2016 Annual Report and Accounts WELCOME TO ARYZTA AG ARYZTA AG (‘ARYZTA’) is an international food business with a leadership position in speciality bakery. ARYZTA is based in Zurich, Switzerland, with operations in North America, Europe, Asia, Australia, New Zealand and South America. ARYZTA has a primary listing on the SIX Swiss Exchange and a secondary listing on the ISE Irish Exchange (SIX: ARYN, ISE: YZA). ARYZTA AG Annual Report 2016 1 Table of Contents Annual Report and Accounts 2016 Page Overview 02 Financial Highlights 03 Letter to Shareholders 06 Business Overview 10 Financial and Business Review 24 Bridge to Group Income Statement Overview Governance 26 Corporate Governance Report 49 Compensation Report 59 Group Risk Statement 61 Our Responsibility Governance Group 65 Group Consolidated Financial Statements Company 145 Company Financial Statements 158 Investor Information Group Company ARYZTA AG Annual Report 2016 2 Annual Report and Accounts 2016 Financial Highlights Group Revenue EBITA1 Underlying Underlying fully in EUR m in EUR m net profit diluted EPS in EUR m in EUR cent 566 4,809 377 80 4,504 422.2 360 52 402.2 1,415 4,208 476 30 319 59.2 1,418 33.3 444 3,877 69 360.3 514 51 291 1,340 3 37.5 69 393 486 57.3 1,300 310.1 485 44 330 260 325 51.5 71 312 42 50.1 368.9 407 363.0 3,820 3,879 268 350.3 375 247 3,394 Overview 303.0 322 3,086 218 286.0 2,868 260.0 2,577 2015 2016 2015 2016 2015 2016 2015 2012 2012 2012 2012 2013 2013 2013 2013 2011 2011 2011 2011 2014 2014 2014 2014 2016 continuing operations discontinued operations ARYZTA ARYZTA Europe Europe Revenue 45 % EBITA 45 % ARYZTA ARYZTA North North € 3.88 bn America € 485 m America 49 % 50 % ARYZTA Rest of World ARYZTA Rest of World 6 % 5 % Revenue – ARYZTA Europe in EUR million EBITA – ARYZTA Europe in EUR million 2016 1,747 2016 216 2015 1,647 2015 212 2014 1,586 2014 230 2013 1,392 2013 186 2012 1,274 2012 170 2011 1,185 2011 149 Revenue – ARYZTA North America in EUR million EBITA – ARYZTA North America in EUR million 2016 1,908 2016 243 2015 1,942 2015 275 2014 1,587 2014 230 2013 1,460 2013 191 2012 1,372 2012 176 2011 1,212 2011 149 Revenue – ARYZTA Rest of World in EUR million EBITA – ARYZTA Rest of World in EUR million 2016 224 2016 26 2015 231 2015 27 2014 221 2014 26 2013 234 2013 30 2012 222 2012 29 2011 180 2011 24 1 See glossary on page 23 for definitions of financial terms and references used in this document. ARYZTA AG Annual Report 2016 3 Annual Report and Accounts 2016 Letter to Shareholders In the financial year 2016, the key successes included strong free cash generation of €267m, the transition to a pure speciality food group, and the successful consolidation and commissioning of new modern capacity to support future growth. Financial year 2016 also marked a return to positive underlying revenue growth of 0.5%, with strong underlying revenue growth of 4.0% in Europe and 6.2% in the Rest of World, which were offset by a recovering underlying revenue performance of negative 3.1% in North America, as a result of losses arising from long-term contract renewals with a small number of key customers. Acquisitions performed to expectation during the year and Overview currency supported revenue growth by 1.4%. Overall, revenue from continuing operations increased by 1.5% to €3.9bn, while EBITA from continuing operations decreased 5.7% to €485m and EBITA margins declined by 100 bps to 12.5%. Half of this margin decline reflects an increased investment in brand marketing, primarily in North America, where the Otis Spunkmeyer and La Brea ranges were extended. The remainder of the margin decline related to the negative operating leverage from the long-term contract renewals. While these revenue losses adversely impacted FY 2016, resulting in an overall 5.0% decline in underlying fully diluted EPS from continuing operations to 350.3c, the successful finalisation of new long-term contracts brings revenue stability and a solid foundation for future growth. During FY 2016, we transitioned into a pure food business, focused on frozen speciality food, by exiting our investment in Origin Enterprises, which we first listed in 2007. Since that time, Origin returned over €1 billion to its founding shareholder. When I reflect on my period as Chairman, I am very proud of how this business transformed to establish a relevance opposite primary food producers. During August 2015, we also re-invested €451m to acquire a 49% shareholding in Picard, with a call option to acquire the balance in FY19, FY20 or FY21. As the lines are blurring between previously delineated food channels, ARYZTA must continuously evolve, and Picard has the potential to enhance ARYZTA’s relevance to customers and consumers, with its unique and innovative business. Picard performed well in terms of revenue and EBITDA growth since our investment, and generated €40.5m of free cash. During the year, the Group also successfully commissioned its €150m investment in additional bakery capacity and capabilities in Germany and consolidated older, less efficient capacity onto the same site. These capital investments, combined with the subdued operating performance, negatively impacted ROIC, which declined by 40bps to 10.5%. Proposed dividend At the Annual General Meeting on 13 December 2016, shareholders will be invited to approve a proposed dividend of CHF 0.5731 (€0.5255) per share. If approved, the dividend will be paid to shareholders on 1 February 2017. A dividend of CHF 0.6555 per share was paid during the year, as approved by shareholders at the Annual General Meeting on 8 December 2015. ARYZTA AG Annual Report 2016 4 Letter to Shareholders (continued) Board membership At the 2015 AGM, held on 8 December 2015, the shareholders approved the re-election of myself, Mr. Denis Lucey as Chairman of the Board of Directors, together with the re- election of Mr. Charles Adair, Ms. Annette Flynn, Mr. Shaun B. Higgins, Mr. Owen Killian, Mr. Andrew Morgan, Mr. Wolfgang Werlé and the election of Mr. Dan Flinter. Mr. Patrick McEniff, CFO / COO and Mr. John Yamin, CEO Americas, did not present themselves for re-election to the Board, as the Board transitioned to more demonstrably independent governance. In addition, Mr. J Brian Davy, retired at the 2015 AGM. Overview The Board of ARYZTA AG now consists of one executive director and seven non-executive directors. The biographies of individual Board members and the Secretary to the Board are available on pages 33 to 36 in the Corporate Governance report. At the 2016 AGM, to be held on 13 December 2016, the Board will propose the re- election of all current Board members other than Shaun B. Higgins and myself. Mr Gary McGann will be proposed as the new Chairman and Prof. Dr. Rolf Watter will be proposed as a new member of the Board. I want to welcome my successor and wholeheartedly recommend Gary McGann and Rolf Watter to you as very experienced, shareholder- friendly leaders, whose reputations are impeccable and whose values align with those of ARYZTA. I thank my fellow and past directors for their courtesy and support during my time as Chairman. I thank you as shareholders who have encouraged, challenged and supported us throughout the period. I thank the nearly 20,000 people who turn up every day and bring their passionate expertise to our bakeries, our logistics centres and all parts of our organisation. In particular, I thank our customers for whom we exist and without whose support we would have no business. ARYZTA, with its passion for good food, is in great hands, and I wish Gary and ARYZTA great success. Denis Lucey Chairman, Board of Directors 3 October 2016 ARYZTA AG Annual Report 2016 6 Annual Report and Accounts 2016 Business Overview About ARYZTA ARYZTA Group Overview Revenue EBITDA EBITA 57 29 € 3.88 bn € 610 m € 485m Bakeries Countries Quick Serve Rest of World Savoury Restaurant & Other Bread 6 % 22 % Top 20 Rolls & Large Customers 15 % Retail Artisan 54 % Loaves 34 % Europe 35 % Geography 45 % Channel Customer Capability Revenue Revenue Revenue Revenue €3.88bn €3.88bn €3.88bn Sweet €3.88bn Convenience Baked & Independent Goods & Retail Other Morning North America Other 11% 46 % Goods 49 % Foodservice 50 % 33 % ARYZTA AG Annual Report 2016 7 Business Overview Markets Reporting Segments ARYZTA AG ARYZTA Europe ARYZTA North America ARYZTA Rest of World Overview International Speciality Food Business ARYZTA Europe Revenue EBITDA EBITA € 1.75 bn € 275 m € 216 m 22 18 Bakeries Countries Quick Serve Food Restaurant Savoury Solutions Convenience Top 20 & Other Bread 8 % & Independent Customers Rolls & 48 % Retail 19 % Artisan Large 21% 37 % Loaves Retail 41% Route 36 % to Market Channel Customer Capability Revenue Revenue Revenue Revenue €1.75bn €1.75bn €1.75bn €1.75bn Sweet Baked Bakeries Other Goods & Other Morning 52 % Foodservice 63 % Goods 35 % 40 % ARYZTA AG Annual Report 2016 8 Business Overview Markets (continued) ARYZTA North America Revenue EBITDA EBITA € 1.91 bn € 300 m € 243 m Overview 24 2 Hawaii Bakeries Countries Customer Quick Serve Savoury Restaurant & Other Bread Brand Branded Other Top 20 Large 30 % 12 % Rolls & 25 % 34 % Retail 32 % 68 % Artisan 34 % Loaves 25 % Route to Market Channel Customer Capability Revenue Revenue Revenue Revenue €1.91bn €1.91bn €1.91bn €1.91bn Sweet Outsourced Baked Supply Convenience Goods & Chain Other & Independent Morning Retail 41% Foodservice 3 % Goods 33 % 63 % ARYZTA Rest of World Revenue EBITDA EBITA € 224 m € 35 m € 26 m 11 9 Bakeries Countries Large Retail Other Food 3 % Savoury & Other Solutions