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Leon's Furniture Ltd.Dufry AnnuAl report 2012 CompAny report turNover in millions of CHF 3300 3000 2700 2400 2100 1800 1500 1200 900 600 300 0 gross Profit in millions of CHF 2200 2000 1800 1600 1400 1200 1000 800 600 400 200 0 Margin 68 % 66 % 64 % 62 % 60 % 58 % 56 % 54 % 52 % 50 % 48 % 46 % 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 ebitDa¹ in millions of CHF Net earNiNgs in millions of CHF +28% +8% +14% +13% +3% 480 440 400 360 320 280 240 200 160 120 80 40 0 240 220 200 180 160 140 120 100 80 60 40 20 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 1 EBITDA before other operational result Adjusted net earnings without other operational result Net sales by regioN 2012 Net sales by ProDuCt Category 2012 EMEA & Asia 25 % America I 25 % America II 23 % USA & Canada 26 % Global Distribution Centers 1 % Perfumes & Cosmetics 27 % Confectionery, Food & Catering 17 % Wine & Spirits 17 % Watches, Jewelry & Accessories 9 % Literature & Publications 8% Fashion, Leather & Baggage 8 % Tobacco goods 7 % Electronics 3 % Other 4 % Net sales by ChaNNel 2012 Net sales by Market seCtor 2012 Airports 89 % Cruise liners & seaports 3 % Downtown, hotels & resorts 3 % Railway stations & other 5 % Duty Free 69 % Duty Paid 31 % Dufry AnnuAl report 2012 CompAny report ANNUAL report 2012 CoMPaNy rePort Message from the Chairman of the Board of Directors 4 6 Statement of the Chief Executive Officer 10 Group Executive Committee 12 Board of Directors 14 Dufry business model 18 Dufry retail concepts 30 Dufry Regions 44 Report of the Chief Financial Officer 48 Corporate Governance fiNaNCial rePort Consolidated financial statements Notes to the consolidated financial statements Report of the statutory auditor Financial statements Dufry AG Notes to the financial statements Appropriation of available earnings Report of the statutory auditor other iNforMatioN Information for investors and media Address details of headquarters 70 76 136 138 140 143 144 146 147 pAge 4 Dufry AnnuAl report 2012 CompAny report MeSSAGe FroM tHe CHAIrMAN oF tHe BoArD oF DIreCtorS Dear shareholDers In 2012, Dufry reached a new milestone in its history, breaking through the CHF 3 billion mark for turnover and achieving CHF 3.2 billion – a 19.6% growth rate over 2011. We further expanded our market share and reached ap- proximately 9% 1, which places Dufry as the largest travel retailer in the world. Additionally, we have also improved our profitability, and posted a record 15.0% EBITDA margin. In 2012, we continued our strategy to grow and consolidate the travel retail industry. In January, Dufry expanded its presence in Russia by acquiring a 51% interest in a local travel retail operator at Sheremetyevo Airport in Moscow. In October, Dufry signed an agreement to acquire the travel retail operations of Folli Follie Group, the leading travel retailer in Greece. With this acquisition, Dufry fur- ther increases its presence in a strategic region, the Mediterranean area. The transaction will also reinforce our leading position in the travel retail industry. Throughout 2012, Dufry strengthened its financial structure. On the debt side, we successfully refinanced our debt ma- turities that were going to expire in 2013 through a renewal of a committed revolving credit facility of CHF 650 million with a syndicate of banks. In addition to that, Dufry made its debut on the debt capital market by issuing USD 500 million senior notes maturing in 2020. These transactions have strengthened our financing structure and diversified our debt funding. On the equity side, Dufry increased its share capital by issuing 2.7 million new shares, a capital increase of 10%. The transaction, one of the financing elements to fund the acquisition of Folli Follie Travel Retail, was done on October 11, 2012, through an accelerated bookbuilding offer and was placed with a large number of existing and new investors. The books were closed in less than three hours and the transaction was very well received by investors. The year was also remarkable in relation to Dufry’s share price performance. Our share price increased by 38% and 1 Including the pending acquisition of the travel retail division of Folli Follie outperformed the respective index in Switzerland by 22 percentage points, a factor of more than two times. Trading volumes of Dufry shares also increased by more than a third and reached an average of CHF 15.6 million per day, a result of the consistent delivery and execution of our strategy. With a market capitalization of CHF 3.5 billion at the end of 2012, Dufry has established itself as a strong mid-cap name and has a broad shareholder base in North and South America as well as in Europe. We continue our strategy to grow and consolidate the travel retail industry. Dufry’s shareholder structure changed in January 2013 through two transactions that have led to a further in- crease in free float to 82.5%. On January 16, 2013, Advent International Corp., one of our larger shareholders, di- vested its interest in Dufry and placed all the shares with a large number of existing and new institutional sharehold- ers. On January 24, 2013, the long-standing shareholder Travel Retail Investment SCA informed the company that they increased their stake in Dufry to 13.18% through purchases in the market. These changes in the share- holder structure will not impact Dufry and the strategy will remain unchanged. The results achieved in 2012 demonstrate once more the effectiveness of our strategy. We will continue to develop our business targeting profitable growth with focus on emerging markets and tourist destinations. There are still Page 5 Dufry aNNual rePort 2012 CoMPaNy rePort JuAn CArlos torres CArretero many opportunities in this fragmented market and we will work hard to capitalize on them. Diversification continues to play an important role in our strategy, as it is a key element of risk management and ensures that we capture a broad range of growth opportunities. We believe the outlook for the travel retail industry in 2013 remains positive. While the economic development in Europe and the USA may be impacted by the political discussion on sovereign debt, bringing some uncertainty and volatility, recent indicators already show an economic recovery in certain regions, especially in Emerging Mar- kets. We will continue to look for organic and external growth opportunities, while continuing to monitor regional developments. As in the past, Dufry continues to engage in social projects that improve lives of disadvantaged people, with a special focus on children, the weakest group of society. After the successful partnership with SOS Children’s Villages in Igarassu, Brazil over the last years, Dufry will sponsor two more initiatives in Agadir, Morocco and Battambang, Cambodia. The two projects together will give education, medical support and other services to children and their families. Furthermore, Dufry is sponsoring the Street Child World Cup to be held in Brazil in 2014. This event acts as a catalyst around the world to safeguard the rights of millions of children who live and work on the streets. Last but not least, we have continued a very important social project in Rio de Janeiro which was launched 17 years ago. It offers free professional education to thirty young people every year. The program is for 16 to 18 year-old girls or boys. Dufry’s employees participate in the program as volunteers, serving as mentors to these teenagers. On behalf of the Board of Directors I thank our senior man- agement for their contribution and their commitment. We also thank our employees for their work and dedication, without whom nothing would be possible. Finally, we thank the shareholders and bondholders for the trust given to us. Sincerely, Juan Carlos Torres Carretero pAge 6 Dufry AnnuAl report 2012 CompAny report StAteMeNt oF tHe CHIeF exeCUtIve oFFICer Dear all In 2012, Dufry delivered once more outstanding results. In a year marked by regional differences, turnover grew strongly by 19.6% and reached CHF 3.2 billion and EBITDA surged by 27.8% to CHF 474.0 million. Our gross margin improved from 58.2% to 58.9% and furthermore, our EBITDA margin showed a strong expansion of 90 basis points to 15.0% in 2012 from 14.1% one year before. Both, the level of gross margin and the EBITDA margin are the best in the history of the Company. 2012 was another year of strong growth in turnover and profitability. We had significant sales performance in all our regions. In Region EMEA & Asia, we grew 20.2%, backed by strong increase in most markets in Asia and Africa and also se- lected markets in Europe. Region America I grew by 48.3% in nominal terms, mainly driven through a combination of strong organic growth, especially in Mexico and selected markets in the Caribbean, and the consolidation of the businesses acquired in August 2011. Region America II had a flat turnover evolution when measured in Swiss Francs. The lower performance compared to previous years was mainly due to the economic slowdown and substantial weakening of the local currency in Brazil. Region United States & Canada grew organically by 8.7% through a com- bination of like-for-like growth and space expansion. Dufry also successfully refinanced its existing credit line and for the first time in its history Dufry entered the debt capital market by issuing USD 500 million senior notes. Such achievements represent the start of a new phase for the Company. Besides that, we also placed 2.7 million new shares in the market. The new financial structure will allow us to continue pursuing opportunities in the still fragmented travel retail industry. Continuous expansion through new concessions Overall, we opened 178 new shops in 2012, representing around 15,000 m² of additional gross retail space. For 2013, we expect further expansion through new square meters and new concessions. Our pipeline of potential projects continues healthy at ap- proximately 40,000 m² and to date we have already signed contracts to open 10,000 m² in the year. In 2012, we were also successful in consolidating our pres- ence in Emerging Markets. We are very pleased to have renewed in November our agreement for the duty free retail space at Guarulhos International Airport in São Paulo, Brazil, which is one of the most important operations in this region. Based on the new agreement, Dufry has renewed its contracts for operating duty free stores at the airport until 2016. Additionally, we have been awarded additional retail space of 2,100 m², increasing overall retail space at the airport by 50%. More than the new space, we believe that it will further enhance and reinforce our position in Brazil and illustrates the quality of our operations, where we have developed a strong organization with deep knowl- edge of the Brazilian consumer. The new space is expected to be operational in the second semester of 2013 and is forecasted to generate a substantial sales increase. Since the acquisition of Hudson News in 2008, our busi- ness in US and Canada has been performing strongly and we have been able to expand our footprint and increase our market share. In 2012, we have opened 63 new shops, pAge 7 Dufry AnnuAl report 2012 CompAny report with a total of 6,240 m² of new retail space. Of these, 25 shops are branded or specialized shops, an example of our ability to develop additional retail formats also in North America. Furthermore, in January 2012, we acquired 51% of a local travel retailer operator at Sheremetyevo Airport in Moscow. The acquired businesses are in the final phase of integra- tion and expected synergies are on track. We continue to actively develop the Hudson News con- cept also outside North America. In 2012, we opened 45 new Hudson News shops in several locations. Dufry continues to consolidate the fragmented travel retail market Dufry continues to expand its presence through acquisi- tions in strategic areas. To start with, we are very pleased with the signing of an agreement to acquire 51% of the travel retail business of Folli Follie Group. The business is the leading travel retailer in Greece with 111 shops and more than 18,000 m² of retail space. The business, which in 2011 generated a turnover of EUR 291 million and an EBITDA of EUR 84 million, is a highly attractive asset. The company operates long-term concession contracts with attractive terms, and has a high quality customer base with more than 80% being international travelers. With this acquisition, we further strengthen and diversify our concession portfolio and we increase our presence in the strategically attractive Mediterranean area. As to the acquisitions made in August 2011, when Dufry acquired operations in several emerging markets loca- tions named Argentina, Uruguay, Ecuador, Armenia and Martinique, the consolidation of these businesses also contributed to the good performance in 2012. We com- pleted the integration of the business in the fourth quarter, ahead of our initial schedule. Internal reorganization creating a basis for further growth In 2012, we performed an internal reorganization in our Group. Dufry has grown strongly over the years and we found the need to adapt and prepare the Group to this new era. We have reduced the number of regions from six to four, in order to create a critical mass in the regions and allow synergies to be generated. At the same time, we redefined the role of the headquarters: responsibili- ties were pushed to the regional level and company’s headquarters’ focus is on activities that will generate synergies for the group on a global basis. JulIán DíAz gonzález for the Folli Follie travel retail acquisition have strength- ened our balance sheet and will allow us to continue growing our business. As for 2013, our general outlook is positive, although there are still some global economic issues that need to be addressed and there may be some increased volatility throughout the year. There is a consensus view that the economic situation will improve in the medium term. Passenger traffic remains positive with global passenger growth being forecasted at 5.5%. While regional differ- ences will continue to persist, all regions are expected to have positive passenger growth in 2013. people make the difference The recognition of our work comes also in the form of awards. We were awarded the “Best Travel Retailer in Americas” for the fifth time, which is a recognition that we are on the right track and illustrates the quality of our operations, where we have developed a strong organiza- tion with deep knowledge of the consumer. For the results achieved in 2012, I would like to thank our employees for their dedicated work. In a year of changes in our organization they supported the move towards the new structure while continuing to deliver every day. I would like to express my gratitude to our shareholders and bondholders for their trust in Dufry, to our Board members for their invaluable support, and to our suppliers and landlords for the shared efforts in our business. Finally, my special thanks go to our customers: Thank you for trusting us and visiting our shops. We will continue to work to design the best shops with the best brands for making your shopping experience unforgettable. Julián Díaz González pAge 8 Dufry AnnuAl report 2012 CompAny report Among other initiatives related to the reorganization, we have started to create a new logistic structure. Our objec- tive is to maximize the economic synergies and know-how of our Company through the consolidation and develop- ment of Dufry’s commercial model and at the same time strengthen even more our relationship with suppliers. The model will centralize our logistic operations in two main platforms: one in the Americas, for that region and another in Europe for Europe, Africa and Asia. This will be a step further to continue growing the company’s produc- tivity and gross profit margin in the near future. We continue to focus on profitable growth and on Emerging Markets and tourist destinations. priorities in 2013 Our strategy, which we have been implementing for the last 8 years, remains unchanged also going forward: we continue to focus on profitable growth and on cash gen- eration, developing the company in emerging Markets and tourist destinations. The medium and long-term trends in travel retail industry, namely the ongoing global passenger growth, as well as the continuation of the consolidation of the travel retail industry have been confirmed and will remain valid. Hence, we will continue to focus on growing organically in our current operations through space expansion and accelerating like-for-like growth. Finally, we also will remain alert regarding the possible acquisition of high- quality assets what will generate synergies through their integration. The integration of the travel retail division of Folli Follie Group as well as an increasing of our commercial area in Guarulhos airport in Brazil will be a priority for us this year where we will put all of our efforts to make it suc- cessfully happen. Last but not least, after several acquisitions in the past years, our goal this year will be also to deleverage our Company using our strong cash generation. The refi- nancing of the 2013 maturities including our debut on the debt capital markets as well as the capital increase done pAge 9 Dufry AnnuAl report 2012 CompAny report oUr orGANIZAtIoNAL StrUCtUre Chief Executive Officer Julián Díaz gonzález Chief Financial Officer Andreas schneiter Global Chief Operating Officer José Antonio gea General Counsel pascal C. Duclos Chief Operating Officer Region EMEA & Asia Chief Operating Officer Region America I Chief Operating Officer Region America II Chief Operating Officer Region United States & Canada Xavier rossinyol rené riedi José Carlos rosa Joseph DiDomizio pAge 10 Dufry AnnuAl report 2012 CompAny report GroUp exeCUtIve CoMMIttee JulIán DíAz gonzález XAvIer rossInyol José AntonIo geA rené rIeDI pAge 11 Dufry AnnuAl report 2012 CompAny report AnDreAs sChneIter José CArlos rosA pAsCAl C. DuClos Joseph DIDomIzIo pAge 12 Dufry AnnuAl report 2012 CompAny report BoArD oF DIreCtorS JuAn CArlos torres CArretero ernest george BAChrACh mAurIzIo mAuro AnDrés holzer neumAn Jorge Born pAge 13 Dufry AnnuAl report 2012 CompAny report steve tADler JoAquín moyA-Angeler CABrerA José luCAs ferreIrA De melo XAvIer Bouton JAmes Cohen mArIo fontAnA Page 14 Dufry annual rePort 2012 ComPany rePort OUR BUSINESS MODEL REGIONAL ORGANIZATION 43 countries orga- nized in four regions, where we combine our global travel retail know-how with local expertise SUPPLIERS Window display for international brands from over 1,000 suppliers LANDLORDS Over 180,000 m² of sales area in 200 locations STRATEGY Strategy of profitable growth with a global reach, focused on emerging markets and tourist destinations RETAIL CONCEPTS 4 distinct retail concepts customized to the travelers’ needs CUSTOMERS First class shopping experiences and unique customer services for over 1.7 billion potential customers EMPLOYEES Unique cultural diversity and attractive employment INVESTORS Sustainable returns for equity and bond investors SOCIAL RESPONSIBILITY Support for dis advantaged children Page 15 Dufry annual rePort 2012 ComPany rePort FUNDAMENTAL FACTS SPECIALTY RETAIL IN AN ATTRACTIVE SEGMENT • Worldwide passenger numbers are expected to grow over 4% p.a. in the next 10 years • Convenience is an important business driver • No competition from other channels, such as internet EXPERTISE IN TRAVEL RETAIL • Over 60 years of travel retail experience • Different shop concepts to capture the full potential of each location • Combines local aspects of operations with global best practices GROWTH STRATEGY • Strategy of profitable growth • Focus on emerging markets and tourist destinations • Dufry has grown by 18% p.a. from 2003 to 2012 GLOBAL FOOTPRINT • Dufry is the leading travel retailer in the industry • More than 1,200 shops in 43 countries STRONG CONCESSION PORTFOLIO AND SUPPLIERS RELATIONSHIPS • Broadly diversified concession portfolio with above average duration • Longstanding relationships with suppliers • Full range of top international brands pAge 16 Dufry AnnuAl report 2012 CompAny report StrAteGY Our current strategy defined in 2004 brought us to the leading position in our industry. In the last eight years our turnover has been multiplied almost by five and the EBITDA grew about tenfold. With 1,243 shops in 43 countries at the end of 2012, Dufry is the largest travel retailer in the world and the most diversified one. profitable growth in emerging markets and tourist destinations Dufry follows the concept of profitable growth in its busi- ness. This means that we will approach every expansion project and also the existing businesses with a focus on its development potential as well as on its profitability. One pillar of our growth strategy is based on the dynamics of the travel retail industry itself, namely the increase in the number of passengers. This key driver for our business has been consistently growing in the last ten years at an average of more than 4% p.a. and is expected to grow fur- ther at a similar pace in the next decade. This means that the number of potential customers for Dufry is expected to continue growing on average by around 4–5% every year to reach over 12 billion air passengers by 2031. An important part of this growth is forecasted to take place in emerging markets and tourist destinations, where Dufry has already been focusing its efforts. For example, emerging markets accounted for 64% of Dufry’s turnover in 2012. Active in the consolidation of the fragmented travel retail industry The global travel retail market (market size larger than USD 40 billion) remains very fragmented. Dufry, as the leading international travel retailer has actively consoli- dated the market in the past years and today has a market share of about 9%1 with half of the market being operated by small and medium-sized local or regional operators. ¹ Including the pending acquisition of the travel retail division of Folli Follie We expect consolidation in our industry to continue in the coming years and we intend to keep an active role in that consolidation. Our long-standing track record in merg- ers & acquisitions combined with our local and regional organization allow us to identify, structure, execute and integrate acquisitions quickly. As a result, we can cap- ture synergies within a short period of time and add sustainable value for our shareholders. Dufry is the leading travel retailer with 1,243 shops in 43 countries, and a market share of about 9%1. recent internal reorganization enhanced our approach of global organization with local execution Operating shops in 43 countries, Dufry is one of the most diversified retailers in the world. To adapt to each local market is key to successful retailing and this is not dif- ferent for the retail formats we operate in travel locations. Based on this idea we have structured our organization in order to capitalize on the global presence and a local approach. Our local teams are responsible for the full understanding of the customers as well as managing the relationship with landlords, local authorities and local suppliers. pAge 17 Dufry AnnuAl report 2012 CompAny report The company’s headquarters focus on responsibilities that result in global synergies. We provide global standard procedures and best practices, and monitor the business and the strategic initiatives across all functions. We also centralize certain functions where we can generate econ- omies of scale such as procurement and logistics. Last June, we performed an internal reorganization to better adapt the company to its current size and re-think the role of local and global teams. As a result we have reduced the number of regions to 4 from 6 and adopted several mea- sures with the goal of further centralize functions that yield global synergies and decentralize the business execution. regional diversification For Dufry, diversification is an important element of our strategy. First of all, it is an effective way to manage the risk of external shocks. Secondly, diversification offers also an important advantage for our understanding of the customer. We collect information from spending habits and preferences worldwide, in order to create a unique database on customer behavior in the industry. Our duty paid activities currently represent 31% of turn- over and we expect this business to increase further in the future. We see great potential in the duty paid segment and have developed several concepts to capture this potential, be it through convenience stores or other retail formats. Being able to operate duty free and duty paid concepts is in our view an important value driver for our business and is also very interesting from a strategic perspective. Market share 2012 9%1 Dufry’s market share at YE 2012 was approximately 9%, an increase of 1 percentage point compared to YE 2011. As a consequence, we will continue with our strategy of diversification on all continents. loNg-terM PasseNger foreCast Billion of passengers Duty free and Duty paid: different but equally attractive concepts The duty free business represents 69% of our turnover today, and is an important concept for our future develop- ment as international travel will continue to increase, especially in emerging markets. In addition to the opportu- nities for external growth in this business, we expect duty free to remain one of the main revenue drivers in the future. 14 12 10 8 6 4 2 0 5.7 6.0 6.3 6.6 6.9 12.2 8.4 2012 2013 2014 2015 2016 2021 2031 Despite of that, two thirds of air passengers are domestic travelers, only entitled to buy duty paid goods, creating a great potential for this format as well. Source: ACI-DKMA The underlying travel retail market is expected to grow to over 12 billion air passengers by 2031 – a CAGR of about 4.1%. 1 Including the pending acquisition of the travel retail division of Folli Follie pAge 19 Dufry AnnuAl report 2012 CompAny report GeNerAL trAveL retAIL SHopS Either duty free or duty paid, general travel retail shops are typically located in areas with high passenger flow. We customize the shop-layout, product assortment and operations to the respective location, to achieve the highest attractiveness to the respective customer profiles and spending patterns. These shops offer a large selection of different products and cover a wide range of product categories, such as perfumes & cosmetics, food & confectionery, wine & spirits, tobacco goods, watches & jewelry, fashion & leather, sou- venirs, electronics and other accessories. In 2012 we continued to renovate these shops and re-shape them towards our customer needs. For example, in Mexico we revamped equivalent to 1,400 m² of retail space at Mexico City Airport, modeling the shops with the best retail techniques, including store-in-store concepts. All categories are now displayed with a fresh new look, show- casing the international brands of more prestige in all traditional duty free categories. In Martinique, acquired in 2011, we fully refurbished our operations and rebranded the shop with the Dufry identity. Sales area also increased to 460 m² from 160 m² in a brand new walk-through for- mat. We also refurbished and improved our general travel retail shops in Basel (Switzerland), Casablanca (Morocco), Edmonton (Canada), and Buenos Aires (Argentina) just to name a few. In all these projects, we touch up the layout of the shops to refine it to the latest trends and offer cus- tomers a clear and attractive display of all the assortment, resulting in an increase in the productivity. pAge 21 Dufry AnnuAl report 2012 CompAny report NeWS AND CoNveNIeNCe StoreS This duty paid concept is applied at the departure or arrival areas of airports, and in other travel locations such as train stations. Operated under the “Hudson News” brand, these stores offer a broad range of convenience products like soft drinks, confectionery, travel accessories, electronics, personal items or souvenirs, together with the classical publication items such as newspapers, magazines and books. The shops are designed in such a way that customers can quickly buy a preferred reading and get something to eat on the go, or cruise leisurely through the shop while wait- ing for the next flight or train connection. Whatever their available time is, a strong visualization and clear presen- tation of the products are very important factors to give the traveler a strong incentive to buy. In 2012, we actively expanded the concept by opening 79 new Hudson News shops. In the United States we started operations at 34 new points-of-sales with a total of 3,024 m². Even more remarkable was the expansion out of North America with the opening of 45 new shops in India, Mexico and Morocco. pAge 23 Dufry AnnuAl report 2012 CompAny report BrAND BoUtIQUeS These boutiques carry a single global brand and mirror the look-and-feel of the high street shops of the respec- tive brand. We operate brand boutiques for some of the most prestigious brands like Armani, Burberry, Coach, Etro, Ferragamo, Hermès, Hugo Boss, Lacoste, Montblanc, Swarovski, Tumi, Versace, Victoria’s Secret or Zegna. Depending on the location, we design these shops either as stand-alone boutiques or integrate them as a shop-in-shop concept within our general travel stores. Based on concessions won in 2011, we inaugurated 1,424 m² of fashion and beauty outlets at Shuangliu Inter- national Airport in Chengdu, China during autumn 2012. Spread across two wings in the newly-opened domestic Terminal 2, we opened 12 top brand boutiques and a multi-brand perfumes & cosmetics outlet that offers one of the most comprehensive ranges of beauty products in the Chinese domestic travel retail market. pAge 25 pAge 25 Dufry AnnuAl report 2012 Dufry AnnuAl report 2012 CompAny report CompAny report SpeCIALIZeD SHopS The specialized shop concept is used in particular markets, where we aim to capture the full passenger potential by operating boutiques that offer a variety of different brands on one specific theme. These shops can be found in air- ports, seaports, hotels or downtown locations. Major concepts include Colombian Emeralds International, which is a dedicated watches & jewelry format used in the Caribbean market, Sunglass Hut, which offers a variety of the world’s brands in sunglasses, Dufry Do Brasil, a par- ticular concept for local Brazilian goods or Sweet Treats, offering premium chocolate to our customers. In 2012, we continued to expand the specialized shop retail format. For example, we expanded our presence in the Columbia Emeralds International shops in the Caribbean with four new stores and also enlarged our portfolio in other categories with the opening of further specialized shops offering wine, electronics and books among others. pAge 26 Dufry AnnuAl report 2012 CompAny report CUStoMerS Deep understanding of customer needs Dufry wants to provide a great shopping experience to its customers in all of its 1,243 shops worldwide. Our journey to best attend to our clients’ needs starts at the definition of the shop concepts and product offerings. The various elements are defined based on extensive con- sumer research, which evaluates the demand for different retail formats and product categories in a given location. The same methodology is used for all the operations in which we are present. Today around 1.7 billion interna- tional and domestic passengers go through locations where we operate. We are poised to continue offering our clients innovative commercial ideas and a broad range of prime international brands. Customer service Our definition of customer service is clear and simple: we want our customers to enjoy their time in our shops, and to give them the comfort that they make the right buying decisions and that Dufry is a most trusted retailer, regardless which Dufry shop they have been visiting any- where in the world. One part of our success is the friendly sales teams who welcome our customers with a smile and help them find- ing the products they are looking for or introducing them to new products that they might be interested in. The other part is our shop designs that we customize in order to build the most attractive commercial space in any given location. Dufry offers a unique Global Customer Service that spans across the entire shopping cycle and supports and covers our customers before, during and after their purchasing, be it through the internet or through our call center, which supports customers on any aspect of their shopping. “Get onto the web and start your journey online”: Dufry’s website is available in Chinese, English, French, German, Portuguese and Spanish and reflects our presence and activities worldwide. It also offers information on custom allowance regulations for every country in the world and travel tips for some romantic and exotic places. Our customers can choose from over 50,000 items available in our portfolio. Dufry is pioneer in adding services to its clients. As an example in Brazil our pre-order service allows customers to select and reserve the products they want to buy in the internet. At the store the travelers just pick up their order in exclusive check outs. In other locations we offer the possibility to buy preferred products at our departure shops and to pick them up in the arrivals, so that travelers don’t need to carry the items along on their journey. The possibility of payments in installments is also an option given by Dufry to its clients in some locations. Unique within the travel retail industry is our customer guarantee, in case a product is not satisfactory: Irre- spective of a location where a customer purchased a product, we guarantee to replace or refund any product within a 30 days period. This guarantee gives comfort to our customers, even if they buy products at a location where they may not return to again. Dufry: an award winning retailer As in previous years, Dufry has again won several major awards in 2012: Through an industry-wide poll conducted by Airport Revenue News (ARN) magazine, our Hudson News format was recognized as “Best News and Gift Operator” and one of our branded boutiques at Newark Liberty International Airport (NJ), namely the Coach store, was rated with the “Best Retail Store Design”. Fur- thermore, Dufry achieved the 2nd place for the “Best New Retail Concept” for its Michael Kors branded store at John F. Kennedy International Airport (NY) at the 2012 Airports Council International North America (ACI-NA) conces- sions contest. And Dufry received the DFNI Americas award “The Americas Travel Retailer Of The Year” for its travel retail excellence in the Americas. We regard these prestigious awards as a confirmation of the reliability and superior quality of Dufry’s customer services. pAge 27 Dufry AnnuAl report 2012 CompAny report global guaraNtee 30 days Replace or refund guarantee offered by Dufry is unique in the travel retail industry. Net sales by ProDuCt Category 2012 27% PerfuMes & CosMetiCs 17% CoNfeCtioNery, fooD & CateriNg 17% WiNe & sPirits 9% WatChes, JeWelry & aCCessories 8% literature & PubliCatioNs 8% fashioN, leather & baggage 7% tobaCCo gooDs 3% eleCtroNiCs 4% other pAge 28 Dufry AnnuAl report 2012 CompAny report eMpLoYeeS Our employees are the heart and pulse of Dufry. With their team spirit and strong commitment, they make our group the most innovative and successful travel retail company. unique cultural diversity At December 31, 2012, Dufry employed 14,361 people compared to 13,874 at year end of 2011. Our workforce comprises people from more than 70 nationalities across all functions. This broad cultural diversity represents a very strong competitive advantage that, together with our global customer base, solid strategy and continued ex- pansion, creates an engaging and truly international working environment with unique career opportunities for our employees. Our global Human Resources strategy continues to be focused on the key pillars of Training and Development, Reward and Recognition. We systematically invest in our people’s development and support a broad range of in-house and external training and development op- portunities. sales and customer care trainings One of the major development programs is our Sales Acad- emy that provides quality trainings for our sales people. Specific aspects trained are: Customer service, sales techniques, product knowledge and retail processes and procedures. This particular training program is delivered by Dufry personnel, who go through specific training themselves to qualify as Dufry Certified Trainers. Since 2010, when the program was launched, 408 Certi- fied Trainers were trained, 241 alone in 2012. They in turn trained 7,638 Dufry sales professionals in 39 countries. 86% of all our sales professionals have been trained until now. Our objective was that by 2012, all sales professionals would have been certified. We have met this objective for most of our operations, and are now focusing on training new employees. Developing management skills in-house Dufry is proud of its long-term Human Resources strategy to develop and grow the management potential that exists within our own group. We filled 95% of new management positions with internal talents. It has been our aim for years to fill new or open manage- ment positions with internal talents whenever possible. In the reorganization at mid-year 2012, 95% of the 22 newly defined management positions were filled with managers that had already been working for Dufry over the previous years. In 2012, we rolled out our “Out in Front” program, which we specifically designed for our shop managers and super- visors on the shop floor during 2011. 303 managers in 11 major locations have gone through the program in 2012 and we expect a similar number of trainings during 2013. The aim is that all our retail managers have gone through this program by year end of 2014. We are convinced that initiatives and programs like this are constantly increas- ing the pool of travel retail professionals from which we can fill vacant or new management positions with internal talents also in the upcoming years. Awards program to recognize excellence Dufry also runs a global recognition program, the “Dufry One Awards”, open to all Dufry teams that demonstrate outstanding improvements in productivity, customer service or a remarkable innovation. equal opportunities Dufry is an equal opportunities employer and offers ca- reer opportunities without discrimination. We offer and promote a work environment where everyone receives equal treatment, regardless of gender, color, ethnic or national origins, disability, age, marital status, sexual orientation or religion. pAge 29 Dufry AnnuAl report 2012 CompAny report eMPloyees 2012 14,361 Dufry employed 14,361 people at December 31, 2012, an increase of 4% compared to year end 2011. eMPloyees by ProfessioN 0.2% exeCutives 5% Warehouse, logistiCs 5% other oPeratioNs 6% fiNaNCe, it, hr 83% retail oPeratioNs eMPloyees by regioN uNiteD states & CaNaDa 35% 23% eMea & asia 2% 15% aMeriCa ii 25% global DistributioN CeNters aMeriCa i Page 30 Dufry annual rePort 2012 ComPany rePort EMEA And AsiA represented In 50 cities number of shops 258 total sales area 46,013 m² employees 3,336 turnover CHF 790.4 million TEnERiFE location Tenerife Sur International Airport Shops 1 Duty free shop total sales area, employees 1,200 m², 51 employees MOsCOW location Sheremetyevo Airport Domodedovo Airport Shops 13 Duty free shop 2 Brand boutiques 1 News & convenience store 1 Specialized shop total sales area, employees 1,310 m², 89 employees sHARJAH location Sharjah International Airport Shops 2 Duty free shops 1 Luxury fashion shop 2 News & convenience stores total sales area, employees 2,130 m², 192 employees TUnis location Tunis Carthage Airport Shops 4 Duty free shops, Departure area 2 Duty free shops, Arrival area total sales area, employees 2,131 m², 193 employees MiLAn locations Malpensa Airport Terminals 1 and 2 Linate Airport Shops 2 Duty free shops 2 Duty paid shops 2 Last minute duty free shops 10 Brand boutiques 5 Specialist shops 14 News & convenience stores total sales area, employees 7,730 m², 344 employees tunis Carthage Airport milan Malpensa Airport Sharjah International Airport sHAnGHAi location Shanghai Hongqiao Airport Shops 14 Brand boutiques 8 Perfumes & cosmetics shops 4 Fashion & accessories shops total sales area, employees 2,949 m², 291 employees Moscow Sheremetyevo Airport Page 32 Dufry annual rePort 2012 ComPany rePort AMERiCA i represented In 53 cities number of shops 255 total sales area 60,963 m² employees 3,667 turnover CHF 778.3 million MEXiCO CiTY location Benito Juárez Int’l Airport Shops 15 Duty free shops 7 News & convenience stores 1 Brand boutique 1 Specialized shop 1 Embassy shop total sales area, employees 5,679 m², 283 employees PUERTO RiCO location Luis Muñoz Marín Int’l Airport, San Juan Shops 4 Duty free shops 7 News & convenience stores 4 Shops-in-shop total sales area, employees 2,328 m², 131 employees BUEnOs AiREs locations Ezeiza Int’l Airport Ministro Pistarini Aeroparque Int’l Airport Jorge Newbery Shops 9 Duty free shops total sales area, employees 7,209 m², 576 employees montevideo Carrasco Int’l Airport dOMiniCAn REPUBLiC location Las Américas Int’l Airport, Santo Domingo Shops 7 Duty free shops 4 News & convenience stores 2 Shops-in-shop total sales area, employees 2,702 m², 186 employees Dominican republic Las Américas Int’l Airport Puerto rico Luis Muñoz Marín Int’l Airport, San Juan FLAGsHiP location Cruise ships of Norwegian Cruise Lines Shops 10 Brand boutiques 11 Duty free shops 6 Perfumes & cosmetics shops total sales area, employees 4,029 m², 205 employees MOnTEVidEO location Carrasco International Airport Shops 2 Duty free shops total sales area, employees 1,503 m², 254 employees Buenos aires Ezeiza Int’l Airport Ministro Pistarini Page 34 Dufry annual rePort 2012 ComPany rePort AMERiCA ii represented In 15 cities number of shops 67 total sales area 15,347 m² employees 2,118 turnover CHF 730.6 million BELO HORiZOnTE locations Tancredo Neves International Airport Conjunto Comercial do Governo de Minas Gerais Patio Savassi Shopping Center BH Shopping Center Shops 2 Duty free shops 3 Duty paid shops 2 Brand boutiques total sales area, employees 588 m², 75 employees PORTO ALEGRE location Salgado Filho International Airport Shops 2 Duty free shops 2 Duty paid shops total sales area, employees 727 m², 46 employees rio de Janeiro Galeão International Airport BRAsÍLiA location Presidente Juscelino Kubitschek Int’l Airport Shops 2 Duty free shops 1 Duty paid shop total sales area, employees 488m², 42 employees Brasília Presidente Juscelino Kubitschek Int’l Airport Belo Horizonte Tancredo Neves International Airport RECiFE location Guararapes-Gilberto Freyre Int’l Airport Shops 2 Duty free shops 1 Duty paid shop total sales area, employees 525 m², 41 employees RiO dE JAnEiRO locations Galeão International Airport Santos Dumont Airport Rua da Assembleia 51 – City Center Visconde de Pirajá, 351 – Loja 118F / Ipanema Fashion Mall Shopping Center Barra Shopping Center Shops 7 Duty free shops 4 Duty paid shops 3 Brand boutiques total sales area, employees 4,968 m², 527 employees sÃO PAULO locations Guarulhos International Airport Viracopos International Airport Congonhas Airport Morumbi Shopping Center Shops 9 Duty free shops 7 Duty paid shops 1 Brand boutique total sales area, employees 5,262 m², 980 employees São Paulo Guarulhos International Airport Page 36 Dufry annual rePort 2012 ComPany rePort UniTEd sTATEs And CAnAdA represented In 57 cities number of shops more than 650 total sales area 58,022 m² employees 4,955 turnover CHF 809.3 million CHiCAGO locations O’Hare International Airport Midway Airport CitiGroup Building, Metra Station Shops 39 News & convenience stores 7 Specialty retail shops 8 Bookstores 3 Duty free shops (under construction) total sales area, employees 4,913 m², 417 employees sEATTLE location Seattle-Tacoma Int’l Airport Shops 17 News & convenience stores 3 Specialty retail shops 3 Bookstores 3 Duty free shops total sales area, employees 3,920 m², 268 employees LOs AnGELEs location Los Angeles International Airport Shops 12 News & convenience stores 17 Specialty retail shops 4 Bookstores total sales area, employees 3,579 m², 299 employees LAs VEGAs location Las Vegas International Airport Shops 22 News & convenience stores 3 Specialty retail shops 1 Bookstore total sales area, employees 3,066 m², 255 employees new york JFK Int’l Airport new york JFK Int’l Airport orlando Sanford Airport nEW YORK locations JFK Int’l Airport – Terminals 1, 2, 4, 7, 8 and 9 LaGuardia Airport Grand Central Terminal Port Authority Bus Terminal Penn Station/PATH 33rd St/Jacob Javits Center United Nations Gift Centre Shops 68 News & convenience stores 17 Specialty retail shops 6 Bookstores total sales area, employees 7,122 m², 852 employees nEWARK locations Newark-Liberty Int’l Airport – Terminals A, B and C Penn Station Newark PATH Station – Journal Square Hoboken Terminal Shops 27 News & convenience stores 4 Specialty retail shops 4 Bookstores 3 Duty free shops total sales area, employees 3,207 m², 314 employees ORLAndO locations Orlando International Airport Sanford Orlando Airport Shops 10 News & convenience stores 11 Specialty retail shops 1 Bookstore total sales area, employees 2,247 m², 100 employees Newark Liberty International Airport pAge 38 Dufry AnnuAl report 2012 CompAny report SUppLIerS Dufry works with more than 1,000 well-known suppliers in the travel retail sector, including the most prestigious brands. Whether in a duty paid or duty free shop, Dufry will position the brands and develop a specific mix of brands and products that meets the profile of its clients as well as the positioning of the supplier. We therefore follow a “best brand policy” and have developed the stron- gest portfolio of brands per product category and customer segmentation in our industry over the past years. Window display Two million passengers pass in front of our shops every day. This volume together with their purchasing power creates a perfect environment for the advertisement focus of international brands. Dufry works with more than 1,000 well- known suppliers in the travel retail sector, including the most prestigious brands. We work closely together with suppliers to continuously strengthen our partnerships. Together with them, we analyze and combine research information and best practices, using Dufry’s and the suppliers’ capabilities, know-how and expertise. Working together for a win-win situation Our suppliers and Dufry share the same goals: Together, we want to enhance the shopping experience, attract a maximum of customers, strengthen the brand aware- ness, convert non-shoppers to shoppers and last but not least increase sales and spend per passenger. We enhance our collaboration with the suppliers in mul- tiple ways, for example through our own Suppliers’ Extranet. It allows our partners to directly access specific sales data of their brands and products on a location- by-location basis (e.g. market share, ranking of their products). We also share sales forecasting and inventory projec- tions with our major suppliers. This allows them to plan our replenishment orders in advance, which in turn helps improving their production and manufacturing cycles, reduces lead times and gives both business partners higher productivity at shorter notice. A new logistics plan Dufry changed the dynamics in the travel retail industry years ago when it implemented its centralized negotia- tions with suppliers. By being a global organization with full control and synchronization with its local operations, we were able to negotiate terms with global suppliers centrally, benefiting from our global scale, a novel ap- proach in our industry. In a new logistic plan expected to be implemented in the coming years, Dufry plans to move one step forward and not only negotiate, but also order and manage inventory centrally. The plan is expected to bring further benefits for Dufry in terms of gross margin and working capital management. Suppliers will benefit from reduced com- plexity, much simpler purchasing processes, and the flow of goods will also be simplified. pAge 39 Dufry AnnuAl report 2012 CompAny report AIrport AUtHorItIeS & LANDLorDS Operating commercial space at any major travel location means to share the infrastructure with other service providers. Hence strong relationships with airport au- thorities and other landlords is a further key factor to the success of Dufry. Dufry wants to be the operator of choice for airport op- erators and other landlords. We can provide the full range of retail formats depending on the characteristics of the retail space. Dufry has a full team on the ground in four different regions, facilitating us to add a business to our portfolio wherever it is. strong and broadly diversified concession portfolio Over the years, Dufry has successfully built a portfolio of concession contracts that is highly diversified and of premium quality. In 2012, we added nearly 4,000 m² of net retail space to our existing portfolio through new concessions, the opening of new shops, and an acquisition in Russia. At year-end 2012, our concession portfolio spread across 43 countries and included total retail space of over 180,000 m² in airports, seaports, train sta- tions and other locations. The announced acquisition of Folli Follie Travel Retail business will add another 18,000 m² of retail space during 2013, once the transac- tion is closed. There are different ways to get concessions: They can be won through tenders or negotiated directly with airport authorities, be structured as joint ventures with the airport operator or be bought through acquisitions. Dufry has a clear policy whenever looking at expanding the concession portfolio: We will analyze the concession fee levels and the duration of the contract, and assess the development potential of the location from retail as well as travel per- spectives. We also take into consideration any execution or operational complexities. Through a strict evaluation of these criteria, we ensure that our concession portfolio remains of the highest quality and that each concession offers attractive returns for our group. Dufry has been adding net new concessions of around 4% of sales per year since 2003. strong concession portfolio Dufry established strong relationships over the years with landlords and business partners, always aiming to create a win-win situation. We have structured a solid conces- sion portfolio with long duration and attractive terms. Managing concession contracts is an important part of our daily work and we actively manage our concession portfolio to renew and extend existing contracts and also to win new contracts. On average, we renew every year contracts which generate 5%–10% of our sales. In addition, we add new contracts every year and over time, we have expanded our concession portfolio sig- nificantly. Since 2003, Dufry has added in average a net 4% of sales per year in new contracts through new concessions. Dufry’s concession portfolio includes also a number of long-term contracts with durations well above 10 years. For example, in our operations in Italy at Milan Linate and Milan Malpensa, where we have partnership with the local airport operator, we have secured concession contracts until 2041. Sharjah (United Arab Emirates), Puerto Rico, Dominican Repub- lic and Argentina are other locations with long-term contract durations. pAge 40 Dufry AnnuAl report 2012 CompAny report INveStorS Dufry’s strategy of profitable growth is designed to create sustainable value for its shareholders. In 2012, Dufry’s share price showed a strong performance of 38% and closed at CHF 119.60 by the end of the year. The daily average volume of our shares (including trading volumes of the separately listed Brazilian Depository Re- ceipts at BM&FBOVESPA in São Paulo, Brazil) climbed further by 38% to approximately CHF 15.6 million per day. Our market capitalization at December 31, 2012 reached CHF 3.55 billion. free float increases to 82.5% Since the beginning of 2012, two events have resulted in an increase of our free float to 82.5%. On October 10, 2012, Dufry successfully executed a capital increase of CHF 286.0 million to finance the acquisition of a 51% par- ticipation in the travel retail division of Folli Follie Group. Furthermore, in January 2013 funds controlled by Advent International announced that they sold all their remaining shares held in Dufry. Both transactions were structured as accelerated book buildings and the shares were placed with a large number of institutional shareholders. successful placement of usD 500 million senior notes Dufry entered the bond market for the first time in 2012 and issued US Dollar denominated senior notes in an aggregate principal amount of USD 500 million to refinance term loans of approximately CHF 502 million that expire in 2013. The notes have an annual coupon of 5.5% and mature on October 15, 2020. The bonds were successfully placed with a broad range of international investors in the Euro- bond market and with qualified US investors (under Regulation S and 144A rules). The bonds are rated by Standard & Poors (BB+), Fitch (BB) and Moody’s (Ba3). Dufry keeps a close relationship with investors and ana- lysts. Our investor relations team is always ready to take queries from the financial community. With investor rela- tions offices in Switzerland and Brazil, Dufry has the best structure to attend to the financial markets’ demands. Dufry has consis tently created sustain - able returns for its investors. risk management Dufry operates a systematic risk management and con- tinuously improves its risk management tools. Wherever possible, we mitigate risks and actively manage those risks that are unavoidable as part of our business operations. Operational performance is measured with clearly de- fined indicators, such as spend per passenger, gross margins, net working capital ratios and operating profits. When assessing new projects or operations, we also place high importance on cash flow models, return on investment or internal rates of return. One important aspect of managing our business risks is our corporate strategy of diversification. Being active in a large number of countries spread across the globe, and working with different suppliers and landlords, reduces the concentration risks in our operations and sourcing. 04.01.10 05.01.10 06.01.10 07.01.10 08.01.10 11.01.10 12.01.10 13.01.10 14.01.10 15.01.10 18.01.10 19.01.10 20.01.10 21.01.10 22.01.10 25.01.10 26.01.10 27.01.10 28.01.10 29.01.10 01.02.10 02.02.10 03.02.10 04.02.10 05.02.10 08.02.10 09.02.10 10.02.10 11.02.10 12.02.10 15.02.10 16.02.10 17.02.10 18.02.10 19.02.10 22.02.10 23.02.10 24.02.10 25.02.10 26.02.10 01.03.10 02.03.10 03.03.10 04.03.10 05.03.10 08.03.10 09.03.10 10.03.10 11.03.10 12.03.10 15.03.10 16.03.10 17.03.10 18.03.10 19.03.10 22.03.10 23.03.10 24.03.10 25.03.10 26.03.10 29.03.10 30.03.10 31.03.10 01.04.10 06.04.10 07.04.10 08.04.10 09.04.10 12.04.10 13.04.10 14.04.10 15.04.10 16.04.10 19.04.10 20.04.10 21.04.10 22.04.10 23.04.10 26.04.10 27.04.10 28.04.10 29.04.10 30.04.10 03.05.10 04.05.10 05.05.10 06.05.10 07.05.10 10.05.10 11.05.10 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06.12.12 07.12.12 10.12.12 11.12.12 12.12.12 13.12.12 14.12.12 17.12.12 18.12.12 19.12.12 20.12.12 21.12.12 26.12.12 27.12.12 28.12.12 Share Price Dufry 150 135 120 105 90 75 60 45 30 15 0 150 135 120 105 90 75 60 45 30 15 0 150 135 120 105 90 75 60 45 30 15 0 SPI Volume 04.01.10 05.01.10 06.01.10 07.01.10 08.01.10 11.01.10 12.01.10 13.01.10 14.01.10 15.01.10 18.01.10 19.01.10 20.01.10 21.01.10 22.01.10 25.01.10 26.01.10 27.01.10 28.01.10 29.01.10 01.02.10 02.02.10 03.02.10 04.02.10 05.02.10 08.02.10 09.02.10 10.02.10 11.02.10 12.02.10 15.02.10 16.02.10 17.02.10 18.02.10 19.02.10 22.02.10 23.02.10 24.02.10 25.02.10 26.02.10 01.03.10 02.03.10 03.03.10 04.03.10 05.03.10 08.03.10 09.03.10 10.03.10 11.03.10 12.03.10 15.03.10 16.03.10 17.03.10 18.03.10 19.03.10 22.03.10 23.03.10 24.03.10 25.03.10 26.03.10 29.03.10 30.03.10 31.03.10 01.04.10 06.04.10 07.04.10 08.04.10 09.04.10 12.04.10 13.04.10 14.04.10 15.04.10 16.04.10 19.04.10 20.04.10 21.04.10 22.04.10 23.04.10 26.04.10 27.04.10 28.04.10 29.04.10 30.04.10 03.05.10 04.05.10 05.05.10 06.05.10 07.05.10 10.05.10 11.05.10 12.05.10 14.05.10 17.05.10 18.05.10 19.05.10 20.05.10 21.05.10 25.05.10 26.05.10 27.05.10 28.05.10 31.05.10 01.06.10 02.06.10 03.06.10 04.06.10 07.06.10 08.06.10 09.06.10 10.06.10 11.06.10 14.06.10 15.06.10 16.06.10 17.06.10 18.06.10 21.06.10 22.06.10 23.06.10 24.06.10 25.06.10 28.06.10 29.06.10 30.06.10 01.07.10 02.07.10 05.07.10 06.07.10 07.07.10 08.07.10 09.07.10 12.07.10 13.07.10 14.07.10 15.07.10 16.07.10 19.07.10 20.07.10 21.07.10 22.07.10 23.07.10 26.07.10 27.07.10 28.07.10 29.07.10 30.07.10 02.08.10 03.08.10 04.08.10 05.08.10 06.08.10 09.08.10 10.08.10 11.08.10 12.08.10 13.08.10 16.08.10 17.08.10 18.08.10 19.08.10 20.08.10 23.08.10 24.08.10 25.08.10 26.08.10 27.08.10 30.08.10 31.08.10 01.09.10 02.09.10 03.09.10 06.09.10 07.09.10 08.09.10 09.09.10 10.09.10 13.09.10 14.09.10 15.09.10 16.09.10 17.09.10 20.09.10 21.09.10 22.09.10 23.09.10 24.09.10 27.09.10 28.09.10 29.09.10 30.09.10 01.10.10 04.10.10 05.10.10 06.10.10 07.10.10 08.10.10 11.10.10 12.10.10 13.10.10 14.10.10 15.10.10 18.10.10 19.10.10 20.10.10 21.10.10 22.10.10 25.10.10 26.10.10 27.10.10 28.10.10 29.10.10 01.11.10 02.11.10 03.11.10 04.11.10 05.11.10 08.11.10 09.11.10 10.11.10 11.11.10 12.11.10 15.11.10 16.11.10 17.11.10 18.11.10 19.11.10 22.11.10 23.11.10 24.11.10 25.11.10 26.11.10 29.11.10 30.11.10 01.12.10 02.12.10 03.12.10 06.12.10 07.12.10 08.12.10 09.12.10 10.12.10 13.12.10 14.12.10 15.12.10 16.12.10 17.12.10 20.12.10 21.12.10 22.12.10 23.12.10 27.12.10 28.12.10 29.12.10 30.12.10 03.01.11 04.01.11 05.01.11 06.01.11 07.01.11 10.01.11 11.01.11 12.01.11 13.01.11 14.01.11 17.01.11 18.01.11 19.01.11 20.01.11 21.01.11 24.01.11 25.01.11 26.01.11 27.01.11 28.01.11 31.01.11 01.02.11 02.02.11 03.02.11 04.02.11 07.02.11 08.02.11 09.02.11 10.02.11 11.02.11 14.02.11 15.02.11 16.02.11 17.02.11 18.02.11 21.02.11 22.02.11 23.02.11 24.02.11 25.02.11 28.02.11 01.03.11 02.03.11 03.03.11 04.03.11 07.03.11 08.03.11 09.03.11 10.03.11 11.03.11 14.03.11 15.03.11 16.03.11 17.03.11 18.03.11 21.03.11 22.03.11 23.03.11 24.03.11 25.03.11 28.03.11 29.03.11 30.03.11 31.03.11 01.04.11 04.04.11 05.04.11 06.04.11 07.04.11 08.04.11 11.04.11 12.04.11 13.04.11 14.04.11 15.04.11 18.04.11 19.04.11 20.04.11 21.04.11 25.04.11 26.04.11 27.04.11 28.04.11 29.04.11 02.05.11 03.05.11 04.05.11 05.05.11 06.05.11 09.05.11 10.05.11 11.05.11 12.05.11 13.05.11 16.05.11 17.05.11 18.05.11 19.05.11 20.05.11 23.05.11 24.05.11 25.05.11 26.05.11 27.05.11 30.05.11 31.05.11 01.06.11 02.06.11 03.06.11 06.06.11 07.06.11 08.06.11 09.06.11 10.06.11 13.06.11 14.06.11 15.06.11 16.06.11 17.06.11 20.06.11 21.06.11 22.06.11 23.06.11 24.06.11 27.06.11 28.06.11 29.06.11 30.06.11 01.07.11 04.07.11 05.07.11 06.07.11 07.07.11 08.07.11 11.07.11 12.07.11 13.07.11 14.07.11 15.07.11 18.07.11 19.07.11 20.07.11 21.07.11 22.07.11 25.07.11 26.07.11 27.07.11 28.07.11 29.07.11 01.08.11 02.08.11 03.08.11 04.08.11 05.08.11 08.08.11 09.08.11 10.08.11 11.08.11 12.08.11 15.08.11 16.08.11 17.08.11 18.08.11 19.08.11 22.08.11 23.08.11 24.08.11 25.08.11 26.08.11 29.08.11 30.08.11 31.08.11 01.09.11 02.09.11 05.09.11 06.09.11 07.09.11 08.09.11 09.09.11 12.09.11 13.09.11 14.09.11 15.09.11 16.09.11 19.09.11 20.09.11 21.09.11 22.09.11 23.09.11 26.09.11 27.09.11 28.09.11 29.09.11 30.09.11 03.10.11 04.10.11 05.10.11 06.10.11 07.10.11 10.10.11 11.10.11 12.10.11 13.10.11 14.10.11 17.10.11 18.10.11 19.10.11 20.10.11 21.10.11 24.10.11 25.10.11 26.10.11 27.10.11 28.10.11 31.10.11 01.11.11 02.11.11 03.11.11 04.11.11 07.11.11 08.11.11 09.11.11 10.11.11 11.11.11 14.11.11 15.11.11 16.11.11 17.11.11 18.11.11 21.11.11 22.11.11 23.11.11 24.11.11 25.11.11 28.11.11 29.11.11 30.11.11 01.12.11 02.12.11 05.12.11 06.12.11 07.12.11 08.12.11 09.12.11 12.12.11 13.12.11 14.12.11 15.12.11 16.12.11 19.12.11 20.12.11 21.12.11 22.12.11 23.12.11 26.12.11 27.12.11 28.12.11 29.12.11 30.12.11 02.01.12 03.01.12 04.01.12 05.01.12 06.01.12 09.01.12 10.01.12 11.01.12 12.01.12 13.01.12 16.01.12 17.01.12 18.01.12 19.01.12 20.01.12 23.01.12 24.01.12 25.01.12 26.01.12 27.01.12 30.01.12 31.01.12 01.02.12 02.02.12 03.02.12 06.02.12 07.02.12 08.02.12 09.02.12 10.02.12 13.02.12 14.02.12 15.02.12 16.02.12 17.02.12 20.02.12 21.02.12 22.02.12 23.02.12 24.02.12 27.02.12 28.02.12 29.02.12 01.03.12 02.03.12 05.03.12 06.03.12 07.03.12 08.03.12 09.03.12 12.03.12 13.03.12 14.03.12 15.03.12 16.03.12 19.03.12 20.03.12 21.03.12 22.03.12 23.03.12 26.03.12 27.03.12 28.03.12 29.03.12 30.03.12 02.04.12 03.04.12 04.04.12 05.04.12 06.04.12 09.04.12 10.04.12 11.04.12 12.04.12 13.04.12 16.04.12 17.04.12 18.04.12 19.04.12 20.04.12 23.04.12 24.04.12 25.04.12 26.04.12 27.04.12 30.04.12 01.05.12 02.05.12 03.05.12 04.05.12 07.05.12 08.05.12 09.05.12 10.05.12 11.05.12 14.05.12 15.05.12 16.05.12 17.05.12 18.05.12 21.05.12 22.05.12 23.05.12 24.05.12 25.05.12 28.05.12 29.05.12 30.05.12 31.05.12 01.06.12 04.06.12 05.06.12 06.06.12 07.06.12 08.06.12 11.06.12 12.06.12 13.06.12 14.06.12 15.06.12 18.06.12 19.06.12 20.06.12 21.06.12 22.06.12 25.06.12 26.06.12 27.06.12 28.06.12 29.06.12 02.07.12 03.07.12 04.07.12 05.07.12 06.07.12 09.07.12 10.07.12 11.07.12 12.07.12 13.07.12 16.07.12 17.07.12 18.07.12 19.07.12 20.07.12 23.07.12 24.07.12 25.07.12 26.07.12 27.07.12 30.07.12 31.07.12 01.08.12 02.08.12 03.08.12 06.08.12 07.08.12 08.08.12 09.08.12 10.08.12 13.08.12 14.08.12 15.08.12 16.08.12 17.08.12 20.08.12 21.08.12 22.08.12 23.08.12 24.08.12 27.08.12 28.08.12 29.08.12 30.08.12 31.08.12 03.09.12 04.09.12 05.09.12 06.09.12 07.09.12 10.09.12 11.09.12 12.09.12 13.09.12 14.09.12 17.09.12 18.09.12 19.09.12 20.09.12 21.09.12 24.09.12 25.09.12 26.09.12 27.09.12 28.09.12 01.10.12 02.10.12 03.10.12 04.10.12 05.10.12 08.10.12 09.10.12 10.10.12 11.10.12 12.10.12 15.10.12 16.10.12 17.10.12 18.10.12 19.10.12 22.10.12 23.10.12 24.10.12 25.10.12 26.10.12 29.10.12 30.10.12 31.10.12 01.11.12 02.11.12 05.11.12 06.11.12 07.11.12 08.11.12 09.11.12 12.11.12 13.11.12 14.11.12 15.11.12 16.11.12 19.11.12 20.11.12 21.11.12 22.11.12 23.11.12 26.11.12 27.11.12 28.11.12 29.11.12 30.11.12 03.12.12 04.12.12 05.12.12 06.12.12 07.12.12 10.12.12 11.12.12 12.12.12 13.12.12 14.12.12 17.12.12 18.12.12 19.12.12 20.12.12 21.12.12 26.12.12 27.12.12 28.12.12 100.000.000 80.000.000 60.000.000 40.000.000 20.000.000 pAge 41 Dufry AnnuAl report 2012 CompAny report Dufry ag share PriCe aND traDiNg voluMe Daily average voluMe Share price in CHF Trading volume millions of CHF millions of CHF 165 150 135 120 105 90 75 60 45 30 15 0 15.6 11.3 9.3 120 100 80 60 40 20 0 16 14 12 10 8 6 4 2 0 3.1 2.7 1.7 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 2007 2008 2009 2010 2011 2012 Dufry SPI Volume Source: Bloomberg Note: SPI Index has been rebased to Dufry’s share price Note: Since April 2011 including trading volumes of Dufry AG BDR Market CaPitalizatioN aND free float shareholDer struCture billions of CHF January 31, 2013 2.9 2.9 3.2 3.1 2.1 2.1 2.2 2.3 2.3 2.3 1.6 1.7 3.5 2.6 3.0 2.2 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Average Market Capitalization Free Float huDsoN MeDia 4.3% travel retail iNvestMeNts sCa 13.2% free float 82.5% pAge 42 Dufry AnnuAl report 2012 CompAny report SoCIAL reSpoNSIBILItY Igarassu, Brazil Dufry has been an active supporter of disadvantaged children with two major projects in Brazil for many years. In 2012, we committed additional donations to new proj- ects in Morocco and Cambodia and have decided to be a sponsor of the next Street Child World Cup, to be held in 2014. In addition, we support a range of cultural events and contribute to charitable organizations to help victims of natural disasters. We focus our contri butions to charitable organizations on helping disadvan- taged children. new projects in morocco and Cambodia In 2012, Dufry evaluated new SOS Children’s Village proj- ects and decided to donate funds for 2013 to cover the cost of food, medicine and clothing for 100 children living at the SOS Children’s Village in Agadir, Morocco. Furthermore, the SOS Hermann Gmeiner School in Bat- tambang, Cambodia, which offers school education from primary to senior high school levels (grades 1 to 12) to about 450 students, received a donation by Dufry that covers half of the personnel costs (e.g. for teachers’ salaries) in 2013. sponsoring the street Child World Cup In December 2012, Dufry signed an agreement to be one of the sponsors of the next Street Child World Cup, which will take place in Rio de Janeiro, Brazil, in March 2014. The Street Child World Cup (SCWC) acts as a catalyst to individuals, companies and governments around the world to increase their efforts to safeguard the rights of millions of children who live and work on the streets. In addition to the football tournament, the SCWC will Agadir, morocco Battambang, Cambodia host an international conference and arts program to give children a platform to talk about the issues they face in their daily lives. uniforms, educational material and transportation assis- tance. Dufry employees also participate in the program as volunteers, serving as mentors to these teenagers. other donations and cultural events Dufry has also donated to the Red Cross Disaster Relief Fund and has been a major cultural sponsor to the Swiss Indoors (tennis tournament) and the AVO session (musical festival) in Basel, as well as the Madrid Open Tennis Tournament, just to name a few. Finally, Dufry also en- ables customer donations for various social projects by maintaining donation boxes in its stores. We would like to thank our customers as well for all the donations during 2012, which have been greatly welcomed by the different charities concerned. Continued support for children in Brazil Dufry has funded the construction of a social center in Igarassu back in 2009 and has continued to finance the running costs of this center and training classes ever since. Under the professional management of the SOS Children’s Villages institution, more than 600 infants, young children and teenagers and their mothers are benefitting from the services provided by this center. Another project is a social promotion program in Rio de Janeiro that has been supported by Dufry’s South America operations for over 17 years. It offers free professional education to thirty young people every year. The program can be attended by 16 to 18 year-old girls or boys and covers subjects, such as English, computer classes, retail operations, professional orientation, teamwork, leader- ship, ethics and citizenship modules. The students also receive free meals, medical and dental care, life insurance, pAge 44 Dufry AnnuAl report 2012 CompAny report report oF tHe CHIeF FINANCIAL oFFICer Dear all 2012 was once again a year of important achievements and strong performance and we continued to add new busi- nesses to our portfolio. Turnover grew by 19.6% and reached CHF 3,153.6 million. At the same time, EBITDA margin increased by 0.9 percentage points, reaching a new record level of 15.0%. Dufry also generated more cash than ever before: cash flow from operations stood at CHF 452.1 million, 20.0% higher than in 2011. Dufry continued to play a major role in the consolidation of the travel retail industry. After the acquisition of several travel retail operations in South America, as well as Mar- tinique and Armenia in August 2011, we started 2012 by acquiring a 51% stake of a Russian travel retailer in Janu- ary, expanding our presence at Sheremetyevo Airport in Moscow. In October, Dufry signed an agreement to acquire 51% of the travel retail operations of Folli Follie Group, the leading travel retailer in Greece. Last but not least, we were able to sign in November 2012 an agreement with Guarulhos International Airport in São Paulo, Brazil, for the extension of our concession until 2016 and the expan- sion of our retail space in the airport of almost 50%. In 2012, Dufry also further strengthened its debt profile. We successfully refinanced our debt maturing in 2013 through a renewal of a committed CHF 650 million bank facility until 2017 and we also debuted in the debt capital markets with a successful 8 year senior notes offering of USD 500 million maturing in 2020. Dufry also strengthened its equity base with a capital increase of CHF 286.0 million to finance the transaction in Greece. turNover iNCreases by 19.6% turnover In 2012, Dufry’s turnover grew by 19.6% to CHF 3,153.6 mil- lion from CHF 2,637.7 million in 2011. Organic growth contributed 3.7%, including like-for-like growth of 1.5% and new concessions contributed net 2.2%. Acquisitions added 11.2% to the turnover growth, through the consoli- dation of the businesses acquired in August 2011 and the acquisition made in Russia at the beginning of 2012. The translational currency effect was positive by 4.7%. Last June an internal reorganization was announced aiming to support our existing structure, as well as to prepare our organization for further growth over the next years. The number of regions was reduced from six to four, and responsibilities were pushed down to re- gional levels. Certain functions, where synergies can be extracted through economies of scale, have been more centralized, such as customer intelligence, procurement and logistics, and treasury. Turnover of region emeA & Asia grew by 20.2% in 2012 and reached CHF 790.4 million versus CHF 657.8 million in the previous year. In constant exchange rates (CER) turnover growth was 19.5% in the period. We had a very strong performance in Asia and Africa where most mar- kets reached double-digit growth for the year. Europe also continued to grow, albeit at a lower pace. There, we saw a good performance in France, Spain and Switzer- land. Growth in the region was also supported by the consolidation of acquisitions in Armenia, Martinique and Russia. In China, the good performance was further enhanced by new concessions in Chengdu. During the year, we also completed the last steps of the exit from Singapore. Turnover in region America I increased by 48.3% to CHF 778.3 million, compared to CHF 524.7 million in 2011. In constant exchange rates (CER), turnover growth was 40.7% in the period. Our operations in Mexico showed strong sales growth supported by passenger growth. Apart from the operations in the British Caribbean, Page 45 Dufry aNNual rePort 2012 CoMPaNy rePort AnDreAs sChneIter which remained weak due to a change in the passenger profile and different itineraries of the cruise lines affect- ing the numbers of customers, the other parts of the Caribbean performed very well. Especially our business in the Dominican Republic and Trinidad performed strongly. In South America, our operations in Argentina and Uruguay were affected by the bankruptcy of the Uru- guayan airline Pluna at the beginning of July. Turnover in region America II increased by 0.2% to CHF 730.6 million, compared to CHF 729.4 million in 2011, with currency translation effects contributing 5.5% in the pe- riod. After many years of continued strong performance, operations in Brazil were impacted by the economic slowdown in the country, a softening of the Brazilian Real against the US Dollar, as well as capacity constraints in some of the Brazilian airports. We successfully imple- mented several measures to safeguard the profitability in the region. Turnover in region united states & Canada increased by 15.5% to CHF 809.3 million in 2012 compared to CHF 700.5 million one year earlier. In constant exchange rates (CER), turnover growth was 8.7% in the period. Turnover continued to show solid growth driven by like-for-like growth as well as through adding new concessions and retail space. The expansion of our presence in the region is not only based on the Hudson News convenience store concept, but we also successfully have expanded our portfolio of brand boutiques and specialized shops as well as duty free shops. Performance in the last quarter of 2012 in the region was impacted by hurricane Sandy but the negative effects were relatively short-lived. iMProveD Profitability – oPeratiNg Costs reMaiN uNDer CoNtrol gross profit Gross profit in 2012 amounted to CHF 1,856.6 million, and the gross margin improved by 70 basis points to 58.9% versus 58.2% in 2011. The continuation of our global negotiations with suppliers and the synergies added from the companies acquired in 2011 and 2012 were the key drivers for achieving the new record level. It is also worth highlighting the cooperation with key suppliers in several projects such as brands plan and data sharing. pAge 46 Dufry AnnuAl report 2012 CompAny report Consoldiated income statement: Net sales Advertising income turnover Cost of sales gross profit Selling expenses Personnel expenses General expenses eBItDA (before other operational result) Depreciation, amortization and impairment Other operational result earnings before interest and taxes (eBIt) Financial expenses, net earnings before taxes (eBt) Income taxes net earnings ATTRIBUTABLE TO: Net earnings attribut. to equity holders Non-controlling interest net earnings to equity holders adjusted for amortization in respect of acquisitions Basic earnings per share in CHF Cash earnings per share¹ in CHF Weighted average number of outstanding shares in thousands ¹ adjusted for amortization of acquisitions 2011 in % 100.0% 41.8% 58.2% 22.0% 15.3% 6.9% 14.1% 5.0% 8.1% 1.9% 6.2% 1.1% 5.1% in millions of Chf in % in millions of Chf 2012 3,062.1 91.5 3,153.6 (1,297.0) 1,856.6 (694.2) (474.7) (213.7) 474.0 (168.3) (30.1) 275.6 (78.3) 197.3 (39.1) 158.2 122.4 35.8 205.2 4.46 7.48 27,447 100.0% 41.1% 58.9% 22.0% 15.1% 6.8% 15.0% 5.3% 8.7% 2.5% 6.3% 1.2% 5.0% 2,560.9 76.8 2,637.7 (1,102.4) 1,535.3 (579.7) (402.6) (182.1) 370.9 (131.5) (26.9) 212.5 (49.4) 163.1 (28.2) 134.9 111.9 23.0 169.2 4.16 6.30 26,873 selling expenses Selling expenses, as a percentage of turnover, remained flat at 22.0%. In absolute terms, they reached CHF 694.2 mil- lion in 2012 versus CHF 579.7 million one year earlier. personnel and general expenses As a percentage of turnover, personnel expenses improved to 15.1% from 15.3% in 2011. Personnel expenses in 2012 were CHF 474.7 million, compared to CHF 402.6 million in 2011. General expenses also improved as a percentage of turn- over to 6.8% from 6.9% in 2011. Expressed in Swiss Francs, general expenses increased to CHF 213.7 million in 2012 from CHF 182.1 million one year earlier. eBItDA EBITDA increased by 27.8% to CHF 474.0 million in 2012 from CHF 370.9 million in 2011 as a result of the gross margin growth and constant focus on keeping expenses under strict control. The EBITDA margin improved by 90 basis points, and reached the record level of 15.0%. Depreciation and Amortization Depreciation and Amortization was at CHF 168.3 million in 2012 from CHF 131.5 million in 2011. Depreciation was higher at CHF 65.1 million in 2012 compared to CHF 58.8 million in 2011. Amortization increased by CHF 30.5 million to CHF 103.2 million in 2012, mainly due to the additional amortization deriving from the acquisitions done in August 2011 and in January 2012. pAge 47 Dufry AnnuAl report 2012 CompAny report which was due to expire in 2013, through a new committed 5 year RCF of CHF 650 million with a syndicate of banks. The facility will be used for general corporate purposes and will have the same covenants as the existing Group credit facilities. At the same time, Dufry successfully placed US dollar- denominated senior notes in an aggregate principal amount of USD 500 million to refinance all term loans expiring in 2013. The newly issued senior notes have a term of eight years with the annual coupon being 5.5%. keeP exPaNDiNg the busiNess toWarDs a More global PreseNCe … The year was also successful in relation to Dufry’s share price performance. Our share price increased by 38%, resulting in a market capitalization of CHF 3.5 billion. Moreover, trading volumes of Dufry shares also increased by 38% and reached an average of CHF 15.6 million per day. The increased trading volumes are also reflective of a broader investor base and an increased visibility of Dufry in the equity markets that we have been able to develop over time. Overall, 2012 was a very successful year for Dufry in all respects: we achieved a strong financial performance, continued to expand our global footprint and increased our market share, and we also reinforced our organization as well as our balance sheet through the re-financings and equity increase. As we look at 2013, our focus will continue to be on or- ganically growing our business based on our existing strategy. At the same, the integration of the Folli Follie Travel Retail transaction and our space expansion in São Paulo will be a priority and both projects will be impor- tant drivers for our business going forward. Last but not least, cash generation and deleveraging our company will allow us to further strengthen our leading position going forward. To conclude, I would like to thank our partner banks, share- holders, key advisors, investors and analysts for their support and contribution in 2012. eBIt EBIT increased to CHF 275.6 million in 2012 versus CHF 212.5 million in 2011. Other operational result (net) was minus CHF 30.1 million in the year. Among this amount, CHF 15.8 million are acquisition-related costs, consulting fees and expenses related to projects and start-ups. financial result and taxes Net financial expenses stood at CHF 78.3 million in 2012 compared to CHF 49.4 million one year earlier. This in- crease is mainly due to the additional debt of USD 1.0 bil- lion structured in August 2011, to finance the acquisitions mentioned earlier. The refinancing of parts of Dufry’s credit facilities and the diversification of its funding by issuing a USD 500 million senior notes offering also added to the increase in the financial result. The new financing carries a fixed 5.5% coupon. Income taxes reached CHF 39.1 million, up from CHF 28.2 million in 2011. The effective tax rate as a percentage of EBT was 19.8% in the period. net earnings Net earnings increased by CHF 23.3 million and stood at CHF 158.2 million. Net earnings attributable to equity holders grew by 9.4% to CHF 122.4 million and Cash EPS increased by 18.7% to CHF 7.48 in 2012 versus CHF 6.30 in 2011. A key driver of the Cash EPS growth was the full year consolidation of the acquisitions done in August 2011 and the respective implementation of the synergies. We suc- cessfully completed the integration of the transaction and could achieve the expected synergies until year-end 2012, well ahead of the initial timeframe of 18–24 months. high Cash floW geNeratioN Cash flow and debt Cash flow from operating activities increased by 13.6% to CHF 382.5 million in 2012 from 336.8 million one year ear- lier. Free cash flow also increased by CHF 22.9 million to CHF 271.8 million. At the end of December 2012, Net debt was CHF 951.3 million compared to the CHF 1,361.3 million one year ago. Adjusting for the capital increase of CHF 286.0 million done in October 2012, whose proceeds will be used to finance the 51% stake of Folli Follie’s travel retail operations, adjusted net debt at year-end 2012 is CHF 1,237.3 million. The main covenant, Net Debt/adjusted EBITDA was 2.4 times as per December 31, 2012. 2012 was also a year of important developments in terms of capital market for Dufry. In October, we refinanced our existing revolving credit facility (RCF) of CHF 415 million, Andreas Schneiter pAge 48 Dufry AnnuAl report 2012 CompAny report CorporAte GoverNANCe 1. group struCture AnD shAreholDers 1.2 SIGNIFICANT SHAREHOLDERS 1.1 GROUP STRUCTURE For an overview of the management organizational chart and operational Group structure, please refer to page 9 of this Annual Report. listed company CompAny Dufry AG, Hardstrasse 95, 4052 Basel, Switzerland (hereinafter “ Dufry AG” or the “Company”) lIstIng Registered shares: SIX Swiss Exchange Brazilian Depositary Receipts (BDRs): São Paulo Stock Exchange (BM&FBOVESPA – Bolsa de Valores de São Paulo), Brazil mArket CApItAlIzAtIon CHF 3,548,989,231 as of December 31, 2012 perCentAge of shAres helD By Dufry Ag 1.139% of Dufry AG share capital as of December 31, 2012 seCurIty numBers Registered shares: ISIN-Code CH0023405456, Swiss Security-No. 2340545 Ticker Symbol DUFN SIN-Code BRDAGBBDR008 Ticker Symbol DAGB11 Pursuant to the information provided to the Company by its shareholders in compliance with the Swiss Stock Exchange Act during 2012, the following significant shareholders held more than 3% of the share capital as of December 31, 2012². Numbers as notified by the share- holders under Art. 20 SESTA adjusted for the capital increase of October 17, 2012: shAreholDer perCentAge Global Retail Group S.à r.l. (1), controlled by funds managed by Advent International Corporation (2) Travel Retail Investment SCA (3), controlled by Petrus PTE Ltd (4) Credit Suisse Group AG (5) Hudson Media Inc. (6) 13.07% 7.49% 4.60% 3.89% (1) 76 Grand Rue, L-1660 Luxembourg City, Grand Duchy of Luxembourg. (2) 75 State Street, Boston, MA 02109, USA. (3) 76 Grand Rue, L-1660 Luxembourg City, Grand Duchy of Luxembourg. (4) 8 Cross Street, #11-00 PWC Building, Singapore 048424. (5) Paradeplatz 8, Postfach, 8070 Zurich, Switzerland. Shareholding held indirectly through various subsidiaries and investment funds controlled by Credit Suisse Group AG. (6) One Meadowlands Plaza, Suite 902, East Rutherford, NJ 07073, USA. Hudson Media Inc. is controlled by James Cohen, c/o Hudson Media Inc., One Meadowlands Plaza, Suite 902, East Rutherford, NJ 07073, USA. non-listed companies For a table of the operational non-listed consolidated entities please refer to page 134 in section Financial State- ments of this Annual Report¹. Travel Retail Investment SCA is controlled by Petrus PTE Ltd, which holds the majority of the shares in Travel Retail Investment SCA and the majority of the shares in Travel Retail S.à r.l., which is the general partner and sole manager of Travel Retail Investment SCA. Petrus PTE Ltd is an affiliate of Mr. Andrés Holzer Neumann and his family. ¹ Including the company names, locations, percentage of shares held, share capital. ² The actual shareholdings may differ from the figures indicated in the table, as the Company must only be notified by its shareholders, if one of the thresholds defined in Art. 20 of the Swiss Stock Exchange Act is crossed. pAge 49 Dufry AnnuAl report 2012 CompAny report Global Retail Group S.à r.l., 76 Grand Rue, L-1660 Luxem- bourg, Grand Duchy of Luxembourg, controlled by funds managed by Advent International Corporation, 75 State Street, Boston, MA 02109, USA, informed the Company that on January 31, 2012, it had left the group of share- holders previously consisting of Global Retail Group S.à r.l. (controlled by funds managed by Advent International Corporation) and Travel Retail Investment SCA (previously controlled by funds managed by Advent International Corporation, other shareholders were Petrus PTE Ltd and Witherspoon Investments LLC). Global Retail Group S.à r.l. disclosed a participation of 14.38% of the share capital of Dufry AG as of January 31, 2012 (the previously existing group of shareholders held 22.62% of the share capital of Dufry AG as of December 31, 2011). Skopos Investimentos Ltda., Rua Hungria, n° 415, Jardim Europa, São Paulo, SP, CEP-0145 Brazil, informed the Company that its shareholding had gone below the threshold of 3% on March 8, 2012, due to a sale transac- tion. Skopos held 4.43% of the share capital of Dufry AG as of December 31, 2011 (then disclosed as a group of funds controlled by Skopos Administradora de Recursos Ltda and Skopos Invest Administradora de Recursos In- ternacionais Ltda.). Travel Retail Investment SCA, 76 Grand Rue, L-1660 Lux- embourg, Grand Duchy of Luxembourg (shareholders of Travel Retail Investment SCA are Petrus PTE Ltd (con- trolling shareholder) and Witherspoon Investments LLC), informed the Company that on January 31, 2012, it held a participation of 8.24% of the share capital of Dufry AG. The disclosure notice was triggered as the funds man- aged by Advent International Corporation and Global Retail Group S.à r.l. left the previously existing group of shareholders consisting of Travel Retail Investment SCA and Global Retail Group S.à r.l. as a result of an internal reorganization at the level of Travel Retail Investment SCA (see also comment to the disclosure notice of Global Retail Group S.à r.l. above and remark under “Develop- ments after December 31, 2012” below). Changes of significant shareholders in connection with Art. 20 of SESTA during fiscal year 2012 can be summarized as follows: Artio Global Management LLC, 330 Madison Avenue, New York, NY 10017 USA, informed the Company that its shareholding had gone below the threshold of 3% on March 20, 2012, due to a sale transaction. Previous disclo- sures in fiscal year 2012: Participation had gone below the threshold of 5% to 4.81% on January 19, 2012, due to a sale transaction. Artio Global Management LLC held 7.07% of the share capital of Dufry AG as of December 31, 2011. Credit Suisse Group AG, Paradeplatz 8, Postfach, 8070 Zurich, Switzerland, informed the Company that its share- holding (held indirectly as a group of companies through various subsidiaries and investment funds controlled by Credit Suisse Group AG) had gone below the threshold of 5% to 4.60% (purchase position of 4.60% in registered shares) on October 18, 2012, due to a sale transaction. Previous disclosures in fiscal year 2012: Participation had gone above the threshold of 5% to 6.02% (purchase positions of 5.50% in registered shares and 0.52% as equity swap; sale positions of 0.25% as equity swap) on October 11, 2012, due to a purchase transaction. Participation had gone below the threshold of 5% to 4.45% (purchase positions of 4.45% in registered shares) on June 22, 2012, due to a sale transaction. Participation had gone above the threshold of 5% to 5.0011% (purchase positions of 4.60% in registered shares and 0.4% as equity swap) on June 21, 2012, due to a purchase transaction. Participation had gone below the threshold of 5% to 4.98% (purchase positions of 4.58% in registered shares and 0.4% as equity swap) on June 12, 2012, due to a sale transaction. Participation had gone above the threshold of 5% to 5.01% (purchase positions of 4.6% in registered shares and 0.41% as equity swap) on June 7, 2012, due to a pur- chase transaction. Participation had gone below the threshold of 5% to 4.95% (purchase positions of 4.55% in registered shares and 0.40% as equity swap) on May 24, 2012, due to a sale transaction. Credit Suisse Group AG held 6.81% of the share capital of Dufry AG as of December 31, 2011. pAge 50 Dufry AnnuAl report 2012 CompAny report Developments after December 31, 2012 Global Retail Group S.à r.l, an entity controlled by Advent International Corporation, notified the Company, that its shareholding fell below 3% of the share capital of Dufry AG on January 15, 2013. Mr. Andrés Holzer Neumann notified the Company that he increased his direct and indirect holdings (held, inter alia, through Travel Retail Investment SCA, and Petrus PTE Ltd) to 13.18% of the share capital of Dufry AG on January 17, 2013. Travel Retail S.à r.l. notified the Company on January 24, 2013, that the group originally consisting of Petrus PTE Ltd, Witherspoon Investment LLC, and funds of Advent International Corporation had been completely (instead of partially) dissolved (correcting the notification published on February 3, 2012) as the funds managed by Advent International Corporation and Global Retail Group S.à r.l left the group of shareholders as a result of an internal reorganization at the level of Travel Retail Investment SCA and that, as a result, Petrus PTE Ltd is the controlling shareholder of Travel Retail Investment SCA. Morgan Stanley notified the Company that it increased its direct and indirect holdings to 5.005% of the share capital of Dufry AG on January 17, 2013. Credit Suisse Group AG notified the Company that it de- creased its direct and indirect holdings to below 3% of the share capital of Dufry AG on February 14, 2013. Credit Suisse Group AG notified the Company that it in- creased its direct and indirect holdings to 3.54% of the share capital of Dufry AG on February 22, 2013. Further details to the above mentioned disclosures are available on the website of SIX Swiss Exchange on: http://www.six-swiss-exchange.com/shares/companies/ major_shareholders_en.html 1.3 CROSS-SHAREHOLDINGS Dufry AG has not entered into cross-shareholdings with other companies in terms of capital shareholdings or voting rights in excess of 5%. 2. CaPital struCture 2.1 SHARE CAPITAL orDInAry shAre CApItAl As of December 31, 2012: CHF 148,369,115 (nominal value) divided in 29,673,823 fully paid registered shares with nominal value of CHF 5 each ConDItIonAl shAre CApItAl CHF 13,488,100 (nominal value) divided in 2,697,620 fully paid registered shares with nominal value of CHF 5 each AuthorIzeD shAre CApItAl CHF 13,488,105 (nominal value) divided in 2,697,621 fully paid registered shares with nominal value of CHF 5 each, issuance possible until May 2, 2014 2.2 DETAILS TO CONDITIONAL AND AUTHORIZED SHARE CAPITAL Conditional share capital Art. 3bis of the Articles of Incorporation, dated October 11, 2012, reads as follows: 1. The share capital may be increased in an amount not to exceed CHF 13,488,100 by the issuance of up to 2,697,620 fully paid registered shares with a nominal value of CHF 5 each through the exercise of conversion and/or option rights granted in connection with the issuance of newly or already issued convertible debentures, debentures with option rights or other financing instruments by the Company or one of its group companies. 2. The preferential subscription rights of the shareholders shall be excluded in connection with the issuance of convertible debentures, debentures with option rights or other financing instruments. The then current own- ers of conversion and/or option rights shall be entitled to subscribe for the new shares. 3. The acquisition of shares through the exercise of con- version and/or option rights and each subsequent transfer of the shares shall be subject to the restrictions set forth in Article 5 of these Articles of Incorporation. 4. The Board of Directors may limit or withdraw the right of the shareholders to subscribe in priority to convertible debentures, debentures with option rights or similar financing instruments when they are issued, if a) an issue by firm underwriting by a consortium of banks with subsequent offering to the public without prefer- ential subscription rights seems to be the most ap- propriate form of issue at the time, particularly in terms of the conditions or the time plan of the issue; or b) the financing instruments with conversion or option rights are issued in connection with the financing or refinancing of the acquisition of an enterprise or parts of an enterprise or with participations or new invest- ments of the Company. pAge 51 Dufry AnnuAl report 2012 CompAny report 5. If advance subscription rights are denied by the Board 2.3 CHANGES IN CAPITAL OF DUFRY AG of Directors, the following shall apply: a) Conversion rights may be exercised only for up to 15 years; and option rights only for up to 7 years from the date of the respective issuance. b) The respective financing instruments must be issued at the relevant market conditions. Authorized share capital Art. 3ter of the Articles of Incorporation, dated October 11, 2012, reads as follows: 1. The Board of Directors shall be authorized to increase the share capital in an amount not to exceed CHF 13,488,105 through the issuance of up to 2,697,621 fully paid registered shares with a nominal value of CHF 5 per share by not later than May 2, 2014. Increases in partial amounts shall be permitted. 2. The subscription and acquisition of the new shares, as well as each subsequent transfer of the shares, shall be subject to the restrictions of Article 5 of these Articles of Incorporation. 3. The Board of Directors shall determine the issue price, the type of payment, the date of issue of new shares, the conditions for the exercise of the preferential sub- scription rights, and the beginning date for dividend entitlement. In this regard, the Board of Directors may issue new shares by means of a firm underwriting through a banking institution, a syndicate or another third party and a subsequent offer of these shares to the current shareholders. The Board of Directors may permit preferential subscription rights that have not been exercised to expire or it may place these rights and/or shares as to which preferential subscription rights have been granted but not exercised, at market conditions or use them for other purposes in the interest of the Company. 4. The Board of Directors is further authorized to re- strict or deny the preferential subscription rights of shareholders or allocate such rights to third parties if the shares are to be used: a) for the acquisition of enterprises, parts of an enter- prise or participations, or for new investment plans or, in case of a share placement, for the financing or refinancing of such transactions; or b) for the participation of strategic partners (including in the case of a public takeover bid) or for the purpose of broadening the shareholder constituency or in connection with a listing of shares on domestic or foreign stock exchanges, including for the purpose of delivering shares to the participating banks in con- nection with an over-allotment option (Greenshoe). nomInAl shAre CApItAl December 31, 2010 December 31, 2011 December 31, 2012 ConDItIonAl shAre CApItAl December 31, 2010 December 31, 2011 December 31, 2012 AuthorIzeD shAre CApItAl December 31, 2010 December 31, 2011 December 31, 2012 CHF 134,881,015 CHF 134,881,015 CHF 148,369,115 2,836,480 CHF CHF 2,836,480 CHF 13,488,100 None None CHF 13,488,105 Changes in capital in 2010 On February 11, 2010, Dufry AG, Dufry South America Ltd (“DSA”) and Dufry Holdings & Investments AG (“DHIAG”) entered into a merger and amalgamation agreement, pursuant to which DSA was merged and amalgamated with and into DHIAG (the “Merger”) by way of absorption in accordance with Art. 3 et seq. of the Swiss Federal Act on Merger, Demerger, Conversion and Transfer of Liabil- ities (the “Merger Act”) and Section 104B of the Bermuda Companies Act. In connection with the Merger, the trading of the shares of DSA on the Luxembourg Stock Exchange and of the Brazilian Depositary Receipt (“BDRs”) of DSA on the BM&FBovespa was discontinued. The Company registered with the Comissão de Valores Mobiliários (“CVM”) and listed its shares in the form of BDRs on the BM&FBovespa. The General Meeting of Shareholders of the Company approved the Merger and the necessary capital increase on March 22, 2010. The share capital was increased from CHF 96,069,770 to CHF 134,881,015 by the issuance of 7,762,249 new registered shares with a nominal value of CHF 5 each. The pre-emptive rights were withdrawn for valid reasons in accordance with Art. 652b para. 2 of the Swiss Code of Obligations, i.e. the absorption of DSA by DHIAG, a wholly-owned subsidiary of the Company. As a result of the Merger, Dufry’s share capital as of December 31, 2010, amounted to 26,976,203 shares with a nominal value of CHF 5 each, and Dufry holds 100% of the combined entity DHIAG – DSA. Changes in capital in 2011 The capital of Dufry AG remained unchanged during fiscal year 2011. pAge 52 Dufry AnnuAl report 2012 CompAny report Changes in capital in 2012 At the Ordinary General Meeting of Shareholders on May 2, 2012, shareholders approved the Board of Direc- tors’ proposal to increase the amount of the previously existing conditional capital from CHF 2,836,480 (567,296 registered shares with nominal value of CHF 5 each) to CHF 13,488,100 (2,697,620 registered shares with nom- inal value of CHF 5 each). At the same Ordinary General Meeting, shareholders also approved the Board of Directors’ proposal to create authorized share capital in an amount of CHF 26,976,205 (5,395,241 registered shares with nominal value of CHF 5 each). On October 10, 2012, Dufry issued 2,697,620 shares with nominal value of CHF 5 from the authorized capital. Hence, the existing authorized share capital decreased from CHF 26,976,205 to CHF 13,488,105, and the ordi- nary share capital increased from CHF 134,881,015 to CHF 148,369,115. 2.4 SHARES As of December 31, 2012, the share capital of Dufry AG is divided into 29,673,823 fully paid in registered shares with a nominal value of CHF 5 each. The Company has only one category of shares. The shares are issued in registered form. All shares are entitled to dividends if declared. Each share entitles to one vote. The Company maintains a share register showing the name and address of the shareholders or usufructuaries. Only persons registered as shareholders or usufructuaries of registered shares in the share register shall be recog- nized as such by the Company. 2.5 PARTICIPATION CERTIFICATES AND PROFIT SHARING CERTIFICATES The Company has not issued any non-voting equity secu- rities, such as participation certificates (“Partizipations- scheine”) or profit sharing certificates (“Genussscheine”). 2.6 LIMITATION ON TRANSFERABILITY AND NOMINEE REGISTRATION OF REGISTERED SHARES – Only persons registered as shareholders or usufruc- tuaries of registered shares in the share register shall be recognized as such by the Company. In the share register the name and address of the shareholders or usufructuaries is recorded. Changes must be reported to the Company. – Acquirers of registered shares shall be registered as shareholders with the right to vote, provided that they expressly declare that they acquired the registered shares in their own name and for their own account. – The Board of Directors may register nominees with the right to vote in the share register to the extent of up to 0.2% of the registered share capital as set forth in the commercial register. Registered shares held by a nominee that exceed this limit may be registered in the share register with the right to vote if the nominee dis- closes the names, addresses and number of shares of the persons for whose account it holds 0.2% or more of the registered share capital as set forth in the com- mercial register. Nominees within the meaning of this provision are persons who do not explicitly declare in the request for registration to hold the shares for their own account and with whom the Board of Directors has entered into a corresponding agreement (see also Art. 5 of the Articles of Incorporation). Nominees are only entitled to represent registered shares held by them at a meeting of shareholders provided that they are registered in the share register and they hold a valid written proxy granted by the beneficial owner of the reg- istered shares instructing the nominee how to vote at the meeting of shareholders. Shares held by a nominee for which it is not able to produce such a proxy count as not represented at the meeting of shareholders. – Corporate bodies and partnerships or other groups of persons or joint owners who are interrelated to one another through capital ownership, voting rights, uniform management or otherwise linked as well as individuals or corporate bodies and partnerships who act in concert to circumvent the regulations concerning the nominees (esp. as syndicates), shall be treated as one single nominee within the meaning of the above mentioned regulation in terms of nominees. – The Board of Directors may cancel the registration, with retroactive effect if appropriate, if the registration was effected based on false information or in case of breach of the agreement between the nominee and the Board of Directors. – After consulting the party involved, the Company may delete entries in the share register if such entries oc- curred in consequence of false statements by the pur- chaser. The purchaser must be informed immediately of the deletion. pAge 53 Dufry AnnuAl report 2012 CompAny report 2.7 CONVERTIBLE BONDS AND OPTIONS As of December 31, 2012, there are no outstanding bonds that are convertible into, or warrants or options to acquire, shares issued by or on behalf of the Company. Dufry has a Restricted Stock Unit (RSU) plan, the essentials of which are disclosed under “Compensation, shareholdings and loans” on page 63. exceptions granted in the year under review The Company has registered with the CVM and listed its shares in the form of BDRs on the BM&FBovespa. Each BDR issued by Itaú Corretora de Valores S.A. (“Depositary Institution”) of the BDR program represents one share issued by the Company and held in custody by the Bank of New York, in London (“Custodian”). BDR holders do not own, from a legal point of view, the Dufry AG shares underlying their BDRs. As a conse- quence, BDR holders are prevented to exercise directly any of the shareholders rights provided for by the Com- pany’s Articles of Incorporation and by the Swiss corpo- rate law. For example, BDR holders are not entitled to personally participate in the Ordinary General Meetings of the Company. However, BDR holders are entitled to instruct the Depositary Institution to vote the Company’s shares underlying their BDRs, according to the instruc- tions sent to them by the Depositary Institution. To facilitate voting by BDR holders, the Company entered into arrangements with the Depositary Institution and the Custodian to enable, by way of exception, registration of The Bank of New York in the share register as nominee with voting rights for the number of registered shares corresponding to the total number of outstanding BDRs. Otherwise, no exceptions have been granted during the year under review. BDR holders who wish to be in a position to directly exercise any of the shareholders rights granted by Swiss corporate law or the Company’s Articles of Incor- poration must convert its BDRs into shares of Dufry AG and ask to be registered in the shares register of the Company, pursuant to Art. 5 of the Company’s Articles of Incorporation. required quorums for a change on the limitations of transferability A change of the limitations on the transfer of registered shares or the removal of such limitations requires a res- olution of the Meeting of Shareholders passed by at least two thirds of the votes represented and the absolute ma- jority of the nominal value of shares represented. pAge 54 Dufry AnnuAl report 2012 CompAny report 3. boarD of DireCtors 3.1 MEMBERS OF THE BOARD OF DIRECTORS nAme professIon nAtIonAlIty posItIon WIth Dufry DAte of fIrst eleCtIon term of offICe other posItIons WIth Dufry ¹ Juan Carlos Torres Carretero Executive at Advent International Spanish Chairman 2003 2016 AC | NRC Ernest George Bachrach Executive at Advent International American Vice Chairman 2004 2014 NRC CEO of Bomagra S.A. Argentinian Director Jorge Born Xavier Bouton James Cohen Consultant CEO of Hudson Media Inc José Lucas Ferreira de Melo Consultant Mario Fontana Consultant French American Brazilian Swiss Director Director Director Director Director Andrés Holzer Neumann President of Grupo Industrial Omega Mexican Maurizio Mauro Consultant Brazilian/Italian Director Joaquin Moya-Angeler Cabrera Consultant Spanish Steve Tadler Executive at Advent International American Director Director ¹ AC: Audit Committee /NRC: Nomination and Remuneration Committee 2010 2005 2009 2010 2005 2004 2010 2005 2010 2013 None 2014 None 2014 None 2013 None 2013 AC 2013 NRC 2013 None 2013 AC 2013 None 3.2 EDUCATION, PROFESSIONAL BACKGROUND, OTHER ACTIVITIES AND FUNCTIONS Juan Carlos Torres Carretero Chairman, born 1949 Ernest George Bachrach ViCe Chairman, born 1952 Jorge Born DireCtor, born 1962 education education education MS in physics from Universidad Complutense de Madrid and MS in management from MIT’s Sloan School of Management. professional Background Many years of private equity and senior manage- ment operating experience. 1988 Joined Advent International, a private equity firm, in Boston as a partner. 1991–1995 Partner at Advent Interna- tional in Madrid. Since 1995 Managing Director and Senior Partner in charge of Advent Interna- tional Corporation’s investment activities in Latin America. Current Board mandates Dufry AG, Inmobiliaria Fumisa, S.A. de C.V., Latin American Airport Holding, Ltd., Aeropuertos Dominicanos Siglo XXI, S.A., International Meal Company Holdings, S.A., Grupo Gayosso, S.A. de C.V., InverCap Holdings, S.A. de C.V. BS in chemical engineering from Lehigh Univer- sity and MBA from Harvard Business School. B.S. in economics from the Wharton School of the University of Pennsylvania. professional Background professional Background More than 28 years of experience in international private equity investment. 1990 Joined Advent International (Advent) in London as a Partner. Since 1995 Managing Advent’s Latin American investment activity. Senior Partner and member of the Executive Committee of Advent International Corporation. 1992–1997 Head of Bunge’s European operations. Before 1997 various capacities in the commodities trading, oil seeding processing and food products areas in Argentina, Brazil, the United States and Europe for Bunge Ltd. 2004–2005 Board member of Dufry AG. Since 1997 President and Chief Ex- ecutive Officer of Bomagra S.A., Argentina. Current board Mandates Current Board mandates Dufry AG, Advent International, Corp., Bunge Group, Ltd., Latin American Airport Holding, Ltd., International Meal Company Holdings, S.A., Board of Governors of the Lauder Institute at Wharton Business School, and the Business Board for Regional Development IAE Business School – Universidad Austral. Dufry AG, Bunge, Ltd., Hochschild Mining, Ltd., Wharton’s Latin American Executive Board at Wharton Business School, Governors of the Lauder Institute at Wharton Business School, Georgetown University and Fundación Bunge y Born (Chairman). Mr. Born served as a member of the Board of Directors of Dufry South America, Ltd. until its merger with Dufry Holdings & Investments AG in March 2010. pAge 55 Dufry AnnuAl report 2012 CompAny report Xavier Bouton DireCtor, born 1950 education James Cohen DireCtor, born 1958 education José Lucas Ferreira de Melo DireCtor, born 1956 education Diploma in economics and finance from l’Institut d’Etudes Politiques de Bordeaux and doctorate in economics and business administration from the University of Bordeaux. professional Background 1978–1984 Director of C.N.I.L. (Commission Nationale de l’Informatique et des Libertés). 1985–1994 Gen- eral Secretary of Reader’s Digest Foundation. 1990– 2005 Board member of Laboratoires Chemineau. Since 1999 Chairman of the Supervisory Board of FSDV (Fayenceries de Sarreguemines Digoin & Vitry le François) based in Paris, France. Current Board mandates Dufry AG, ADL Partners and F.S.D.V. (Fayenceries de Sarreguemines Digoin & Vitry le François) (Chair- man of the Supervisory Board). Bachelor’s degree in economics from the Wharton School of the University of Pennsylvania. Bachelor’s degree in accounting from Associação de Ensino Unificado do Distrito Federal, Brazil. professional Background professional Background Since 1980 various positions at Hudson Media Inc. (President and CEO since 1994). Current Board mandates Dufry AG, Hudson Media, Inc. 1979–1991 various positions at Pricewaterhouse Coopers Auditores Independentes. 1992 Director of Brazilian Exchange Commission (CVM). 1993–1997 Partner at PricewaterhouseCoopers Auditores In- dependentes. 1998 Partner at Global Control Con- sultoria. 1999–2009 Executive Director and later Vice-President at Unibanco – União de Bancos Brasileiros, S.A. and Unibanco Holdings, S.A. Current Board mandates Dufry AG, International Meal Company Holdings, S.A. and Banco Bradesco, S.A. Mr. Ferreira de Melo served as a member of the Board of Directors of Dufry South America, Ltd. until its merger with Dufry Holdings & Investments AG in March 2010. Mario Fontana DireCtor, born 1946 education Engineering studies at ETH Zurich and Georgia In- stitute of Technology, Master of Science Degree. professional Background 1970–1977 IBM Switzerland, sales representative and international account manager. 1977–1980 Brown Boveri Brazil, Chief of staff and CIO. 1981–1983 Stor- age Technology Switzerland, General Manager. 1984–1993 Hewlett-Packard Switzerland, General Manager. 1993–1995 Hewlett-Packard Germany, General Manager. 1995–1997 Hewlett-Packard Eu- rope, General Manager. 1997–1999 Hewlett-Packard USA, General Manager. Since 1998 independent Board member at various public companies. Served on the Board of Directors of AC-Service, Amazys, Bon appétit Group, Büro Fürrer, Inficon, Leica Geosys- tems, SBB Swiss Railways, Sulzer and X-Rite. Current board Mandates Dufry AG, Swissquote Bank (Chairman), Hexagon AB and Regent Lighting AG (Chairman). Andrés Holzer Neumann DireCtor, born 1950 education Graduate of Boston University, holds an MBA from Columbia University. professional Background Since 1973 President of Grupo Industrial Omega, S.A. de C.V., the holding company of Holzer y CÌA, S.A. de C.V., Industria Nacional de Relojes Suizos, S.A. de C.V., Consorcio Metropolitano Inmobiliario, S.A. de C.V., Inmobiliara Coapa Larca, S.A. de C.V., Inmobiliara Castellanos, S.A. de C.V., and Negocios Creativos, S.A. de C.V. Maurizio Mauro DireCtor, born 1949 education Bachelor’s in Business Administration from Escola de Admionistração de Empresas de São Paulo da Fundação Getulio Vargas and specialization in Corporate Finance from Faculdade de Economia e Administração da Universidade de São Paulo. professional Background 1986–1988 Executive Officer of Banco Noroeste. 1988–2001 several managing and consultant posi- tions in Booz Allen Hamilton. Left the company as Senior Partner and General Manager for Brazil. 2001–2006 CEO of the Abril Group. Current Board mandates Current Board mandates Dufry AG, Inmobiliaria Fumisa, S.A. de C.V. (Chair- man), Latin American Airport Holding Ltd. and Opequimar, S.A. de C.V. Dufry AG, Tecnisa, S.A., Banco Pine, S.A., T4F (Time for Fun), TopSport, S.A., Mixer Brazil and JMacedo, S.A. Academic activities: Teaching the discipline of Leadership at Insper Instituto de Ensino e Pesquisa. Mr. Mauro served as a member of the Board of Direc- tors of Dufry South America, Ltd. until its merger with Dufry Holdings & Investments AG in March 2010. Messrs Juan Carlos Torres Carretero (Chair- man), Ernest George Bachrach (Vice Chairman), and Steve Tadler (Director) are related to Global Retail Group S.à r.l., controlled by funds man- aged by Advent International Corporation, which held 13.07% of Dufry’s share capital as of De- cember 31, 2012. Mr. Andrés Holzer Neumann is related to a group of shareholders consisting of Travel Retail Investment SCA, Petrus PTE Ltd and Witherspoon Investments LLC, which held 7.49% of Dufry’s share capital as of De- cember 31, 2012. See for details the disclosure under “1.2 Significant Shareholders” on page 48 of this Annual Report and the related “Develop- ments after December 31, 2012”. All members of the Board of Directors are non-executive members and they have never been in a man- agement position at Dufry AG or any of its subsidiaries. For information on related parties and related party transactions please refer to Note 36 on page 120 of this Annual Report. pAge 56 Dufry AnnuAl report 2012 CompAny report Joaquín Moya-Angeler Cabrera DireCtor, born 1949 Steve Tadler DireCtor, born 1959 education education Master’s degree in mathematics from the Univer- sity of Madrid, diploma in economics and forecasting from the London School of Economics and Political Science and an MBA from MIT’s Sloan School of Management. professional Background Mr. Moya-Angeler has focused his career on the technology and real estate industries, including having founded a number of companies. 1994–1997 Chairman of IBM Spain. 1994–1997 Chairman of Leche Pascual. Chairman of Meta4 (1997–2002) and TIASA (1996–1998). To date Chairman of Redsa (since 1997), Hildebrando (since 2003), as well as Presenzia and Pulsar Technologies (since 2002), La Quinta Real Estate (since 2003), Inmoan (since 1989), Avalon Private Equity (since 1999) and Cor- poración Tecnológica Andalucía (since 2005). Current board Mandates Dufry AG, Corporación Teype, La Quinta Group, Palamon Capital Partners, MCH Private Equity, Hildebrando, S.A. de C.V., Corporación Tecnológica Andalucia, Board of Trustees University of Almeria (Chairman), Fundación Mediterránea (Chairman), Redsa S.A., Imoan SL, Avalon Private Equity and Spanish Association of Universities Governing Bodies (Chairman). BS, with distinction, from the University of Virginia and an MBA from Harvard Business School. professional Background 1981–1984 Loan Officer at Manufacturers Hanover Trust Co., providing financing for a number of leveraged buyouts, technology-oriented firms and special situations. 1985 joined Advent Interna- tional’s Boston office, becoming managing director of the North American buyouts group in 1994. 1997 moved to Advent’s London office to head the firm’s European Operations and returned to Boston in 2006. Since 2002 Member of Advent’s Executive Committee. Managing Partner of Advent Interna- tional. Serves on each of Advent’s Western Europe, Central Europe, North America and Latin America Investment Advisory Committees. Current board Mandates Dufry AG, Advent International Corporation, wTe Corporation, SkillSoft, PLC, TransUnion and Bo- jangles. 3.3 ELECTION AND TERMS OF OFFICE In accordance with Art. 13 of the Articles of Incorporation of the Company: – The Board of Directors shall consist of at least three and at most eleven members. – Members of the Board of Directors shall be elected for a maximum term of five years. A year shall mean the period running between one Ordinary Meeting of Shareholders and the next. Previous resignation and dismissal may change the terms of office. New mem- bers elected during the year shall continue in office until the end of their predecessor’s term. – The Board of Directors shall be renewed by rotation in such manner that, after a period of five years, all mem- bers will have been subject to re-election. – The members of the Board of Directors may be re- elected without limitation. Whenever members of the Board of Directors are pro- posed for election or re-election at a General Meeting of Shareholders such elections are being held as individual elections. No elections or re-elections took place at the General Meeting held on May 2, 2012. 3.4 INTERNAL ORGANIZATIONAL STRUCTURE The Board of Directors determines its own organization. It shall elect its Chairman and one or two Vice Chairmen. It shall appoint a Secretary who does not need to be a member of the Board of Directors. The Board of Directors has established an Audit Com- mittee and a Nomination and Remuneration Committee. Both Committees are assisting the Board of Directors in fulfilling its duties and have also decision authority to the extent described below. pAge 57 Dufry AnnuAl report 2012 CompAny report Officer and of the members of the Board of Directors. The Board of Directors has the ultimate authority to ap- prove such proposals. The Nomination and Remuneration Committee decides on possible amendments to the RSU plan and the overall size of the RSUs to be granted under the Company’s Restricted Stock Unit plan, if any, and makes proposals on the grant of options or other securi- ties under any other management incentive plan of the Company, if any. The Nomination and Remuneration Committee meets as often as business requires. The meeting held in the fiscal year 2012 lasted about 3 hours. The CEO attended the meeting of the Nomination and Remuneration Committee held in 2012. Work method of the Board of Directors As a rule, the Board of Directors meets about six to seven times a year (usually at least once per quarter). Additional meetings or conference calls are held as and when nec- essary. The Board of Directors held 11 meetings during fiscal year 2012. The meetings of the Board of Directors usually lasted half a day. The Chairman determines the agenda and items to be discussed at the Board meetings. All members of the Board of Directors can request to add further items on the agenda. The Chief Executive Officer, the Chief Financial Officer, the Global Chief Operating Officer and the General Coun- sel, also acting as Secretary to the Board, attend the meetings of the Board of Directors. Other members of the Group Executive Committee may attend meetings of the Board of Directors as and when required. Members of the Group Executive Committee attended meetings of the Board of Directors in 2012 as follows: CEO 11 meet- ings, CFO 11 meetings, Global Chief Operating Officer 11 meetings, General Counsel 11 meetings, Chief Operating Officers of the regions 1 meeting. The Board of Directors also engages specific advisors to address specific matters when required. The external Auditors partially attended 2 meetings of the Audit Com- mittee in fiscal year 2012. External M&A advisors partially attended 3 meetings of the Board of Directors in 2012 in connection with acquisition projects of the Company. Audit Committee Members: Joaquín Moya-Angeler Cabrera (Chairman Audit Committee), Juan Carlos Torres Carretero, Mario Fontana. The members of the Audit Committee are non-executive and independent members of the Board of Directors. An independent member is a non-executive member, has not been an executive member of the Dufry Group in the last three years and does not have major business relations with the Company. The members shall be appointed, as a rule, for the entire duration of their mandate as Board members and be re-eligible. The Audit Committee assists the Board of Directors in fulfilling its duties of supervision of management. It is responsible for the review of the performance and inde- pendence of the Auditors, the review of and the decision on the audit plan and the audit results and the monitoring of the implementation of the findings by management, the review of the internal audit plan, the assessment of the risk management and the decision on proposed mea- sures to reduce risks, the review of the compliance levels and risk management, as well as the review to propose whether the Board of Directors should accept the Com- pany’s accounts. The Audit Committee regularly reports to the Board of Directors on its decisions, assessments, findings and proposes appropriate actions. The Audit Committee generally meets at the same dates the Board of Directors meetings take place, although the Chairman may call meetings as often as business requires. The length of the meetings lasted usually for approximately 2 to 3 hours in fiscal year 2012, during which the Audit Committee held 5 meetings. The auditors attended 2 meetings of the Audit Committee in 2012. Members of the Group Executive Committee attended meetings of the Audit Committee as follows: The CEO and the CFO, who acts as Secretary of the Audit Committee, each attended 5 meetings. nomination and remuneration Committee Members: Ernest George Bachrach (Chairman Nomination and Remuneration Committee), Andrés Holzer Neumann, Juan Carlos Torres Carretero. The Nomination and Remuneration Committee assists the Board of Directors in fulfilling its nomination and remuneration related matters. It is responsible for as- suring the long-term planning of appropriate appoint- ments to the positions of the Chief Executive Officer and the Board of Directors, as well as for the review of the remuneration system of the Company and for proposals in relation thereto to the Board of Directors. The Nomi- nation and Remuneration Committee makes proposals in relation to the remuneration of the Chief Executive pAge 58 Dufry AnnuAl report 2012 CompAny report 3.5 DEFINITION OF AREAS OF RESPONSIBILITY 3.6 INFORMATION AND CONTROL INSTRUMENTS VIS-à-VIS THE SENIOR MANAGEMENT The Board of Directors is the ultimate corporate body of Dufry AG. It further represents the Company towards third parties and shall manage all matters which by law, Articles of Incorporation or Board regulations have not been delegated to another body of the Company. The Board of Directors ensures that it receives sufficient information from the management to perform its super- visory duty and to make the decisions that are reserved to the Board through several means. In accordance with the Board regulations (“Organisation- sreglement”), the Board of Directors has delegated the operational management of the Company to the Chief Executive Officer who is responsible for overall manage- ment of the Dufry Group. The following responsibilities remain with the Board of Directors: – Ultimate direction of the business of the Company and the power to give the necessary directives; – Determination of the organization of the Company; – Administration of the accounting system, financial control and financial planning; – Appointment and removal of the persons entrusted with the management and representation of the Company, as well as the determination of their signatory power; – Ultimate supervision of the persons entrusted with the management of the Company, in particular with re- spect to their compliance with the law, the Articles of Incorporation, regulations and directives; – Preparation of the business report and the Meetings of Shareholders and to carry out the resolutions adopted by the Meeting of Shareholders; – Notification of the judge if liabilities exceed assets; – Passing of resolutions regarding the subsequent pay- ment of capital with respect to non-fully paid in shares; – Passing of resolutions confirming increases in share capital and the amendments of the Articles of Incor- poration entailed thereby; – Non-delegable and inalienable duties and powers of the Board of Directors pursuant to the Swiss Merger Act; – Examination of the professional qualifications of the Auditors; – To approve any non-operational or non-recurring trans- action not included in the annual budget and exceeding the amount of CHF 4,000,000; – To issue convertible debentures, debentures with option rights or other financial market instruments; – To approve the annual investment and operating budgets of the Company and the Dufry Group; and – To approve the executive regulations promulgated in accordance with the board regulation. Except for the Chairman of the Board of Directors, who has single signature authority, the members of the Board have joint signature authority, if any. – Dufry Group has an internal management information system that consists of financial statements, perfor- mance indicators and risk management. Information to management is provided on a regular basis according to the cycles of the business: sales on a weekly basis; income statement, cash management and key perfor- mance indicator (KPI) including customer, margins and investment information, balance sheet and other finan- cial statements on a monthly basis. The management information is prepared on a consolidated basis as well as per business unit. Financial statements and key financial indicators/ratios are submitted to the entire Board of Directors on a quarterly basis. – During Board meetings, each member of the Board may request information from the other members of the Board, as well as from the members of the man- agement present on all affairs of the Company and the Group. – Outside of Board meetings, each member of the Board may request from the Chief Executive Officer informa- tion concerning the course of business of the Com- pany and the Group and, with the authorization of the Chairman, about specific matters. – The Chief Executive Officer reports at each meeting of the Board of Directors on the course of business of the Company and the Group in a manner agreed upon from time to time between the Board and the Chief Executive Officer. Apart from the meetings, the Chief Executive Officer reports immediately any extraordi- nary event and any change within the Company and within the Dufry Group to the Chairman. – For attendance of the members of the Group Executive Committee at meetings of the Board of Directors or meetings of the Audit Committee or Nomination and Remuneration Committee please refer to section 3.4 Internal organizational structure above. – The Audit Committee met 5 times in 2012 with man- agement to review the business, better understand laws, regulations and policies impacting the Dufry Group and its business and support the management in meeting the requirement and expectations of stake- holders. In meetings of the Audit Committee, the Chief Financial Officer acts as Secretary to the Committee. The Auditors are invited to the meetings of the Audit Committee and attended 2 meetings of the Audit Com- mittee in 2012. Among these meetings some or part of them are also held without management. pAge 59 Dufry AnnuAl report 2012 CompAny report – The Internal Audit provides independent and objective assessments of the effectiveness of the internal con- trol systems globally. The selection of Internal Audit projects and the scope of each review are based on risk assessment, with a focus on operating risks, throughout the Dufry Group. In fiscal year 2012, the Internal Audit conducted 60 audits, examining opera- tions or processes in 44 countries. A written report is compiled for every audit by Internal Audit and includes a defined schedule of concrete steps for implementing the measures that have been determined. In 2012, a particular focus was, amongst others, on compliance with procedures related to inventory and cash, and other related risks. The results of the Internal Audit report are communicated to management in charge and the Company’s senior management on an on-going basis and to the Audit Committee on a quarterly basis. Regular follow-up is performed to ensure that risk mitigation and control improvement measures are implemented on a timely basis. – The Board of Directors and the Group Executive Com- mittee regularly carry out risk assessments. The ob- jective of the risk assessments is to make the principal risks to which Dufry is exposed more transparent and to improve the quality of the risk dialogue. The principal risks identified in 2012 are, amongst others, in the areas of supply chain expertise, alternative forms of retail distributions, relations with the airport authorities, product and service quality, acquisition projects and related integration capabilities, inventory valuation and management, compliance with debt covenants and tax accounting. – Detailed information on the financial risk management is provided in Note 38 in the Financial Statements of this Annual Report. pAge 60 Dufry AnnuAl report 2012 CompAny report 4. grouP exeCutive CoMMittee 4.1 MEMBERS OF THE GROUP EXECUTIVE COMMITTEE As of December 31, 2012, the Group Executive Committee comprised eight executives. As of July 1, 2012, Dufry regrouped its business into 4 regions (from 6 regions previously). Certain members of the current Group Executive Committee were appointed with new responsibilities as of that date. The Group Executive Committee, under the control of the Chief Executive Officer, conducts the operational manage- ment of the Company pursuant to the Company’s board regulations. The Chief Executive Officer reports to the Board of Directors on a regular basis. The following table sets forth the name and year of appointment of the current eight members of the Group Executive Committee, followed by a short description of each member’s business experience, education and activities: nAme nAtIonAlIty posItIon Julián Díaz González Andreas Schneiter José Antonio Gea Pascal C. Duclos Xavier Rossinyol René Riedi Spanish Swiss Spanish Swiss Spanish Swiss Chief Executive Officer Chief Financial Officer Global Chief Operating Officer General Counsel Chief Operating Officer Region EMEA & Asia Chief Operating Officer Region America I José Carlos Costa da Silva Rosa Portuguese Chief Operating Officer Region America II Joseph DiDomizio American Chief Operating Officer Region United States & Canada geC memBer sInCe yeAr 2004 2012 2004 2005 2004 2000 2006 2008 All agreements entered into with the members of the Group Executive Committee are entered for an indefinite period of time. 4.2 EDUCATION, PROFESSIONAL BACKGROUND, OTHER ACTIVITIES AND VESTED INTERESTS Julián Díaz González Chief exeCutiVe offiCer Andreas Schneiter Chief finanCial offiCer José Antonio Gea Global Chief operatinG offiCer born 1958 education born 1970 education born 1963 education Degree in business administration from Universidad Pontificia Comillas I.C.A.D.E., de Madrid. professional Background 1989–1993 General Manager at TNT Leisure, S.A. 1993–1997 Division Director at Aldeasa. 1997–2000 various managerial and business positions at Aeroboutiques de Mexico, S.A. de C.V. and Deor, S.A. de C.V. 2000–2003 General Manager of Latino- americana Duty-Free, S.A. de C.V. Since 2004 Chief Executive Officer at Dufry AG. Current Board mandates Distribuidora Internacional de Alimentacion (DIA), S.A. Degree in business administration and specializa- tion in finance at School of Economy and Business Administration Berne. professional Background 1998–2003 various positions at UBS Warburg in Zurich in the area of Mergers and Acquisitions. Joined Dufry in 2003 as Head Corporate Control- ling. 2004–2012 Head Group Treasury and since 2005 additionally Investor Relations at Dufry. Since July 2012 Chief Financial Officer at Dufry AG. Degree in economics and business sciences from Colegio Universitario de Estudios Financieros. professional Background 1989–1995 various positions at TNT Express Espana, S.A. Director of Blue Cow Division (1993–1995). 1995–2003 various managerial positions at Aldeasa. Left Aldeasa as Director of Operations. Since 2004 Global Chief Operating Officer at Dufry AG. pAge 61 Dufry AnnuAl report 2012 CompAny report Pascal C. Duclos General Counsel born 1967 education Xavier Rossinyol Chief operatinG offiCer René Riedi Chief operatinG offiCer reGion emea & asia, born 1970 reGion ameriCa i, born 1960 education education Licence en droit from Geneva University School of Law, L.L.M. from Duke University School of Law. Licensed to practice law in Switzerland and admit- ted to the New York Bar. professional Background 1991–1997 Senior attorney at law at Geneva law firm Davidoff & Partners. Also academic assistant at the University of Geneva School of Law (1994– 1996). 1999–2001 Attorney at law at New York law firm Kreindler & Kreindler. 2001–2002 Financial planner at UBS AG in New York. 2003–2004 Senior foreign attorney at law at the Buenos Aires law firm Beretta Kahale Godoy. Since 2005 General Counsel and Secretary to the Board of Directors at Dufry AG. Bachelor’s degree in Business Administration at ESADE (Spain), MBA at ESADE and at the Univer- sity of British Columbia (Canada and Hong Kong), Master’s degree in business law from Universidad Pompeu Fabra (Spain). Professional background 1995–2003 Various positions at Areas (member of the French group Elior) with responsibility for fi- nance, controlling, strategic planning. Left Areas as its Corporate Development Director. 2004–2012 Chief Financial Officer at Dufry AG. Since July 2012 Chief Operating Officer Region EMEA & Asia at Dufry AG. Degree in business administration from the School of Economy and Business Administration Zurich. Professional background Prior to 1993 worked in product marketing and international sales of the multinational FMCG (Fast Moving Consumer Goods) company Unilever. 1993–2000 Joined Dufry as Sales Manager East- ern Europe. Product Category Manager Spirits & Tobacco (1995–1996). Head of Product Marketing (1996–1997). Director Division Spirits & Tobacco (Weitnauer Distribution Ltd. 1998–2000). 2000– 2012 Chief Operating Officer Region Eurasia at Dufry AG. Since July 2012 Chief Operating Officer Region America I at Dufry AG. other activities and vested interests None of the members of the Group Executive Committee of Dufry AG has had other activi- ties in governing and supervisory bodies of important Swiss or foreign organizations, institutions or foundations under private and public law with the exception of Mr. Julián Díaz who serves as member of the Board of Distribuidora Internacional de Alimentacion (DIA), S.A. No member of the Group Executive Committee has permanent management or consultancy functions for important Swiss or foreign interest groups, nor holds any official functions and political posts. José Carlos Costa da Silva Rosa Chief operatinG offiCer Joseph DiDomizio Chief operatinG offiCer reGion ameriCa ii, born 1955 reGion uniteD states & CanaDa, born 1970 education education Military and Civil Engineer’s degree from the Aca- demia Militar of Portugal. Bachelor’s of Arts degree in Marketing and Business Administration from the University of Bridgeport. professional Background Professional background 1978–1993 Officer with the Portuguese Army. 1993–1994 Director of Property Management of Richard Ellis Portugal. 1994–2000 General Director of AmoreirasGest. 2000–2006 Retail Director at ANA-Aeroportos de Portugal AS. 2006–2012 Chief Operating Officer Region South America at Dufry AG. Since July 2012 Chief Operating Officer Region America II at Dufry AG. 1992–2008 several managerial positions in Hudson Group (April–September 2008: President and CEO). Since October 2008 Chief Operating Officer Region United States & Canada at Dufry AG. pAge 62 Dufry AnnuAl report 2012 CompAny report 4.3 MANAGEMENT CONTRACTS Dufry AG does not have management contracts with com- panies or natural persons not belonging to the Group. 5. CoMPeNsatioN, shareholDiNgs aND loaNs 5.1 CONTENT AND METHOD OF DETERMINING THE COMPENSATION AND THE SHAREHOLDING PROGRAMS Board of Directors The Board of Directors determines the amount of the fixed remuneration of its members, taking into account their responsibilities, experience, and the time they invest in their activity as members of the Board of Directors. The compensation for the members of the Board of Di- rectors is not tied to particular targets of the Company and the amount of fixed remuneration is determined on a discretionary basis. The Nomination and Remuneration Committee makes proposals in relation to the compen- sation of the members of the Board of Directors. The Board of Directors ultimately decides on the compensa- tion to its members, upon proposal of the Nomination and Remuneration Committee, once per year and at its own discretion. The compensation for the members of the Board of Directors is paid in cash (including social charges). Extraordinary assignments or work which a member of the Board of Directors accomplishes outside of his activity as a Board member is specifically remu- nerated and is approved by the Board of Directors. In addition, the members of the Board of Directors are re- imbursed all reasonable cash expenses incurred by them in the discharge of their duties. Juan Carlos Torres Carretero (Chairman), Ernest George Bachrach (Vice Chairman) and Steve Tadler (Board mem- ber) did not receive compensation as members of the Board of Directors of Dufry AG, as they were represent- ing the interests of Advent International Corporation and its funds in Global Retail Group S.à r.l. described on section “1.2 Significant shareholders” on page 48 of this Annual Report. group executive Committee Members of the Group Executive Committee receive compensation packages, which consist of a fixed basic salary in cash that reflects competitive compensation, the experience and the area of responsibility of each in- dividual member, and a performance related cash bonus. The weighting of these criteria and the amount of the fixed basic salary in cash is defined on a discretionary basis. The fixed basic salary is usually defined once at the end of the previous year period and is not changed during the reporting period (except in cases where the member of the Group Executive Committee assumes dif- ferent responsibilities during a reporting period). The bonus is defined once per year and depends on the overall financial results of the Group and of specific sub- divisions thereof, as well as on achieving defined goals by each individual person. Each member of the Group Executive Committee has its own bonus. The main part of the bonus is related to measures regarding financial results, in fiscal year 2012 mainly EBITDA, both of the Group and of the pertinent Region in the case of the Re- gional Chief Operating Officers. Such financial measures are weighted with 50% for 3 of the 4 Regional Chief Op- erating Officers and the Chief Financial Officer, and with 100% for the Chief Executive Officer, Global Chief Opera- tions Officer, General Counsel and 1 of the 4 Regional Chief Operating Officers. Non-financial oriented targets are also taken into account and are reflected with a weighting of 50% in the case of 3 of the 4 Regional Chief Operating Officers and the Chief Financial Officer. The bonus component can be between a minimum of zero and no maximum. The bonus part of the compensation for the members of the Group Executive Committee represented in 2012 be- tween 31% and 173% of their fixed basic salary and amounted to CHF 3.76 million in the aggregate (2011: be- tween zero and 110% of fixed basic salary and an amount of CHF 3.65 million in the aggregate). In addition, fringe benefits such as health insurance in an amount of CHF 0.60 million in the aggregate have been granted to certain members (2011: CHF 0.56 million). The bonus compensa- tion for each of the members of the Group Executive Com- mittee is approved by the Chief Executive Officer at his own discretion. The total amount of the bonus pool available for the members of the Group Executive Committee (other than the CEO bonus) is approved by the CEO following guidelines given by the Nomination and Remuneration Committee. The CEO informs the Board of Directors once per year about the amounts of compensation paid to the members of the Group Executive Committee (other than his own compensation). The CEO’s own compensation is proposed by the Nomina- tion and Remuneration Committee and decided upon by the Board of Directors at their own discretion. The Chief Executive Officer does not participate during the time of the meeting that the Nomination and Remuneration Committee and the Board of Directors discuss his com- pensation. The Board of Directors receives the proposal for the compensation of the Chief Executive Officer from the Nomination and Remuneration Committee once per year. The Nomination and Remuneration Committee and the Board of Directors review yearly the compensation of the Chief Executive Officer, Chief Financial Officer, pAge 63 Dufry AnnuAl report 2012 CompAny report the survey also considers Swiss companies from other sectors (the private banking, insurance, industry and logistics sectors). This group mainly includes SMIM com- panies of a size (number of employees and/or turnover) similar to Dufry. The contracts of the Chief Executive Officer, the Global Chief Operating Officer, the General Counsel and 2 Re- gional Chief Operations Officers provide for a termination notice of 3 months and a severance payment correspond- ing to the gross salary of 24 months unless the agreement is terminated for cause. 5.2 COMPENSATION, SHAREHOLDINGS AND LOANS OF ACTING AS WELL AS FORMER MEMBERS OF GOVERNING BODIES For detailed information on remuneration, shareholdings and loans please refer to the Financial Statements, Statutory Notes on page 141 of this Annual Report. The compensation paid to the members of the Board of Directors in 2012 remained unchanged in comparison to the previous reporting year 2011. The differences in the amount of compensation paid to the members of the Group Executive Committee in 2012 in comparison to 2011 are mainly due to regular salary increases between 5% and 20% based on annual perfor- mance review, bonus payments based on achievement of yearly objectives set in advance, and one case of an extraordinary bonus granted based on significantly ex- ceeding performance objectives. On the other hand, the lower total amount can be explained by the fact that the Group Executive Committee consists of 8 members since July 1, 2012, compared to 10 members during the entire year 2011. In addition, there was a vesting of Re- stricted Stock Units in 2011 which resulted in higher social costs compared with 2012 when there was no such vesting. Global Chief Operating Officer and the General Counsel. The compensation of the Regional Chief Operating Officers is reviewed once per year by the Chief Executive Officer. During 2011 and 2012, the Company also had Restricted Stock Unit (RSU) plans in place for the members of the Group Executive Committee and certain members of the Dufry Group Management, in the aggregate 83 persons. The participants of Dufry’s RSU plan have been granted the right to receive on January 1, 2013, free of charge, 334,953 RSUs on aggregate (of these, 157,541 RSUs were granted to GEC members), based on the market value of the Company’s shares on the Swiss Stock Exchange (SIX) on December 14, 2011 (i.e. CHF 85.65 per share) (“the RSU Awards 2011”). The RSU Awards 2011 contain two vesting conditions to be met: a) the participants must be employed by the Company from January 1, 2011 (or, if later, from the individual employment entry date) until Janu- ary 1, 2013 and b) the average price of the Company’s shares on the SIX for the ten previous trading days to January 1, 2013 must be equal or higher than 101% of the Company’s share price on December 14, 2011. From an economic point of view, the RSUs are stock op- tions with an exercise price of nil. The vesting of the RSU awards is conditioned upon the price of the Dufry share at the vesting date being superior to the price of the Dufry share at the grant date. The total number of RSUs to be granted yearly is set forth in the RSU plans and related documents. The RSU plans have been approved by the Nomination and Remuneration Committee and the Board of Directors. Pursuant to the RSU plans, the Chief Ex- ecutive Officer, in its own and sole discretion, decides the amount of each specific grant to each individual plan par- ticipant. The grants made to the Chief Executive Officer are decided by the Chairman. In 2012, there were no grants under the RSU and no RSUs vested to the participants of the RSU award of 2011. With the vesting on January 1, 2013, the respective RSU plan ended. Dufry consulted PricewaterhouseCoopers AG for a general review of the conditions and the structure of the compen- sation of the Senior Management and the RSU plan. Other divisions of this firm also provided services as tax and HR advisors for other projects. The individualized survey includes compensation data from a set of listed Swiss and European companies with com- parable positions from the luxury, retail and consumer products industry as well as from third party advisors. The companies are generally of similar size (in terms of num- ber of employees and/or turnover) or complexity as Dufry and have a significant international presence. Moreover, in order to reflect broader Swiss remuneration practice, pAge 64 Dufry AnnuAl report 2012 CompAny report 6. shareholDers’ PartiCiPatioN rights 6.1 VOTING RIGHTS AND REPRESENTATION Each share recorded as share with voting rights in the share register confers one vote on its registered holder. Each shareholder duly registered in the share register on the record date may be represented at the Meeting of Shareholders by any person who is authorized to do so by a written proxy. A proxy does not need to be a share- holder. Shareholders entered in the share register as shareholders with voting rights on a specific qualifying date (record date) designated by the Board of Directors shall be entitled to vote at the Meeting of Shareholders and to exercise their votes at the Meeting of Shareholders. See section 6.5 below. Nominees are only entitled to represent registered shares held by them at a Meeting of Shareholders, if they are registered in the share register in accordance with Art. 5 para. 4 of the Articles of Incorporation and if they hold a valid written proxy granted by the benefi- cial owner of the registered shares instructing the nominee how to vote at the Meeting of Shareholders. Shares held by a nominee for which it is not able to produce such a proxy count as not be represented at the Meeting of Shareholders. As explained under section 2.6 above, BDR holders do not own the Dufry AG shares underlying their BDRs. As a consequence, BDR holders are prevented from exer- cising directly any of the shareholders rights provided for by the Company’s Articles of Incorporation and by Swiss corporate law. For example, BDR holders are not entitled to personally participate in the Ordinary General Meetings of the Company. However, BDR holders are entitled to instruct the Depositary Institution to vote the Company’s shares underlying their BDRs, according to the instructions sent to them by the Depositary Institu- tion. See section 2.6 above or the Articles of Incorpora- tion on our website http://www.dufry.com/en/Investors/ Articlesofincorporation/index.htm 6.2 QUORUMS The Meeting of Shareholders shall be duly constituted irrespective of the number of shareholders present or of shares represented. Unless the law or Articles of Incor- poration provide for a qualified majority, an absolute majority of the votes represented at a Meeting of Share- holders is required for the adoption of resolutions or for elections, with abstentions, blank and invalid votes having the effect of “no” votes. The Chairman of the Meeting shall have a casting vote. A resolution of the Meeting of Shareholders passed by at least two thirds of the votes represented and the absolute majority of the nominal value of shares represented shall be required for: 1. a modification of the purpose of the Company 2. the creation of shares with increased voting powers 3. restrictions on the transfer of registered shares and the removal of such restrictions 4. restrictions on the exercise of the right to vote and the removal of such restrictions 5. an authorized or conditional increase in share capital 6. an increase in share capital through the conversion of capital surplus, through a contribution in kind or in exchange for an acquisition of assets, or a grant of special benefits upon a capital increase 7. the restriction or denial of pre-emptive rights 8. the change of the place of incorporation of the Company 9. the dismissal of a member of the Board of Directors 10. an increase in the maximum number of members of the Board of Directors 11. the dissolution of the Company 12. other matters where statutory law provides for a cor- responding quorum 6.3 CONVOCATION OF THE MEETING OF SHAREHOLDERS The Meeting of Shareholders shall be called by the Board of Directors or, if necessary, by the Auditors. One or more shareholders with voting rights representing in aggregate not less than 10% of the share capital can request, in writ- ing, that a Meeting of Shareholders shall be convened. Such request must be submitted to the Board of Directors, specifying the items and proposals to appear on the agenda. The Meeting of Shareholders shall be convened by notice in the Swiss Official Gazette of Commerce (SOGC) not less than 20 days before the date fixed for the Meeting. Regis- tered shareholders will also be informed by ordinary mail. 6.4 AGENDA The invitation for the Meeting of Shareholders shall state the day, time and place of the Meeting, and the items and proposals of the Board of Directors and, if any, the pro- posals of the shareholders, who demand that the Meet- ing of Shareholders be called or that items be included in the agenda. One or more shareholders with voting rights whose com- bined holdings represent an aggregate nominal value of at least CHF 1,000,000 may request that an item be included in the agenda of a Meeting of Shareholders. Such a request must be made in writing to the Board of Directors at the latest 60 days before the Meeting and shall specify the agenda items and the proposals made. 6.5 REGISTRATION INTO THE SHARE REGISTER 8. auDitors pAge 65 Dufry AnnuAl report 2012 CompAny report The record date for the inscription of registered share- holders into the share register in view of their participation in the Meeting of Shareholders is defined by the Board of Directors. It is usually 14 days before the Meeting. Share- holders who dispose of their shares before the Meeting of Shareholders are no longer entitled to vote. 7. ChaNge of CoNtrol aND DefeNCe Measures 7.1 DUTY TO MAKE AN OFFER An investor who acquires more than 33 1/3% of all voting rights (directly, indirectly or in concert with third parties) whether they are exercisable or not, is required to submit a takeover offer for all shares outstanding (Art. 32 SESTA). The Articles of Incorporation of the Company contain neither an opting-out nor an opting-up provision (Art. 22 SESTA). 7.2 CLAUSES ON CHANGE OF CONTROL In case of change of control or in any event which would trigger a mandatory offer pursuant to the SESTA with respect to the Company, the Restricted Stock Units awarded to the RSU Plan Participants shall vest imme- diately. The RSU Plan ended on January 1, 2013. In case of change of control, all amounts drawn under the CHF 650,000,000 multicurrency revolving credit facility agree- ment and the USD 1,000,000,000 multicurrency term credit facility agreement shall become immediately due and payable. Furthermore, all amounts due under the USD 500,000,000 Senior Notes due 2020 shall become immediately due and payable. While not directly containing a change of control clause, the contracts of the Chief Executive Officer, the Global Chief Operating Officer, the General Counsel and 2 Re- gional Chief Operations Officers provide for a termination notice of 3 months and a severance payment correspond- ing to the gross salary of 24 months unless the agreement is terminated for cause. 8.1 AUDITORS, DURATION OF MANDATE AND TERM OF OFFICE OF THE LEAD AUDITOR Pursuant to the Articles of Incorporation, the Auditors shall be elected every year and may be re-elected. Ernst & Young Ltd acted as Auditors and has held the mandate as Auditor since 2004. Patrick Fawer has been the Lead Auditor in charge for the consolidated financial statements of the Company and the statutory financial statements as of December 31, 2012. Mr. Fawer took the existing auditing mandate in 2011. 8.2 AUDITING FEE During fiscal year 2012, Dufry agreed with Ernst & Young Ltd to pay a fee of CHF 2.9 million for services in connection with auditing the statutory annual financial statements of Dufry AG (including quarterly reviews) and its subsidiaries, as well as the consolidated financial statements of Dufry Group and a fee of CHF 0.4 million for audit related services. 8.3 ADDITIONAL FEES Additional fees amounting to CHF 1.1 million were paid to Ernst & Young Ltd for transaction services and CHF 0.3 mil- lion for tax services. 8.4 SUPERVISORY AND CONTROL INSTRUMENTS PERTAINING TO THE AUDIT The Audit Committee as a committee of the Board of Directors reviews and evaluates the performance and independence of the Auditors at least once each year. Based on its review, the Audit Committee recommends to the Board of Directors, which external Auditor should be proposed for election at the General Meeting of Share- holders. The decision regarding this agenda item is then taken by the Board of Directors. When evaluating the performance and independence of the Auditors, the Au- dit Committee puts special emphasis on the following criteria: Global network of the audit firm, professional competence of the lead audit team, understanding of Dufry’s specific business risks, personal independence of the lead auditor and independence of the audit firm as a company, co-ordination of the Auditors with the Audit Committee and the Senior Management / Finance De- partment of Dufry Group, practical recommendations with respect to the application of IFRS regulations. Within the yearly approved budget, there is also an amount permissible for non-audit services that the Audi- tors may perform. Within the scope of the approved and budgeted amount, the Chief Financial Officer can dele- gate non-audit related mandates to the Auditors. pAge 66 Dufry AnnuAl report 2012 CompAny report The Audit Committee determines the scope of the external audit and the relevant methodology to be applied to the external audit with the Auditors and discusses the results of the respective audits with the Auditors. The Auditors prepare a management letter addressed to the Senior Management, the Board of Directors and the Audit Com- mittee once per year, informing them in detail on the result of their audit. The Auditors also review the interim quarterly reports before these publications are released. Representatives of the Auditors are regularly invited to meetings of the Audit Committee, namely to attend during those agenda points that dealt with accounting, financial reporting or auditing matters. In addition, the Audit Committee reviews regularly the internal audit plan. Internal Audit reports are communi- cated to management in charge and the Company’s senior management on an on-going basis and to the Audit Com- mittee on a quarterly basis. During the fiscal year 2012, the Audit Committee held 5 meetings. The Auditors were present at 2 of those meet- ings. The Board of Directors has determined the rotation interval for the Lead Auditor to be seven years, as defined by the Swiss Code of Obligation; such rotation occurred the last time in 2011. 9. iNforMatioN PoliCy Dufry is committed to an open and transparent commu- nication with its shareholders, financial analysts, potential investors, the media, customers, suppliers and other in- terested parties. Dufry AG publishes its financial reports on a quarterly basis, both in English and Portuguese. The financial re- ports and media releases containing financial information are available on the Company website. In addition, Dufry AG organizes presentations and con- ference calls with the financial community and media to further discuss details of the reported earnings or on any other matters of importance. The Company undertakes roadshows for institutional investors on a regular basis. Details and information on the business activities, Company structure, financial reports, media releases and investor relations are available on the Company’s website: www.dufry.com The official means of publication of the Company is the Swiss Official Gazette of Commerce: https://www.shab.ch Web-links regarding the SIX Swiss Exchange push-/pull- regulations concerning ad-hoc publicity issues are: http://www.dufry.com/en/OurCompany/NewsandMedia/ Latestnews/index.htm http://www.dufry.com/en/OurCompany/NewsandMedia/ Mediareleasesubscription/index.htm Web-links regarding the filings made by the Company with the CVM or BM&FBOVESPA are: http://www.dufry.com/en/Investors/ CVMFilings/QuarterlyFinancialStatementsITR /index.htm http://www.cvm.gov.br http://www.bovespa.com.br The current Articles of Incorporation are available on Dufry’s website under: http://www.dufry.com/en/Investors/ Articlesofincorporation/index.htm The financial reports are available under: http://www.dufry.com/en/Investors/ FinancialReports/index.htm For the Investor Relations and Corporate Communications contacts as well as a summary of anticipated key dates in 2013 please refer to page 146 of this Annual Report. Company’s website: Latest news: Articles of incorporation: Financial reports: financial report Page 69 Dufry annual rePort 2012 fInanCIal rePort financial report consolidated financial statements Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements Most important affiliated companies Report of the statutory auditor financial statements dufry aG Income statement Statement of financial position Notes to the financial statements Appropriation of available earnings Report of the statutory auditor other information Information for investors and media Address details of headquarters 70 71 72 73 75 76 134 136 138 139 140 143 144 146 147 Page 70 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements conSoliDateD incoMe StateMent for the year ended december 31, 2012 In mIllIons of CHf Net sales Advertising income turnover Cost of sales gross profit Selling expenses Personnel expenses General expenses eBItDa1 Depreciation, amortization and impairment Other operational result earnings before interest and taxes (eBIt) Interest expenses Interest income Foreign exchange gain / (loss) earnings before taxes (eBt) Income taxes net earnings AttRIbutAble tO: equity holders of the parent Non-controlling interests eARNINGS PeR ShARe AttRIbutAble tO equIty hOlDeRS OF the PAReNt basic earnings per share Diluted earnings per share Weighted average number of outstanding shares in thousands 1 ebItDA1 is earnings before interest, taxes, depreciation, amortization and other operational result note 2012 2011 7 8 9 11 12 13 14 15 15 16 17 17 3,062.1 91.5 3,153.6 (1,297.0) 1,856.6 (694.2) (474.7) (213.7) 474.0 (168.3) (30.1) 275.6 (79.5) 1.3 (0.1) 197.3 (39.1) 158.2 122.4 35.8 4.46 4.41 27,447 2,560.9 76.8 2,637.7 (1,102.4) 1,535.3 (579.7) (402.6) (182.1) 370.9 (131.5) (26.9) 212.5 (55.2) 4.1 1.7 163.1 (28.2) 134.9 111.9 23.0 4.16 4.16 26,873 Page 71 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements conSoliDateD StateMent of coMpreHenSiVe incoMe for the year ended december 31, 2012 In mIllIons of CHf net earnings otHer ComPreHensIve InCome Items reclassified subsequently to net income upon derecognition exchange differences on translating foreign operations Net gain / (loss) on hedge of net investment in foreign operations Changes in the fair value of interest rate swaps held as cash flow hedges other comprehensive income before taxes Income tax relating to net gain / (loss) on hedge of net investment Income tax on cash flow hedges Income tax relating to components of other comprehensive income total other comprehensive income for the year, net of tax total comprehensive income for the year, net of tax AttRIbutAble tO: equity holders of the parent Non-controlling interests 2012 158.2 (31.1) 6.3 1.0 (23.8) (0.8) (0.1) (0.9) (24.7) 133.5 100.0 33.5 2011 134.9 98.2 (82.7) 1.1 16.6 9.9 (0.1) 9.8 26.4 161.3 135.3 26.0 Page 72 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements conSoliDateD StateMent of financial poSition at december 31, 2012 In mIllIons of CHf note 31.12. 2012 31.12. 2011 ASSetS Property, plant and equipment Intangible assets Deferred tax assets Other non-current assets non-current assets Inventories trade and credit card receivables Other accounts receivable Income tax receivables Cash and cash equivalents Current assets total assets lIAbIlItIeS AND ShARehOlDeRS’ equIty equity attributable to equity holders of the parent Non-controlling interests total equity Financial debt Deferred tax liabilities Provisions Post-employment benefit obligations Other non-current liabilities non-current liabilities trade payables Financial debt Income tax payables Provisions Other liabilities Current liabilities total liabilities total liabilities and shareholders’ equity 19 21 23 24 25 26 27 28 32 23 33 34 35 32 33 35 259.8 2,032.6 153.0 36.9 2,482.3 421.1 59.5 120.4 8.3 434.0 1,043.3 3,525.6 1,238.8 128.4 1,367.2 1,345.4 165.0 39.0 6.1 8.3 1,563.8 247.8 39.9 10.8 11.2 284.9 594.6 2,158.4 3,525.6 246.1 2,078.6 146.5 37.8 2,509.0 432.0 47.0 127.3 3.4 199.1 808.8 3,317.8 870.0 84.1 954.1 1,529.8 168.5 39.5 6.0 11.3 1,755.1 301.1 30.6 14.2 7.1 255.6 608.6 2,363.7 3,317.8 Page 73 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements conSoliDateD StateMent of cHanGeS in eQUitY for the year ended december 31, 2012 2012 In mIllIons of CHf note share capital share premium treasury shares Hedging & revaluation reserves trans- lation reserves retained ear nings total non- ControllIng Interests total equIty attrIButaBle to equIty HolDers of tHe Parent Balance at January 1, 2012 134.9 934.5 (13.5) (0.9) (176.6) (8.4) 870.0 84.1 954.1 Net earnings Other comprehensive income (loss) 18 total comprehensive income for the period – – – – – – tRANSACtIONS WIth OR DIStRIbutIONS tO OWNeRS: Dividends to non-controlling interests Net proceeds from issue of shares Purchase of treasury shares Share-based payment tax effect on equity transactions total transactions with or distributions to owners 29.2 30.2 30 16 ChANGeS IN OWNeRShIP INteReStS IN SubSIDIARIeS: Changes in participation of non-controlling – – – – – – – 13.5 272.5 – – – – – – (28.1) – – 13.5 272.5 (28.1) interests 31 – – – Balance at December 31, 2012 148.4 1,207.0 (41.6) – 0.9 – 122.4 122.4 (23.3) – (22.4) 35.8 (2.3) 158.2 (24.7) 0.9 (23.3) 122.4 100.0 33.5 133.5 – – – – – – – – – – – – – – – – 8.8 2.1 – 286.0 (28.1) 8.8 2.1 (29.9) – – – – (29.9) 286.0 (28.1) 8.8 2.1 – 10.9 268.8 (29.9) 238.9 – – – 40.7 40.7 (199.9) 124.9 1,238.8 128.4 1,367.2 Page 74 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements conSoliDateD StateMent of cHanGeS in eQUitY for the year ended december 31, 2012 2011 In mIllIons of CHf note share capital share premium treasury shares Hedging & revaluation reserves trans- lation reserves retained ear nings total non- ControllIng Interests total equIty Balance at January 1, 2011 134.9 934.2 (28.7) (1.9) (199.0) (105.8) 733.7 81.1 814.8 attrIButaBle to equIty HolDers of tHe Parent Net earnings Other comprehensive income (loss) 18 total comprehensive income for the period tRANSACtIONS WIth OR DIStRIbutIONS tO OWNeRS Dividends to non-controlling interests Release of share issuance costs Purchase of treasury shares Distribution of treasury shares Share-based payment tax effect on equity transactions Reclassifications total transactions with or distributions to owners 29.2 30.2 30.2 30 16 ChANGeS IN OWNeRShIP INteReStS IN SubSIDIARIeS: Changes in participation of non-controlling – – – – – – – – – – – – – – – 2.6 – – – – (2.3) – – – – – (12.5) 27.7 – – – 0.3 15.2 – 1.0 – 111.9 22.4 – 111.9 23.4 23.0 3.0 134.9 26.4 1.0 22.4 111.9 135.3 26.0 161.3 – – – – – – – – – – – – – – – – – – – – 2.6 (12.5) (27.7) 9.6 1.3 2.3 – 9.6 1.3 – (25.0) (25.0) – – – – – – 2.6 (12.5) – 9.6 1.3 – (14.5) 1.0 (25.0) (24.0) interests 31 – – – – – – – Balance at December 31, 2011 134.9 934.5 (13.5) (0.9) (176.6) (8.4) 870.0 2.0 84.1 2.0 954.1 Page 75 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements conSoliDateD StateMent of caSH floWS for the year ended december 31, 2012 In mIllIons of CHf note 2012 2011 CASh FlOW FROM OPeRAtING ACtIvItIeS earnings before taxes (eBt) ADjuStMeNtS FOR Depreciation, amortization and impairment Increase / (decrease) in allowances and provisions loss / (gain) on unrealized foreign exchange differences Other non-cash items Interest expenses Interest income Cash flow before working capital changes ¹ Decrease / (increase) in trade and other accounts receivable Decrease / (increase) in inventories Increase / (decrease) in trade and other accounts payable Cash generated from operations ² Income tax paid net cash flows from operating activities CASh FlOW FROM INveStING ACtIvItIeS Purchase of property, plant and equipment Purchase of intangible assets Proceeds from sale of property, plant and equipment Interest received business combinations, net of cash Proceed from sale of interest in subsidiaries, net of cash net cash flows used in investing activities free cash flow ³ CASh FlOW FROM FINANCING ACtIvItIeS Issue of shares Share issuance cost paid Proceeds from issuance of Senior Notes Proceeds from bank loans Repayment of bank loans Proceeds from / (repayment of) 3rd parties’ loans Dividends paid to non-controlling interest Purchase of treasury shares Contributions from non-controlling interest holders Arrangement fees paid Interest paid net cash flows (used in) / from financing activities Currency translation on cash (Decrease) / Increase in cash and cash equivalents CASh AND CASh equIvAleNtS At the – beginning of the period – end of the period 13 15 15 25 20 22 6 29.2.1 31.1 197.3 168.3 13.5 7.4 8.8 79.5 (1.3) 473.5 (4.5) 2.6 (19.5) 452.1 (69.6) 382.5 (83.9) (28.6) 0.7 1.1 (47.7) 0.9 (157.5) 271.8 294.0 (8.0) 466.1 8.3 (608.3) 1.7 (29.9) (28.1) 0.7 (11.3) (60.8) 24.4 (14.5) 234.9 199.1 434.0 163.1 131.5 15.8 (2.7) 9.5 55.2 (4.1) 368.3 9.8 (69.9) 68.4 376.6 (39.8) 336.8 (65.0) (30.0) 3.2 3.9 (743.2) 0.6 (830.5) 248.9 – (0.9) – 773.4 (87.9) 3.8 (25.0) (12.5) 0.7 (15.0) (41.1) 595.5 16.7 118.5 80.6 199.1 ¹ Comprise cash flows generated by earnings before taxes adjusted for all non-cash items, i.e. up to interest income ² Comprise net cash flows from operating activities before income taxes paid ³ Comprise net cash flows from operating activities and the cash flows from investing activities related to property, plant and equipment, intangible assets and interest received Page 76 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements noteS to tHe conSoliDateD financial StateMentS for the year ended december 31, 2012 1. corporate information 2.2 bASIS OF CONSOlIDAtION the consolidated financial statements incorporate the financial statements of Dufry AG and entities controlled by Dufry (its subsidiaries) as at December 31, 2012 and the respective comparative information. Subsidiaries are fully consolidated from the date of acqui- sition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control is lost. the financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using uniform accounting policies. All intra- group balances, transactions, unrealized gains and losses resulting from intra-group transactions and dividends are eliminated in full. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it (i) derecognizes the assets (including goodwill) and liabil- ities of the subsidiary, derecognizes the carrying amount of any non-controlling interest as well as derecognizes the cumulative translation differences recorded in equity (ii) recognizes the fair value of the consideration received, recognizes the fair value of any investment retained as well as recognizes any surplus or deficit in the con- solidated income statement and (iii) reclassifies the parent’s share of components previ- ously recognized in other comprehensive income to the consolidated income statement or retained earnings, as appropriate. Dufry AG (“ Dufry” or “the Company”) is a publicly listed company with headquarters in basel, Switzerland. the Company is the world’s leading travel retail company. It operates over 1,200 shops worldwide. the shares of the Company are listed on the Swiss Stock exchange (SIX) in Zürich and its brazilian Depository Receipts on the bM&FbOveSPA in São Paulo. the consolidated financial statements of Dufry AG and its subsidiaries (“the Group”) for the year ended December 31, 2012 were authorized for public disclosure in accordance with a resolution of the board of Directors of the Company dated March 7, 2013. 2. accountinG policies 2.1 bASIS OF PRePARAtION the consolidated financial statements of Dufry AG and its subsidiaries (“the Group”) have been prepared in accordance with International Financial Reporting Standards (IFRS). Dufry AG’s consolidated financial statements have been prepared on the historical cost basis, except for financial instruments that are measured at fair values, as explained in the accounting policies below. historical cost is gener- ally based on the fair value of the consideration given in exchange for assets. the carrying values of recognized assets and liabilities that are hedged items in fair value hedges, and are otherwise carried at amortized cost, are adjusted to record changes in the fair values attributable to the risks that are being hedged. the consolidated financial statements are presented in Swiss francs and all values are rounded to the nearest one hundred thousand, except when otherwise indicated. Page 77 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 2.3 SuMMARy OF SIGNIFICANt ACCOuNtING POlICIeS a) Business combinations and goodwill business combinations are accounted for using the acqui- sition method. the cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non- controlling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in the other operational result. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is in- cluded in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. b) revenue recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the rev- enue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, sales taxes or duties. When the Group acquires a business, it assesses the fi- nancial assets and liabilities assumed for appropriate classification and designation in accordance with the con- tractual terms, economic circumstances and pertinent conditions as at the acquisition date. Net sales Sales are recognized when significant risks and rewards of ownership of the products have been transferred to the customer. Retail sales are settled in cash or by credit card. Any contingent consideration to be transferred by the buyer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability will be recognized either in the consolidated income statement or as a change to other comprehensive income. If the con- tingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consid- eration is not a financial instrument, it is measured in accordance with the appropriate IFRS. the Group measures goodwill at the acquisition date as: – the fair value of the consideration transferred; plus – the recognized amount of any non-controlling interests in the acquiree; plus – if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the ac- quiree; less – the net recognized amount of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognized immediately in the consolidated income statement. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combi- nation is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Advertising income Advertising income is recognized when the services have been rendered. c) foreign currency translation the consolidated financial statements are expressed in Swiss francs (ChF). each company in the Group uses its corresponding functional currency and items included in the financial statements of each entity are measured using that functional currency. transactions in foreign curren- cies are initially recorded in the functional currency using the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated in the functional currency us- ing the exchange rate at the reporting date. exchange differences arising on the settlement or on the translation of derivative financial instruments are recognized through the consolidated income statement, except where the hedges on net investments allow the recognition in the other comprehensive income, until the respective invest- ments are disposed of. In this case any related deferred taxes are also accounted for in the other comprehensive income. Non-monetary items that are measured at his- torical cost in the respective functional currency are translated using the exchange rates as at the dates of the initial transactions. At the reporting date, the assets and liabilities of all sub- sidiaries reporting in foreign currency are translated into the presentation currency of Dufry (Swiss francs) using the exchange rate at the reporting date. the consolidated income statement is translated using the average exchange rates of the respective month in which the transactions Page 78 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements occurred. the net translation differences are recognized in the other comprehensive income. On disposal of a for- eign entity or when control is lost, the deferred cumulative translation difference recognized within equity relating to that particular operation is recognized in the consolidated income statement as gain or loss on sale of subsidiaries. Intangible assets and fair value adjustments identified on the acquisition of a new business (purchase price alloca- tion) are treated as assets and liabilities of such operation in the respective functional currency. Principal foreign exchange rates applied for valuation and translation In CHf 1 uSD – uS Dollar 1 euR – euro 1. 1. – 31.12. 2012 average rates 1. 1. – 31.12. 2011 average rates 31.12. 2012 ClosIng rates 31.12. 2011 ClosIng rates 0.9377 1.2052 0.8868 1.2329 0.9146 1.2069 0.9387 1.2167 d) Pension and other post-employment benefit obligations – Pension obligations the employees of the subsidiaries are eligible for retire- ment, invalidity and death benefits under local social security schemes prevailing in the countries concerned and defined benefit or defined contribution plans provided through separate funds, insurance plans, or unfunded arrangements. the pension plans are generally funded through regular contributions made by the employer and the employee and through the income generated by the capital investments. In the case of defined contribution plans, the net periodic pension cost to be recognized in the consolidated income statement equals the contributions made by the employer. In the case of defined benefit plans, the net periodic pen- sion cost is determined using the projected unit credit method. the defined benefit obligation is measured as the present value of expected future payments required to settle the obligation resulting from employee service in the current and prior periods. the net periodic pension cost less employee contributions is included in the per- sonnel expenses. Plan assets are recorded at their fair value. Actuarial gains or losses beyond a corridor of 10% of the greater of the present value of the defined benefit obligation and the fair value of plan assets arising from adjustments posted and changes in actuarial assump- tions are recognized in the consolidated income state- ment over the average remaining service lives of the related plan participants. e) share-based payments equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. the fair value determined at the grant date of the equity- settled share-based payments is expensed on a straight- line basis over the vesting period, based on the estimated number of equity instruments that will eventually vest. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. the impact of the revision of the original esti- mates, if any, is recognized in the consolidated income statement such that the cumulative expense reflects the revised estimate. Where the terms of an equity-settled award are modified, the minimum expense recognized is the expense if the terms had not been modified. An additional expense is recognized for any modification, which increases the total fair value of the share based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification. f) taxation Income tax expense represents the sum of the tax cur- rently payable and deferred tax. Current income tax Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the tax authorities. the tax rates and tax laws used to compute the amount are those that are enacted or sub- stantially enacted, at the reporting date in the countries where the Group operates and generates taxable income. Page 79 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substan- tially enacted at the reporting date. Deferred tax positions not relating to items recognized in the consolidated income statement, are recognized in correlation to the underlying transaction either as other comprehensive income or equity. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the de- ferred taxes relate to the same taxable entity. tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognized subsequently if new in- formation about facts and circumstances changed. the adjustment would either be treated as a reduction of goodwill (as long as it does not exceed goodwill) if it was noted during the measurement period or afterwards in the consolidated income statement. g) Property, plant and equipment these are stated at cost less accumulated depreciation and any impairment in fair value. Depreciation is computed on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. the useful lives applied are as follows: – buildings 15 to 20 years – leasehold improvements 5 to 10 years – Furniture, fixture and vehicles 4 to 10 years – Computer hardware 5 years the asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Additional costs, which extend the useful life of tangible assets, are capitalized. there are no borrowing costs rec- ognized that are associated with the construction of tan- gible assets. the carrying amount of tangible assets is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. the recoverable amount is the higher of an asset’s fair value less cost to sell or its value in use. Current income tax relating to items recognized in other comprehensive income is recognized in the same state- ment. Management periodically evaluates positions taken in the tax returns with respect to situations in which ap- plicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred tax Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognized for all taxable tem- porary differences, except: – When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a trans- action that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss – In respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be con- trolled and it is probable that the temporary differences will not reverse in the foreseeable future Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible tem- porary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except: – When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transac- tion, affects neither the accounting profit nor taxable profit or loss – In respect of deductible temporary differences associ- ated with investments in subsidiaries, deferred tax assets are recognized only to the extent that it is prob- able that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized the carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the deferred tax asset to be utilized. unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Page 80 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements h) Intangible assets Intangible assets acquired (separately or from a business combination) these assets mainly comprise of concession rights, brands and goodwill (for goodwill see 2.3.a). Intangible assets acquired separately are capitalized at cost and those from a business acquisition are capitalized at fair value as at the date of acquisition. Following initial rec- ognition, the cost model is applied to intangible assets. the useful lives of these intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. Intangible as- sets with indefinite useful lives are not amortized but are tested for impairment annually at the asset or cash gen- erating unit level. the useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be sup- portable. If not, any changes are made on a prospective basis. brands have been assessed to have indefinite use- ful lives and are therefore not amortized. Certain concession rights are granted for periods ranging from 10 to 30 years by the relevant airport authorities. based on Dufry’s experience, these concession rights have been renewed in the past at little or no cost for the Group. As a result these concession rights are assessed as having an indefinite useful life. i) Impairment of non-financial assets Intangible assets with indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to depreciation and amortization are reviewed for impairment whenever events or circum- stances indicate that the carrying amount may not be recoverable. An impairment loss is recognized when the carrying amount of an asset or cash generating unit exceeds its recoverable amount. the recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are sepa- rately identifiable cash inflows (cash generating units). sary to make the sale. Inventory allowances are set up in the case of slow-moving and obsolete stock. expired items are fully written off. k) Provisions Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. the amount recognized as a provision is the best estimate at the end of the reporting period of the consideration re- quired to settle the present obligation, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that the reimbursement will be received and the amount of the receivable can be measured reliably. Contingent liabilities acquired in a business combination Contingent liabilities acquired in a business combination are initially measured at fair value at the acquisition date. At the end of subsequent reporting periods, such contingent liabilities are measured at the higher of the amount that would be recognized in accordance with IAS 37 Provisions, Contingent liabilities and Contingent Assets and the amount initially recognized less cumulative amortization recognized in accordance with IAS 18 Revenue. Onerous contracts Present obligations arising under onerous contracts are recognized and measured as provisions. An onerous con- tract is considered to exist if the Group has a contract under which the unavoidable costs of meeting the obliga- tions under the contract exceed the economic benefits expected to be received from the contract. j) Inventories Inventories are valued at the lower of historical cost or net realizable value. the historical costs are determined using the FIFO method. historical cost includes all expenses incurred in bringing the inventories to their present loca- tion and condition. this includes import duties, transport and handling costs and any other directly attributable costs of acquisition. Purchase discounts and rebates are de- ducted in determining the cost of inventories. the net realizable value is the estimated selling price in the ordi- nary course of business less the estimated costs neces- Restructurings A restructuring provision is recognized when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. the measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity. Page 81 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements l) financial instruments Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial lia- bilities on initial recognition. transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in the consolidated income statement. effective interest method the effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. the effective interest rate is the rate that exactly discounts estimated future cash flows (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. m) financial assets Financial assets are classified into the following catego- ries: financial assets at fair value through profit or loss (FvtPl), held-to-maturity investments, available-for-sale (AFS) financial assets and loans and receivables. the categorization depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of finan- cial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or conven- tion in the marketplace. Financial assets at FvtPl (fair value through profit or loss) Financial assets are classified as at FvtPl when the financial asset is either held for trading or it is designated as at FvtPl. A financial asset is classified as held for trading if: – it has been acquired principally for the purpose of sell- ing it in the near term; or – it is a derivative that is not designated and effective as a hedging instrument. A financial asset other than a financial asset held for trading may be designated as at FvtPl upon initial recognition if: – such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or – the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk man- agement or investment strategy, and information about the grouping is provided internally on that basis; or – it forms part of a contract containing one or more em- bedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire com- bined contract (asset or liability) to be designated as at FvtPl. Financial assets at FvtPl are stated at fair value, with any gains or losses arising on remeasurement recognized in the consolidated income statement. the net gain or loss recognized in the consolidated income statement incor- porates any dividend or interest earned on the financial asset and is included in the other operating result line item in the consolidated income statement. Fair value is determined in the manner described in note 38. trade and other accounts receivable trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. trade and other receivables (including credit cards receivables, other accounts re- ceivable, cash and cash equivalents) are measured at amortized cost using the effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. Impairment of financial assets Financial assets, other than those at FvtPl, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. – on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit- taking; or Certain categories of financial assets, such as trade re- ceivables, are assessed for impairment individually. For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between Page 82 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. No gain or loss is recognized in the consolidated income statement on the purchase, sale, issue or cancellation of the Company’s own equity instruments. the carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, loans and other re- ceivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allow- ance account are recognized in the consolidated income statement. For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the consolidated income statement to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. Derecognition of financial assets the Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an as- sociated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group con- tinues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received. n) equity instruments Debt and equity instruments issued by the Group are classified as either financial liabilities or as equity in ac- cordance with the substance of the contractual arrange- ments and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs. Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity. o) financial liabilities Financial liabilities are classified as either financial lia- bilities at FvtPl or other financial liabilities. Financial liabilities at FvtPl Financial liabilities are classified as at FvtPl when the financial liability is either held for trading or it is desig- nated as at FvtPl. A financial liability is classified as held for trading if: – it has been acquired principally for the purpose of re- purchasing it in the near term; or – on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit- taking; or – it is a derivative that is not designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading may be designated as at FvtPl upon initial rec- ognition if: – such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or – the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk man- agement or investment strategy, and information about the grouping is provided internally on that basis; or – it forms part of a contract containing one or more em- bedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire com- bined contract (asset or liability) to be designated as at FvtPl. Financial liabilities at FvtPl are stated at fair value, with any gains or losses arising on remeasurement recognized in the consolidated income statement. the net gain or loss recognized in the consolidated income statement incorporates any interest paid on the financial liability and is included in the other operational result line item in the consolidated income statement. Fair value is de- termined in the manner described in note 38. Other financial liabilities Other financial liabilities (including borrowings) are sub- sequently measured at amortized cost using the effective interest method (see l). Page 83 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements Cash flow hedges the effective portion of changes in the fair value of de- rivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated in the hedging and revaluation reserves. the gain or loss relating to the ineffective portion is recognized in the consolidated income statement, and is included in the interest expenses / income line item. Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to the consolidated income statement in the periods when the hedged item is recognized in the consolidated income state- ment, in the same line of the consolidated income statement as the recognized hedged item. however, when the hedged forecast transaction results in the recognition of a non- financial asset or a non-financial liability, the gains and losses previously recognized in other comprehensive in- come and accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss rec- ognized in other comprehensive income and accumulated in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the consolidated income statement. When a forecast trans- action is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in the consolidated income statement. hedges of net investments in foreign operations hedges of net investments in foreign operations are ac- counted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognized in other comprehensive income and accumulated under the heading of translation re- serves. the gain or loss relating to the ineffective portion is recognized immediately in the consolidated income statement, and is included in the foreign exchange gains / loss line item. Derecognition of financial liabilities the Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in the consolidated income statement. p) Derivative financial instruments the Group enters into a variety of derivative financial in- struments to manage its exposure to interest rate or foreign exchange rate risks, including foreign exchange forward contracts, interest rate swaps and cross currency swaps. Further details of derivative financial instruments are disclosed in note 38. Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subse- quently remeasured to their fair value at the end of each reporting period. the resulting gain or loss is recognized in the consolidated income statement unless the deriva- tive is designated and effective as a hedging instrument, in which event the timing of the recognition in the con- solidated income statement depends on the nature of the hedge relationship. embedded derivatives Derivatives embedded in non-derivative host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FvtPl. q) Hedge accounting the Group designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, as either fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges. At the inception of the hedge relationship, the entity docu- ments the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk. Note 38 sets out details of the fair values of the derivative instruments used for hedging purposes. Page 84 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 2.4 ChANGeS IN ACCOuNtING POlICy AND DISClOSuReS 3. critical accountinG judGments and key sources of estimation uncertainty new and amended standards and interpretations the accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended IFRS and IFRIC interpretations: standards and Interpretations affecting the reported financial performance and / or financial position the Group has not adopted any new or revised Standards and Interpretations during the current year that affected the amounts reported in these financial statements. standards and Interpretations affecting presentation and disclosure only Ifrs 7 financial Instruments: Disclosures – enhanced Derecognition Disclosure requirements (effective july 1, 2011) the amendment requires additional disclosure about financial assets that have been transferred but not derec- ognized to enable the user of the Group’s financial state- ments to understand the relationship with those assets that have not been derecognized and their associated liabilities. In addition, the amendment requires disclosures about continuing involvement in derecognized assets to enable the user to evaluate the nature of, and risks as- sociated with, the entity’s continuing involvement in those derecognized assets. the amendment affects disclosure only and has no impact on the Group’s financial position or performance. standards and Interpretations adopted with no material effect on the financial statements during the current reporting period the following new or revised Interpretation has been adopted in these financial statements. Its adoption has not had a significant impact on the amounts reported in these financial statements, but may affect the accounting for future transactions or arrangements. Ias 12 Deferred tax – recovery of underlying assets amendments to Ias 12 (effective january 1, 2012) IAS 12 has been updated to include a presumption that deferred tax on investment property measured using the fair value model in IAS 40 and on non-depreciable assets measured using the revaluation model in IAS 16, should always be measured on a sale basis. Dufry has not ac- counted for any investment property. the preparation of the Group’s financial statements re- quires management to make judgments, estimates and assumptions that affect the reported amounts of income, expenses, assets and liabilities, and the disclosure of con- tingent liabilities, at the reporting date. however, uncer- tainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability in the future. Key SOuRCeS OF eStIMAtION uNCeRtAINty the key assumptions concerning the future and other key sources of estimation include uncertainties at the reporting date, which may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial periods, are discussed below. Concession rights Concession rights acquired in a business combination are measured at fair value as at the date of acquisition. the useful lives of operating concessions are assessed to be either finite or indefinite based on individual circumstances. the useful lives of operating concessions are reviewed annually to determine whether the indefinite useful life assessment for those concessions continues to be sustain- able. the Group annually tests the operating concessions with indefinite useful lives for impairment. the underlying calculation requires the use of estimates. the comments and assumptions used are disclosed in note 21.1.2. Brands and goodwill the Group tests these items annually for impairment. the underlying calculation requires the use of estimates. the comments and assumptions used are disclosed in note 21.1.4. Income taxes the Group is subject to income taxes in numerous jurisdic- tions. Significant judgment is required in determining the worldwide provision for income taxes. there are many transactions and calculations for which the ultimate tax assessment is uncertain. the Group recognizes liabilities for tax audit issues based on estimates of whether addi- tional taxes will be payable. Where the final tax outcome is different from the amounts that were initially recorded, such differences will impact the income tax or deferred tax provisions in the period in which such assessment is made. Further details are given in note 16. Deferred tax assets Deferred tax assets are recognized for all unused tax losses and deductible temporary differences to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies. Further details are given in note 23. Provisions Management makes assumptions in relation to the expected outcome and cash outflows based on the development of each individual case. Further details are given in note 33. share-based payments the Group measures the cost of equity-settled transac- tions with employees by reference to the fair value of the equity instruments at the grant date. estimating fair value requires determining the most appropriate valuation model for a grant of equity instruments, which depends on the terms and conditions of the grant. this also re- quires determining the most appropriate inputs to the valuation model including the expected life of the option, volatility and dividend yield and making assumptions about them. the assumptions and models used are dis- closed in note 30. Pension and other post-employment benefit obligations the cost of defined benefit pension plans is determined using actuarial valuations. the actuarial valuation involves assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant un- certainty. Further details are given in note 34. Purchase price allocation the determination of the fair values of the identifiable assets (especially the concession rights) and the assumed liabil- ities (especially the contingent liabilities recognized as provisions), resulting from business combinations, is based on valuation techniques such as the discounted cash flow model. Some of the inputs to this model are partially based on assumptions and judgments and any changes thereof would affect the reported values (see note 6). 4. new and revised standards and interpretations in issue but not yet adopted / effective the standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s fi- nancial statements are disclosed below. Only those that are expected to have an impact on the Group’s financial position, performance, and / or disclosures are listed. the Group intends to adopt these standards, if applicable, when they become effective. Page 85 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements Ias 1 Presentation of Items of other Comprehensive Income – amendments to Ias 1 (effective july 1, 2012) the amendments to IAS 1 change the grouping of items presented in other comprehensive income (OCI). Items that could be reclassified (or recycled) to profit or loss at a future point in time (for example, actuarial gains and losses on defined benefit plans) would be presented separately from items that will never be reclassified (for example, net gain on hedge of net investment, exchange differences on translation of foreign operations, net movement on cash flow hedges and net loss or gain on available-for-sale financial assets). the amendment af- fects presentation only and has no impact on the Group’s financial position or performance. Ias 19 employee Benefits (revised) (effective january 1, 2013) the IASb has issued numerous amendments to IAS 19. these range from fundamental changes such as remov- ing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re- wording. the Group will change its accounting policy in 2013 to recognize actuarial gains and losses in other comprehensive income. the amended standard will impact the net benefit expense as the expected return on plan assets will be calculated using the same interest rate as applied for the purpose of discounting the benefit obliga- tion. Further details are given in note 34. the application of this new standard will imply a restate- ment of the 2012 situation. based on current knowledge, the financial statements will be impacted at December 31, 2012 as follows: – an additional loss of ChF 0.1 million in the consolidated income statement – an additional loss of ChF 7.7 million in other compre- hensive income – a reduction of pension assets of ChF 0.4 million and addition of pension liabilities of ChF 15.0 million – a reduction of equity of ChF 15.4 million due to the retrospective application of IAS 19R Ias 28 Investments in associates and Joint ventures (as revised in 2011) (effective january 1, 2013) As a consequence of the new IFRS 11, and IFRS 12, IAS 28 Investments in Associates, has been renamed as IAS 28 Investments in Associates and joint ventures, and de- scribes the application of the equity method to investments in joint ventures in addition to associates. Page 86 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements Ias 32 offsetting financial assets and financial liabilities – amendments to Ias 32 (effective january 1, 2014) these amendments clarify the meaning of “currently has a legally enforceable right to set-off”. the amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. the changes introduced by IFRS 10 will require manage- ment to exercise significant judgment to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27. based on the preliminary analyses performed, IFRS 10 is not expected to have any impact on the valuation or presentation of the currently consolidated investments of the Group. Ifrs 7 Disclosures – offsetting financial assets and financial liabilities – amendments to Ifrs 7 (effective january 1, 2013) these amendments require an entity to disclose information about rights to set-off and related arrangements (e.g., collateral agreements). the disclosures would provide users with information that is useful in evaluating the ef- fect of netting arrangements on an entity’s financial posi- tion. the new disclosures are required for all recognized financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. the disclo- sures also apply to recognized financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32. Ifrs 9 financial Instruments: Classification and measurement (effective january 1, 2015) IFRS 9, as issued, reflects the first phase of the IASb’s work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. the standard was initially effective for annual periods beginning on or after january 1, 2013, but amendments to IFRS 9 Mandatory effective Date of IFRS 9 and transition Disclosures, issued in December 2011, moved the mandatory effective date to january 1, 2015. In subse- quent phases, the IASb will address hedge accounting and impairment of financial assets. the adoption of the first phase of IFRS 9 in 2015 will have an effect on the classifica- tion and measurement of the Group’s financial assets, but will not have an impact on classification and measurements of financial liabilities. the Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued. Ifrs 10 Consolidated financial statements, Ias 27 separate financial statements (effective january 1, 2013) IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the account- ing for consolidated financial statements. It also addresses the issues raised in SIC-12 Consolidation — Special Purpose Ifrs 11 Joint arrangements (effective january 1, 2013) IFRS 11 replaces IAS 31 Interests in joint ventures and SIC-13 jointly-controlled entities — Non-monetary Con- tributions by venturers. IFRS 11 removes the option to account for jointly controlled entities (jCes) using pro- portionate consolidation. Instead, jCes that meet the definition of a joint venture must be accounted for using the equity method. Ifrs 12 Disclosure of Interests in other entities (effective january 1, 2013) IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. these disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required, but has no impact on the Group’s financial position or performance. Ifrs 13 fair value measurement (effective january 1, 2013) IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. the Group is cur- rently assessing the impact that this standard will have on the financial position and performance, but based on the preliminary analyses, no material impact is expected. Improvements to Ifrss (may 2012) the adoption of the relevant standards will not have any significant impact on the accounting policies, financial position or performance of the Group. Page 87 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 5. seGment information the Group’s risks and returns are predominantly affected by the fact that it operates in different countries. there- fore, the Group presents the segment information as it does internally to the Group executive Committee, using geographical segments and the distribution centers as separate segment. As of july 1, 2012 Dufry has regrouped its business into 4 geographical segments and one segment “global distri- bution centers” to achieve the financial, commercial and efficiency goals set in its strategic plan. the former re- gions europe, Africa and eurasia have been merged into one new region. the former region South America was split into a new region America I and a region America II. the former region Central America and Caribbean has been merged into region America I. Of the former region South America, the operations in Argentina, ecuador and uruguay have been merged into Region America I; and bolivia and brazil have been moved to Region America II. the region North America has been renamed united States & Canada. the comparative figures for 2011 have been prepared accordingly to reflect the above mentioned changes. 2012 In mIllIons of CHf eMeA & Asia America I America II united States & Canada Global Distribution Centers eliminations Dufry group 2011 In mIllIons of CHf eMeA & Asia America I America II united States & Canada Global Distribution Centers eliminations Dufry group turnover with external customers with other segments total eBItDa1 full tIme equIvalents 790.4 778.3 730.6 809.3 45.0 – 3,153.6 – – – – 757.8 (757.8) – 790.4 778.3 730.6 809.3 802.8 (757.8) 3,153.6 turnover 81.9 57.2 133.0 90.3 111.6 – 474.0 3,336 3,667 2,118 4,955 285 – 14,361 with external customers with other segments total eBItDa1 full tIme equIvalents 657.8 524.7 729.4 700.5 25.3 – 2,637.7 – – – – 599.4 (599.4) – 657.8 524.7 729.4 700.5 624.7 (599.4) 2,637.7 48.2 37.8 130.4 76.9 77.6 – 370.9 3,059 3,697 2,063 4,800 256 – 13,874 1 ebItDA before other operational result. the Group generated in Switzerland (domicile) a share of 1.1% (2011: 1.2%) of the total turnover with external customers. Page 88 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 2012 In mIllIons of CHf eMeA & Asia America I America II united States & Canada Global Distribution Centers unallocated positions Dufry group 2011 In mIllIons of CHf eMeA & Asia America I America II united States & Canada Global Distribution Centers unallocated positions Dufry group total assets total lIaBIlItIes InCome tax exPense CaPItal exPenDIture PaID DePreCIatIon & amortIzatIon otHer non-CasH Items 578.4 1,323.9 401.7 517.3 203.3 501.0 3,525.6 208.0 247.2 142.0 120.7 51.0 1,389.5 2,158.4 (2.1) (6.6) (27.0) (0.2) (2.4) (0.8) (17.3) (20.3) (21.0) (48.6) (0.9) (4.4) 34.3 66.0 21.4 41.4 1.3 3.9 (39.1) (112.5) 168.3 15.3 3.3 4.3 0.1 2.3 6.2 31.5 total assets total lIaBIlItIes InCome tax exPense CaPItal exPenDIture PaID DePreCIatIon & amortIzatIon otHer non-CasH Items 476.4 1,396.3 385.4 520.2 258.5 281.0 3,317.8 184.8 282.8 147.6 103.4 68.3 1,576.8 2,363.7 2.7 (0.7) (28.1) (0.5) (1.2) (0.4) (28.2) (20.2) (26.4) (16.3) (19.9) (0.5) (11.7) (95.0) 27.3 39.6 18.9 40.3 1.0 4.4 4.8 6.4 2.5 0.2 4.9 3.8 131.5 22.6 the unallocated assets comprise those of headquarter companies. the unallocated liabilities correspond mainly to the Group’s financial debt. 6. business combinations 2012 transactions 6.1 ACquISItION OF ReGStAeR llC, RuSSIA On january 10, 2012, Dufry took control by acquiring 51% of the shares of Dufry Staer holding Group (DSh) for a total consideration of ChF 44.7 million. Its main subsidiary, Regstaer llC, is a travel retailer operating Duty Free Shops at the Muscovite airport of Sheremetyevo in Russia. the acquired business complements Dufry’s existing op- erations by site adding 1,200 square meters in nine duty free shops across several terminals. Synergies are expected to be achieved among others when Dufry integrates the 200 Regstaer employees into its local organization, introduces its corporate procedures and integrates the logistics into its global supply chain. the current period 2012. the non-controlling interests resulting were measured at the proportionate share of the identifiable net assets. these financial statements include the results of Dufry Staer holding and its subsidiaries as of january, 2012. In the period (full year) ended December 31, 2012 these op- erations contributed ChF 51.2 million in turnover and ChF 10.6 million in ebIt to the consolidated income statement of the Group. the non-controlling interests have been valued at the proportionate share in the acquiree’s iden- tifiable net assets. the acquisition has been accounted for using the acquisi- tion method. the total transaction costs in relation with this acquisition amount to ChF 1.0 million, whereof ChF 0.2 million are included in the other operational result of the resulting goodwill is not amortized, is not deductible for tax purposes and is subject to annual impairment test- ing. the fair value of the identifiable assets and liabilities of the acquired group at the date of acquisition and the resulting goodwill were determined as follows: January 10, 2012 Inventories Other current assets Property, plant and equipment Other non current assets Concession rights Deferred tax liability Other liabilities Identifiable net assets Dufry’s share in the net assets (51%) Goodwill total consideration Page 89 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements faIr value In mIllIons of CHf faIr value In mIllIons of eur 7.7 2.8 6.4 1.1 64.8 (13.2) (1.6) 68.0 34.7 10.0 44.7 6.4 2.3 5.3 0.9 53.4 (10.8) (1.3) 56.2 28.7 8.2 36.9 6.2 ReCONCIlIAtION OF CASh FlOWS uSeD FOR / FROM buSINeSS COMbINAtIONS, Net OF CASh 2012 In mIllIons of CHf total ConsIDeratIon net CasH aCquIreD suBtotal CHanges In aC- Counts PayaBle net CasH flow Regstaer, Moscow – Russia Alliance, San juan – Puerto Rico Sovenex, Martinique – France Other total (44.7) 0.8 (43.9) – – – – – – – – – (44.7) 0.8 (43.9) – (0.9) (2.3) (0.6) (3.8) (43.9) (0.9) (2.3) 0.6 (47.7) 2011 transactions 6.3 ACquISItION OF INteRbAIReS AND OtheR COMPANIeS IN ARMeNIA, eCuADOR AND uRuGuAy On August 4, 2011, continuing with its strategy of investing in emerging markets, the Group acquired 100% of the shares and obtained control of several companies in South America and in Armenia, for a total consideration of ChF 753.9 million (uSD 987.2 million). the main companies incorporated into the group are: – Interbaires SA: the exclusive retailer operating duty free shops at both international airports of buenos Aires plus the airports of Cordoba, Mendoza and other smaller destinations in Argentina, – Navinten SA and blaicor SA: two uruguayan retailers operating duty free shops at the international airports of Montevideo and Punta del este respectively, – ADF Shops CjSC: An Armenian retailer operating ex- clusively the duty free shops at the international airport of yerevan, – ecuador Duty Free SA: A retailer in ecuador operating duty free shops at the international airport of Guayaquil, and – International Operation & Services Corp, an uruguayan distribution platform delivering duty free products to the above mentioned retailers. As a result of the acquisition the Group achieved a leading position in the Duty Free market in South America. the Group has integrated the new businesses into its existing organiza- tion and in this way generating considerable synergies. the acquisitions have been accounted for using the acqui- sition method. the financial statements of the Group in- clude the results of all the above mentioned companies as well as some intermediate holding entities as from the acquisition date. Page 90 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements the fair value of the identifiable assets and liabilities of the acquired companies at the date of acquisition and the resulting goodwill were determined as follows: august 4, 2011 In mIllIons of CHf In mIllIons of usD ReCOGNIZeD AMOuNtS OF IDeNtIFIAble ASSetS ACquIReD AND lIAbIlItIeS ASSuMeD Inventories Other assets Property, plant and equipment Intangible assets, mainly concession rights Deferred tax liability Provisions and contingent liabilities liabilities Identifiable net assets Goodwill total consideration 54.8 47.7 15.6 455.4 (31.0) (31.5) (62.6) 448.4 305.5 753.9 71.8 62.4 20.3 596.3 (40.6) (41.2) (82.0) 587.0 400.2 987.2 Acquisition related expenses, included in the other opera- tional result in the consolidated income statement for the period ended December 31, 2011 amounted to ChF 11.1 mil- lion (uSD 12.5 million). In the period ended December 31, 2011 these operations contributed ChF 171.4 million (uSD 195.6 million) in turn- over and ChF 34.4 million (uSD 39.2 million) in ebItDA¹ to the consolidated income statement of the Group. 6.4 ACquISItION OF SOveNeX SAS, MARtINIque On September 14, 2011, the Group acquired through a share deal 100% of the shares of Sovenex SAS, a retailer operat- ing the duty free shops at the international airport of Martinique (France) for a total consideration of ChF 7.0 mil- lion (euR 6.1 million). As a result of the acquisition, the Group expects to increase its presence in the French Caribbean and to improve profitability through economies of scale. the goodwill will not be deductible for tax purposes. the acquisition has been accounted for using the acquisi- tion method. these financial statements include the results of Sovenex SAS as of September, 2011. the fair value of the identifiable assets and liabilities of the acquired company at the date of acquisition and the resulting goodwill were determined as follows: sePtemBer 14, 2011 In mIllIons of CHf In mIllIons of eur Cash Contingent consideration total consideration ReCOGNIZeD AMOuNtS OF IDeNtIFIAble ASSetS ACquIReD AND lIAbIlItIeS ASSuMeD Inventories Other assets Property, plant and equipment Concession rights Deferred tax liability Current liabilities Identifiable net assets Goodwill total consideration 6.2 0.8 7.0 0.7 2.6 0.1 6.0 (2.0) (1.2) 6.2 0.8 7.0 5.4 0.7 6.1 0.6 2.3 0.1 5.2 (1.7) (1.1) 5.4 0.7 6.1 Page 91 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements Acquisition related expenses, included in the other opera- tional result in the consolidated income statement for the period ended December 31, 2011 amounted to ChF 0.2 mil- lion (euR 0.2 million). In the period ended December 31, 2011 this operation contributed ChF 2.8 million (euR 2.3 million) in turnover and ChF 0.4 million (euR 0.4 million) in ebItDA¹ to the consolidated income statement of the Group. If all business combinations of 2011 would have occurred as of the beginning of such year, the Group would have generated a turnover of ChF 2,855.8 million and an op- erative result of ChF 413.0 million in 2011. 6.5 ReCONCIlIAtION OF CASh FlOWS uSeD FOR/ FROM buSINeSS COMbINAtIONS, Net OF CASh 2011 In mIllIons of CHf Cost of tHe aCquIsItIon net CasH aCquIreD suBtotal CHanges In aCCounts PayaBles Interbaires and other, buenos Aires – Argentina Sovenex SAS, Martinique – France Network Italia edicole, Milan – Italy Alliance, San juan – Puerto Rico Other total (753.9) (7.0) – – (0.4) (761.3) 18.9 2.3 – – – 21.2 (735.0) (4.7) – – (0.4) (740.1) – 2.2 (4.4) (0.9) – (3.1) net CasH flow (735.0) (2.5) (4.4) (0.9) (0.4) (743.2) 2011 656.6 426.7 416.3 236.0 242.9 213.2 180.4 81.7 107.1 2012 831.2 528.6 514.9 235.1 288.1 245.3 210.6 94.9 113.4 3,062.1 2,560.9 2012 2,107.0 955.1 3,062.1 2011 1,690.3 870.6 2,560.9 7. net sales Net sales by product categories: In mIllIons of CHf Perfumes and Cosmetics Confectionery, Food and Catering Wine and Spirits literature and Publications Watches, jewelry and Accessories Fashion, leather and baggage tobacco goods electronics toys, Souvenirs and other goods total Net sales by market sector: In mIllIons of CHf Duty free Duty paid total Page 92 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements Net sales by channel: In mIllIons of CHf Airports Cruise liners and seaports Railway stations and other Downtown hotels and resorts total 8. cost of sales 2012 2,724.8 102.9 155.5 78.9 3,062.1 2011 2,258.2 98.0 118.0 86.7 2,560.9 Cost of sales are recognized when the Company sells a product and comprise the purchase price and the cost incurred until the product arrives at the warehouse, i. e. import duties, transport and third parties handling cost as well as inventory valuation adjustments and inventory differences. 9. sellinG expenses In mIllIons of CHf Concession fees and rents Credit card commissions Advertising and commission expenses Packaging materials Other selling expenses selling expenses Concession and rental income Commission income Commercial services and other selling income selling income total 2012 (659.9) (38.3) (18.2) (10.2) (12.7) (739.3) 14.3 1.8 29.0 45.1 (694.2) 2011 (558.8) (31.2) (13.9) (8.6) (10.9) (623.4) 14.6 2.0 27.1 43.7 (579.7) 10. number of retail shop concessions Dufry Group operates more than 1,200 retail shops in 43 countries at the reporting date. Dufry has entered into concession arrangements with operators of airports, sea- ports, railway stations etc. to operate these retail shops. the concession fees are usually variable based on sales level or number of passengers. the arrangements typically define among other aspects: – duration – nature of remuneration – product categories to be sold – location of the shops – normal fee and minimal concession fee the concession providers grant the right to sell a pre-defined assortment of products to travelers during the concession period as defined in the respective arrangements. they may comprise of one or several shops and are awarded in a public or private tender or in a negotiated transaction. 11. personnel expenses In mIllIons of CHf Salaries and wages Social security expenses Retirement benefits (defined contribution plans) Retirement benefits (defined benefit plans) Other personnel expenses total 12. General expenses In mIllIons of CHf Repairs, maintenance and utilities legal, consulting and audit fees Premises eDP and It expenses taxes, other than income taxes Office and administration travel, car, entertainment and representation Franchise fees and commercial services PR and advertising bank expenses Insurances total 13. depreciation, amortization and impairment In mIllIons of CHf Depreciation Impairment subtotal (note 19) Amortization Impairment subtotal (note 21) total Page 93 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 2012 (358.9) (69.2) (3.0) (2.6) (41.0) (474.7) 2012 (40.6) (40.0) (25.0) (19.6) (18.5) (17.7) (17.0) (13.0) (9.5) (6.7) (6.1) (213.7) 2012 (62.3) (2.8) (65.1) (103.2) – (103.2) (168.3) 2011 (302.5) (56.6) (3.2) (1.8) (38.5) (402.6) 2011 (33.6) (35.1) (20.8) (18.0) (12.1) (16.3) (16.1) (10.7) (9.4) (4.6) (5.4) (182.1) 2011 (55.2) (3.6) (58.8) (72.4) (0.3) (72.7) (131.5) Page 94 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 14. other operational result Other operational expenses and other operational income include non-recurring transactions, impairments of finan- cial assets and changes in provisions. In mIllIons of CHf Acquisition–related costs Consulting fees, expenses related to projects and start-ups Closing or rebranding of shops; restructuring of operations Increase of provisions Impairment of financial assets losses on sale of non-current assets Other expenses subtotal other operational expenses In mIllIons of CHf Gain on sale of non-current assets Recovery of write offs / release of allowances litigation income Other income subtotal other operational income In mIllIons of CHf Other operational expenses Other operational income other operational result 15. interest In mIllIons of CHf Interest expense Amortization of arrangement fees Interest on discounted financial liabilities Other finance expenses Interest expense on financial liabilities Interest on non-financial instruments total interest expense Interest income on short-term deposits total interest income 2012 (6.7) (9.1) (6.4) (4.8) (0.5) (0.1) (5.9) (33.5) 2012 0.1 0.2 1.2 1.9 3.4 2012 (33.5) 3.4 (30.1) 2012 (64.3) (13.4) (0.1) (1.2) (79.0) (0.5) (79.5) 1.3 1.3 2011 (11.3) (6.3) (3.2) (2.2) (1.2) (0.3) (4.6) (29.1) 2011 1.7 – – 0.5 2.2 2011 (29.1) 2.2 (26.9) 2011 (42.2) (6.9) (0.2) (5.9) (55.2) – (55.2) 4.1 4.1 16. income taxes INCOMe tAX ReCOGNIZeD IN the CONSOlIDAteD INCOMe StAteMeNt In mIllIons of CHf Current income taxes of which corresponding to the current period of which adjustments recognized in relation to prior years Deferred income taxes of which related to the origination or reversal of temporary differences of which adjustments recognized in relation to prior years of which adjustments due to change in tax rates total In mIllIons of CHf Consolidated earnings before income tax (ebt) expected tax rate in % tax at the expected rate eFFeCt OF: Income not subject to income tax Different tax rates for subsidiaries in other jurisdictions Different tax regime for sale of subsidiaries Non deductible expenses Current year tax loss carry-forwards not recognized Non recoverable withholding taxes Adjustments recognized in relation to prior year Other items total Page 95 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 2012 (61.2) (61.6) 0.4 22.1 23.1 – (1.0) (39.1) 2012 197.3 16.2% (31.9) 8.6 7.7 0.1 (6.5) (8.9) (6.7) 0.4 (1.9) (39.1) 2011 (41.7) (43.1) 1.4 13.5 13.5 0.3 (0.3) (28.2) 2011 163.1 17.0% (27.7) 8.3 6.0 0.2 (8.4) (0.7) (6.7) 1.4 (0.6) (28.2) the expected tax rate approximates the weighted average based on the ebt, instead of net sales as in prior year, of the countries where Dufry is active. In 2012, there have been no significant changes in the individual tax rates of the countries where Dufry was active. the comparative figures for 2011 have been adjusted to reflect the above mentioned changes accordingly. CuRReNt tAX ASSetS AND lIAbIlItIeS In mIllIons of CHf Income tax receivables Income tax payables total 2012 8.3 (10.8) (2.5) 2011 3.4 (14.2) (10.8) Income tax receivables or payables for the current and prior period are measured at the amount expected to be recovered from or paid to the tax authorities. the tax rates and tax laws used to compute the amounts are those that are enacted at the reporting date. Page 96 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements DeFeRReD INCOMe tAX ReCOGNIZeD IN OtheR COMPReheNSIve INCOMe In mIllIons of CHf ARISING ON INCOMe AND eXPeNSeS ReCOGNIZeD IN OtheR COMPReheNSIve INCOMe: Net gain / (loss) on hedge of net investment Cash flow hedges total INCOMe tAX ReCOGNIZeD DIReCtly IN equIty In mIllIons of CHf CuRReNt tAX Current tax effect on share based payments subtotal DeFeRReD tAX tax effect on share based payments tax effect on treasury shares subtotal total 17. earninGs per share bASIC basic earnings per share are calculated by dividing the net earnings attributable to equity holders of the parent by the weighted average number of shares outstanding during the year. In mIllIons of CHf / quantIty Net earnings attributable to equity holders of the parent Weighted average number of ordinary shares outstanding Basic earnings per share in CHf 2012 (0.8) (0.1) (0.9) 2012 – – 2.1 – 2.1 2.1 2011 9.9 (0.1) 9.8 2011 3.5 3.5 (3.7) 1.5 (2.2) 1.3 2012 122.4 27,447.0 4.46 2011 111.9 26,872.8 4.16 Page 97 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements DIluteD Diluted earnings per share are calculated by dividing the net earnings attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. In mIllIons of CHf / quantIty Net earnings attributable to equity holders of the parent Weighted average number of ordinary shares outstanding adjusted for the effect of dilution Diluted earnings per share in CHf 2012 122.4 27,782.0 4.41 2011 111.9 26,872.8 4.16 eARNINGS PeR ShARe ADjuSteD FOR AMORtIZAtION (CASh ePS) Dufry is presenting an adjusted ePS, so called Cash ePS, where the net earnings attributable to equity holders of the parent are adjusted by the amortization effect gener- ated by the intangible assets identified during the purchase price allocations of past acquisitions. With this Cash ePS, Dufry aims to facilitate the comparison at ePS level with other companies not having performed such acquisition activities. In mIllIons of CHf / quantIty Net earnings attributable to equity holders of the parent ADjuSteD FOR: Dufry’s share of the amortization in respect of acquisitions Adjusted net earnings Weighted average number of ordinary shares outstanding ePs adjusted for amortization (cash ePs) in CHf WeIGhteD AveRAGe NuMbeR OF ORDINARy ShAReS In tHousanDs Outstanding shares less treasury shares used for calculation of basic earnings per share eFFeCt OF DIlutION: Share options used for calculation of earnings per share adjusted for the effect of dilution For movements in shares see note 29.2 equity, 30.1 Share- based payment and 30.2 treasury shares. 2012 122.4 82.8 205.2 27,447.0 7.48 2012 27,573.2 (126.2) 27,447.0 335.0 27,782.0 2011 111.9 57.3 169.2 26,872.8 6.30 2011 26,976.2 (103.4) 26,872.8 – 26,872.8 Page 98 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 18. components of other comprehensive income 2012 In mIllIons of CHf exchange differences on translating foreign operations Net gain / (loss) on hedge of net investment in foreign operations Income tax effect subtotal Changes in the fair value of interest rate swaps held as cash flow hedges Income tax effect subtotal other comprehensive income (loss) attrIButaBle to equIty HolDers of tHe Parent Hedging & re- valuation reserves translation reserves non- ControllIng Interests total total equIty – – – – 1.0 (0.1) 0.9 0.9 (28.8) (28.8) (2.3) (31.1) 6.3 (0.8) 5.5 – – – (23.3) 6.3 (0.8) 5.5 1.0 (0.1) 0.9 (22.4) – – – – – – 6.3 (0.8) 5.5 1.0 (0.1) 0.9 (2.3) (24.7) 2011 In mIllIons of CHf attrIButaBle to equIty HolDers of tHe Parent Hedging & re- valuation reserves translation reserves non- ControllIng Interests total total equIty exchange differences on translating foreign operations Net gain / (loss) on hedge of net investment in foreign operations Income tax effect subtotal Changes in the fair value of interest rate swaps held as cash flow hedges Income tax effect subtotal other comprehensive income (loss) – – – – 1.1 (0.1) 1.0 1.0 95.2 95.2 3.0 98.2 (82.7) 9.9 (72.8) – – – 22.4 (82.7) 9.9 (72.8) 1.1 (0.1) 1.0 23.4 – – – – – – 3.0 (82.7) 9.9 (72.8) 1.1 (0.1) 1.0 26.4 Page 99 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 19. property, plant and equipment 2012 In mIllIons of CHf leaseHolD ImProvements furnIture fIxture ComPuter HarDware veHICles work In Progress At COSt balance at january 1, 2012 business combinations (note 6) Additions (note 20) Disposals Reclassification within classes Reclassification to intangible assets Currency translation adjustment Balance at December 31, 2012 ACCuMulAteD DePReCIAtION balance at january 1, 2012 Additions (note 13) Disposals Currency translation adjustment 233.6 5.3 17.0 (8.0) 24.6 (0.4) (5.0) 267.1 (101.8) (31.4) 5.8 1.1 172.7 0.5 9.3 (7.5) 18.2 – (5.7) 187.5 (101.3) (23.9) 7.0 3.9 Balance at December 31, 2012 (126.3) (114.3) IMPAIRMeNt balance at january 1, 2012 Impairment (note 13) Disposals Currency translation adjustments Balance at December 31, 2012 (3.0) (2.0) 1.5 – (3.5) (1.2) (1.2) 0.3 0.3 (1.8) 51.4 0.4 5.5 (1.4) 0.4 – (1.1) 55.2 (34.9) (6.2) 1.4 0.7 (39.0) (0.6) – – – (0.6) 7.4 0.2 0.9 (0.5) 0.1 – (0.2) 7.9 (5.1) (0.8) 0.5 – (5.4) – – – – – 29.3 – 47.3 (0.1) (43.3) – (0.2) 33.0 – – – – – (0.4) 0.4 – – – 2011 In mIllIons of CHf leaseHolD ImProvements furnIture fIxture ComPuter HarDware veHICles work In Progress At COSt balance at january 1, 2011 business combinations (note 6) Additions (note 20) Disposals Reclassification within classes Reclassification to intangible assets Currency translation adjustment 205.2 6.6 17.6 (7.7) 11.5 – 0.4 156.9 0.8 12.4 (6.1) 8.1 – 0.6 Balance at December 31, 2011 233.6 172.7 ACCuMulAteD DePReCIAtION balance at january 1, 2011 Additions (note 13) Disposals Currency translation adjustment (83.7) (25.3) 7.2 – (83.5) (23.0) 5.5 (0.3) Balance at December 31, 2011 (101.8) (101.3) IMPAIRMeNt balance at january 1, 2011 Impairment (note 13) Currency translation adjustment Balance at December 31, 2011 CARRyING AMOuNt: at December 31, 2012 at December 31, 2011 (1.1) (2.0) 0.1 (3.0) 137.3 128.8 (0.1) (0.8) (0.3) (1.2) 71.4 70.2 43.4 0.8 6.8 (0.5) 0.6 – 0.3 51.4 (29.3) (6.0) 0.4 – (34.9) (0.2) (0.4) – (0.6) 15.6 15.9 7.0 0.1 0.9 (0.6) – – – 7.4 (4.7) (0.9) 0.6 (0.1) (5.1) – – – – 2.5 2.3 16.0 7.2 25.5 (0.4) (20.2) (0.1) 1.3 29.3 – – – – – – (0.4) – (0.4) 33.0 28.9 total 494.4 6.4 80.0 (17.5) – (0.4) (12.2) 550.7 (243.1) (62.3) 14.7 5.7 (285.0) (5.2) (2.8) 1.8 0.3 (5.9) total 428.5 15.5 63.2 (15.3) – (0.1) 2.6 494.4 (201.2) (55.2) 13.7 (0.4) (243.1) (1.4) (3.6) (0.2) (5.2) 259.8 246.1 Page 100 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 19.1 IMPAIRMeNt OF PROPeRty, PlANt AND equIPMeNt the impairment loss in 2012 relates mainly to certain shops in Italy (ChF 1.1 million) and uSA (ChF 1.3 million), the impairment loss in 2011 relates mainly to certain shops in europe (ChF 1.3 million) and uSA (ChF 1.7 million). 20. cash flow used for purchase of property, plant and equipment In mIllIons of CHf Payables for capital expenditure at the beginning of the period business combinations (note 6) Additions of property, plant and equipment (note 19) Payables for capital expenditure at the end of the period Currency translation adjustment total Cash flow 2012 (15.0) – (80.0) 10.8 0.3 (83.9) 2011 (14.0) (2.9) (63.2) 15.0 0.1 (65.0) 21. intanGible assets 2012 ConCessIon rIgHts In mIllIons of CHf Indefinite lives finite lives BranDs gooDwIll otHer total At COSt balance at january 1, 2012 business combinations (note 6) Additions (note 22) Disposals Reclassifications from property, plant and equipment Currency translation adjustment Balance at December 31, 2012 ACCuMulAteD AMORtIZAtION balance at january 1, 2012 Additions (note 13) Currency translation adjustment Balance at December 31, 2012 IMPAIRMeNt balance at january 1, 2012 Disposals Currency translation adjustment Balance at December 31, 2012 61.2 1,337.2 158.9 – – – – (0.8) 60.4 – – – – – – – – 64.8 7.0 – (0.1) (32.4) 1,376.5 (234.6) (90.6) 6.7 (318.5) (0.4) – 0.1 (0.3) – – – – (0.1) 158.8 – – – – – – – – 715.3 10.0 – (0.8) – (17.1) 707.4 – – – – (0.8) 0.8 – – 81.5 – 19.2 (0.1) 0.5 (1.5) 99.6 (39.7) (12.6) 1.0 (51.3) – – – – 2,354.1 74.8 26.2 (0.9) 0.4 (51.9) 2,402.7 (274.3) (103.2) 7.7 (369.8) (1.2) 0.8 0.1 (0.3) 2011 In mIllIons of CHf At COSt balance at january 1, 2011 business combinations (note 6) Additions (note 22) Disposals Reclassification Currency translation adjustment Balance at December 31, 2011 ACCuMulAteD AMORtIZAtION balance at january 1, 2011 Additions (note 13) Disposals Currency translation adjustment Balance at December 31, 2011 IMPAIRMeNt balance at january 1, 2011 Additions (note 13) Disposals Currency translation adjustment Balance at December 31, 2011 CARRyING AMOuNt: at December 31, 2012 at December 31, 2011 Page 101 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements ConCessIon rIgHts Indefinite lives finite lives BranDs gooDwIll otHer total 62.5 – – – – (1.3) 61.2 – – – – – – – – – – 769.2 460.7 1.2 (0.8) – 106.9 1,337.2 (168.4) (61.5) 0.3 (5.0) (234.6) (0.3) – – (0.1) (0.4) 158.9 – – – – – 158.9 – – – – – – – – – – 338.5 306.3 – – – 70.5 715.3 – – – – – (0.8) – – – (0.8) 60.4 61.2 1,057.7 1,102.2 158.8 158.9 707.4 714.5 58.1 0.7 22.7 (1.3) 0.1 1.2 81.5 (29.1) (10.9) 1.0 (0.7) (39.7) – (0.3) 0.2 0.1 – 48.3 41.8 1,387.2 767.7 23.9 (2.1) 0.1 177.3 2,354.1 (197.5) (72.4) 1.3 (5.7) (274.3) (1.1) (0.3) 0.2 – (1.2) 2,032.6 2,078.6 ADDItIONS thROuGh buSINeSS COMbINAtIONS In mIllIons of CHf 31.12. 2012 31.12.2011 31.12. 2012 31.12.2011 gooDwIll ConCessIon rIgHts Regstaer, Moscow – Russia (note 6.1) Interbaires and other, buenos Aires – Argentina (note 6.3) Sovenex, Martinique – France (note 6.4) total 10.0 – – 10.0 – 305.5 0.8 306.3 64.8 – – 64.8 – 454.7 6.0 460.7 Page 102 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 21.1 IMPAIRMeNt teSt Concession rights with indefinite useful lives, as well as brands and goodwill are subject to impairment test- ing each year. Concession rights with finite useful lives are tested for impairment whenever events or circum- stances indicate that the carrying amount may not be recoverable. 21.1.1 Impairment test of goodwill For the purpose of impairment testing, goodwill recognized from business combinations has been allocated to the following cash generating units (CGu’s). these groups also reflect the reportable segments that are expected to ben- efit from the synergies of the business combinations: In mIllIons of CHf eMeA & Asia America I America II united States & Canada total carrying amount of goodwill 31.12. 2012 31.12.2011 99.6 394.1 138.3 75.4 707.4 64.9 431.4 141.9 76.3 714.5 the recoverable amounts of goodwill for each of the above group of CGu’s have been determined based on value- in-use calculations. Such calculations are based on busi- ness plans approved by senior management and use cash flow projections covering a five-year period as well as a discount rate, which represents the weighted average cost of capital (WACC) adjusted for regional specific risks. Cash flows beyond that five-year period have been ex- trapolated using a steady growth rate that does not exceed the long-term average growth rate for the respective markets in which these CGu’s operate. the discounted cash flow model uses net sales as a basis to determine the free cash flow and the value assigned. Net sales pro- jections are based on actual net sales achieved in the year 2012 and latest estimations for the projected years. the intersegment results of the global distribution centers have been assigned/allocated to the respective geograph- ical segments. gooDwIll europe Africa eurasia eMeA & Asia America I America II united States & Canada Post tax DIsCount rates Pre-tax DIsCount rates growtH rates for net sales 2012 2011 2012 2011 2012 2011 – – – 7.17% 8.38% 7.67% 5.45% 6.30% 8.10% 6.22% – 7.21% 7.60% 5.03% – – – 7.82% 9.40% 9.22% 6.89% 8.48% 9.15% 6.78% – 8.21% 9.12% 6.83% – – – 1.9–9.6% 3.8–9.4% 2.0–18.8% 2.6–13.1% 4.5–9.3% 6.0–11.7% 8.0–22.0% – 4.5–12 % 5.2–38.1 % 2.4–10.9 % As basis for the calculation of these discount rates, the following risk free interest rates have been used (derived from prime 10-year bonds rates): ChF 1.23%, euR 2.32%, uSD 2.32% (2011: ChF 0.73%, euR 1.87%, uSD 1.97%). Page 103 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements For the calculation of the discount rates and WACC (weighted average cost of capital), the company used the following relevered beta: beta factor 2012 0.64 2011 0.84 Sensitivity to changes in assumptions Management believes that any reasonably possible change in the key assumptions, on which the recoverable amounts are based, would not cause the respective car- rying amount to exceed its recoverable amount, except for Region America I where the actual recoverable amount exceeds its carrying amount by ChF 256.9, but where a reduction of the gross margin by 1% would lead to an im- pairment of ChF 5.4 million. the key assumptions used for the determination of the value-in-use are the same as the ones described below for concession rights. 21.1.2 Impairment test of concession rights with indefinite useful lives Concession rights are tested for impairment purposes at company level, which represents the cash generating unit. For presentation purposes the CGu’s are grouped into business units. A business unit is a part of Dufry’s busi- ness segments. the following table illustrates the existing business units with concessions rights with indefinite useful life: In mIllIons of CHf Italy Middle east and India total carrying amount of concession rights 31.12. 2012 31.12.2011 48.4 12.0 60.4 48.8 12.4 61.2 the recoverable amounts for each of the CGu’s have been determined based on value-in-use calculations. Such calculations are based on business plans approved by senior management and use cash flow projections cover- ing a five-year period as well as a discount rate, which represents the weighted average cost of capital (WACC) adjusted for local specific risks. Cash flows beyond that five-year period have been ex- trapolated using a steady growth rate that does not exceed the long-term average growth rate for the respective mar- kets in which these CGu’s operate. the discounted cash flow model uses net sales as a basis to determine the free cash flow and subsequently the value assigned. Net sales projections are based on actual net sales achieved in year 2012 and latest estimations for the years thereafter. the key assumptions used for determining the recoverable amounts for these business units are: ConCessIon rIgHts 2012 2011 2012 2011 2012 2011 Post tax DIsCount rates Pre-tax DIsCount rates 1 growtH rates for net sales Italy Middle east and India 7.56% 6.39% 6.19% 6.09% 8.85% 6.39% 7.40% 6.09% 3.0–5.2% 3.0–5.3% 1.9–5.9% 8.9–9.7% 1 based on the country in which the concession is located Discount rates Several factors affect the discount rates: – For the financial debt part, the rate is based on the aver- age yield of the past 5 years of the respective ten-year government bond and is increased by the company’s effective bank margin and adjusted by the effective blended tax rate of the respective CGu. – For the equity part, a 5% equity risk premium is added to the base rate commented above and adjusted by the beta of Dufry’s peer group. the same methodology is used by management to deter- mine the discount rate used in discounted cash flow (DCF) valuations, which are a key instrument to assess business potential of new or additional investment proposals. the Group has used a growth rate of 2% to extrapolate the cash flow projections beyond the period covered by the most recent forecasts. 21.1.4 Brands the brand name Dufry is not allocated to any specific CGu for impairment testing purpose, but to a group of CGu’s. the brand name hudson is allocated only to the CGu’s of hudson. Management believes that the syner- gies from the brands reflecting the economic reality are in accordance with these two groupings. the recoverable amount is determined based on the Relief from the Royalty method that considers a steady royalty stream of 0.3% post tax of the net sales projected of Dufry (without hudson) and a steady royalty stream of 0.9% post tax of the net sales projected of hudson. the net sales projections cover a period of five years (2013–2017) with year on year growth rates between 2.9% and 12.6% (2011: 4.7%–21.0%) (budget). these growth rates do not exceed the long-term average growth rate for Dufry Group. the discount rate of 5.9% (2011: 5.0%) represents the weighted average cost of capital (WACC) at Group level. the recov- erable amount exceeds the carrying amount by ChF 265.7 million (2011: ChF 221.6 million). Page 104 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements Sensitivity to changes in assumptions the actual recoverable amount for the CGu subject to impairment testing exceeds its carrying amount by ChF 509.7 million (2011: ChF 434.0 million). With regard to the assessment of value-in-use of the CGu, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the concession rights to materially exceed its recover- able amount. 21.1.3 key assumptions used for value-in-use calculations the calculation of value-in-use is most sensitive to the following assumptions: – Sales growth – Gross margin and suppliers prices – Concession fee levels – Discount rates – Growth rate used to extrapolate Sales growth Sales growth is estimated based on several factors. First Management takes into consideration statistics published by external experts, such as Air4cast or ACI (Airports Council International) to estimate the development of in- ternational passenger traffic per airport or country where Dufry is active. Management also takes into consideration specific price inflation factors of the country, cross cur- rency effect and the expected potential to capture clients (penetration) per business segment. Gross margins the expected gross margins are based on average prod- uct assortment values estimated by the management for the budget 2013. these values are maintained over the planning period or where specific actions are planned, these values have been increased or decreased by up to 1% over the 5 year planning horizon compared to the historical data. the gross margin is also affected by sup- plier’s prices. estimates are obtained from global nego- tiations held with the main suppliers for the products and countries for which products are sourced, as well as data relating to specific commodities during the months before the reporting date. Concession fee levels these assumptions are important because, as well as using specific economic sector data for growth rates (as noted below), management assesses how the position of the CGu, relative to its competitors, might change over the projected period. For the CGu’s subject to a value- in-use calculation, management expects the competitive position to remain stable over the budget period. 22. cash flows used for purchase of intanGible assets In mIllIons of CHf Payables for capital expenditure at january 1 Additions of intangible assets (note 21) Payables for capital expenditure at December 31 Currency translation adjustment total Cash flow Page 105 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 2012 (6.9) (26.2) 4.4 0.1 (28.6) 2011 (12.8) (23.9) 6.9 (0.2) (30.0) 23. deferred tax assets and liabilities temporary differences arise from the following positions: In mIllIons of CHf 31.12. 2012 31.12.2011 DeFeRReD tAX ASSetS Property, plant and equipment Intangible assets Provisions and other payables tax loss carry-forward Other total DeFeRReD tAX lIAbIlItIeS Property, plant and equipment Intangible assets Provisions and other payables Other total Deferred tax liabilities net there are no temporary differences associated with invest- ments in subsidiaries, for which deferred tax liabilities need to be recognized. Deferred tax balances are presented in the consolidated statement of financial position as follows: 8.1 76.4 30.3 34.7 18.1 167.6 (5.4) (165.3) (3.2) (5.7) (179.6) (12.0) 8.5 79.0 19.9 38.6 16.3 162.3 (1.3) (160.7) (16.6) (5.7) (184.3) (22.0) In mIllIons of CHf 31.12. 2012 31.12.2011 Deferred tax assets Deferred tax liabilities Balance at the end of the period 153.0 (165.0) (12.0) 146.5 (168.5) (22.0) Page 106 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements Reconciliation of movements to the deferred taxes: In mIllIons of CHf 31.12. 2012 31.12.2011 Changes in deferred tax assets Changes in deferred tax liabilities business combinations (notes 6.1 – 6.3 – 6.4) Currency translation adjustment Deferred tax income (expense) at the end of the period 6.5 3.5 13.2 (1.1) 22.1 8.7 (22.2) 33.1 (6.1) 13.5 tax loss carry-forwards Certain subsidiaries incurred tax losses, which according to the local tax legislation gives rise to a tax credit usable in future tax periods. however, the use of this tax benefit can be limited in time (expiration) and by the ability of the respec- tive subsidiary to generate enough taxable profits in future. Deferred tax assets relating to tax loss carry-forwards or temporary differences are recognized when it is probable that such tax credits can be utilized in the future in ac- cordance with the budget 2013 approved by the board of Directors and the projections prepared by management for these entities. the unrecognized tax loss carry-forwards by expiry date are as follows: In mIllIons of CHf 31.12. 2012 31.12. 2011 expiring within 1 to 3 years expiring within 4 to 7 years expiring after 7 years With no expiration limit total 24. other non-current assets 3.4 41.8 95.2 15.2 155.6 4.0 42.6 82.3 15.0 143.9 In mIllIons of CHf 31.12. 2012 31.12. 2011 Guarantee deposits loans and contractual receivables Other subtotal Allowances total Other non-current assets have maturities exceeding 12 months from initial recognition. 14.0 15.9 8.8 38.7 (1.8) 36.9 12.9 18.3 8.5 39.7 (1.9) 37.8 MOveMeNt IN AllOWANCeS: In mIllIons of CHf balance at the beginning of the period Creation utilization unused amounts reversed Currency translation adjustment Balance at the end of the period 25. inventories In mIllIons of CHf Purchased inventories at cost Inventory allowances 1 total 1 the inventory impaired has a book value of ChF 23.4 million (2011: ChF 24.6 million) CASh FlOW uSeD FOR INCReASe/FROM DeCReASe IN INveNtORIeS: In mIllIons of CHf balance at the beginning of the period balance at the end of the period gross change business combinations Impairments and other non-cash transactions Currency translation adjustment Cash flow – (Increase) /decrease in inventories Cost of sales includes inventories written down to net re- alizable value and inventory differences of ChF 15.6 million (2011: ChF 17.9 million). Page 107 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 2012 (1.9) (0.1) 0.1 0.1 – (1.8) 2011 (2.0) – – 0.1 – (1.9) 31.12. 2012 31.12.2011 441.5 (20.4) 421.1 2012 453.8 441.5 12.3 7.7 (4.2) (13.2) 2.6 453.8 (21.8) 432.0 2011 314.9 453.8 (138.9) 55.5 (8.0) 21.5 (69.9) Page 108 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 26. trade and credit card receivables In mIllIons of CHf trade receivables Credit card receivables gross Allowances net trade receivables and credit card receivables are stated at their nominal value less allowances for doubtful amounts. these allowances are established based on an individual evaluation when collection appears to be no longer probable. AGING ANAlySIS OF tRADe ReCeIvAbleS 31.12. 2012 31.12. 2011 15.3 45.1 60.4 (0.9) 59.5 23.7 24.1 47.8 (0.8) 47.0 In mIllIons of CHf 31.12. 2012 31.12. 2011 Not due OveRDue: up to 30 days 31 to 60 days 61 to 90 days More than 90 days total overdue trade receivables, gross MOveMeNt IN AllOWANCeS In mIllIons of CHf balance at the beginning of the period Creation Balance at the end of the period 9.6 1.9 0.3 2.6 0.9 5.7 15.3 2012 (0.8) (0.1) (0.9) 12.8 5.8 1.7 1.6 1.8 10.9 23.7 2011 (0.4) (0.4) (0.8) 27. other accounts receivable In mIllIons of CHf 31.12. 2012 31.12. 2011 Page 109 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 35.9 33.3 16.2 12.4 8.0 6.9 1.5 1.3 0.5 0.2 10.5 126.7 (6.3) 120.4 2012 (3.9) (2.5) 0.1 0.1 0.1 (6.3) 41.7 30.8 14.5 13.4 13.3 1.7 1.9 1.1 0.4 0.2 12.2 131.2 (3.9) 127.3 2011 (1.6) (2.0) – (0.4) 0.1 (3.9) Sales tax and other tax credits Receivables for refund from suppliers Receivables from subtenants and local business partners Prepayments Accrued concession fees and rental income Guarantee deposits Personnel receivables Accrued income Derivative financial assets 1 loans receivable Other total Allowances total 1 See note 38 Financial instruments MOveMeNt IN AllOWANCeS In mIllIons of CHf balance at the beginning of the period Creation Release utilized Currency translation adjustment Balance at the end of the period 28. cash and cash equivalents Cash and cash equivalents consist of cash on hand and banks as well as short-term deposits at banks with maturity of 90 days or less. Cash and cash equivalents at the end of the reporting period include ChF 20.8 million (2011: ChF 6.1 million) held by subsidiaries operating in countries with exchange controls or other legal restrictions on money transfer. Page 110 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 29. equity 29.1 ISSueD CAPItAl In mIllIons of CHf Share capital Share premium total 29.1.1 fully paid ordinary shares 31.12. 2012 31.12. 2011 148.4 1,207.0 1,355.4 134.9 934.5 1,069.4 In mIllIons of CHf numBer of sHares sHare CaPItal sHare PremIum balance at january 1, 2011 Release of accrued share issuance costs Reclassification to reserves balance at December 31, 2011 Issue of shares Balance at December 31, 2012 26,976,203 – – 26,976,203 2,697,620 29,673,823 134.9 – – 134.9 13.5 148.4 934.2 2.6 (2.3) 934.5 272.5 1,207.0 29.2 AuthORIZeD AND CONDItIONAl ShARe CAPItAl autHorIzeD sHare CaPItal numBer of sHares In tHousanDs of CHf balance at january 1, 2011 balance at December 31, 2011 Increase of authorized share capital utilized October 11, 2012 Balance at December 31, 2012 – – 5,395,241 (2,697,620) 2,697,621 – – 26,976 (13,488) 13,488 ConDItIonal sHare CaPItal numBer of sHares In tHousanDs of CHf balance at january 1, 2011 balance at December 31, 2011 Increase of conditional share capital Balance at December 31, 2012 567,296 567,296 2,130,324 2,697,620 2,836 2,836 10,652 13,488 Share capital increase On October 11, 2012, Dufry AG utilized part of its authorized share capital and placed 2,697,620 new registered shares representing 9.99% of the total shares. After this share issuance, the share capital of the company amounts to ChF 148,369,115. using an accelerated book building procedure the company offered the new shares as a private placement in Switzerland and to certain qualifying institutional inves- tors outside of Switzerland. Dufry received for this offering a price of ChF 109 per share, resulting in gross proceeds of ChF 294 million, which are planned to be used to finance the acquisition of the Folli Follie travel Retail operations (see note 39). the trading of the offered shares on the SIX Swiss exchange commenced on October 15, 2012. the share issuance costs related with this transaction amount to ChF 8.0 million and have been presented in equity. Page 111 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 29.3 ReSeRveS 29.3.1 Hedging and revaluation reserves In mIllIons of CHf 31.12. 2012 31.12. 2011 balance at the beginning of the year Gain / (loss) arising on changes in fair value of financial instruments: – Interest rate swaps entered for as cash flow hedges Related income tax Balance at the end of the year there were no gains or losses arising on changes in fair value of hedging instruments reclassified from equity into consolidated income statement during the year. 29.3.2 translation reserves In mIllIons of CHf balance at the beginning of the year exchange differences arising on translating the foreign operations (attributed to equity holders of parent) Net gain/(loss) on hedge of net investments in foreign operations (note 32) Income tax related to net gains/(losses) on hedge of net investments in foreign operations Balance at the end of the year exchange differences arising from the translation of the results and net assets of the Group’s foreign operations from their functional currencies to the Group’s presen- tation currency (i.e. ChF) are recognized directly in other comprehensive income and accumulated in the translation reserves. exchange differences previously accumulated in the translation reserves (in respect of translating the net assets of foreign operations) are reclassified to the consolidated income statement on the disposal of the foreign operation. (0.9) 1.0 (0.1) – 31.12. 2012 (176.6) (28.8) 6.3 (0.8) (199.9) (1.9) 1.1 (0.1) (0.9) 31.12.2011 (199.0) 95.2 (82.7) 9.9 (176.6) Foreign exchange gains and losses on financing instru- ments that are designated as hedging instruments for net investments in foreign operations are included in the translation reserves. Page 112 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 29.3.3 retained earnings In mIllIons of CHf 31.12. 2012 31.12. 2011 balance at the beginning of the year Net earnings attributable to equity holders of the parent Distribution of treasury shares Share-based payments tax effect on equity transactions Reclassification from share premium Balance at the end of the year On May 2, 2012, the Ordinary General Assembly has approved not to distribute dividends for 2012 (same as for 2011). (8.4) 122.4 – 8.8 2.1 – 124.9 (105.8) 111.9 (27.7) 9.6 1.3 2.3 (8.4) 30 share-based payments ReStRICteD StOCK uNIt PlAN (RSu) Dufry has implemented specific restricted stock unit (“RSu”) plans for certain members of the Group manage- ment. these RSu Awards are from economic point of view stock options with an exercise price of nil. each RSu represents the right to receive one share if the vesting conditions are met. two years. the expected volatility reflects assumptions, that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. there are no cash settlement alternatives. In 2012, the accrued cost based on a fair value of ChF 55.11 per RSu (2011: ChF 55.11 per RSu) is ChF 8.8 million (2011: ChF 9.6 million) and has been recorded in the consolidated income statement against a reserve in equity. 30.1 RSu PlANS OF DuFRy AG 30.2 tReASuRy ShAReS At the beginning of 2012 Dufry hold 108,116 treasury shares with a book value of ChF 13.5 million (2011: 289,059 shares at ChF 28.7 million). During the period the Company did not distribute shares to RSu holders (in 2011: 281,362 shares with a value of ChF 27.7 million) and purchased 230,000 shares to ChF 28.1 million (2011: 100,419 to ChF 12.5 million). At the end of the year Dufry hold 338,116 treasury shares with a book value of ChF 41.6 million. treasury shares are kept at historical cost. At inception 86 participants of Dufry’s RSu award 2011 have been granted the right to receive on january 1, 2013, free of charge, 349,200 RSu’s on aggregate, based on the market value of the Company’s shares on the Swiss Stock exchange (SIX) on December 14, 2011 (i.e. ChF 85.65 per share) (“the RSu Awards 2011”). the RSu Awards 2011 contain two vesting conditions to be met: a) the participants must be employed by the Company from january 1, 2011 until january 1, 2013 and b) the average price of the Company’s shares on the SIX for the ten previous trading days to january 1, 2013 must be 1% higher than at grant date. All restrictions on the RSu award 2011 lapsed on january 1, 2013, and 334.953 RSu awards were converted into shares of the Company and given to 83 RSu plan participants free of restrictions. thereafter, no other obligations in rela- tion with the RSu award 2011 or any preceding awards remained unsettled. the fair value of the RSu Awards 2011 has been estimated at the grant date using a binominal pricing model, taking into account the terms and conditions (risk free interest rate of 0.7% and a volatility of 42%) upon which the awards were granted. the contractual life of the awards 2011 is Page 113 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 2012 33.3 – 6.7 0.7 40.7 2011 – 0.7 1.7 (0.4) 2.0 31 breakdown of transactions with non-controllinG interests 31.1 ChANGeS IN PARtICIPAtIONS OF NON-CONtROllING INteReStS Recognized in equity attributable to non-controlling interests: In mIllIons of CHf Regstaer llC, 49% non-controlling interests (note 6), business combination Shanghai huaihai Dufry trading Co. ltd, 50% non-controlling interests, founded hudson Group, increase in the non-controlling interests of several subsidiaries Other total 31.2 equIty ReSeRve FOR tRANSACtIONS WIth NON-CONtROllING INteReStS In 2012 and 2011 there have been no transactions with share- holders of non-controlling interests affecting equity reserve. 32 financial debt In mIllIons of CHf 31.12. 2012 31.12.2011 bank debt (overdrafts) bank debt (loans) 3rd party loans financial debt, short-term bank debt (loans) Senior Notes 3rd party loans financial debt, long-term total of which are: bank debt Senior Notes loans payable 25.3 11.5 3.1 39.9 894.4 447.4 3.6 1,345.4 1,385.3 931.2 447.4 6.7 23.4 5.1 2.1 30.6 1,525.5 – 4.3 1,529.8 1,560.4 1,554.0 – 6.4 Page 114 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements bANK Debt In mIllIons of CHf bANK Debt (lOANS AND OveRDRAFtS) DeNOMINAteD IN: uS Dollar Swiss Franc euro Other currencies subtotal Deferred bank arrangement fees total the Group negotiates and manages centrally its key credit facilities. For practical reasons, minor credit lines are kept at local level. CReDIt FACIlItIeS the main bank credit facilities are granted by two bank syndicates with the london branch of ING N.v. acting as agent for both bank syndicates. the facilities consist of: – A term loan of uSD 1,000.0 million (ChF 914.6, 2011: 938.7) includes an amortization schedule with repayments scheduled between August 2014 and August 2016 – A committed 5-year revolving credit facility (RCF) of ChF 650 million which replaced the expiring RCF of ChF 415 million. the new facility allows extending the maturity profile of the financial indebtedness the agreements contain covenants and conditions custom- ary to this type of financing. During 2012 and 2011, Dufry complied with the financial covenants and conditions con- tained in the bank credit agreements. 31.12. 2012 31.12. 2011 921.6 0.7 5.6 19.3 947.2 (16.0) 931.2 1,475.6 30.4 56.7 12.2 1,574.9 (20.9) 1,554.0 the borrowings under these credit facilities bear interest at a floating rate (euRIbOR or lIbOR) plus spread. At De- cember 31, 2012 the overall weighted average interest rate was 3.2% (2011: 2.5%), consisting of uSD borrowings at 3.2% (2011: 2.5%), euR borrowings at 3.4% (2011: 3.2%) and ChF borrowings at 2.2% (2011: 1.9%). In addition the operations of Duty Free Caribbean ltd, emeralds Distributors ltd, young Caribbean jewelers Distributors ltd and CeI barbados ltd maintain credit facilities from the First Caribbean International bank for an amount of uSD 22.6 million (ChF 20.7 million) (2011: uSD 23.3 million or ChF 20.9 million) which are guaranteed with the assets of the subsidiaries mentioned above. SeNIOR NOteS 32.1 heDGe OF Net INveStMeNtS IN FOReIGN OPeRAtIONS On October 26, 2012, Dufry placed ChF 466.1 million (uSD 500 million) Senior Notes denominated in uSD with a maturity up to October 2020 with qualified institutional investors in Switzerland and abroad. the Senior Notes are listed at the ISe, Ireland’s stock exchange. the Senior Notes carry a coupon of 5.5% per year which will be payable semi-annually in arrears. Dufry used the pro- ceeds to replace bank loans expiring in August 2013. At December 31, 2012 an amount of uSD 947.2 million (December 31, 2011: uSD 707.3 million) included in the financial debt has been kept as hedge of net investment held in Dufry do brasil, Interbaires SA, Navinten SA, blaicor SA, International Operation & Services Corp. and Duty Free ecuador SA in accordance with IAS 39, para- graph 102. Page 115 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements With these instruments, the Group reduces the transla- tion risk. At December 31, 2012, a net gain on hedge of net investments in foreign operations resulted in the amount of ChF 6.3 million (2011: loss of ChF 82.7 million) to compensate the respective exchange differences on translating foreign operations, both amounts recognized in the other comprehensive income. 32.2 Net INveStMeNt IN FOReIGN OPeRAtION Additionally, Dufry granted the following long-term loans to subsidiaries, which are considered as part of Dufry’s net investment in foreign operations in accordance with IAS21, paragraph 15, as settlement is neither planned nor likely to occur in the foreseeable future. In mIllIons CurrenCy 31.12. 2012 31.12. 2011 SubSIDIARy: Dufry America holding Inc. Dufry Mexico SA de Cv Dufry hispanosuiza Sl 33 provisions uSD uSD euR 20.4 – – 20.4 52.5 5.1 In mIllIons of CHf ContIngent lIaBIlItIes CloseDown law suIts anD DutIes DIsPute on ContraCts laBor DIsPutes otHer total Balance at January 1, 2012 Charge of the year utilized unused amounts reversed Currency translation adjustment Balance at December 31, 2012 thereof: – current – non-current Balance at January 1, 2011 business combinations Charge of the year utilized unused amounts reversed Currency translation adjustment Balance at December 31, 2011 thereof: – current – non-current 36.7 – – – (1.7) 35.0 – 35.0 – 30.0 – – – 6.7 36.7 – 36.7 – 1.0 – – – 1.0 1.0 – – – – – – – – – – 4.9 2.2 (0.2) (0.2) – 6.7 6.7 – 1.8 – 3.2 – – (0.1) 4.9 4.9 – – 0.4 – – – 0.4 0.4 – 0.4 – – (0.4) – – – – – 3.0 0.5 – – (0.1) 3.4 0.2 3.2 3.2 0.1 0.1 (0.3) (0.1) – 3.0 0.2 2.8 2.0 1.3 (0.2) (0.1) 0.7 3.7 2.9 0.8 0.1 1.4 2.8 (0.1) (2.7) 0.5 2.0 2.0 – 46.6 5.4 (0.4) (0.3) (1.1) 50.2 11.2 39.0 5.5 31.5 6.1 (0.8) (2.8) 7.1 46.6 7.1 39.5 Management believes that its provisions are adequate based upon currently available information. however, given the inherent difficulties in estimating liabilities in the below described areas, it cannot be guaranteed that additional or lesser costs will be incurred above or below the amounts provisioned. Page 116 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements CONtINGeNt lIAbIlItIeS ClOSe DOWN Several contingent liabilities with a fair value of ChF 35.0 million (2011: ChF 36.7 million) were determined during the due diligence process made for the acquisition of the companies in South America, Central America and Asia. IFRS 3 business combinations requires to reflect these liabilities with uncertain amount in the statement of financial position although the risk exposure for some of these positions has been regarded as medium or low. the identified risks include a variety of potential liabilities from past periods, mainly related to the import and sale of merchandise by entities under common control or regarding contributions owed based on the contractual situation of employees. As the identified risks implied in these contingent liabil- ities are subject to interpretations and uncertainties in the respective regulations the management made an estimation of the fair value. the provision of ChF 1.0 million relates to the closing of an operation in Asia. No such provision exists in 2011. lAbOR DISPuteS the provision of ChF 3.4 million (2011: ChF 3.0 million) relates mainly to claims presented by sales staff based on disputes related to the termination of temporary labor contracts in brazil. lAW SuItS AND DutIeS the ChF 6.7 million (2011: ChF 4.9 million) provisions cov- ers uncertainties related to the outcome of several law suits in relation to taxes, duties or other claims in several countries. In 2012 the increase relates to cases in brazil and Italy. these claims are subject to arbitration where the final outcome can take several years. the expected timing of the related cash outflows of non- current provisions as of December 31, 2012 is currently projected as follows: In mIllIons of CHf 2014 2015 2016 2017+ total non-current exPeCteD CasH outflow 1.6 36.8 0.4 0.2 39.0 Page 117 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 34 post-employment benefit obliGations the employees of Dufry Group are insured against the risk of old age and disablement in accordance with the local laws and regulations. A description of the significant retirement benefit plans is as follows: 34.1 SWItZeRlAND Dufry has a defined benefit pension plan, which is based on the actual salary of the employee and covers sub- stantially all of Dufry’s employees in Switzerland. the plan requires contributions to be made to a separate legal entity, the administrative fund. this pension fund does not hold assets related to the Group. net pension costs In mIllIons of CHf Current service costs Interest costs Net actuarial loss recognized in year under §92 ff. expected return on plan assets Pension expenses the following table summarizes the components of pen- sion expenses recognized in the consolidated income statement: 2012 (2.3) (1.0) (0.4) 1.1 (2.6) 2011 (1.8) (0.9) (0.1) 1.0 (1.8) the pension expenses of the Group are included in person- nel expenses (see note 11 retirement benefits). the actual return of plan assets in 2012 was a gain of ChF 4.1 million (2011: ChF 0.3 million). the expected rate of return on plan assets is determined based on the market prices prevailing on that date ap- plicable to the period over which the obligation is to be settled. In 2013, Dufry expects to contribute ChF 2.1 million to this defined benefit pension plan. the principal assumptions for the actuarial computation are as follows: In % Discount rates expected return on plan assets Future salary increases Future pension increases Average retirement age (in years) 2012 1.75% 3.00% 2.00% 0.50% 64 2011 2.25% 3.00% 1.50% 1.00% 64 Page 118 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements the following table summarizes the components of the funded status and amounts recognized in the consolidated statement of financial position for the plan: funded status In mIllIons of CHf Fair value of plan assets at beginning of period expected return Contributions paid by employer Contributions paid by employees benefits paid expected fair value of plan assets at end of period Actuarial gains / (losses) fair value of plan assets at end of period Defined benefit obligation (PbO) at beginning of period Current service costs Contributions paid by employees Interest costs benefits paid expected defined benefit obligation at end of period Actuarial loss (gain) on obligation 1 Defined benefit obligation (PBo) at end of period Funded status unrecognized actuarial loss (gain) net asset in balance sheet 2012 36.1 1.0 2.1 1.3 (0.6) 39.9 3.1 43.0 43.5 2.3 1.3 1.0 (0.6) 47.4 12.0 59.4 (16.4) 16.8 0.4 2011 31.7 0.9 2.0 1.2 1.0 36.8 (0.7) 36.1 35.2 1.8 1.2 0.9 1.0 40.1 3.4 43.5 (7.4) 8.3 0.9 1 the actuarial loss of ChF 12.0 million is made of: a) experience loss ChF 1.7 million, b) change in discount rate ChF 5.4 million, c) change in salary increase ChF 2.6 million, d) other ChF 2.3 million as change in mortality tables, pension increases etc. reconciliation to the consolidated statement of financial position the net pension asset is recognized in other non-current assets. the movements have been as follows: In mIllIons of CHf balance at beginning of period Pension expenses Contributions paid by employer net asset at end of period 2012 0.9 (2.6) 2.1 0.4 2011 0.7 (1.8) 2.0 0.9 Page 119 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements amounts for the current and previous periods are as follows: In mIllIons of CHf 2012 2011 2010 2009 2008 Defined benefit obligation (PbO) Plan assets (Deficit) surplus experience adjustments on plan liabilities effect of changes in actuarial assumptions on plan liabilities experience adjustments on plan assets 59.4 43.0 (16.4) (1.7) (10.3) 3.1 the major categories of plan assets as percentages of the fair value of the total plan assets are as follows: In % Shares bonds Rented properties Other total 2012 24% 43% 25% 8% 100% 43.5 36.1 (7.4) 1.3 2.1 (0.7) 2011 24% 44% 26% 6% 35.2 31.7 (3.5) (1.6) (3.5) (0.2) 2010 25% 44% 25% 6% 24.2 22.5 (1.7) (0.1) – 1.4 2009 24% 46% 26% 4% 22.2 19.1 (3.1) (0.1) 1.9 (2.7) 2008 19% 50% 26% 5% 100% 100% 100% 100% 34.2 ItAly AND OtheR COuNtRIeS Post-employment benefit obligations In mIllIons of CHf Italy Other countries total In Italy, an unfunded defined benefit plan exists. the pen- sion contributions owed by the employer are based on the number of years the respective employee worked with the respective Italian subsidiary. the principal assump- tions for actuarial computation are as follows: 31.12. 2012 31.12. 2011 4.3 1.8 6.1 4.6 1.4 6.0 In % 31.12. 2012 31.12. 2011 Discount rate expected salary increase Inflation rate 4.0% 3.0% 2.0% 4.5% 3.0% 2.0% Page 120 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 35 other liabilities Other current liabilities comprise of one time and recurring liabilities due within one year. In mIllIons of CHf 31.12. 2012 31.12. 2011 Concession fee payables Other service related vendors Personnel payables Sales tax and other tax liabilities Interest payables Payables for capital expenditure (notes 20 –22) Accrued liabilities Payables to local business partners Payables for acquisitions Financial derivative liabilities Other payables total theReOF : – current liabilities – non-current liabilities total 83.5 66.7 64.5 23.6 19.0 16.8 5.4 5.1 1.7 0.3 6.6 293.2 284.9 8.3 293.2 71.5 54.3 62.0 23.3 11.2 23.3 4.2 5.2 5.4 1.8 4.7 266.9 255.6 11.3 266.9 36 related parties and related party transactions A party is related to the Group if the party directly or indirectly controls, is controlled by, or is under common control with Dufry, has an interest in the Group that gives it significant influence over the Group, has joint control over the Group or is an associate or a joint venture of the Group. In addition, members of the key management personnel of Dufry or close members of the family are also considered related parties as well as post-employ- ment benefit plans for the benefit of employees of the Group. transactions with related parties are conducted on an at-arm’s-length basis. the related party transactions and relationships for the Dufry Group are the following: Dufry Group purchased during 2012, goods from the follow- ing related parties: hudson Wholesale for ChF 23.1 million (2011: ChF 23.2 million) and from hudson RPM ChF 4.5 mil- lion (2011: ChF 4.6 million). the purchase prices used in these transactions were at arm’s length. At December 31, 2012, the Dufry Group had open invoices with the following related parties: hudson Wholesale ChF 1.9 million (2011: ChF 2.4 million) and with hudson RPM ChF 0.4 million (2011: ChF 0.5 million). latin American Airport holding ltd is the holding company of Inmobiliaria Fumisa SA de Cv (Fumisa) and Aeropuertos Dominicanos Siglo XXI, SA (Aerodom). three members of the Group’s board of Directors are also members of the board of Directors of latin American Airport holding ltd. Advent International Corporation manages funds that con- trol among others, the Group, Fumisa and Aerodom. Dufry and Inmobiliaria Fumisa SA de Cv, the airport op- erator of the International Airport benito juarez of Ciudad de Mexico reached an agreement in May 2012, to amend the present agreement setting new terms and conditions for the years 2012 and 2013 for the shop rental. In October 2010, Fumisa granted a reduction in the amount of rent as agreed on the original contract until the end of 2011, as palliative measures after the reduction in passenger num- bers caused when Mexicana Airlines ceased operations in August 2010. During 2012, even though traffic develop- ment was improving, Fumisa agreed to still offer Dufry better conditions than the original terms of the agree- ment. During 2012 the local operations amortized prepaid concessions in the value of ChF 1.4 million and accrued concession fees of ChF 19.3 million (2011: ChF 16.2 mil- lion). In this context, both parties also agreed to waive Page 121 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements the receivables and payables existing at such date. As a consequence Dufry derecognized prepaid concessions fees in the amount of ChF 7.3 million in the current period 2012 through profit and loss. Inversiones tunc SA operates shops at several airports in the Dominican Republic under concession agreements with Aerodom. According to these agreements, Inversiones tunc SA compensated through monthly rental fees the right to use the commercial areas leased to them by Aerodom. In 2012, the total sales based rent for Inversiones tunc SA amounted to ChF 5.9 million (2011: ChF 5.1 million). benefits was ChF 15.0 million (2011: ChF 15.7 million). this amount includes: a) 157,541 stock options (RSu’s) of the biannual award 2011 (2011: 181,541 RSu’s of the biannual award 2011) of Dufry AG, b) a cash compensation of ChF 9.0 million (2011: ChF 8.8 million), c) employer’s contribu- tion to the pension and other post-employment benefits of ChF 1.0 million (2011: ChF 2.0 million). the expenses accrued in relation to the restricted stock unit plan 2011 which covers a two years period 2011/2012 was ChF 5.0 million (2011: ChF 5.0 million) and is included in the short-term employee benefits mentioned above. On February 1, 2012 transportes Aereos de Xalapa SA de Cv, a subsidiary of Aerodom agreed to provide air transport services to Dufry. During 2012 Dufry received services for ChF 3.5 million (2011: ChF 2.6 million). the legally required disclosure of the participations and compensations of the members of the board of Directors and the Group executive Committee of Dufry are explained in the respective notes to the stand alone financial state- ments of Dufry AG. 37 commitments and continGencies GuARANtee COMMItMeNtS the Group enters into long-term agreements with airport authorities, seaport authorities and other landlords. the concessionaires use to require a minimum annual guar- antee, which can be based on sales, number of passengers or other indicators of operational activity to guarantee the performance of Dufry’s obligations. In case of an early termination, the operation can be required to compensate the concessionaire for lost earnings. the Group or their subsidiaries have granted these guarantees regarding the performance of the above mentioned long-term contracts directly or through third parties. As at December 31, 2012 and December 31, 2011, no party has exercised their right to call upon these guarantees. Some of these long-term concession agreements, which Dufry has entered into, include clauses to prevent early termination, such as obligations to fulfill guaranteed minimal payments during the full term of the agreement. the conditions for an onerous contract will be met, when such operation presents a non-profitable outlook. In this event, a provision based on the present value of the future net cash flows needs to be created. At the reporting date of 2012 and 2011, no such onerous concession exists. Mr. Dante Marro, who until june 2012 was the Chief Oper- ating Officer of region europe and member of the Group executive Committee of Dufry, controls the company Gestione Spazi Attrezzati Srl (GSA). An agreement entered in 2002 granted GSA usufruct rights up to May 2041 on 6% of the shares of Dufrital SpA, plus at expiration 6% of the undistributed retained earnings of Dufrital SpA. In 2012, ChF 0.3 million (2011: ChF 0.0 million) was recognized as usufruct in the income statement. On june 14, 2011 Dufry International AG purchased back the usufruct right granted to Gestione Spazi Attrezzati Srl (GSA) which permitted the benefits of share ownership, including the receipt of dividends on 10% of the shares of Dufry Shop Finance Srl, which otherwise would have expired in May 4, 2041 for ChF 5.4 million (euR 4.5 million). Mr. josé González, Chief Operating Officer of region Cen- tral America & Caribbean and member of the Group executive Committee until june 30, 2012, owns 26.3% of the share capital of the subsidiary Puerto libre Interna- tional SA (“PlISA”). PlISA operates duty free shops at the international airport of Managua as well as three border shops in Nicaragua. the Swiss entities have outstanding contributions with the pension fund Weitnauer in the amount of ChF 0.3 million (2011: ChF 0.3 million). In 2012 the remuneration for the board members was ChF 1.4 million (2011: ChF 1.4 million). In addition Mr. Xavier bouton (member) received ChF 0.3 million (2011: ChF 0.3 million) for strategic consulting services provided to the Group. In 2012 the total compensation for the 8 members (2011: 10 members) of the Group executive Committee recognized in personnel expenses and including all short-term employee Page 122 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 38 financial instruments significant accounting policies these are described in note 2.3 l) and following. 38.1 CAPItAl RISK MANAGeMeNt Capital comprises equity attributable to the equity holders of the parent less hedging and revaluation reserves for unrealized gains or losses on net investment, plus other equity-linked or equity-like instruments attributable to the parent. or adjust the capital structure, the Group evaluates to adjust dividend payments to shareholders, return capital to shareholders, issue new shares, issue equity-linked instruments or equity-like instruments. the primary objective of the Group’s capital management is to ensure that it maintains an adequate credit rating and sustainable capital ratios in order to support its business and maximize shareholder value. the Group manages its capital structure and makes ad- justments to it in light of its strategy and the long-term opportunities and costs of each capital source. to maintain 38.1.1 gearing ratio the following ratio compares owner’s equity to borrowed funds: In mIllIons of CHf Cash and cash equivalents Financial debt net debt equity attributable to equity holders of the parent translation reserve, hedging and revaluation reserves total capital gearing ratio the Group did not hold collateral of any kind at the reporting dates. the Group monitors capital using a combination of ratios; including a gearing ratio, cash flow considerations and profitability ratios. As for the gearing ratio the Group includes within net debt, interest bearing loans and bor- rowings, less cash and cash equivalents, excluding dis- continued operations. 31.12. 2012 (434.0) 1,385.3 951.3 1,238.8 (32.9) 1,205.9 44.1% 31.12. 2011 (199.1) 1,560.4 1,361.3 870.0 (26.5) 843.5 61.7% 38.2 CAteGORIeS OF FINANCIAl INStRuMeNtS Page 123 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements at DeCemBer 31, 2012 In mIllIons of CHf Cash and cash equivalents trade and credit card receivables Other accounts receivable Other non-current assets total In mIllIons of CHf trade payables Financial debt short-term Other liabilities Financial debt long-term Other non-current liabilities total at DeCemBer 31, 2011 In mIllIons of CHf Cash and cash equivalents trade and credit card receivables Other accounts receivable Other non-current assets total In mIllIons of CHf trade payables Financial debt. short-term Other liabilities Financial debt long-term Other non-current liabilities total loans and receivables at fvtPl 1 Held-to-maturity investments subtotal non-fInanCIal assets 3 fInanCIal assets 434.0 59.5 53.8 31.6 578.9 at amortized cost 247.8 39.9 254.9 1,345.4 7.8 1,895.8 – – 0.5 – 0.5 – – 66.1 5.3 – – – – – 434.0 59.5 54.3 31.6 579.4 fInanCIal lIaBIlItIes Cf hedge 2 at fvtPl 1 subtotal non-fInanCIal lIaBIlItIes 3 – – – – – – – – 0.3 – – 0.3 247.8 39.9 255.2 1,345.4 7.8 1,896.1 – – 29.7 – 0.5 loans and receivables at fvtPl 1 Held-to-maturity investments subtotal non-fInanCIal assets 3 fInanCIal assets 199.1 47.0 52.0 33.3 331.4 at amortized cost 301.1 30.6 225.7 1,529.9 11.3 2,098.6 – – 0.4 – 0.4 – – 74.9 4.5 – – – – – 199.1 47.0 52.4 33.3 331.8 fInanCIal lIaBIlItIes Cf hedge 2 at fvtPl 1 subtotal non-fInanCIal lIaBIlItIes 3 – – 1.0 – – 1.0 – – 0.8 – – 0.8 301.1 30.6 227.5 1,529.9 11.3 2,100.4 – – 28.1 (0.1) – total 434.0 59.5 120.4 36.9 total 247.8 39.9 284.9 1,345.4 8.3 total 199.1 47.0 127.3 37.8 total 301.1 30.6 255.6 1,529.8 11.3 1 Financial assets and liabilities at fair value through consolidated income statement 2 Cash flow hedges for which fair value changes are recognized in other comprehensive income 3 Non-financial assets and liabilities comprise prepaid expenses and deferred income, which will not generate a cash outflow or inflow as well as sales tax and other tax positions Page 124 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 38.2.1 net income by Ias 39 valuation category Financial Assets at December 31, 2012 In mIllIons of CHf Interest income (expenses) Other finance income (expenses) from interest Fair values gain (loss) Foreign exchange gain (loss) 1 Impairments / allowances 2 total – from subsequent valuation net income Financial liabilities at December 31, 2012 In mIllIons of CHf Interest income (expenses) Other finance income (expenses) from interest Fair values gain (loss) Foreign exchange gain (loss) 1 Impairments / allowances 2 total – from subsequent valuation net income loans anD reCeIvaBles at fvtPl HelD-to- maturIty Investments 1.3 – 1.3 – (21.3) (0.7) (22.0) (20.7) – – – 1.3 – – 1.3 1.3 – – – – – – – – at amortIzeD Cost Cf HeDge at fvtPl (77.8) (1.2) (79.0) – 21.2 – 21.2 (57.8) – – – – – – – – – – – (0.8) – – (0.8) (0.8) Net financial assets and liabilities at December 31, 2012 In mIllIons of CHf Interest income (expenses) Other finance income (expenses) from interest Fair values gain (loss) Foreign exchange gain (loss) 1 Impairments / allowances 2 total – from subsequent valuation net income fInanCIal assets fInanCIal lIaBIlItIes 1.3 – 1.3 1.3 (21.3) (0.7) (20.7) (19.4) (77.8) (1.2) (79.0) (0.8) 21.2 – 20.4 (58.6) total 1.3 – 1.3 1.3 (21.3) (0.7) (20.7) (19.4) total (77.8) (1.2) (79.0) (0.8) 21.2 – 20.4 (58.6) net (76.5) (1.2) (77.7) 0.5 (0.1) (0.7) (0.3) (78.0) 1 this position includes the foreign exchange gain (loss) recognized on third party and intercompany financial assets liabilities through consolidated income statement 2 this position includes the income from the release of impairments and allowances and recoveries during the period less the increase of impairments and allowances and write-offs Page 125 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements Financial Assets at December 31, 2011 In mIllIons of CHf Interest income (expenses) Other finance income (expenses) from interest Fair values gain (loss) Foreign exchange gain (loss) 1 Impairments / allowances 2 total – from subsequent valuation net income Financial liabilities at December 31, 2011 In mIllIons of CHf Interest income (expenses) Other finance income (expenses) from interest Fair values gain (loss) Foreign exchange gain (loss) 1 Impairments / allowances 2 total – from subsequent valuation net income loans anD reCeIvaBles at fvtPl HelD-to- maturIty Investments 4.1 – 4.1 – 163.9 (3.7) 160.2 164.3 – – – 0.4 – – 0.4 0.4 at amortIzeD Cost Cf HeDge (49.3) (5.9) (55.2) – (161.8) – (161.8) (217.0) – – – – – – – – – – – – – – – – at fvtPl – – – (0.8) – – (0.8) (0.8) Net financial assets and liabilities at December 31, 2011 In mIllIons of CHf Interest income (expenses) Other finance income (expenses) from interest Fair values gain (loss) Foreign exchange gain (loss) 1 Impairments / allowances 2 total – from subsequent valuation net income fInanCIal assets InanCIal lIaBIlItIes 4.1 – 4.1 0.4 163.9 (3.7) 160.6 164.7 (49.3) (5.9) (55.2) (0.8) (161.8) – (162.6) (217.8) total 4.1 – 4.1 0.4 163.9 (3.7) 160.6 164.7 total (49.3) (5.9) (55.2) (0.8) (161.8) – (162.6) (217.8) net (45.2) (5.9) (51.1) (0.4) 2.1 (3.7) (2.0) (53.1) 1 this position includes the foreign exchange gain (loss) recognized on third party and intercompany financial assets liabilities through consolidated income statement 2 this position includes the income from the release of impairments and allowances and recoveries during the period less the increase of impairments and allowances and write-offs Page 126 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 38.3 FINANCIAl RISK MANAGeMeNt ObjeCtIveS material exposure, the Group may use financial instru- ments to hedge the respective exposure. As a global retailer, Dufry has worldwide activities which need to be financed in different currencies and are con- sequently affected by fluctuations of foreign exchange and interest rates. the Group treasury manages the fi- nancing of the operations through centralized credit facilities as to ensure an adequate allocation of these resources and simultaneously minimize the potential financial risk impacts. Dufry continuously monitors the market risk, such as risks related to foreign currency, interest rate, credit, liquidity and capital. the Group seeks to minimize the currency exposure and interest rates risks using appropriate trans- action structures or alternatively, using derivative financial instruments to hedge the exposure to these risks. the treasury policy forbids entering or trading financial instru- ments for speculative purposes. 38.4 MARKet RISK the Group may enter into a variety of financial instru- ments to manage its exposure to foreign currency risk, including forward foreign exchange contracts, currency swaps and over the counter plain vanilla options. During the current financial year the Group utilized for- eign currency forward contracts and options for hedging purposes. 38.5 FOReIGN CuRReNCy RISK MANAGeMeNt Dufry manages the cash flow surplus or deficits in foreign currency of the operations through FX-transactions in the respective local currency. Major imbalances in foreign currencies at Group level are hedged through foreign exchange forwards contracts. the terms of the foreign currency forward contracts have been negotiated to match the terms of the forecasted transactions. Dufry’s financial assets and liabilities are mainly exposed to market risk in foreign currency exchange and interest rates. the Group’s objective is to minimize the consolidated income statement impact and to reduce fluctuations in cash flows through structuring the respective transactions to minimize market risks. In cases, where the associated risk cannot be hedged appropriately through a transaction structure and the evaluation of market risks indicates a 38.5.1 foreign currency sensitivity analysis Among various methodologies to analyze and manage risk, Dufry utilizes a system based on sensitivity analyses. this tool enables Group treasury to identify the level of risk of each entity. Sensitivity analysis provides an approximate quantification of the exposure in the event that certain specified parameters were to be met under a specific set of assumptions. Foreign Currency exposure: In mIllIons of CHf usD euro Brl otHer total DeCeMbeR 31, 2012 Monetary assets Monetary liabilities net exposure before hedging hedging net exposure after hedging DeCeMbeR 31, 2011 Monetary assets Monetary liabilities net exposure before hedging hedging net exposure after hedging 131.3 984.3 (853.0) 847.6 (5.4) 983.5 1,591.3 (607.8) 595.5 (12.3) 114.0 136.8 (22.8) – (22.8) 121.7 143.7 (22.0) (6.2) (28.2) 49.5 50.6 (1.1) – (1.1) 15.7 53.5 (37.8) – (37.8) 56.4 65.5 (9.1) – (9.1) 43.1 65.2 (22.1) – (22.1) 351.3 1,237.2 (885.9) 847.6 (38.3) 1,164.0 1,853.7 (689.7) 589.3 (100.4) Page 127 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements the sensitivity analysis includes all monetary assets and liabilities irrespective of whether the positions are third party or intercompany. Dufry has considered some in- tercompany long-term loans, which are not likely to be settled in the foreseeable future as being part of the net investment in such subsidiary. Consequently, the related exchange differences are recognized in other compre- hensive income and presented within translation reserve in equity. the foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure of the Group entities. the values and risk disclosed here are the hedged and not hedged positions assuming a 5% appreciation of the ChF against all other currencies. A positive result indicates a profit in the consolidated in- come statement or in the hedging and revaluation reserves when the ChF strengthens against the relevant currency. In mIllIons of CHf 31.12. 2012 31.12. 2011 Net earnings – profit (loss) of uSD Other comprehensive income – profit (loss) of uSD Net earnings – profit (loss) of euR Other comprehensive income – profit (loss) of euR 11.5 31.0 1.1 – 0.5 29.8 1.4 (0.3) Reconciliation to categories of financial instruments: In mIllIons of CHf FINANCIAl ASSetS total financial assets held in foreign currencies (see above) less intercompany financial assets in foreign currencies third party financial assets held in foreign currencies third party financial assets held in reporting currencies total third party financial assets 1 FINANCIAl lIAbIlItIeS total financial liabilities held in foreign currencies (see above) less intercompany financial liabilities in foreign currencies third party financial liabilities held in foreign currencies third party financial liabilities held in reporting currencies total third party financial liabilities 1 1 see note 38.2 “categories of financial instruments” 31.12. 2012 31.12. 2011 351.3 (220.8) 130.5 448.9 579.4 1,237.2 (95.0) 1,142.2 753.9 1,896.1 1,164.0 (1,097.0) 67.0 264.8 331.8 1,853.7 (113.0) 1,740.7 359.7 2,100.4 38.5.2 forward foreign exchange contracts and foreign exchange options at fair value As the management of the company actively pursues to naturally hedge the positions in each operation, the policy of the Group is to enter into foreign exchange forward and options contracts only where needed. the following table shows the contracts or underlying prin- cipal amounts and fair values of derivative financial instru- ments. Contracts or underlying principal amounts indicate the volume of business outstanding at the balance sheet date. the fair values are determined by reference to market prices or standard pricing models that used observable market inputs at December 31 of each year. Page 128 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements Foreign exchange forward contracts and options: In mIllIons of CHf December 31, 2011 December 31, 2012 ContraCt or unDerlyIng PrInCIPal amount PosItIve faIr values negatIve faIr values 67.5 268.6 0.5 0.5 0.8 0.3 38.6 INteReSt RAte RISK MANAGeMeNt the Group manages the interest rate risk through interest rate swaps and options to the extent that the hedging can- not be implemented through managing the duration of the debt drawings. the levels of the hedging activities are evaluated regularly and may be adjusted in order to reflect the development of the various parameters. 38.6.1 Interest rate swap contracts the following table shows the contracts or underlying principal amounts and fair values of derivative financial instruments. Contracts or underlying principal amounts indicate the volume of business outstanding at the balance sheet date. the fair values are determined by reference to market prices or standard pricing models that used ob- servable market inputs at December 31 of each year. Interest rate related instruments 1: In mIllIons of CHf December 31, 2011 December 31, 2012 ContraCt or unDerlyIng PrInCIPal amount PosItIve faIr values negatIve faIr values 280.6 – – – 1.0 – 1 these instruments are designated as cash flow hedges and the changes in the fair value are recognized through other comprehensive income. the interest rate swaps settle on a monthly basis. the floating rate on the interest rate swaps is the equivalent to one month uSD lIbOR rate. the Group will settle the difference between the fixed and floating interest rate on a net basis. All interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are des- ignated as cash flow hedges in order to reduce the Group’s cash flow exposure resulting from variable interest rates on borrowings. the interest rate swaps and the interest payments on the loan occur simultaneously and the amount accumulated in equity is reclassified to the con- solidated income statement over the period that the float- ing rate interest payments on debt affect the consolidated income statement. 38.6.2 Interest rate sensitivity analysis the sensitivity analyses below have been determined based on the exposure to interest rates derivatives and non-derivative instruments at the reporting date. the risk analysis provided here assumes a simultaneous increase of 100 basis points of the interest rate of all interest bearing financial positions. If interest rates had been 100 basis points higher whereas all other variables were held constant, the Group’s net earnings for the year 2012 would decrease by ChF 13.5 mil- lion (2011: decrease by ChF 7.4 million). 38.6.3 allocation of financial assets and liabilities to interest classes In % In mIllIons of CHf Page 129 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements at DeCemBer 31, 2012 average variable interest rate average fixed interest rate variable interest rate fixed interest rate total interest bearing non-interest bearing Cash and cash equivalents trade and credit card receivables Other accounts receivable Other non-current assets financial assets trade payables Financial debt, short-term Other liabilities Financial debt, long-term Other non-current liabilities financial liabilities net financial liability 0.8% 0.5% 400.5 1.6 402.1 3.7% 0.5% 0.0% 5.5% 2.0% – – 5.0 405.5 – 36.7 – – – 0.8 2.4 – 3.2 – – – 5.8 407.9 – 39.9 – 5.5% 894.4 451.0 1,345.4 – 931.1 525.6 – 454.2 451.8 – 1,385.3 977.4 total 434.0 59.5 54.3 31.6 31.9 59.5 54.3 25.8 171.5 579.4 247.8 – 255.2 – 7.8 510.8 339.3 247.8 39.9 255.2 1,345.4 7.8 1,896.1 1,316.7 at DeCemBer 31, 2011 average variable interest rate average fixed interest rate variable interest rate fixed interest rate total interest bearing non-interest bearing In % In mIllIons of CHf Cash and cash equivalents trade and credit card receivables Other accounts receivable Other non-current assets financial assets trade payables Financial debt, short-term Other liabilities Financial debt, long-term Other non-current liabilities financial liabilities net financial liability 1.1% 2.6% 0.1% 11.7% 4.5% 2.0% 139.6 – (0.1) 3.4 142.9 – 27.9 0.1 2.5% 4.2% 1,525.6 – 1,553.6 1,410.7 2.2 – 0.1 1.7 4.0 – 2.7 – 4.2 – 6.9 2.9 141.8 – – 5.1 146.9 – 30.6 0.1 1,529.8 – 1,560.5 1,413.6 total 199.1 47.0 52.4 33.3 331.8 301.1 30.6 227.5 1,529.9 11.3 2,100.4 1,768.6 57.3 47.0 52.4 28.2 184.9 301.1 – 227.4 0.1 11.3 539.9 355.0 38.7 CReDIt RISK MANAGeMeNt Credit risk refers to the risk that counterparty may default on its contractual obligations resulting in financial loss to the Group. Almost all Groups’ sales are retail sales made against cash or internationally recognized credit/debit cards. Dufry has policies in place to ensure that other sales are only made to customers with an appropriate credit history or that the credit risk is insured adequately. the remaining credit risk is in relation to taxes, refunds from suppliers and guarantee deposits. the credit risk on cash deposits or derivative financial instruments relates to banks or financial institutions. the Group monitors the credit ranking of these institutions and does not expect defaults from non-performance of these counterparties. 38.7.1 maximum credit risk the carrying amount of financial assets recorded in the financial statements, after deduction of any allowances for losses, represents the Group’s maximum exposure to credit risk. Page 130 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 38.8 lIquIDIty RISK MANAGeMeNt the group evaluates this risk as the ability to settle its fi- nancial liabilities on time and at a reasonable price. beside its capability to generate cash through its operations, Dufry mitigates liquidity risk by keeping unused credit facilities with financial institutions. (See note 32). 38.8.1 remaining maturities for non-derivative financial assets and liabilities the following tables have been drawn up based on the undiscounted cash flows of financial assets and liabilities (based on the earliest date on which the Group can receive or be required to pay). the tables include principal and interest cash flows. at DeCemBer 31, 2012 In mIllIons of CHf Cash and cash equivalents trade and credit card receivables Other accounts receivable Other non–current assets total cash inflows trade payables Financial debt, short–term Other liabilities Financial debt, long–term Other non–current liabilities total cash outflows at DeCemBer 31, 2011 In mIllIons of CHf Cash and cash equivalents trade and credit card receivables Other accounts receivable Other non–current assets total cash inflows trade payables Financial debt, short–term Other liabilities Financial debt, long–term Other non–current liabilities total cash outflows 1–6 montHs 6–12 montHs 1–2 years more tHan 2 years 434.8 59.5 53.7 – 548.0 247.9 40.0 254.9 14.7 – 557.5 – – 0.1 – 0.1 – 0.2 0.1 12.0 – 12.3 – – – – – – – – 23.7 – 23.7 – – – 31.6 31.6 – – – 1,443.3 7.8 total 434.8 59.5 53.8 31.6 579.7 247.9 40.2 255.0 1,493.7 7.8 1,451.1 2,044.6 1–6 montHs 6–12 montHs 1–2 years more tHan 2 years 199.9 47.0 51.9 – 298.8 301.1 39.6 223.2 64.4 – 628.3 0.5 – 0.5 – 1.0 – 9.0 2.6 64.3 – 75.9 – – – 0.1 0.1 – – – 844.5 – 844.5 – – 0.1 33.4 33.5 – – – 709.2 11.3 720.5 total 200.4 47.0 52.5 33.5 333.4 301.1 48.6 225.8 1,682.4 11.3 2,269.2 Page 131 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 38.8.2 remaining maturities for derivative financial instruments the following table details the Group’s liquidity analysis for its derivative financial instruments. the table has been drawn up based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis and those derivatives that re- quire gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves at the end of the report- ing period. at DeCemBer 31, 2012 In mIllIons of CHf Net settled: interest rate swaps foreign exchange forward contracts Gross settled: foreign exchange forward contracts total at DeCemBer 31, 2011 In mIllIons of CHf Net settled: interest rate swaps foreign exchange forward contracts Gross settled: foreign exchange forward contracts total less tHan 3 montHs 3–6 montHs 6 montHs to 1 year 1 year + – – 0.1 0.1 – – – – – – – – – – – – less tHan 3 montHs 3–6 montHs 6 montHs to 1 year 1 year + (0.5) 0.3 0.3 0.1 (0.6) – 0.1 (0.5) – – 0.1 0.1 – – – – 38.9 FAIR vAlue OF FINANCIAl INStRuMeNtS 38.9.1 fair value of financial instruments carried at amortized cost except as detailed in the following table, the Group con- siders that the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values. In mIllIons of CHf Carrying amount fair value Carrying amount fair value 31.12. 2012 31.12. 2011 Credit card receivables, (assets) Senior Notes non-current, (liabilities) 45.1 447.4 44.7 467.0 24.1 – 23.8 – Page 132 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 38.9.2 valuation techniques and assumptions applied for the purposes of measuring fair value the fair values of financial assets and financial liabilities are determined as follows: – the fair values of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices (includes listed redeemable notes, bills of exchange, debentures and perpetual notes). – the fair values of derivative instruments are calculated using quoted prices. Where such prices are not avail- able, a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives. Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts. Foreign exchange option contracts are measured by using an option pricing valuation model. – the fair values of other financial assets and financial liabilities (excluding those described above) are deter- mined in accordance with generally accepted pricing models based on discounted cash flow analysis. 38.9.3 fair value measurements recognized in the consolidated statement of financial position the following table provides an analysis of financial instru- ments that are measured subsequent to initial recognition at fair value, grouped into levels 1 to 3 based on the degree to which the fair value is observable: – level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. – level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). – level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). the Group held the following financial instruments measured at fair value at the reporting date: In mIllIons of CHf ASSetS MeASuReD At FAIR vAlue ¹ Foreign exchange related derivative financial instruments Interest rate related derivative financial instruments Available-for-sale financial assets total assets lIAbIlItIeS MeASuReD At FAIR vAlue ² Foreign exchange related derivative financial instruments Interest rate related derivative financial instruments total liabilities 1 Included in the position “other accounts receivable” in the statement of financial position 2 Included in the position “other liabilities” in the statement of financial position During the years ended December 31, 2012 and 2011, there were no transfers between level 1 and level 2 fair value measurements, and no transfers into and out of level 3 fair value measurements. level 2 31.12. 2012 level 2 31.12. 2011 0.5 – – 0.5 0.3 – 0.3 0.5 – – 0.5 0.8 1.0 1.8 Page 133 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 39 events after reportinG date DuFRy SIGNS AGReeMeNt tO ACquIRe tRAvel RetAIl OPeRAtIONS OF FOllI FOllIe GROuP On October 10, 2012, Dufry signed an agreement to acquire 51% of the travel retail business of Folli Follie Group for a total consideration of ChF 241.6 million (euR 200.5 million). Dufry expects to close the transaction in the next weeks. the transaction includes, among other elements, an option to acquire the remaining 49% of the shares after four years at fair market value. before closing of the transaction, the target business will be carved-out into a separate entity by Folli Follie Group in a series of legal steps which involves various regulatory and shareholder approvals. Furthermore, a syndicate of local banks has committed to provide the new entity with a non-recourse bank facility of ChF 403.7 million (euR 335 million) at closing of the transaction, structured as a committed 5-year amortizing term loan secured through pledging of all shares of the new entity. Page 134 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements MoSt iMportant affiliateD coMpanieS h = holdinG r = retail d = distribution center as of DeCemBer 31, 2012 loCatIon Country tyPe ownersHIP In % sHare CaPItal In tHousanDs CurrenCy HeaDquarters Dufry International AG Dufry Management AG Dufry holdings & Investments AG gloBal DIstrIButIon Centers Dufry travel Retail AG Dufry America Services, Inc. basel basel basel basel Miami International Operation & Services Corp. Montevideo eurotrade Corporation (II) limited Nassau emea & asIa Dufry basel-Mulhouse AG Dufry Samnaun AG Dufrital SpA Dufry Italia SpA Network Italia edicole Dufry Islas Canarias Sl Dufry France SA Dufry hellas ltd Dufry tunisie SA Dufry Maroc Sarl Dufry egypt llC Dufry & G.t.D.C. ltd Dufry Aeroport d’Alger Sarl Dufry Côte d’Ivoire SA Dufry east OOO Dufry Moscow Sheremetyevo Regstaer ltd Dufry Cambodia ltd Dufry (Shanghai) Commercial Co. ltd. Shanghai ADF Shops CjSC Dufry Sharjah Fzc Dufry d.o.o. yerevan Sharjah belgrade Switzerland Switzerland Switzerland Switzerland uSA uruguay bahamas Switzerland Switzerland Italy Italy Italy Spain France Greece tunisia Ghana Algeria Ivory Coast Russia Russia Russia Cambodia China Armenia u. Arab emirates Serbia h h h D D D D R R R R R R R R R R R R R R R R R R R R R R 100 100 100 100 100 100 100 100 100 60 100 100 100 100 99 100 80 80 63 80 100 100 69 51 80 100 100 51 100 1,000 1,000 1,000 5,000 398 50 5,580 100 100 258 251 20 333 3,491 147 2,300 2,500 450 413 20,000 158 712 420 3,991 1,231 19,497 553,834 2,054 693,078 ChF ChF ChF ChF uSD uSD uSD ChF ChF euR euR euR euR euR euR euR MAD uSD uSD DZD euR uSD uSD euR uSD CNy AMD AeD RSD basel Samnaun Milan Milan Milan tenerife Nice Athens tunis Accra Alger Abidjan Moscow Moscow Moscow Phnom Pen Casablanca Morocco Sharm-el-Sheikh egypt Page 135 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements as of DeCemBer 31, 2012 loCatIon Country tyPe ownersHIP In % sHare CaPItal In tHousanDs CurrenCy amerICa I Dufry Mexico SA de Cv Alliance Duty Free, Inc. Dufry Aruba N.v. Inversiones tunc, SA Duty Free Caribbean ltd Colombian emeralds Int. ltd Flagship Retail Services Inc. Interbaires S. A. Navinten S. A. Duty Free ecuador S. A. Dufry America, Inc. Mexico City San juan Oranjestad Mexico Puerto Rico Aruba Santo Domingo Dominican Republic bridgetown Castries Delaware barbados St. lucia uSA buenos Aires Argentina Montevideo Guayaquil Miami uruguay ecuador uSA amerICa II Dufry do brasil Duty Free Shop ltda. Iperco Com exterior ltda. Dufry bolivia Rio de janeiro Rio de janeiro Santa Cruz brazil brazil bolivia unIteD states & CanaDa hudson News Company Inc. east Rutherford Dufry Newark, Inc. Dufry houston Duty Free and Retail Partnership AMS-Cv Newark, jv Airport Management Services, llC AMS-Olympic Nashville, jv hudson News O’hare, jv hudson Retail-Neu News jv jFK Air ventures National Air ventures Seattle Air ventures AMS-teI Miami, jv AMS hudson las vegas, jv hudson Group Canada, Inc. Newark houston Newark Delaware Nashville Springfield New york New york Dallas Olympia Miami las vegas vancouver uSA uSA uSA uSA uSA uSA uSA uSA uSA uSA uSA uSA uSA Canada R R R R R R R R R R h R R R h / R R R R h / R R R R R R R R R R 100 100 80 100 60 60 100 100 100 100 100 100 100 100 100 100 75 80 100 83 70 80 80 70 75 70 73 100 27,429 2,213 1,900 ‹ 1 5,000 ‹ 1 ‹ 1 293 126 401 5 4,146 14,552 356 ‹ 1 1,501 1 ‹ 1 ‹ 1 ‹ 1 ‹ 1 ‹ 1 ‹ 1 ‹ 1 ‹ 1 ‹ 1 ‹ 1 ‹ 1 uSD uSD uSD uSD uSD uSD uSD uSD uSD uSD uSD uSD bRl uSD uSD uSD uSD uSD uSD uSD uSD uSD uSD uSD uSD uSD uSD CAD Page 136 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements To the General Meeting of Dufry AG, Basel Basel, 7 March 2013 Ernst & Young Ltd Aeschengraben 9 P.O. Box CH-4002 Basel Phone Fax www.ey.com/ch +41 58 286 86 86 +41 58 286 86 00 Report of the statutory auditor on the consolidated financial statements As statutory auditor, we have audited the consolidated financial statements of Dufry AG, Basel, which comprise the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in equity and notes (pages 70 to 135), for the year ended 31 December 2012. Board of Directors’ responsibility The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standard (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards and International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Member of the Swiss Institute of Certified Accountants and Tax Consultants Page 137 Dufry annual rePort 2012 ConsolIDateD fInanCIal statements 2 Opinion In our opinion, the consolidated financial statements for the year ended 31 December 2012 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with IFRS and comply with Swiss law. Report on other legal requirements We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. Ernst & Young Ltd Patrick Fawer Licensed audit expert (Auditor in charge) David Haldimann Licensed audit expert Page 138 Dufry annual rePort 2012 fInanCIal statements of Dufry ag incoMe StateMent for the year ended december 31, 2012 In tHousanDs of CHf Dividend income Financial income Management and franchise fee income total income Personnel expenses General and administrative expenses Management and franchise fee expenses Amortization of intangibles transaction and project costs Financial expenses taxes total expenses net earnings (loss) 2012 83,222 2,868 11,477 97,567 19,092 3,998 7,869 5,755 – 7,000 753 44,467 53,100 2011 – 3,216 12,000 15,216 12,664 3,731 11,851 5,755 (2,638) 8,450 612 40,425 (25,209) Page 139 Dufry annual rePort 2012 fInanCIal statements of Dufry ag StateMent of financial poSition at december 31, 2012 In tHousanDs of CHf note 31.12. 2012 31.12. 2011 ASSetS Cash and cash equivalents Marketable securities Receivables intercompany Receivables – related party Receivables – third party loan receivables Dufry International AG Other current assets Current assets Investments Intangible assets non-current assets total assets lIAbIlItIeS AND ShARehOlDeRS’ equIty Payables – intercompany Payables – related party Payables – third party bank debt Other current liabilities Current liabilities total liabilities Share capital legal reserves: Share premium (capital contribution reserves) General reserves Reserve for treasury shares Available earnings shareholders’ equity 3 1 9 14,144 40,537 42,394 2 91 320,000 – 417,168 1,082,671 99,270 1,181,941 1,599,109 28,145 313 835 – 43,421 72,714 72,714 9 9,494 84,504 2 49 – 1 94,059 1,074,449 105,025 1,179,474 1,273,533 51,291 367 340 29,134 13,147 94,279 94,279 148,369 134,881 1,253,287 5,927 41,605 77,207 1,526,395 972,734 5,927 13,485 52,227 1,179,254 total liabilities and shareholders’ equity 1,599,109 1,273,533 Page 140 Dufry annual rePort 2012 fInanCIal statements of Dufry ag noteS to tHe financial StateMentS amounts are expressed in thousands of chf, except where otherwise indicated. 1. siGnificant investments suBsIDIary In tHousanDs of CHf PartICIPatIon 2012 2011 2012 2011 Book value sHare CaPItal Dufry International AG, Switzerland Dufry Management AG, Switzerland Dufry Corporate AG, Switzerland Dufry holdings & Investments AG, Switzerland total 100% 100% 100% 100% 352,896 344,674 100 100 100 100 729,575 1,082,671 729,575 1,074,449 1,000 100 100 1,000 1,000 100 100 1,000 2. siGnificant shareholders’ participation In PerCentage 31.12. 2012 31.12. 2011 Global Retail Group S.àr.l, luxembourg 1 travel Retail Investment SCA, luxembourg 1 Credit Suisse Group AG Skopos Administradora de Recursos ltda and SkoposInvest Administradora de Recursos International ltda hudson Media Inc., east Rutherford, uSA the Capital Group Companies Inc, CA, uSA 13.07% 7.49% 4.60% – 3.89% – 14.38% 8.24% 6.81% 4.43% 4.28% 4.21% 1 Global Retail Group S.àr.l and travel Retail Investment SCA formed a group of shareholders until january 31, 2012 3. treasury shares at January 1, 2011 Assigned to holders of RSu-awards 2010 Share purchases Revaluation at December 31, 2011 Share purchases Revaluation at December 31, 2012 Page 141 Dufry annual rePort 2012 fInanCIal statements of Dufry ag numBer of sHares In tHousanDs of CHf 289,059 (281,362) 100,419 – 108,116 230,000 – 338,116 36,948 (35,452) 12,503 (4,505) 9,494 28,120 2,923 40,537 4. enterprise risk manaGement In accordance with the article 663b of the Swiss Code of Obligations the board of Directors of Dufry AG reviewed and assessed the risk areas of the Group and where necessary, updated the key controls performed to ensure an adequate risk monitoring. 7. compensation, participations and loans to the members of the board of directors and the Group executive committee (Disclosure according to Swiss Code of Obligations 663b) PARtICIPAtIONS IN DuFRy AG 5. pledGed assets In 2012 and 2011, Dufry AG had no pledged assets. 6. Guarantee commitment reGardinG swiss value added tax (vat) the following companies constitute a group for the Swiss Federal tax Administration, main division vAt: – DuFRy International AG – DuFRy travel Retail AG – DuFRy Samnaun AG – DuFRy Participations AG – DuFRy Russia holding AG – DuFRy trading AG – DuFRy basel Mulhouse AG – DuFRy Management AG – DuFRy Corporate AG – DuFRy holdings & Investments AG – DuFRy AG – DuFRy Altay AG Dufry AG is jointly and severally liable for the value Added tax owed by this specific group. the members of the board of Directors of Dufry AG juan Carlos torres Carretero (Chairman), ernest George bachrach (vice Chairman) and Steve tadler (member) representing the interest of Advent International Corpo- ration and its funds do not hold any shares or share options on December 31, 2012 or December 31, 2011. On December 31, 2012, the following members of the board of Directors and Group executive Committee (including closely related parties) held the following number of shares / number of share options (restricted stock units) / percentage participation in Dufry AG: Mr. Andrés holzer Neumann, member 2,338,775 / 0 / 7.88% (which includes 2,223,563 shares held by travel Retail Investment SCA); Mr. james Cohen, member 1,331,687 / 0 / 4.49% (which includes 1,154,677 shares held by hudson Media, Inc.); Mr. joaquín Moya-Angeler Cabrera, member 6,000 / 0 / 0.02%; Mr. Mario Fontana, member 6,000 / 0 / 0.02%; Mr. julián Díaz González, Chief executive Officer 32,100 / 39,941 / 0.24%; Mr. Andreas Schneiter, Chief Financial Officer 3,000 / 6,600 / 0.03%; Mr. josé Antonio Gea, Global Chief Operating Officer 631 / 26,400 / 0.09%; Mr. Pascal C. Duclos, General Counsel 0 / 21,000 / 0.07%; Mr. Xavier Rossinyol, Chief Operating Officer Region eMeA & Asia 30,000 / 26,400 / 0.19%; Mr. René Riedi, Chief Operating Officer Region America I 0 / 10,200 / 0.03%; Mr. josé Carlos Costa da Silva Rosa, Chief Operating Officer Region America II 0 / 10,200 / 0.03% and Mr. joseph DiDomizio, Chief Operating Officer Region united States and Canada 0 / 16,800 / 0.06%. Page 142 Dufry annual rePort 2012 fInanCIal statements of Dufry ag On December 31, 2011, the following members of the board of Directors and Group executive Committee (including closely related parties) held the following number of shares / number of share options (restricted stock units) / percentage participation in Dufry AG: Mr. Andrés holzer Neumann, member 2,262,125 / 0 / 8.39% (which includes 2,151,913 shares held by Petrus Pte ltd); Mr. james Cohen, member 1,257,687 / 0 / 4.66% (which includes 1,154,677 shares held by hudson Media, Inc.); Mr. joaquin Moya- Angeler Cabrera, member 13,390 / 0 / 0.05%; Mr. Mario Fontana, member 10,000 / 0 / 0.04%; Mr. julián Díaz González, Chief executive Officer 60,100 / 39,941 / 0.37%; Mr. Xavier Rossinyol, Chief Financial Officer 45,000 / 26,400 / 0.26%; Mr. josé Antonio Gea, Global Chief Operating Of- ficer 37,000 / 26,400 / 0.24%; Mr. Pascal C. Duclos, General Counsel 0 / 21,000 / 0.08%; Mr Dante Marro, Chief Operat- ing Officer Region europe 0 / 10,200 / 0.04%; Mr. Miguel Ángel Martínez, Chief Operating Officer Region Africa 8,500 / 10,200 / 0.07%; Mr. René Riedi, Chief Operating Officer Re- gion eurasia 1,500 / 10,200 / 0.04%; Mr. josé h. González, Chief Operating Officer Region Central America & Caribbean 0 / 10,200 / 0.04%; Mr. josé Carlos Costa da Silva Rosa, Chief Operating Officer Region South America 2,000 / 10,200 / 0.05% and Mr. joseph DiDomizio, Chief Operating Officer Region North America 13,500 / 16,800 / 0.11%. the remaining members of the board of Directors or the Group executive Committee had no participation on December 31, 2011. All these participations are reported in accordance with the regulations of the Federal Act on Stock exchanges and Securities trading (SeStA), in force since December 1, 2007, showing the participation (including restricted stock units) as a percentage of the number of outstanding reg- istered shares on December 31, 2012 and December 31, 2011, respectively. 8. compensation of members of the board of directors and Group executive committee the members of the board of Directors of Dufry AG juan Carlos torres Carretero (Chairman), ernst George ba- chrach (vice Chairman) and Steve tadler (member) rep- resenting the interest of Advent International Corporation and its funds do not receive any compensation for the years 2012 or 2011. In 2012 Dufry paid to its non-executive members of the board of Directors fees in total amount of ChF 1,350.0 (to Mr. jorge born, member ChF 150.0; to Mr. Xavier bouton, member ChF 150.0; to Mr. james Cohen, member ChF 150.0; to Mr. josé lucas Ferreira de Melo, member ChF 150.0 to Mr. Mario Fontana, member ChF 200.0; to Mr. Andrés holzer Neumann, member ChF 200.0; to Mr. Maurizio Mauro, member ChF 150.0; to Mr. joaquín Moya-Angeler Cabrera, member ChF 200.0). In addition to these fees Mr. Xavier bouton received ChF 250.0 for strategic consulting services provided to the Group during the year. the social charges related to these fees are calculated in accordance with the local regulations amounted to ChF 81.8 in total (to Mr. jorge born, member ChF 9.1; to Mr. Xavier bouton, member ChF 9.1; to Mr. james Cohen, member ChF 9.1; to Mr. josé lucas Ferreira de Melo, member ChF 9.1; to Mr. Mario Fontana, member ChF 12.1; to Mr. Andrés holzer Neumann, member ChF 12.1; to Mr. Maurizio Mauro, member ChF 9.1; to Mr. joaquín Moya-Angeler Cabrera, member ChF 12.1). Finally, the total compensation to the non-executive members of the board of Directors amounted to ChF 1,681.8 in total (to Mr. jorge born, member ChF 159.1; to Mr. Xavier bouton, member ChF 409.1; to Mr. james Cohen, member ChF 159.1; to Mr. josé lucas Ferreira de Melo, member ChF 159.1; to Mr. Mario Fontana, member ChF 212.1; to Mr. Andrés holzer Neumann, member ChF 212.1; to Mr. Maurizio Mauro, member ChF 159.1; to Mr. joaquín Moya-Angeler Cabrera, member ChF 212.1). In 2011 Dufry paid to its non-executive members of the board of Directors fees in total amount of ChF 1,350.0 (to Mr. jorge born, member ChF 150.0; to Mr. Xavier bouton, member ChF 150.0; to Mr. james Cohen, member ChF 150.0; to Mr. josé lucas Ferreira de Melo, member ChF 150.0; to Mr. Mario Fontana, member ChF 200.0; to Mr. Andrés holzer Neumann, member ChF 200.0; to Mr. Maurizio Mauro, member ChF 150.0; to Mr. joaquín Moya- Angeler Cabrera, member ChF 200.0). In addition to these fees Mr. Xavier bouton received ChF 250.0 for strategic consulting services provided to the Group during the year. the social charges related to these fees are calculated in accordance with the local regulations amounted to ChF 81.8 in total (to Mr. jorge born, member ChF 9.1; to Mr. Xavier bouton, member ChF 9.1, to Mr. james Cohen, mem- ber ChF 9.1; to Mr. josé lucas Ferreira de Melo, member ChF 9.1; to Mr. Mario Fontana, member ChF 12.1; to Mr. Andrés holzer Neumann, member ChF 12.1; to Mr. Maurizio Mauro, member ChF 9.1; to Mr. joaquín Moya-Angeler Cabrera, member ChF 12.1). Finally, the total compensation to the non-executive members of the board of Directors amounted to ChF 1,681.8 in total (to Mr. jorge born, mem- ber ChF 159.1; to Mr. Xavier bouton, member ChF 409.1; to Mr. james Cohen, member ChF 159.1; to Mr. josé lucas Ferreira de Melo, member ChF 159.1; to Mr. Mario Fontana, member ChF 212.1; to Mr. Andrés holzer Neumann, mem- ber ChF 212.1; to Mr. Maurizio Mauro, member ChF 159.1; to Mr. joaquín Moya-Angeler Cabrera, member ChF 212.1). In the years 2012 and 2011 there were no other compensa- tions paid directly or indirectly to active or former members of the board of Directors and there are also no loans or guarantees received or provided to these board members, nor to their related parties. Page 143 Dufry annual rePort 2012 fInanCIal statements of Dufry ag In 2012 the eight members of the Group executive Com- mittee received the following compensation: i) in cash ChF 8,977.0 (basic salary ChF 4,609.7, bonus ChF 3,764.7, allow- ances in kind ChF 602.6) and ii) as employer’s social charges ChF 1,035.2, adding up to a total compensation of ChF 10,012.2. these figures include the compensation to Mr. julián Díaz González, Chief executive Officer of Dufry AG, who received a compensation: i) in cash ChF 1,966.9 (basic salary ChF 1,065.9, bonus ChF 867.7, allowances in kind ChF 33.3) and ii) as employer’s social charges ChF 229.0, adding up to a total compensation of ChF 2,195.9. In 2011 the ten members of the Group executive Commit- tee received the following compensation: i) in cash ChF 8,765.0 (basic salary ChF 4,335.6, bonus ChF 3,647.2, allowances in kind ChF 782.2) and ii) as employer’s social charges ChF 1,977.9 and iii) in form of unvested stock options for the biannual award 2011, i.e. for the years 2011 and 2012 181,541 RSu’s of Dufry AG (for this purposes fully considered as a compensation 2011), adding up to a total compensation of ChF 20,747.7. these figures include the compensation to Mr. julián Díaz González, Chief executive Officer of Dufry AG, who received a compensation: i) in cash ChF 1,789.4 (basic salary ChF 912.1, bonus ChF 844.4, allowances in kind ChF 32.9) and ii) as employer’s social charges ChF 513.2 and iii) in form of unvested stock options for the biannual award 2011, i.e. for the years 2011 and 2012 39,941 RSu’s of Dufry AG (for this purposes fully considered as a compensation 2011), adding up to a total compensation of ChF 4,503.7. In the years 2012 and 2011 there were no other compensa- tions paid directly or indirectly to active or former members of the Group executive Committee, nor to their related parties and there are also no loans or guarantees received or provided to these members, nor to their related parties. For details regarding conditions of Restricted Stock unit (RSu) Plan refer to note 30 of the consolidated financial statements. 9. appropriation of available earninGs In tHousanDs of CHf Retained earnings Movement in legal reserves Net earnings (loss) for the year available earnings at December 31 to be carried forward 2012 52,227 (28,120) 53,100 77,207 77,207 2011 62,217 15,219 (25,209) 52,227 52,227 Page 144 Dufry annual rePort 2012 fInanCIal statements of Dufry ag To the General Meeting of Dufry AG, Basel Basel, 7 March 2013 Ernst & Young Ltd Aeschengraben 9 CH-4051 Basel Phone Fax www.ey.com/ch +41 58 286 86 86 +41 58 286 86 00 Report of the statutory auditor on the financial statements As statutory auditor, we have audited the financial statements of Dufry AG, Basel, which comprise the statement of financial position, income statement and notes (pages 138 to 143), for the year ended 31 December 2012. Board of Directors’ responsibility The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements for the year ended 31 December 2012 comply with Swiss law and the company’s articles of incorporation. Member of the Swiss Institute of Certified Accountants and Tax Consultants Page 145 Dufry annual rePort 2012 fInanCIal statements of Dufry ag 2 Report on other legal requirements We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 Code of Obligation (CO) and article 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors. We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved. Ernst & Young Ltd Patrick Fawer Licensed audit expert (Auditor in charge) David Haldimann Licensed audit expert Page 146 Dufry annual rePort 2012 otHer InformatIon inforMation for inVeStorS anD MeDia dufry shares SIX Swiss exchange Registered shares DuFN Ch0023405456 listing type of security ticker symbol ISIN-No. Swiss Security-No 2340545 DuFN.S Reuters DuFN SW bloomberg dufry bdrs listing type of security ticker symbol ISIN-No. Reuters bloomberg bM&FbOveSPA brazilian Depositary Receipts (bDRs) DAGb11 bRDAGbbDR008 DAGb11.SA DAGb11 bZ investor relations sara lizi Manager Investor Relations Dufry Group Phone +55 21 2157 9901 sara.lizi@br. Dufry.com rafael Duarte Investor Relations Dufry Group Phone +41 61 266 45 77 rafael.duarte@ Dufry.com victor Bento Investor Relations Dufry Group Phone +55 21 2157 9610 victor.bento@br. Dufry.com dufry senior notes corporate communications type of security Size of issue Interest rate Maturity ISIN-No. bloomberg Senior Notes uSD 500 million 5.5% p.a., paid semi-annually October 15, 2020 uSl2660RAA25 (Serie ReG S) uS26433uAA34 (Serie 144A) DuFSCA key dates in 2013 April 30, 2013 May 7, 2013 july 31, 2013 November 4, 2013 Results First Nine Months 2013 Annual General Meeting Results First quarter 2013 Results First half year 2013 lubna Haj Issa Corporate Communications Dufry Group Phone +41 61 266 44 46 lubna.haj-issa@ Dufry.com mario rolla Corporate Communications Dufry Group Phone +55 21 2157 9611 mario.rolla@br. Dufry.com Page 147 Dufry annual rePort 2012 otHer InformatIon aDDreSS DetailS of HeaDQUarterS corporate headquarters reGion emea & asia Dufry ag hardstrasse 95 4020 basel Switzerland Phone +41 61 266 44 44 Dufry management buckhauserstrasse 11 8048 Zurich Switzerland Phone +41 61 266 44 44 reGion america i Dufry america, Inc. 10300 N.W. 19th Street Suite 114 Miami / Fl 33172 Mailing Address: Miami / Fl 33222, uSA Phone +1 305 591 1763 reGion america ii Dufry do Brasil Duty free shop ltda Rua da Assembléia, 51 Centro, Rio de janeiro – Rj brazil – 20011-001 Phone +55 21 2157 9695 reGion united states & canada Hudson group One Meadowlands Plaza east Rutherford, Nj 07073 P.O. box 226170, uSA Phone +1 201 939 5050 Page 148 Dufry annual rePort 2012 fInanCIal rePort this Annual Report contains certain forward-looking statements, which can be identified by terms like “believe”, “assume”, “expect” or similar expressions, or implied discussions regarding potential new projects or potential future revenues, or discussions of strategy, plans or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. All forward-looking statements are based only on data available to Dufry at the time of preparation of this Annual Report. Dufry does not undertake any obligation to update any forward-looking statements contained in this Annual Report as a result of new information, future events or otherwise. Publisher Dufry AG, basel Concept, Production tolxdorff & eicher Consulting, horgen Design MetaDesign, Zurich Print Druckerei Feldegg, Schwerzenbach © Dufry ltd 2013 Global preSence eMea & aSia aMerica i aMerica ii armenia: Yerevan czech republic: Prague france: Nice, Martinique, Guadeloupe Greece: Diagoras, Eptanisos, on-board of ferries of Blue-Star or Superfast italy: Milan, Rome, Bergamo, Genoa, Naples, Turin, Venice, Verona netherlands: Amsterdam serbia: Belgrade spain: Tenerife switzerland: Basel-Mulhouse, Samnaun russia: Moscow algeria: Algiers egypt: Sharm-el-Sheikh, Assyud, Borg El Arab Ghana: Accra ivory coast: Abidjan morocco: Casablanca, Marrakech, Agadir, Dakhla, Essaouira, Fez, Nador, Oujda, Rabat, Tanger tunisia: Tunis, Djerba, Monastir, Sfax, Tabarka, Tozeur united arab emirates: Sharjah india: New Delhi china: Shanghai, Beijing, Chengdu cambodia: Phnom Penh, Siem Reap argentina: Buenos Aires, Corboda, Mendoza, Bariloche caribbean islands: Dominican Republic, Puerto Rico, Aruba, Antigua, Bahamas, Barbados, Bonaire, Curaçao, Grand Turk, Grenada, Jamaica, St Kitts, St Lucia, St Maarten, St Thomas, Trinidad ecuador: Guayaquil honduras: Roatan mexico: Mexico City, Acapulco, Algodones, Cancun, Cozumel, Guadalajara, Ixtapa, Laredo, Leon, Los Cabos, Mahahual, Mazatlan, Monterrey, Nogales, Progreso, Puerto Vallarta, Reynosa nicaragua: Managua, El Espino, Guasaule, Las Manos, Peñas Blancas uruguay: Montevideo, Punta del Este cruise lines: on-board of ships of Norwegian Cruise Lines bolivia: La Paz, Santa Cruz brazil: Rio de Janeiro, São Paulo, Brasília, Belém, Belo Horizonte, Campinas, Curitiba, Florianopolis, Fortaleza, Natal, Porto Alegre, Recife, Salvador UniteD StateS & canaDa canada: Vancouver, Calgary, Edmonton, Halifax united states: Over 50 cities including Albuquerque, Anchorage, Baltimore, Birmingham, Boston, Charleston, Chicago, Cleveland, Dallas, Denver, Ft Lauderdale, Houston, Las Vegas, Los Angeles, Manchester, Memphis, Miami, Nashville, New Orleans, New York, Newark, Norfolk, Omaha, Orlando, Philadelphia, Phoenix, Pittsburg, Portland, Raleigh, Richmond, Rochester, San Francisco, San José, Seattle, Washington
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