
                                                         reflected in the income statement.                      ating solely in the fashion trade. The centralization
                                                                                                                 and replication of the concept are fundamental
                                                         Equity interests of less than 20% are recorded
                                                                                                                 cornerstones of the Group’s strategy. For the correct
                                                         under investments and are valued at cost. Any impair-
                                                                                                                 presentation of the added value resulting from the
                                                         ment in value is recorded as financial expense.
                                                                                                                 central services, the sales organizations are charged
                                                         Intercompany receivables and payables, expenses         with an imputed service mark-up corresponding
                                                         and profits between companies included in the con-      to a fair market price of 15% on the purchase price
                                                         solidation are eliminated.                              of products sold.
                                                         The companies included in the consolidation are
                                                         disclosed in the Group structure of the consolidated
                                                         financial statements on page 36.
       1.5 Foreign currency conversion
All assets and liabilities in balance sheets prepared
in foreign currencies are converted using year-




                                                                                                                  Auditors
end exchange rates. Income and expenses in income
statements prepared in foreign currencies are
converted at average rates of exchange for the year.
Exchange differences arising from conversion
are allocated directly to retained earnings in the bal-
ance sheet. Exchange gains and losses resulting
from foreign currency transactions are included in




                                                                                                                  Notes
the income statement.
The following CHF exchange rates are used for the
Group’s major currencies:




                                                                                                         Changes in Equity
                                                                                                         Cash Flow and
                                                                                                Income
2003                                                      ISO-Code   Unit   Balance sheet    statement

Euro                                                         EUR       1           1.56         1.52
United Kingdom                                               GBP       1           2.20         2.20
Hong Kong                                                   HKD        1           0.16         0.17
USA                                                          USD       1           1.24         1.35




                                                                                                         and Balance Sheet
                                                                                                         Income Statement
                                                                                                Income
2002                                                      ISO-Code   Unit   Balance sheet    statement

Euro                                                         EUR       1           1.45         1.47
United Kingdom                                               GBP       1           2.23         2.34
Hong Kong                                                   HKD        1           0.18         0.20               9
USA                                                          USD       1           1.39         1.56


Foreign currency transactions during the year are
converted at the exchange rate prevailing at the date
of the transaction.
       1.6 Intangible assets
Intangible assets include goodwill, information tech-
nology software (acquired from or developed
by third parties; IT software developed in-house is
not included) and added value resulting from the
acquisition of locations. The depreciation period is
as follows:

Information technology (IT) software                                                         5 years
Goodwill LBO 1997 and goodwill in new markets                                               20 years
Goodwill in existing markets                                                                 5 years

If indications of a value reduction in goodwill arise,
a valuation assessment will be performed. In the
case of a negative assessment, the goodwill will be
adjusted.
                                                           1.7 Tangible assets
                                                        Other tangible assets are valued at historical cost less
                                                        straight-line depreciation based on the useful life
                                                        of the asset. The depreciation periods are as follows:

                                                        Operating equipment: Fixtures and fittings                  10 years
                                                                              IT hardware                            5 years
                                                                              Cars                                   4 years
                                                                              Trucks                                 6 years
                                                        Low-value items                                              5 years
Financial Statements 2003 of the Charles Vögele Group




                                                        Properties: Properties were adjusted to current
                                                        market values as part of the first full consolidation
                                                        as of December 31st, 1997. Buildings are depreci-
                                                        ated on a straight-line basis over a period of 40 years.
                                                        Buildings in leasehold are depreciated over
                                                        the leasehold period up to a maximum of 40 years.
                                                           1.8 Financial instruments
                                                        Financial instruments comprise all financial assets
                                                        (cash and cash equivalents, receivables and ad-
                                                        vance payments and long-term financial assets) and
                                                        financial liabilities (short-term and long-
                                                        term bank debt, trade payables, other liabilities and
                                                        accruals, financial leasing and mortgages). Where
10                                                      the fair values of the individual financial assets and
                                                        financial liabilities are not disclosed separately,
                                                        these values approximate to the book values shown
                                                        in the consolidated balance sheet. The fair value
                                                        is disclosed separately in the notes on the long-term
                                                        liabilities on the basis of discounted values. The
                                                        transactions for financial assets are recognised on
                                                        settlement date.
                                                        Transactions with financial instruments may lead to
                                                        certain financial risks being taken over by the
                                                        Group or transferred to a third party. The risks for
                                                        the Charles Vögele Group are limited essentially
                                                        to risks relating to foreign exchange risk, interest rate
                                                        risk, liquidity risk, and credit risk. As part of the
                                                        risk management policies, financial risks – which in-
                                                        clude both opportunities and risks of loss – are
                                                        monitored continuously.
   1.8.1 Financial risk management
   Foreign exchange risk                                   Credit risk
This risk is based on fluctuations in foreign ex-       The Group carries a low risk of credit default as
change rates. In order to manage its foreign            the transactions resulting from current business ac-




                                                                                                                           Auditors
exchange risk resulting from the purchase of goods      tivities are paid mainly in cash or by third-party
in USD, the Group enters into foreign exchange          debit or credit cards. The risks connected with cash
contracts. The forward exchange contracts comprise      payments (money transportation) are low and
nearly 100% of the foreign currency requirements        minimized by the selected partners. Risks resulting
at the date of the block order based on the forecast    from prepayments to suppliers or from claims re-
purchases. The changes in the fair value resulting      sulting from faulty delivery of merchandise are taken
from hedging transactions are recognised directly       into account by means of periodic monitoring of




                                                                                                                           Notes
in shareholders’ equity. Inventories and trade          the corresponding value adjustments.
payables are shown in the balance sheet at the ex-
                                                           Hedging instruments
change rates hedged by these exchange rate trans-
                                                        The Charles Vögele Group determines the required




                                                                                                                  Changes in Equity
actions (hedging in accordance with the parameters




                                                                                                                  Cash Flow and
                                                        coverage for hedging future cash flow on the
set out in IAS 39). No further foreign exchange
                                                        basis of the planned transaction volume. Derivative
contracts for foreign exchange rate risks are en-
                                                        financial instruments are classified as a hedge
tered into.
                                                        instrument if the hedging transaction covering the
   Interest rate risk                                   related future cash flow is considered highly
The interest rate risk arising from fluctuations in     effective, the effectiveness of the hedge can be re-




                                                                                                                  and Balance Sheet
                                                                                                                  Income Statement
market interest rates is compensated to a certain ex-   liably measured, the expected future cash flow is
tent by the staggered maturities of bank loans.         highly probable and there is formal documentation
Current interest rates and the rate adjustment dead-    of hedging relationships at the inception of the
lines are listed separately in the notes to individ-    hedge.
ual balance sheet positions.
                                                        A change in the fair value that qualifies as a highly            11

   Liquidity risk                                       effective hedge is included directly in the reserve
The Group’s refinancing risk is managed by binding      for valuation of financial instruments in shareholders’
long-term partners into its financing activities        equity. The change in value of hedging instru-
and considerations. Short- and long-term financing      ments that are no longer effective is recognized in
is secured by continuously reviewing funding re-        “Exchange gains or losses” in the income statement.
quirements in the light of current and future devel-
                                                        If a hedge transaction classified as effective has an
opments. Liquidity risk is reduced through
                                                        inefficient portion or if an expected future cash flow
the cash flow generated from trading activities.
                                                        fails to materialize, the accrued profits or losses
                                                        recorded directly in the shareholders’ equity relating
                                                        to these hedge transactions are immediately re-
                                                        versed and booked through the income statement.
                                                        Financial instruments not classified as hedge instru-
                                                        ments are valued at fair value and value fluc-
                                                        tuations of these financial instruments are recorded
                                                        through the income statement.
                                                           1.8.2 Financial assets
                                                           Cash and cash equivalents                                  Other liabilities and accruals
                                                        Cash and cash equivalents are balances from current        Financial liabilities include other liabilities only.
                                                        business activity managed through a Group-wide             This position includes credit notes and unpaid value
                                                        cash pooling system. Foreign currency positions are        added tax.
                                                        valued at the year-end rate as of December 31st.
                                                                                                                      Leasing
                                                           Receivables and advance payments                        Financial leasing: Leasing objects that are financed
                                                        Other receivables comprise short-term reclaimable          over the useful life of the asset and where owner-
                                                        withholding taxes, other tax credits and rent              ship is transferred to the Group after expiry of the
                                                        prepayments. Advance payments for textiles from            lease term based on non-cancelable contracts
Financial Statements 2003 of the Charles Vögele Group




                                                        suppliers are shown as prepayments. All values             are classified as finance leases under fixed assets.
                                                        are shown in the balance sheet at nominal value cost       The acquisition costs are depreciated using the
                                                        or lower fair values.                                      straight-line method over the useful life of the asset.
                                                                                                                   The liabilities are stated at the present value of
                                                           Financial assets
                                                                                                                   the minimum lease payments. All leasing commit-
                                                        Financial assets are shown in the balance sheet at
                                                                                                                   ments not included under financial leasing are
                                                        historical cost or fair value. Value adjustments
                                                                                                                   classified as operating leasing.
                                                        are stated under other financial income (expenses)
                                                        in the income statement.                                   Operating leasing: Operating leasing includes leases
                                                                                                                   of assets in which substantially all risks and re-
                                                           1.8.3 Financial liabilities
                                                                                                                   wards are retained by the lessor. Lease payments un-
                                                           Bank debt
                                                                                                                   der operating leasing are recognized as an expense
                                                        Short-term bank overdrafts: Bank overdrafts are
                                                                                                                   in the income statement.
                                                        shown as such in the balance sheet. Bank advances
                                                        and short-term bank loans are shown as short-                 Mortgages
12
                                                        term financial liabilities, if the maturity is less than   These are mortgages on buildings used for opera-
                                                        twelve months. The short-term bank debt in for-            tions and are subsequently carried at amor-
                                                        eign currency is converted using the year-end rate         tized cost. The terms of the existing mortgages
                                                        as of December 31st.                                       are extended on a continuous basis and
                                                                                                                   therefore not reclassified under short-term lia-
                                                        Long-term bank debt: Bank loans with a maturity
                                                                                                                   bilities.
                                                        date of more than twelve months are valued at amor-
                                                        tized cost.
                                                           Trade payables
                                                        Liabilities resulting from the delivery of goods
                                                        and services relating to trading activities are valued
                                                        at the hedged foreign exchange rate (refer also to
                                                        “Hedging of foreign exchange rates”) or at the year-
                                                        end rate as of December 31st. At the time of pay-
                                                        ment, cash discounts earned are recognized as oper-
                                                        ating financial income in the income statement.
   1.9 Inventories                                           1.12 Employee benefit plans
Inventories are valued using the average cost method      The Group operates different pension plans
based on the effective purchase price plus delivery       based on local practices and the regulations of the




                                                                                                                           Auditors
costs, less discounts received. On December 31st, 2001,   different countries. Pension plans classified as de-
an inventory valuation system was introduced              fined contribution plans are charged to income in
(see also Note 17) that takes into account the ageing     the year contributions are made. The obligation
structure of the inventory and will be continued          and costs relating to pension plans classified as de-
systematically. Foreign currency items are converted      fined benefit plans are determined by actuarial
at the exchange rate of the day or at the hedged          valuations using the projected unit credit method.
exchange rate of the purchased goods.                     Actuarial gains and losses are amortized based




                                                                                                                           Notes
                                                          on the average remaining service period of the em-
   1.10 Deferred taxes
                                                          ployees.
The provision for deferred income taxes is cal-
culated using the liability method. The calculation is       1.13 Advertising




                                                                                                                  Changes in Equity
                                                                                                                  Cash Flow and
based on the differences arising between the tax          Advertising expenses are recorded in the income
value of assets and liabilities and their values in the   statement on the publication date of the advertis-
consolidated financial statements. The deferred           ment.
tax liabilities arising from these differences are pro-
                                                             1.14 Operating financial income
vided on the basis of future local and individual
                                                          Operating financial income comprises vendor
tax rates. Deferred taxes on future dividends from




                                                                                                                  and Balance Sheet
                                                                                                                  Income Statement
                                                          discounts less costs resulting from cash transactions
retained earnings of subsidiaries are also provided.
                                                          of the stores and bank charges.
Deferred tax assets from net operating loss carry-
                                                             1.15 Financial expenses
forwards considered realizable in the near future are
                                                          Interest costs are recognized directly in the
capitalized on the basis of future national tax rates.
                                                          income statement.                                              13
   1.11 Provisions
Provisions are recognised when a current liability
arises based on an event which has occurred in
the past, when it is likely that a drain of resources
will occur, if the liability is met, and when the
amount of the liability can be assessed reliably.
If interests represent a significant part of the ex-
pected expenses, the provisions are recognized on
a discounted value basis.
                                                        2 Segment information
                                                                 2.1 Financial segment information 2003                                                   Sales     Central      Holding   Consolidation
                                                             in CHF 1 000                                                                         organizations     services    company           entries         Group

                                                             Gross sales                                                                          1 616 034       685 668             0      (685 719)      1 615 983
                                                             Net sales                                                                            1 414 622       685 668             0      (685 718)      1 414 572
                                                             EBITDA1)                                                                                93 732        67 536       (3 460)        14 098         171 906
                                                             EBITDA in % of net sales                                                                  6.6%         9.8%              –                –        12.2%
                                                             EBIT 2)                                                                                 33 495        61 238       (3 460)          8 422         99 695
                                                             EBIT in % of net sales                                                                    2.4%         8.9%              –                –          7.0%


                                                             Depreciation                                                                            49 068         6 298             0            193         55 559
                                                             Amortization of goodwill                                                                  9 685              0           0          5 483         15 168
Financial Statements 2003 of the Charles Vögele Group




                                                             Impairment                                                                                1 484              0           0                0         1 484
                                                             Other non-cash expenses                                                                 68 008        22 049      (12 975)          2 299         79 381


                                                             Operating assets 3)                                                                    844 034       188 494        2 190       (109 900)        924 818
                                                             Operating liabilities 4)                                                               204 309        65 177        2 104       (120 603)        150 987
                                                             Tangible assets 5)                                                                     413 069         8 594             0                0      421 663
                                                             Net investments                                                                         14 251         3 938             0                0       18 189


                                                             Net sales per m2 (in CHF)                                                                 2 437              0           0                0         2 437
                                                             Net sales per average number of full-time employees, in CHF 6)                         277 431               0           0                0      266 297


                                                                                                                                                                                                                    Total
                                                                                                                                                                                               Belgium/             sales
                                                             in CHF 1 000                                                                          Switzerland     Germany       Austria The Netherlands    organizations

                                                             Gross sales                                                                            563 891       577 622      297 885        176 636       1 616 034
14
                                                             Net sales                                                                              522 545       496 806      247 408        147 863       1 414 622
                                                             EBITDA1)                                                                                77 079         8 170       26 976        (18 493)         93 732
                                                             EBITDA in % of net sales                                                                 14.8%         1.6%        10.9%         – 12.5%            6.6%
                                                             EBIT2)                                                                                  56 917       (14 792)      20 938        (29 568)         33 495
                                                             EBIT in % of net sales                                                                   10.9%       – 3.0%         8.5%         – 20.0%            2.4%


                                                             Depreciation                                                                            20 085        17 190        5 498           6 295         49 068
                                                             Amortization of goodwill                                                                        0      5 189             0          4 496           9 685
                                                             Impairment                                                                                    77         583          540             284           1 484
                                                             Other non-cash expenses                                                                 14 741        29 706       11 492         12 069          68 008


                                                             Operating assets 3)                                                                    320 128       270 362       88 172        165 372         844 034
                                                             Operating liabilities 4)                                                                54 573        84 265       44 440         21 031         204 309
                                                             Tangible assets 5)                                                                     208 764       129 049       40 988         34 268         413 069
                                                             Net investments                                                                           5 324        7 122        3 600          (1 795)        14 251


                                                             Net sales per m2 (in CHF)                                                                 4 178        1 897        2 685           1 457           2 437
                                                             Net sales per average number of full-time employees, in CHF 6)                         371 918       255 954      276 125        172 536         277 431
                                                        1) Earnings before depreciation and amortization, interest and taxes
                                                        2) Earnings before interest and taxes
                                                        3) Trade receivables, inventories, other receivables without financing characteristics,

                                                           tangible and intangible assets
                                                        4) Trade payables, provisions and other payables without financing characteristics

                                                        5) Tangible assets are included in the position “Operating assets”

                                                        6) Excluding apprentices
         Financial segment information 2002                                                       Sales     Central      Holding   Consolidation
     in CHF 1 000                                                                         organizations     services    company           entries         Group

     Gross sales                                                                          1 709 775       789 104             0      (788 946)      1 709 933
     Net sales                                                                            1 498 398       789 104             0      (788 947)      1 498 555




                                                                                                                                                                             Auditors
     EBITDA1)                                                                                90 758        65 502       (2 997)        12 161         165 424
     EBITDA in % of net sales                                                                  6.1%         8.3%              –                –        11.0%
     EBIT 2)                                                                                 34 062        59 424       (2 997)          6 680         97 169
     EBIT in % of net sales                                                                    2.3%         7.5%              –                –         6.5%


     Depreciation                                                                            47 352         6 078             0               (1)      53 429
     Amortization of goodwill                                                                  9 344              0           0          5 482         14 826




                                                                                                                                                                             Notes
     Impairment                                                                                      0            0           0                0               0
     Other non-cash expenses                                                                 76 912        31 966       18 432        (31 494)         95 816




                                                                                                                                                                    Changes in Equity
     Operating assets 3)                                                                    928 588       210 880        4 482       (146 443)        997 507




                                                                                                                                                                    Cash Flow and
     Operating liabilities 4)                                                               243 062        38 031        6 232       (142 396)        144 929
     Tangible assets 5)                                                                     433 507         9 695             0                0      443 202
     Net investments                                                                         36 477         3 761             0                0       40 238


     Net sales per m2 (in CHF)                                                                 2 647              0           0                0         2 647




                                                                                                                                                                    and Balance Sheet
                                                                                                                                                                    Income Statement
     Net sales per average number of full-time employees, in CHF 6)                         273 181               0           0                0      263 413


                                                                                                                                                            Total
                                                                                                                                       Belgium/             sales
     in CHF 1 000                                                                          Switzerland     Germany       Austria The Netherlands    organizations

     Gross sales                                                                            611 741       611 557      292 851        193 626       1 709 775
                                                                                                                                                                           15
     Net sales                                                                              566 849       526 161      243 393        161 995       1 498 398
     EBITDA1)                                                                                90 414           137       24 525        (24 318)         90 758
     EBITDA in % of net sales                                                                 16.0%         0.0%        10.1%         – 15.0%            6.1%
     EBIT2)                                                                                  70 515       (21 782)      20 107        (34 778)         34 062
     EBIT in % of net sales                                                                   12.4%        – 4.1%        8.3%         – 21.5%            2.3%


     Depreciation                                                                            19 899        16 913        4 418           6 122         47 352
     Amortization of goodwill                                                                        0      5 006             0          4 338           9 344
     Impairment                                                                                      0            0           0                0               0
     Other non-cash expenses                                                                 25 050        29 067       10 845         11 950          76 912


     Operating assets 3)                                                                    356 576       296 514       94 287        181 211         928 588
     Operating liabilities 4)                                                                92 154        74 054       43 856         32 998         243 062
     Tangible assets 5)                                                                     223 601       130 190       40 137         39 579         433 507
     Net investments                                                                           7 042       14 041       15 335               59        36 477


     Net sales per m2 (in CHF)                                                                 4 682        2 074        2 846           1 530           2 647
     Net sales per average number of full-time employees, in CHF 6)                         359 676       251 390      275 956        173 441         273 181
1) Earnings before depreciation and amortization, interest and taxes
2) Earnings before interest and taxes
3) Trade receivables, inventories, other receivables without financing characteristics,

   tangible and intangible assets
4) Trade payables, provisions and other payables without financing characteristics

5) Tangible assets are included in the position “Operating assets”

6) Excluding apprentices
                                                                 2.2 Statistical segment information 2003                                                    Sales        Central
                                                                                                                                                     organizations        services         Group

                                                             Branches (number):
                                                             Balance 1.1.2003                                                                                775                0            775
                                                             New openings                                                                                     24                0             24
                                                             Closures                                                                                        (20)               0            (20)
                                                             Balance 31.12. 2003                                                                             779                0            779


                                                             Sales area (m2):
                                                             Balance 1.1.2003                                                                          581 323                  0      581 323
                                                             New openings    1)                                                                         17 045                  0       17 045
Financial Statements 2003 of the Charles Vögele Group




                                                             Closures                                                                                  (15 028)                 0      (15 028)
                                                             Balance 31.12. 2003                                                                       583 340                  0      583 340


                                                             Average number of full-time employees on an annual basis2) :
                                                             Sales                                                                                        4 220                 0         4 220
                                                             Warehouse                                                                                       628                0            628
                                                             Purchase/administration                                                                         251            213              464
                                                             Total                                                                                        5 099             213           5 312


                                                             Total employees 2)                                                                           7 605             240           7 845


                                                                                                                                                                                             Total
                                                                                                                                                                        Belgium/             sales
                                                                                                                            Switzerland    Germany        Austria The Netherlands    organizations

                                                             Branches (number):
16
                                                             Balance 1.1. 2003                                                    153         346            128            148              775
                                                             New openings                                                            3         12               8               1             24
                                                             Closures                                                                0         (5)             (4)           (11)            (20)
                                                             Balance 31.12. 2003                                                  156         353            132            138              779


                                                             Sales area (m 2):
                                                             Balance 1.1. 2003                                              123 848       259 896       91 600         105 979         581 323
                                                             New openings    1)                                                2 619        8 648         5 944            (166)        17 045
                                                             Closures                                                                0     (3 694)       (1 981)         (9 353)       (15 028)
                                                             Balance 31.12. 2003                                            126 467       264 850       95 563          96 460         583 340


                                                             Average number of full-time employees on an annual basis2) :
                                                             Sales                                                             1 077        1 588            787            768           4 220
                                                             Warehouse                                                            267         269             57              35             628
                                                             Purchase/administration                                               61          84             52              54             251
                                                             Total                                                             1 405        1 941            896            857           5 099


                                                             Total employees 2)                                                2 308        2 717         1 207           1 373           7 605
                                                        1) Including change in floor space, movements within
                                                           the same location (shopping centers) and size adjustments
                                                        2) Excluding apprentices
         Statistical segment information 2002                                                        Sales        Central
                                                                                             organizations        services         Group

     Branches (number):
     Balance 1.1.2002                                                                                744                0            744




                                                                                                                                                      Auditors
     New openings                                                                                     42                0             42
     Closures                                                                                        (11)               0            (11)
     Balance 31.12. 2002                                                                             775                0            775


     Sales area (m2):
     Balance 1.1.2002                                                                          555 379                  0      555 379
     New openings    1)                                                                         33 095                  0       33 095




                                                                                                                                                      Notes
     Closures                                                                                    (7 151)                0        (7 151)
     Balance 31.12. 2002                                                                       581 323                  0      581 323




                                                                                                                                             Changes in Equity
     Average number of full-time employees on an annual basis2) :




                                                                                                                                             Cash Flow and
     Sales                                                                                        4 555                 0         4 555
     Warehouse                                                                                       667                0            667
     Purchase/administration                                                                         263            204              467
     Total                                                                                        5 485             204           5 689




                                                                                                                                             and Balance Sheet
                                                                                                                                             Income Statement
     Total employees 2)                                                                           8 042             245           8 287


                                                                                                                                     Total
                                                                                                                Belgium/             sales
                                                                    Switzerland    Germany        Austria The Netherlands    organizations

     Branches (number):
                                                                                                                                                    17
     Balance 1.1. 2002                                                    148         330            117            149              744
     New openings                                                            7         23             11                1             42
     Closures                                                               (2)        (7)              0              (2)           (11)
     Balance 31.12. 2002                                                  153         346            128            148              775


     Sales area (m 2):
     Balance 1.1. 2002                                              118 292       247 368       82 389         107 330         555 379
     New openings    1)                                                6 822       16 620         9 211             442         33 095
     Closures                                                         (1 266)      (4 092)              0        (1 793)         (7 151)
     Balance 31.12. 2002                                            123 848       259 896       91 600         105 979         581 323


     Average number of full-time employees on an annual basis2) :
     Sales                                                             1 245        1 706            761            843           4 555
     Warehouse                                                            273         291             69              34             667
     Purchase/administration                                               58          96             52              57             263
     Total                                                             1 576        2 093            882            934           5 485


     Total employees 2)                                                2 500        2 788         1 249           1 505           8 042
1) Including change in floor space, movements within
   the same location (shopping centers) and size adjustments
2) Excluding apprentices
                                                        3 Sales
                                                             3.1 Gross sales by country                                                    Change
                                                         in CHF 1 000                                                 2003        2002       in %

                                                         Switzerland                                              563 840     611 899    – 7.9%
                                                         Germany                                                  577 622     611 557    – 5.5%
                                                         Austria                                                  297 885     292 851      1.7%
                                                         Belgium/The Netherlands                                  176 636     193 626    – 8.8%
                                                         Gross sales                                             1 615 983   1 709 933   – 5.5%


                                                             3.2 Net sales by country                                                      Change
                                                         in CHF 1 000                                                 2003        2002       in %

                                                         Switzerland                                              522 495     567 006    – 7.9%
Financial Statements 2003 of the Charles Vögele Group




                                                         Germany                                                  496 806     526 161    – 5.6%
                                                         Austria                                                  247 408     243 393      1.6%
                                                         Belgium/The Netherlands                                  147 863     161 995    – 8.7%
                                                         Net sales                                               1 414 572   1 498 555   – 5.6%



                                                        4 Reduction in sales
                                                         in CHF 1 000                                                             2003      2002

                                                         Sales tax                                                            197 185    206 843
                                                         Other reductions in sales                                              4 226      4 535
                                                         Total                                                                201 411    211 378



                                                        5 Personnel expenses
                                                         in CHF 1 000                                                             2003      2002
18                                                       Wages and salaries                                                   252 654    259 183
                                                         Social security costs                                                 45 374     46 743
                                                         Sundries                                                               6 905      8 229
                                                         Total                                                                304 933    314 155


                                                             5.1 Defined contribution retirement plans
                                                         All corporate retirement benefit plans in Switzerland
                                                         are multi-employer plans where fixed contri-
                                                         butions are paid to a separate legal entity with full
                                                         reinsurance coverage. The employers’ and em-
                                                         ployees’ contributions are directly charged to the
                                                         company’s income statement.
                                                         Charles Vögele Fashion (Netherlands) B.V. has an
                                                         independent industry pension plan. Because there is
                                                         no reliable basis for allocating the plan’s assets to
                                                         the individual participating companies, this plan is
                                                         treated in these financial statements as a defined
                                                         contribution plan.
                                                         In 2003 personnel expenses contained a contri-
                                                         bution of CHF 4.1 million and in 2002 CHF 4.0 mil-
                                                         lion to defined contribution retirement plans.
    5.2 Defined benefit retirement plans
The pension plans of Charles Vögele (Belgium)
B.V.B.A. and Charles Vögele (Netherlands) B.V. were




                                                                                                                         Auditors
operated as defined benefit plans from December
31st, 1999, onwards. The future liabilities were de-
termined by using the projected unit credit
method. Provisions for the resulting deficit were
made for the first time in December 1999. In
accordance with IAS 19 the corresponding costs
will be allocated over a period of five years.




                                                                                                                         Notes
Both in the years 2003 and 2002, CHF 0.2 million
each were charged to personnel expenses. The
pension plan of Charles Vögele (Belgium) B.V.B.A.




                                                                                                                Changes in Equity
was changed from a defined benefit plan to a




                                                                                                                Cash Flow and
defined contribution plan as of January 1st, 2003.
The following average assumptions underlie the
actuarial valuations:
                                                          The Netherlands The Netherlands   Belgium   Belgium
                                                                    2003            2002       2003      2002




                                                                                                                and Balance Sheet
                                                                                                                Income Statement
Future salary increases                                           0.5%            0.5%        n.a.    1.5%
Inflation rate                                                    2.5%            2.5%        n.a.    2.5%
Discount rate                                                     5.5%            5.0%        n.a.    5.0%
Indexation                                                        2.5%            2.5%        n.a.    2.5%
Return on plan assets                                             5.5%            5.5%        n.a.    5.0%
                                                                                                                       19

Provisions made in the balance sheet for future
defined retirement benefit consist of the following:
in CHF 1 000                                                                                  2003      2002

Present value of claims of former and present employees                                     4 894     5 921
Fair value of plan assets                                                                   (2 648)   (2 939)
Provision for defined retirement benefit obligations                                        2 246     2 982
                                                        Based on an actuarial calculation, expenses for
                                                        defined retirement benefit plans recognized in the
                                                        income statement consist of the following:
                                                        in CHF 1 000                                                2003      2002

                                                        Current service cost                                        951     2 174
                                                        Interest cost                                               225       528
                                                        Expected return on plan assets                             (119)     (779)
                                                        Actuarial gain                                            (1 139)        0
Financial Statements 2003 of the Charles Vögele Group




                                                        Other expenses                                               94          0
                                                        Expenses recognized in the income statement                  12     1 923


                                                        Based on the current parameters, the premiums
                                                        owed for the year 2003 were calculated actuarially
                                                        and corresponding provisions made.
                                                        Movements in the net liabilities for defined retire-
                                                        ment benefit plans shown in the balance sheet as of
                                                        December 31st, 2003, are as follows:
                                                        in CHF 1 000                                                2003      2002

                                                        Liability, net, opening balance                           2 982     3 201
                                                        Expenses (as above)                                          12     1 923
                                                        Contributions paid                                             0    (2 079)
                                                        Benefits paid                                              (376)         0
20
                                                        Effect of change of plan                                   (541)         0
                                                        Effect of exchange rates                                    169        (63)
                                                        Liability, net, closing balance                           2 246     2 982


                                                        The pension liabilities of the German and Austrian
                                                        Group companies are governed by the various
                                                        national regulations and are based on the defined
                                                        benefit schemes. No recalculation or adjustment
                                                        of provisions for future liabilities has been made be-
                                                        cause in the context of the consolidated financial
                                                        statements the liabilities relate to an insignificantly
                                                        small group of 19 employees only (2002: 20 em-
                                                        ployees). The 2003 income statements of Group com-
                                                        panies were charged with CHF 0.2 million
                                                        (2002: CHF 0.1 million).
 6 Rent and maintenance expenses
  in CHF 1 000                                              2003       2002

  Rent                                                   147 845    142 171
  Incidental expenses, cleaning, maintenance              45 627     41 378




                                                                                        Auditors
  Total                                                  193 472    183 549



 7 Operating and administration expenses
   Operating and administration expenses include
   operating lease expenses amounting to CHF 5.1 mil-
   lion (2002: CHF 7.1 million). Vehicles and cash
   register systems are leased under operating leases.




                                                                                        Notes
 8 Operating real estate income, net




                                                                               Changes in Equity
  in CHF 1 000                                              2003       2002




                                                                               Cash Flow and
  Real estate income                                       1 975      2 056
  Real estate expenses                                      (211)      (347)
  Total                                                    1 764      1 709



 9 Other operating income




                                                                               and Balance Sheet
                                                                               Income Statement
   This position of CHF 1.2 million results mainly
   from redemption fees generated by branch closures.
10 Depreciation
  in CHF 1 000                                              2003       2002

  Depreciation                                            55 559     53 429
                                                                                      21
  Impairment losses                                        1 484          0
  Total                                                   57 043     53 429


  For branch closures planned for 2004 and 2005,
  impairment losses of CHF 1.5 million were booked
  on store equipment.

11 Other financial income
  in CHF 1 000                                              2003       2002

  Interest income                                           967       1 185
  Interest income from securities                            87         74
  Total                                                    1 054      1 259
                                                        12 Other financial expenses
                                                           in CHF 1 000                                                                                                  2003           2002

                                                           Interest expenses on current accounts and loans                                                           19 481        26 307
                                                           Mortgages interest charges                                                                                 1 768          1 981
                                                           Lease interest                                                                                             3 725          3 868
                                                           Total                                                                                                     24 974        32 156


                                                        13 Taxes
                                                               13.1 Composition of tax expense
                                                           in CHF 1 000                                                                                                  2003           2002
Financial Statements 2003 of the Charles Vögele Group




                                                           Current income taxes                                                                                      36 549        28 174
                                                           Change in deferred taxes                                                                                   4 443          8 237
                                                           Tax from previous years                                                                                    1 987          5 381
                                                           Other taxes                                                                                                      0            (21)
                                                           Total tax expenses                                                                                        42 979        41 771


                                                               13.2 Analysis of tax expense
                                                           in CHF 1 000                                                                                                  2003           2002

                                                           Earnings before taxes                                                                                     80 448        57 669
                                                           Taxes on current operating results calculated on the theoretical average
                                                           Group tax rate of 25%                                                                                     20 112        14 417
                                                           Effect of amortization of goodwill not deductible for tax purposes                                         1 371          1 371
                                                           Effect of change in tax rates on deferred taxes in the balance sheet                                          576                0
                                                           Effect of deferred tax assets not capitalized                                                             18 346        27 041
                                                           Adjustment of capitalized tax loss carry-forwards                                                         18 593          5 828
22
                                                           Effect of different tax rates                                                                            (14 114)      (12 096)
                                                           Effect of other non-taxable transactions                                                                     (101)          (150)
                                                           Taxes from previous years                                                                                  1 987          5 381
                                                           Adjustments of deferred taxes from previous years                                                         (3 791)                0
                                                           Other taxes                                                                                                      0            (21)
                                                           Total tax expense                                                                                         42 979        41 771


                                                               13.3 Deferred taxes in the balance sheet                               31.12.2003    31.12.2003     31.12.2002    31.12.2002
                                                           in CHF 1 000                                                                    Assets    Liabilities        Assets    Liabilitiess

                                                           Deferred taxes from: – Various receivables                                          8              0             9               0
                                                                                  – Inventories                                          8 653       (27 437)         9 183       (35 566)
                                                                                  – Goodwill                                            16 607       (14 299)        10 852                 0
                                                                                  – Other long-term assets                                     0     (15 639)               0     (22 353)
                                                                                  – Real estate                                                0     (11 369)               0     (11 190)
                                                                                  – Trade payables                                          280               0             0               0
                                                                                  – Intercompany loans                                   3 344                0          291                0
                                                                                  – Accruals                                                257          (332)              0          (629)
                                                                                  – Provisions                                           1 217        (3 000)               0       (2 839)
                                                                                  – Treasury shares                                            0              0             0            (24)
                                                                                  – Loss carry-forwards                               118 059                 0      94 806                 0
                                                           Total deferred taxes, gross                                                148 425        (72 076)      115 141        (72 601)
                                                           Adjustment of deferred tax assets                                          (100 397)               0     (62 129)                0
                                                           Total deferred taxes                                                         48 028       (72 076)        53 012       (72 601)
                                                           Offset of assets and liabilities                                            (24 552)       24 552        (21 661)       21 661
                                                           Total deferred taxes, net                                                    23 476       (47 524)        31 351       (50 940)
       13.4 Change in deferred taxes, net
   in CHF 1 000

   Total deferred tax assets/(liabilities), net as of 31.12.2002                             (19 589)
   Effect of exchange rates                                                                    1 406




                                                                                                                 Auditors
   Change in tax rates from previous years                                                      (576)
   Adjustments of deferred taxes from previous years                                           3 791
   Adjustments of deferred tax assets                                                        (18 593)
   Changes in valuation differences during the year under review                               9 513
   Total deferred tax assets/(liabilities), net as of 31.12.2003                             (24 048)


   The calculation of deferred tax assets is based on




                                                                                                                 Notes
   future national tax rates. The effectively owed
   deferred tax is calculated on the main valuation dif-
   ferences. The Group companies show tax loss




                                                                                                        Changes in Equity
   carry-forwards of approximately CHF 332.3 million




                                                                                                        Cash Flow and
   with no expiration date, and with a tax impact
   of about CHF 118.1 million. These tax losses repre-
   sent market entry costs and are capitalized if
   sufficient taxable profit is likely to be generated
   in the foreseeable future.




                                                                                                        and Balance Sheet
                                                                                                        Income Statement
   During the financial year 2003, deferred tax
   assets from loss carry-forwards capitalized in previ-
   ous years were written down by CHF 18.6 million
   (2002: CHF 5.8 million). The new tax carry-forwards
   arising in the 2003 and 2002 financial years were                                                           23
   not capitalized because it is not certain that they can
   be used in the near future. The deferred taxes on
   loss carry-forwards not capitalized amounted to ap-
   proximately CHF 100.4 million as of December 31st,
   2003 (December 31st, 2002: approximately
   CHF 62.1 million).

14 Earnings per share
                                                                                    2003        2002

   Net income                                                      CHF 1 000     37 469      15 898
   Weighted average number of shares undiluted                       number    8 744 824   8 783 291
   Weighted average number of shares conditional capital             number     264 000     264 000
   Weighted average number of shares diluted                         number    9 008 824   9 047 291
   Earnings per share (undiluted)                                       CHF         4.28        1.81
   Earnings per share (diluted)                                         CHF         4.16        1.76
                                                        15 Cash and cash equivalents
                                                           in CHF 1 000                                                         31.12. 2003   31.12. 2002

                                                           Petty cash, postal account balances and cash at banks                121 985       142 510
                                                           Clearing accounts of points of sale                                     1 467         5 399
                                                           Total                                                                123 452       147 909


                                                           The average interest rate on postal account
                                                           balances and cash at banks was 0.3% (2002: 0.5%).

                                                        16 Receivables and advance payments
                                                           in CHF 1 000                                                         31.12. 2003   31.12. 2002
Financial Statements 2003 of the Charles Vögele Group




                                                           Tax credits: – Sales taxes                                              9 677         8 646
                                                                          – Income taxes from previous years                       2 066         3 832
                                                                          – Reclaimable withholding taxes                              50            53
                                                           Advance payments for advertising campaigns                              2 234         2 414
                                                           Various receivables and accruals                                       17 930        17 762
                                                           Total                                                                  31 957        32 707



                                                        17 Inventories
                                                           in CHF 1 000                                                         31.12. 2003   31.12. 2002

                                                           Current inventory, gross                                             347 250       410 451
                                                           Inventory valuation adjustment                                        (98 914)      (96 462)
                                                           Current inventory (current and previous seasons), net                248 336       313 989
                                                           Upcoming season                                                        57 073        33 155
                                                           Heating oil                                                                204           267
24
                                                           Total                                                                305 613       347 411


                                                           The inventory valuation adjustment shown as
                                                           of December 31st, 2003, includes additional, non-
                                                           systematic value adjustments amounting to
                                                           CHF 8.1 million for intended special discounts and
                                                           other measures in 2004.

                                                        18 Tangible assets
                                                               18.1 Change in book values                           Land and
                                                           in CHF 1 000                                             buildings   Equipment           Total

                                                           Balance 1.1. 2002                                       206 455      254 226       460 681
                                                           Effect of exchange rates                                    (914)      (3 225)       (4 139)
                                                           Additions                                                 7 697        35 552        43 249
                                                           Disposals                                                (4 281)       (2 762)       (7 043)
                                                           Depreciation                                             (5 648)      (43 898)      (49 546)
                                                           Balance 31.12. 2002                                     203 309      239 893       443 202
                                                           Effect of exchange rates                                  3 497        11 202        14 699
                                                           Additions                                                    274       20 070        20 344
                                                           Disposals                                                       0     (10 650)      (10 650)
                                                           Depreciation                                             (5 800)      (38 648)      (44 448)
                                                           Impairment losses                                               0      (1 484)       (1 484)
                                                           Balance 31.12. 2003                                     201 280      220 383       421 663


                                                           Impairment losses are stated under “Depreciation”
                                                           in the income statement.
    18.2 Composition of book values                       Land and
in CHF 1 000                                              buildings   Equipment       Total

Acquisition cost                                         276 976      461 774     738 750
Accumulated depreciation                                 (73 667)     (221 881)   (295 548)




                                                                                                       Auditors
Balance 31.12. 2002                                      203 309      239 893     443 202


Acquisition cost                                         281 546      490 061     771 607
Accumulated depreciation                                 (80 266)     (269 678)   (349 944)
Balance 31.12. 2003                                      201 280      220 383     421 663


As of December 31st, 2003, CHF 108.1 million of




                                                                                                       Notes
the land and buildings are pledged as security
for mortgages and for the Group’s syndicated credit
facility (December 31st, 2002: CHF 108.1 million).




                                                                                              Changes in Equity
                                                                                              Cash Flow and
The position “Equipment” includes store and ware-
house fittings, office fixtures and IT equipment.
    18.3 Finance leases
The book values of tangible assets include the
following leased assets:




                                                                                              and Balance Sheet
                                                                                              Income Statement
                                                          Land and
in CHF 1 000                                              buildings   Equipment       Total

Acquisition cost                                          56 522       23 639      80 161
Accumulated depreciation                                  (7 931)       (5 386)    (13 317)
Balance 31.12. 2002                                       48 591       18 253      66 844
Additions 2002                                             7 190         1 740       8 930           25
Disposals 2002                                                   0           0           0
Reclassification                                                 0      (5 139)     (5 139)


Acquisition cost                                          61 729       25 349      87 078
Accumulated depreciation                                 (11 413)       (8 217)    (19 630)
Balance 31.12. 2003                                       50 316       17 132      67 448


Finance leasing for land and buildings includes the
distribution centers of the Charles Vögele Group in
Lehrte and Sigmaringen in Germany, as well as
Kalsdorf in Austria. Furnishings and fittings relating
to the warehouses and offices of these locations
are included in leased assets under equipment. The
additions for 2002 consist of the extensions
to the distribution centers in Lehrte (Germany)
and Kalsdorf (Austria). In the financial year
2003 no additions or disposals were recorded.
                                                        19 Financial assets
                                                               19.1 Change in book values
                                                           in CHF 1 000                                              Securities      Loans    Investments      Total

                                                           Balance 1.1. 2002                                          1 335           200           170       1 705
                                                           Effect of exchange rates                                       (27)           0             0        (27)
                                                           Additions                                                       95            0             0        95
                                                           Disposals                                                         0       (200)             0       (200)
                                                           Balance 31.12. 2002                                        1 403              0          170       1 573
                                                           Effect of exchange rates                                      101             0             0       101
                                                           Additions                                                         0           0             0          0
                                                           Disposals                                                      (16)           0             0        (16)
                                                           Valuation adjustments                                          (27)           0             0        (27)
Financial Statements 2003 of the Charles Vögele Group




                                                           Balance 31.12. 2003                                        1 461              0          170       1 631


                                                           The securities are valued and recognized at fair value.
                                                           The position essentially comprises long-term securi-
                                                           ties invested as part of the Austrian pension fund.
                                                           The interest rate on the loans in 2002 until repay-
                                                           ment was 5.5%.
                                                           The position “Investments” comprises interests
                                                           in non-consolidated companies (mainly parking
                                                           garages) with shareholdings below 20%.
                                                               19.2 Composition of book values
                                                           in CHF 1 000                                              Securities      Loans    Investments      Total

                                                           Acquisition cost                                           1 452              0          170       1 622
26
                                                           Accumulated depreciation                                       (49)           0             0        (49)
                                                           Balance 31.12. 2002                                        1 403              0          170       1 573


                                                           Acquisition cost                                           1 537              0          170       1 707
                                                           Accumulated depreciation                                       (76)           0             0        (76)
                                                           Balance 31.12. 2003                                        1 461              0          170       1 631



                                                        20 Intangible assets
                                                                                                                                                   Other
                                                               20.1 Change in book values                                                      intangible
                                                           in CHF 1 000                                                            Goodwill        assets      Total

                                                           Balance 1.1. 2002                                                      187 740        7 378      195 118
                                                           Effect of exchange rates                                                (1 814)            (2)    (1 816)
                                                           Additions                                                                     0       2 051        2 051
                                                           Disposals                                                                     0             0          0
                                                           Amortization                                                           (14 826)      (2 508)     (17 334)
                                                           Balance 31.12. 2002                                                    171 100        6 919      178 019
                                                           Effect of exchange rates                                                 6 076              7      6 083
                                                           Additions                                                                     0       1 476        1 476
                                                           Disposals                                                                     0             0          0
                                                           Amortization                                                           (15 168)      (2 760)     (17 928)
                                                           Balance 31.12. 2003                                                    162 008        5 642      167 650
                                                                                                                                     Other
       20.2 Composition of book values                                                                                           intangible
   in CHF 1 000                                                                                                  Goodwill            assets         Total

   Acquisition cost                                                                                            234 268           21 989       256 257
   Accumulated amortization                                                                                     (63 168)        (15 070)       (78 238)




                                                                                                                                                                     Auditors
   Balance 31.12. 2002                                                                                         171 100             6 919      178 019


   Acquisition cost                                                                                            242 598           23 488       266 086
   Accumulated amortization                                                                                     (80 590)        (17 846)       (98 436)
   Balance 31.12. 2003                                                                                         162 008             5 642      167 650


       20.3 Composition of Goodwill




                                                                                                                                                                     Notes
                                                                            Amortization     Acquisition     Amortization     Accumulated           Book
   in CHF 1 000                                                                   period            cost            2003      amortization         values

   Acquisition of store locations in Switzerland 1995                          5 years           9 500                  0         (9 500)              0
   Initial consolidation in connection with LBO 1997                         20 years          76 632            (3 832)        (22 990)        53 642




                                                                                                                                                            Changes in Equity
   Purchase of the minority interest




                                                                                                                                                            Cash Flow and
   in Charles Vögele (Austria) AG 1998                                       20 years          33 012            (1 651)          (8 253)       24 759
   Acquisition of store locations in The Netherlands 1999                    20 years            4 771                  0         (4 771)              0
   Acquisition Mac Fash Group 2000                                             5 years         26 575            (5 189)        (21 260)         5 315
   Acquisition Kien Group 2001                                               20 years          92 108            (4 496)        (13 816)        78 292
   Balance 31.12. 2003                                                                        242 598           (15 168)        (80 590)      162 008




                                                                                                                                                            and Balance Sheet
                                                                                                                                                            Income Statement
21 Short-term financial liabilities
   in CHF 1 000                                                                                                                31.12. 2003    31.12. 2002

   Short-term loans, Note 26                                                                                                             0    101 325
   Lease commitments (due < 1 year), Note 23                                                                                       8 383         4 734
   Total                                                                                                                           8 383      106 059              27



22 Other liabilities and accruals
   in CHF 1 000                                                                                                                31.12. 2003    31.12. 2002

   Sales tax                                                                                                                     20 052          8 972
   Credit notes                                                                                                                    7 569         6 782
   Accruals                                                                                                                      51 341         68 714
   Total                                                                                                                         78 962         84 468


23 Finance lease liabilities                                                                    Residual          Residual        Residual
   in CHF 1 000                                                                            term < 1 years   term 1–5 years   term > 5 years         Total

   Lease commitments, gross                                                                      8 450           33 635          54 739         96 824
   Discounted                                                                                   (3 716)         (11 819)        (12 636)       (28 171)
   Balance 31.12. 2002                                                                           4 734           21 816          42 103         68 653


   Lease commitments, gross                                                                    11 861            27 407          52 363         91 631
   Discounted                                                                                   (3 478)         (10 714)        (10 020)       (24 212)
   Balance 31.12. 2003                                                                           8 383           16 693          42 343         67 419


   in CHF 1 000                                                                                                                31.12. 2003    31.12. 2002

   Disclosure: – Short-term financial liabilities (due < 1 year), Note 21                                                          8 383         4 734
                  – Lease liabilities                                                                                            59 036         63 919
   Total                                                                                                                         67 419         68 653


   The average discount rate of finance lease commit-
   ments amounted to 5.3% (2002: 5.6%).
                                                        24 Provisions                                              Personnel       Other
                                                           in CHF 1 000                                           provisions   provisions     Total

                                                           Balance 1.1. 2002                                        9 462        1 459      10 921
                                                           Increase                                                 1 071        5 325       6 396
                                                           Usage                                                      (201)        (244)      (445)
                                                           Decrease                                                   (734)         (75)      (809)
                                                           Effect of exchange rates                                   (183)           (3)     (186)
                                                           Balance 31.12. 2002                                      9 415        6 462      15 877
                                                           Increase                                                 1 288           415      1 703
                                                           Usage                                                      (165)     (5 455)     (5 620)
                                                           Decrease                                                (2 548)         (242)    (2 790)
Financial Statements 2003 of the Charles Vögele Group




                                                           Effect of exchange rates                                    645             7      652
                                                           Balance 31.12. 2003                                      8 635        1 187       9 822


                                                           Personnel provisions are mainly associated with pen-
                                                           sion liabilities and settlements paid to employees
                                                           in various Group companies. The increases and de-
                                                           creases are attributable to alterations to pension
                                                           and settlement liabilities recognized in the income
                                                           statement. Usage reflects the annual pension
                                                           payments that are offset by the provisions. The de-
                                                           creases of CHF 2.5 million in the financial year
                                                           2003 are mainly attributable to provisions for set-
                                                           tlements and provisions associated with pension
                                                           plans that are no longer needed (see Note 5).
28
                                                           “Other provisions” mainly includes estimated
                                                           outflows of funds connected with legal matters.
                                                           Increases in the financial year 2002 include
                                                           a CHF 5.0 million provision for legal risks (see
                                                           Note 28.2). The usage of CHF 5.5 million in
                                                           the financial year 2003 is due to legal costs that
                                                           were set off against provisions.
                                                           The precise timing of the estimated outflows of
                                                           funds from “Other provisions” is difficult to ascer-
                                                           tain and largely out of the company’s control.
                                                           Management assumes that the outflow will occur
                                                           within the next one to three years.
25 Mortgages
      25.1 Duration and development
  in CHF 1 000                                                       31.12. 2003   31.12. 2002

  Due within 1 year                                                    17 800        14 880
  Due between 1 and 5 years                                            49 500        52 720




                                                                                                          Auditors
  Total                                                                67 300        67 600

  in CHF 1 000

  Balance 1.1. 2002                                                                  72 400
  Repayment of mortgages                                                             (4 800)
  Balance 31.12. 2002                                                                67 600
  Repayment of mortgages                                                                (300)




                                                                                                          Notes
  Balance 31.12. 2003                                                                67 300


  Based on the assumption that the short-term mort-




                                                                                                 Changes in Equity
  gages will be replaced by long-term financing,




                                                                                                 Cash Flow and
  a reclassification to current liabilities was not made.
      25.2 Terms

  Average interest rate 2002                                                           2.9%
  Average interest rate 2003                                                           2.6%




                                                                                                 and Balance Sheet
                                                                                                 Income Statement
      25.3 Future interest rate adjustments
  in CHF 1 000                                                2004         2005        > 2005

  1st half-year                                                 0             0             0
  2nd half-year                                             17 800            0      49 500
                                                                                                        29
  Total                                                     17 800            0      49 500



26 Loans
      26.1 Composition
  in CHF 1 000                                                       31.12. 2003   31.12. 2002

  Short-term loans, gross                                                     0    102 500
  Credit procurement costs                                                    0      (1 175)
  Short-term loans, net, Note 21                                              0    101 325


  Long-term loans, gross                                             275 000       350 000
  Credit procurement costs                                             (4 264)       (7 848)
  Long-term loans, net                                               270 736       342 152


  The credit procurement costs incurred are con-
  nected to the new loan agreement (see Note 26.2),
  and are amortized, depending on remaining
  maturity and credit utilization, over the remaining
  lifetime of the loan contract.
                                                            26.2 Duration and development of the loans, gross       Maturity       Maturity      Maturity
                                                        in CHF 1 000                                             < 12 months   12–24 months   > 24 months       Total

                                                        Balance 1.1. 2002                                        280 000         121 664       125 000      526 664
                                                        Additions                                                102 500           75 000      275 000      452 500
                                                        Repayments                                               (280 000)      (121 664)     (125 000)     (526 664)
                                                        Balance 31.12. 2002                                      102 500           75 000      275 000      452 500
                                                        Additions                                                         0              0      30 000       30 000
                                                        Repayments                                               (102 500)        (75 000)     (30 000)     (207 500)
                                                        Reclassifications                                                 0      275 000      (275 000)            0
                                                        Balance 31.12. 2003                                               0      275 000               0    275 000
Financial Statements 2003 of the Charles Vögele Group




                                                        The book value of the loans outstanding as of
                                                        December 31st, 2003, is in line with market value as
                                                        the interest rates are adjusted annually. The annual
                                                        adjustment of the margin reflects the risk assessment
                                                        of the company by the market.
                                                        In August 2002, the Group signed a CHF 577.5 mil-
                                                        lion revolving syndicated credit facility comprising
                                                        a CHF 350.0 million term loan and a CHF 227.5 mil-
                                                        lion amortizing revolving credit line. In December
                                                        2003, CHF 75.0 million of the term loan was repaid
                                                        early, implying that all contractual repayment
                                                        obligations have been fullfilled until the end of the
                                                        contract. The remaining sum of CHF 275.0 mil-
30                                                      lion is to be paid off at the end of the term. The
                                                        amortizing revolving credit line also has a three-year
                                                        term and was reduced in accordance with the con-
                                                        tract by CHF 102.5 million during the financial year
                                                        2003. Among others, shares and participation
                                                        rights of subsidiaries were pledged as securities to
                                                        the banking consortium (see Note 11 in the notes
                                                        to Charles Vögele Holding AG).
                                                            26.3 Terms
                                                        The term loan and revolving credit facility will
                                                        be used to refinance existing Group borrowings and
                                                        for general corporate purposes. The new facility
                                                        requires the Group to meet certain financial and
                                                        other covenants including maximum gearing
                                                        and interest cover ratios. Interest is payable based
                                                        on EURIBOR or LIBOR plus a margin ranging
                                                        from 100 to 275 basis points depending on the
                                                        achievement of certain financial ratios. The in-
                                                        terest rate as of December 31st, 2003, is 175 basis
                                                        points above LIBOR.

                                                        Average interest rate 2002                                                                             3.7%
                                                        Average interest rate 2003                                                                             2.9%
27 Incentive and share ownership plans
   In order to link the interests of the members of its
   Board of Directors, Management and employees




                                                                                                                                                   Auditors
   with those of its shareholders, the Group offered
   a number of opportunities for certain employees
   to purchase shares, both in connection with the IPO
   in 1999 and thereafter.
       27.1 Management share option plan 2002
   The option plan 2002 for members of the Board of
   Directors, Group Management, and the second




                                                                                                                                                   Notes
   management level replaced all former management
   share option plans. The option plan is financed
   through treasury shares and conditional share ca-




                                                                                                                                          Changes in Equity
                                                                                                                                          Cash Flow and
   pital. The award of options is proposed by the
   Compensation Committee and approved by the
   Board of Directors. Each option entitles the
   holder to acquire one Charles Vögele bearer share.
   The number of shares issued under this plan is
   not allowed to exceed 3% of the share capital of




                                                                                                                                          and Balance Sheet
                                                                                                                                          Income Statement
   the company. The duration of the option plan
   is not limited. The duration of the options of each
   tranche expires after five years, with a vesting pe-
   riod of three years from the date they are awarded.
   As of November 18th, 2002, a first tranche of                                                                                                 31

   119 000 options with an exercise price of CHF 29.50
   was issued.
   As of August 29th, 2003, a second tranche of
   98 000 options with an exercise price of CHF 54.55
   was issued.

                                                              Number
                                 Number        Number          of open
                                 of issued   of expired   options as of       Exercise
   Tranche                        options       options    31.12.2003     price in CHF              Duration             Vesting period

   2002                        119 000        (4 000)      115 000            29.50 28.11.2002 – 18.11.2007 28.11.2002 – 18.11.2005
   2003                         98 000               0       98 000           54.55 29.08.2003 – 29.08.2008 29.08.2003 – 29.08.2006
   Total                       217 000        (4 000)      213 000


   Further allocations under this plan will normally be
   decided at the Board of Directors’ meeting for the
   approval of the half-year results. The exercise price
   will be calculated based on the volume-weighted
   share price during the 30 days before and 10 days
   after the allocation.
   The imputed rights related to the share option plan
   are not included in the balance sheet.
                                                        28 Contingent liabilities
                                                               28.1 Outstanding merchandise orders and letter of credits
                                                           As of December 31st, 2003, commitments result-
                                                           ing from merchandise orders not yet included
                                                           in the balance sheet amounted to CHF 131.3 million
                                                           (December 31st, 2002: CHF 123.3 million).
                                                           As of December 31st, 2003, letter of credits not
                                                           included in the balance sheet amounted to
                                                           CHF 43.0 million (December 31st, 2002: CHF 53.2
                                                           million).
Financial Statements 2003 of the Charles Vögele Group




                                                               28.2 Out-of-court third-party claims and lawsuits
                                                           The Charles Vögele Group is involved in a number
                                                           of legal cases. In addition, there are out-of-
                                                           court claims pending from third parties. Examples
                                                           for these legal cases and out-of-court claims are
                                                           trademark disputes and an out-of-court claim relat-
                                                           ing to an investment held in Germany until
                                                           1995, which was settled out of court in 2003.
                                                           The Charles Vögele Group sets up provisions for
                                                           ongoing and pending lawsuits if independent ex-
                                                           perts are of the opinion that the risk is tangible and
                                                           the amount at risk can be evaluated. Additional
                                                           provisions are set up to cover estimated costs for
                                                           legal expenses. The estimated risk for these
32                                                         pending lawsuits is covered in full by a provision
                                                           (see Note 24).

                                                        29 Forward foreign exchange contracts
                                                           The following foreign exchange forward con-
                                                           tracts were open with financial institutions as of
                                                           December 31st:
                                                           in CHF 1 000                                                    31.12. 2003   31.12. 2002

                                                           Purchasing                                                      104 327       207 953
                                                           Surplus foreign exchange positions                                       0      52 056
                                                           Total                                                           104 327       260 009
    29.1 Derivatives for cash flow hedges
The open forward foreign exchange contracts as of
December 31st, 2003, for the purchase of inven-




                                                                                                                                                 Auditors
tory, cover the exchange risks for the spring/summer
collection 2004 (CHF 85.6 million) and the
autumn/winter collection 2004 (CHF 18.7 million).
The forward exchange contracts will become due
over the next nine months of the following financial
year.




                                                                                                                                                 Notes
                                                                                           Positive       Negative
    Forward foreign exchange contracts                                                 replacement     replacement          Contract
in CHF 1 000                                                                                  value           value          volume

31.12. 2002                                                                                      0       21 240           207 953




                                                                                                                                        Changes in Equity
31.12. 2003                                                                                      0       10 014           104 327




                                                                                                                                        Cash Flow and
    Contract volume by maturity
in CHF 1 000                                             Up to 3 months   3–6 months   6–9 months     9–12 months              Total

31.12. 2002                                                  133 407        35 129        39 417                 0        207 953
31.12. 2003                                                   85 651              0       18 676                 0        104 327




                                                                                                                                        and Balance Sheet
                                                                                                                                        Income Statement
Derivative financial instruments are valued at their
replacement value (fair value) and classified as
accrued assets or liabilities. Any differences arising
from the valuation on the balance sheet date is
booked off the income statement under shareholders                                                                                             33
equity as “Reserve for valuation of financial in-
struments” until the hedged underlying transaction
has been completed. The valuation difference
from ineffective hedge transactions is debited or
credited to exchange differences in the income
statement. The following table shows the develop-
ment of the changes in fair values during 2003:                                            Contract
                                                                                                        Valuation differences in
                                                                                                           income statement:
                                                                                            volume       recognized    not recognized
                                                                                       in USD 1 000   in CHF 1 000       in CHF 1 000
Season 2003/1 – Total coverage                                                          110 000
               – Used                                                                  (107 000)           2 236
               – Not required                                                             (3 000)         (1 094)


Season 2003/2 – Total coverage                                                            75 000
               – Used                                                                    (84 500)
               – Repurchased                                                               9 500           1 354


Season 2004/1 – Total coverage                                                            82 207
               – Used                                                                    (14 000)
               – Not required                                                             (9 917)         (1 490)
               Open as of 31.12. 2003                                                     58 290                            (9 399)


Season 2004/2 – Total coverage                                                            75 000
               Open as of 31.12. 2003                                                     75 000                               (615)
Total as of 31.12. 2003                                                                 133 290            1 006          (10 014)
                                                              29.2 Derivatives for trading purposes
                                                          The change in fair value (valuation at current
                                                          replacement value) of the currency swaps relating
                                                          to currency balances resulted in a loss as of
                                                          December 31st, 2003, of CHF 1.0 million (2002: loss
                                                          of CHF 2.1 million) which was included in the
                                                          income statement under “Exchange gains or losses”.
                                                                                                                            Contract   Replacement
                                                          in CHF 1 000                                          Currency       value          value    Difference
                                                          2002                                                     USD     29 182         27 720        (1 462)
Financial Statements 2003 of the Charles Vögele Group




                                                                                                                   EUR     22 874         22 225           (649)
                                                                                                                 Total     52 056         49 945        (2 111)


                                                          2003                                                     USD     (12 400)      (12 004)           396
                                                                                                                   USD     12 320         10 972        (1 348)
                                                                                                                   EUR     12 400         12 462             62
                                                                                                                   EUR     (12 320)      (12 462)          (142)
                                                                                                                 Total            0       (1 032)       (1 032)



                                                        30 Rental commitments
                                                           Rental contracts with fixed rental terms have
                                                           the following minimum payments (excluding options
                                                           for renewal):
                                                          in CHF 1 000                                                                 31.12. 2003    31.12. 2002
34
                                                          Maturity < 1 year                                                             170 182       159 740
                                                          Maturity 1–5 years                                                            473 314       444 742
                                                          Maturity > 5 years                                                            307 141       328 917
                                                          Total                                                                         950 637       933 399
31 Related party transactions
   The remuneration of the Board of Directors and
   Group Management in total amounted to:




                                                                                                      Auditors
                                                           Board of         Group
                                                           Directors   Management    Total

   2002   Number of members                                       6            6
          Amount in CHF 1 000                                  850         5 256    6 106


   2003   Number of members                                       5            3
          Amount in CHF 1 000                                  968         2 792    3 760




                                                                                                      Notes
   As a result of the current management share option
   plan (Note 27), in the financial year 2003,
   22 500 options (2002: 30 000) were allocated to




                                                                                             Changes in Equity
   the members of the Board of Directors and




                                                                                             Cash Flow and
   31 500 options (2002: 32 000) to the members of
   Group Management.
   During the financial year 2003, a related party
   charged the company a CHF 602 500 fee for legal
   advice (2002: CHF 638 750). Apart from that,




                                                                                             and Balance Sheet
                                                                                             Income Statement
   there were no further major transactions with re-
   lated parties in the years 2003 and 2002.

32 Post balance sheet events
   The present financial statements take into con-                                                  35
   sideration events occurring between the balance sheet
   date and March 4th, 2004. The 2003 financial
   statements were discussed with the Audit Committee
   and representatives of Group Management, and
   were approved by the Charles Vögele Holding AG
   Board of Directors on March 4th, 2004. The 2003
   financial statements were published on March 9th,
   2004, and will be presented to the Annual Share-
   holders’ Meeting on April 6th, 2004, for approval.
                                                        33 Group structure
                                                           as of December 31st, 2003                                     Share/Partnership
                                                          Company                                             Currency             capital

                                                          Charles Vögele Holding AG
                                                          Pfäffikon SZ, CH
                                                          Holding                                               CHF        88 000 000
                                                             100% Charles Vögele Trading AG
                                                                  Pfäffikon SZ, CH
                                                                  Central services                              CHF        10 000 000
                                                             100% Charles Vögele Store Management AG
                                                                  Pfäffikon SZ, CH
                                                                  Central services                              CHF            250 000
                                                             100% Prodress AG
Financial Statements 2003 of the Charles Vögele Group




                                                                  Pfäffikon SZ, CH
                                                                  Central services                              CHF            100 000
                                                             100% Cosmos Mode AG
                                                                  Pfäffikon SZ, CH
                                                                  Central services                              CHF            100 000
                                                             100% Mac Fash GmbH
                                                                  Pfäffikon SZ, CH
                                                                  Central services                              CHF              20 000
                                                             100% Charles Vögele Import GmbH
                                                                  Lehrte, DE
                                                                  Central services                               EUR             25 000
                                                             100% Charles Vögele Fashion (HK) Ltd.
                                                                  Hong Kong, HK
                                                                  Central services                              HKD            100 000
                                                             100% Charles Vögele Mode AG
                                                                  Pfäffikon SZ, CH
                                                                  Sales organization                            CHF        20 000 000
36                                                           100% Charles Vögele Deutschland GmbH
                                                                  Sigmaringen, DE
                                                                  Sales organization                             EUR       15 340 000
                                                             100% Charles Vögele (Austria) AG
                                                                  Kalsdorf, AT
                                                                  Sales organization                             EUR        1 453 457
                                                             100% Charles Vögele (Netherlands) B.V.
                                                                  Utrecht, NL
                                                                  Sales organization                             EUR        2 268 901
                                                             100% Charles Vögele Fashion (Netherlands) B.V.
                                                                  Utrecht, NL
                                                                  Sales organization                             EUR        1 000 000
                                                             100% Charles Vögele (Belgium) B.V. B.A.
                                                                  Turnhout, BE
                                                                  Sales organization                             EUR           644 523
Report of the Group Auditors to the General Meeting
of Charles Vögele Holding AG, Pfäffikon SZ




                                                                                                            Auditors
                     As auditors of the Group, we have audited the consolidated financial
                     statements (balance sheet, income statement, statement of cash flows,
                     statement of changes in equity and notes, pages 4 to 36) of Charles
                     Vögele Group for the year ended December 31st, 2003. The prior year




                                                                                                            Notes
                     corresponding figures were audited by other Group auditors.
                     These consolidated financial statements are the responsibility of the Board




                                                                                                   Changes in Equity
                     of Directors. Our responsibility is to express an opinion on these con-




                                                                                                   Cash Flow and
                     solidated financial statements based on our audit. We confirm that we meet
                     the legal requirements concerning professional qualification and in-
                     dependence.
                     Our audit was conducted in accordance with auditing standards promul-
                     gated by the Swiss profession and with the International Standards on




                                                                                                   and Balance Sheet
                                                                                                   Income Statement
                     Auditing, which require that an audit be planned and performed to obtain
                     reasonable assurance about whether the consolidated financial state-
                     ments are free from material misstatement. We have examined on a test
                     basis evidence supporting the amounts and disclosures in the con-
                     solidated financial statements. We have also assessed the accounting prin-           37
                     ciples used, significant estimates made and the overall consolidated
                     financial statement presentation. We believe that our audit provides a rea-
                     sonable 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 the International Financial Reporting Standards
                     (IFRS) and comply with Swiss law.
                     We recommend that the consolidated financial statements submitted to
                     you be approved.


                     PricewaterhouseCoopers AG




                     Peter Binz                  Matthias von Moos


                     Zurich, March 4th, 2004
38
     Financial Statements 2003 of the Charles Vögele Group
Charles Vögele Holding AG
Contents Financial Statements Holding



                     40 Income Statement Holding
                     41 Balance Sheet Holding
                     42 Notes to the Financial Statements
                     45 Proposed Appropriation of Retained Earnings
                     46 Report of the Statutory Auditors




                                                                      Contents Financial Statements Holding
                                                                      39
                                                         Income Statement Holding
                                                         from January 1st to December 31st




                                                         in CHF 1 000                                    Note      2003       2002

                                                         Income
                                                         Dividends                                              57 701      80 000
                                                         Financial income                                  2    15 494      48 396
                                                         Exchange gains, net                                       574           0
                                                         Total income                                           73 769     128 396


                                                         Expenses
                                                         Administration expenses                                 (2 622)    (2 818)
Financial Statements 2003 of Charles Vögele Holding AG




                                                         Financial expenses                                2    (21 445)   (29 538)
                                                         Impairment on loans to subsidiaries               3    (33 663)         0
                                                         Exchange loss, net                                           0     (1 152)
                                                         Total expenses                                         (57 730)   (33 508)


                                                         Net income of the year before taxes                    16 039      94 888
                                                         Taxes                                                     542        (876)
                                                         Net income of the year                                 16 581      94 012


                                                         Comparisons with previous years’ figures are
                                                         possible only to a limited extent because of
                                                         the merger of Charles Vögele Beteiligungen AG
                                                         with Charles Vögele Holding AG as of Janu-
                                                         ary 1st, 2003.

40
Balance Sheet Holding
as of December 31st




in CHF 1 000                                                                 Note   31.12. 2003    31.12. 2002

Assets
Current assets
Cash and cash equivalents                                                      4      22 263         33 128
Receivables from subsidiaries                                                  5    106 686        704 722
Other receivables and prepayments                                                         753             87
Total current assets                                                                129 702        737 937


Long-term assets




                                                                                                                          Auditors
Loans to subsidiaries                                                          5    380 971        200 000
Investments                                                                    6    263 306        420 770
Treasury shares                                                                           878            868
Other assets                                                                           4 263          9 023
Total long-term assets                                                              649 418        630 661
Total assets                                                                        779 120       1 368 598




                                                                                                                          Notes
Liabilities and shareholders’ equity
Liabilities
Bank loans                                                                          275 000        452 500




                                                                                                                 and Balance Sheet
                                                                                                                 Income Statement
Accounts payable: Third parties                                                           148             65
                      Subsidiaries                                             5    104 264        138 417
Accrued liabilities                                                                    1 125          3 495
Provisions for taxes                                                                         0        1 507
Total liabilities                                                                   380 537        595 984
                                                                                                                        41

Shareholders’ equity
Share capital                                                                  7      88 000         88 000
Legal reserves                                                                      173 789        173 789
Reserve for treasury shares                                                    8       5 790             868


Retained earnings: – Retained earnings as of January 1st                            509 957        415 977
                      – Decrease/(Increase) of reserve for treasury shares            (4 922)            (32)
                      – Merger loss                                                 (390 612)               0
                      – Dividend paid                                                        0              0
                      – Net income of the year                                        16 581         94 012
Total retained earnings                                                             131 004        509 957


Total shareholders’ equity                                                          398 583        772 614
Total liabilities and shareholders’ equity                                          779 120       1 368 598


Comparisons with previous years’ figures are
possible only to a limited extent because of
the merger of Charles Vögele Beteiligungen AG
with Charles Vögele Holding AG as of Janu-
ary 1st, 2003.
                                                          Notes to the Financial Statements



                                                         1 Basis of presentation
                                                           Charles Vögele Holding AG is based in Pfäffikon, in
                                                           the Canton of Schwyz, Switzerland, and its purpose
                                                           is the holding and administration of investments
                                                           of the Charles Vögele Group.
                                                          The financial statements are presented in accordance
                                                          with the Swiss law.
                                                          The integration of the financial statements of Charles
Financial Statements 2003 of Charles Vögele Holding AG




                                                          Vögele Holding AG into the consolidated finan-
                                                          cial statements of the Charles Vögele Group has been
                                                          made in accordance with the accounting prin-
                                                          ciples explained in the notes to the consolidated finan-
                                                          cial statements.
                                                          In June 2003, Charles Vögele Holding AG was
                                                          merged with Charles Vögele Beteiligungen AG, with
                                                          retrospective effect from January 1st, 2003. As
                                                          a result, all assets and liabilities of Charles Vögele
                                                          Beteiligungen AG were transferred to Charles
                                                          Vögele Holding AG.

                                                         2 Financial income and expenses
                                                           The financial income basically arises from the
42
                                                           interest income from cashpooling and from interest
                                                           on loans granted to subsidiary companies. These
                                                           are counterbalanced by interest expenses in the form
                                                           of interest on cashpooling and on accounts
                                                           payable to subsidiary companies and third parties.

                                                         3 Impairment on loans to subsidiaries
                                                           Impairments on loans to Group companies concern
                                                           value adjustments on Group loans to sub-
                                                           sidiaries in Germany, The Netherlands and Belgium.

                                                         4 Cash and cash equivalents
                                                           This position mainly includes time deposits at
                                                           banks.

                                                         5 Loans due from and to subsidiaries
                                                           This position consists of receivables and payables
                                                           due from and to other Group companies.

                                                         6 Investments
                                                           The structure of the Charles Vögele Group is
                                                           documented in the Group structure of the consoli-
                                                           dated financial statements on page 36.
7 Share capital
  The share capital of the company consists of
  8 800 000 fully paid-in bearer shares at a par value
  of CHF 10 each.
  The articles of the Company include a provision
  authorizing the Board of Directors to carry out
  a conditional increase of the share capital of up to
  CHF 2.64 million, divided into 264 000 fully
  paid-in bearer shares at a par value of CHF 10 each,




                                                                                                                      Auditors
  without giving rise to any pre-emptive rights to
  existing shareholders. The shares relating to the con-
  ditional share capital may only be used for exist-
  ing or future share option plans for the Board of
  Directors and Management.

8 Movement in treasury shares




                                                                                                                      Notes
                                                                                                 Number
                                                                                 Price in CHF    of shares

  Treasury shares 31.12. 2001                                                                    15 086
  Purchase of treasury shares                                    July 2002           10.00        3 228




                                                                                                             and Balance Sheet
                                                                                                             Income Statement
  Treasury shares 31.12. 2002                                                                    18 314
  Purchase of treasury shares                                February 2003           10.00          971
  Purchase of treasury shares by Charles Vögele Trading AG    August 2003    49.79 – 50.00       98 000
  Treasury shares 31.12. 2003                                                                   117 285

                                                                                                                    43
  For the holdings of treasury shares in the Charles
  Vögele Group as of December 31st, 2003, a reserve
  was formed in Charles Vögele Holding AG to the
  amount of the purchase value of CHF 5.8 million.
                                                          9 Major shareholders
                                                            According to information required by legislation
                                                            governing stock exchange transactions, Classic
                                                            Global Equity Fund (asset management by Braun,
                                                            von Wyss & Müller AG) held 6.2% of the
                                                            company’s capital as of March 28th, 2002. In addi-
                                                            tion, as per March 1st, 2004, The Capital Group
                                                            Company’s Inc. held 5.07% of the company’s share
                                                            capital.
Financial Statements 2003 of Charles Vögele Holding AG




                                                         10 Contingent liabilities
                                                            in CHF 1 000                                           31.12. 2003   31.12. 2002

                                                            Rent guarantees to third parties                         53 324        54 999
                                                            Guarantees to financing banks                          155 583       147 144


                                                            In addition, letters of comfort were issued to sub-
                                                            sidiary companies.

                                                         11 Pledged assets
                                                            Shares and participation rights of the following
                                                            Group companies were pledged in connection
                                                            with syndicated Group financing (see Note 26 in
                                                            the notes to the consolidated financial statements):
                                                            Charles Vögele Trading AG, Cosmos Mode AG,
44                                                          Charles Vögele Mode AG, Charles Vögele (Austria)
                                                            AG, Charles Vögele Deutschland GmbH, Charles
                                                            Vögele (Netherlands) B.V., Charles Vögele Fashion
                                                            (Netherlands) B.V. and Charles Vögele (Belgium)
                                                            B.V.B.A.
Proposed Appropriation of Retained Earnings
as of December 31st, 2003




The Board of Directors proposes the following
appropriation of retained earnings:
in CHF 1 000

Dividend 2003                                              8 800
Allocation to free reserves                              110 000
Balance carried forward                                   12 204
Retained earnings as of December 31st, 2003              131 004




                                                                            Auditors
The total payment for the financial year 2003 of
CHF 8.8 million proposed by the Board of Directors
reflects a dividend of CHF 1.00 per bearer share
with a nominal value of CHF 10.
Since the legal reserves have reached 20% of
the share capital, there will be no further allocation




                                                                            Notes
to the legal reserve.




                                                                   and Balance Sheet
                                                                   Income Statement
                                                                          45
                                                         Report of the Statutory Auditors to the General Meeting
                                                         of Charles Vögele Holding AG, Pfäffikon SZ


                                                                              As statutory auditors, we have audited the accounting records and the
                                                                              financial statements (balance sheet, income statement and notes, pages
                                                                              40 to 44) of Charles Vögele Holding AG for the year ended December 31st,
Financial Statements 2003 of Charles Vögele Holding AG




                                                                              2003. The prior year corresponding figures were audited by other
                                                                              auditors.
                                                                              These financial statements are the responsibility of the Board of Directors.
                                                                              Our responsibility is to express an opinion on these financial statements
                                                                              based on our audit. We confirm that we meet the legal requirements con-
                                                                              cerning professional qualification and independence.
                                                                              Our audit was conducted in accordance with auditing standards promul-
                                                                              gated 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, signifi-
                                                                              cant estimates made and the overall financial statement presentation.
46
                                                                              We believe that our audit provides a reasonable basis for our opinion.
                                                                              In our opinion, the accounting records and 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.


                                                                              PricewaterhouseCoopers AG




                                                                              Peter Binz                  Matthias von Moos


                                                                              Zurich, March 4th, 2004
     Income Statement
47




     and Balance Sheet   Notes   Auditors
Financial Statements 2003 of the Charles Vögele Group




                                                                                            Publisher                          Contact address
                                                        The Annual Report of the              Charles Vögele Holding AG           Charles Vögele Holding AG
48
                                                        Charles Vögele Group is published     CH-8808 Pfäffikon                   Investor Relations
                                                        in English and German.                                                    P. O. Box 58
                                                                                            Graphic Design
                                                        The original language is German.                                          Gwattstrasse 15
                                                                                              Gottschalk+Ash Int’l
                                                                                                                                  CH-8808 Pfäffikon SZ
                                                                                            Photography
                                                                                                                               T + 41 55 416 71 00
                                                                                              Portraits:
                                                                                                                               F + 41 55 410 12 82
                                                                                              Peter Gunti, Solothurn
                                                                                                                               E investor-relations@voegele-mode.com
                                                                                              Fashion pictures:
                                                                                                                                  www.voegele-mode.com
                                                                                              Charles Vögele Group
                                                                                                                               Forthcoming events
                                                                                            Typesetting and Printing
                                                                                                                                 – Annual Shareholders’ Meeting 2003: April 6th, 2004
                                                                                              Neidhart + Schön Group, Zurich
                                                                                                                                 – Analysts’ and media conference on
                                                                                                                                   the 2004 half-year report: August 31st, 2004
                                                                                                                                 – Analysts’ and media conference on
                                                                                                                                   the 2004 year-end results: March 8th, 2005
                                                                                                                                 – Annual Shareholders’ Meeting 2004:
                                                                                                                                   April 13th, 2005
                                                                                                                                 – Analysts’ and media conference
                                                                                                                                   on the 2005 half-year report: August 30th, 2005

				
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