B o a r d , M a n a g e m e n t & A u d i t o r s o f H ü g l i H o l d i n g A G 2

I m p o r t a n t K e y F i g u r e s o f t h e H ü g l i G r o u p 3

R e p o r t o f t h e B o a r d o f D i r e c t o r s 4 – 6

G e o g r a p h i c a l S e g m e n t s o f S a l e s 2 0 0 0 – 2 0 0 4 7

D i v i s i o n s / C u s t o m e r S e g m e n t s 2 0 0 0 – 2 0 0 4 7

P r o d u c t G r o u p S e g m e n t s 2 0 0 0 – 2 0 0 4 7

R e p o r t s o f t h e H e a d s o f D i v i s i o n s 8 – 1 5

S e g m e n t R e p o r t s 1 6 – 1 7

C o r p o r a t e G o v e r n a n c e 1 8 – 2 5

B a l a n c e S h e e t o f H ü g l i H o l d i n g A G 2 6

I n c o m e S t a t e m e n t o f H ü g l i H o l d i n g A G 2 7

P r o p o s e d A p p r o p r i a t i o n o f t h e Av a i l a b l e E a r n i n g s 2 8

N o t e s t o t h e F i n a n c i a l S t a t e m e n t s o f H ü g l i H o l d i n g A G 2 8

R e p o r t o f t h e A u d i t o r s 2 9

C o n s o l i d a t e d B a l a n c e S h e e t o f t h e H ü g l i G r o u p 3 0

S t a t e m e n t o f C h a n g e s i n E q u i t y o f H ü g l i G r o u p 3 1

C o n s o l i d a t e d I n c o m e S t a t e m e n t o f t h e H ü g l i G r o u p 3 2

C o n s o l i d a t e d C a s h F l o w S t a t e m e n t o f t h e H ü g l i G r o u p 3 3

N o t e s t o t h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s 3 4 – 4 8

C o m m e n t t o t h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s 4 9

R e p o r t o f G r o u p A u d i t o r s 5 0

K e y F i g u r e s 5 - Ye a r S u m m a r y 5 1

G r o u p C o m p a n i e s o f t h e H ü g l i G r o u p 5 2

C o n t e n t s

Annual General Meeting of Share h o l d e r sTu e s d a y , 2 4 M a y 2 0 0 5

4 . 3 0 p m

S e e p a r k s a a l , 9 3 2 0 A r b o n , S w i t z e r l a n d

Translation: The original of this annual report is written in German. In the case of inconsistencies between the German original andthis English translation, the German version shall preva i l .

2

Hügli Holding AG

B O A R D O F D I R E C T O R S

D r . A l e x a n d e r S t o f f e l , Chairman Arbon

R e t o C o n s o n i Horn

F r i t z H ö c h n e r Romanshorn

B e a t K a u f m a n n Winterthur

D r . C h r i s t o p h L e c h n e r Uster

D r . E r n s t L i e n h a r d Glarus

D r . J e a n G é r a r d V i l l o t Rorschacherberg

T h o m a s B o d e n m a n n Head of Food Service Division / Country Manager for Austria, Switzerland

A l e x a n d e r M o o s m a n n Head of Health and Natural Food Division / Country Manager for Germany

D r . J e a n G é r a r d V i l l o t Chief Executive Officer (CEO) / Head of Private Label DivisionCoordination Purchase, Production, QM

E r i k L i n k e Head of Industrial Foods Division

A n d r e a s S e i b o l d Chief Financial Officer (CFO), Coordination Finance & IT

from left to right:

D r. A l exander Stoff e lG e s a m t l e i t u n g

G R O U P M A N A G E M E N T

S T A T U T O R Y A U D I T O R S

O B T AGS t . G a l l e n

3

Important Key Fi g u res of the Hügli Gro u p

* R e p ayment of par value 2004 according to the proposal to the General Meeting

F u r ther key f igures and 5-year summary see page 51.

2 0 0 4 C h a n g e 2 0 0 3

S a l e s m i o . C H F 2 3 3 . 2 + 10.3% 2 1 1 . 4

O p e r a t i n g p r o f i tb e f o r e d e p r e c i a t i o n ( E B I T DA ) m i o . C H F 2 5 . 6 + 39.3% 1 8 . 4A s % o f s a l e s % 1 1 . 0 8 . 7

O p e r a t i n g p r o f i t ( E B I T ) m i o . C H F 1 8 . 9 + 57.3% 1 2 . 0A s % o f s a l e s % 8 . 1 5 . 7

N e t p r o f i t m i o . C H F 1 5 . 5 + 54.7% 1 0 . 0A s % o f s a l e s % 6 . 7 4 . 7

C a s h f l ow f r o m o p e r a t i n g a c t i v i t i e s m i o . C H F 2 4 . 8 + 44.3% 1 7 . 2A s % o f s a l e s % 1 0 . 6 8 . 1

I nv e s t m e n t s ( t a n g i b l e / i n t a n g i b l e a s s e t s ) m i o . C H F 1 5 . 3 + 46.2% 1 0 . 5A s % o f c a s h f l ow f r o m o p e r a t i n g a c t i v i t i e s % 6 1 . 8 6 1 . 0

N u m b e r o f e m p l oye e s ( 1 0 0 % p o s i t i o n s ) 8 1 5 + 5.3% 7 7 4

N e t s a l e s p e r e m p l oye e ( o n av e r a g e ) T C H F 2 9 4 + 3.5% 2 8 4

To t a l a s s e t s m i o . C H F 1 5 5 . 5 + 7.5% 1 4 4 . 6

E q u i t y m i o . C H F 6 4 . 1 + 33.6% 4 7 . 9A s % o f t o t a l a s s e t s % 4 1 . 2 3 3 . 2

N e t d e b t m i o . C H F 4 7 . 3 – 14.3% 5 5 . 2G e a r i n g ( R a t i o t o e q u i t y ) 0 . 7 1 . 2

R e t u r n o n i nv e s t e d c a p i t a l ( RO I C ) % 1 3 . 7 9 . 1

R e t u r n o n e q u i t y ( RO E ) % 2 7 . 7 2 0 . 5

I n f o r m a t i o n p e r b e a r e r s h a r e N e t p r o f i t p e r b e a r e r s h a r e C H F 3 3 . 6 2 + 51.7% 2 2 . 1 6R e p ay m e n t o f p a r va l u e / d i v i d e n d * C H F 8 . 5 0 + 54.5% 5 . 5 0Pa yo u t r a t i o % 2 5 2 5M a r k e t p r i c e h i g h C H F 3 2 5 2 0 3M a r k e t p r i c e l ow C H F 1 9 9 1 6 2P / E h i g h 9 . 7 9 . 2P / E l ow 5 . 9 7 . 3

4

Report of the Board of Dire c t o r s

L a d i e s a n d G e n t l e m e n ,

On behalf of the Board of Dire c t o rs of Hügli Holding AG,we have pleasure in presenting the annual report, balance sheetand income statement of Hügli Holding AG, together with theconsolidated financial statements of the Hügli Group for thefinancial year 2004.

We are pleased to be able to report very good re s u l t s :- Group sales rose by 10.3% (9% in local currency terms) to CHF 233.2 million- The operating result (EBIT) was 57% higher at CHF 18.9 million- The group net pro fit rose by 55% to CHF 15.5 million

S t ra t e g y a n d o p e r a t i o n a l s t r e n g t h

This ve ry strong gr owth calls for a brief retrospective. In 2000, Hügli adopted a new management and orga n i-sational structure. One of the key principles followed by Hügli is to develop only those activities where our ow ncapabilities and strengths enable us to perfectly satisfy our customers’ n e e d s .

For a business that was originally ve ry small and is now medium-sized, this implies a focus on small or larg eniche markets. We have defined these in three dimensions: in regard to customer seg m e n t s , we have identified thefour areas of Food Service (all types of out of home catering), Private Label (food retail trade own brands), Indu-strial Foods (semi-finished products for the food industry) and Health and Natural Food (organic products for theo rganic food trade) as being part i c u l a r ly appropriate for our business. Focusing on particular activities inev i t a blyimplies renouncing to others. In our case, we do not sell products under our own Hügli brand in the food retail tra-de. G e og ra p h i c a l ly, our second dimension, we concentrate on a limited number of countries – initially, the Ger-man-speaking area, but later extended to the rest of We s t e rn Europe and in 2000 to Central Europe too. When itcomes to p ro d u c t s – the third dimension – we regard ourselves primarily as specialists in all types of dry bl e n d ssuch as soups, sauces, stock, spices, desserts and prepared dishes. Here, we aim to achieve leadership ex p e rt i s e .We aimed to add a new and stronger gr owth dynamic to this long-standing basic strategy with our new manage-ment and organisational structure which consists essentially of a matrix organisation with national companies andfour divisions serving specif ic customer segments in a range of countries.

Since 2001, we have therefore invested substantial resources to set up new distribution organisations andstrengthen our existing organisations. A new production facility has also been established in the Czech Republ i c .This development proved successful and, despite all the imponderables, went ahead on schedule. In the ye a r s2001-2003, howeve r, the income statement mainly showed the costs of this development. We were able to describethe successes, but they were not really reflected as yet in our financial results.

5

C o nve r s i o n t o I F R S a c c o u n t i n g s t a n d a r d s

Up to now, our accounts have been compliant with Swiss GAAP FER standards. From our own perspective ,there would have been no reason to change because this standard was relative ly straightforward and neve rtheless –or precisely because of this – gave a true picture of economic developments at the Hügli group both to ourselve sand to the general public. Howeve r, with effect from the 2005 financial ye a r, the Swiss Exchange (SWX) requiresa conversion to IFRS (International Financial Reporting Standards). The aim is to improve the international com-parability of the annual account statements of all companies listed on the stock market. These signif i c a n t ly moredetailed and in part highly formalistic rules must no doubt also be seen as a reaction to the management scandalsof recent years.

We decided to make this conversion already for our 2004 annual accounts, restating the 2003 accounts asrequired. Our aim was to make our shareholders aware at an early date of the impact this conversion has on theincome statement and balance sheet.

This impact can be summarised as follows: in the restatement of the 2003 income statement, the net profit isCHF 1 million lower than under Swiss GAAP FER. This is larg e ly due to the entry of the net profit on the sale ofown shares directly under equity instead of in the income statement, and also to an exchange rate effect (use ofannual average rates instead of reference day rates). In the restatement as of 01.01.2003 for the c o n s o l i d a t e dbalance sheet, a reduction of equity by CHF 13.4 million is stated by comparison with Swiss GAAP FER. T h emain items here are CHF 3.9 million for lower valuation of property no longer needed for operations and CHF 8.7million for deferred taxation prev i o u s ly only stated in the notes – and for the most part will never result in tax pay-ments. Overall, we are satisfied that we were able to introduce the new accounting standards: the heavy wo r k l o a dwas successfully handled by our internal finance and accounting department and the impact on our balance sheetand income statement remained reasonable.

By making this conversion, we also wish to show our determination to remain a public company listed on themain section of the Swiss Exchange (SWX). Public control of the group is an incentive to the Board of Directorsand management and also enhances the motivation of our staff.

All the links between the published statement of accounts for 2003 according to Swiss GAAP FER and therestatement for 2003 according to IFRS will be found in the notes to the consolidated accounts on page 47.

C o n s o l i d a t e d i n c o m e s t a t e m e n t

In the year under rev i ew, s a l e s rose by a ve ry satisfa c t o ry 10.3% (9% in local curr e n cy terms). All the natio-nal companies and multinational divisions contributed to this positive result. Central Europe and the Private LabelD ivision proved part i c u l a r ly dynamic, while Hügli Germ a ny, by far the largest of our national companies, madethe most substantial contribution.

Because c o s t s were kept well under control - as already mentioned, the structures required for gr owth we r ecreated in previous years – the o p e rating result (EBIT) leapt ahead by 57%. In relation to sales we have nowa c h i eved the target of 8.1% announced in 2001, and are able to set new goals. Despite signifi c a n t ly higher tax pay-ments, the net pro fi t rose in line with the operating result by 55% to CHF 15.5 million (CHF 10.0 million in thep r evious year) to reach 6.7% of sales (4.7% in the previous year).

The reports of the country and division managers on pages 8-17 will provide a detailed analysis of the pro-gress of our bu s i n e s s e s .

6

C o n s o l i d a t e d b a l a n c e s h e e t

C u r rent assets rose by CHF 3.4 million, a slower rate than the increase in sales. On the fi xed assets s i d e ,t a n g i ble fi xed assets rose by CHF 4.4 million because of investment activity which remained vigorous. The intan-g i ble assets item is CHF 4.3 million higher, reflecting in particular the trademark rights and client base acquired atthe end of 2004 when a business specialising in organic products closed. Overall, fi xed assets rose by CHF 8.5m i l l i o n .

On the l i ab i l i t i e s side, despite the dynamic trend of sales and investments at a total of CHF 15.3 million,i n t e rest-bearing borrow i n g s were reduced to CHF 49.7 million (against CHF 59.1 million in the previous ye a r ) .S h a re h o l d e rs ’ e q u i t y rose by CHF 16.1 million against the 2003 restatement, to CHF 64.1 million, which alsoc o rresponds to a strong 41.2% of the balance sheet total by IFRS standards.

D iv i d e n d / n o m i n a l va l u e r e p ay m e n t

In view of the ve ry good annual result, the Board of Directors proposes the distribution of CHF 8.50 per bea-rer share (CHF 5.50 in the previous year), equivalent to 25.3% of the group net profit. Despite this massive increa-se, we are still at the lower end of the range of 25% to 30% of net profit we aim for. The payment is to be made inthe form of a reduction in nominal value of each bearer share from CHF 50 to CHF 41.50. The General Meetingwill be asked to decide on the necessary amendments to the articles of incorporation.

C o rp o r a t e G ove r n a n c e

All the information about Corporate Gove rnance will be found on pages 18-25 of this annual report.

O u t l o o k

The 2004 financial year brought us excellent results in all areas with some ve ry steep increases. With respectto our medium-term planning, we already met the 2005 earnings target in 2004.

The strategic focus of the Hügli Group is right and our business operations benefit from a ve ry capable andm o t ivated team. We therefore regard the prospects for Hügli for 2005 and subsequent years as ve ry promising, alt-hough with lower gr owth rates than in 2004.

We wish to thank all the staff at Hügli for their hard work and excellent performance. We also wish to thankour shareholders for their loyalty and confidence in Hügli. We look forward to working together to build a success-ful future for Hügli.

S t e i n a ch, March 2005

D r. A l exander Stoff e l D r. Jean Gérard Vi l l o tChairman of the Board of Dire c t o rs D e l egate of the Board of Dire c t o rs

7

D iv i s io ns / C us t o m er S egm ent s 20 0 0– 20 0 4

Ye a r Food Service P r ivate Label Industrial Fo o d s Health & Natural Food O t h e r

mio. CHF % mio. CHF % mio. CHF % mio. CHF % mio. CHF %

2 0 0 0 7 8 . 1 4 3 . 4 3 8 . 6 2 1 . 5 2 3 . 5 1 3 . 1 3 6 . 2 2 0 . 1 3 . 4 1 . 9

2 0 0 1 8 1 . 7 4 2 . 4 4 0 . 1 2 0 . 8 2 8 . 1 1 4 . 6 3 9 . 8 2 0 . 6 3 . 0 1 . 6

2 0 0 2 8 6 . 4 4 3 . 4 4 5 . 1 2 2 . 6 2 9 . 1 1 4 . 6 3 5 . 5 1 7 . 8 3 . 2 1 . 6

2 0 0 3 9 5 . 4 4 5 . 1 4 6 . 2 2 1 . 8 3 2 . 5 1 5 . 4 3 4 . 4 1 6 . 3 2 . 9 1 . 4

2 0 0 4 1 0 0 . 6 4 3 . 2 5 7 . 7 2 4 . 7 3 6 . 2 1 5 . 5 3 5 . 9 1 5 . 4 2 . 8 1 . 2

Trend and Segments of Sales

P rod uc t Grou p S egm ent s 20 0 0– 20 0 4

Ye a r S o u p s / s t o c k s Other products of C o m m e rcial go o d s Fresh pro d u c t s Frozen pro d u c t s

s a u c e s / s e a s o n i n g s own manu f a c t u re

p re p a red dishes

mio. CHF % mio. CHF % mio. CHF % mio. CHF % mio. CHF %

2 0 0 0 1 0 2 . 1 5 6 . 8 1 5 . 4 8 . 6 2 2 . 3 1 2 . 4 2 5 . 8 1 4 . 3 1 4 . 2 7 . 9

2 0 0 1 1 0 9 . 4 5 6 . 8 1 9 . 5 1 0 . 1 2 0 . 3 1 0 . 5 2 8 . 6 1 4 . 8 1 4 . 9 7 . 7

2 0 0 2 1 2 2 . 3 6 1 . 4 1 7 . 0 8 . 5 1 9 . 7 9 . 9 2 5 . 7 1 2 . 9 1 4 . 6 7 . 3

2 0 0 3 1 2 7 . 2 6 0 . 1 2 2 . 1 1 0 . 5 2 1 . 3 1 0 . 0 2 5 . 6 1 2 . 1 1 5 . 5 7 . 3

2 0 0 3 1 4 4 . 5 6 1 . 9 2 5 . 9 1 1 . 1 2 2 . 8 9 . 8 2 4 . 6 1 0 . 6 1 5 . 4 6 . 6

G e og r ap hica l Seg m ent s o f Sal e s 2 00 0 –2 0 04 ( b a s ed o n lo ca t io n o f cu s to mer s ) *

Ye a r S w i t z e rl a n d G e r m a ny Au s t r i a E a s t e rn Euro p e Other countries

mio. CHF % mio. CHF % mio. CHF % mio. CHF % mio. CHF %

2 0 0 0 2 5 . 0 1 3 . 9 1 0 6 . 9 5 9 . 4 2 5 . 5 1 4 . 2 5 . 0 2 . 8 1 7 . 4 9 . 7

2 0 0 1 2 5 . 8 1 3 . 4 1 1 5 . 5 5 9 . 9 2 6 . 4 1 3 . 7 6 . 5 3 . 4 1 8 . 5 9 . 6

2 0 0 2 2 7 . 0 1 3 . 6 1 1 7 . 6 5 9 . 0 2 6 . 5 1 3 . 3 9 . 8 4 . 9 1 8 . 4 9 . 2

2 0 0 3 2 8 . 1 1 3 . 3 1 1 7 . 7 5 5 . 7 2 8 . 0 1 3 . 3 1 5 . 3 7 . 2 2 2 . 3 1 0 . 5

2 0 0 4 3 0 . 4 1 3 . 1 1 2 5 . 7 5 3 . 9 2 9 . 3 1 2 . 5 2 2 . 8 9 . 8 2 5 . 0 1 0 . 7* Geographical Segments of Sales based on location of assets (segment reporting) see note 26, page 45- 46

T h e C z e c h R e p u b l i c a n d S l o v a k i a

Based on the USPs of product quality and serv i-ce we have become an important market player in ave ry short time. Thanks to local production and mana-gement we are now perceived as a Czech business ear-ning us great acceptance and sympathy. The combina-tion of quality, local production and competent mana-gement resulted in gr owth of just under 40% in localc u rr e n cy term s .

H u n g a r y

Encouraged by our success in the Czech Republ i cand Slovakia, we built up a nationwide Food Serv i c eteam with the necessary infrastructure in Hunga ry with-in just six months during the second half of the ye a r.The organisational structure and size of the Hunga r i a nd i s t r i bution organisation is already comparable to thesuccessful Czech structure. Launched on January 1s t,2005 we are the third competitor on this market, alon-gside Unilever and Nestlé.

O u t l o o k f o r 2 0 0 5

Although we are one of the smaller food bu s i n e s-ses, we are now among the most important Food Ser-vice companies in West and Central Europe in our corea s s o rtment. In all six countries we are able to rely on ah i g h ly eff icient sales organisation with excellent pro-duct portfolios. This basis will enable us to achievecontinuous high gr owth rates and so to further ex p a n dour market shares and market position.

Thomas BodenmannHead of Food Service Div i s i o n

The Food Service Division operates ex c l u s ive ly inthe “out of home” market. This includes such customers egments as restaurants, canteens, hospitals, instituti-ons, caterers, armed forces etc. Alongside our corea s s o rtment of “stocks, sauces and soups”, we supplyour customers with additional products such as des-s e rts, base items and cold sauces produced at our ow nfacilities. We have also strengthened our product ran-ges in the different countries to include carefully sel-ected ex c l u s ive and trade assortments.

F o o d S e r v i c e M a r k e t

Our markets differ signifi c a n t ly from country toc o u n t ry. While markets in We s t e rn Europe are matureand gr owth can therefore only be achieved by ga i n i n gm a r ket share from competitors markets in CentralEurope are indeed gr owing. Our customers are asvaried as our markets. In the Alpine countries of Swit-zerland and Austria over half of our sales are made tocustomers in the restaurant sector, while in Germ a nyand Central Europe the emphasis is on institutionalcustomers and industrial catering.

G e r m a n y

Under the present market conditions, industrialcatering is part i c u l a r ly hard hit in Germ a ny. With theclosure of works and constant staff cuts, this seg m e n tis loosing customers. Growth in the hospital segment isalso sluggish because of patients spending less time inthe wards. Neve rtheless, thanks to our innova t ive pro-ducts our performance in local curr e n cy terms wa ss l i g h t ly better than last year despite the ve ry diffi c u l tm a r ket env i r o n m e n t .

S w i t z e r l a n d a n d A u s t r i a

About half of the div i s i o n ’s sales are achieved inSwitzerland and Austria. These two markets are heav i-ly dependent on tourism and their success thereforea lways depends on a good summer and winter season.Although we saw the year mainly as one of consolida-tion, we did succeed in increasing sales by around 3%in local curr e n cy terms thanks to professional marke-ting activ i t i e s .

DivisionFood Service

8

The industrial foods division operates in the high-ly competitive food ingredients market. Our blends aredesigned to enhance flavour and functionality of ourcustomers products. Our main customers are them a kers of prepared dishes, soups, sauces, snacks andother foods, both in Switzerland and abroad.

M a r k e t e nv i ro n m e n t

The market in Europe is generally exposed to pri-ce pressure exe rted by retailers on food manufa c t u r e r s .Thus one of our main tasks is to enable our customersto develop innova t ive and high quality foods despitethis situation, and to do so on the basis of our broada s s o rtment of appropriate semi-finished products.

As a supplier we must therefore enable our custo-mers to cut their raw material and processing costs byusing our products. Howeve r, this must not lead tocompromises on the quality of the foods produced. Wetherefore produce to the highest possible quality stan-dards and strictly monitor the quality of our blends. A tthe same time it is essential that we retain control ove rour costs at all levels, while still being able to off e rtechnical innovations. Fulf illing these ve ry diff e r e n trequirements is one of our specif ic strengths and give sus a decisive competitive edge over our numerous com-p e t i t o r s .

R e t r o s p e c t i ve 2 0 0 4

Last ye a r, I reported on various strategic approa-ches chosen to safeguard the future gr owth of our div i-sion. The focus was on implementing specif ic saless t r a t egies by our gr e a t ly enlarged team, and achiev i n ga superior positioning with new and more complex pro-ducts.

To d ay, I am pleased to report that both approachesh ave been successfully implemented. This is furt h e rproof of the strength of the market strategy deve l o p e dsome years ago now being successfully implementedwith the help of our new ly created organisation andthanks to its operational strength.

In numerical terms, we have achieved 10% gr ow t hin the whole division. The new parts of the assort m e n tdescribed last year achieved 29.4% gr owth. This meanswe have gained market share, as the overall market isestimated to have gr own by only 1-2%.

O u t l o o k fo r 2 0 0 5

The Industrial Foods division aims for furt h e rgr owth in 2005. The activities needed to achieve thatwill be mainly at the operating level in 2005, just as in2004. We are convinced that our strategy is the right oneand the present success of the division appears to con-f i rm this. Howeve r, despite the focus on the operatio-nal side we will stay alert with regards to possible stra-t egic shifts in the market.

Operational activities call for greater eff o rts at thesales level and the improvement of internal processesb e t ween product development, sales and customers.These activities also include constant development ofour assortment regarding quality, innovation and costaspects.

Another focus will be on the regional improve-ment of our sales performance. We are not yet equallysuccessful in all regions. This is part ly due to the pre-vailing market environment and part ly also to inade-quate internal adjustment to the existing markets. In2005 we expect some important improvements in thisr egard. The planned relaunch of our corporate imagewhich has already begun will cert a i n ly make a contri-bution here. With our slogan “intelligent culinary solu-tions”, we believe that we have developed an imagewhich conv i n c i n g ly presents both our technical strengthsand our culinary background. At the same time, theimage is a commitment to the quality standards derive dfrom the culinary origin which we propose to continueo ffering our customers in future.

With this package of measures we are conv i n c e dthat we will once again be able to satisfy the highexpectations put on our market performance in 2005.

Erik LinkeHead of Industrial Foods Div i s i o n

DivisionIndustrial Foods

10

DivisionPrivate Label

The Private Label Division supplies major retailtrade organisations, especially discounters and massretailers in Europe. The assortment consists of dryblended products and is supplied in a range of r e t a i lpacks. We use the term “dry blended products” todenote such items as soups, sauces, stocks, preparednoodle and rice dishes and dessert s .

The term “Private Label” means that our pro-ducts are not sold as Hügli branded items but under thelabel of the relevant food retailer or altern a t ive ly underone of our service brands such as Radolf, Fe s t ivo orBonita.

The Private Label assortment is developed andproduced at two sites: Radolfzell (Germ a ny) and Zas-m u ky (Czech Republic). In terms of market cove r a g e ,G e rm a ny focuses on deliveries to West European coun-tries, while the Czech plant handles deliveries for Cen-tral and Eastern Europe.

R e t r o s p e c t i ve 2 0 0 4

We were optimistic about the market trend andour own market prospects for the financial year 2004,and we achieved strong sales gr owth at both sites.Compared to the f inancial year 2003 we were able toexpand our total sales in local curr e n cy terms by23.8%.

In Germ a ny the focus of sales promotions shiftedfrom non-food to food, as we ex p e c t e d, and we didb e n e f it gr e a t ly from this trend. Reinforcements to ourproduct development team at the Radolfzell site enab-led us to successfully supply new and innova t ive pro-ducts to the food trade. The competitive environment inG e rm a ny is ve ry consumer- friendly, at least from thepricing point of view. Highly rationalized or low costproduction is a significant prerequisite for any marke tsuccess. The eff o rts we made in recent years to opti-mise processes and secure efficient technical standardsfor our production facilities are now bearing fruit.

The other West European markets to which wes u p p ly goods from the Radolfzell site also report e dve ry good gr owth f igures. In the Scandinavian coun-tries, in part i c u l a r, we were able to report doubl e - d i g i tgr owth rates. Because we are strengthening our ow n

sales team in the ex p o rt markets, we believe that pros-pects for safeguarding our future sales and earn i n g sgr owth are good.

In Central and Eastern Europe, we boosted oursales by around 65% in the last financial ye a r. The trendon the Polish market, in part i c u l a r, was highly dynamicfor Hügli. After the accession of the Czech Republ i c ,Po l a n d, Slovakia and Hunga ry to the EU, it becameeasier for us to operate in these markets. Some retailersh ave recently begun to coordinate their expansion inCentral and Eastern Europe from Prague. Our companyis ve ry well established in these markets and, becausewe work ex c l u s ive ly with local employees, we are per-c e ived as a strong local supplier. Hügli East benefi t ss t r o n g ly from the fact that consumer preferences inCentral and Eastern Europe differ – in some cases sig-n i fi c a n t ly – from those in We s t e rn Europe. This make sus a preferred partner for the local retail food tradecompared to our West European competitors.

O u t l o o k fo r 2 0 0 5

Fo l l owing ex t r e m e ly strong gr owth in the f i n a n c i-al year 2004, we expect to see a distinct reduction of thepace of gr owth to around 5% for the financial year 2005overall. In Central and Eastern Europe, we will oncea gain achieve double-digit gr owth and the share of the-se new markets in total Group sales will continue togr ow. In terms of both personnel and technical require-ments, Hügli is curr e n t ly well placed to achieve successin sluggish and gr owing markets alike .

D r. Jean Gérard Vi l l o tHead of Private Label Div i s i o n

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DivisionHealth and Natural Food

The Health and Natural Food division serves thespecialist trade with the emphasis on health food andnatural food outlets. We sell products made in-housesuch as soups, sauces, stocks and dry prepared dishes.For health food stores, the range also comprises orga-nic items such as oils, dairy products and various spe-cialties made under Hügli’s own brands in organic stan-dards. More than 90% of the sales go to Germ a ny.

Under the “Natur Compagnie” brand we are alsoattracting a gr owing number of customers on ourex p o rt markets.

In addition to these brand activities, we makeo rganic private label products for various distribu t i o nc h a n n e l s .

R e t r o s p e c t i ve 2 0 0 4

The health food marke t in Germ a ny, the div i-s i o n ’s largest sales channel, stabilised in 2004 in linewith trends in the food retail trade. Growth in our div i-sion was slightly above the Group average with a strongfocus on own made products (+14.5%) resulting in sig-n i f icant earnings gr owth. Our already excellent marke tposition was further enhanced by assortment relaun-ches and ongoing sales promotions.

In the n a t u ral food tra d e we once again achieve dgr owth rates well above average industry leve l(+9.6%), at 28.1%. The “Natur Compagnie” brandwhich was only set up f ive years ago has now becomethe market leader far in front of the competition in thesoup categ o ry, one of Hügli’s core specialities.

O verall, the Health and Natural Fo o d d iv i s i o nincreased its sales by 3% on the previous year in localc u rr e n cy terms. By placing strong emphasis on thea s s o rtments produced in our own facilities and optimi-sing our sales and logistics services, together with theo rganisation of the division, the result reported by thed ivision was signif i c a n t ly improve d .

O u t l o o k fo r 2 0 0 5

The trend towards more modern specialist outletswith gr e a t ly enlarged retail floor space is continuingand gathering pace. The accompanying image gain andneed for security felt by many consumers is attractingn ew customers to the specialist trade and suggests thatgr owth will be above the normal food trade average. Weare responding by strengthening our own sales f i e l ds e rvice, and our objective is to achieve gr owth rateswell above average industry level in the future.

With the acquisition of the E rn t e s e ge n brand –which is well established in the n a t u ral food tra d e – atthe end of 2004, we paved the way for sustainable deve-lopment of this market segment with Hügli core pro-ducts and also with further assortments.

We are tapping into additional areas of customerpotential which were not prev i o u s ly a main focus of thed ivision through a substantial increase in ex p o rt activ i-ties.

We expect to see good sales and earnings gr ow t hin the Health and Natural Fo o d d ivision in 2005.

A l exander MoosmannHead of Health and Natural Food Div i s i o n

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ber 2004. This gave a substantial boost to sales activ i-ties, part i c u l a r ly in the Health and Natural Food Div i-sion. Total investments in the f inancial year 2004 stoodat CHF 8.3 million (CHF 3.8 million in the prev i o u sye a r ) .

O u t l o o k f o r 2 0 0 5

F u rther gr owth is expected in all divisions and theRadolfzell production site is well placed to handle this.In the year 2005 the expansion of production andwarehousing space will be one focus of inve s t m e n t .Despite keen competition and an unfavo u r a ble consu-mer climate in some sectors, Hügli Germ a ny is we l lequipped to achieve further sales and earnings gr ow t h .

S w i t z e r l a n d / re s t o f We s t e r n E u ro p e

The Swiss production site specializes in small andmedium series production and also in the manufa c t u r eof customised dry blends. These two production pro-cesses require not just highly qualif ied staff but alsom a c h i n e ry installed on a modular basis, ensuring thegreatest possible flexibility combined with the highestp o s s i ble standard of quality at all times. At the Swisssite, we only make products for three of our div i s i o n s :Food Service, Industrial Foods, Health and NaturalFood. Around 50% of the volume is ex p o rt e d, goingm a i n ly to the group distribution companies in A u s t r i a ,England and Italy, but also to Germ a ny to prov i d eb a c k u p .

R e t r o s p e c t iv e 2 0 0 4

The Switzerland/rest of We s t e rn Europe countrycluster achieved sales wo rth CHF 70.1 million, repre-senting a 7.1% increase on the previous year (or 6.1%in local curr e n cy terms). As this gr owth was achieve d

G e r m a ny

In Radolfzell, the Hügli gr o u p ’s biggest produc-tion site, products are manufactured for all four div i s i-ons (Food Service, Private Label, Industrial Fo o d s ,Health and Natural Food). The focus is on the manu-facture of substantial batch sizes. High perform a n c em a c h i n e ry is therefore required and must be operatedby suitably qualif ied staff. Automation and maximume ff i c i e n cy have always been essential at the Radolfzellsite, not least because of the manufacturing bu s i n e s sfor private label/retail customers. Howeve r, the othercustomer groups also benefit gr e a t ly from thesee ff o rts.

R e t r o s p e c t ive 2 0 0 4

Sales totalling CHF 140.4 million corr e s p o n d e dto a 7.5% sales increase (or 5.9% in local curr e n cyt e rms).

C o m p e t i t ive conditions in the market for impor-tant raw materials resulted in a slight easing of purcha-se prices. With continuous rationalisation and costoptimisation measures throughout the value chain, fur-ther productivity gains were achieved. Staff numbers,at around 400, remained unchanged on the prev i o u sye a r. At CHF 3.7 million, depreciation was in line withp r evious practice.

EBIT rose by CHF 4.8 million to CHF 12.6 milli-on, equivalent to a 61% increase. With this result weare reaping the benefits of our policy of continuousi m p r ovement of processes, as well as our ongoingi nve s t m e n t s .

In addition to normal replacements and machi-n e ry purchases, we also invested in a new building andfacilities to make paste products. Another signif i c a n ti nvestment was the acquisition of intangible assets (tra-demark, client base) of a former competitor in Nove m-

Segment reports

Hügli Radolfzell plant 1, Germ a ny

Hügli Radolfzell plant 2, Germ a ny

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e n t i r e ly on markets and in customer segments withstrong competition, we were able to signif i c a n t lyexpand our market position yet again.

The rationalisation measures and process optimi-sations of recent years once again brought signif i c a n tp r o d u c t ivity gr owth. The combination of sales gr ow t hand productivity increases resulted in a massive reduc-tion in costs per unit, especially last ye a r. As a result,EBIT rose from CHF 4.8 million to CHF 6.4 million,e q u ivalent to part i c u l a r ly strong gr owth of 34%.

To cover the future requirements of the sales div i-sions as eff e c t ive ly as possible we enlarged our hand-ling and preparation floor space signif i c a n t ly last ye a r,t h e r e by increasing our investment volume by aroundCHF 2 million in relation to the long-term ave r a g e .Depreciation also increased slightly, mainly because ofi nvestments in information technolog y.

O u t l o o k f o r 2 0 0 5

As organisation, processes and infrastructure havealready been adjusted in large measure to handle theplanned sales gr owth of coming years we expect to seef u rther productivity increases in the future. In view ofthis situation, we are assuming that the EBIT – as a per-centage f igure – will improve further in future, alt-hough perhaps not to the same extent as last ye a r.

E a s t e r n E u ro p e

We combine our results for the Czech Republ i c ,S l ovakia, Poland and Hunga ry under the name of Hüg-li East.

These countries are supplied from the productionsite at Zasmuky in the Czech Republic. The Hügli gr o u pdid not invest in these markets until around the ye a r2000, which was comparably late. For that reason, ourmajor goal was to open these markets up as soon as pos-

Hügli Steinach, Switzerland

s i ble before they joined the EU. Three customer seg-ments are covered: Food Service, Private Label retailand Industrial Foods.

R e t r o s p e c t iv e 2 0 0 4

Hügli achieved sales wo rth CHF 22.8 million inthis group of countries in the 2004 financial ye a r, equi-valent to gr owth of 48.4% on the previous ye a r. All thecustomer segments covered performed successfully. Inthe course of the ye a r, we decided to build up a com-p r e h e n s ive f ield service organisation with the neces-s a ry infrastructure and management to handle the Fo o dS e rvice market in Hunga ry. The EBIT for the last fi n a n-cial year stands at CHF -0.2 million (previous year CHF-0.6 million). The EBIT result is prov i s i o n a l ly aff e c t e dby the market opening costs in Hunga ry (from the 4thq u a rter of 2004) and in Slovakia (from 2003). Ove r a l l ,our sales and earnings fall within our set target range.P r o d u c t ivity is constantly being improved at the pro-duction site in the Czech Republic. Overall, Hüglie m p l oys 248 persons in Eastern Europe, including then ew organisation in Hunga ry (212 last year).

O u t l o o k f o r 2 0 0 5

For the year 2005, we anticipate sales gr owth ofthe same magnitude as last ye a r, i.e. a plus of around50% to about CHF 33 million. The productivity increa-ses will be significant so that, with a distinctly positi-ve EBIT overall, net profit will be achieve d, althoughH u n ga ry will still report a loss in its f irst year of tra-ding. Earnings prospects are excellent, as are the skillsand motivation of our staff.

Hügli Zasmuky, Czech Republ i c

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The term corporate gove rnance denotes all the principles designed to protect the interests of shareholders; theseprinciples seek to ensure transparency and a balanced relationship between management and the controlling functionat the highest level in the company, while safeguarding the ability to take decisions and achieve effi c i e n cy.

We have published below the informations required by the Swiss Stock Exchange directive (SWX) on Corp o r a t eG ove rnance. We have complied strictly with the structure set out in the attachment to that directive.

1 . G ro u p S t r u c t u re a n d S h a re h o l d e r s

G roup Structure

The Hügli group is organised with a matrix structure. The Group Management Committee heads up, f i r s t ly, thenational companies with production, quality assurance, administration, material management and IT functions ands e c o n d ly, the four international divisions def ined according to the customer segments with sales and marketing func-tions.

The Food Service Div i s i o n c overs the “Out of Home Market” with sales to hotels, restaurants, institutions suchas company caterers, hospitals, residential homes and other caterers. The Health and Natural Food Div i s i o n is res-p o n s i ble for the sale of organic products to the European specialist trade, i.e. natural food outlets, health food storesand in some cases also drugstores and chemists. The P r ivate Label Div i s i o n supplies big European retail trade orga-nisations, primarily discounters and mass retailers, with products sold under their own labels. The Industrial Fo o d sD iv i s i o n specialises in the sale of semi-f inished and f inished products to the European food industry.

Hügli operates p roduction plants in Germ a ny, Switzerland and the Czech Republic. T h ey supply the four div i -sions described above. Hügli’s own sales companies also operate in several countries.

Listed companies in the scope of consolidation: The only listed company in the scope of consolidation is HügliHolding AG, 9323 Steinach, Switzerland. Its bearer shares are quoted on the Swiss Exchange SWX in Zurich (securi-ty no. 464795). On 31.12.2004, the closing price for the Hügli bearer share was CHF 325, corresponding to a marke tcapitalisation of CHF 158 million. Of this total, CHF 91 million are represented by the stock capitalisation of thelisted bearer shares and CHF 67 million by unlisted registered shares.

Unlisted companies in the scope of consolidation: see page 52.

Major Share h o l d e rs

- Dr A. Stoffel Holding AG / Dr A. Stoffel, 9320 Arbon, Switzerland:37’842 bearer shares with a par value of CHF 50 each (13.5% of bearer share capital)410’000 registered shares with a par value of CHF 25 each (100% of the registered share capital)64.9% of the voting rights, equivalent to 50.1% of the share capital

- Hügli Holding AG, 9323 Steinach, Switzerland (own shares):16’513 bearer shares with a par value of CHF 50 each (5.9% of bearer share capital)2.4% of voting rights, equivalent to 3.4% of the share capital

- Free float:225’645 bearer shares with a par value of CHF 50 each (80.6% of bearer share capital)32.7% of voting rights, equivalent to 46.5% of the share capital

C ro s s - S h a re h o l d i n g s

There are no cross-shareholdings.

C o r p o rate Gove r n a n c e

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2 . S h a re C a p i t a l S t r u c t u re

The share capital amounts to CHF 24‘250'000.

It is divided into:

280’000 bearer shares with a par value of CHF 50 each CHF 14’000’000410’000 registered shares with a par value of CHF 25 each CHF 10’250’000

CHF 24’250’000

There is no conditional or approved capital.

D evelopment of shareholders’ equity of Hügli Holding AG in the last three f inancial ye a r s .

in CHF 3 1 . 1 2 . 2 0 0 4 Change 2004 3 1 . 1 2 . 2 0 0 3 Change 2003 3 1 . 1 2 . 2 0 0 2 Change 2002Share capital 2 4 ’ 2 5 0 ’ 0 0 0 0 2 4 ’ 2 5 0 ’ 0 0 0 0 2 4 ’ 2 5 0 ’ 0 0 0 0R e s e rve s 1 1 ’ 8 9 8 ’ 2 6 3 – 681’277 1 2 ’ 5 7 9 ’ 5 4 0 – 189’071 1 2 ’ 7 6 8 ’ 6 1 1 – 72’752P r o f it brought forwa r d 2 0 ’ 2 6 9 ’ 0 2 2 1 0 ’ 1 2 4 ’ 5 1 7 1 0 ’ 1 4 4 ’ 5 0 5 6 ’ 4 0 2 ’ 5 7 4 3 ’ 7 4 1 ’ 9 3 1 – 689’272Total equity 5 6 ’ 4 1 7 ’ 2 8 5 9 ’ 4 4 3 ’ 2 4 0 4 6 ’ 9 7 4 ’ 0 4 5 6 ’ 2 1 3 ’ 5 0 3 4 0 ’ 7 6 0 ’ 5 4 2 – 7 6 2 ’ 0 2 4

There are no profit participation or dividend rights cert i f i c a t e s .

The dividend entitlement of all the registered and bearer shares is calculated in proportion to their par value. Fo rdetails see page 28 “proposed appropriation of ava i l a ble earn i n g s ” .

There are no limitations on transferability and no special provisions relating to nominee entries.There are no conve rt i ble loans and no options on shareholding rights outstanding at present.

3 . B o a r d o f D i re c t o r s

M e m b e rs of the Board of Dire c t o rs

A l exander Stoffel, Swiss, age 76, Chairman of the Board of Directors of Hügli Holding AG since 1966. He gr a-duated from the Higher Commercial Institute (now University) of St. Gallen in 1956 with a doctorate in economics. Inthe same year he took over the management of Hügli Nährmittel AG, a fa m i ly business with sales at the time of aroundCHF 1 million. In the course of the rapid expansion of Hügli, A l exander Stoffel successive ly held practically all themanagement functions, except for technical plant management, at Hügli Switzerland and in the subsidiary companiess u b s e q u e n t ly formed in Austria and Germ a ny. Hügli Holding AG was established in 1966 and he has been its chairm a never since. On 31.12.2002 he retired from the chairmanship of the Group Management Committee as announced twoyears prev i o u s ly but remained Chairman of the Board of Directors.

Reto Consoni, Swiss, age 64, member of the Board of Directors of Hügli Holding AG since 2001. He gr a d u a t e dfrom the University of St. Gallen in 1966 with a degree in economics (lic. oec.). He went on to work in marketing andsales in the food and paper industry. From 1974 to 1996, Reto Consoni held various senior positions with Nestlé AG ,including that of Director of Maggi Switzerland and Frisco Findus Rorschach. From 1996 to 2000, he was CEO andC h a i rman of the Board of Directors of Spühl AG in St. Gallen. Since 2001 he has been working as an independentconsultant. He remains Chairman of the Board of Directors of Spühl AG and also has a seat on the Board of Directorsof the St. Gallen Creditanstalt.

Fritz Höchner, Swiss, age 63, member of the Board of Directors of Hügli Holding AG since 1991. He comple-ted his education with a commercial diploma from the Cantonal School of Tr ogen. After a number of work ex p e r i e n c ecourses, he took over the administrative management of a large fa rm in A rgentina in 1961. From 1964, Fritz Höchnerwo r ked in the textile industry. In 1968 he moved to the banking sector, became an authorised signatory of A m e r i c a n

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Express Zurich and from 1971 to 2001 was responsible for all the Spanish-speaking countries in the Private BankingD ivision of Credit Suisse Zurich.

Beat Kaufmann, Swiss, age 72, member of the Board of Directors of Hügli Holding AG since 1990. He comple-ted his studies at the then Higher Commercial Institute (now University) of St. Gallen in 1955 with a degree in econo-mics (lic. oec.) and went on to manage a fa m i ly business in the ga rments and fashion sector. From 1966 to 1972 hewas the general manager of Vollmoeller AG Uster, the licensee for Jockey Inc. USA (sport swear and men’s under-wear). In 1972 he became a member of the Management Committee of the Underberg Group (spirits) and from 1975to 1996 he headed Schiesser AG Radolfzell, Germ a ny, as the Chairman of the Exe c u t ive Board. From 1992 to 1997 hechaired the Board of Directors of the Mövenpick Group.

Christoph Lechner, German, age 37, member of the Board of Directors of Hügli Holding AG since 2001. Hestudied economics at Wayne State University (MA in economics in 1993) followed by management studies at A u g s-bu rg University (‘Diplomkaufmann’ or business degree in 1995) and doctoral studies at the University of St. Gallen(doctorate in economics in 1998). Between 1987 and 1995, he held a number of positions with Deutsche Bank AG .From 1999 to 2003 he taught strategic management at the University of St. Gallen. After serving as a guest professorin the USA at the University of Connecticut and the W h a rton School, University of Pe n n s y l vania, in the ye a r s2002/2003, Christoph Lechner returned to the University of St. Gallen where he has wo r ked since 2004 as a full pro-fessor of strategic management. In 2002, together with Prof. Müller- S t ewens, he was awarded the distinction of “BestG e rman Business Book” for his publication “Strategic Management: How Strategic Initiatives Lead to Change”. A l o n g -s i de his academic activ i t y, Christoph Lechner is a consultant in strategy matters to leading international businesses.

E rnst Lienhard, Swiss, age 58, member of the Board of Directors for Hügli Holding AG since 2001. He com-pleted his studies at the University of St. Gallen in 1976 with a doctorate in economics. Ernst Lienhard joined CreditSuisse Zurich in 1972. After serving abroad in Paris, Pe ru, New York and the Bahamas, he was appointed head ofcommerce in Zurich and became Managing Director Swiss Corporates in 1997. Ernst Lienhard retires on 30.04.2004.

Jean Géra rd Vi l l o t, French, age 52, member of the Board of Directors of Hügli Holding AG since 2002 andChief Exe c u t ive Officer since 1.1.2003. He completed a doctorate at Strasbourg University and, after holding va r i o u spositions in industry, wo r ked as a management consultant, most recently as director of management consultancy andmember of the Management Committee of Prognos AG Basel. He joined Hügli in 1990 and was in charge of HügliSwitzerland until 1996, after which he was responsible for Hügli Germ a ny until the end of 2002. At the General Mee-ting in May 2002 he was elected to the Board of Directors of Hügli Holding AG. In addition to his duties as CEO, MrVillot represents the interests of the Private Label Division on the Group Management Committee and is responsibl efor coordination of production, quality assurance and materials management activities within the Hügli Group.

Jean Gérard Villot has been elected to the Board of Directors until the General Meeting of 2005; the term ofo ffice of the other members will expire at the General Meeting in 2007.

All the members of the Board of Directors, with the exception of Jean Gérard Villot, are non-exe c u t ive. As men-tioned prev i o u s ly, A l exander Stoffel held an exe c u t ive position until 31.12.2002.

Material Intere s t s

E rnst Lienhard remained a member of the exe c u t ive management of a bank providing important services to Hüg-li (CS Zurich) until 30.04.2004. Christoph Lechner advises Hügli on strategic matters. The other non-exe c u t ive mem-bers have no signif icant business relations with the Hügli Group. A l exander Stoffel is the majority shareholder inHügli Holding AG through a fa m i ly holding company (see “Major Shareholders”).

There are no c ro s s - s h a re h o l d i n g interests with reciprocal positions on the Board of Directors of listed (or un-listed) companies.

Election and Term of Offi c e

The members of the Board of Directors are elected by the General Meeting for a three year term of office. T h e r eis no limitation on the term of off ice. The period between one General Meeting and the next is regarded as a year ofo ffi c e .

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I n t e rnal Orga n i s a t i o n

The Chairman, A l exander Stoffel, is responsible for preparing the meetings of the Board of Directors and forcoordinating its work. He is primarily concerned with strategic issues, controlling and coordination between theBoard of Directors and the Group Management Committee. He works closely with the CEO and delegate of the Boardof Directors. The main contribution by Beat Kaufmann and Reto Consoni to the work of the Board of Directors istheir knowledge of the consumer goods industry, in particular the food industry. Christoph Lechner assesses measureswhich are planned and taken in the light of scientif ic business management considerations. Ernst Lienhard and Fr i t zHöchner are the f inancial ex p e rts on the Board of Directors. Jean Villot is the CEO and delegate of the Board ofDirectors. He represents the interests of the operational business on the Board of Directors.

The Board of Directors has decided not to set up any b o a rd committees for the time being; because of its smallsize, the Board performs the necessary tasks under the joint responsibility of all its members. In the event of possibl econflicts of interest (e.g. determination of compensation for the Group Management Committee), the members con-c e rned withdraw from the meeting.

Wo rking Method

The Board of Directors holds at least four meetings a ye a r, each of which generally lasts a whole day. A d d i t i o n a lmeetings are convened to deal with important events. Each member may ask the Chairman to call an immediate mee-ting, stating the reasons for his request. For the approval of the annual statements of account, the statutory auditors ofthe holding company and, where relevant, the main subsidiary companies are in attendance. When operational mattersare dealt with, and depending on the particular agenda item, members of the Group Management Committee are in-vited to attend in addition to the CEO and delegate to the Board of Directors, who is always present.

Terms of Refere n c e

The respective responsibilities of the Board of Directors and Group Management Committee are defined in theo rganisational rules of procedure of those bodies. The main points are as follow s :

Until 31.12.2002, the Board of Directors assigned group management responsibility in full to its Chairm a n ,A l exander Stoffel; since 1.1.2003 this responsibility has rested with the CEO and delegate to the Board of Directors,Jean Vi l l o t .

In addition to the seven tasks which are reserved ex c l u s ive ly for the Board of Directors by article 716a OR(Swiss Code of Obl i gations) and part ly for the performance of those tasks, the Board has reserved the follow i n gp owers for itself:

- a p p r oval of the overall group strategy and divisional strateg i e s ;- a p p r oval of the budgets of the group as a whole, the divisions and the main subsidiary companies on the basis of a

rolling three-year plan and ve r i f ication of compliance with the budget f igures; - a p p r oval of all acquisitions and sales of companies, together with the cessation of existing business areas and the

e n t ry into new areas;- appointment and dismissal of members of the Group Management Committee and the national managers, and

d e t e rmination of their compensation;- the Board of Directors may – as it bears ultimate responsibility for the company – act in all areas of the business if

it regards that as necessary for the proper performance of its tasks. Howeve r, it takes care not to intervene unneces-s a r i ly in areas of operational responsibility.

I n formation and Controlling Instruments

The rules of procedure stipulate that the Board of Directors will receive :

- m o n t h ly documents on the progress of business of the four divisions and of the national companies;- an assessment of, and information on, the status of key projects;- q u a rt e r ly consolidated income statements for the divisions and group with a consolidated balance sheet;

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- m o n t h ly analyses of changes from the previous year and the budgeted f igures, together with the audited annualf o r e c a s t ;

- in Nove m b e r, the three-years rolling strategic plan;- audit reports for the group member companies and management letters in respect of the whole group and all the

i m p o rtant subsidiary companies;- an internal audit body, reporting directly to the Board of Directors, was created in 2003.

4 . G ro u p M a n a g e m e n t C o m m i t t e e

The responsibilities, working method and delimitation of the terms of reference from those of the Board ofDirectors are set out in the rules of procedure of the Group Management Committee.

The Group Management Committee is the senior operational management body of the Hügli Group. It reports tothe Board of Directors. With effect from 1.1.2003, it has f ive members instead of the previous six (Alexander Stoff e lhas retired, see Section 3).

Jean Géra rd Vi l l o t, born 1952, a French national, has been an exe c u t ive member of the Board of Directors andCEO since 1.1.2003, making him Chairman of the Hügli Group Management Committee. See notes on page 18 under“Members of the Board of Directors”.

Thomas Bodenmann, born 1962, a Swiss n a t i o n a l, has been a member of the Group Management Committees i n c e 2001. He is in charge of the Food Service Division (see section entitled “Group Structure”). Fo l l owing basiccommercial training, Thomas Bodenmann graduated from the St. Gallen University of Applied Sciences with a degr e ein management and went on to take various courses of further training at the University of St. Gallen and at Harva r dBusiness School, Boston, USA. After holding various positions in industry, he became Swiss sales manager atBenckiser (Schweiz) AG, Wi n t e rt h u r, a position which he held until 1995. Thomas Bodenmann joined Hügli Switzer-land in 1995 as ex p o rt manager and member of the Management Committee. In 1997, he became Managing Directorof Hügli Switzerland, to which the position of Managing Director of Hügli Austria was added in 1999. In addition tohis duties as a member of the Group Management Committee and Head of the Food Service Division, he remainsManaging Director of Hügli Switzerland and Hügli A u s t r i a .

Erik Linke, born 1966, a German national, has been a member of the Group Management Committee since2001. He is in charge of the Industrial Foods Division (see section entitled “Group Structure”). Erik Linke gr a d u a t e din commerce from the University of Erlangen-Nürn b e rg. Before working for Hügli he held various posts with LidlG e rm a ny, one of the leading German discounters, and most recently a senior position with Lidl UK. In 1997 he move dto Hügli Switzerland as ex p o rt manager.

A l exander Moosmann, born 1950, a German national, has been a member of the Group Management Commit-tee since 2001. He is in charge of the Health and Natural Food Division (see section entitled “Group Structure”). A f t e rtaking his university entrance examinations, A l exander Moosmann studied economics, management and law at theU n iversity of Giessen (without graduating). He held various positions in industry before becoming marketing and dis-t r i bution manager at Hellma Gastronomie Service in Hemmingen, near Stuttga rt, Germ a ny. In 1988, he joined Hüglias Head of Food Service Germ a ny and was also appointed Head of Health and Natural Food Germ a ny in 1996. Inaddition to his duties as member of the Group Management Committee and Head of the Health & Natural Food Div i-sion, A l exander Moosmann is also the General Manager of Hügli Germ a ny.

A n d reas Seibold, born 1964, a Swiss national, became Chief Financial Officer and member of the Group Mana-gement Committee in March 2004. After the swiss cert i f icate in business administration, he acquired the high-schooldiploma and studied economic sciences at Zurich University (lic. oec. publ.). He went on to qualify as a chart e r e daccountant at the Swiss Institute of Cert i f ied Accountants while continuing his professional employment. After wo r-king for many years as an auditor with KPMG Zurich he changed to Sefar AG, Rüschlikon, as Head of Finance andTr e a s u ry and then to Sefar Holding AG as Head of Group Controlling. In addition to his function as CFO he is res-p o n s i ble for Investor Relations.

23

No member of the Group Management Committee has any other important activities or material interests.

Hügli Holding AG and its subsidiary companies have not concluded any m a n a gement agre e m e n t s.

5 . C o m p e n s a t i o n s , S h a r e h o l d i n g I n t e re s t s a n d L o a n s

Content and Pro c e d u re for Fixing Compensation and Shareholding Prog ra m m e s

The non-exe c u t ive members of the Board of Directors receive a fi xed salary; in addition, the Chairman alsor e c e ives a profit share. The members of the Group Management Committee receive a fi xed salary and a profit sharewhich is linked to the overall results of the group plus, in the case of division managers, the earnings of the respectived ivisions. T h ey also have the possibility of using a limited part of their bonus to buy shares of the company at a prefe-rential price, which is 25% below the market price.

All compensation figures are decided by the Board of Directors; members directly concerned (Chairman, exe c u-t ive member) leave the meeting during these deliberations.

Fo rmer members of the Board of Directors and Group Management Committee do not receive any remuneration.

Compensation for Serving Members of the Corp o rate Bodies

Total compensation of CHF 2.367 million was paid to the exe c u t ive member of the Board of Directors and to themembers of the Group Management Committee (5 persons in all) in the f inancial year 2004.

A total of CHF 0.561 million was paid to non-exe c u t ive members of the Board of Directors (6 persons) in thefinancial year 2004.

No separate severance compensation was paid.

Compensation for Former Members of Corp o rate Bodies

No compensation was paid to former members of corporate bodies.

Allocation of Shares in the Year Under Rev i ew

In the year under rev i ew (2004), the exe c u t ive member of the Board of Directors and the members of the GroupManagement Committee purchased a total of 605 bearer shares on the stated preferential terms (CHF 165 per bearershare). No allocations were made to any persons having a close relationship to these members. No shares were alloca-ted to non-exe c u t ive members of the Board of Directors or to persons close to them.

S h a re Owners h i p

Together all the exe c u t ive members of the Board of Directors and the members of the Group Management Com-mittee and persons close to them hold 3’939 bearer shares.

All the non-exe c u t ive members of the Board of Directors and persons close to them together own 39’432 bearershares and 410’000 registered shares. This f igure includes the 37’842 bearer shares and 410’000 registered shareswhich are owned by the Dr. A. Stoffel Holding AG / Dr A. Stoffel (see Section 1).

O p t i o n s

No options have ever been issued on shareholding rights in Hügli Holding AG, either to exe c u t ive or to non-exe c u t ive members of the Board of Directors or to members of the Group Management Committee.

24

A dditional Fees and Remu n e ra t i o n

No additional fees or remuneration were paid in the year under rev i ew (2004) to the members of the Board ofDirectors or Group Management Committee.

Loans to Members of Corp o rate Bodies

There are no loans, advances or credits outstanding with respect to members of the Board of Directors or theGroup Management Committee, or to persons close to them.

M a x i mum Total Compensation

The maximum total compensation paid to a member of the Board of Directors in the f inancial year 2004 wa sCHF 0.648 million. Moreove r, this member bought 121 bearer shares on the stated preferential terms (CHF 165 perbearer share).

6 . S h a re h o l d e r s ’ R i g h t s o f Pa r t i c i p a t i o n

There are no limitations on voting rights.

There are no statutory quorum requirements, apart from the statutory provisions of articles 703 and 704 CO(Swiss Code of Obl i ga t i o n s ) .

There are no rules deviating from statutory provisions in respect of the c o nvening of the General Meeting.

There are no rules deviating from articles 699 and 700 CO relating to the placing of items for discussion on thea ge n d a and time limits.

Entry in the share re g i s t e r: Pursuant to article 8, paragraph 4, of the articles of incorporation of the company,changes in the ownership of registered shares are no longer taken into account after invitations have been issued toattend the General Meeting.

7 . C h a n ge o f C o n t ro l a n d S a f e g u a rd M e a s u re s

O bl i gation to Offer for Purc h a s e

Under article 5 of the articles of incorporation, a bidder is only required to make a public purchase offer as spe-c i f ied in article 32 of BEHG (Swiss federal law on share trading and the stock exchange) if he holds more than 49%of the voting rights in the company (opting-up).

C h a n ge of Control Clauses

No such agreements exist with the members of the Board of Directors, the Group Management Committee orother exe c u t ive staff .

25

8 . S t a t u t o r y Au d i t o r s

D u ration of Mandate and Term of Office of the Auditor in Charge

OBT AG, St. Gallen, Switzerland is both the statutory auditor for Hügli Holding AG and the auditing companyfor the group. This f i rm was appointed for the f irst time in 1962 as the statutory auditing company to Hügli Nährm i t-tel AG and then as auditing company to Hügli Holding AG following its incorporation in 1966. The audit mandateruns for one year with the possibility of reappointment under article 19 of the articles of incorporation.

The auditor in charge has held his position since the financial year 2000.

Audit Fe e s

In 2004 OBT AG, St. Gallen, invoiced the sum of CHF 92’260 to Hügli Holding AG and its Swiss subsidiarycompanies for services provided in connection with the audit of the annual statement of accounts and consolidatedaccounts.

A dditional Fe e s

No additional fees were paid to OBT AG or to persons or companies affiliated to it.

S u p e rvisory and Controlling Instruments in Relation to the Au d i t

The Board of Directors examines the audit reports of Hügli Holding AG, the group audit and those of the mains u b s i d i a ry companies, together with the management letters. A workshop is held on the occasion of the approval ofthe annual statement of accounts with the group auditors and, where appropriate, with the auditors of individual subsi-d i a ry companies.

9 . I n f o r m a t i o n Po l i c y

Key Dates and Further Info r m a t i o n

- R e p o rt on sales: J a n u a ry of the following ye a r- Balance sheet press conference, report for

f irst quart e r, publication of annual report : A p r i l- General Meeting: M ay- H a l f - year report : A u g u s t- The annual report, letters to shareholders and

other publications can be consulted at: w w w. h u eg l i . c o m- Person in charge of Investor Relations: Andreas Seibold, at the Group Head Offi c e

Tel. +41 71 447 22 50 E-Mail: andreas.seibold@hueg l i . c o m

26

Balance Sheet of Hügli Holding AG

A s s e t s 3 1 . 1 2 . 2 0 0 4 3 1 . 1 2 . 2 0 0 3

C H F C H F

Cash and cash equiva l e n t s 2 4 0 ’ 6 5 9 2 ’ 3 9 2 ’ 1 2 9Accounts receiva ble from group companies 7 4 7 ’ 6 6 0 3 0 5 ’ 4 5 5Prepaid expenses and accrued income 4 ’ 6 8 9 2 3 4 ’ 9 3 3

C u r re n t a s s e t s 9 9 3 ’ 0 0 8 2 ’ 9 3 2 ’ 5 1 7

Loans to group companies 3 3 ’ 9 7 9 ’ 6 5 0 2 1 ’ 6 2 4 ’ 9 7 4I nve s t m e n t s 6 0 ’ 2 9 7 ’ 8 5 1 6 0 ’ 0 6 9 ’ 9 9 7I n t a n g i ble assets 1 1Own shares 7 9 8 ’ 2 6 3 1 ’ 4 7 9 ’ 5 4 0

F i x e d a s s e t s 9 5 ’ 0 7 5 ’ 7 6 5 8 3 ’ 1 7 4 ’ 5 1 2

To t a l a s s e t s 9 6 ’ 0 6 8 ’ 7 7 3 8 6 ’ 1 0 7 ’ 0 2 9

L i a b i l i t i e s a n d s h a re h o l d e r s ’ e q u i t y

Bank debts 2 0 ’ 1 0 0 ’ 0 0 0 1 4 ’ 0 5 8 ’ 3 5 7Accounts pay a ble to group companies 7 ’ 8 5 0 4 ’ 5 7 5 ’ 3 8 0P r ovision for inve s t m e n t s 1 5 ’ 0 0 0 ’ 0 0 0 1 6 ’ 0 0 0 ’ 0 0 0A c c rued expenses and deferred income 1’069’593 1 ’ 1 0 9 ’ 7 7 9P r ovision for curr e n cy diff e r e n c e s 3 ’ 4 7 4 ’ 0 4 5 3 ’ 3 8 9 ’ 4 6 8

L i a b i l i t i e s 3 9 ’ 6 5 1 ’ 4 8 8 3 9 ’ 1 3 2 ’ 9 8 4

Share capital 2 4 ’ 2 5 0 ’ 0 0 0 2 4 ’ 2 5 0 ’ 0 0 0General reserve s 1 1 ’ 1 0 0 ’ 0 0 0 1 1 ’ 1 0 0 ’ 0 0 0R e s e rve for own shares 7 9 8 ’ 2 6 3 1 ’ 4 7 9 ’ 5 4 0P r o fit carried forwa r d 8 ’ 2 9 5 ’ 0 7 2 1 ’ 6 7 1 ’ 5 3 2Net prof it of the ye a r 1 1 ’ 9 7 3 ’ 9 4 9 8 ’ 4 7 2 ’ 9 7 3

S h a r e h o l d e r s ’ e q u i t y 5 6 ’ 4 1 7 ’ 2 8 5 4 6 ’ 9 7 4 ’ 0 4 5

To t a l l i ab i l i t i e s a n d s h a r e h o l d e r s ’ e q u i t y 96’068’773 8 6 ’ 1 0 7 ’ 0 2 9

27

Income Statement of Hügli Holding AG

2 0 0 4 2 0 0 3

C H F C H F

Income from inve s t m e n t s 7 ’ 0 4 7 ’ 6 9 0 0E a rnings from associated companies 0 7 ’ 4 8 2 ’ 9 9 7Income from group companies 2 ’ 8 5 9 ’ 6 0 8 2 ’ 4 1 1 ’ 8 6 9Release of provision for inve s t m e n t s 9 6 9 ’ 6 8 6 0Financial income from group companies 1 ’ 4 0 9 ’ 2 6 6 1 ’ 2 4 1 ’ 7 0 6Other financial income 2 ’ 9 2 4 ’ 7 9 6 6 0 2 ’ 1 6 3

To t a l i n c o m e 1 5 ’ 2 1 1 ’ 0 4 6 1 1 ’ 7 3 8 ’ 7 3 5

Personal ex p e n s e s 1 ’ 8 7 0 ’ 5 3 0 1 ’ 5 6 2 ’ 1 0 2Other ex p e n s e s 3 2 7 ’ 8 7 3 2 8 0 ’ 0 0 7Financial ex p e n s e s 5 5 2 ’ 0 7 6 7 2 7 ’ 9 5 3Ta xe s 4 8 6 ’ 6 1 8 6 9 5 ’ 7 0 0

To t a l ex p e n s e s 3 ’ 2 3 7 ’ 0 9 7 3 ’ 2 6 5 ’ 7 6 2

N e t p ro f i t o f t h e ye a r 1 1 ’ 9 7 3 ’ 9 4 9 8 ’ 4 7 2 ’ 9 7 3

28

P roposed A p p ropriation of Available Earnings

Notes to the Financial Statements of Hügli Holding AG

3 1 . 1 2 . 2 0 0 4 3 1 . 1 2 . 2 0 0 3

C H F C H F

Net prof it of the ye a r 1 1 ’ 9 7 3 ’ 9 4 9 8 ’ 4 7 2 ’ 9 7 3P r o fit carried forwa r d 7 ’ 4 7 7 ’ 0 0 5 1 ’ 3 1 6 ’ 9 3 1Decrease of reserve for own shares / Dividends on own shares 8 1 8 ’ 0 6 7 3 5 4 ’ 6 0 1Ava i l able earn i n g s 2 0 ’ 2 6 9 ’ 0 2 1 1 0 ’ 1 4 4 ’ 5 0 5

The Board of Dire c t o rs proposes the fo l l owing appropriation

of the ava i l able earnings to the General Meeting:

CHF 0 div i d e n d per bearer share (CHF 5.50 in the previous ye a r ) 0 2 ’ 6 6 7 ’ 5 0 0Balance to be carried forwa r d 2 0 ’ 2 6 9 ’ 0 2 1 7 ’ 4 7 7 ’ 0 0 5

The Board of Dire c t o rs proposes the fo l l owing

s h a re capital re d u c t i o n :

CHF 8.50 reduction in par value per bearer share (CHF 0 previous ye a r ) 4 ’ 1 2 2 ’ 5 0 0 0Share capital after reduction 2 0 ’ 1 2 7 ’ 5 0 0 2 4 ’ 2 5 0 ’ 0 0 0

Subject to approval by the General Meeting

the reduction in par value (in the previous year: dividend) pay a ble is:

CHF 8.50 (CHF 5.50 in the previous year) per bearer share

P r evious year: less 35% withholding tax CHF 1.925 CHF 8 . 5 0 0 CHF 3 . 5 7 5CHF 4.25 (CHF 2.75 in the previous year) per registered share

P r evious year: less 35% withholding tax CHF 0.9625 CHF 4 . 2 5 0 CHF 1 . 7 8 7 5p ay a ble on 5 August 2005

– Sureties, guarantee commitments and pledges in favour of third parties total tomio. CHF 18.9 (mio. CHF 49.3 in the previous ye a r ) .

– No assets have been pledged or assigned to secure own commitments. There are no reservations of ow n e r s h i p .

– For details of investments, see separate list on page 52 of the annual report .

– Own shares held by the company: 16’513 bearer shares (30’606 in the previous year) with a par value of CHF 50 each. In theyear reporting, 1’085 shares (911 in the previous year) were sold to staff as part of a stock ownership program at the reduced pri-ce of CHF 165 (CHF 127 in the previous year) per share. Further 13’008 (3’000 in the previous year) shares were sold on thestock ex c h a n g e .

– The positive curr e n cy differences 2004 reported on group loans in the amount of CHF 84’578 (CHF 1’224’168 in the prev i o u syear) were put in the ‘Provision for curr e n cy diff e r e n c e s ’ .

29

A s s t a t u t o r y a u d i t o r s , w e h a v e a u d i t e d t h e a c c o u n t i n g r e c o r d s a n d t h e

f i n a n c i a l s t a t e m e n t s ( b a l a n c e s h e e t , i n c o m e s t a t e m e n t a n d n o t e s ) o f

H ü g l i H o l d i n g A G f o r t h e f i n a n c i a l y e a r e n d e d D e c e m b e r 3 1 , 2 0 0 4 .

T h e f i n a n c i a l s t a t e m e n t s a r e t h e r e s p o n s i b i l i t y o f t h e B o a r d o f D i r e c t o r s .

O u r t a s k i s t o e x p r e s s a n o p i n i o n o n t h e s e f i n a n c i a l s t a t e m e n t s o n t h e b a s i s o f

o u r a u d i t . We c o n f i r m t h a t w e m e e t t h e l e g a l r e q u i r e m e n t s c o n c e r n i n g

p r o f e s s i o n a l q u a l i f i c a t i o n a n d i n d e p e n d e n c e .

O u r a u d i t w a s c o n d u c t e d i n a c c o r d a n c e w i t h t h e a u d i t i n g s t a n d a r d s o f t h e

S w i s s p r o f e s s i o n , w h i c h r e q u i r e a n a u d i t t o b e p l a n n e d a n d p e r f o r m e d t o

o b t a i n a r e a s o n a b l e a s s u r a n c e a s t o w h e t h e r t h e f i n a n c i a l s t a t e m e n t s a r e f r e e

f r o m m a t e r i a l m i s s t a t e m e n t . We h a v e e x a m i n e d b y a n a l y s i s a n d o n a t e s t b a s i s

t h e a m o u n t s a n d d i s c l o s u r e s i n t h e f i n a n c i a l s t a t e m e n t s . We h a v e a l s o a s s e s s e d

t h e a p p l i c a t i o n o f t h e m a i n a c c o u n t i n g p r i n c i p l e s u s e d , s i g n i f i c a n t e s t i m a t e s

m a d e a n d t h e o v e r a l l p r e s e n t a t i o n o f t h e f i n a n c i a l s t a t e m e n t s .

We b e l i e v e t h a t o u r a u d i t p r o v i d e s a r e a s o n a b l e b a s i s f o r o u r o p i n i o n .

I n o u r o p i n i o n , t h e a c c o u n t i n g r e c o r d s a n d f i n a n c i a l s t a t e m e n t s a n d t h e

p r o p o s e d a p p r o p r i a t i o n o f a v a i l a b l e e a r n i n g s c o m p l y w i t h S w i s s l a w

a n d w i t h t h e c o m p a n y ’s a r t i c l e s o f i n c o r p o r a t i o n .

We r e c o m m e n d t h a t t h e f i n a n c i a l s t a t e m e n t s s u b m i t t e d t o y o u b e a p p r o v e d .

S t . G a l l e n , M a r c h 7 , 2 0 0 5

Report of the Au d i t o r s

T H E A U D I T O R S

S t e f a n T r a b e r S w i s s C e r t i f i e d A c c o u n t a n t

A u d i t o r i n C h a r g e

C h r i s t i a n S i e g f r i e d S w i s s C e r t i f i e d A c c o u n t a n t

O B T AGS t . G a l l e n

30

Consolidated Balance Sheet of the Hügli Gro u p

in CHF 1’000

A s s e t s N o t e 3 1 . 1 2 . 2 0 0 4 % 3 1 . 1 2 . 2 0 0 3 %

Cash and cash equiva l e n t s 2 2 ’ 3 5 8 3 ’ 9 4 7Trade accounts receiva bl e 3 2 9 ’ 7 3 8 2 8 ’ 1 3 9Other accounts receiva bl e 4 3 ’ 5 1 7 2 ’ 5 7 2I nve n t o r i e s 5 3 1 ’ 8 5 4 3 0 ’ 4 5 0

C u r re n t a s s e t s 67’467 4 3 65’108 4 5

Land and bu i l d i n g s 6 5 9 ’ 6 7 1 5 6 ’ 5 7 4Technical equipment and machinery 6 1 5 ’ 0 2 6 1 3 ’ 6 5 0Other tangible assets 6 7 ’ 8 6 2 7 ’ 9 6 6I n t a n g i ble assets 7 5 ’ 0 4 1 7 6 8Financial assets 8 3 8 7 5 1 9

F i x e d a s s e t s 87’987 5 7 79’477 5 5

To t a l A s s e t s 155’454 1 0 0 144’585 1 0 0

L i a b i l i t i e s a n d s h a re h o l d e r s ’s e q u i t y

Financial liabilities 9 2 5 ’ 4 5 1 2 4 ’ 1 2 9Trade accounts pay a bl e 1 7 ’ 1 4 6 1 3 ’ 0 7 7Tax liabilities 1 ’ 8 4 0 1 ’ 1 9 9Other current liabilities 1 0 1 1 ’ 4 9 4 1 2 ’ 0 7 8C u r rent liabilities 5 5 ’ 9 3 1 3 6 5 0 ’ 4 8 3 3 5

Financial liabilities 9 2 4 ’ 2 3 5 3 5 ’ 0 1 4D e f e rred tax liabilities 1 1 9 ’ 5 6 7 9 ’ 4 9 3P r ovisions for employee benef i t s 1 2 1 ’ 3 1 1 1 ’ 2 4 2Other non-current liabilities 3 5 4 4 1 6N o n - c u r rent liabilities 3 5 ’ 4 6 7 2 3 4 6 ’ 1 6 5 3 2

L i a b i l i t i e s 91’398 5 9 96’648 6 7

Share capital 1 7 2 4 ’ 2 5 0 2 4 ’ 2 5 0R e s e rve s 1 7 2 4 ’ 2 9 3 1 3 ’ 6 6 0Net prof i t 1 5 ’ 5 1 3 1 0 ’ 0 2 7

S h a r e h o l d e r s ’ e q u i t y 64’056 4 1 47’937 3 3

To t a l l i a b i l i t i e s a n d s h a r e h o l d e r s ’ e q u i t y 155’454 1 0 0 144’585 1 0 0

31

Statement of Changes in Equity

in CHF 1’000O w n R e t a i n e d Translation

Share capital Share premium s h a r e s e a rn i n g s d i ff e r e n c e s To t a l

Balance at 31.12.2002 Swiss GAAP FER 2 4 ’ 2 5 0 1 1 ’ 1 0 0 – 1’669 2 0 ’ 8 4 8 – 4’450 5 0 ’ 0 7 9

E ffect of the first-time adoption of IFRS 1) – 17’824 4 ’ 4 5 0 – 13’374

Balance at 01.01.2003 IFRS 2 4 ’ 2 5 0 1 1 ’ 1 0 0 – 1’669 3 ’ 0 2 4 0 3 6 ’ 7 0 5

D iv i d e n d s – 2’259 – 2’259

Net prof i t 1 0 ’ 0 2 7 1 0 ’ 0 2 7

P ro fit and losses dire c t lyre c o rded in equity:

Sales of own shares 4 7 5 1 8 9 6 6 4

Stock ownership progr a m 3 9 3 9

Translation adjustment 2 ’ 7 6 1 2 ’ 7 6 1

To t a l 3 ’ 4 6 4

Balance at 31.12.2003 IFRS 2 4 ’ 2 5 0 1 1 ’ 5 7 5 – 1’480 1 0 ’ 8 3 1 2 ’ 7 6 1 4 7 ’ 9 3 7

D iv i d e n d s – 2’531 – 2’531

Net prof i t 1 5 ’ 5 1 3 1 5 ’ 5 1 3

P ro fit and losses dire c t lyre c o rded in equity:

Sales of own shares 2 ’ 6 1 8 6 8 2 3 ’ 3 0 0

Stock ownership progr a m 6 0 6 0

Translation adjustment – 223 – 223

To t a l 3 ’ 1 3 7

Balance at 31.12.2004 IFRS 2 4 ’ 2 5 0 1 4 ’ 1 9 3 – 798 2 3 ’ 8 7 3 2 ’ 5 3 8 6 4 ’ 0 5 6

1)F u rther information of how the transition of IFRS has affected the equity is provided in note 30

32

Consolidated Income Statement of the Hügli Gro u p

in CHF 1’000

N o t e 2 0 0 4 % 2 0 0 3 %

S a l e s 1 8 233’230 1 0 0 . 0 211’367 1 0 0 . 0

Sales deductions – 4’184 1 . 8 – 4’365 2 . 1

N e t s a l e s 229’046 9 8 . 2 207’002 9 7 . 9

Change in inve n t o ry – 1’184 0 . 5 9 7 7 0 . 5

O p e r a t i n g re ve nu e 227’862 9 7 . 7 207’979 9 8 . 4

Material ex p e n s e s – 111’608 4 7 . 9 – 103’646 4 9 . 0

Personnel ex p e n s e s 1 9 – 51’923 2 2 . 3 – 49’743 2 3 . 5

Other operating expenses, net 2 1 – 38’758 1 6 . 6 – 36’238 1 7 . 1

O p e r a t i n g p r o f i t b e fo re d e p re c i a t i o n a n d a m o r t i s a t i o n ( E B I T DA ) 25’573 1 1 . 0 18’352 8 . 7

D e p r e c i a t i o n 6 – 6’297 2 . 7 – 5’976 2 . 8

O p e r a t i n g p r o f i t b e fo re a m o r t i s a t i o n ( E B I TA ) 19’276 8 . 3 12’376 5 . 9

A m o rt i s a t i o n 7 – 390 0 . 2 – 373 0 . 2

O p e r a t i n g p r o f i t ( E B I T ) 18’886 8 . 1 12’003 5 . 7

Financial ex p e n s e s 2 3 – 2’177 0 . 9 – 2’659 1 . 3

Financial income 2 3 1 ’ 1 0 1 0 . 5 2 ’ 1 8 2 1 . 0

P ro f i t b e fo r e t a xe s 17’810 7 . 6 11’526 5 . 5

Income taxe s 2 4 – 2 ’ 2 9 7 1 . 0 – 1’499 0 . 7

N e t p ro f i t 15’513 6 . 7 10’027 4 . 7

E a rnings per share (in CHF) 2 7 3 3 . 6 2 2 2 . 1 6

33

Consolidated Cash Flow Statement of the Hügli Gro u p

in CHF 1’000

N o t e 2 0 0 4 2 0 0 3

Net profi t 1 5 ’ 5 1 3 1 0 ’ 0 2 7Depreciation / amort i s a t i o n 6 / 7 6 ’ 6 8 7 6 ’ 3 4 9Increase in prov i s i o n s 11 / 12 1 3 5 3 4 5E a rnings from associated companies 2 3 – 968 – 2’037Interest expenses, net 2 3 2 ’ 1 3 2 2 ’ 6 1 1Income taxe s 2 4 2 ’ 2 9 7 1 ’ 4 9 9Other non-cash result – 157 – 697Change in net working capitals

(Increase) / Decrease in receiva bl e s – 2’414 – 961(Increase) / Decrease in inve n t o r i e s – 1’236 – 2’215Increase / (Decrease) in liabilities 4 ’ 4 4 5 3 ’ 8 5 9

Income taxes paid – 1’654 – 1’602

C a s h f l ow f r o m o p e r a t i n g a c t i v i t i e s 24’780 17’178

I nvestments in tangible fi xed assets 6 – 10’504 – 10’485I nvestments in intangible assets 7 – 4’660 0Disposals of tangible assets 6 2 7 9 8 0 4Disposals of financial assets 8 1 2 7 3 7 9Disposal of associated companies 0 1 0 ’ 6 4 6Interests receive d 2 3 4 5 4 8

C a s h f l ow f r o m i nve s t i n g a c t i v i t i e s – 14’713 1’392

R e p ayment of financial liabilities 9 – 9’955 – 12’440R e p ayment of finance lease liabilities 9 – 180 – 176D ividends paid – 2’531 – 2’259Interests paid – 2’288 – 2’592Sale of own shares 3 ’ 3 0 0 6 6 4

C a s h f l ow f r o m f i n a n c i n g a c t i v i t i e s – 11’654 – 16’803

To t a l c a s h f l ow – 1’587 1’767

Translation adjustment on cash and cash equiva l e n t s – 2 5 1

C h a n ge i n c a s h a n d c a s h e q u i va l e n t s – 1’589 1’818

Cash and cash equivalents at 01.01. 3 ’ 9 4 7 2 ’ 1 2 9Cash and cash equivalents at 31.12. 2 ’ 3 5 8 3 ’ 9 4 7

34

Notes to the Consolidated Financial Statements

C o rp o ra t e a cco unt i ng pr i nc i p le s

G e n e ra l

The consolidated financial statements of the Hügli Group have been prepared the first time for the financial year 2004 (report i n gperiod) in accordance with International Financial Reporting Standards (IFRS), which are applicable as of 31 December 2004. The IFRS opening balance sheet (date of transition) was prepared as at 1 January 2003. The financial statements 2003 (compari-son period), in the previous period presented in accordance with Swiss GAAP FER, were adjusted to the new accounting policies.An explanation of how the transition from Swiss GAAP FER to IFRS has affected profit and equity is provided in note 30. The consolidated financial statements give a true and fair view of the financial position of the Group, the results of its operationsand its cash flows and comply with Swiss law. T h ey are prepared on a historical cost basis except that the following assets and lia-bilities are stated at their fair value: non operating land and buildings, deriva t ive financial instruments and further financial assets.

The consolidated financial statements include the audited financial statements of all consolidated group companies as at 31 Decem-b e r. These f inancial statements are prepared in accordance with corporate accounting principles.

The consolidated financial statements 2004 were approved by the board of directors of Hügli Holding AG as at 14 March 2005.T h ey will be subject to the approval by the General Meeting on 24 May 2005.

Scop e a nd pr i nc i p le s o f con so l i da t io n

The consolidated f inancial statements include both those of Hügli Holding AG and those of all Swiss and foreign subsidiaries inwhich the holding company holds directly or indirectly a participation of more than 50% of voting rights or by otherwise has thep ower to gove rn their operating and financial policies. By applying the method of full consolidation, assets and liabilities as we l las incomes and expenses of such consolidated companies are included entirely. Intercompany balances and transactions (accountsr e c e iva ble, accounts pay a ble, income and expenses) are eliminated upon consolidation. Minority interests included in equity andresults of consolidated companies are presented separately. Gains arising from intercompany transactions and included in accountbalances are eliminated in full. Capital consolidation is based on the purchase method, wh e r e by the acquisition cost of a subsidi-a ry is eliminated at the time of acquisition against the fair value of net assets, determined according to uniform corporate va l u a t i-on principles. A positive difference will be recognized as goodwill.Companies in which Hügli has a minority interest of at least 20% but less than 50% are included in the consolidated financial sta-tements using the equity method of accounting and are recognized as investments in associates. The share in prof it or loss is reco-gnized in the consolidated income statement and presented separately. Investments with voting rights of less than 20% are va l u e dat their fair value and recognized under other financial assets, with unrealized gains and losses recognized under retained earn i n g suntil disposal. At the time of disposal or in the case of an impairment, the related cumulative gain or loss is transferred to the inco-me statement. The ove rv i ew of the consolidated group companies is provided on page 52.

Fo re ig n curre n c i e s

C o rporate subsidiaries prepare their financial statements in local curr e n cy. Monetary assets and liabilities held in foreign curr e n-cies are translated at exchange rates as at balance sheet date. Foreign curr e n cy gains and losses resulting from transactions and fromthe translation of balance sheet items denominated in foreign currencies are reported in the income statement.

35

The consolidated financial statements are calculated and presented in Swiss francs (CHF). For consolidation purposes the financial statements of subsidiaries denominated in foreign currencies are translated into Swiss fran-cs as follows: balance sheets at ye a r-end rates, income and cash flow statements at average rates for the year under rev i ew. A nytranslation differences resultant from the different translation of balance sheets and income statements, as well as differences resul-ting from equity-like corporate loans denominated in foreign currencies, are credited or debited to retained earnings without impacton the result. If realized, the accumulated foreign curr e n cy differences will be recognized as income.

Fi na nc ia l r i sk m a nagem ent / F ina nc i a l ins t rum ent s

The international business activities of the Hügli Group are exposed to various financial risks, primarily in connection withexchange rates and interest rates. The group management at the Holding level is continuously monitoring these risks and wh e-n ever it seems appropriate, to manage the risks using deriva t ives. Hedging is applied only to existing assets and liabilities aswell as future business events that occur with a ve ry high probability.Owing to its reporting in Swiss francs, the group is mainly exposed to exchange rate fluctuations against the Euro, the CzechKo runa and the British Pound. The exchange rate risk is minimized because most of the expenses are in the same curr e n cy asthe incomes. Only some residual inpayments in foreign currencies are part ly hedged by forward exchange contracts.The group manages interest-rate risks by choosing the ratio of f i xed interest-rate debts to va r i a ble interest-rate debts, ensuringa well-balanced ratio of short - t e rm to long-term liabilities at the same time. In order to optimize the mix, the group may useinterest-rate deriva t ive s .Liquidity risks from borr owing and depositing money are reduced by business relations to only high-grade Swiss and foreignb a n k s .Credit-loss risks on trade receiva bles are limited due to the active management of these positions, the varied customer base andlack of risk concentrations.D e r iva t ive financial instruments are recognized at fair value and reported under other receiva bles or other pay a bles. Unrealizedgains and losses are reported in the financial result. Hedge accounting is generally not applied.

Cash and cash equiva l e n t sCash and cash equivalents with an original term of a maximum of 3 months are recorded at nominal values at closing date.

Accounts re c e i va bl eAccounts receiva ble are stated at nominal value less appropriate valuation allowance. The valuation allowance depends on matu-rity structure and identif i a ble solve n cy risks. In addition to individual allowances with respect to specif ic identif i a ble risks, ove r-all allowances are recognized based on statistically determined credit risks.

I nve n t o r i e sTrading goods are generally valued at average acquisition cost, manufactured products at manufacturing cost, including directlabor and materials used, as well as an appropriate share of related overhead costs. If the net realizable value is lowe r, va l u -ation adjustments are made accordingly. A d d i t i o n a l ly, inventories that are difficult to sell or with an unsatisfying turn over areadjusted in value.

36

Ta n g i ble fi xed assetsTa n g i ble f i xed assets are stated at acquisition cost less appropriate, straight-line depreciation over their useful lives, and if neces-s a ry, less impairment allowance. In the case of the operating land and buildings, the historical acquisition costs are based onreplacement values which were determined in 1992. These buildings were depreciated over their useful lives that was determ i-ned by an ex t e rnal real estate ex p e rt for the f irst adoption of IFRS. These ex p e rt valuations confi rmed the replacement va l u e s .Non-operating buildings are valued at fair value; the unrealized gains and losses, resulting from periodically performed newvaluations, are recognized in the income statement. The useful lives of buildings are 30 to 50 years, for machinery, equipment and other tangible assets 6 to 12 years, for both EDPand vehicles, 4 to 6 years. The current repair and maintenance expenses are directly charged to the income statement.

L e a s i n gAssets acquired under f inancial lease contracts, in which risks and benef its are transferred to the group upon entering into thecontract, are capitalized at the lower of minimum lease payments or fair value. Assets are depreciated on a straight-line basis.The related outstanding lease installments are presented under current and non-current liabilities. Lease installments are div i-ded into an interest part, recorded in the income statement, and a redemption part for the financial liabilities. Operating lease expenses are charged to the income statement.

I n t a n g i ble assetsI n t a n g i ble assets with f inancial yield, such as acquired royalties, patents, trademarks and client base are capitalized and amor-tised on a straight-line basis over the expected useful life, usually over 5 to 10 years. Goodwill, the difference between the acqui-sition cost and the fair value of the acquired net assets, are capitalized. Until the f inancial year 2004, the goodwill is amort i s e don a straight-line basis over the estimated useful life (generally over 5 to 10 years). From financial statements 2005 onwards, thegoodwill and the other intangible assets with an indefinite useful life are, in accordance with IFRS 3.78 ff., not systematicallya m o rtised. But they are tested for impairment at each balance sheet date and if necessary, impairment allowances are charged tothe income statement.

R e s e a rch and deve l o p m e n tAll research costs are recognised in the income statement when incurred. Development costs are only capitalized if def ined cri-teria of IAS 38 are met.

Financial assetsSecurities and other financial assets are stated at fair value, whereas unrealized gains and losses are recognised in the fi n a n c i a lresult. Own shares are stated at acquisition cost and netted in the equity. Gains and losses from disposals of own shares are boo-ked in the share premium.

I m p a i r m e n tThe recove r a ble amount of non-current assets is rev i ewed on an annual basis. If there is any indication of an impairment, ani m p a i rment test is performed. If the carrying amount exceeds the recove r a ble amount, an impairment loss is recognised in theincome statement.

L i a b i l i t i e sLiabilities are stated at acquisition cost, which are mostly the nominal va l u e .

P rov i s i o n sP r ovisions are recognised for any present legal or constru c t ive obl i gation incurred as a result of a past event if it is probable thatan outflow of resources will be required to settle the obl i gation and the amount can be estimated reliably.

37

Ta xe sC u rrent income taxes are calculated on the taxable profit. Deferred taxes are calculated by applying the balance sheet liabilitymethod on the temporary differences between the carrying amount and tax base of assets and liabilities. Calculation of deferr e dt a xes is based on the country - s p e c i f ic tax rates. Netting of tax assets and liabilities is done if they concern the same taxable ent-ity and the same tax authorities. Deferred tax assets on losses carried forward are only accounted for in the balance sheet if therealization is probable. Provisions for taxes withheld at source on not distributed profits in foreign subsidiaries are only set-upif dividend payments are intended by the group in the near future.

E m p l oyee benefi t sSwiss group companies sponsor a lega l ly independent pension plan foundation according to Swiss legislation. This foundationp e r f o rms services in case of retirement, death and disability. Generally, it is funded by employer and employee contribu t i o n s .Besides these funding expenses, there are no further financial obl i gations. A p p lying IAS 19, this pension plan qualifies as a defi-ned benefit plan. A c c o r d i n g ly, the defined benef it obl i gation is calculated applying the projected unit credit method over theaverage remaining service years, based on actuarial assumptions like expected salary and pension increase and discount rate.Calculated current service costs are recognised in the income statement. Actuarial gains and losses arise mainly from changesin assumptions and from differences between actuarial assumptions and realized values. T h ey are recognized in the income sta-tement on a straight-line basis over the average remaining service years to the extent that they exceed 10% of the fair value ofassets or the present value of the def ined benef it obl i gations (“corridor”), wh i c h ever is the higher. Def icits arising from suchcalculations as of balance sheet date are recognised according to this mechanism. Prepaid contributions are capitalized underother f inancial assets. Other surpluses are only capitalized if they are actually ava i l a ble to the group in the form of ex p e c t e drefunds from the fund or reductions in contributions to the fund.The other group companies have no material independent pension plan. Pension provisions for retired individuals and othere m p l oyee benefit obl i gations are subject to actuarial calculations and are recorded in the prov i s i o n s .P u blic plans run by the gove rnment, which do not include any future f inancial commitments, are qualified as defined contribu-tion plans. The funding of def ined benefit plans is based norm a l ly on f i xed percentages of the insured salaries. The paid employ-er contributions are recognised directly in the income statement.

S t o ck ownership prog ra mThe difference between the fair market value of shares and proceeds received from the employees under the gr o u p ’s stock ow n e r s-hip program are recorded as personnel expenses in the income statement.

Segment re p o rt i n gThe segment reporting reflects the operational and production related structure of the Hügli Group. This structure is based onthe three production sites including the associated sales companies (country clusters based on the location of assets); theses egments are the basis of risks and returns. Therefore, the primary segment reporting is prepared according to geographic cri-teria. The segment “Germ a ny” contains eve ry active group company in the country, the segment “Switzerland / Rest ofWe s t e rn Europe” the companies in Switzerland (incl. insignificant group functions), Austria, Great Britain and Italy, the seg-ment “Eastern Europe” the companies in the Czech Republic, the Slovak Republic, Poland and Hunga ry.The Hügli Group consist only of one single business unit whose purpose is to develop, produce and distribute food productsn a m e ly dry blended products. Due to the various customer segments, a secondary segment reporting of the sales f igures rela-tes to divisions / client segments. An objective allocation of the manufacturing facilities (assets and investments) to the salesd ivisions is not feasible; the relevant information is consequently wa ive d .

38

N o t es t o t h e co ns ol ida t ed f ina nc i a l s t a t em ent s

1 C h a n ge s i n t he sco pe of co nso l ida t io n

At the end of the year under rev i ew, Hügli Food Kft., Budapest, Hunga ry was founded as well as Ern t e s egen Naturko s tGmbH, Radolfzell, Germ a ny. Besides that, there have been no other changes in the scope of consolidation. In the previous year 2003, Hügli Italia s.r.l., Italy and Hügli Food Slovakia s.r.o., Slovak Republic was founded. Moreo-ve r, the minority interest of 29.3% of an associated company was sold.An ove rv i ew of all group companies (all fully consolidated) is presented on page 52 of this annual report .

2 Ca s h a nd ca sh equ iva l e n t s

2 0 0 4 2 0 0 3T C H F T C H F

Bank accounts and cash on hand 2 ' 3 5 8 3 ' 9 4 7

As at balance sheet date, there does not exist cash equivalents or limited availability of cash and cash equiva l e n t s .

3 Tra de acco unt s re c e i vabl e

2 0 0 4 2 0 0 3T C H F T C H F

Trade accounts receiva ble, gr o s s 3 0 ’ 1 8 5 2 8 ’ 8 4 2./. Valuation allowa n c e – 447 – 703To t a l 2 9 ’ 7 3 8 2 8 ’ 1 3 9

4 Ot her ac coun t s re c e ivab l e

2 0 0 4 2 0 0 3T C H F T C H F

Income tax receiva bl e s 2 6 9Other receiva bl e s 2 ’ 5 2 3 1 ’ 6 4 4A c c rued assets 9 4 7 9 0 2D e r iva t ive financial instru m e n t s 2 1 1 7To t a l 3 ’ 5 1 7 2 ’ 5 7 2

Details on the deriva t ive financial instruments are found under note 14.

5 I nve n t o r i e s

2 0 0 4 2 0 0 3T C H F T C H F

R aw materials (incl. packaging material) 1 3 ’ 8 6 4 1 1 ’ 1 6 6M a n u factured products 1 3 ’ 5 3 4 1 4 ’ 2 7 3Trading goods 4 ’ 7 7 9 5 ’ 3 2 1./. Valuation allowa n c e – 323 – 310To t a l 3 1 ’ 8 5 4 3 0 ’ 4 5 0

39

6 Ta n g i ble f i xed a ss e t s

in T C H F Land and Tech. Equip./ Other TOTAL TOTALBuildings Machinery tangible assets 2004 2003

Acquisition va l u e sAt 01.01. 7 4 ’ 9 4 4 4 3 ’ 6 9 6 3 1 ’ 3 6 9 1 5 0 ’ 0 0 9 1 3 4 ’ 0 4 0A d d i t i o n s 4 ’ 5 9 6 3 ’ 3 3 0 2 ’ 7 4 0 1 0 ’ 6 6 6 1 0 ’ 4 8 5D i s p o s a l s – 217 – 385 – 429 – 1’031 – 1’034Other changes, reclassif i c a t i o n s – 64 6 4 0 0 0Translation diff e r e n c e s – 20 7 5 – 137 – 82 6 ’ 5 1 8At 31.12. 7 9 ’ 2 3 9 4 6 ’ 7 8 0 3 3 ’ 5 4 2 1 5 9 ’ 5 6 1 1 5 0 ’ 0 0 9

A c c u mulated depre c i a t i o nAt 01.01. – 18’371 – 30’046 – 23’404 – 71’821 – 62’678Planned depreciations – 1’304 – 2’220 – 2’773 – 6’297 – 5’976D i s p o s a l s 1 3 3 7 9 3 6 5 7 5 7 2 6 8Other changes, reclassif i c a t i o n s 0 0 0 0 0Translation diff e r e n c e s 9 4 1 3 3 1 3 2 3 5 9 – 3’435At 31.12. – 19’568 – 31’754 – 25’680 – 77’002 – 71’821

C a rrying values at 01.01. 5 6 ’ 5 7 3 1 3 ’ 6 5 0 7 ’ 9 6 5 7 8 ’ 1 8 8 7 1 ’ 3 6 2Carrying values at 31.12. 5 9 ’ 6 7 1 1 5 ’ 0 2 6 7 ’ 8 6 2 8 2 ’ 5 5 9 7 8 ’ 1 8 8

Under tangible fi xed assets, investments in f inancial leasing are disclosed. Their net book value amounts to TCHF 1’250( p r evious year: TCHF 1’225). The non-liquidity impacting additions of the investments in financial leasing (non-cashtransactions) amount to TCHF 162 (previous year: TCHF 0).The f ire insurance value of the tangible f i xed assets totals TCHF 164’345, of which TCHF 69’365 is for buildings andTCHF 94’980 for other f i xed assets (previous year: Total TCHF 157’ 659, of which TCHF 67’346 is for buildings andTCHF 90’313 for others).Pledged tangible f i xed assets for the hedging of financial liabilities:Real estate mort gage rights total TCHF 36’692 (previous year: TCHF 32’643), there-upon utilized credit TCHF 21’897( p r evious year: TCHF 26’114).

7 I n t a n g i b le as se t s

T C H F Other TOTAL TOTALGoodwill intangible assets 2004 2003

Acquisition va l u e sAt 01.01. 2 ’ 3 8 7 3 9 2 ’ 4 2 6 2 ’ 3 9 6A d d i t i o n s 0 4 ’ 6 6 0 4 ’ 6 6 0 0D i s p o s a l s 0 0 0 0Translation diff e r e n c e s 8 2 0 8 2 3 0At 31.12. 2 ’ 4 6 9 4 ’ 6 9 9 7 ’ 1 6 8 2 ’ 4 2 6

A c c u mulated amort i s a t i o nAt 01.01. – 1’650 – 8 – 1’658 – 1’264A d d i t i o n s – 347 – 43 – 390 – 373D i s p o s a l s 0 0 0 0Translation diff e r e n c e s – 80 0 – 80 – 21At 31.12. – 2’077 – 50 – 2’127 – 1’658

C a rrying values at 01.01. 7 3 7 3 1 7 6 8 1 ’ 1 3 2Carrying values at 31.12. 3 9 2 4 ’ 6 4 9 5 ’ 0 4 1 7 6 8

As at end December 2004, a client base and a trade mark were taken over following the liquidation of a competitor for atotal of TCHF 4’660. These intangible assets will be depreciated over an estimated average useful life of 10 ye a r s .

40

8 Fi na nc ia l a ss e t s

2 0 0 4 2 0 0 3T C H F T C H F

S e c u r i t i e s 3 8 7 5 1 9

The securities comprise namely separate assets in accordance with legal clauses on the backing of the balanced prov i-sions for employee benefi t s .

9 Fi na nc ia l l i ab i l i t i e s

2 0 0 4 2 0 0 3T C H F T C H F

C u rrent financial liabilities 2 5 ’ 4 5 1 2 4 ’ 1 2 9N o n - c u rrent f inancial liabilities 2 4 ’ 2 3 5 3 5 ’ 0 1 4To t a l 4 9 ’ 6 8 6 5 9 ’ 1 4 3thereof leasing accounts pay a bl e 5 5 5 7 3 5thereof mort gage secured 2 1 ’ 8 9 7 2 6 ’ 1 1 4

Planned maturity:up to 1 ye a r 2 5 ’ 4 5 1 2 4 ’ 1 2 91 to 5 ye a r s 2 4 ’ 0 0 8 3 4 ’ 5 1 9over 5 ye a r s 2 2 7 4 9 5

The financial liabilities consist mainly of f i xed advances of banks in the currencies CHF, EUR and CZK. These arep a rt i a l ly secured by mort gages. The interest-bearing foreign capital underlies, in particular on the side of the part i a l lyi n d e p e n d e n t ly f inanced foreign subsidiaries, a number of f inancial terms of credit (Financial Covenants), which amongothers require the observance of f inancial operating figures such as debt-to-EBITDA ratio and the interest cove r a g efa c t o r. These terms of credit were observed. For the total of the financial liabilities the average interest rate amounts to3.9% (previous year: 4.2%).

1 0 Ot her current l i ab i l i t i e s

2 0 0 4 2 0 0 3T C H F T C H F

Personnel / social securities 4 ’ 3 6 7 3 ’ 8 2 1A c c rual vacation and ove rt i m e 1 ’ 3 9 3 1 ’ 5 1 9Customer related liabilities 2 ’ 2 9 9 2 ’ 8 4 9Other liabilities 1 ’ 4 9 3 1 ’ 0 3 5A c c rued expenses and deferred income 1 ’ 9 4 2 2 ’ 8 5 4To t a l 1 1 ’ 4 9 4 1 2 ’ 0 7 8

1 1 D e f e r red t a x l i ab i l i t i e s

The deferred tax liabilities and tax assets are recorded in the following balance sheet positions:

2 0 0 4 2 0 0 3T C H F T C H F

I nve n t o r i e s 7 9 5 7 6 7Land and bu i l d i n g s 6 ’ 8 2 3 6 ’ 9 8 1Other tangible f i xed assets 4 2 7 3 1 2P r ov i s i o n s 1 ’ 7 1 7 1 ’ 7 0 6Other balance sheet positions 5 9 4Total Tax Liab i l i t i e s 9 ’ 8 2 1 9 ’ 7 7 0

41

I nve n t o r i e s 1 7 1 1 6 5P r ov i s i o n s 8 3 3 1Other balance-sheet positions 0 8 1Total Tax A s s e t s 2 5 4 2 7 7D e f e r red Tax Liabilities (net) 9 ’ 5 6 7 9 ’ 4 9 3

The deferred tax liabilities and assets based on temporary valuation differences are calculated as a gross and balanced asa net on the company level. This balancing effect amounts to TCHF 254 (previous year: TCHF 277).

Total tax assets on loss carry - f o r wards are only capitalized in case their realization is probable. The accumulated lossc a rry - f o r wards total CHF 13.9 million (previous year: CHF 23.8 million), the non-capitalized deferred tax assets totalCHF 4.9 million (previous year: CHF 8.6 million).In accordance with IAS 12.39, no deferred tax liabilities on undistributed prof its at foreign subsidiaries were accumula-ted.

1 2 E m p l oyee b ene f i t prov i s i o n s

2 0 0 4 2 0 0 3T C H F T C H F

At 01.01. 1 ’ 2 4 2 9 6 3I n c r e a s e 1 3 8 2 0 8U t i l i s a t i o n – 3 – 5D e c r e a s e – 56 0Exchange-rate diff e r e n c e s – 10 7 6At 31.12. 1 ’ 3 1 1 1 ’ 2 4 2

The employee benefit provisions for retired individuals as well as the partial retirement accounts pay a ble in Germ a ny andAustria are periodically actuarially calculated.

1 3 E m p l oyee b ene f i t s

For the Swiss employee pension plan, which qualifies as a defined benefit according to IFRS, which according to Swissl aw lega l ly qualif ies as a contribution plan, an opinion was provided by an actuary. According to this actuarial valuation which is based on IAS 19, the following benefit obl i gations and fair values of planassets are calculated as at balance sheet date:

2 0 0 4 2 0 0 3T C H F T C H F

B e n e fit obl i ga t i o n – 26’340 – 24’153Fair value of the plan assets 2 6 ’ 4 1 2 2 5 ’ 2 8 8Net benefit assets 7 2 1 ’ 1 3 5U n r e c ognised part of the ove r f u n d i n g – 72 – 1’135R e c ognised overfunding in balance sheet 0 0

An overfunding is not capitalised in accordance with IAS 19.58. There are no employer premium reserve s .

S u b s e q u e n t ly there arise the following changes of the recognised overfunding of the defined benefit plan:

42

2 0 0 4 2 0 0 3T C H F T C H F

O verfunding as at 01.01. 0 0Calculated net benef it costs – 428 – 386N o n - r e c ognised benefit earn i n g s – 273 – 248Paid employee contribu t i o n s 7 0 1 6 3 4O verfunding as at 31.12. 0 0

The employee benefit costs for the defined benefit plan in the income statement are comprised as follow s :

2 0 0 4 2 0 0 3T C H F T C H F

Increase of defined benef it obl i ga t i o n s – 1’100 – 985Interest costs – 872 – 805Expected return on plan assets 1 ’ 1 4 7 1 ’ 0 4 5G ross benefit costs – 825 – 745E m p l oyee contribu t i o n s 3 9 7 3 5 9Net benefit costs – 428 – 386N o n - r e c ognised benefit earn i n g s – 273 – 248E m p l oyee benefit costs – 701 – 634

The expenses for the mostly nationally defined contribution plans total to TCHF 2’891 (previous year: TCHF 2’765).

The basic estimates that are used for the provisions of the costs were determined as follow s :

2 0 0 4 2 0 0 3S a l a ry deve l o p m e n t s 2 . 0 % 2 . 0 %Pension benefit deve l o p m e n t 0 . 5 % 0 . 5 %Discount rate 3 . 2 % 3 . 5 %L o n g - t e rm rate-of-term on assets 4 . 5 % 4 . 5 %Average expected remaining service ye a r s 8.6 ye a r s 8.2 ye a r s

1 4 Fi na nc ia l in s t ru men t s

For the partial hedging of curr e n cy risks on future, secured foreign curr e n cy inflow in GBP were closed with maturitiesof up to 9 months (previous year: 12 months).

2 0 0 4 2 0 0 3T C H F T C H F

Contract va l u e 2 ’ 5 9 4 2 ’ 1 6 2Po s i t ive replacement va l u e s 2 1 1 7N ega t ive replacement va l u e s 0 0

The positive replacement values correspond to balance sheet date related non-realised profits. These are disclosed underother receiva bles and realised in the income statement.

1 5 O p e rat i ng L eas in g

The operating lease liabilities are as follows due:

2 0 0 4 2 0 0 3T C H F T C H F

Due within 1 ye a r 1 ’ 5 6 6 1 ’ 3 9 2Due between 2 to 5 ye a r s 2 ’ 5 8 1 1 ’ 9 1 8Due after 5 ye a r s 0 0To t a l 4 ’ 1 4 7 3 ’ 3 1 0

The leasing contracts concern mostly motor vehicles for the sales orga n i s a t i o n s .

43

1 6 G u a ra nt ees in f avo ur o f t h i rd pa r t i e s a nd f u t ure l i ab i l i t i e s ,cap i t a l com m i t me nt s

As at 31 December 2004 and 31 December 2003 there existed no positions requiring disclosure.The Group is invo l ved at the moment in various legal cases that have arisen from the normal business developments. Fo rthese ongoing legal cases, there exist in justif ied cases short - t e rm provisions to cover foreseeable risks so that the eff e c t sneither in individual cases nor totally have a significant influence on the f inancial position and prof i t a b i l i t y.

1 7 S h a re h o l d e r s ´ equ i t y

2 0 0 4 2 0 0 3T C H F T C H F

Share capital 2 4 ’ 2 5 0 2 4 ’ 2 5 0consists of fully paid-in280'000 bearer shares at CHF 50.-410'000 registered shares at CHF 25.-Own shares – 798 – 1’480Bearer shares valued at ave r a g eacquisition costs of CHF 48.34Share premium 1 4 ’ 1 9 3 1 1 ’ 5 7 5Retained earn i n g s 2 3 ’ 8 7 3 1 0 ’ 8 3 1Translation diff e r e n c e s 2 ’ 5 3 8 2 ’ 7 6 1To t a l 6 4 ’ 0 5 6 4 7 ’ 9 3 7

Own shares at 01.01. (in units) 3 0 ’ 6 0 6 3 4 ’ 5 1 7Sales via stock ownership progr a m – 1’085 – 911Sales via stock ex c h a n g e – 13’008 – 3’000Own shares at 31.12. (in units ) 1 6 ’ 5 1 3 3 0 ’ 6 0 6

The share premium increases by the prof it after taxes from the sale of own shares. The average sales price per share wa sCHF 251.58 (previous year: CHF 180.31). The entire amount recognised in the retained earnings amounts to TCHF 60( p r evious year: TCHF 39) and relates to the costs of the senior management participation program, which was creditedin equity. The exchange rate differences were set on the translation date 01.01.2003 to zero, in accordance with IFRS andaccounted with the prof it reserves. The subsequent increase is mainly ascribed to the positive development of the Euro. There is no contingent or authorized capital. Furt h e rmore, no conversion or option rights are outstanding.

1 8 S a l e s

The segment reporting of sales is found under note 26.The breakdown of sales according to divisions / client segments, product groups and geographic markets (location ofcustomers) is found on page 7 of the annual report .

1 9 Pe r so nne l co s t s

2 0 0 4 2 0 0 3T C H F T C H F

Salaries and wa g e s 4 2 ’ 8 7 6 4 0 ’ 7 6 2Social benef i t s 5 ’ 1 2 2 4 ’ 7 9 7E m p l oyee benef it costs 3 ’ 6 7 4 3 ’ 6 0 7Other personnel costs 2 5 1 5 7 7To t a l 5 1 ’ 9 2 3 4 9 ’ 7 4 3

44

2 0 St ock ow n e rs h i p p rog r a m

In accordance with a senior management participation program established by the Board of Directors, it is possible forthe members of upper senior management to use a limited part of the bonus to acquire shares (owned by the company) ata preferential price of 75% of the market value. In accordance with IFRS 2, the discount of 25% qualif ies as personnelcosts and realised as an impact on earnings, with an offsetting entry in equity. The costs in the financial year amount toTCHF 60 (previous year: TCHF 39). In 2004, 1’085 shares were obtained at a price of CHF 165 per share, in the prev i o u syear 911 shares at a price of CHF 127 per share.

2 1 Ot her op era t in g co s t s ( n e t )

2 0 0 4 2 0 0 3T C H F T C H F

M a r keting and sales 2 7 ’ 6 1 3 2 5 ’ 9 6 0Other costs 1 2 ’ 3 3 4 1 1 ’ 9 3 0./. Other operating income – 1’189 – 1’652To t a l 3 8 ’ 7 5 8 3 6 ’ 2 3 8

The other operating income contains namely cost reductions, i.e. through cost transfers of postage / packaging, discounts,income of other accounting periods as well as rental income.

2 2 D eve lo pm ent co s t s

D evelopment costs of TCHF 1’823 (previous year: TCHF 1’647) were debited during 2004. Development serves mainlythe creation of new products and improvement of the existing product range and is included in the personnel and otheroperating costs and depreciation positions. At no time were development costs capitalised.

2 3 Fi na nc ia l re s u l t

2 0 0 4 2 0 0 3T C H F T C H F

Interest ex p e n s e s 2 ’ 1 7 7 2 ’ 6 5 9Financial ex p e n s e s 2 ’ 1 7 7 2 ’ 6 5 9

Interest income – 45 – 48E a rnings from associated companies – 968 – 2’037Foreign exchange rate income – 88 – 97Financial income – 1’101 – 2’182

Financial expenses (net) 1 ’ 0 7 6 4 7 7

The earnings from associated companies are due to a former minority participation. It was sold during the 2003 fi n a n c i-al ye a r, which amounted to a pro rata capital gain of TCHF 2’037. Based on the assumed guarantees affiliated with thesale, a part of the capital gain was deferred for two years. The non-required partial release of this deferral results in ap r o fit share for the f inancial year 2004 of net CHF 968.

2 4 Inco m e t axe s

2 0 0 4 2 0 0 3T C H F T C H F

C u rrent income taxe s 2 ’ 1 8 2 1 ’ 7 8 0D e f e rred income taxe s 1 1 5 – 281To t a l 2 ’ 2 9 7 1 ’ 4 9 9

45

The deviations between the theoretical, weighted tax rate of the Group of 32.1% (previous year: 26.4%) calculated inco-me taxes and the eff e c t ive income taxes results as follow s :

2 0 0 4 2 0 0 3T C H F T C H F

Theoretical income taxe s 5 ’ 7 1 7 3 ’ 0 3 9Appropriation of accumulated defi c i t – 3’665 – 1’894Losses without tax reductions 1 0 1 1 8 2Ta x a ble unrecognised costs 2 0 1 1 8 5O t h e r – 57 – 13To t a l 2 ’ 2 9 7 1 ’ 4 9 9

Income taxes, which, as with the underlying transactions, were realised directly in the equity, amount to TCHF 223 (pre-vious year: TCHF 41).

2 5 Tra nsa c t i ons wi t h re l a t ed p ar t i e s

The Board of directors, the group management members and important shareholders as well as companies controlled bythese persons are deemed to be related parties. The detailed information on the relationships to these groups is found inthe Corporate Gove rnance section of the annual report, Section 1 (Significant shareholders), Section 3 (Board of Direc-tors) as well as Section 4 (Group management). Transactions with related parties are principally processed with marke tc o n f o rming conditions.The non-exe c u t ive members of the Board of Directors (6 persons) are remunerated with a f i xed salary, the board presi-dent receives additionally an earnings share. The members of the management of the group, including the exe c u t ive mem-bers of the Board of Directors (5 members), receive a f i xed salary, an earnings share and furt h e rmore the possibility topurchase own shares at a price of 25% below the market value with a determined part of the earnings share. All com-pensation are included in the personnel ex p e n s e s .

2 0 0 4 2 0 0 3T C H F T C H F

Remuneration of:N o n - exe c u t ive board members 5 6 1 4 5 5Members of the group management 2 ’ 3 6 7 1 ’ 8 5 5

Discount senior management progr a m 3 3 2 0

F u rt h e rmore, there are neither accounts receiva bles or accounts pay a bles opposite related parties nor did transactions takep l a c e .

2 6 Segm en t i n fo r m a t i o n

The Hügli Group consist only of one single business unit whose purpose it is to develop, produce and distribute food pro-ducts namely dry blended products. The primary segment information thus is prepared according to geographic criteria,based on the three production sites with the associated operations companies (country clusters on the basis of the loca-tion of the assets). The segment “Germ a ny” contains eve ry active group company in the country, the segment “Switzerland / Rest of We s t e rnEurope”, the companies in Switzerland (including insignificant group functions), Austria, Great Britain and Italy, the seg-ment “Eastern Europe” the companies in the Czech Republic, Slovakia, Poland and Hunga ry. Due to the various customer segments, a secondary segment reporting of the sales f igures relates to divisions / client seg-ments. An objective allocation of the manufacturing facilities (assets and investments) to the sales divisions is not feasi-ble; the relevant information is consequently wa ive d .

46

In the case of the allocation of segment assets and segment liabilities according to geographic criteria, the f inancial lia-bilities as well as the tax assets and liabilities are in accordance with IAS 14 not allotted. A c c o r d i n g ly, the segment resultbefore interests and taxes can be allotted to the operating net assets. The allocation of the sales according to client related geographic markets does not deviate signifi c a n t ly (more than 10%of the group sales) from the primary segments.

Switzerland/ Eastern Elimination/ Total2 0 0 4 in T C H F Germany Rest Western Europe Europe Not allocated Group

Consolidated sales 1 4 0 ’ 3 9 7 7 0 ’ 0 5 2 2 2 ’ 7 8 1 2 3 3 ’ 2 3 0I n t e r- s egment sales 3 ’ 2 1 5 4 ’ 8 1 2 0Total sales 1 4 3 ’ 6 1 2 7 4 ’ 8 6 4 2 2 ’ 7 8 1 – 8’027

E B I T 1 2 ’ 6 3 8 6 ’ 4 3 2 – 184 1 8 ’ 8 8 6Financial results (net) – 1’076Income taxe s – 2’297Net prof i t 1 5 ’ 5 1 3

I nvestments (gr o s s ) 8 ’ 2 7 7 4 ’ 8 3 0 2 ’ 2 1 9 1 5 ’ 3 2 6Depreciation / amort i s a t i o n 3 ’ 7 0 5 2 ’ 0 2 6 9 5 6 6 ’ 6 8 7

A s s e t s 8 0 ’ 5 3 3 5 4 ’ 2 1 2 2 2 ’ 3 1 5 – 1’606 1 5 5 ’ 4 5 4L i a b i l i t i e s 1 2 ’ 4 7 9 1 4 ’ 8 5 5 4 ’ 6 0 3 5 9 ’ 4 6 1 9 1 ’ 3 9 8

Personnel (100% positions) 3 9 2 1 7 5 2 4 8 8 1 5

Fo o d P r iva t e Industrial Health & Total2 0 0 4 in T C H F Service Label Foods Natural Food Other Group

S a l e s 1 0 0 ’ 6 2 0 5 7 ’ 7 0 5 3 6 ’ 1 8 4 3 5 ’ 9 4 9 2 ’ 7 7 2 2 3 3 ’ 2 3 0

Switzerland/ Eastern Elimination/ Total2 0 0 3 in T C H F Germany Rest Western Europe Europe Not allocated Group

Consolidated sales 1 3 0 ’ 5 8 9 6 5 ’ 4 3 4 1 5 ’ 3 4 4 2 1 1 ’ 3 6 7I n t e r- s egment sales 2 ’ 3 8 0 4 ’ 3 4 0 0Total sales 1 3 2 ’ 9 6 9 6 9 ’ 7 7 4 1 5 ’ 3 4 4 – 6’720

E B I T 7 ’ 8 4 1 4 ’ 7 9 1 – 629 1 2 ’ 0 0 3Financial results (net) – 447Income taxe s – 1’499Net prof i t 1 0 ’ 0 2 7

I nvestments (gr o s s ) 3 ’ 8 3 4 2 ’ 5 0 9 4 ’ 1 4 2 1 0 ’ 4 8 5Deprieciation / amort i s a t i o n 3 ’ 7 3 6 1 ’ 8 4 5 7 6 8 6 ’ 3 4 9

A s s e t s 7 5 ’ 9 8 5 5 2 ’ 3 0 9 1 7 ’ 4 2 4 – 1’133 1 4 4 ’ 5 8 5L i a b i l i t i e s 1 1 ’ 3 0 2 1 3 ’ 8 0 3 2 ’ 8 5 0 6 8 ’ 6 9 3 9 6 ’ 6 4 8

Personnel (100% positions) 3 8 8 1 7 4 2 1 2 7 7 4

Fo o d P r iva t e Industrial Health & Total2 0 0 3 in T C H F Service Label Foods Natural Food Other Group

S a l e s 9 5 ’ 3 9 9 4 6 ’ 1 6 7 3 2 ’ 4 5 8 3 4 ’ 4 0 9 2 ’ 9 3 4 2 1 1 ’ 3 6 7

47

2 7 E a rn i ngs per sha re

2 0 0 4 2 0 0 3Group profit (in CHF) 1 5 ’ 5 1 3 ’ 0 0 0 1 0 ’ 0 2 7 ’ 0 0 0Number of bearer shares at nom. 50.- 2 5 6 ’ 4 4 1 2 4 7 ’ 4 3 9Total registered shares at nom. 25.- 4 1 0 ’ 0 0 0 4 1 0 ’ 0 0 0Total bearer shares - equiva l e n t 4 6 1 ’ 4 4 1 4 5 2 ’ 4 3 9P r o fit per bearer share (in CHF) 3 3 . 6 2 2 2 . 1 6

The average number of outstanding bearer shares is calculated on the basis of the issued shares less the weighted ave r-ages of own shares. Since neither conversion nor options rights are outstanding, the prof it per share is not diluted.

2 8 Fo re ig n ex c h a n ge ra t e s

Income statement Balance sheet2 0 0 4 2 0 0 3 2 0 0 4 2 0 0 3

1 E U R 1 . 5 4 4 1 . 5 2 1 1 . 5 4 4 1 . 5 5 81 G B P 2 . 2 7 6 2 . 1 9 8 2 . 1 8 0 2 . 2 0 6

1 0 0 C Z K 4 . 8 4 7 4 . 7 7 8 5 . 0 7 4 4 . 7 6 91 0 0 S K K 3 . 8 6 0 3 . 6 7 1 3 . 9 9 2 3 . 7 9 61 0 0 P L N 3 4 . 1 8 0 3 4 . 6 5 0 3 7 . 7 9 0 3 3 . 0 2 01 0 0 H U F 0 . 6 1 5 0 . 6 0 1 0 . 6 2 9 0 . 5 9 7

2 9 Subs equent eve nt s a f t er b al anc e s hee t da t e

No events occurred between the 31.12.2004 and the approval of the consolidated f inancial statements by the Board ofDirectors on 14.03.2005 that would have caused an adjustment of the book values of assets and liabilities of the group orwhich would have to be disclosed in this position.

3 0 Tra ns i t io n of t he a nnua l f in anc i a l s t a t em ent 20 0 3f ro m S wi ss GA A P F ER t o IF R S

T C H FP ro fit 2003 in accordance with Swiss GAAP FER 1 1 ' 0 4 2

a ) P r o f it from sale of own shares - 4 7 5b ) Foreign curr e n cy translation - 2 4 9c ) Changes deferred tax liabilities - 1 6 6d ) Expenses upper management progr a m - 3 9g ) O t h e r - 8 6

P ro fit 2003 in accordance with IFRS 1 0 ' 0 2 7

Equity 01.01.2003 in accordance with Swiss GAAP FER 5 0 ' 0 7 9c ) R e c ognition of deferred tax liabilities - 8 ' 7 4 5e ) Value adjustment land and bu i l d i n g s - 3 ' 8 9 1g ) O t h e r - 7 3 8

Equity 01.01.2003 in accordance with IFRS 3 6 ' 7 0 5

Equity 31.12.2003 in accordance with Swiss GAAP FER 6 1 ' 9 9 8c ) R e c ognition of deferred tax liabilities - 9 ' 0 3 5e ) Value adjustment land and bu i l d i n g s - 4 ' 1 7 2f ) P r o f it difference 2003 Swiss GAAP FER-IFRS - 2 5 2g ) O t h e r - 6 0 2

Equity 31.12.2003 in accordance with IFRS 4 7 ' 9 3 7

48

a ) Under Swiss GAAP FER 2003 the prof it from the sale of own shares corresponded still to a transaction affecting netincome; corr e s p o n d i n g ly this prof it was disclosed as a part of the f inancial results. Under IFRS, this cash inflowdoes not however qualify as profit and is credited directly to the equity (capital reserve s ) .

b ) P r ev i o u s ly the translation of the annual accounts in foreign currencies in accordance with Swiss GAAP FER No. 4was still carried entirely at the daily exchange rate on the balance sheet date. In accordance with IFRS for the inco-me statement, the annual average rate of the respective curr e n cy is now applied.

c ) In accordance with the current IFRS Standards, consequent deferred tax liabilities must be presented on all tempor-a ry differences in the balance sheet. Furt h e rmore these tax liabilities may not be discounted, independent of how fa rin the future a realization could be. The additional recording of deferred tax liabilities in the equity as at 01.01.2003is primarily based on new valuations of operations real estate in the years 1989 – 1992, which also occurred direct-ly in the equity neither affecting profit or loss. Prev i o u s ly this deferred tax liability was disclosed in the notes to theconsolidated financial statements.

d ) The discount of 25% on the market value of the sold own shares to the employees is now qualified as personnel costsand is recognised as affecting net income, with an offsetting entry in equity.

e ) The value adjustment of land and buildings corresponds to non-operations real estate in Germ a ny. This was trans-f e rred to the non-operation real estate in connection with the IFRS conversion in the year 2004 and revalued by anex t e rnal ex p e rt at fair value. The subsequently determined difference between the previous book value and the fa i rvalue was debited to equity within the framework of the implementation.

f ) The equity relevant profit difference between Swiss GAAP FER and IFRS in the year 2003 corresponds to the abo-ve presented prof it transition, with exception of the directly recognised positions in the equity (sale of own shares,e t c . ) .

g ) In the case of the other transitions, it deals mainly with period related new reallocation of expenses and incomeand their limitations as at year end, namely in the area of accruals for vacation / ove rtime and interim profit ong o o d s - o n - h a n d .

49

I m p roved balance sheet structure

The operational net-assets/invested capital in-creased slightly by 5.9% to CHF 124.6 million, despi-te ex p a n s ive business activities. The net current assetsdecreased from CHF 38.8 million to CHF 37.0 million.The below - average increase of the accounts receiva bl e sas well as the light increase of raw material stocks wa sove r-compensated through the increase of the short -t e rm operative liabilities. On the other hand, the mate-rial and immaterial assets increased by CHF 8.6 milli-on to CHF 87.6 million, justif ied predominatelythrough upgrade investments in the operations bu i l-dings as well as the acquisition of a new client base andbrand. The net-debt could again be signif i c a n t ly redu-ced by CHF 7.9 million to CHF 47.3 million. Furt h e r-more, the equity strengthened to CHF 64.1 million dueto the good profi t a b i l i t y. This corresponds to solid cir-cumstances of the net-debt on equity (Gearing) of aro-und 0.7, in comparison to 1.2 in the prior ye a r.

Good cash f l owf rom operat ing act iv i t i e s

The cash flow from operating activities rose pro-m i n e n t ly by 44% to CHF 24.8 million, mainly due tothe signif i c a n t ly increased operational profi t a b i l i t y( E B I T DA) as well as to the fact that despite ex p a n s i-on, no additional funds in the net current assets we r ecommitted. With this good internal f inancing, theincreased liquidity could accommodate the inve s t-ments of CHF 15.2 million. In addition, around CHF10.0 million in f inancial liabilities were repaid, sup-p o rted also through the cash flow from the sale of ow nshares amounting to CHF 3.3 million.

I n c reased pro f i t ab i l i t y

The rate of return of the operational net-assets( ROIC) increased from 9.1% to 13.7%, which amountsto a pleasant increase in profitability of the inve s t e dcapital. In relation to the intern a l ly established ave r a g ecapital cost rates (WACC) of 8.0%, this corresponds toan operationally earned added value of 5.7% points.S i m i l a r ly, the rate of return of the equity increasedfrom 20.5% to 27.7%, even though the equity on ther e p o rting year 2004 increased by around a third.

E a rnings clearly incre a s e d

In the reporting year the turn over in local curr e n-cy was increased signif i c a n t ly by around 9.0% after anincrease of 1.9% in the previous ye a r. The orga n i cgr owth strateg i c a l ly corresponds to over 95% of thet u rn over with own products, which gr ew by 11.9%,while the turn over on commodities increased by 1.4%.The positive curr e n cy influence from the translation ofthe income statement in foreign curr e n cy resulted in ashare of 1.3% points, predominately due to EUR andCZK. Howeve r, because a large portion of the costsa c c rued in the respective currencies of the turn ove r, thec u rr e n cy chances and risks (leverage) on the gr o u pp r o fit level are less import a n t .

The EBIDTA increased by CHF 7.2 million, or39%, to CHF 25.6 million. This increase is mainlya t t r i buted to cost savings in material purchases as we l las below average gr owth in operating costs. The gr o u pproject regarding the increase of the gross marg i nthrough optimisation of the purchases thus alreadys h ows results that achieved a part of the profi t a b i l i t y,as in the case of a material expenditure of around 50%of the turn ove r, an important part. The personnelexpenditure increased moderately by 4.4% during adeadline-related increase of full-time employees from774 to 815. This personnel increase mainly occurred inE a s t e rn Europe. The remaining operational ex p e n d i t u-res increased 7.0% and also reflect, along with strengt-hened marketing and sales activities, the slight increa-se production costs. This was despite the fact of anincrease in output of 2,990 tons, or 10.3% of a total of31,975 tons in the year 2004. The depreciations rose by5.4% based on the upgrade investments from prev i o u syears, in which the influence of the long-term utiliza-ble investments in structures and machines is signif i-c a n t ly less than investments in other tangible assets,n a m e ly IT. The amortisation corresponds to two minorgoodwill positions, from which one was amortised tozero in the reporting ye a r. The goodwill as of31.12. 2004 of CHF 0.4 million can in the present viewbe deemed as “of value”. Under IFRS, this may no lon-ger be systematically amort i s e d .

The EBIT consequently increased strongly aboveaverage by 57% to CHF 18.9 million. The fi n a n c i a lexpenditures decreased by 18%, predominately becau-se of the roughly CHF 10 million repayment of bankliabilities, lower short - t e rm interest rates and improve dcredit conditions. The financial earnings consist main-ly of the profit contribution of an associated corp o r a-tion that was sold in 2003.

Commentary on theconsolidated financial statements 2004

50

Report of the Group Au d i t o r s

T H E A U D I T O R S

S t e f a n T r a b e r S w i s s C e r t i f i e d A c c o u n t a n t

A u d i t o r i n C h a r g e

C h r i s t i a n S i e g f r i e d S w i s s C e r t i f i e d A c c o u n t a n t

O B T AGS t . G a l l e n

A s g r o u p a u d i t o r s , w e h a v e a u d i t e d t h e c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s

( b a l a n c e s h e e t , i n c o m e s t a t e m e n t , s t a t e m e n t o f c h a n g e s i n e q u i t y , c a s h f l o w

s t a t e m e n t a n d n o t e s ) o f H ü g l i H o l d i n g A G f o r t h e y e a r e n d e d D e c e m b e r 3 1 , 2 0 0 4 .

T h e s e c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s a r e t h e r e s p o n s i b i l i t y o f t h e

B o a r d o f D i r e c t o r s . O u r r e s p o n s i b i l i t y i s t o e x p r e s s a n o p i n i o n o n t h i s c o n s o l i d a t e d

f i n a n c i a l s t a t e m e n t s b a s e d o n o u r a u d i t . We c o n f i r m t h a t w e m e e t t h e l e g a l

r e q u i r e m e n t s c o n c e r n i n g p r o f e s s i o n a l q u a l i f i c a t i o n s a n d i n d e p e n d e n c e .

O u r a u d i t w a s c o n d u c t e d i n a c c o r d a n c e w i t h t h e a u d i t i n g s t a n d a r d s o f t h e

S w i s s p r o f e s s i o n a n d w i t h t h e I n t e r n a t i o n a l S t a n d a r d s o n A u d i t i n g ( I S A ) , w h i c h

r e q u i r e a n a u d i t b e p l a n n e d a n d p e r f o r m e d t o o b t a i n a r e a s o n a b l e a s s u r a n c e a b o u t

w h e t h e r t h e c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s a r e f r e e f r o m m a t e r i a l m i s s t a t e m e n t .

We h a v e e x a m i n e d o n a t e s t b a s i s e v i d e n c e s u p p o r t i n g t h e a m o u n t s a n d d i s c l o s u r e s

i n t h e c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s . We h a v e a l s o a s s e s s e d t h e a c c o u n t i n g

p r i n c i p l e s u s e d , s i g n i f i c a n t e s t i m a t e s m a d e a n d t h e o v e r a l l c o n s o l i d a t e d f i n a n c i a l

s t a t e m e n t p r e s e n t a t i o n . We b e l i e v e t h a t o u r a u d i t p r o v i d e s a r e a s o n a b l e b a s i s

f o r o u r o p i n i o n .

I n o u r o p i n i o n , t h e c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s g i v e a t r u e a n d f a i r v i e w

o f t h e f i n a n c i a l p o s i t i o n , t h e r e s u l t s o f o p e r a t i o n s a n d t h e c a s h f l o w s i n a c c o r d a n c e

w i t h t h e I n t e r n a t i o n a l F i n a n c i a l R e p o r t i n g S t a n d a r d s ( I F R S ) a n d c o m p l y

w i t h S w i s s l a w .

We r e c o m m e n d t h a t t h e c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s s u b m i t t e d

t o y o u b e a p p r o v e d .

S t . G a l l e n , 2 2 M a r c h 2 0 0 5

51

Key Fi g u res 5-Year Summary

2 0 0 4 2003 2 0 0 2* 2 0 0 1* 2 0 0 0*

Sales mio. CHF 233.2 211.4 199.3 192.7 179.8C h a n ge relative to previous year % 10.3 6.1 3.4 7.1 2.2

Operating profit before depreciation (EBITDA) mio. CHF 25.6 18.4 15.5 18.4 19.5As % of sales % 11.0 8.7 7.8 9.6 10.8C h a n ge relative to previous year % 39.3 18.0 – 15.7 – 5.3 18.8

Operating profit (EBIT) mio. CHF 18.9 12.0 9.9 12.7 13.5As % of sales % 8.1 5.7 5.0 6.6 7.5C h a n ge relative to previous year % 57.3 20.8 – 21.7 – 5.6 35.3

Income taxes mio. CHF 2.3 1.5 1.5 1.1 1.0

Net profit mio. CHF 15.5 10.0 9.7 9.7 9.1As % of sales % 6.7 4.7 4.9 5.1 5.1C h a n ge relative to previous year % 54.7 3.5 – 0.6 6.9 n.a.

Cash flow from operating activities mio. CHF 24.8 17.2 11.8 14.8 16.1As % of sales % 10.6 8.1 5.9 7.7 9.0C h a n ge relative to previous year % 44.3 46.0 – 20.3 – 8.6 n.a.

Depreciation / amortisation mio. CHF 6.7 6.3 5.6 5.7 6.0

Investments (tangible and intangible assets) mio. CHF 15.3 10.5 9.4 9.0 7.0

Number of employees (100% positions at balance sheet date) 815 774 717 658 605

Sales per employee (on average) TCHF 294 284 290 305 314

Total assets mio. CHF 155.5 144.6 141.1 132.6 126.3

Invested capital mio. CHF 124.6 117.7 114.0 109.0 102.6Net working capital mio. CHF 37.0 38.8 38.2 36.1 31.0Ta n g i ble and intangible assets mio. CHF 87.6 79.0 75.8 73.0 71.5

Equity mio. CHF 64.1 47.9 50.1 43.4 36.9As % of total assets % 41.2 33.2 35.5 32.7 29.2

Net debt 1) mio. CHF 47.3 55.2 67.8 65.2 64.2Gearing (Ratio to equity) 0.7 1.2 1.4 1.5 1.7

Return on invested capital (ROIC) 2) % 13.7 9.1 7.5 11.0 11.9

Return on equity (ROE) 3) % 27.7 20.5 20.7 24.3 26.6

Information per bearer shareNet profit per bearer share CHF 33.62 22.16 19.97 20.08 18.79R e p ayment of par value / dividend (proposal 2004) CHF 8.50 5.50 5.00 5.00 4.50Payout ratio % 25 25 25 25 24Equity per bearer share CHF 132 99 103 90 76M a r ket price high CHF 325 203 177 147 120M a r ket price low CHF 199 162 134 100 85P/E high 9.7 9.2 8.9 7.3 6.4P/E low 5.9 7.3 6.7 5.0 4.5*2004 and 2003 according to IFRS; 2002-2000 according to Swiss GAAP FER

D e f i n i t i o n s :1) Net debt Interest bearing f inancial debts - Cash and equiva l e n t s2) Return on invested capital (RO I C ) (EBIT - Ta xes) / (Average Net working capital + Ta n g i ble and intangible assets)3) Return to equity (RO E ) Net prof it / Average equity

52

Paricipation in % Nominal capital3 1 . 1 2 . 2 0 0 4 3 1 . 1 2 . 2 0 0 3 in thousand

H ü g l i H o l d i n g A G S t e i n a c h / S w i t z e r l a n d C H F 2 4 ’ 2 5 0Telephone +41 71 4472211, E-Mail: info@hueg l i . c o m

H ü g l i N ä h r m i t t e l AG S t e i n a c h / S w i t z e r l a n d 1 0 0 1 0 0 C H F 1 ’ 1 0 0Telephone +41 71 4472211, E-Mail: info@hueg l i . c o m

H ü g l i I n d u s t r i a l Fo o d s AG S t e i n a c h / S w i t z e r l a n d 1 0 0 1 0 0 C H F 1 0 0Telephone +41 71 4472211, E-Mail: info@hueg l i . c o m

H ü g l i N ä h r m i t t e l - E r z e u g u n g G m b H H a r d / A u s t r i a 1 0 0 1 0 0 E U R 7 6 5Telephone +43 5574 6940, E-Mail: hueg l i @ h u eg l i . c o m

H u e g l i U K L t d . Taunton/Gret Britain 1 0 0 1 0 0 G B P 1Telephone +44 1823 350950, E-Mail: hueg l i 2 @ b t c o n n e c t . c o m

H ü g l i I t a l i a s . r . l . M i l a n o / I t a ly 1 0 0 1 0 0 E U R 1 0Telephone +39 02 6467 2540, E-Mail: giorg i o . r ava s i n i @ h u eg l i . c o m

H ü g l i N a h r u n g s m i t t e l G m b H R a d o l f z e l l / G e rm a ny 1 0 0 1 0 0 E U R 2 5 ’ 0 5 3Telephone +49 7732 8070, E-Mail: hueg l i @ h u eg l i . d e

H ü g l i H o l d i n g G m b H R a d o l f z e l l / G e rm a ny 1 0 0 1 0 0 E U R 5 ’ 1 1 3

H e i r l e r C e n ov i s G m b H R a d o l f z e l l / G e rm a ny 1 0 0 1 0 0 E U R 2 ’ 7 7 4Telephone +49 7732 8071, E-Mail: info@heirler- c e n ov i s . d e

D i a s a n a Ve r t r i e b G m b H R a d o l f z e l l / G e rm a ny 1 0 0 1 0 0 E U R 1 5 3

K ü c h e n c h e f Fe i n k o s t G m b H B e r l i n / G e rm a ny 1 0 0 1 0 0 E U R 2 5 0

S a u e r m a n n G r u n d s t ü c k s v e r wa l t u n g G m b HR a d o l f z e l l / G e rm a ny 1 0 0 1 0 0 E U R 2 5 6

N a t u r C o m p a g n i e G m b H R a d o l f z e l l / G e rm a ny 1 0 0 1 0 0 E U R 2 6Telephone +49 7732 8073, E-Mail: info@natur- c o m p a g n i e . d e

E r n t e s e g e n N a t u r k o s t G m b H R a d o l f z e l l / G e rm a ny 1 0 0 0 E U R 2 6Telephone +49 7732 807 620, E-Mail: info@ern t e s eg e n . d e

H ü g l i Fo o d s . r . o . Z á s m u ky/Czech Republ i c 1 0 0 1 0 0 C Z K 8 0 ’ 0 0 0Telephone +420 321 759 611, E-Mail: info@hueg l i . c z

H ü g l i Fo o d Po l s k a s p . z o . o . L o d z / Po l a n d 1 0 0 1 0 0 P L N 5 0Telephone +48 42 639 8987, E-Mail: hfp.zaranski@epf.pl

H ü g l i Fo o d S l ova k i a s . r . o . Trn ava / S l ova k i a 1 0 0 1 0 0 S K K 2 0 0Telephone +421 33 535 4773, E-Mail: diana.ptacinova @ h u eg l i . s k

H ü g l i Fo o d K f t . B u d a p e s t / H u n ga ry 1 0 0 0 H U F 3 ’ 0 0 0Telephone +36 1 4432 100 1222, E-Mail: zoltan.molnar@hueg l i . h u

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G roup Companies of the Hügl i Gro u p