Annual Report 2015 — Financial Overview Annual Report 2015 Financial Overview Corporate Governance Report Remuneration Report Report Financial Annual Report 2015 Financial Overview Financial Report Remuneration Report Corporate Governance Report Financial Report Remuneration Report Consolidated Financial Statements Compensation and Performance Overview 2015 100 Consolidated Balance Sheet 4 Compensation-Setting Process 101 Consolidated Income Statement 5 Compensation Components 103 Consolidated Statement of Comprehensive Income 5 Compensation of the Board of Directors 104 Consolidated Cash Flow Statement 6 Compensation of the Executive Committee 106 Consolidated Statement of Changes in Equity 7 Share Ownership of the Members of the Board of Notes to the Consolidated Financial Statements 8 Directors and the Executive Committee 116 Report of the Statutory Auditor 81 Report of the Statutory Auditor 119 Financial Statements of Lonza Group Ltd, Basel Balance Sheet 82 Corporate Governance Report Income Statement 83 Notes to the Financial Statements 84 Group Structure and Shareholders 122 Proposal of the Board of Directors 89 Capital Structure 124 Report of the Statutory Auditor 91 Board of Directors 127 Executive Committee 139 Supplementary Financial Information Compensation, Shareholdings and Loans 143 Investor Information 92 Shareholders’ Participation Rights 143 Statement of Value Added 94 Changes of Control and Defense Measures 144 Free Cash Flow 95 Auditors 145 CORE Results 96 Information Policy and Key Reporting Dates 146 Financial Report Consolidated Financial Statements Consolidated Balance Sheet 4 Consolidated Income Statement 5 Consolidated Statement of Comprehensive Income 5 Consolidated Cash Flow Statement 6 Consolidated Statement of Changes in Equity 7 Notes to the Consolidated Financial Statements 8 Report of the Statutory Auditor 81 Financial Statements of Lonza Group Ltd, Basel Balance Sheet 82 Income Statement 83 Notes to the Financial Statements 84 Proposal of the Board of Directors 89 Report of the Statutory Auditor 91 Supplementary Financial Information Investor Information 92 Statement of Value Added 94 Free Cash Flow 95 CORE Results 96 Financial Report Remuneration Report | Corporate Governance Report | 3 Consolidated Balance Sheet Assets 1 Total Equity and Liabilities 1 million CHF 2 Note 2015 2014 million CHF 2 Note 2015 2014 Non-current assets Equity Property, plant and equipment 6 2 366 2 466 Share capital 25 53 53 Intangible assets 5 830 877 Share premium 311 311 Goodwill 5 1 121 1 130 Treasury shares 25 (51) (77) Other non-current assets 19 21 Retained earnings and reserves 1 822 1 843 Deferred tax assets 21 47 47 Total equity attributable to equity holders of the parent 2 135 2 130 Investments in associates / joint ventures 7 13 17 Non-controlling interest 0 0 Other investments 7 7 Total equity 2 135 2 130 Non-current loans and advances 14 1 1 Total non-current assets 4 404 4 566 Liabilities Deferred tax liabilities 21 255 256 Current assets Non-current provisions 13 68 47 Inventories 8 893 898 Employee benefit liability 23 738 727 Trade receivables 10 538 622 Other non-current liabilities 62 36 Current tax receivables 21 7 Non-current debt 14 1 414 1 693 Other receivables, prepaid expenses Total non-current liabilities 2 537 2 759 and accrued income 11 115 139 Current provisions 13 33 38 Cash and cash equivalents 12, 14 277 209 Other current liabilities 15 638 647 Total current assets 1 844 1 875 Current tax payables 89 77 Trade payables 16 292 262 Total assets 6 248 6 441 Current debt 14 524 528 Total current liabilities 1 576 1 552 Total liabilities 4 113 4 311 Total equity and liabilities 6 248 6 441 1 At 31 December 2 See the accompanying notes to the consolidated financial statements 4 Lonza Annual Report 2015 — Financial Overview Consolidated Consolidated Income Statement of Statement Comprehensive Income million CHF 1 Note 2015 2 2014 million CHF 1 Note 2015 2014 Sales 2 3 803 3 640 Profit for the period 277 237 Cost of goods sold (2 704) (2 566) Gross profit 1 099 1 074 Other comprehensive income Marketing and distribution (239) (239) Items that will not be reclassified Research and development 22 (103) (101) to profit or loss: Administration and general overheads (313) (294) Re-measurements of net defined Other operating income 19 55 45 benefit liability 23 (58) (352) Other operating expenses 19 (71) (62) Income tax on items that will not be Result from operating activities (EBIT) 428 423 reclassified to profit or loss 21.2 8 (50) 103 (249) Financial income 20.1 4 24 Items that are or may be reclassified Financial expenses 20.2 (89) (84) subsequently to profit or loss: Net financing costs (85) (60) Exchange differences on translating Share of loss of associates / foreign operations (113) 131 joint ventures 7 (2) (84) Cash flow hedges - effective portion of Profit before income taxes 341 279 changes in fair value 10 (12) Cash flow hedges - reclassified to Income taxes 21 (64) (42) profit or loss (3) 0 Profit for the period 277 237 Income tax on items that are or may be reclassified to profit or loss 21.2 (1) (107) (4) 115 Attributable to: Equity holders of the parent 277 237 Other comprehensive (loss) / income Non-controlling interest 0 0 for the period, net of tax (157) (134) Profit for the period 277 237 Total comprehensive income for the period 120 103 CHF CHF Basic earnings per share 26 5.30 4.56 Total comprehensive income Diluted earnings per share 26 5.26 4.54 attributable to: Equity holders of the parent 120 103 Non-controlling interest 0 0 Total comprehensive income for the period 120 103 1 See the accompanying notes to the consolidated financial statements 2 The presentation of financial income / expenses has changed in 2015 (note 20) and 2014 information was adjusted accordingly Financial Report Remuneration Report | Corporate Governance Report | 5 Consolidated Cash Flow Statement million CHF 1 Note 2015 2014 million CHF 1 Note 2015 2014 Profit for the period 277 237 Purchase of property, plant and equipment 6 (256) (158) Adjustments for non-cash items: Purchase of intangible assets 5 (8) (22) – Income taxes 21 64 42 Proceeds from sale of tangible and – Net financing costs 20 85 60 intangible assets 2 8 – Share of loss of associates / joint ventures 7 2 84 Acquisition of subsidiaries, net of cash acquired (30) 0 – Depreciation of property, plant and equipment Disposal of subsidiaries, (excl. impairment) 6 249 250 net of cash disposed of 4 0 – Amortization of intangibles 5 51 49 Purchase of unconsolidated investments 0 (3) – Reversal of impairment 3,6 (1) (1) Proceeds from sale of other assets 0 2 – Impairment losses on property, plant, Decrease in loans and advances 0 2 equipment and intangibles 3,6 53 16 Increase in loans and advances 0 (6) – Increase of provisions 13 37 14 Interest received 1 8 – Decrease of employee benefit liability (44) (8) Dividends received 5 2 – Loss on disposal of property, plant Net cash used for investing activities (282) (167) and equipment 6 2 – Amortization of other liabilities / assets (2) 1 Repayment of straight bond 14 (240) 0 – Share-based payments 24 17 11 Repayment of German private placement 14 (155) 0 Income taxes paid (61) (39) Issue of straight bond 14 324 0 Interest paid (60) (61) Repayment of syndicated loan 14 (125) (195) Total before change in net Repayment of acquisition bridge financing 14 0 (104) working capital 673 657 Repayment of borrowings 14 (83) (14) Increase inventories (15) (111) Increase in other non-current liabilities 30 3 (Increase) / decrease in trade receivables 68 (45) Decrease in other non-current liabilities (1) (1) Increase / (decrease)in trade payables 36 (6) Dividends paid 26 (131) (112) Decrease in other net working capital 50 68 Sale of treasury shares 0 2 Use of provisions 13 (21) (33) Net cash used for financing activities (381) (421) Decrease in other payables, net (50) (47) Net cash provided by operating activities 741 483 Effect of currency translation on cash (10) 8 Net increase / (decrease) in cash and cash equivalents 68 (97) Cash and cash equivalents at 1 January 209 306 Cash and cash equivalents at 31 December 277 209 1 See the accompanying notes to the consolidated financial statements 6 Lonza Annual Report 2015 — Financial Overview Consolidated Statement of Changes in Equity million CHF 1 Note Attributable to equity holders of the parent Non- Total Share Share Retained Hedging Translation Treasury controlling equity capital premium earnings reserve reserve shares Total interest At 31 December 2013 53 310 2 416 1 (574) (80) 2 126 0 2 126 Profit for the period 0 0 237 0 0 0 237 0 237 – Remeasurement of defined benefit liability 0 0 (249) 0 0 0 (249) 0 (249) – Exchange differences on translating foreign operations 0 0 0 0 125 0 125 0 125 – Cash flow hedges 0 0 0 (10) 0 0 (10) 0 (10) Other comprehensive income, net of tax 0 0 (249) (10) 125 0 (134) 0 (134) Total comprehensive income for the period 0 0 (12) (10) 125 0 103 0 103 Dividends 26 0 0 (112) 0 0 0 (112) 0 (112) Recognition of share-based payments 24 0 0 11 0 0 0 11 0 11 Movement in treasury shares 0 1 (2) 0 0 3 2 0 2 At 31 December 2014 53 311 2 301 (9) (449) (77) 2 130 0 2 130 Profit for the period 0 0 277 0 0 0 277 0 277 – Remeasurement of defined benefit liability 0 0 (50) 0 0 0 (50) 0 (50) – Exchange differences on translating foreign operations 0 0 0 0 (113) 0 (113) 0 (113) – Cash flow hedges 0 0 0 6 0 0 6 0 6 Other comprehensive income, net of tax 0 0 (50) 6 (113) 0 (157) 0 (157) Total comprehensive income for the year 0 0 227 6 (113) 0 120 0 120 Dividends 26 0 0 (131) 0 0 0 (131) 0 (131) Recognition of share-based payments 24 0 0 15 0 0 0 15 0 15 Movement in treasury shares 0 0 (25) 0 0 26 1 0 1 At 31 December 2015 53 311 2 387 (3) (562) (51) 2 135 0 2 135 Translation Reserve The translation reserve of the consolidated 1 See the accompanying notes to the consolidated statement of changes in equity comprises all foreign exchange financial statements differences arising from the translation of the financial statements of foreign entities including the impact on translating monetary items that form a net investment in a foreign operation.