Dufry AG Annual Report 2015

Plain-text annual report

ANNUAL REPORT 2015 STARTING A NEW ERA ANNUAL REPORT 2015 CONTENT 1 MANAGEMENT REPORT Dufry at a Glance 4 – 5 Highlights 2015 6 – 7 Message from the Chairman of the Board of Directors 8 – 10 Statement of the Chief Executive Officer 12 – 15 Organizational Structure 16 Board of Directors 18 – 19 Group Executive Committee 20 – 21 Dufry Investment Case 22 – 23 Dufry Business Model 24 – 73 Dufry Divisions 42 – 63 2 SUSTAINABILITY REPORT Sustainability 74 Environment 75 – 76 Employees 77 – 81 Social Responsibility 82 – 85 3 FINANCIAL REPORT Report of the Chief Financial Officer 86 – 90 Financial Statements 91 – 212 Consolidated Financial Statements 94 – 199 Financial Statements Dufry AG 200 – 211 4 GOVERNANCE REPORT Corporate Governance 213 – 232 Remuneration Report 233 – 245 Information for Investors and Media 246 – 247 Address Details of Headquarters 247 3 1 Management Report DUFRY ANNUAL REPORT 2015 DUFRY AT A GLANCE TURNOVER IN MILLIONS OF CHF GROSS PROFIT IN MILLIONS OF CHF MARGIN 7,200 6,600 6,000 5,400 4,800 4,200 3,600 3,000 2,400 1,800 1,200 600 0 3,600 3,300 3,000 2,700 2,400 2,100 1,800 1,500 1,200 900 600 300 0 66 % 65 % 64 % 63 % 62 % 61 % 60 % 59 % 58 % 57 % 56 % 55 % 54 % 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 EBITDA¹ IN MILLIONS OF CHF NET EARNINGS IN MILLIONS OF CHF 720 660 600 540 480 420 360 300 240 180 120 60 0 200 180 160 140 120 100 80 60 40 20 0 – 20 – 40 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Net earnings ¹ EBITDA before other operational result Adjusted net earnings without other operational result 4 NET SALES BY PRODUCT CATEGORY 2015 5 % TOYS, SOUVENIRS AND OTHER GOODS 31 % PERFUMES & COSMETICS 3 % LITERATURE & PUBLICATIONS 4 % ELECTRONICS 7 % FASHION, LEATHER & BAGGAGE 7 % WATCHES, JEWELRY & ACCESSORIES NET SALES BY REGION 2015 0 % DISTRIBUTION CENTERS 17 % EMEA & ASIA 11 % TOBACCO GOODS 23 % WORLD DUTY FREE BUSINESS 22 % NUANCE BUSINESS 13 % AMERICA I 8 % AMERICA II 17 % UNITED STATES & CANADA 15 % WINE & SPIRITS 17 % FOOD, CONFECTIONERY & CATERING NET SALES BY CHANNEL 2015 NET SALES BY MARKET SECTOR 2015 4 % RAILWAY STATIONS & OTHER 4 % BORDER, DOWNTOWN & HOTEL SHOPS 2 % CRUISE LINERS & SEAPORTS 37 % DUTY-PAID 90 % AIRPORTS 63 % DUTY-FREE 5 1 Management Report DUFRY ANNUAL REPORT 2015 HIGHLIGHTS 2015 SOLID GROWTH IN NORTH AMERICA North America is one of Dufry’s best performing divisions, posting solid growth in the past several years. EXPANSION OF DUTY-PAID IN BRAZIL Despite the current challenges, Brazil continues to offer substantial potential. Dufry has opened 26 shops in the country in 2015, of which 24 being duty-paid ACQUISITION OF WORLD DUTY FREE With the acquisition of WDF, Dufry entered important markets, such as the UK, Spain and several locations in South America, Middle East and Asia 6 INTEGRATION OF NUANCE COMPLETED Dufry has successfully concluded the integration of Nuance. The expected CHF 70 million synergies from the acquisition will be delivered in 2016 PRESENTING YOU THE NEW DUFRY The acquisitions of Nuance and World Duty Free were transformational for Dufry in many aspects and marked the perfect moment for a fresh new logo and corporate identity PLATFORM FOR GROWTH IN ASIA Now present in 17 locations across 8 countries, Dufry has built a strong platform to grow its presence in Asia CUTTING EDGE REFURBISHMENTS IN EUROPE Dufry’s refurbishment plan continues full speed with the major modernization of our operations in Milan Malpensa, Athens and London Heathrow, bringing the best of travel retail to these locations 7 13 ENVIRON- MENTAL AWARDS FOR NUANCE IN HONG KONG As part of the Environmental Recognition Scheme of Hong Kong’s HKIA airport, Dufry’s Hong Kong operations have been recognized with 13 awards 8 MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS DEAR SHARE- HOLDERS In my Chairman’s letter for last year’s annual report, I wrote to you we were extremely happy to have reached a new milestone in the development of the company through the acquisition of Nuance. Today, I am even more proud to introduce you with another very successful year for Dufry and with the trans- formational acquisition of World Duty Free (WDF), which fosters even further our position as undisputed leader of the industry and reshapes the landscape of travel retail going forward. The transaction announced on March 30, 2015, val- ued at EUR 3.6 billion enterprise value, was closed in two major steps; first with the acquisition of the 50.1 % majority stake from Edizione S.p.A. on August 7, 2015, and second with the delisting of World Duty Free as per November 13, 2015, following the mandatory tender offer for the minority share- holders. We have started to consolidate WDF as per August 2015 and we expect to generate synergies of EUR 100 million. The acquisition was funded with a mix of equity and debt financing. First we raised CHF 2.2 billion in a rights issue executed by the end of June, and complemented financing by issuing a EUR 700 million Senior Notes, carrying a coupon of 4.5 %, as well as with a new term loan of EUR 800 million. I thank all our shareholders, bondholders and the banks that supported our com- pany to finance this strategically very important growth step. The new and enlarged Dufry is present in over 370 locations in 63 countries and operates over 2,200 shops on all 5 continents, representing a total market share of 24 % in airport travel retail. Going forward Dufry will benefit from an even stronger geographic diversification featuring a well balanced portfolio of emerging and mature market operations. Following this considerable growth step we revised the organizational structure of the company, to adapt our business operating model to the new requirements and to reinforce our management capacity at the ex- ecutive level – all changes having become effective as of January 1, 2016. Last but not least, given the trans- formational character of the last two acquisitions we have also refreshed our corporate identity. The new logo combines our Swiss heritage with the travel re- tail industry and our slogan WorldClass.WorldWide. underlines our commitment to provide customers and business partners with a unique service around the globe. Most important, the new logo is a common sym- bol for all our employees and provides the joint start- ing point to launch a new era: The New Dufry. Well balanced and diversified con- cession portfolio. In 2015, we have successfully completed the integra- tion of Nuance and started to deliver the synergies for an amount of CHF 34 million. Once World Duty Free is fully integrated, the new Dufry will continue with its strategy of focusing on profitable growth and expand- ing its diversified geographic footprint. Furthermore, our strong and resilient cash generation capability will allow us to deleverage the company while also provid- ing us with the strategic flexibility to finance further non-organic growth or to consider returning cash to shareholders. In 2016 and 2017, the focus will be to reduce our leverage ratio to below 3x Net Debt / EBITDA. The business year 2015 has also been characterized by a high volatility of the financial markets, which has impacted our operations exposed to Brazilian and Russian travelers. Thanks to our proven long-term strategy to purchase and sell our products in hard currencies and to actively foster natural hedging by matching the currencies of revenues and cash flows, FX fluctuations result mainly in a translation impact on our financials reported in Swiss Francs, allowing us once more to successfully navigate through these ad- verse waters. With the well balanced and enlarged geographic diversification and the smaller exposure to emerging markets the impact on our business we have seen in 2015 will be considerably reduced going forward. From a financial market perspective, Dufry’s market cap- italization grew by 21 % to CHF 6.5 billion on December 31, 2015. This places Dufry among the 30 largest Swiss 9 1 Management ReportDUFRY ANNUAL REPORT 2015410,000 m²Dufry operates close to 410,000 m² of retail space. ger numbers. Our focus will be on the integration of World Duty Free and the implementation of the new business operating model. In this very special year full of achievements, it is imperative to me to thank all Dufry employees – in- cluding the new colleagues of World Duty Free – for their extraordinary dedication and the high degree of motivation shown when executing the different proj- ects and driving our existing business. I also thank our suppliers, landlords and business partners for their ongoing support and the longstanding relationships. Finally, I extend my thanks again to our shareholders and bondholders, who continue to share and strongly support our vision of building a company that is WorldClass.WorldWide. Sincerely, Juan Carlos Torres Carretero publicly listed companies. Despite the ongoing high mar- ket volatility, trading volumes in the year under review grew and reached a daily average of CHF 25.1 million exceeding the already high levels of 2014. The higher market capitalization has attracted new investors and we continue to see growing interest of investor groups putting the Dufry share on their radar. As a consequence of the World Duty Free acquisition and the related capital increase, Dufry’s shareholder structure has seen important changes with GIC, Qatar Investment Authority and Temasek joining our shareholder base. The participation of the syndicate led by the long-term shareholder Travel Retail In- vestments amounted to 22.4 % as per December 31, 2015. Consequently, at year-end 2015, the free float of our shares was 77.6 %, thus providing a very good trading liquidity. Dufry continued to foster its social responsibility en- gagement focusing on helping disadvantaged children around the world with a variety of charity initiatives to support weak members of society. Dufry has been funding projects of SOS Children’s Villages for over 6 years now, underlining the long-term character of our commitment. In 2015, Dufry has endorsed proj- ects in many parts of the world as in Cambodia, Mexico and Ivory Coast. Furthermore, we have continued to support projects in many other countries such as in Haiti, Greece, Serbia, Argentina, the US, the UK and Brazil, to name a few. Even if the 2016 start of the year has shown an on- going emerging market currency volatility which might still continue throughout the year, we believe, that it will have a reduced magnitude as compared to last year. Our organization is ready to perform well, backed by our solid strategy and positive fundamentals of the industry, which expect again strong growth in passen- 10 1 Management ReportDUFRY ANNUAL REPORT 201511 12 STATEMENT OF THE CHIEF EXECUTIVE OFFICER DEAR ALL 2015 was a transformational year for Dufry, mostly characterized by the full integration of Nuance and the acquisition of World Duty Free. While these ac- quisitions allowed us to reach new levels in growing our company, they also generated the need for im- portant structural and organizational changes, which lead us to adapt our organization, to review our busi- ness operating and financial model and to create a new corporate identity. From a business perspective, our financial performance continued strong: turnover increased to CHF 6,139.3 mil- lion, resulting in a growth of 46.3 % over 2014; EBITDA reached CHF 723.8 million and free cash flow genera- tion, before acquisition-related cash flows, amounted to CHF 338.4 million. Furthermore, our initiatives launched to drive organic growth have shown good results in an economic environment, in which the vast majority of our operations performed well. Dufry has become the clear market leader with 24 % of market share in airport travel retail Our acquisition of World Duty Free (WDF) – one of the world’s leading travel retailers, operating in 20 coun- tries with a turnover of EUR 2,440 million and an EBITDA of EUR 261 million in FY 2014 – marked a new milestone for Dufry and the travel retail industry. First, this acquisition will generate a significant amount of synergies and has grown Dufry’s market share in air- port retail to 24 %, which is three times bigger than the next competitor. Second, it has allowed us to consid- erably enhance our presence in key strategic markets and to further refine our geographic diversification with a good balance of emerging market exposure and important operations in developed markets. Going forward, we will create value by integrating WDF, which we expect to generate total synergies of approx- imately EUR 100 million. By more than doubling its turnover since 2013 and by currently operating over 370 locations in 63 countries on all five continents, Dufry has become an ever more important partner for global brands through the unique global retail network we can offer. This will allow us to realize gross profit increases through improved purchasing power, and even more so with our brands plan and joint growth and marketing initiatives with suppliers. Moreover, a tremendous value is generated by com- bining all employees’ skills and know-how of Nuance, WDF and Dufry – three of the best travel retail com- panies. The new Dufry team will undoubtedly emerge as the best group of travel retail professionals ever. On the cost side, efficiencies will be generated by integrating global functions of the enlarged company and by streamlining regional and global headquarters. Once the WDF integration is completed and the new operating business model is fully operational, Dufry should have the cost leadership in travel retail and thus gain additional strategic flexibility to further develop the company. Integration of Nuance completed The Nuance acquisition, which we completed in September 2014, has helped us to strengthen our presence in Europe with locations in Switzerland, Sweden, and Turkey, as well as in North America, and Asia. Thanks to this transaction, and including the new World Duty Free operations, we are now present in 17 locations in Asia, which makes us the most inter- national player in this important growth area. In the year under review, we have completed on time the integration of Nuance combining all Group, divi- sional and operational functions and aligning business models by using best practices from both companies to adapt the related processes. A first contribution of 13 1 Management ReportDUFRY ANNUAL REPORT 20152,200 Dufry is a real global player operating over 2,200 shops throughout all continents. Nuance synergies to the consolidated EBITDA in the magnitude of CHF 34 million is already reflected the 2015 full year results. The remaining CHF 36 million of synergies, adding up to the CHF 70 million we had announced, will be fully reflected in our results in 2016. New Group Structure, Business Operating and Financial Model and Corporate Identity The acquisitions of Nuance and World Duty Free marked the start of a new development phase for Dufry. To adapt the organization to its increased size, geographic spread and broader complexity as well as preparing it for future growth, we first implemented a new business operating model. By redefining the regional Divisions, the introduction of global functions and the elimination of a management level we will be able to simplify processes, increasing efficiency and speed. The new organization is also reflected in the Group Executive Committee – which includes exec- utives from Nuance, World Duty Free and Dufry. Moreover, we have started to enhance our Finance organization to align with the requirements of the enlarged Group. We have already introduced central- ized finance functions to manage and coordinate the respective activities on a group-wide basis, and we plan to expand the concept of Financial Shared Services Center to create efficiencies through scale and to bundle expertise. The full integration has considerable implications in- ternally and externally. Three established corporate cultures and well-recognized duty-free brands need to be integrated and aligned. Dufry’s new corporate logo and branding strategy provide both a common starting point with respect to corporate culture and a new identity for all Group employees. Moreover, it is a consistent branding approach for the markets, allow- ing to maintain the powerful commercial brands and to benefit from their recognition and positive image 14 established with landlords and customers to drive fur- ther growth. The existing portfolio of brands which are successfully established in specific regions, such as Hellenic Duty Free in Greece, or which represent spe- cific commercial concepts, such as Hudson for travel convenience stores, will be continued to be used as lo- cal retail brands. The same applies for the three main brands of our duty-free business Dufry, Nuance and World Duty Free. In 2015 we started a new era for Dufry and the travel retail industry. Operating performance driven by expansion and efficiencies Organic growth is a key pillar of our strategy and we continued to work hard to drive growth in our business. Excluding sales to Brazilian and Russian travelers oper- ating and business performance overall saw a positive development in the vast majority of our geographies and resulted in an organic growth for the year of 4.0 %. As to sales to Brazilians and Russians – which on a pro forma basis account for about 10 % of our sales in the combined group – the massive devaluation of their lo- cal currencies had a significant impact on their pur- chase power in US Dollar and Euro and consequently impacted our sales growth in selected locations. We therefore went through an important efficiency plan in our Russian and Brazilian operations, which was com- pleted in the third quarter of 2015. Our local teams did a remarkable effort to re-size the structure of these operations resulting in savings of CHF 20 million, which will be fully reflected in the 2016 financials. 1 Management ReportDUFRY ANNUAL REPORT 2015ger numbers expected to increase by 6 %. Secondly, we will leverage and focus on capitalizing on our strong project pipeline and on the opportunities for new con- cessions the market continues to provide – we have already signed projects securing additional 19,000 m², of new retail space to be opened in 2016. Last but not least, we will benefit from our highly diversified geo- graphic footprint and the large locations network, which considerably reduces the company’s exposure to external impacts, which are typically related to sin- gle countries or regions. Thank you 2015 was a truly remarkable and extraordinary year for Dufry. I would, above all, like to thank all the col- leagues and teams around the world for their huge ef- forts and their commitment to the company. In 2015, we have successfully executed important projects and mastered some highly demanding challenges. We will remember this year as the yet most remarkable milestone in our development. I also thank our suppliers, landlords and business partners for their continuous support in an intense year. We are absolutely confident that we have set the base for a mutually beneficial development and growth going forward. Finally, in the name of the senior man- agement, I would like to thank the members of our board of directors and our shareholders for their sup- port, trust and contribution to make our company WorldClass.Worldwide. Best regards, Julián Díaz González Within our expansion activities we opened a total of 189 new shops representing 18,700 m² of new retail space. In this context, we want to highlight the 7 brand and specialized shops in Switzerland; the major exten- sions and refurbishments in Italy and Greece and the six shops opened in Puerto Rico. Brazil saw the successful expansion of our convenience concept Hudson, which accounts for 12 shops of the total 26 stores opened in the country. Worth mentioning are also the 76 shops opened in the United States, which include 12 brand boutiques and 17 specialized shops, proving that the US market has strong potential beyond our successful Hudson concept. To further accelerate organic growth, Dufry has also launched a wide range of initiatives, which have shown strong results and which will be continued in 2016. The most important ones are the refurbish- ment plan and the brands plan, which have both proven their capacity to generate additional sales. Furthermore, we piloted a variety of customer oriented activities, such as the loyalty program Dufry Red or the VIP voucher, which will be further expanded in 2016. Additionally, we have also completed the setup of our world-wide logistics and procurement platform by putting into service our distribution center in Hong Kong, which will be serving the Asia-Pacific operations. Together with the two other distribution centers in Latin America and Europe they are a key instrument to further improve our supply chain, to better manage inventory levels and product availability at the stores and to reduce lead times. The procurement and sup- ply chain has thus become a true global function, which will allow us to leverage our size by working closer with our suppliers and generating efficiencies. Looking forward to a promising future In 2016 we have great challenges to tackle. The clear priority will be the integration of WDF. We want to seize the opportunity to build the strongest team of travel retail experts and at the same time implement the new business operating model identifying efficiencies and creating value through synergies. Since the fourth quarter of 2015 we have developed a specific action plan for the integration and we have now started its execution, which our teams expect to be completed by mid 2017. From a market perspective, 2016 started again with very volatile financial markets, thus reducing visibility. Nevertheless, for this year, the drivers of additional growth will first be the positive global trends for travel retail, which will continue to provide growing passen- 15 1 Management ReportDUFRY ANNUAL REPORT 2015OUR ORGANIZATIONAL STRUCTURE – GROUP EXECUTIVE COMMITTEE AS OF JANUARY 1, 2016 Chief Executive Officer Julián Díaz González Global Chief Operating Officer Chief Financial Officer Global Chief Corporate Officer José Antonio Gea Andreas Schneiter Luis Marin Global Resources Director Jordi Martin-Consuegra General Counsel Pascal C. Duclos SOUTHERN EUROPE AND AFRICA Divisional Chief Executive Officer UK, CENTRAL AND EASTERN EUROPE Divisional Chief Executive Officer ASIA, MIDDLE EAST AND AUSTRALIA Divisional Chief Executive Officer LATIN AMERICA Divisional Chief Executive Officer NORTH AMERICA Divisional Chief Executive Officer Pedro Castro Eugenio Andrades Andrea Belardini René Riedi Joseph DiDomizio BRAZIL AND BOLIVIA General Manager Gustavo Fagundes 16 1 Management ReportDUFRY ANNUAL REPORT 201517 BOARD OF DIRECTORS MEMBERS 1 1 Juan Carlos Torres Carretero 2 Andrés Holzer Neumann 3 Jorge Born 4 Xavier Bouton 3 4 2 18 1 Management ReportDUFRY ANNUAL REPORT 20155 7 9 5 James S. Cohen 6 Julián Díaz González 7 José Lucas Ferreira de Melo 8 George Koutsolioutsos 9 Joaquín Moya-Angeler Cabrera 6 19 8 GROUP EXECUTIVE COMMITTEE MEMBERS 2 1 Julián Díaz González 2 Andreas Schneiter 3 José Antonio Gea 4 Luis Marin 5 Pascal C. Duclos 4 5 1 3 20 1 Management ReportDUFRY ANNUAL REPORT 20156 Jordi Martin-Consuegra 7 Pedro Castro 8 Eugenio Andrades 9 Andrea Belardini 10 René Riedi 11 Joseph DiDomizio 12 Gustavo Magalhães Fagundes 7 9 11 6 10 8 12 21 1 Management Report DUFRY ANNUAL REPORT 2015 DUFRY’S INVESTMENT CASE 24%24 % market share in airport retail MARKET LEADER IN THE TRAVEL RETAIL INDUSTRY Dufry’s market share is three times the size of its next competitor and reaches 24 % in airport retail OFFERING AIRPORT AUTHORITIES UNIQUE ACCESS TO GLOBAL BRANDS Dufry provides airports access to an extensive portfolio of global brands, while these benefit at the same time from a balanced shop network in mature and emerging markets 22 370 Over 370 UNIQUE GLOBAL FOOTPRINT locations operated by Dufry world-wide Average growth of 3 % for like-for-like and 2 % for new concessions p.a. since 2006 Most active player in the consolidation of the industry with track-record of 16 % yearly average growth through acquisitions in the last 10 years 8 YEARS LONG-TERM CONCES- SION PORTFOLIO 8 years of remaining average concession life-time of highly diversified portfolio High quality concession portfolio Biggest concession represents about 6 % of turnover Top 10 concessions represent less than 25 % of turnover 4%4 % p.a. average global FAST GROWING INDUSTRY passenger growth expected for the next 5 years Average growth of 4 % p.a. in coming years will by key driver for Dufry’s organic growth Affluent customer base, with above average spending power STRONG FREE CASH FLOW GENERATION Strong capability of free cash flow conversion from EBITDA SUBSTANTIAL SYNERGIES TO BE DELIVERED IN 2016 – 2018 The acquisitions of Nuance and WDF are expected to generate synergies of CHF 175 M at the EBITDA level fully reached in 2018 Both transactions expected to be Cash EPS accretive in second year after the acquisition 23 OUR STRATEGY PROFITABLE GROWTH AND GLOBAL FOOTPRINT Dufry’s strategy is to grow profitably by operating its own shops in travel retail globally with a portfolio di- versified by geographies, sectors and channels. Our operations cover both the duty-free and the duty-paid environments, benefiting from the large number of passengers travelling internationally and domestically. Through a combination of organic growth and acqui- sitions, Dufry has become the undisputed leader in airport retail having a market share of 24 % globally. Undisputed market leader with more than 2,200 shops in over 370 locations across 63 countries. Retail excellence for customers, landlords and suppliers Travel retail is a fast moving and growing industry driven by ever changing customer expectations, which we address with a broad range of retail concepts and continuously develop and refine (see detailed descrip- tions of the concepts on pages 28 through 37). We aim to offer retail solutions for landlords in ev- ery travel location be it airports, seaports, railway stations or border shops, in both duty-free and duty- paid environments. Ultimately, the goal is always the same: we want to offer a memorable retail experience for our custom- ers by combining the sense of place of any location with the international appeal that any travel loca- tions has. Hence, we ensure that our shop designs reflect local cultural characteristics and have an individual appearance. In order to offer customers the right products, create the right retail concepts and provide an excellent ser- vice, it is crucial to understand the customer and their buying habits. To best serve our customers, Dufry has always set high priority on using business intelligence, analyzing customer profiles in all its activities. This in- formation is the basis to refine concepts, adapt as- sortments and to structure passenger flows with a view to achieve two goals at the same time: providing customer satisfaction and make the available retail space more efficient to maximize sales. On top of Dufry’s well-known retail capabilities, the acquisitions of Nuance and World Duty Free contrib- ute further to enhance our skills by combining the ex- pertise and know-how of three major players in the industry. This excellence in retail will be an important asset creating added value for Dufry. These skills and know-how are also beneficial for our landlords and our suppliers alike. Landlords benefit from the access to a unique portfolio of renowned global brands and Dufry’s capability to design loca- tion specific retail areas offering great shopping ex- perience to travelers and maximizing revenues for landlords through a variety of retail concepts. Global brands are first of all offered a seamless world-wide window-display to showcase their prod- ucts in 63 countries, representing a well-balanced mix of over 370 locations in attractive emerging and mature markets. Secondly, Dufry’s brand plan opens new opportuni- ties on how to increase sales performance, based on 24 1 Management ReportDUFRY ANNUAL REPORT 2015brand-specific analyses of improvement potentials and customer buying habits, which are jointly devel- oped with our retail experts. Geographic diversification to maximize opportunities and mitigate risks Geographic diversification is one of the most impor- tant aspects of our strategy as it is the best way to benefit from the global opportunities provided by the ever growing number of travelers worldwide, a key driver for growth of the travel retail industry. Geographic diversification is a key pillar of our strategy. Dufry’s global footprint with operations on all conti- nents allows us to better and quickly evaluate new projects wherever they arise, as we already have local teams almost everywhere. Having an own team on the ground gives us a clear understanding of the local market characteristics and to closely collaborate with landlords and other local business partners to best develop new opportunities. Furthermore, Dufry is also the only true global travel retailer, with a clear organization that links global headquarter and central functions with divisions and the countries where we operate. This setup grants us a substantial efficiency potential, as we can combine the benefits of global central functions and global standardized process creating economies of scale, while still keeping the proximity to the customer and landlords at local level. Moreover, being geographically diversified consider- ably mitigates risks generated by external impacts in single markets or regions. This risk mitigation effect is best illustrated by the share any individual operation has on the total Group. With the largest concession accounting for about 6 % of our business, and with the ten biggest ones representing less than 25 % of pro- forma sales, Dufry has no significant exposure to sin- gle operations. The defensive nature of our business is further en- hanced through the highly variable cost structure, resulting in a solid and resilient business profile. Priority on organic growth and focus on returns In the ten years from 2006 to 2015 Dufry has grown with an average annual top line growth of 21 %, to which or- ganic growth contributed 5 %, while acquisitions added 16 %. While our basic strategy of profitable growth con- tinues, organic growth will play a more important role going forward. Supported by the increase of passenger numbers – the most important driver of our business –, we will focus on increasing sales on a like-for-like basis through the implementation of attractive shop con- cepts and new retail techniques. We also expect to grow through additional retail space, be it by expanding in existing locations or by winning new concessions in further airports or new businesses. Dufry currently generates 63 % of its revenues in duty- free and 37 % in duty-paid operations and both sectors continue to offer growth opportunities. Dufry tradition- ally features a strong project pipeline, which has allowed us to increase retail space in different channels of both sectors. While the duty-free business at airports is ex- pected to continue to be the largest and fastest grow- ing part of our business, we do see additional potential by further developing airport duty-paid business or also in duty-free border shops, downtown duty-free as well as the cruise ship business in selected markets. The duty-paid sector has a considerable development potential as well, since the expected growth of domes- tic passengers is similar to the one for international travelers. Furthermore, this sector is still unexplored and even more fragmented than duty-free, thus offer- ing attractive new expansion opportunities. Organic growth with increasing importance going forward. One of our main initiatives is the international roll-out of our successful retail concepts, Hudson and Dufry Shopping, which today are implemented in specific re- gions and which have the potential to be deployed on a world-wide scale. Hudson is a well-established con- venience store concept that has been very successful in North America in the past 25 years and which we have deployed into 15 countries so far since 2009. Dufry Shopping is a duty-paid concept that offers a high quality assortment of international brands in an exclusive setting, similar to a duty-free travel retail store, but in a duty-paid environment targeted to do- 25 1 Management ReportDUFRY ANNUAL REPORT 2015 Our strategy is supported by strong and resilient industry fundamentals The travel retail industry has seen strong growth and has more than doubled its size in the past decade. The fundamental driver of this performance is the growth in passenger numbers, which has been showing a steady increase year after year. Industry specialists expect this trend to continue, thus providing a resilient driver of growth for travel retail going forward. As airports need to further develop their offering and optimize their revenue mix in order to attract airlines and passengers, the development of their commercial offering plays a crucial role. Dufry plays an important part in this trend as we hold the tools to maximize com- mercial space revenues of our landlords, be it airport operators or other facility owners. On the supplier side, structural growth of travel retail is a very attractive feature for global brands, which at- tribute to travel retail an above average growth poten- tial. Besides the pure commercial aspect of generating additional sales, the opportunity to present their brand products in a unique window display across the globe generates additional value to them. Thus, positioning themselves in the travel retail market is a priority for many brands, and they have extended their activities by providing special travel retail editions, and to use travel retail to present novelties, both of which add in turn to the attractiveness of the channel. Overall, the travel retail industry will continue to see a dynamic development, which will be supported by sustained growth of passengers, and developing inno- vative commercial concepts with landlords and brands alike. Dufry’s ambition is twofold – capture the market growth and also reflect the industry leader position by excellence in execution and driving change in the way the travel retail industry operates. mestic passengers. We pioneered Dufry Shopping in Brazil where we have achieved strong results and based on this positive experience, we are convinced that it can also be successful in other markets globally. With respect to acquisitions, Dufry has been the in- dustry’s most active consolidator. As a result, Dufry Group has become the largest travel retailer, not least because of the Nuance and WDF acquisitions done in the last two years. For these two acquisitions the goal is the same as to previous transactions done in the past: create value for shareholders by improving the business and creating synergies. As the travel retail market is still fairly fragmented, acquisitions will remain a growth component of Dufry’s strategy, albeit the contribution will be more moder- ate going forward as potential targets are likely to be small or mid-sized businesses. We will continue to as- sess potential targets with a focus on Asia and Middle East or bolt-on acquisitions that complement our presence in existing markets. For any of its growth opportunities, be it organic or acquisitions, Dufry applies a disciplined financial ap- proach. We carefully analyze every project or signif- icant investment with detailed projections and with a view on investment returns. This implies that not only the original investment needs to be carefully as- sessed but also the cost structure and profitability of the business once operational. This culture of fo- cusing on returns and cost control has allowed us to grow our business and to capture opportunities in many different markets. High free cash flow generation. The combination of Dufry’s solid profitability and the low capital intensity results in our proven and strong capability of generating free cash flows. With the current size of the Group and post the full integra- tion of both acquisitions, we expect to be the most efficient travel retailer and our cash generation ca- pability will be second to none in the industry. As a consequence, we expect to deleverage quickly, which will give us strategic flexibility in the future, to drive further growth and to return value to shareholders, who have been greatly supporting the company in the past years. 26 1 Management ReportDUFRY ANNUAL REPORT 2015 GLOBAL PRESENCE A full list of locations is available on pages 62 and 63 LONG-TERM PASSENGER FORECAST IN BILLIONS OF PASSENGERS GLOBAL PASSENGERS 2015 BY REGION 14 12 10 8 6 4 2 0 27 % NORTH AMERICA 30 % EUROPE 8 % LATIN AMERICA 28 % ASIA / PACIFIC 7 % MIDDLE EAST / AFRICA 2015 2016 2017 2018 2021 2031 Source: ACI-DKMA Source: ACI 27 1 Management ReportDUFRY ANNUAL REPORT 2015GENERAL TRAVEL RETAIL SHOPS Dufry’s general travel retail shops carry a large selec- tion of different items and cover a range of product categories, such as perfumes & cosmetics, food & con- fectionary, wine & spirits, watches & jewelry, fashion & leather, tobacco goods, souvenirs, electronics and other accessories. General Travel retail shops are typically located in central areas with high passenger flow, mostly in air- ports, but also in seaports and other locations. Both departure and arrival areas are fitted with this shop concept. As of December 31, 2015, Dufry operated 710 shops under the General Travel Retail Concept. In the duty-free segment, these shops can be recognized by several brand names such as Dufry, Nuance, World Duty Free, Hellenic Duty Free, Reg Staer and others. 2015 was an important year for the expansion and im- provement of our general travel retail concept. We have made important renovations in two of our most important operations: Milan Malpensa Airport, in Italy, and Athens Airport, in Greece. Our operations at Milan Malpensa, one of the first to receive our well known walk-through concept back in 2008, received a major uplift. The renovation brought to the location the most up-to-date trends in shop design, creating an evolving experience for passengers passing through the airport. In Athens, our retail space reached a whole new level with the implementation of the walk-through concept in the extra-Schengen departures area of the airport. Passengers are now immersed in a world of global lux- ury brands on the way to the departing gates. In both cases the renovations resulted in a significant increase in the spend per passenger, proving once more the value creation of this initiatives. 28 29 30 DUFRY SHOPPING We believe that domestic passengers deserve the same great product offering available nowadays mainly to international passengers. In fact, domestic passen- gers account for the majority of global passengers, particularly in large countries such as China, the United States and Brazil, where it can reach 90 % of the passenger flow. With this thought in mind, Dufry created a new retail concept: a general travel retail shop for domestic passengers, which offers a product range similar to a duty-free shop. Domestic passengers are presented with the same retail excellence they normally find in international terminals, with a great variety of prod- ucts from the most prestigious brands combined with the best customer services. The concept, operated under the identity Dufry Shop- ping, was first introduced in Brazil, in a pilot at Brasilia airport. Results from this 1,600 m² shop were very en- couraging and we are ready to roll out the concept in other locations in Brazil and internationally. In fact, Dufry has recently been granted a new concession to operate a 1,300 m² Dufry Shopping at Rio de Janeiro International Airport, a project that is expected to be concluded ahead of the Olympic Games, starting in August. We also plan for 2016 the opening of another 1,000 m² Dufry Shopping at Viracopos Airport in São Paulo. 31 BRAND BOUTIQUES Brand boutiques enhance the traveler’s retail experi- ence and allow to create a comprehensive and exciting shopping mall environment. Dufry is a partner of choice for global brands to showcase their products in a sin- gular retail space, mirroring the image of the high street shops of the respective brand. As of December 31, 2015, Dufry operated 220 Brand Boutiques. The brands Dufry represents include the world’s most prestigious luxury names like Burberry, Bally, Bvlgary, Carolina Herrera, Chopard, Coach, Desigual, Dunhill, Emporio Armani, Ermenegildo Zegna, Etro, GAP, Hermès, Hugo Boss, Kiehl’s, Lacoste, L’Occitane, MAC, Marc O’Polo, MCM, Michael Kors, Montblanc, Pandora, Paul & Shark, Pinko, Polo Ralph Lauren, Salvatore Ferragamo, Shang Hai Tang, Shang Xia, Superdry, Swarovski, Thomas Pink, Tommy Hilfiger, Tumi, Versace or Victoria’s Secret. Depending on the specific location and traveler pro- file, we design these shops as stand-alone boutiques or integrate them as a shop-in-shop concept within our own general travel retail stores. Brand boutiques can be found in both duty-free or duty-paid areas. In 2015, we opened 35 brand boutiques in all regions, representing over 3,245 m² of commercial space. About half of the openings were located in the United States, a market that continues to offer attractive opportuni- ties in the segment. Other highlights are the opening of several GAP & Superdry shops at Spanish airports and the opening of three new shops at Zurich Airport. 32 33 34 CONVENIENCE STORES Operated under the name “Hudson”, these shops of- fer a wide assortment of products ranging from soft drinks, confectionary, travel accessories, electronics, personal items or souvenirs to publications such as newspapers, magazines and books. As “The Traveler’s Best Friend”, our ultimate goal is to provide passen- gers with the best range or convenience items. Hudson is a very flexible concept for Dufry, that is suc- cessful at airports in both international and domestic areas, as well as in other channels such as railway sta- tions and other transit locations. Constantly adapting to customers needs, an important enhancement to the concept was brought to life in 2013. Our goal was to create a more open, friendly and welcoming environment for travelers. We have accom- plished this mission through whimsical, color-coded signage to attract customers’ attention to our four dis- tinct selling areas: Media, Marketplace, Essentials and Destination. Greatly enhanced sales of healthy snacks, grab-and-go foods, authentic souvenirs and a wide range of electronics gear and accessories have re- sulted in rave reviews from customers and our land- lords, along with improved revenue for the airport wherever the new concept has been opened. North America, from where the concept originates, is home of most of our convenience stores. With 545 stores, Dufry is the leader in the segment in the region. It is our goal to develop this great concept interna- tionally. The number of shops outside North America continued to grow in 2015, with the opening of 17 shops in Brazil, Italy and Russia, with 1,000 m² of retail space. As at year-end 2015, Hudson shops can be found in 15 countries. 35 SPECIALIZED SHOPS / THEME STORES Specialized stores and theme stores is a shop concept that offer products from a variety of different brands belonging to one specific product category. We use this concept often for products such as watches & jewelry, sunglasses, spirits, food or destination merchandise and in locations where we see a strong potential for a shop to carry a broad product range relating to only one specific theme. As of December 31, 2015, Dufry op- erated 644 shops under the Specialized Shops / Theme Stores concept. Examples of the shop concepts names include “ Colombian Emeralds International”, a dedicated watches & jewelry format used in the Caribbean market; “Dufry Do Brasil” for local Brazilian goods; “Kids Works” with its wide selection of toys, dolls, games, books and apparel for children; or “Tech on the Go” focusing on the needs of the tech-oriented trav- eler offering electronics and accessories. Further ex- amples are “Sun Catcher” for sunglasses; “World of Whiskies” for a selection of finest single malt or blend whiskies; “Master of Time” for luxury watches and jew- elries; “Sound & Visions” for multi-brand electronics; “Temptation & time-box” for fashion watches and ac- cessories as well as “Travel Store” for luggage and travel aid products and finally “Atelier”, a women leather accessories store. These shops can be located in airports, seaports, on-board cruise liners, as well as in hotels or down- town locations. 36 37 BUSINESS OPERATING MODEL GLOBAL APPROACH, LOCAL EXECUTION As part of the new organization, Dufry has also re- viewed its operational and management structure and defined a new business operating model based on three layers: Headquarters, Division and Country. The previ- ous organizational level of the business unit has been eliminated with the teams being reallocated to Divi- sion or Country activities. The new organization allows Dufry to respond faster across all levels, given the lighter structure. We aim to increase the coordination efficiency of the global, divisional and country teams. Furthermore, with standardized processes, Dufry is able to create synergies throughout the whole organi- zation and achieve consistent and even stronger com- mercial and financial execution. In order to extract the most from our size, we have created Global Functions in departments such as Procurement, Logistics, IT and Treasury. These teams are responsible for generating economies of scale on functions that can be executed globally. On top of generating efficiencies, our global teams are also responsible for designing policies and procedures for activities that are executed locally, ensuring the sharing of best practices across our organization. In our new structure the Divisions hold the link be- tween Headquarters and Countries. They are also a major source of efficiencies, as they will execute tasks that are not covered by the global teams but have potential for synergies. Countries or locations are in turn the most important of the layers, as they hold the knowledge of the market and relationship with landlords and customers. Our local teams concentrate on activities inherent to the single businesses, while responsible for implementing the processes and procedures previously defined. 38 1 Management ReportDUFRY ANNUAL REPORT 2015BUSINESS OPERATING MODEL BASED ON THREE LAYERS AS OF JANUARY 1, 2016 GROUP HEADQUARTERS – – Strong HQ to own and develop one unique commercial model with common processes and IT applications HQ to provide selected global services to divisions and / or countries GLOBAL FUNCTIONS – Global Procurement – Global Supply Chain – Global Customer Service - Global IT - Global Marketing - Global Treasury DIVISIONS – Divisions to manage and supervise country execution – Committees to create full alignment and participation of Divisions on commercial and financial activities COUNTRIES – Execute operations at local level – Secure actions to be aligned with the Business Operating Model BENEFITS AND ADDED VALUE – Unique commercial model – High standardization – Functional scale effects – Full long-term synergies across divisions - Local execution - Closer to customers 39 1 Management ReportDUFRY ANNUAL REPORT 2015NEW BRANDING UNIQUE IDENTITY, COMMON VALUES The two transformational acquisitions of Nuance and World Duty Free have considerably changed the foot- print of Dufry Group in the market and at internal level with the number of employees now reaching close to 29,000 colleagues. In order to clearly position the “New Dufry” in the market and to create a common new starting point for all employees of the Group, we have developed a new corporate identity and defined common corporate values. The new Dufry logo incorporates our heritage and the travel retail business The new Dufry Logo has been created by combining the cross of the Swiss national flag with the “D F” of Dufry and Duty-Free. At a first sight, the newly created icon does not immediately transmit the link to the travel retail business, but when rotated by 90° the “shopping basket” becomes evident. The new logo will be implemented step-by-step at shop level and in the different marketing and communication channels of our Group. WorldClass.WorldWide. – an impactful claim for the industry leader Our claim or slogan Worldclass.WorldWide. is short and impactful and refers to the two pillars of Dufry, which make us unique in the industry. It transmits a charismatic reason of pride to be part of the one company leading the industry, but also engages all em- ployees in delivering world-class performance across all the companies’ activities. + → Combining the cross of the Swiss national flag … … with the letters “D F” of Dufry and Duty-Free … … we obtain an inte- grated icon. When we rotate it by 90°, we obtain our new company symbol. Its shape is that of a shopping basket – which relates directly to our business. 40 1 Management ReportDUFRY ANNUAL REPORT 2015Established commercial brands under the umbrella of a strong new Dufry corporate identity In order to establish a common corporate identity for all Dufry operations, while at the same time maintain- ing the powerful commercial brands at local level and benefiting from their recognition and positive image established with landlords and customers, we have decided to create a new strong and fresh Dufry cor- porate brand – reflected in the new logo – and to maintain the well-established commercial brands in the stores. Keeping the brands we love The existing logos of our subsidiaries which are suc- cessfully established in specific regions, such as for example Hellenic Duty Free in Greece or which repre- sent specific commercial concepts, such as Hudson for our travel convenience stores, will be continued. The three main brands of our traditional duty-free business, Dufry, Nuance and World Duty Free will also be continued and used according to their recognition at country or regional level. Going forward, we will therefore assess with a case-by-case approach, which is the most suitable brand to be used for a specific project and implement it accordingly. This will allow us to benefit from positive local market perceptions of the existing commercial brands and to success- fully drive global expansion while supporting each individual local market. Corporate Masterbrand – Core corporate brand defining corporate identity and corporate values – Owner of business operating model Retail Concepts – Retail brands to be used on a project by project basis depending on their local / regional reputation – Maintain flexibility of offering customers a variety of concepts 41 1 Management ReportDUFRY ANNUAL REPORT 20151 Management Report DUFRY ANNUAL REPORT 2015 SOUTHERN EUROPE AND AFRICA PORTION OF PRO-FORMA TURNOVER 2015 KEY REPORTED DATA 2015 LATIN AMERICA Number of shops Sales area in m² Employees in FTE NORTH AMERICA 419 103,763 5,527 ASIA, MIDDLE EAST & AUSTRALIA 22 % SOUTHERN EUROPE & AFRICA 42 UK, CENTRAL & EASTERN EUROPE Market leader in the world’s most important tourist destination Dufry has traditionally been a key player in the world’s most important touristic region – the Mediterranean – with its operations in Greece, Italy and France, as well as several locations in North of Africa. With the newly integrated operations in Spain, including important airports such as Madrid, Barcelona and the Canary Islands, as well as the Antalya airport serving the Turkish tourist destinations, Dufry has considerably consolidated its presence in this key region. The new division with its headquarter in Madrid also includes all African operations in Cape Verde, Egypt, Algeria, Ghana, Ivory Coast, Kenya, Morocco and Nigeria. In total, the division comprises over 120 locations in 14 countries in Southern Europe and Africa. In 2015, the division saw major refurbishments in two important operations: Athens, Greece and Milan, Italy. At Athens Airport, the transformation was remark- able, as we converted all our commercial space into a large walk-through duty-free shop, showcasing well- known brands with special attention to typical Greek local products. In Italy, Milan Malpensa Airport also experienced a revamp of its operations. Home of one of our first walk-though shops, our operations received a uplift, showcasing new trends in terms of shop de- sign in a rich combination of multiple shop concepts in a single area. 43 ATHENSCASABLANCAFEZNICEGRANADABARCELONATHESSALONIKITOULOUSE VERONAKOSFLORENCEALICANTEGENOAHERAKLIONKRYSTALLOPIGILA PALMALANZAROTEMYKONOSROMENIKITURINJEREZIBIZAKALAMATAKARPATHOSCORFUBERGAMOACCRACALAISCHANIASANTIAGO DE COMPOSTELAMALTAMALAGAMARRAKECHMILANNAPLESTENERIFEFUERTEVENTURAMADRIDALGIERSMURCIAMYTILINIPIRAEUSSAMOSSANTORINILAS PALMAS DE GRAN CANARIASEVILLAKAYSERI BILBAOPROMACHONASANTALYARHODESPRAGUEVALENCIAPOINTE-À-PITREPALMA DE MALLORCA1 2 1 ATHENS | ATHENS INTERNATIONAL AIRPORT Located in the extra-Schengen departure area of the airport, Dufry offers the delights of Greek food in this newly designed shop. 2 MILAN | MILAN MALPENSA INTERNATIONAL AIRPORT Several brand boutiques and specialized shops complement our rich and well developed retail space at this key Italian airport. 44 3 3 3 MILAN | MILAN MALPENSA INTERNATIONAL AIRPORT One of the first walk-through concepts ever implemented in travel retail, the retail space at the airport saw a major renovation in one of the most important projects implemented in 2015. 45 1 Management Report DUFRY ANNUAL REPORT 2015 UK, CENTRAL AND EASTERN EUROPE BASEL-MULHOUSE ASTANA EDINBURGH BIRMINGHAM CARDIFF DUSSELDORF STANSTED JÖNKÖPING LONDON NORRKÖPING GENEVA BURGAS SUNDSVALL YEREVAN MANCHESTER BELGRADE SKELLEFTEÅ STOCKHOLM UMEÅ ST PETERSBURG KALMAR SHERWOOD FOREST MOSCOW HAMBURG ZURICH GLASGOW WHINFELL FOREST ÖSTERSUND VISBY HELSINKI WOBURN FOREST SAINT PETER VARNA 46 In 2015, the division saw a major comercial develop- ment, including shop openings and most important the revamp of World Duty Free’s operations in Heathow, as well as 7 new shops opened at Zurich Airport. Other locations such as Serbia, Russia and Sweden also contemplated shop openings. Building a strong position in key European markets Through the acquisitions of Nuance and World Duty Free, Dufry has considerably expanded its footprint in several key markets of Central and Eastern Europe. The new operations such as in the United Kingdom, Switzerland, Sweden, Finland and Germany as well as Russia, Kazakhstan, Armenia, Serbia and Bulgaria per- fectly extend Dufry’s footprint in Central and Eastern European countries and create a strong operational entity with a well-balanced portfolio operating in 60 locations in 11 countries. This division is headquartered in London and benefits from a broad variety of customer nationalities from mature and emerging markets with both tourist and business travelers. PORTION OF PRO-FORMA TURNOVER 2015 KEY REPORTED DATA 2015 LATIN AMERICA Number of shops Sales area in m² Employees in FTE NORTH AMERICA 294 81,548 5,551 ASIA, MIDDLE EAST & AUSTRALIA SOUTHERN EUROPE & AFRICA 28 % UK, CENTRAL & EASTERN EUROPE 47 1 1 48 1 LONDON | LONDON HEATHROW AIRPORT Our operations in the departure area of Terminal 5 offer travelers a first-class shopping experience with a walk- through general travel retail shop and brand boutiques. 2 3 2 EDINBURGH | EDINBURGH AIRPORT Fascinating shop-in-shop concept in the departure area of the airport, providing global brands with a unique window display opportunity. 3 EDINBURGH | EDINBURGH AIRPORT The dedicated whisky bar in the center of the Wine & Spirits category helps drive penetration attracting travelers inside the shop. 49 1 Management Report DUFRY ANNUAL REPORT 2015 ASIA, MIDDLE EAST AND AUSTRALIA PORTION OF PRO-FORMA TURNOVER 2015 KEY REPORTED DATA 2015 LATIN AMERICA Number of shops Sales area in m² Employees in FTE NORTH AMERICA 130 28,053 2,474 10 % ASIA, MIDDLE EAST & AUSTRALIA SOUTHERN EUROPE & AFRICA 50 UK, CENTRAL & EASTERN EUROPE High priority region for growth with multi-channel potential Already today, Dufry is the most international player in the region with operations in 11 countries and 130 shops. The strong presence of Nuance in Asia and World Duty Free’s operations in the Middle East, to- gether with Dufry’s existing business provide the per- fect platform to accelerate our expansion in this fast growing region. International forecasts on passenger growth expect Asia to have the highest growth rates worldwide for both international and domestic passengers. Dufry’s portfolio of duty-paid and duty-free retail concepts is perfectly tailored to offer any retail needs of land- lords. The Asian markets also feature the probably most diverse range of channels, where duty-free or duty-paid shops can be operated. Be it traditional airport locations, downtown duty-free shops, the growing cruise ship business or border shops, they all offer substantial growth opportunities. Finally, Dufry’s footprint has now reached the neces- sary critical mass to set up a regional distribution cen- ter. The new logistics setup will drive efficiency in the supply chain, improve lead times and reduce out-of- stock situations for the whole division. The new Dufry logistics center has become operational in early 2016 in Hong Kong, where the division is headquartered. India, Hong Kong, Cambodia and Indonesia, to name a few countries, saw increases of the sales area either by shop openings or expansion of existing operations. 51 BUSANBANGALOREKUWAITHONG KONGCHENGDUBEIJINGAMMANCANBERRAHAMBANTOTASINGAPOREBALICOLOMBOMACAUMELBOURNESHANGHAISIEM REAPPHNOM PENHSHARJAHAQABAMUMBAIMARKA1 2 1 BANGALORE | BANGALORE AIRPORT Specialized shop offering travelers a wide range of electronics and accessories, located at the departure area of the airport. 2 MACAU | THE ATRIUM After a recent renovation, this downtown duty-free shop became a flagship operation for the further development of the concept in Asia. 52 3 3 3 HONG KONG | HONG KONG INTERNATIONAL AIRPORT Several specialized and brand boutiques capturing the 68 million passengers that pass through the airport. 53 1 Management Report DUFRY ANNUAL REPORT 2015 LATIN AMERICA 54 BRASILIAGUADALAJARALIMABUENOS AIRESMONTERREYRECIFESÃO PAULOSANTIAGO DE GUAYAQUILCORDOBAMENDOZABELO HORIZONTEPONCESAN JUANPUERTO VALLARTAREYNOSALA PAZMAZATLANNATALCAMPINASMANAGUAPORTO ALEGREBAHAMASANTIGUACANCUNCURAÇAOLA ROMANAPUERTO PLATABELÉMCURITIBAGRENADACOZUMELFORTALEZAFLORIANOPOLISLAREDOST LUCIAGRAND TURKPUNTA DEL ESTEJAMAICAGUASAULERIO DE JANEIROPROGRESOSAMANASANTIAGO DE CHILESANTO DOMINGOSALVADORACAPULCOSANTIAGOST MAARTENORANJESTADSALVADORBARBADOSMEXICO CITYMONTEVIDEOA long-lasting stronghold of Dufry’s global presence The new Latin America division unifies all Central and Southern American as well as Caribbean operations of Dufry. By combining the existing Dufry operations and adding businesses in Chile and Peru from World Duty Free, the new reporting entity will further consolidate its traditionally strong position in this region. The division, which is headquartered in Miami, USA, features some of the most dynamic markets for travel retail globally. Altough being the division where Dufry has the largest market share, there are still several opportunities for expansion, including alternative channels to airports. In 2015, we expanded further our presence in Brazil, taking advantage of the challenging economic environ- ment and opened a total of 2,000 m² across 26 shops ranging from all retail concepts. Other locations in Latin America also expanded their operations, for ex- ample in Puerto Rico, Dominican Republic, Mexico and Argentina, among others. Furthermore, the convenience shop concept Hudson has been successfully introduced in Brazil with the opening of 12 shops. This allows Dufry to even better capture domestic passengers and to leverage the existing infrastructure. PORTION OF PRO-FORMA TURNOVER 2015 KEY REPORTED DATA 2015 20 % LATIN AMERICA Number of shops Sales area in m² Employees in FTE NORTH AMERICA 391 102,868 6,833 ASIA, MIDDLE EAST & AUSTRALIA SOUTHERN EUROPE & AFRICA UK, CENTRAL & EASTERN EUROPE 55 1 1 56 1 SÃO PAULO | GUARULHOS INTERNATIONAL AIRPORT The airport not only showcases the biggest duty-free shop in the world in a beautiful walk-through environment, but also brings together the most renowned brands in brand boutiques and specialized shops. 2 3 2 BRASILIA | BRASILIA INTERNATIONAL AIRPORT Our sales teams are always ready to help travelers who pass by the first Dufry Shopping concept, located in the domestic area of the airport. 3 SAN JOSÉ DEL CABO | LOS CABOS INTERNATIONAL AIRPORT Tourists visiting this well-known Mexican destination are offered a vast array of duty-free products and local products in this departure shop. 57 1 Management Report DUFRY ANNUAL REPORT 2015 NORTH AMERICA PORTION OF PRO-FORMA TURNOVER 2015 KEY REPORTED DATA 2015 LATIN AMERICA Number of shops Sales area in m² Employees in FTE 20 % NORTH AMERICA 974 92,709 8,124 ASIA, MIDDLE EAST & AUSTRALIA SOUTHERN EUROPE & AFRICA 58 UK, CENTRAL & EASTERN EUROPE High opportunity potential in a resilient market In the past years, the North American travel retail market has shown a stable growth performance and Dufry still has substantial potential to further develop the division through a variety of channels. strong existing market position and vast network of convenience shops and seize further opportunities in duty-free and other concepts in duty-paid, such as brand boutiques and specialized shops. The North American division, with headquarters in East Rutherford, New Jersey, is the original market of one of our most successful concepts, Hudson. We cur- rently operate 545 convenience shops in 75 locations in the United States and Canada. Altough being a developed market, the region offers tremendous potential for further expansion, not only for Hudson, but also for other concepts. We aim to build on our In 2015, the Minneapolis St. Paul’s airport was added to the portfolio with a mix of convenience stores as well as duty-free and duty-paid retail spaces. Furthermore important stores were opened in Virginia, Las Vegas and Los Angeles, among several other locations all across North America. This division continues to be the most dynamic in terms of expansion adding a total of 6,100 m² of gross retail space in 76 shops in 2015. DENVER ATLANTIC CITY WASHINGTON FORT LAUDERDALE BIRMINGHAM DALLAS HALIFAX BURLINGTON FRESNO GREENVILLE-SPARTANBURG GULFPORT LAS VEGAS LOS ANGELES HOUSTON JACKSON HARRISBURG MOBILE OKALOOSA MYRTLE MIAMI NEWPORT NORFOLK NASHVILLE NEW ORLEANS NEWARK OMAHA MANCHESTER BOSTON PHOENIX NEW YORK PITTSBURG RALEIGH PHILADELPHIA SAN DIEGO ORLANDO EDMONTON RICHMOND ROANOKE ROCHESTER ST LOUIS SANTA ANA ALBUQUERQUE SEATTLE SAN JOSÉ SAN FRANCISCO CLEVELANDTORONTO VANCOUVER ANCHORAGE BALTIMORE CALGARY CHARLESTON 59 CHICAGO1 1 60 1 LOS ANGELES | LOS ANGELES INTERNATIONAL AIRPORT Dufry’s well-designed brand boutiques and innovative specialized shops at the airport are trend-setting examples of the recent developments seen at American airports. 1 2 2 VANCOUVER | VANCOUVER INTERNATIONAL AIRPORT The travelers’ best friend marks its presence at the air port with its fresh Hudson concept, providing travelers with the best mix of convenience products in the industry. 61 OVER 370 LOCATIONS WORLDWIDE SOUTHERN EUROPE AND AFRICA Algeria Algiers Cape Verde Sal Santiago Cote d’Ivoire Abidjan Czech Republic Prague Egypt Borg El Arab France Calais Fort-de-France Nice Pointe-à-Pitre Toulouse Ghana Accra Greece Aktio Alexandroupoli Anchialos Araxos Athens Blue Galaxy Blue Horizon Blue Star I, II Blue Star Delos Blue Star Diagoras Blue Star Naxos Blue Star Paros Chania Corfu Doirani Elyros Evzonoi Forza Hellenic Spirit Heraklion Igoumenitsa Kafalonia Kakavia Kalamata Karpathos Kastanies Kastelorizo Katakolo Kavala Kipoi Kos Kriti I Ship Krystallopigi Kydon Ship Limnos Mertziani Mykonos Mytilini 62 Niki Olympic Champion Ormenio Patmos Patras Piraeus Promachonas Rhodes Sagiada Samos Santorini Superfast I, II, XI, XII Symi Thessaloniki Zante Italy Bergamo Genoa Milan Central Milan Linate Milan Malpensa Naples Roma Fiumicino Turin Verona Kenya Nairobi Malta Malta Morocco Agadir Casablanca Dakhla Essaouira Fez Marrakech Nador Oujda Rabat Tanger Nigeria Lagos Spain Alicante Almeria Asturias Barcelona Bilbao Fuerteventura Gerona Granada Ibiza Jerez La Coruna La Palma (SPC) Lanzarote Las Palmas de Gran Canaria (LPA) Madrid Mahon Malaga Murcia Palma de Mallorca (PMI) Reus Santander Santiago de Compostela Sevilla Tenerife Norte Tenerife Sur Valencia Turkey Antalya Kayseri Kutahya UK, CENTRAL AND EASTERN EUROPE Armenia Yerevan Bulgaria Burgas Varna Finland Helsinki Germany Dusseldorf Hamburg Jersey Saint Peter Kazakhstan Astana Russia United Kingdom Aberdeen Belfast Birmingham Bournemouth Bristol Cardiff Doncaster East Midlands Edinburgh Elvedon Forest Center Parks Exeter Folkestone Glasgow Airport Glasgow Prestwick Kirmington Leeds Liverpool London Gatwick London Heathrow London Luton Longleat Forest Center Parks Manchester Newcastle Sherwood Forest Center Parks Southampton Stansted Whinfell Forest Center Parks Windsor Woburn Forest Center Parks Moscow Domodedovo Moscow Sheremetyevo St Petersburg Pulkovo ASIA, MIDDLE EAST AND AUSTRALIA Serbia Belgrade Sweden Jönköping Kalmar Karlstad Landvetter Luleå Norrköping Östersund Skellefteå Stockholm Arlanda Stockholm Bromma Sturup Sundsvall Umeå Visby Switzerland Basel-Mulhouse Geneva Samnaun Zurich Australia Canberra Melbourne Cambodia Phnom Penh Siem Reap China Beijing Chengdu Hong Kong Macau Shanghai India Bangalore Mumbai Indonesia Bali Jordan Amman Aqaba Marka 1 Management ReportDUFRY ANNUAL REPORT 2015 Kuwait Kuwait City Singapore Changi South Korea Busan Sri Lanka Colombo Hambantota United Arab Emirates Sharjah Dominican Republic La Romana Puerto Plata Samana Santiago Santo Domingo Ecuador Santiago de Guayaquil Grenada Grenada Honduras Roatan Jamaica Jamaica Cruise Ships Dawn Escape Gem Jade Jewel Pearl Sky Spirit Star Sun NORTH AMERICA LATIN AMERICA Montego Bay Antigua Antigua Argentina Bariloche Buenos Aires Buenos Aires Ezeiza Cordoba Mendoza Aruba Oranjestad Bahamas Bahamas Freeport Barbados Barbados Bolivia La Paz Santa Cruz Brazil Belém Belo Horizonte Brasilia Campinas Curitiba Florianopolis Fortaleza Goiania Natal Porto Alegre Recife Rio de Janeiro Rio de Janeiro Galeão Rio de Janeiro Santos Dumont Salvador São Paulo Congonhas São Paulo Guarulhos Vitoria Chile Santiago de Chile Curaçao Willemstad Mexico Acapulco Cancun Cozumel Guadalajara Guanajuato Ixtapa Laredo Los Cabos Mazatlan Mexico City Monterrey Progreso Puerto Vallarta Reynosa San José del Cabo Netherlands Bonaire Nicaragua El Espino Guasaule Managua Peñas Blancas Peru Lima Puerto Rico Ponce San Juan St Kitts & Nevis St Kitts St Lucia St Lucia St Maarten St Maarten Trinidad & Tobago Port of Spain Turks & Caicos Islands Grand Turk Turks & Caicos Islands Uruguay Montevideo Punta del Este Canada Calgary Edmonton Halifax Toronto Vancouver USA Albuquerque Anchorage Atlanta Atlantic City Baltimore-Washington Birmingham Boston Burbank Burlington Charleston Chicago Chicago Midway Chicago O'Hare Cincinnati Cleveland Corpus Christi Dallas Fort Worth Dallas Love Field Denver Detroit Fort Lauderdale Hollywood Fresno Grand Rapids Greater Rochester Greenville-Spartanburg Gulfport-Biloxi Harrisburg Houston Houston George Bush Houston William P. Hobby Jackson Santa Ana Las Vegas Little Rock Los Angeles Lubbock Manchester Boston Miami Minneapolis Mobile Bates Field Myrtle Beach Nashville New Orleans New York City New York JFK New York LaGuardia Newark Newark Liberty Newport News Williamsburg Norfolk Oakland Okaloosa Omaha Ontario Orlando Orlando Sanford Philadelphia Phoenix Pittsburgh Portland Raleigh Richmond Roanoke Salt Lake City San Antonio San Diego San Francisco San José Seattle St Louis Stewart Newburgh Tampa Washington DC Washington Dulles CHANNELS Airports Border, Downtown & Hotel Shops Railway Stations & Other Cruise Liners & Ferries Seaports 63 CUSTOMERS DELIGHTED BY A THRILLING SHOPPING EXPERIENCE Dufry – Part of your travel experience Traveling is one of the most enjoyable experiences and we are thrilled to be part of your adventure! Our pri- mary goal is to provide travelers with the best shop- ping experience during their journey. With a presence in over 370 locations in 63 countries all around the world, Dufry will most likely be part of your next trip! Dufry is the world’s biggest retailer specialized in travel locations. This gives us a unique understanding of trav- elers’ needs. From a simple bottle of water to a sophis- ticated fashion accessory, Dufry is there with the best shops, the most prestigious brands and most impor- tantly, the best customer service to make traveling a pleasant and memorable experience. True global customer service Customer service is a key priority for Dufry and our efforts to better attend our clients go beyond our shops. At our website, dufry.com, the travel experi- ence starts even before a trip, with travel tips for over 50 destinations, including tourist attractions, accom- modation and shopping locations. We also offer the convenience of a pre-order system through our website. It allows customers to select their favorite products and collect them directly at our shops once they travel. Our pre-order service is currently available in Argentina, Brazil, Greece, India, Russia as well as in Uruguay, Sweden and Switzerland. Full customer satisfaction is of upmost importance to us. For this reason we operate a unique and truly global 30 days replacement or refund guarantee. When shop- ping at Dufry, customers are assured they will have full support, whenever and wherever they made their pur- chase. Our representatives can be reached online, by email or by phone, in several languages. 64 Dufry Red At Dufry shops travelers experience the best cus- tomer service in travel retail, but this doesn’t stop us from doing more. Dufry Red is the Group’s first ap- proach to a loyalty program, which had its first pilot launched in Brazil in 2014. After its successful start, the program has also been rolled out in Switzerland and is expected to be launched in Spain and Sweden in the first half of 2016. The program offers exclusive advantages for its participants such as discounts and exclusive gifts. Awards that confirm our retail excellence In 2015 as in previous years, Dufry was recognized as a leading travel retailer, providing cutting edge retail concepts. Several operations saw their efforts recog- nized, such as in Canada, where we received the “Best Canadian Airport Duty Free Company” award from the Frontier Duty Free Association. In the Caribbean, Colombian Emeralds won the prize “JIS Retailer of the Year Award”, for its Galleria Lounge located in the Miami Beach Convention Center. Among many others, Hudson has also received the “OYA Top Award in Cus- tomer Service Excellence”, by the Customer Service Experts (CSE) together with Miami Airport. World Dufry Free, which joined the Group in 2015, is also recognized as a top travel retailer. Among the awards received in 2015, is the “Best Marketing of Sunglasses”, for the activities developed in several Spanish Airports in summer and the first ever “Haba- nos Specialist” accreditation granted by Habanos S.A. for the high quality features of the stores, as well as the world-class service, extensive product knowledge and specialist advice that customers receive from World Duty Free’s expert staff. 1 Management ReportDUFRY ANNUAL REPORT 2015MORE THAN 50,000 items are available in our portfolio that our customers can choose from NET SALES BY PRODUCT CATEGORY 2015 5 % TOYS, SOUVENIRS AND OTHER GOODS 31 % PERFUMES & COSMETICS 3 % LITERATURE & PUBLICATIONS 4 % ELECTRONICS 7 % FASHION, LEATHER & BAGGAGE 7 % WATCHES, JEWELRY & ACCESSORIES 11 % TOBACCO GOODS 15 % WINE & SPIRITS 17 % FOOD, CONFECTIONERY & CATERING 30 DAYS replacement or refund guarantee offered by Dufry is unique in the travel retail industry 65 SUPPLIERS TRUST DUFRY Dufry offers suppliers the largest network of travel re- tail locations with over 370 locations and the oppor- tunity to benefit from the growing customer potential generated by the constantly increasing passenger num- bers on a world-wide scale. In 2015, close to one billion passengers passed in front of our shops, making Dufry the perfect window display for global brands. Partnering with suppliers to increase sales Travel retail is one of the most important channels for global brands. It is one of the retail formats which provides the fastest growth profile, given the nature of increasing passenger numbers, and it is also the channel that concentrates the most affluent con- sumer groups of society – the ones who can afford to travel. Dufry as the largest company in the industry plays an important part in this process, not only due to our 24 % market share in airport retail, but most importantly due to our global reach of operations, spanning more than 370 locations in 63 countries. This presence cre- ates a unique window display available for global brands to market, promote and sell their products. For sup- pliers, Dufry is the one-stop shop in travel retail, as they benefit from our scale to access this fast grow- ing industry and market. New performance levels with individual Brand Plans The Brand Plan is an innovative way of engaging with suppliers, offering a complete new dimension of ini- tiatives for achieving common goals. The plan com- prises a deep analysis of medium-term initiatives for the development of certain brands in our business. Once set, the strategy will be implemented by Dufry with a close evaluation of the results achieved. The plan creates a win-win situation whereby suppliers can implement their strategy inside our shop on a longer horizon and Dufry is compensated by achiev- 66 ing the targets defined in the plan. Currently Dufry has developed brand plans with its most important global brands. Suppliers benefit from Dufry’s centralized purchasing and logistics The world-wide footprint and the centralization of global functions generating efficiencies are two core elements of Dufry’s business model. Our suppliers also benefit from the centralization of certain functions, es- pecially procurement and logistics, which brings more operational efficiencies from the entire supply chain, by offering higher service levels for suppliers and customers alike. Dufry’s Brand Plan generates value for brand partners and Dufry. The centralization of our procurement functions allows our Global Category Managers to coordinate the ma- jor activities centrally, thus facilitating the inter actions with suppliers. The definition of the Brand Plan as well as other contractual parameters are largely coordi- nated centrally. This also includes the ordering process itself, where Dufry transmits one consolidated order to suppliers, after having internally aggregated the or- ders of the individual locations. An approach that con- siderably simplifies the order process and reduces costs overall. A similar concept, which generates additional effi- ciencies for both partners, is applied to logistics. In order to support our activities in 63 countries and still benefit from being a single group, Dufry has set up three distribution centers: One in Uruguay attending the Americas, one in Switzerland serving Europe (ex- cluding Spain and the UK), North of Africa and the Middle East, as well as one in Hong Kong supplying Asia and the Pacific region. Suppliers can thus effi- ciently ship larger units to single Dufry distribution centers, while Dufry can better manage individual shop supply, ensuring improved product availability for customers and thus ultimately improving sales. 1 Management ReportDUFRY ANNUAL REPORT 2015BRAND UNIVERSE 1,000 Dufry works with over 1,000 of the most renowned global and local brands. 67 1 Management ReportDUFRY ANNUAL REPORT 2015 AIRPORT AUTHORITIES & LANDLORDS CAPITALIZING ON STRONG REVENUE GENERATION With the acquisition of Nuance and World Duty Free, Dufry has become by far the world’s largest airport retailer with a market share of 24 % in airport travel retail, thus combining the retail know-how and expe- rience of three major industry players and putting them at the service of airport authorities and land- lords across the globe. Dufry’s portfolio of over 2,200 shops in 63 countries includes airports, seaports, rail- way stations, downtown areas, border crossings, cruise liners, hotels and other locations. Strong partnerships and common goals with facility owners Dufry has traditionally been partnering with land- lords of larger and smaller airports in emerging and developed markets, providing the same level of ex- pertise on how to best develop retail space in order to maximize revenues, independently from the size of a given project. We always try to develop a partner- ship approach with common goals with the landlord, which has proven to be a successful working relation- ship for the airport operator and for Dufry alike. Examples of such successful cooperation are the de- velopments realized over time at the airports of Milan, Athens, Phnom Penh, Siem Reap, São Paulo, Brasilia, London Heathrow and many others, where the design of passenger flows, retail space exten- sions and shop refurbishments have considerably in- creased sales growth. retail environments that fit travelers’ expectations in any given location. Following this approach, we create win-win partnerships as landlords benefit by maximiz- ing their commercial revenues and by increasing the overall attractiveness of their facilities. At the same time we foster our reputation as an innovative and re- liable designer and operator of retail space, which we have built over many years. Customized shop concepts with local touch Every airport deserves a unique retail environment that combines local traditions and cultural aspects, while acting as window display for global products. With its world-wide footprint, Dufry knows how to perfectly match customized shop design with effi- cient retail concepts to best serve travelers’ needs and to generate value for landlords. For this purpose, Dufry features an extensive portfolio of shop con- cepts for duty-free and duty-paid environments, which allow tailoring available retail space to the individual needs of any given airport – be it a smaller airport or major hubs. Broad concession portfolio covering around 410,000 m². Offering landlords the largest industry experience Dufry shares a common goal with the facility owners, which is to maximize returns on the available space and to create an innovative and attractive shopping experience for the traveler. Since for any traveler shopping is about fun, pleasure, convenience and feel- ing comfortable within the shops, we constantly re- search customer behavior and provide landlords with our global experience in order to create customized First-class and broadly diversified concession portfolio Over the years, Dufry has consistently built a high quality and diversified concession portfolio. In 2015, the group added over 133,000 m² of net retail space to the existing portfolio through the acquisition of World Duty Free. Further 18,700 m² were opened through new concessions such as in several locations in the United States, Brazil and Europe and through 68 1 Management ReportDUFRY ANNUAL REPORT 2015Getting attractive new concessions There are different ways to enhance the concession portfolio: They can be won in a tender process or negotiated directly with airport authorities, be struc- tured as joint ventures with the airport operator or be bought through acquisitions. Dufry has a clear policy whenever looking at expanding the concession port- folio: We will analyze the opportunity, with concession fee levels and duration of the contract being key fac- tors. We will also factor in the investments required for the project and assess the development potential of the location from retail as well as travel perspec- tives. Through a strict evaluation of these criteria and our discipline to focus on returns, we ensure that our concession portfolio remains of the highest quality and that each concession offers attractive returns for our Group. important expansions such as at Milan Malpensa and Athens airports. At December 31, 2015, the entire con- cession portfolio of the group included retail space of around 410,000 m². A major effect of the World Duty Free acquisition and our own new concessions was the additional diversifi- cation of the overall concession portfolio during 2015. From a risk management perspective, the exposure to any single concession has been reduced significantly, with the largest concession representing about 6 % of pro-forma turnover in 2015, and the biggest 10 con- cessions representing less than 25 %. Our concession portfolio also includes a large num- ber of long-term contracts with durations of ten or more years. For example, our operations at Milan air- ports in Italy have concession contracts until 2041 and our operations in Greece are based on a duty-free license until 2048. Other long-term contracts include airports in the United Kingdom, Sharjah, Puerto Rico, Dominican Republic, Brazil and Argentina, to name a few. The overall average consolidated contract dura- tion is 8 years. Approximately 20 % of the portfolio have a remaining life-time of two years; close to a third have a duration of three to five years, while another 20 % have a life-time of between six and nine years, and the remaining third of the concessions has a duration of ten years or more. On average, Dufry renews every year existing con- tracts that generate between 8 % to 10 % of our sales, and we add new contracts every year. In 2015, 2.4 % of sales growth were related to new concessions. NET SALES BY CHANNEL 2015 4 % RAILWAY STATIONS, OTHER 4 % BORDER, DOWNTOWN, HOTEL SHOPS 2 % CRUISE LINERS, SEAPORTS 90 % AIRPORTS 69 1 Management ReportDUFRY ANNUAL REPORT 2015INVESTORS PARTICIPATING IN A GROWING INDUSTRY Dufry’s long-term strategy of profitable growth and its clear focus on returns and cash generation are designed to create sustainable value for shareholders and bondholders. Reaching new levels with a market capitalization of CHF 6.5 billion Over the past year Dufry has seen an increasing importance of the company in the market. With a market capitalization of CHF 6.5 million, Dufry has en- tered the radar of new investors. This is evidenced by our inclusion in the Swiss Leader Index (SLI) at the Swiss stock exchange as of March 21, 2016. Dufry is now among the 30 biggest publicly listed companies in Switzerland. Our size isn’t the only factor that attracted new inves- tors to the equity story. The strong fundamentals of the travel retail industry are also a strong argument for investing in Dufry. Combined with our track record and the increasingly lower risk profile, due to our con- stant geographical diversification, this altogether cre- ates attractive factors to the Dufry case. The acquisitions of Nuance and World Duty Free Dufry financed the Nuance acquisition through a mix of debt and equity. On the debt side, Dufry launched senior notes in the amount of EUR 500 million, which expire in 2022 with a coupon of 4.5 %. On the equity side the transaction was financed by an equity increase of CHF 810 million, complemented by the launch of Mandatory Convertible Notes of CHF 275 million in aggregate, which have been converted into shares in late 2015. issuance of EUR 700 million, expiring in 2023 with a coupon of 4.5 %. Dufry has also performed a capital in- crease of CHF 2.2 billion, which was partially supported by the investors GIC (the Sovereign Wealth Fund for the Government of Singapore), Qatar Investment Authority and Temasek Holdings (Private) Limited, each concluding the process with holdings of 4.1 % of Dufry’s shares. Market capitalization of CHF 6.5 billion. Diversified shareholder base In addition to the continuous commitment of our long- term anchor shareholders’ group which holds 22.4 % of our share capital at year-end 2015, Dufry has been able to secure strong support for its strategy from investors worldwide. At year-end 2015, the free float of our shares stood at 77.6 %, translating into nominal free float of over CHF 5.0 billion (CHF 3.8 billion at year-end 2014). The largest amounts of shares are currently held by the following nationalities: UK, US, Switzerland, Singapore, Qatar and Brazil. Important investors added to the shareholder base. A similar format was implemented on the World Duty Free acquisition. Dufry financed the acquisition par- tially through debt, with the structuring of a new bank facility of EUR 800 million expiring in 2019 and a bond Dufry’s share price started the year 2015 at CHF 149.20 and fluctuated between a high of CHF 151.30 and a low of CHF 111.00. After the share price low at the end of September 2015, the shares recovered to close at 70 1 Management ReportDUFRY ANNUAL REPORT 201578% free float of our shares at year-end 2015 DAILY AVERAGE VOLUME MILLIONS OF CHF 25.2 24.9 25.1 27 24 21 18 15 12 9 6 3 0 15.6 11.3 2011 2012 2013 2014 2015 Note: Since April 2011 including trading volumes of Dufry AG BDR SHAREHOLDER STRUCTURE AT DECEMBER 31, 2015 51.2 % OTHER SHAREHOLDERS 22.4 % GROUP OF SHARE HOLDERS LED BY TRAVEL RETAIL INVEST- MENTS SCA 8.6 % TEMASEK HOLDINGS 7.8 % GOVERN- MENT OF SINGAPORE 6.9 % STATE OF QATAR 3.1 % BLACKROCK, INC. 71 DUFRY AG SHARE PRICE AND TRADING VOLUME SHARE PRICE IN CHF TRADING VOLUME MILLIONS OF CHF 200 180 160 140 120 100 80 60 40 20 0 300 270 240 210 180 150 120 90 60 30 0 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Dufry SPI Volume Source: Bloomberg Note: SPI Index has been rebased to Dufry’s share price MARKET CAPITALIZATION AND FREE FLOAT BILLIONS OF CHF 8 7 6 5 4 3 2 1 0 72 6.5 4.8 5.3 5.1 3.5 2.7 3.8 3.8 2.3 1.7 2011 2012 2013 2014 2015 Free Float Average Market Capitalization 1 Management ReportDUFRY ANNUAL REPORT 2015 CHF 120.00 by year-end 2015. Our market capitalization reached CHF 6.5 billion at the end of 2015, compared with CHF 5.3 billion at the end of 2014. Strong fundamentals – solidity for bond holders Dufry has a well-established presence in the senior notes market. Since the first launch in 2012, this has been an important source of financing for the com- pany. Dufry’s strong cash flow generation and solid balance sheet are characteristics welcomed by the fixed income market. With bank credit facilities for a total amount of CHF 2,430 million maturing in 2019 (denominated in USD, CHF and EUR); the existing USD 500 million 5.5 % Senior Notes maturing in October 2020; the EUR 500 million 4.5 % Senior Notes maturing in July 2022 and the EUR 700 million 4.5 % Senior Notes maturing in August 2023, Dufry has a well-balanced financing structure with a net debt / adjusted EBITDA ratio of 3.92 times as at December 31, 2015. All maturity dates of the financial debt are spread across a time horizon between 2019 and 2023. Dufry’s Senior Notes are currently rated by Standard & Poors (BB), Fitch (BB-) and Moody’s (Ba3). Committed to a fair and comprehensive market communication As the world’s leading travel retailer, we aim to present our investment story and market opportunities by pro- viding transparent and consistent up-to-date informa- tion to all our stakeholders. We pursue a constant, open dialogue with investors, analysts and the media through direct phone and email exchanges, regular roadshows and one-to-one meetings. We communicate our financial performance quarterly, which senior management discusses with the financial and media communities through press and analysts conferences, conference calls and webcasts. All price- sensitive information, whenever it occurs during the year, is published through ad hoc press releases avail- able to everyone. As part of our 2015 Investor Relations activities, senior management and the investor rela- tions team devoted 41 days to meet investors directly through roadshows in Europe, North and South America, during which we held over 800 one-to-one or group meetings with investors, and we further pre- sented at several large broker conferences in Switzer- land, France, United States, United Kingdom and Brazil. For contact details of our Investor Relations team, located in Switzerland and Brazil, please see page 247 of this Annual Report. 73 1 Management ReportDUFRY ANNUAL REPORT 2015 SUSTAINABILITY REPORT STRONG COMMITMENT TO STAKEHOLDERS Dufry considers sustainability as one of the corner- stones of corporate culture to increase its long-term value and minimize risks for the company’s future development. With the acquisitions of Nuance in 2014 and World Duty Free in 2015, Dufry has started a new era in its history that today involves close to 29,000 employees and more than 370 locations worldwide. The first pri- ority of the Group in the next 18 months will be on the complete integration of World Duty Free and the im- plementation of the new business operating model. Dufry is strongly committed to sustainability and plans to expand its sustainability reporting step-by-step in the coming years with more detailed analysis of the impact it has on society and the environment. Dufry companies operate in all countries according to local legislation and regulations. We have incorporated across the Group an “Integrity in Business Transac- tion Policy” that sets guidelines in the fair dealings with business partners and particularly prohibits any kind of passive or active bribery or corruption. The policy is applicable to all employees, including the Group Executive Committee and the Board of Directors. In case of any question regarding the Policy or suspicion of a violation of the Policy, any Dufry employee can connect with a centralized contact point through a dedicated Dufry email address or follow the hierarchi- cal reporting line. Any wrongdoing concerns can also be reported directly to the CEO. The identity of an em- ployee reporting such concerns or possible violations against the Policy will be kept confidential, unless the disclosure of the identity is required by law. Insider information and security trading policies are also in place and signed by all employees concerned. STAKEHOLDER VALUE ALLOCATION BY DUFRY IN 2015 The stakeholder value allocation of Dufry corresponds to corporate output less third-party inputs. The cal- culation is based on Dufry’s EBIT plus personnel costs. It does not comprise of values allocated to business stakeholders, such as suppliers and landlords. The value allocated reached CHF 988.9 million in 2015 (CHF 876.2 million in 2014). Of this amount, CHF 856.2 million was accrued to our employees in form of re- muneration and social security payments. CHF 200.7 million were for interest payments to our bondholders and financing banks. Current income taxes to public authorities and communities in which the group com- panies are located were CHF 69.9 million, net of de- ferred income taxes, a tax income of CHF 10.1 million was reflected in the income statement. 74 Dufry employees are the most important stakeholder value contributors. 2 Sustainability ReportDUFRY ANNUAL REPORT 2015ENVIRONMENT Dufry operates over 2,200 retail stores worldwide, where it sells products sourced from over 1,000 sup- pliers. Following the acquisitions of Nuance and World Duty Free, the company has restructured its operations into five well-balanced, geographical Di- visions as of January 1, 2016. For information on the new Divisions please refer to pages 42 to 63. All the stores operated can be categorized into one of five major retail concepts, which are explained on pages 28 to 37. As a pure retailer, the company does not have any pro- duction sites. The main logistics operations (Global Distribution Centers) are centralized in three plat- forms: Basel / Switzerland, Montevideo / Uruguay and Hong Kong / China. The latter has been set up and be- come operational in late 2015 and will be ramped up during 2016. These main distribution centers receive the long-haul and major shipments and secure the fur- ther dispatch of the goods into the local entities at country and single shop level. High efficiency in our logistics chain enables us to keep the environmental impact of transporting the goods at a minimum level. Energy consumption Our travel retail shops are mostly operated in prem- ises and buildings such as airports or seaports and downtown resorts, which are owned by third party landlords. Thus, a large portion of the utilities con- sumption, such as energy or water in the shops cannot be directly influenced by Dufry as these factors are predetermined by the landlords and the building con- struction. The highest influence in energy efficiency can be taken when Dufry is designing or refurbishing stores. The main focus thereby is on substituting traditional lighting for more energy-efficient lighting systems (e.g. LED) on ceiling and furniture displays, and on using A-rated electronic devices (e.g. air conditioning, refrigerators) in our stores. The same concept of using latest energy-efficient technologies also applies for our Basel head office and the local operations centers. One example of our environmental management have been the 13 awards that Nuance received in June 2015 amongst a total of 23 winning retail stores at the Hong Kong International Airport Environmental Management Recognition Scheme 2014 / 2015. The HKIA recognized environmental performance and commitment based on six aspects: waste manage- ment, energy efficiency, waste water management, air pollution control, noise pollution control and overall environmental management. Dufry’s environmental managememt schemes recognized by Hong Kong International Airport. CO2 emission Reducing CO2 emissions is one of Dufry’s concerns. Whenever possible, transports of goods are done by shipping containers on sea-ships, thereby choosing the most CO2-efficient way of transportation. Through reconfiguration of goods in our Global Distribution Centers and regional logistics stations, we minimize intercompany transportation of the goods to a mini- mum. The distribution to the individual shop locations is usually done by road whereby Dufry outsources the transportation to specialized national or international logistics partners, who partly have their own world- wide environmental strategies in place. 75 2 Sustainability ReportDUFRY ANNUAL REPORT 2015Further actions to reduce the CO2 emissions are in the area of business travel by advising employees to consider alternatives to traveling such as the use of virtual meeting systems (video conferencing, confer- ence calls, computer live-meetings) or reducing travel frequencies by optimizing each trip. In addition, Dufry employees are also encouraged to use public trans- port systems not only for business trips but also for their daily journeys to and from work. In specific loca- tions, the company grants contributions to employees using public transport for commuting. The reduction in the consumption of shopping bags is another area where Dufry is seeking sustainable solu- tions by replacing traditional plastic bags with reusable bags and / or advising its retail staff to ask customers if they need a bag. All shops in the UK as well as the operations in Guarulhos Airport, São Paulo, are ISO 14001 certified (environment certification). Employees are advised to minimize business travel and encouraged to use public transport to and from work. Waste and recycling Avoiding any waste in the first place or recycling it if it occurs is an effective way to save valuable re- sources. The Distribution Center in Switzerland is out- sourced and run by a specialized logistics company and packaging material which mainly consists of card- board, paper, plastic film, wood as well as electronic and plastic consumables such as neon lamps and PET are sorted out in different containers and sent for recycling. The recycling process is then further out- sourced to specialized service providers. If these pro- viders have a climate program in place, Dufry’s Swiss logistics provider supports their program by paying a surcharge on the transports, which is devolved to “myclimate” ( www. myclimate.org). Guarulhos Airport and all UK shops granted ISO 14001 certification. In the shops, the waste produced by our operations is mostly packing material handled through the land- lord’s waste disposal system and recycled accordingly where possible. 76 2 Sustainability ReportDUFRY ANNUAL REPORT 2015EMPLOYEES Dufry’s employees are the heart and pulse of our op- erations. Throughout the business, it is our teams, who with their friendliness, team spirit and commitment on first-class service to our customers and close collab- oration with our business partners, make Dufry the successful company it has become over the years. WorldClass.WorldWide. – The new Dufry slogan is lived by our employees every day and we thank them for their outstanding commitment. As a Group we strive to offer our employees attractive working en- vironments, interesting tasks, fair and competitive wages, and a general working atmosphere that is characterized by mutual respect and appreciation for each individual. We also systematically invest in our people’s development by supporting a broad range of in-house as well as external training and development opportunities. Constructive dialogue between the individual em- ployee and her / his manager on goals, priorities and development is an important part of our human re- sources policy. Each employee receives an annual performance review aimed at evaluating the perfor- mance and identifying further personal development potentials for next career steps. Growing to almost 29,000 employees worldwide Following the acquisition of World Duty Free in 2015, our total workforce grew by 44.7 % to reach 28,853 people (FTE) as at December 31, 2015 compared to 19,946 at the year-end 2014. Organically, the number of employees declined by 0.8 %, the World Duty Free acquisition added 45.5 %. At the end of 2015, our total workforce comprises col- leagues from more than 70 nationalities across all functions. We continue to believe that this broad cul- tural diversity represents a unique competitive advan- tage and that it is a key element in the successful development of the Group and the implementation of our long-term growth strategy. But aside from stra- tegic issues, the diversity factor also creates a truly international working environment within the entire Group, which gives interesting career perspectives to many of our employees. Over 70 nationalities create a unique cultural diversity. The staff in our local shops of each country are to a high extent local people. Dufry’s know-how on oper- ating local businesses in 63 countries around the world make us a strong job creator in a large number of cit- ies, many of them being located in emerging markets. New HR information system launched In December 2015, Dufry launched a new, standard- ized Human Resources information system “Dufry Connect” which will support the HR and line manag- ers to place additional focus on people management activities, enabling greater automation and solid inter- face to manage people, development and careers at Dufry. For example, the yearly performance manage- ment reviews will be administrated online, which leaves more time to the managers and the employees to fo- cus on feedback and development plans and increase visibility of outcomes, challenges and progress. An- other key improvement will be related to the learning management platform: The new learning platform will store all Dufry learning programs and enable training paths by employee role, easily accessible worldwide. The global Headquarters in Basel and the Swiss oper- ations have been the first entities to pilot the system at the end of 2015. This starting phase of implementa- tion also included about 2,000 employees – from Divisional CEOs to Shop Managers. The global roll-out to the majority of Dufry operations is planned to take place during 2016 and 2017. Learning and professional development during 2015 We are developing and growing the management po- tential within our Group through job enrichment, coaching and targeted management learnings. The aim is to fill as many new or open management positions as possible with internal people and talents. Through tailored learning programs we ensure that our profes- sionals have the leadership and managerial skills as well as the knowledge necessary to operate our busi- ness successfully. 77 2 Sustainability ReportDUFRY ANNUAL REPORT 201528,853 Dufry employed 28,853 people (FTE) at December 31, 2015, an increase of 44.7 % to year-end 2014 As part of our new Group structure for example, we have been able to promote all new members of the Group Executive Committee from internal sources and expect to fill above 90 % of managerial positions within the new Dufry organization with internal personnel. Dufry Sales Academy Dufry Sales Academy is the first of our important learning programs and includes: Out in Front and Dufry + 1. Starting in 2012, we introduced the Out in Front pro- gram for our shop managers and supervisors on the shop floor. After having trained a total of 691 retail managers as of year-end 2014, further 227 managers received this specific learning during 2015. By the end of 2015, Out in Front is running in 35 countries and cov- ers over 70 locations, which make up more than 60 % of Group sales in 2015 (including the Nuance business, excluding World Duty Free). The Dufry + 1 program will be expanded in 2016 to also reach out to the newly acquired WDF locations and is expected to provide training to over 5,800 sales pro- fessionals. Under the Dufry + 1 program we trained a total of 6,680 new shop floor hires on our foundational sales and service course as of year-end 2015. Dufry + 1 courses are taught in 63 countries. The learning of both programs is given by Dufry Certified Trainers, with the number of training certifications having in- creased to 1,551 at year-end 2015 compared to 800 in the previous year. Step Ahead Retail Management Training Program Managers running important segments in our value chain, such as commercial, logistics, procurement, mar- keting or retail functions, require specific learning in or- der to be successful in their roles, and run the company according to the Group’s performance expectations. 78 The Step Ahead program was launched in 2013 to ensure that new and potential retail managers are for- mally educated on Dufry’s business model and pro- cesses, as well as on critical people management skills. Also in this program, all education is delivered by other Dufry managers, ensuring that best practices are ex- changed among peers and know-how remains within the company. During 2015 in the Step Ahead Management Skills pro- gram, we organized several courses and had a number of 1,905 in attendance. In the Step Ahead Retail Oper- ations learning we have educated 72 team members in various roles. Since 2013, the total numbers educated in these two programs are 2,646 in attendance for Step Ahead Management Skills and 142 managers for Step Ahead Retail Operations. Talent Management Our future and long-term management needs are getting addressed by an optimal balance of promot- ing internal high-level personnel and hiring external talents (for example in new countries where we start operations). In 2013, Dufry started piloting a global, systematic integrated process to identify high-po- tential talents in our organization and develop them toward the key roles in our business model. Since then, the program has been continuously developed and expanded. We believe talent management and succession plan- ning are ongoing processes, all the more so as we as- sess and leverage the high-quality pool of employees who have joined the company through our acquisition- intense transformation phase. Accordingly, we carry out a yearly review of the quality of our talent pipeline at two levels: 2 Sustainability ReportDUFRY ANNUAL REPORT 2015 DUFRY SALES TRAINING PROGRAMS SALES TRAINING PROGRAMS COVERAGE (IN TOTAL AT YEAR-END) Out in Front Dufry + 1 2015 2014 2013 2012 918 retail managers 6,931 sales professionals 35 countries 691 retail managers 5,500 sales professionals 29 countries 313 retail managers 3,534 sales professionals 24 countries 303 retail managers 2,142 sales professionals 6 countries 6,680 sales professionals 63 countries 3,191 sales professionals 46 countries 2,437 sales professionals 32 countries 684 sales professionals 27 countries Trainer Certificates 1,551 trainer certificates 800 trainer certificates 626 trainer certificates 408 trainer certificates – On the first level, each year we select a limited num- ber of candidates to occupy one of our pre-defined key positions in our organizational structure. To date, we have selected and focused on developing 57 high-potential managers (as of year-end 2015), addressing and safeguarding the succession in spe- cific key management positions at the top. – The second level focuses on the stores. Within our top-performing stores’ personnel and supervisors, we have identified 300 people on whose develop- ment we will focus in order to ensure a quality store management succession pipeline. Equal employment Dufry fosters a culture of equal opportunity. Our HR policy is to provide equal employment conditions and to offer career opportunities without discrimination to all our employees. The company fulfills local leg- islation and regulations of each country where it operates. 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. Any kind of child labor or forced labor is strictly rejected and we have clear recruitment procedures and work- place control in place to ensure full compliance with this regulation. In terms of remuneration, we provide our employees with fair and competitive wages based on the individ- ual’s background and experience, the particular job within our organization, the appropriate market bench- mark in the respective countries and locations, as well as her / his performance. Dufry World – Our internal news magazine Dufry regularly reports on important news in its cor- porate E-magazine “Dufry World”, which is published in 5 languages. This ensures that important trends in our industry and developments of our Group are com- municated to our staff members in full. Furthermore, the magazine also aims at providing news “from the people for the people” and covering all 5 divisions, to reflect the different cultures and promote the global reach of the company. The magazine is issued 4 times per year. In addition, all internal and external information are also made available in Dufry’s intranet “Dufry Gate”, which can also be accessed via the “Dufry Cloud”. The Dufry Cloud is an online platform which allows employ- ees to connect remotely to the company’s internal communication channels. The Cloud is continuously improved to maximize connectivity, thus improving employee’s reachability around the world. In addition, the reach of the Dufry Gate will be further extended by the end of the second quarter 2016 by allowing direct access for group employees through any kind of mobile device by the use of adaptive design technology. Recognizing outstanding performances – Our Awards programs Dufry Group runs various global and regional recog- nition programs that award teams within the organi- zation, who go the extra mile. The announcement of the winners of the awards usually takes place by mid- year and reflects the achievements of the previous year. In 2014, Dufry and Nuance were still recognizing employees achievements based on the two entities award systems, while in 2015 World Duty Free was using locally based recognition plans. Going forward, the Dufry One Award system will be enhanced and extended to all the close to 29,000 employees, thus creating a unique award system based on identical criteria. 79 2 Sustainability ReportDUFRY ANNUAL REPORT 2015EMPLOYEES BY FUNCTION 3 % PROCUREMENT, BUSINESS DEVELOPMENT AND MARKETING 1 % CORPORATE AND SUPPORT FUNCTIONS, OTHERS 4 % FINANCE, IT, HR 3 % LOGISTICS 89 % RETAIL OPERATIONS EMPLOYEES BY DIVISION NORTH AMERICA 28% SOUTHERN EUROPE AND AFRICA UK, CENTRAL AND EASTERN EUROPE 19% LATIN AMERICA 24% 9% ASIA, MIDDLE EAST AND AUSTRALIA 19% 1% HEADQUARTERS AND DISTRIBUTION CENTERS 80 The 2014 award winners have been announced in spring 2015 and published in the July 2015 issue of the corpo- rate magazine Dufry World as well as in the Dufry Gate. – Implementing anti-theft inventory check list at Stockholm-Arlanda Airport, Sweden – Introducing iPads to sell sunglasses at Zurich Dufry One Awards 1. The One Productivity Award – A global program rec- ognizing year on year measurable improvement across sales, number of tickets, organic growth and average spend per ticket. The 2014 Awards went to: – Dufry Argentina – Ezeiza Airport, Arrivals, Argentina – Hudson News – San Francisco Airport, News Discover, USA – Hellenic Duty Free Shops – Evzonoi border shop, Greece 2. The One Customer Award – Open to all shops par- ticipating in the global Mystery Shopper program, recognizes individual shop performance across the specific customer impact segments of the Mystery Shop. The winners of the 2014 Awards were: – Teams of Dominican Republic and Puerto Rico operations – Hellenic Duty Free Shops – Kos Airport, Greece – Dufry Newark Airport, USA Awards programs to recognize excellence in travel retail. Nuance Star Awards Star Awards recognize teams and individuals for outstanding service and excellent team work in the Nuance’s former EMEA organization. In autumn 2014, the countries were asked to nominate candidates for the following categories: Service Stars, Team Stars and Proactivity Award. 1. Service Stars – 10 professionals selected for outstanding ser- vices in their roles. Their names were individually published in the internal corporate magazine. 2. Team Stars – Terminal 2 Team, Lisbon Airport, Portugal – Travel Star Team, Geneva Airport, Switzerland – Temptation T1 Team, Manchester Airport, UK 3. Proactivity Award – 4 professionals selected who proactively improved the shop floor experience (with names individually published in the internal corporate magazine) for: Airport, Switzerland – Launching the online rota system at Cardiff Air- port (UK) allowing to plan staff allocation to shifts according to expected passenger flow Employee engagement surveys Measuring employee engagement and satisfaction through regular surveys is an important tool to recog- nize potential for improvements across the Group. With close to 29,000 employees, Dufry does its employee surveys systematically over defined cycles, always in- volving a substantial part of its employees across the world in each survey, and ensuring that over the times- pan of the entire cycle, all employees have been in- volved in a survey. This system results in more frequent surveys, a better quality of the responses and a higher engagement rate (compared to doing surveys with the entire workforce on a yearly basis). In 2015, Dufry carried out an employee survey which concentrated on areas like compensation and benefits, working environment, manager and co-worker rela- tionships, learning and development, rewards, culture, job engagement and organizational engagement. More than 20 countries have completed the 2015 survey cov- ering four different divisions. The overall response rate was 76 %, the engagement rate 60 %, which are excel- lent rates compared to the overall benchmark of the survey system we used. For 2016, Dufry is organizing another global employee engagement survey, which is the same for all employ- ees in every location. Running in several phases, the first one already started in September 2015 with the aim to be fully completed by May 2016. The survey will be 100 % confidential and will include over 13,000 em- ployees. The results of the survey will be discussed at the level of the single operation as well as aggregated at divisional and at Group level and corrective measures will be initiated where necessary. Health and safety at the work place Health and safety at the work place is essential to en- sure employee welfare. The majority of Dufry’s work- force operates in airport and cruise-ship environ- ments, where employees have to comply and follow the respective airport’s, seaport’s or vessel’s safety regulations. Regular learning courses, among others in fire safety and first aid, are provided to our employ- ees for the prevention and quick, correct reaction in cases of emergencies. 81 2 Sustainability ReportDUFRY ANNUAL REPORT 2015SOCIAL RESPONSIBILITY Dufry remains strongly committed to social and cul- tural involvement and engages in many countries in which it operates through charitable sponsoring and partnerships. The main focus of our programs is on disadvantaged children, young people and their fami- lies. The Group also supports various cultural and sports events and contributes to charitable organiza- tions to help victims of natural disasters. The most im- portant non-profit organizations that we currently work with are: SOS Children’s Villages programs in Brazil, Cambodia, Mexico, Ivory Coast and Russia Dufry initiated its successful partnership with the SOS Children’s Villages organization back in 2009, when it started to sponsor a social center in Igarassu, Brazil. At that time, the Group funded the construc- tion of the center and has continued to support its running costs and training classes ever since. In 2015, 520 infants, young children and teenagers with their mothers in 130 families profited from family strengthening programs with child-minding and day care centers. In Cambodia, Dufry supports the running costs of the SOS Children’s Villages youth facility in Battambang. When young people are ready to move out of the SOS families, they can join the SOS Youth Program, where they start vocational training or go on to higher educa- tion. Dufry’s funding in 2015 supports ten adolescents on their way to shape their own future. The SOS Children’s Villages Family strengthening pro- gram in Tehuacan, Mexico, focuses on the work with families to enlarge the potential for a quality life inside their families or in groups. Mothers for example are given the opportunity to leave their children in the SOS child day care center during the day so that they can go to work and earn an income. The Dufry donations 82 support the running costs of the social center in Tehuacan since 2013. In 2015, this program covered 570 beneficiaries in 150 families. In the Ivory Coast (Abobo-Gare, Abidjan), we support a SOS Children’s Villages Youth Facility project, by covering the running costs of this facility, which pro- vides housing, education and support programs for vulnerable young people in the Abidjan area. The donations help to support 34 young people. In 2015, we expanded our social engagement with SOS Children’s Village with a new project in Lavrovo, Russia. Dufry provides community support to improve the quality of public schools and kindergartens by offering training to teachers and educators. Disadvantaged children and their families benefit from our support. Since 2013, Dufry runs an additional financing chan- nel in favor of the worldwide work of SOS Children’s Villages by installing coin collection boxes in many Dufry shops all over the world. This gives customers and business partners an opportunity to also partic- ipate in the various valuable support programs of this organization. A twenty year project in Rio de Janeiro, Brazil 2015 marked the twenty year anniversary of Dufry Brazil’s sponsorship of a social promotion program in Rio de Janeiro. This program offers free professional education to 30 young people every year. The program 2 Sustainability ReportDUFRY ANNUAL REPORT 20151 2 1 SAINT MARC | HAITI Participating in a student sponsorship program by the Hand in Hand for Haiti Foundation. 2 IGARASSU | BRAZIL A SOS Children’s Villages project supported by Dufry since 2009. 83 3 3 TEHUACAN | MEXICO Supporting the SOS Children’s Villages Family strengthening program. can be attended by 16 to 18 year-old female or male teenagers and covers subjects, such as English, com- puter classes, retail operations, professional orien- tation, teamwork, leadership, ethics and citizenship modules. Students also receive free meals, medical and dental care, life insurance, uniforms, educational material and transportation assistance. Dufry employees regularly participate in the program as volunteers, serving as mentors to these teenagers. Hand in Hand for Haiti Dufry became a sponsor in the Student Sponsorship Program launched by the Hand in Hand for Haiti Foun- dation and supported in 2015 an entire class of 25 stu- dents at the school complex in Saint Marc, north of Port-au-Prince, Haiti’s capital. This donation enables the sponsored students to receive free trilingual edu- cation in French, English and Creole. It also provides them with meals, health services, uniforms and school supplies as well as bus transportation to and from school. In addition, after-school programs are orga- nized daily for all children as well as day-camps during the Easter and summer breaks. Street Child United Since 2014, Dufry is also a main sponsor of Street Child United, a charity and global campaign for street children to receive protection, support and oppor- tunities to realize their potential. Street Child United works to challenge the negative perceptions of street children by transforming the way they are treated. The charity does this by using the power of sports, arts and children’s voices to deliver interna- tional sporting events for street children where they can powerfully demonstrate their potential and bring the challenges and injustices they face onto the global agenda. Street Child United’s international events take place ahead of the world’s biggest sporting events such as FIFA World Cups or Olympic Games. Following the successful 2014 Street Child World Cup football event (also sponsored by Dufry), Street Child United will host the first-ever Street Child Games in March 2016, just ahead of the Olympic and Paralympic Games. Former street children from up to 18 countries will come to- gether in Rio de Janeiro, Brazil, for a week of Olympic- themed sports, a festival of arts and a congress for street children’s rights. 84 rated with various local foundations, putting items they produce on sale in the Hellenic Duty Free shops. All revenues achieved from such sales go directly to the foundations involved, without Dufry making a profit on these transactions. Duty Free Uruguay organized one of the most recog- nized golf tournaments in Uruguay, with over a thou- sand golf players participating, in aid of the Cimientos Foundation. Cimientos is an Argentinian NGO founded in 1997 with operations in Uruguay since 2011. Their goal is to enable more children to finish high school. Duty Free Shop Argentina also collaborates with Cimientos and another Argentinian NGO – Programa de Reciclado de la Fundación hospital de Pediatria Garrahan. The Garrahan Pediatrics Hospital Founda- tion gives social and emotional assistance to poor chil- dren being hospitalized at Garrahan Hospital. The sponsorship of cultural events included many local community events for example in the US or in Greece as well as the Swiss Indoors tennis tournament in Basel or the Baloîse Session, a three week music festival in Switzerland. The great number of shops we operate worldwide enables us to encourage many customers globally to participate in support activities for specific or local programs or for victims of natural disasters by main- taining donation boxes in our shops. The amounts that we are able to collect in this way are always surprising and we would like to express our deepest gratitude to our customers for having participated so generously. The donations have been greatly welcomed by the different charities that were supported. Major projects supported by World Duty Free Since 2006, WDF has worked together with The One Foundation. This charity set up the bottled water brand “One Water” in 2005 to help people who do not have access to clean drinking water. All profits gen- erated from the sale of this water are donated by the foundation to the construction of infrastructure to provide sub-Saharan African regions with drinking water. WDF sells the “One” brand water bottles and reusable jute bags in its UK stores and has thereby helped to raise funds for clean water and nutrition projects, and also financed other water projects in sub-Saharan countries. The Rainbow Trust Children’s Charity – committed to offering emotional and practical support to children with a life-threatening or terminal illness, and to their families. World Duty Free started to collaborate with the Rainbow Trust in 2013 and its employees across different WDF UK regions have organized several fun- draising events such as half marathons, Santa and 10 kilometers dash runs or skydives since then to raise money in support of these children and their families. In 2015, charity activities included WDF employee par- ticipation at the London Marathon, quiz nights, spon- sored walks, golf event, and participations on 10 kilo- meters urban courses in different UK cities. Since 2013, WDF has raised money for the Rainbow Trust Children’s Charity for providing nearly 7,000 hours of support for families in crisis. WDF also supports the Touchstone Family Associa- tion through its Vancouver operation since 2012. This association is a non-profit, community-based social service agency whose aim is to preserve and enhance family relationships which have been affected by times of financial crisis. Further donations and cultural events Dufry is involved in many other social projects with local activities in countries where it operates. In 2015, these included for example Dufry employees in Belgrade who worked together with volunteers of the Asylum Protection Center to hand out food and hygiene products to Syrian refugees. In Northern Greece, donations were made to several schools and municipalities to cover the fuel costs for the heating of school premises. The operations in Greece also supported charities such as the Mitera Infant Center, Pentelis Convalescent Home, Agios Andreas Children’s Home, Agia Varvara Children’s Home, the Western and Eastern Attica Chronic Diseases Foundation or the Greek Red Cross refugees program just to name a few. It also collabo- 85 2 Sustainability ReportDUFRY ANNUAL REPORT 2015 86 STRONG PERFORMANCE IN A HISTORIC YEAR DEAR ALL 2015 was an eventful year: it started with the integra tion of Nuance, which we acquired in 2014, and con tinued with the acquisition of World Duty Free (WDF), which we announced in March 2015. The complexities of the integration of Nuance and the WDF transaction didn’t take our focus from the daytoday activities of our business, which required ongoing fine tuning: there was a volatile environment for a number of emerging markets, and events like the Swiss National Bank aban doning the floor against the Euro in January 2015, and resulting in an appreciation of the Swiss Franc by 19 %, also required attention. In this context, Dufry achieved solid operational and financial performance: Turnover increased by 46.3 % and reached CHF 6,139.3 million and EBITDA amounted to CHF 723.8 million, with EBITDA margin reaching 11.8 %. Also in 2015, we continued to generate free cash flow, which before acquisitions related cash outflows increased to CHF 338.4 million. Our primary focus in 2015 was the integration of Nuance and we were able to conclude the process by yearend as planned. The expected synergies of CHF 70 million are confirmed for 2016, of which CHF 34 million are already reflected in the results of 2015. In March 2015, Dufry announced what would be the biggest transaction in the history of the Group: the acquisition of World Duty Free (WDF) for an enterprise value of EUR 3.6 billion. The transaction was struc tured in two steps with the first being the acquisition of the 50.1 % stake from Edizione S.p.A. in August 2015, following clearance of antitrust authorities in several countries. The second step was the execution of a Mandatory Tender Offer according to Italian law, which we concluded in November, 2015, resulting in the delisting of WDF and a 100 % Dufry ownership of the business. The acquisition of World Duty Free, one of our key competitors with a reported turnover of EUR 2,440 million and EBITDA of EUR 261 million for FY 2014, is transformational in many aspects. From an efficiency point of view, we have identified EUR 100 million as potential synergies, stemming from gross margin improvements and cost savings. Strategically, the acquisition is even more important, as it reinforces our global leadership in airport retail with 24 % market share. The World Duty Free acquisition reinforces Dufry’s leadership in travel retail. Dufry financed the WDF transaction through a com bination of equity and debt, in line with our longterm financing strategy. In June 2015, we performed a cap ital increase of CHF 2.2 billion. On the debt side, we structured a new bank facility of EUR 800 million and issued EUR 700 million Senior Notes. The combination of Dufry, Nuance and World Duty Free is expected to generate a total of CHF 175 million of synergies, which will substantially increase our effi ciency and generate value for our shareholder going forward. Dufry’s resilient and strong cash generation capability will allow us to reduce debt levels quickly over the next 18 – 24 months to our target leverage level of 2 – 3x Net Debt / EBITDA. On the operations side, 2015 was a mixed year. Emerg ing markets showed a wide range of performances, many of them influenced by strong volatility in the currency markets and also negatively impacted in cer tain locations by political events. On the other hand developed markets showed in general solid trends, namely the United States and Europe. A common fac tor across regions was the continuous passenger growth, which reached 6 % in the year and is expected to continue in a similar trend in 2016. STRONG TURNOVER GROWTH OF 46.3 % IN 2015 Turnover grew by 46.3 % and reached CHF 6,139.3 mil lion in 2015, from CHF 4,196.6 million one year earlier. Organic growth was – 5.3 %, a result of likeforlike growth of – 5.6 % and a contribution of (net) new conces sions of 0.3 %. Organic growth for the year was signif 87 3 Financial ReportDUFRY ANNUAL REPORT 2015icantly impacted by the volatility in emerging market currencies, which reduced the purchasing power of certain emerging market consumers, most notably Brazilians and Russians. Organic growth excluding these two customer groups was 4.0 %, thus underlin ing the positive performance of the vast majority of our business. Changes in scope, which includes the consolidation of Nuance and WDF added 51.8 %, to the turnover growth, while the FX translation impact was – 0.2 %, as a result of opposing factors: the Swiss Franc appreciation versus the Euro in January 2015; and the appreciation of the US Dollar in the period. Turnover in Region EMEA & Asia reached CHF 1,010.8 million in 2015, from CHF 1,194.5 million in 2014. In con stant exchange rates (CER), growth was – 8.1 %. Europe performed positively in general. In locations where Russians are a relevant customer base, the neg ative impact of the Russian Ruble was felt, most nota bly in Russia, and to a lesser extent in Greece. On the other hand, refurbishments implemented at Milan Malpensa and Bergamo airports drove growth in Italy, as did the revamp of our ExtraSchengen retail space at Athens airport. Other operations such as France and Czech Republic also showed good results. Performance continued to be weak in Africa, affected by the instability especially in Northern Africa, which has directed tourist flows to nearby destinations like Greece and Spain. In Middle East and Asia, growth was seen in most of the operations, benefiting from the structurally higher passenger growth in the region. Highlights were our operations in Cambodia, Indonesia and South Korea, among others. Region America I’s turnover grew by 6.0 % to CHF 808.4 million in 2015, versus CHF 763.0 million in the previous year. In CER, turnover grew by 0.8 % in the period. Performance was positive in Central America, both in the Caribbean and in Mexico. In South America, our operations held up well, considering the currency volatility seen in the year, which impacts pur chasing power of local consumers. Turnover in Region America II went to CHF 487.8 mil lion in 2015, against CHF 683.3 million in 2014. Turnover measured in CER declined by – 32.1 %, directly reflect ing the devaluation of the Brazilian Real against the US Dollar of 42 % for the year. In the second half of 2015, the weakening of the local currency even reached 53 %. Because the region’s most important consum ers are Brazilians, the devaluation of the Brazilian Real reduces their purchasing. When measured in local currencies, sales in the region declined by – 5 %. Region United States & Canada’s turnover grew by 8.3 % in 2015 (3.6 % in CER) and reached CHF 1,043.2 million compared to CHF 963.1 million in 2014. Hudson continues to post sustained growth, both from a like forlike and new concessions perspective. Other for mats like dutyfree shops and brand boutiques have increasing importance in the region. Nuance’s turnover reached CHF 1,337.9 million from a four months consolidated turnover of CHF 536.6 mil lion in 2014. Most operations performed well resulting in a slightly positive proforma organic growth, when excluding the lower number and reduced spending of Russians, which particularly impacted Turkey and Russia. Turnover in World Duty Free was CHF 1,410.0 million, from August to December of 2015. On a proforma basis, organic growth in the period reached 9.6 %. While performance in the UK was flat due to the strengthening of the British Pound, Spain posted strong growth through a strong passenger increase including higher inflow of tourists going to other destinations in previous years, such as Tunisia or Egypt. CONSOLIDATION OF NUANCE AND WDF INFLUENCES COST STRUCTURE Gross profit Gross profit reached CHF 3,574.7 million in 2015 (2014: CHF 2,463.6 million, representing a growth of 45.1 %. Gross margin moved to 58.2 % from 58.7 % in 2014, due to the consolidation of Nuance and World Duty Free. Selling expenses Selling expenses reached CHF 1,684.0 million in 2015, (2014: CHF 1,023.3 million). As a percentage of turnover, in 2015 they went to 27.4 %, from 24.4 % in 2014. The change is due to the consolidation of Nuance and WDF. Personnel and general expenses Personnel expenses as a percentage of turnover reached 13.9 %, 60 basis points lower versus 2014. Gen eral expenses also saw a reduction as a percentage of turnover, declining by 100 basis points to 5.1 %. For both lines the improvement is a consequence of the consolidation of Nuance and WDF. EBITDA EBITDA reached CHF 723.8 million, 25.6 % higher ver sus the CHF 576.5 million reported in 2014. The EBITDA margin was 11.8 % in 2015, compared to 13.7 % in 2014. In 2015, a first tranche of around CHF 34 million of Nu ance synergies were already included in the results. 88 3 Financial ReportDUFRY ANNUAL REPORT 2015CONSOLIDATED INCOME STATEMENT IN MILLIONS OF CHF 2015 IN % IN MILLIONS OF CHF 2014 IN % CONTINUING OPERATIONS Net sales Advertising income Turnover Cost of sales Gross profit Selling expenses Personnel expenses General expenses Share of result of associates EBITDA 1 Depreciation, amortization and impairment Linearization Other operational result Earnings before interest and taxes (EBIT) Interest expenses Interest income Foreign exchange gain / (loss) Earnings before taxes (EBT) Income tax Net earnings from continuing operations DISCONTINUED OPERATIONS Net earnings from discontinued operations Net earnings ATTRIBUTABLE TO Equity holders of the parent Noncontrolling interests Net earnings to equity holders adjusted for amortization in respect of acquisitions Basic earnings per share from continuing operations Cash earnings per share 2 Weighted average number of outstanding shares in thousands 5,961.7 177.6 6,139.3 (2,564.6) 3,574.7 (1,684.0) (856.2) (314.7) 4.0 723.8 (444.8) (29.2) (117.1) 132.7 (200.7) 16.0 5.2 (46.8) 10.1 (36.7) (0.2) (36.9) (79.3) 42.4 182.8 (1.73) 3.99 45,810 100.0 % 41.8 % 58.2 % 27.4 % 13.9 % 5.1 % (0.1 %) 11.8 % 7.2 % 0.5 % 1.9 % 2.2 % 3.3 % (0.3 %) (0.1 %) (0.8 %) (0.2 %) (0.6 %) 0.0 % (0.6 %) 4,063.1 133.5 4,196.6 (1,733.0) 2,463.6 (1,023.3) (609.7) (256.4) 2.3 576.5 (248.9) – (61.1) 266.5 (154.1) 5.7 (11.1) 107.0 (20.4) 86.6 (0.8) 85.8 51.6 34.2 174.4 1.57 5.24 33,307 1 EBITDA is earnings before interest, taxes, depreciation, amortization, linearization and other operational result 2 Adjusted for amortization in respect of acquisitions 100.0 % 41.3 % 58.7 % 24.4 % 14.5 % 6.1 % (0.1 %) 13.7 % 5.9 % 0.0 % 1.5 % 6.4 % 3.7 % (0.1 %) 0.3 % 2.5 % 0.5 % 2.1 % 0.0 % 2.0 % 89 3 Financial ReportDUFRY ANNUAL REPORT 2015 Depreciation, amortization, impairment and linearization Depreciation as a percentage of turnover, remained nearly stable at 2.2 % compared to 2.1 % in 2014. In absolute terms it reached CHF 135.8 million in 2015 from CHF 88.2 million in the previous year. Amortiza tion was CHF 148.3 million higher when compared to 2014 and reached CHF 309.0 million in 2015, as a result of the additional amortization generated by the acqui sitions of Nuance and WDF. Linearization amounted to CHF – 29.2 million in 2015. Linearization is a noncash item related to the Spanish business. It originates by the difference between the average minimum guarantee (MAG) over the full con cession period and the MAG payable in the period. This item also includes the reduction in concession pay ments granted based on an upfront payment (prepaid lease) related to some Spanish contracts. EBIT EBIT stood at CHF 132.7 million in 2015 from CHF 266.5 million in the last year. Other operational result (net) reached CHF – 117.1 million, of which CHF – 77.4 million are due to one off restructuring costs of Nuance and transaction costs related to the WDF acquisition. Financial result Net financial results increased by CHF 20 million and reached CHF 179.5 million in 2015 from CHF 159.5 mil lion in 2014. The increase is a result of the higher net debt level related to the acquisition of WDF, as well as transaction costs also related to the acquisition of CHF 31.9 million. Taxes Income taxes was positive by CHF 10.1 million in 2015, versus an expense of CHF 20.4 million one year before. Net earnings Net earnings reached CHF – 36.9 million in 2015. Exclud ing transaction and restructuring costs related to the acquisitions of Nuance and WDF, net earnings reached CHF 72.4 million. Reported Cash EPS in 2015 stood at CHF 3.99. When excluding the beforehand mentioned oneoffs, Cash EPS reached 6.38, compared to CHF 6.60 in 2014 (also excluding oneoffs). to CHF 197.6 million in 2014. As a result, free cash flow reached CHF 250.2 million, 29.0 % higher than in 2014. Before acquisition related cash outflows of the Nuance and WDF acquisition, free cash flow was CHF 338.4 million. Net debt was CHF 3,957.9 million in December 2015 (2014: CHF 2,354.4 million). Our main covenant, Net Debt / adjusted EBITDA was 3.92x at yearend 2015. Dufry’s share price started the year 2015 at CHF 149.20 and fluctuated between a high of CHF 151.30 and a low of CHF 111.00. At yearend it closed at CHF 120.00 resulting in a market capitalization of CHF 6.5 billion. 2016, FOCUS ON THE INTEGRATION OF WDF AND DELEVERAGING By having completed the integration of Nuance in our organization, we now expect to see the full impact of the CHF 70 million synergies in 2016. Our focus for this year will be the integration of WDF. After doing a detailed analysis, the action plans to be deployed by the integration teams are now ready and we expect the integration to be concluded by mid2017. As after other acquisitions, deleveraging is a priority for us. Apart from the integration and the related syn ergies, we will be monitoring costs, net working capi tal and investments closely to drive cash generation. From a macroeconomic perspective, 2016 started in a similar fashion as the previous year and we expect the volatility of the financial markets to continue – even if at a reduced level. We are ready to face the challenges of managing the business with regional dif ferences, while benefitting from a geographically well balanced concession portfolio, where the exposure to single concessions was drastically reduced. After a strong support during 2015, we thank our share and bondholders, banks, analysts and key advisors for their confidence and contribution for the building of a much stronger company, the new Dufry. Kind regards, SOLID FINANCIAL STRUCTURE Cash flow and debt Net cash flow from operating activities reached CHF 414.8 million in 2015, from CHF 391.5 million in 2014. In 2015, CAPEX was CHF 164.6 million compared Andreas Schneiter 90 3 Financial ReportDUFRY ANNUAL REPORT 2015Financial Statements 2015 FINANCIAL STATEMENTS 2015 CONTENT Consolidated income statement 94 Consolidated statement of comprehensive income 95 Consolidated statement of financial position 96 Consolidated statement of changes in equity 97–98 Consolidated statement of cash flows 99–100 Notes to the consolidated financial statements 101–195 Most important subsidiaries 196–197 Report of the statutory auditor 198–199 Income statement 200 Statement of financial position 201 Notes to the financial statements 202–209 Report of the statutory auditor 210–211 93 3 Financial ReportDUFRY ANNUAL REPORT 201593943 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015CONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED DECEMBER 31, 2015IN MILLIONS OF CHFNOTE2015RESTATED* 2014CONTINUING OPERATIONSNet sales7 5,961.7 4,063.1 Advertising income 177.6 133.5 Turnover 6,139.3 4,196.6 Cost of sales(2,564.6)(1,733.0)Gross profit 3,574.7 2,463.6 Selling expenses8(1,684.0)(1,023.3)Personnel expenses9(856.2)(609.7)General expenses10(314.7)(256.4)Share of result of associates11 4.0 2.3 EBITDA 1 723.8 576.5 Depreciation, amortization and impairment12(444.8)(248.9)Linearization13(29.2)–Other operational result13(117.1)(61.1)Earnings before interest and taxes (EBIT) 132.7 266.5 Interest expenses14(200.7)(154.1)Interest income14 16.0 5.7 Foreign exchange gain / (loss) 5.2 (11.1)Earnings before taxes (EBT)(46.8) 107.0 Income tax15 10.1 (20.4)Net earnings from continuing operations(36.7) 86.6 DISCONTINUED OPERATIONSNet earnings from discontinued operations(0.2)(0.8)Net earnings(36.9) 85.8 ATTRIBUTABLE TOEquity holders of the parent(79.3) 51.6 Non-controlling interests 42.4 34.2 EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENTBasic earnings per share 16(1.73) 1.55 Diluted earnings per share 16(1.73) 1.50 Weighted average number of outstanding shares in thousands1645,810 33,307 EARNINGS PER SHARE FOR CONTINUING OPERATIONSBasic earnings per share attributable to equity holders of the parent16(1.73) 1.57 Diluted earnings per share attributable to equity holders of the parent16(1.73) 1.53 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)1 EBITDA is earnings before interest, taxes, depreciation, amortization, linearization and other operational result953 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015IN MILLIONS OF CHFNOTE2015RESTATED* 2014Net earnings(36.9) 85.8 OTHER COMPREHENSIVE INCOMEActuarial gains / (losses) on post-employment benefits17 12.8 (37.9)Income tax15, 17(1.2) 4.5 Items not being reclassified to net income in subsequent periods, net of tax 11.6 (33.4)Exchange differences on translating foreign operations17(83.7) 223.9 Net gain / (loss) on hedge of net investment in foreign operations17 2.2 (102.4)Changes in the fair value of interest rate swaps held as cash flow hedges17 1.0 –Income tax on above positions15, 17(0.3) 3.2 Items to be reclassified to net income in subsequent periods, net of tax(80.8) 124.7 Total other comprehensive income, net of tax(69.2) 91.3 Total comprehensive income, net of tax(106.1) 177.1 ATTRIBUTABLE TOEquity holders of the parent(140.6) 130.7 Non-controlling interests 34.5 46.4 Total comprehensive income attributable to equity holders of the parent(140.6) 130.7 ATTRIBUTABLE TOContinuing operations(140.3) 131.5 Discontinued operations(0.3)(0.8)* Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED DECEMBER 31, 2015963 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAT DECEMBER 31, 2015IN MILLIONS OF CHFNOTE 31.12.2015RESTATED * 31.12.2014ASSETSProperty, plant and equipment18 604.6 435.4 Intangible assets20 7,308.2 4,733.2 Investments in associates11 41.4 72.9 Deferred tax assets22 203.9 195.9 Other non-current assets23 347.4 106.6 Non-current assets 8,505.5 5,544.0 Inventories24 907.3 741.2 Trade and credit card receivables25 132.8 118.7 Other accounts receivable26 336.0 227.2 Income tax receivables 27.8 11.0 Financial instruments at fair value through profit and loss38.5.3 17.7 –Cash and cash equivalents 432.5 513.0 Current assets 1,854.1 1,611.1 Assets of discontinued operations held for sale40– 1.8 Total assets 10,359.6 7,156.9 LIABILITIES AND SHAREHOLDERS’ EQUITYEquity attributable to equity holders of the parent27 3,149.1 2,293.6 Non-controlling interests29, 30 183.6 159.5 Total equity 3,332.7 2,453.1 Financial debt31 4,313.1 2,821.8 Deferred tax liabilities22 693.1 419.1 Provisions32 183.9 109.2 Post-employment benefit obligations33 55.3 37.7 Other non-current liabilities34 64.9 3.3 Non-current liabilities 5,310.3 3,391.1 Trade payables 546.8 418.3 Financial debt31 77.3 45.6 Income tax payables 44.1 33.8 Provisions32 153.7 54.8 Other liabilities34 894.7 760.2 Current liabilities 1,716.6 1,312.7 Total liabilities 7,026.9 4,703.8 Total liabilities and shareholders’ equity 10,359.6 7,156.9 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)973 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED DECEMBER 31, 2015ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT2015 IN MILLIONS OF CHFNOTEShare capitalShare premium Treasury sharesCapital reserve for mandatory convertible notesEmployee benefit reserveHedging & revalu-ation reservesTrans- lation reservesRetained earningsTOTALNON-CON-TROLLING INTERESTSTOTAL EQUITYRestated* Balance at January 1 179.5 1,964.7 (14.3) 262.8 (32.9)–(112.2) 46.0 2,293.6 159.5 2,453.1 Net earnings / (loss)–––––––(79.3)(79.3) 42.4 (36.9)Other comprehensive income / (loss)17–––– 11.6 0.7 (73.6)–(61.3)(7.9)(69.2)Total comprehensive income / (loss) for the period–––– 11.6 0.7 (73.6)(79.3)(140.6) 34.5 (106.1)TRANSACTIONS WITH OR DISTRIBUTIONS TO SHAREHOLDERS:Dividends to non-controlling interests–––––––––(43.3)(43.3)Rights issue27 80.8 2,119.2 –––––– 2,200.0 – 2,200.0 Conversion of mandatory convertible notes27 9.1 253.7 –(262.8)–––––––Transactions costs for equity instruments27–(78.3)––––––(78.3)–(78.3)Share-based payment28––––––– 2.8 2.8 – 2.8 Tax effect on equity transactions15–––––––(0.2)(0.2)–(0.2)Total transactions with or distributions to owners 89.9 2,294.6 –(262.8)––– 2.6 2,124.3 (43.3) 2,081.0 CHANGES IN OWNERSHIP INTERESTS IN SUBSIDIARIES:Changes in participation of non-controlling interests6.3, 29–––––––(1,128.2)(1,128.2) 32.9 (1,095.3)Balance at December 31 269.4 4,259.3 (14.3)–(21.3) 0.7 (185.8)(1,158.9) 3,149.1 183.6 3,332.7 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)983 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED DECEMBER 31, 2015ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT2014 IN MILLIONS OF CHFNOTEShare capitalShare premiumTreasury sharesCapital reserve for mandatory convertible notesEmployee benefit reserveHedging & revalu-ation reservesTrans- lation reservesRetained earningsTOTALNON-CON-TROLLING INTERESTSTOTAL EQUITYBalance at January 1 154.5 1,207.0 (18.1)– 0.3 –(224.5) 18.3 1,137.5 129.9 1,267.4 Restated* net earnings / (loss)6.4––––––– 51.6 51.6 34.2 85.8 Other comprehensive income / (loss)17––––(33.2)– 112.3 – 79.1 12.2 91.3 Total comprehensive income for the period––––(33.2)– 112.3 51.6 130.7 46.4 177.1 TRANSACTIONS WITH OR DISTRIBUTIONS TO SHAREHOLDERS:Dividends to non-controlling interests–––––––––(39.5)(39.5)Issuance of equity instruments27 25.0 785.0 – 269.6 –––– 1,079.6 – 1,079.6 Transaction costs for equity instruments27–(27.3)–(6.8)––––(34.1)–(34.1)Net purchase of treasury shares28.2––(13.8)––(13.8)–(13.8)Assignment of treasury shares28.2–– 17.6 ––––(17.6)–––Share-based payment28––––––– 2.4 2.4 – 2.4 Tax effect on equity transactions15––––––– 0.1 0.1 – 0.1 Total transactions with or distributions to owners 25.0 757.7 3.8 262.8 –––(15.1) 1,034.2 (39.5) 994.7 CHANGES IN OWNERSHIP INTERESTS IN SUBSIDIARIES:Changes in participation of non-controlling interests–––––––(8.8)(8.8) 22.7 13.9 Restated * Balance at December 31 179.5 1,964.7 (14.3) 262.8 (32.9)–(112.2) 46.0 2,293.6 159.5 2,453.1 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)993 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2015IN MILLIONS OF CHFNOTE2015RESTATED* 2014CASH FLOWS FROM OPERATING ACTIVITIESEarnings before taxes (EBT)(46.8) 107.0 Net earnings from discontinued operations40(0.2)(0.8)Total earnings before taxes (EBT)(47.0) 106.2 ADJUSTMENTS FORDepreciation, amortization and impairment12 444.8 248.9 Loss / (gain) on sale of non-current assets 0.9 (0.9)Increase / (decrease) in allowances and provisions 53.1 (16.0)Loss / (gain) on unrealized foreign exchange differences 1.5 9.1 Other non-cash items 14.3 2.4 Share of result of associates11(4.0)(2.3)Interest expense14 200.7 154.1 Interest income14(16.0)(5.7)Cash flow before working capital changes 648.3 495.8 Decrease / (increase) in trade and other accounts receivable 63.5 (32.0)Decrease / (increase) in inventories24 15.3 36.0 Increase / (decrease) in trade and other accounts payable(221.9)(43.5)Dividends received from associates11 4.8 0.4 Cash generated from operations 510.0 456.7 Income taxes paid(95.2)(65.2)Net cash flows from operating activities 414.8 391.5 CASH FLOW FROM INVESTING ACTIVITIESPurchase of property, plant and equipment 18, 19(134.8)(143.7)Purchase of intangible assets20, 21(179.7)(57.0)Purchase of financial assets(11.7)–Proceeds from sale of property, plant and equipment 4.9 3.1 Interest received 11.4 4.9 Business combinations, net of cash6(1,366.7)(1,124.6)Proceeds from sale of interests in subsidiaries and associates11 28.6 0.2 Net cash flows used in investing activities(1,648.0)(1,317.1)1003 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015IN MILLIONS OF CHFNOTE2015RESTATED* 2014CASH FLOW FROM FINANCING ACTIVITIESProceeds from issue of new shares27 2,200.0 810.0 Proceeds from mandatory convertible notes27– 275.0 Transaction costs for issuance of financial instruments(110.8)(75.9)Proceeds from bank loans31 824.0 1,570.8 Proceeds from issuance of notes31 734.6 606.8 Repayment of bank loans and senior notes31(981.9)(1,821.7)Repayment of 3rd party loans 31(5.1)(5.7)Dividends paid to non-controlling interest29(43.3)(39.5)Net purchase of treasury shares28–(13.8)Net contributions from / (purchase of) non-controlling interests(1,413.3) 31.1 Interest paid (135.2)(107.8)Net cash flows (used in) / from financing activities 1,069.0 1,229.3 Currency translation on cash 83.7 (37.1)(Decrease) / increase in cash and cash equivalents(80.5) 266.6 CASH AND CASH EQUIVALENTS AT THE– beginning of the period 513.0 246.4 – end of the period 432.5 513.0 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)FOR THE YEAR ENDED DECEMBER 31, 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2015 1. CORPORATE INFORMATION Dufry AG (the Company) is a publicly listed company with headquarters in Basel, Switzerland. The Company is the world’s leading travel retail company. It operates around 2,200 shops worldwide. The shares of the Company are listed on the Swiss Stock Exchange (SIX) in Zurich and its Brazilian Depository receipts on the BM&FBOVESPA in São Paulo. The consolidated financial statements of Dufry AG and its subsidiaries (Dufry or the group) for the year ended December 31, 2015 were authorized for public dis- closure in accordance with a resolution of the Board of Directors of the Company dated March 8, 2016, and are subject to the approval of the Annual General meet- ing to be held on April 28, 2016. 2. ACCOUNTING POLICIES 2.1 BASIS OF PREPARATION The consolidated financial statements of Dufry AG and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS). Dufry AG’s consolidated financial statements have been prepared on the histori- cal cost basis, except for financial instruments that are measured at fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The carrying val- ues 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 millions of Swiss Francs (CHF) and all values are rounded to the nearest one hundred thousand, except when otherwise indicated. 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, 2015 and the respective comparative information. Certain comparative figures were restated due to the revision of the values of the purchase price analysis of the Nuance Group (see notes 6.5 and 39). 101 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Subsidiaries are fully consolidated from the date of acquisition, being the date on which Dufry obtains control, and continue to be consolidated until the date when such control is lost. The group controls an entity when Dufry is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiaries are prepared for the same reporting period as the parent com- pany, using uniform accounting policies. All intra group balances, transactions, unrealized gains and losses resulting from intragroup 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 subsid- iary, it – derecognizes the assets (including goodwill) and liabilities of the subsidiary, derecognizes the carrying amount of any non-controlling interest as well as derecognizes the cumulative translation differences recorded in equity – 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 consolidated income statement and – reclassifies the parent’s share of components previously recognized in other comprehensive income to the consolidated income statement or retained earnings, as appropriate. For the accounting treatment of associated companies see 2.3 p). 2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a) Business combinations and goodwill Business combinations are accounted for using the acquisition 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, Dufry selects 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 related transaction costs are expensed and included in other operational result. When Dufry acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with the changes in contingent considerations recognized in the income statement. Dufry 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 acquiree; – 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. 102 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015After initial recognition, goodwill is measured at cost less any accumulated impair- ment losses. For the purpose of impairment testing, goodwill acquired in a busi- ness combination is, from the acquisition date, allocated to each of the group’s cash-generating units that are expected to benefit from the combination. 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 included 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 por- tion of the cash-generating unit retained, unless there are specific allocations. b) Turnover Sales are measured at the fair value of the consideration received, excluding sales taxes or duties. Retail sales are settled in cash or by credit card, whereas adver- tising income is recognized when the services have been rendered. c) Cost of sales 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, inventory valuation adjustments and inventory differences. d) Foreign currency translation The consolidated financial statements are expressed in millions of 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 currencies 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 re-measured to their fair value in the functional currency using the exchange rate at the report- ing date and recorded as unrealized foreign exchange gains / losses. Exchange dif- ferences 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 other comprehen- sive income, until the respective investments are disposed of. Any related deferred tax is also accounted through other comprehensive income. Non-monetary items are measured at historical cost in the respective functional currency. At the reporting date, the assets and liabilities of all subsidiaries reporting in for- eign currency are translated into the presentation currency of Dufry (CHF) using the exchange rate at the reporting date. The income statements of the subsidiar- ies are translated using the average exchange rates of the respective month in which the transactions occurred. The net translation differences are recognized in other comprehensive income. On disposal of a foreign entity or when control is lost, the deferred cumulative translation difference recognized within equity relat- ing to that particular operation is recognized in the consolidated income state- ment as gain or loss on sale of subsidiaries. Intangible assets and fair value adjustments identified during a business combina- tion (purchase price allocation) are treated as assets and liabilities in the functional currency of such operation. 103 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015104 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Principal foreign exchange rates applied for valuation and translation:AVERAGE RATECLOSING RATERATES AT ACQUISITION DATEIN CHF2015201431.12.201531.12.201407.08.201509.09.20141 USD0.96250.91550.99970.99390.98220.93421 EUR1.06801.21441.08631.20271.07661.20671 GBP1.47071.50681.47301.54841.5202e) Equity instrumentsAn 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. 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.f) Share capitalOrdinary shares are classified as equity. Mandatory convertible notes are classi-fied as compound financial instruments (see 2.3 g) below.Costs directly attributable to the issuance of shares or options are shown in the statement of changes in equity as transaction costs for equity instruments, net of tax.When any subsidiary purchases Dufry shares (treasury shares), the consideration paid, including any directly attributable expenses, net of income taxes, is deducted from equity until the shares are cancelled, assigned or sold. Where such ordinary shares are subsequently sold, any consideration received, net of any direct trans-action expenses and income tax, is included in equity.g) Compound financial instrumentsCompound financial instruments issued by Dufry comprise convertible notes that can be converted to share capital. The number of shares to be issued is dependent on the changes in their fair value.The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component and is represented in equity for the date of inception. The directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured except on conversion or expiry.The liability component is classified as current liabilities unless Dufry has an unconditional right to defer settlement for at least 12 months after the end of the reporting period.105 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015h) LinearizationIn cases where fees for the concession are based on fix or determinable amounts of money, the expenses paid are treated as operational lease. For these operational leases when the amounts are increasing or decreasing over the time Dufry accrues the difference between the amount paid and the respective straight-line expenses for the period calculated over the overall duration of the contract, as linearization. In addition, this line item includes the reduction in concession payments granted based on an upfront payment (see prepaid lease in note 26) done at the inception of two Spanish contracts (Madrid and Barcelona as main airports), acquired as part of the World Duty Free acquisition (see note 6.1). i) Pension and other post-employment benefit obligationsThe employees of the subsidiaries are eligible for retirement, 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 either funded through regular contributions made by the employer or the employee or unfunded.The cost of providing benefits under defined benefit plans is determined using the projected unit credit method.Re-measurements, the effect of the asset ceiling (excluding net interest) and the return on plan assets (excluding net interest), are recognized in the statement of financial position with a corresponding debit or credit to other comprehensive income in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.Past service costs are recognized in profit or loss on the earlier of: –The date of the plan amendment or curtailment, and –the date that Dufry recognizes restructuring related costsNet interest is calculated by applying the discount rate to the net defined benefit obligation (asset). Dufry recognizes the following changes in the net defined benefit obligation in the income statement: –Service costs comprising current service costs, past service costs, gains and losses on curtailments and non-routine settlements under “personnel expenses” –Net interest expense or income under “interest expenses or income”j) Share-based paymentsEquity settled share based payments to employees and other third parties provid-ing services are measured at the fair value of the equity instruments at grant date. The fair value determined at grant date of the equity-settled share-based pay-ments is expensed on a pro rata basis over the vesting period, based on the esti-mated number of equity instruments that will eventually vest. At the end of each reporting period, Dufry revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in the 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 as 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 holder of the option as measured at the date of modification. k) Taxation Income tax expense represents the sum of the current income tax and deferred tax. Income tax positions not relating to items recognized in the income statement, are recognized in correlation to the underlying transaction either in other comprehen- sive income or equity. Current income tax Income tax receivables or payables 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 substantially enacted at the reporting date in the countries where Dufry operates and generates taxable income. Income tax relating to items recognized in other comprehensive income is recog- nized in the same statement. Deferred tax Deferred tax is provided using the liability method on temporary differences between the tax basis of assets or liabilities and their carrying amounts for finan- cial reporting purposes at the reporting date. Deferred tax liabilities are recognized for all taxable temporary differences, except: – When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction 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 controlled 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 or tax losses. Deferred tax assets are recog- nized to the extent that it is probable that taxable profit will be available, against which the deductible temporary 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 transaction, affects neither the accounting profit nor taxable profit or loss – In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. 106 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015The 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. 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 substantially enacted at the reporting date applicable for each respective company. l) 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: – Real estate (buildings) 20 to 40 years – Leasehold improvements the shorter of 10 years – Furniture and fixtures the shorter of 5 years – Motor vehicles the shorter of 5 years – Computer hardware the shorter of 5 years m) Intangible assets These assets mainly comprise of concession rights and brands. Dufry considers that these assets have indefinite useful live, when concession rights are granted by one of the non-controlling interests holder of the company, or for brands when the company considers to use the brand for the foreseable future. 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 recogni- tion, the cost model is applied to intangible assets. The useful lives of these intan- gible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life. Intangible assets with an indefinite useful life are reviewed annually to determine whether the indefinite life assessment continues to be supportable. If not, any changes are made on a pro- spective basis. n) 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 amor- tization are reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recog- nized 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 cost of disposal and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash generating units). o) Non-current assets held for sale or for distribution to equity holders of the parent and discontinued operations Dufry classifies investments as held for sale or for distribution to equity holders of the parent if their carrying amounts will be recovered principally through a sale or distribution rather than through continuing use. Dufry measures these at the lower of their carrying amount or fair value less costs to sell or to distribute. 107 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Assets and liabilities classified as held for sale or for distribution are presented separately in the statement of financial position. A disposal group qualifies as discontinued operation if it is: – A major line of business or major geographical area; – part of a single coordinated plan for disposal; or – a subsidiary acquired exclusively with a view to resale Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as net earnings after tax from discontinued operations in the consolidated statement of income. Additional disclosures are provided in note 40. All other notes to the financial statements mainly include amounts for continuing operations, unless otherwise mentioned. p) Associates Associates are all entities over which Dufry has significant influence but not con- trol, generally accompanying a shareholding of more than 20 % of the voting rights. Investments in associates are accounted for using the equity method of account- ing. Under the equity method, the investment is initially recognized at cost. The carrying amount is increased or decreased to recognize the investor’s share of the net earnings of the investee after the date of acquisition and decreased by divi- dends declared. Dufry’s investment in associates includes goodwill identified on acquisition. Dufry’s share of post-acquisition net earnings is recognized in the income state- ment, and its share of post-acquisition movements in other comprehensive income is recognized in the statement of comprehensive income with a corresponding adjustment to the carrying amount of the investment. When Dufry’s share of losses in an associate equals or exceeds its interest in the associate, Dufry does not rec- ognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. If the ownership interest in an asso- ciate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income is reclassified to net earnings where appropriate. Dufry determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, Dufry calcu- lates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount adjacent to share of result of associates in the income statement. Profits and losses resulting from upstream and downstream transactions between Dufry and its associate are recognized in the group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where neces- sary to ensure consistency with the policies adopted by Dufry. Dilution gains and losses arising in investments in associates are recognized in the income statement. 108 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015q) 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 location and condi- tion. This includes mainly import duties and transport cost. Purchase discounts and rebates are deducted in determining the cost of inventories. The net realizable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. Inventory allowances are set up in the case of slow-moving and obsolete stock. Expired items are fully written off. r) Cash and cash equivalents Cash and cash equivalents consist of cash on hand or current bank accounts as well as short-term deposits at banks with initial maturity below 91 days. Short-term investments are included in this position if they are highly liquid, readily convert- ible into known amounts of cash and subject to insignificant risk of changes in value. Bullet bonds amounting to CHF 29.5 (2014: 23.9) million, due within 90 days are dis- closed here. s) Provisions Provisions are recognized when the group has a present obligation (legal or con- structive) as a result of a past event, it is probable that Dufry 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 report- ing period of the consideration required 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 rec- ognized 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 contract is considered to exist if Dufry has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract. 109 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Restructurings A restructuring provision is recognized when Dufry has developed a detailed for- mal 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 announc- ing 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. t) Financial instruments Financial assets and financial liabilities are recognized when Dufry becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Trans- action 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 deducted from or added to the fair value of the financial assets or financial liabilities 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 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. u) Financial assets Financial assets are classified into the following categories: financial assets at fair value through profit or loss (FVTPL), Held to maturity financial assets, 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 purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular purchases or sales of financial assets are those that require delivery of assets within the time frame established by regulation or convention in the marketplace. Financial assets at FVTPL 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 selling it in the near term; or – on initial recognition it is part of a portfolio of identified financial instruments that Dufry 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. 110 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015A 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 Dufry’s documented risk management 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 embedded derivatives, and IAS 39 Financial instruments: recognition and measurement permits the entire combined 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 re-measurement recognized in the income statement. The net gain or loss rec- ognized in the income statement incorporates any dividend or interest earned on the financial asset and is included in the other operating result line item in the income statement. Fair value is determined in the manner described in note 37. Trade and other accounts receivable Trade and other receivables (including credit cards receivables, other accounts receivable, cash and cash equivalents) are measured at amortized cost using the effective interest method, less any impairment. Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impair- ment 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 financial asset have been affected. Certain categories of financial assets, such as trade receivables, are assessed for impairment individually. Subsequent recoveries of amounts previously written off are credited against the allowance accounts for these categories. Changes in the carrying amount of the allowance account are recognized in the income statement in the lines selling expenses or other operational result. Derecognition of financial assets Dufry 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 substan- tially all the risks and rewards of ownership of the asset to another entity. If Dufry neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred as set, Dufry recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If Dufry retains substantially all the risks and rewards of ownership of a transferred financial asset, Dufry continues to recognize the financial asset and also recog- nizes a collateralized borrowing for the proceeds received. 111 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015v) Financial liabilities Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. Financial liabilities at FVTPL These financial liabilities are either held for trading or have been designated 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. Other financial liabilities, not 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 liability forms part of a group of financial assets or financial liabilities or both, which is managed together and its performance is evaluated on a fair value basis, in accordance with the group’s documented risk management 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 embedded derivatives, and IAS 39 Financial instruments: recognition and measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL. Financial liabilities at FVTPL are stated at fair value, with any gains or losses aris- ing on re-measurement recognized in the 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 financial result in the income state- ment. Fair value is determined in the manner described in note 37. Other financial liabilities Other financial liabilities (including borrowings) are subsequently measured at amortized cost using the effective interest method (see 2.3 t). Derecognition of financial liabilities Dufry derecognizes financial liabilities only when the obligations are discharged, cancelled or they expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid or payable is recognized in the consolidated income statement. w) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforce- able legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously (see note 38.10). 112 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015x) Derivative financial instruments Dufry enters into a variety of derivative financial instruments to manage its expo- sure to interest rate or foreign exchange rate risks, including foreign exchange for- ward 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 subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in the income statement unless the derivative is designated and effective as a hedging instru- ment, in which event the timing of the recognition in the 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. y) Hedge accounting Dufry designates certain hedging instruments, which include 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 documents the relationship between the hedging instrument and the hedged item, along with its risk manage- ment objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, Dufry docu- ments 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. Hedge accounting is discontinued when Dufry 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 recognized in other comprehensive income and accumulated in equity at that time, is recognized when the underlying hedged item is ultimately derecognized in the income statement. Cash flow hedges The effective portion of changes in the fair value of derivatives 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 income statement, and is included in the interest expenses / income line item. Hedges of net investments in foreign operations Hedges of net investments in foreign operations are accounted 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 accumu- lated under the heading of translation reserves. The gain or loss relating to the ineffective portion is recognized immediately in the income statement, and is included in the foreign exchange gains / losses line item (see notes 31.1 and 31.2). 113 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 20152.4 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES New and amended standards and interpretations The accounting policies adopted are consistent with those of the previous finan- cial year, except for the revised Standards and the Interpretations adopted in these financial statements (effective January 1, 2015). Their adoption did not have a significant impact on the amounts reported in these financial statements or dis- closures therein. Annual improvements 2010 – 2012 (issued December 2013) – IFRS 2 Share-based payments The definition of vesting condition was clarified, by separately defining a “performance condition” and a “service condition”. – IFRS 3 Business combinations Accounting for contingent consideration in a business combination that is a financial asset or financial liability can only be measured at fair value, with changes in fair value being presented in either profit or loss or other comprehensive income. – IFRS 8 Operating segments Aggregation of operating segments requires the disclosure of those factors that are used to identify the entity’s reportable segments. – IAS 24 Related party disclosures An entity providing key management personnel services to the reporting entity is a related party of the reporting entity. 114 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES 3. OF ESTIMATION UNCERTAINTY The preparation of Dufry’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of income, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. 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 and are consid- ering extensions and renewals. The useful lives of operating concessions are reviewed annually to determine whether the indefinite useful life assessment for those concessions continues to be sustainable. Dufry annually tests the operat- ing concessions with indefinite useful lives and assesses these with finite life for impairment indications. The underlying calculation requires the use of estimates. The comments and assumptions used are disclosed in note 20.1.2. Onerous contracts Some of the long-term concession agreements described above include clauses to prevent early termination, such as obligations to fulfill guaranteed minimal pay- ments during the full term of the agreement. The conditions for an onerous con- tract will be met, when such a contract presents a non-profitable outlook. In this event, a provision based on the present value of the unavoidable future negative cash flows expected by the management is established. The unavoidable costs are the lower of the costs of fulfilling it and any compensation or penalties arising from failure to fulfil it. Further details are given in note 32. Brands and goodwill Dufry tests these items annually for impairment. The underlying calculation requires the use of estimates. The comments and assumptions used are disclosed in note 20.1. Income taxes Dufry is subject to income taxes in numerous jurisdictions. 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. Dufry recognizes liabilities for tax audit issues based on estimates of whether additional 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 notes 15 and 22. 115 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Deferred tax assets Deferred tax assets are recognized for unused tax losses and deductible tempo- rary differences to the extent that it is probable that taxable profit will be avail- able 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. Further details are given in note 22. 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 32. Share-based payments Dufry measures the cost of equity settled transactions with employees by refer- ence to the fair value of the equity instruments at the grant date. Estimating such fair values require determining the most appropriate valuation model for a grant of equity instruments, which depends on the terms and conditions of the grant, as well as, the most appropriate inputs to the valuation model including the expected probability that the triggering clauses will be met. The result will be the expected quantity of shares to be assigned. The assumptions and models used are disclosed in note 28. 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, future salary and pension increases as well as mortality rates. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. Further details are given in note 33. Purchase price allocation The determination of the fair values of the identifiable assets (especially the con- cession rights) and the assumed liabilities (especially the contingent liabilities rec- ognized 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). Consolidation of entities where Dufry has control, but holding only minority voting rights Dufry considers controlling certain entities, even when it holds less than the majority of the voting rights, when it is exposed to or has the rights to variable returns from the involvements with the investee and has the ability to affect those returns through its power over the entity. These indicators are evaluated at the time of first consolidation and reviewed when there are changes in the statutes or composition of the executive board of these entities. Further details on non-con- trolling interests are disclosed in notes 29 and 30 as well as the Annex “Most im- portant subsidiaries”. 116 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015NEW AND REVISED STANDARDS AND INTERPRETATIONS ISSUED 4. BUT NOT YET ADOPTED / EFFECTIVE The standards and interpretations described below are expected to have an impact on Dufry’s financial position, performance, and / or disclosures. Dufry intends to adopt these standards when they become effective. IAS 7 Statement of cash flows (effective January 1, 2017) The IASB has issued an amendment to IAS 7 introducing an additional disclosure that will enable users of financial statements to evaluate changes in liabilities aris- ing from financing activities. IAS 12 Income taxes (effective January 1, 2017) Additional amendments have been issued by the IASB regarding IAS 12 on the rec- ognition of deferred tax assets for unrealized losses. These amendments clarify how to account for deferred tax assets related to debt instruments measured at fair value. IFRS 9 Financial Instruments (effective January 1, 2018) Phase 1: Classification and measurement – determines how financial assets and financial liabilities are accounted for and measured on an ongoing basis. Phase 2: Impairment – a new single expected loss impairment model is introduced that will require more timely recognition of expected credit losses. Phase 3: Hedge accounting – the new model aligns the accounting treatment with risk management activities, users of the financial statements will be provided with better information about risk management and the effect of hedge accounting on the financial statements. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the group’s financial assets, but will not impact the financial liabilities. Phase 2 is not expected to have any significant impact on the financial statements and phase 3 is expected to effect the disclosure requirements from a current point of view. IFRS 15 Revenue from contracts with customers (effective January 1, 2018) IFRS 15, revenue from contracts with customers deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognized when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. 117 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015118 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015The standard replaces IAS 18 Revenue and IAS 11 Construction contracts and related interpretations. Dufry is currently analyzing the impact of the standard, however, does not expect any material changes to the current revenue recognition approach. Dufry considered the following aspects:(a) Sale of goodsDufry’s retail sales are on cash or credit basis and the revenue recognition occurs when the assets are transferred to the customer, (b) Advertising incomeAdvertising income is recognized when the services have been rendered.IFRS 16Leases(effective January 1, 2019)Lessees will be required to recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. The lease liability will be measured at present value of the lease payments to be made over the lease term. In other words, lessees will appear to become more asset-rich but also more indebted. To be considered as such, a lease agreement has to convey the right to control the use of an identified asset through-out the period of use, so that the customer has the right to obtain substantially all of the economic benefits from the use of the identified asset; and direct the use of the identified asset (i.e. direct how and for what purpose the asset is used). Dufry will be assessing the impact of IFRS 16 on the accounting for its lease, and in par-ticular the concession agreements.By conducting a detailed survey and compliance analysis of relevant agreements, Dufry will determine if the contracts convey the rights to control the use of the premises and if these grant substantially all economic benefits of that use.Amendments that are considered to be insignificant from a current point of view:Sale or Contribution of Assets between an Investor and its Associate or Joint venture (proposed amendments to IFRS 10 and IAS 28)(effective date not yet defined by IASB)The gain or loss resulting from the sale to or contribution from an associate of assets that constitute a business as defined in IFRS 3 is recognized in full. The gain or loss resulting from the sale to or contribution from a subsidiary that does not constitute a business as defined in IFRS 3 (i.e. not a group of assets conforming a business) to an associate is recognized only to the extent of unrelated investors’ interests in the associate.Annual Improvements 2012 – 2014 – issued September 2014(effective January 1, 2016) –IFRS 5 non-current assets held for sale and discontinued operations: Changes in methods of disposal are clarified, i.e. whether such a change in a disposal method would qualify as a change to a plan of sale. This amendment does not currently have any impact on Dufry. –IAS 34 Interim Financial reporting: Disclosure of information “elsewhere in the interim financial report” is clarified and requires the inclusion of a cross-reference from the interim financial statements to the location of this information.119 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 20155. SEGMENT INFORMATIONDufry’s risks and returns are predominantly affected by the fact that Dufry oper-ates in different countries. Therefore, Dufry presents the segment information as it does internally to the Group Executive Committee, using 4 geographical areas plus the Nuance business, the World Duty Free business and the distribution cen-ters as additional business units.TURNOVER2015 IN MILLIONS OF CHFwith external customerswith other business unitsTOTALEBITDA 1FULL TIME EQUIVALENTSEMEA & Asia 1,010.8 – 1,010.8 134.5 4,407 America I 808.4 – 808.4 55.7 3,674 America II 487.8 – 487.8 0.7 2,263 United States & Canada 1,043.2 – 1,043.2 126.9 5,743 The Nuance Business 1,337.9 – 1,337.9 131.6 3,386 World Duty Free Business 2 1,410.0 – 1,410.0 153.3 9,069 Distribution Centers 41.2 836.7 877.9 121.1 311 Total segments 6,139.3 836.7 6,976.0 723.8 28,853 Eliminations–(836.7)(836.7)––Dufry 6,139.3 – 6,139.3 723.8 28,853 TURNOVER2014 IN MILLIONS OF CHFwith external customerswith other business unitsTOTALEBITDA 1*FULL TIME EQUIVALENTSEMEA & Asia 1,194.5 – 1,194.5 189.9 4,367 America I 763.0 – 763.0 57.0 3,565 America II 683.3 – 683.3 27.2 2,389 United States & Canada 963.1 – 963.1 121.8 5,669 The Nuance Business 3 536.6 – 536.6 51.3 3,654 World Duty Free Business–––––Distribution Centers 56.1 882.5 938.6 129.3 303 Total segments 4,196.6 882.5 5,079.1 576.5 19,946 Eliminations–(882.5)(882.5)––Dufry 4,196.6 – 4,196.6 576.5 19,946 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)1 EBITDA before linearization and other operational result2 For the period August to December 20153 For the period September to December 2014As of January 1, 2016, Dufry has regrouped its geographical areas. Mainly the Nuance and the World Duty Free businesses have been included evenly in 5 geo-graphical divisions and the distribution centers as an additional division.In Switzerland (domicile), Dufry generated 5.5 % (2014: 4.9 %) of the turnover with external customers.120 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Financial Position and other disclosures31.12.2015 IN MILLIONS OF CHFTOTAL ASSETSTOTAL LIABILITIESINCOME TAX (EXPENSE) / GAINCAPITAL EXPENDITURE PAIDDEPRECIATION AND AMORTIZATIONOTHER NON-CASH ITEMSEMEA & Asia 1,284.0 310.7 (23.6)(25.3)(55.6) 9.4 America I 1,381.7 187.5 (4.2)(22.1)(62.7) 14.1 America II 477.8 88.2 17.7 (178.0)(66.9) 2.0 United States & Canada 634.7 130.4 0.4 (41.5)(56.9) 0.4 The Nuance Business 1,967.0 469.5 13.4 (14.5)(99.5) 0.9 World Duty Free Business 1 3,828.1 1,231.6 4.8 (27.0)(86.5) 25.4 Distribution Centers 432.3 152.1 0.6 (1.2)(1.3) 5.4 Total segments 10,005.6 2,570.0 9.1 (309.6)(429.4) 57.6 Unallocated positions 354.0 4,456.9 1.0 (4.9)(15.4) 4.4 Dufry 10,359.6 7,026.9 10.1 (314.5)(444.8) 62.0 31.12.2014 (RESTATED*) IN MILLIONS OF CHFTOTAL ASSETSTOTAL LIABILITIESINCOME TAX (EXPENSE) / GAINCAPITAL EXPENDITURE PAIDDEPRECIATION AND AMORTIZATIONOTHER NON-CASH ITEMSEMEA & Asia 1,391.1 343.8 (20.5)(44.6)(52.1) 1.4 America I 1,324.1 208.1 (1.6)(12.3)(61.3)(1.6)America II 560.6 293.6 6.1 (78.0)(37.1) 3.7 United States & Canada 729.5 132.8 (0.2)(54.8)(49.3)(0.1)The Nuance Business 2 2,377.4 613.0 4.4 (6.5)(34.1)(2.1)World Duty Free Business––––––Distribution Centers 402.4 189.4 (4.2)(0.9)(1.1)(1.3)Total segments 6,785.1 1,780.7 (16.0)(197.1)(235.0)–Unallocated positions 371.8 2,923.1 (4.4)(3.6)(13.9)(5.5)Dufry 7,156.9 4,703.8 (20.4)(200.7)(248.9)(5.5)* Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)1 For the period August to December 20152 For the period September to December 2014121 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Reconciliation of the earningsIN MILLIONS OF CHF2015RESTATED* 2014EBITDA 1 723.8 576.5 Depreciation, amortization and impairment(444.8)(248.9)Linearization(29.2)–Other operational result(117.1)(61.1)Interest expenses(200.7)(154.1)Interest income 16.0 5.7 Foreign exchange gain / (loss) 5.2 (11.1)Earnings before taxes(46.8) 107.0 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)1 EBITDA before linearization and other operational resultReconciliation of assetsIN MILLIONS OF CHF31.12.2015RESTATED* 31.12.2014Operating assets 10,005.6 6,785.1 Current assets of corporate and holding companies 69.2 93.1 Non-current assets of corporate and holding companies 284.8 278.7 Total assets 10,359.6 7,156.9 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)Reconciliation of liabilitiesIN MILLIONS OF CHF31.12.2015RESTATED* 31.12.2014Operating liabilities 2,570.0 1,780.7 Financial debt of corporate and holding companies, short-term 0.5 0.5 Financial debt of corporate and holding companies, long-term 4,306.4 2,815.5 Other non-segment liabilities 150.0 107.1 Total liabilities 7,026.9 4,703.8 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)122 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 20156. ACQUISITIONS OF BUSINESSES AND OTHER AGREEMENTS2015 TRANSACTIONS6.1 ACQUISITION OF WORLD DUTY FREE S.P.A.On August 7, 2015, Dufry acquired a first stake of 50.1 % in the voting equity inter-ests in World Duty Free S.p.A. (WDF), a publicly listed company in Italy for a total consideration of CHF 1,407.1 (EUR 1,307) million equivalent to EUR 10.25 per share in cash. This initial acquisition of WDF triggered a mandatory tender offer (MTO) for the outstanding 49.9 % of WDF shares (see note 6.3 transactions with non- controlling interests). The acquisition was mainly financed through the issuance of share capital (see note 27.1.1 fully paid ordinary shares). This acquisition has been accounted for using the acquisition method.Continuing with its strategy to expand its travel retail business, Dufry acquired WDF, one of the top global travel retailers, to complement the geographical presence in key markets such as the airports of Heathrow, Gatwick, Stansted, Manchester in the UK, Madrid, Barcelona, Las Palmas and Tenerife in Spain, Vancouver in Canada, 29 destinations in the USA, as well as other key locations in Jamaica, Mexico, Peru, Chile, Finland, France, Germany, Italy, Jordan, Kuwait and Sri Lanka. With more than 500 shops located in 105 locations in 20 countries WDF achieved a turnover of EUR 2,439.6 (CHF 2,962.8) million and employed about 9,500 people in 2014.Dufry expects to generate significant cost and margin synergies through the integration of WDF into its common business model and supply chain as well as through the combination of the global and divisional organizations and support functions, which are reflected in the value of the goodwill. The resulting goodwill is not amortized, is not tax deductible and will be subject to annual impairment testing. WDF will further enhance Dufry’s global position in the travel retail market industry. For this acquisition Dufry incurred transaction costs of CHF 50.7 million presented as other operational expenses and financial transaction taxes of CHF 12.3 million presented as other financial expenses in the income statement.123 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015The fair value of the identifiable assets and liabilities of WDF at the date of acqui-sition and the resulting goodwill were determined preliminarily as Dufry is in the process of verifying the valuation of these net assets identified as follows:PRELIMINARY FAIR VALUE AT AUGUST 7, 2015IN MILLIONS OFCHFEURTrade and credit card receivables 43.3 39.9 Inventories 206.3 191.6 Other current assets 194.7 180.9 Property, plant and equipment 190.4 176.9 Concession rights 1,893.7 1,759.0 Other intangible assets 112.9 104.8 Other non-current assets 268.7 249.6 Trade payables(235.9)(218.8)Financial debt(1,029.3)(956.0)Provisions(162.1)(150.5)Contingent liabilities(6.7)(6.2)Other liabilities(502.9)(467.4)Deferred tax liabilities(383.7)(356.4)Fair value of non-controlling interests(37.7)(35.0)Identifiable net assets 551.7 512.4 Dufry’s share in the net assets (50.1 %) 276.4 256.7 Goodwill 1 1,130.7 1,050.3 Total consideration 1,407.1 1,307.0 1 The goodwill comprises intangible values from several subsidiaries in different countries. At the exchange rate of December 31, 2015, the value was CHF 1,070.9 million (see note 20.1.1)124 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 20156.2 CASH FLOWS USED FOR BUSINESS COMBINATIONS, NET OF CASH 2015 IN MILLIONS OF CHFTOTAL CONSIDERATIONNET CASH ACQUIREDSUBTOTALCHANGES IN ACCOUNTS PAYABLENET CASH FLOWWorld Duty Free Group, Italy(1,407.1) 40.4 (1,366.7)–(1,366.7)TOTAL(1,407.1) 40.4 (1,366.7)–(1,366.7)6.3 TRANSACTION WITH NON-CONTROLLING INTERESTS IN WORLD DUTY FREEAfter the initial acquisition on August 7, 2015, Dufry launched a MTO for the out-standing WDF shares at the Milan Stock Exchange and acquired until November 13, 2015, in several steps the outstanding 49.9 % WDF shares for a total consideration paid in cash of CHF 1,412.6 million equivalent to EUR 10.25 per share. As a result, WDF has become a fully owned subsidiary of Dufry. The difference of the carrying value of the non-controlling interests in WDF acquired and the total consideration paid in cash is CHF 1,137.3 million. This amount is recognized in the retained earn-ings in the line changes in participation of non-controlling interests in the state-ment of changes in equity. The related transaction costs are described in note 6.1.DECEMBER 31, 2015IN MILLIONS OF CHFIN MILLIONS OF EURCarrying value of the non-controlling interests in WDF acquired 275.3 255.7 Difference recognized in retained earnings within equity 1,137.3 1,046.0 Total consideration paid in cash 1,412.6 1,301.7 From the date when Dufry took control of the WDF operations in August until December 2015, these operations contributed CHF 1,410.0 (EUR 1,299.4) million in turnover and CHF 30.4 (EUR 28.0) million in EBIT to the income statement of Dufry. If the business combination had taken place at the beginning of 2015, WDF would have generated a turnover of CHF 3,118.9 million and an EBIT of CHF 64.1 million.6.4 TRANSACTION WITH NON-CONTROLLING INTERESTS IN DUFRY LOJAS FRANCAS LTD.Dufry entered a call / put option with a Brazilian Partner, which was exercized during the first quarter of 2015. Based on this transaction, Dufry acquired an additional 20 % of the shares of Dufry Lojas Francas Ltd. (DLF), an existing subsidiary operat-ing the duty free shops at the airport of Guarulhos in Sao Paulo, Brazil. The total net consideration paid for this transaction was CHF 147.2 (USD 163.2) million. After the exercise of the option, Dufry holds 80 % of DLF. This step up acquisition gen-erated a change in the participation of non-controlling interests (see statement of changes in equity).125 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 20152014 TRANSACTIONS6.5 ACQUISITION OF THE NUANCE GROUPOn September 9, 2014, Dufry acquired 100 % of The Nuance Group (TNG) for a net consideration of CHF 1,312.2 million. The acquisition has been accounted for using the acquisition method. The related transaction costs of CHF 11.4 million have been presented in other operational result in the income statement. TNG is one of the top global travel retailers with headquarters in Switzerland. In 2013, TNG reached a turnover of CHF 2,094.9 million (of which CHF 481.2 million from operations in Australia). Overall at acquisition date, TNG operated about 270 shops in 15 countries and employed approximately 3,900 full time equivalents (FTE’s). Among the main locations operated by TNG are airports in Toronto in Canada, Hong Kong and downtown stores in Macau, China, Stockholm in Sweden, Zurich and Geneva in Switzer land, Antalya in Turkey and Heathrow in UK. This geographical presence of TNG complements the one of Dufry very well. Dufry expects to expand this business and to generate significant cost synergies through the integration of TNG into its marketing model and supply chain as well as through the combination of the global and regional organizations and support functions, which are reflected in the value of the goodwill. The resulting goodwill is not amortized, is not tax deductible and will be subject to annual impairment testing. The consideration paid for the acquisition, together with the refinancing of TNG’s debt and related transaction expenses, was financed through the issuance of (gross proceeds): –Mandatory convertible notes of CHF 275.0 million on June 18, 2014 (see note 27.2) –Share capital of CHF 810.0 million on July 8, 2014 (see note 27.2) –Senior Notes of CHF 606.8 million on July 17, 2014 (see note 31)The transaction costs in relation with the equity component of the mandatory con-vertible notes and the share capital increase have been accounted through equity, whereas the costs related with the senior notes are part of the effective interest rate and will be amortized over the term of the debt.126 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015The fair value of the identifiable assets and liabilities at the date of acquisition are to be considered as final and changed from the disclosure in Dufry’s annual finan-cial statements as of December 31, 2014:FAIR VALUE AT SEPTEMBER 09, 2014IN MILLIONS OF CHFPRELIMINARYCHANGEFINALTrade and credit card receivables 54.8 – 54.8 Inventories 211.1 (0.5) 210.6 Other current assets 246.2 – 246.2 Property, plant and equipment 45.6 – 45.6 Concession rights 1,091.0 (12.0) 1,079.0 Other intangible assets 19.5 – 19.5 Investments in associates 67.6 – 67.6 Other non-current assets 20.5 – 20.5 Deferred tax assets 12.4 12.4 Trade payables(144.3)–(144.3)Financial debt(449.7)–(449.7)Provisions(96.8)(13.0)(109.8)Contingent liabilities(1.0)–(1.0)Other liabilities(256.4)–(256.4)Deferred tax liabilities(175.2)(2.6)(177.8)Fair value of non-controlling interests(2.6) 6.5 3.9 Identifiable net assets 642.7 (21.6) 621.1 Dufry’s share in the net assets 642.7 (21.6) 621.1 Goodwill 669.5 21.6 691.1 Total consideration 1,312.2 – 1,312.2 Dufry revised the preliminary values of the purchase price analysis as presented at December 31, 2014 to reflect: –Change in deferred tax values based on more accurate underlying assumptions regarding import regimes / benefits in Turkey –Inclusion of income tax effect on sale of investment in associates and –Enterprise valuation of a startup operation in India after properly assessing the market.From the date when Dufry took control of the TNG operations in September 2014 until December 2014 these operations contributed CHF 536.6 million in turnover and CHF 14.0 million in EBIT to the income statement of Dufry.If the business combination had taken place at the beginning of 2014, TNG would have generated a turnover of CHF 1,776.4 million and an EBIT of approximately CHF 58 million.6.6 CASH FLOWS USED FOR BUSINESS COMBINATIONS, NET OF CASH 2014 IN MILLIONS OF CHFTOTAL CONSIDERATIONNET CASH ACQUIREDSUBTOTALCHANGES IN ACCOUNTS PAYABLENET CASH FLOWThe Nuance Group, Switzerland(1,312.2) 188.5 (1,123.7)–(1,123.7)Alliance, Puerto Rico–––(0.9)(0.9)TOTAL(1,312.2) 188.5 (1,123.7)(0.9)(1,124.6)127 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 20157. NET SALESNet sales by product categories:IN MILLIONS OF CHF20152014Perfumes and Cosmetics 1,834.3 1,164.5 Confectionery, Food and Catering 1,017.6 734.9 Wine and Spirits 905.7 634.4 Watches, Jewelry and Accessories 419.0 355.9 Tobacco goods 656.6 380.5 Fashion, Leather and Baggage 394.2 350.3 Literature and Publications 204.7 190.6 Electronics 229.2 152.9 Toys, Souvenirs and other goods 300.4 99.1 Total 5,961.7 4,063.1 Net sales by market sector:IN MILLIONS OF CHF20152014Duty-free 3,752.4 2,712.4 Duty-paid 2,209.3 1,350.7 Total 5,961.7 4,063.1 Net sales by channel:IN MILLIONS OF CHF20152014Airports 5,328.9 3,539.0 Border, downtown and hotel shops 251.4 242.1 Cruise liners and seaports 141.0 121.6 Railway stations and other 240.4 160.4 Total 5,961.7 4,063.1 128 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 20158. SELLING EXPENSES IN MILLIONS OF CHF2015RESTATED* 2014Concession fees and rents(1,596.6)(979.7)Credit card commissions(61.8)(46.1)Advertising and commission expenses(30.3)(24.7)Packaging materials(12.2)(10.8)Other selling expenses(27.2)(18.7)Selling expenses(1,728.1)(1,080.0)Concession and rental income 14.0 14.1 Commission income 5.8 7.7 Commercial services and other selling income 24.3 34.9 Selling income 44.1 56.7 Total(1,684.0)(1,023.3)* Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)Landlords require from Dufry a concession fee to operate duty free shops at airports or other similar locations. These fees are usually determined proportionally to sales or based on the number of passengers and limited by a minimum threshold.9. PERSONNEL EXPENSES IN MILLIONS OF CHF20152014Salaries and wages(669.9)(475.7)Social security expenses(106.3)(85.5)Retirement benefits (defined benefit plans)(7.7) 8.2 Retirement benefits (defined contribution plans)(8.8)(5.3)Other personnel expenses(63.5)(51.4)Total(856.2)(609.7)10. GENERAL EXPENSES IN MILLIONS OF CHF20152014Repairs, maintenance and utilities(66.2)(48.2)Legal, consulting and audit fees(52.3)(41.6)Premises(50.8)(38.2)EDP and IT expenses(32.0)(25.4)Travel, car, entertainment and representation(28.3)(21.2)Office and administration(27.2)(21.2)Franchise fees and commercial services(19.4)(20.2)PR and advertising(13.5)(10.2)Insurances(9.2)(8.0)Taxes, other than income taxes(8.0)(14.9)Bank expenses(7.8)(7.3)Total(314.7)(256.4)129 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201511. INVESTMENT IN ASSOCIATESLojas Francas de Portugal SA operates duty-paid and duty-free shops in the airports of Lisbon as well as other locations in Portugal and Nuance Group (Chicago) LLC operates a duty-free shop at O’Hare International Airport of Chicago in Illinois, USA.These investments are accounted for using the equity method.Dufry’s interests in Nuance Group (Orlando) LLC and Broward Duty Free LLC were sold on March 15, 2015, for CHF 28.4 (USD 30) million to an existing shareholder at book value.Summarized statement of financial positionIN MILLIONS OF CHFLOJAS FRANCAS DE PORTUGAL SANUANCE GROUP (CHICAGO) LLCNUANCE GROUP (ORLANDO) LLCOTHER ASSOCIATES31.12.2015Cash and cash equivalents 1.2 2.6 – 0.3 4.1 Other current assets 27.0 3.9 – 3.1 34.0 Non-current assets 58.6 27.5 – 0.8 86.9 Financial debt(2.1)–––(2.1)Other current liabilities(23.0)(2.0)–(4.6)(29.6)Non-current liabilities–––(5.1)(5.1)Equity 61.7 32.0 –(5.5) 88.2 Proportion of the Group’s ownership49 %35 %Dufry’s share of the equity 30.2 11.2 –– 41.4 IN MILLIONS OF CHFLOJAS FRANCAS DE PORTUGAL SANUANCE GROUP (CHICAGO) LLCNUANCE GROUP (ORLANDO) LLCOTHER ASSOCIATES31.12.2014Cash and cash equivalents 1.6 2.7 3.5 0.9 8.7 Other current assets 25.7 4.1 3.6 1.5 34.9 Non-current assets 53.5 30.0 47.7 26.5 157.7 Other current liabilities(17.7)(1.9)(1.7)(0.6)(21.9)Equity 63.1 34.9 53.1 28.3 179.4 Proportion of the Group’s ownership49 %35 %37.5 %Dufry’s share of the equity 30.9 12.2 19.9 9.9 72.9 130 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Summarized statement of comprehensive incomeIN MILLIONS OF CHFLOJAS FRANCAS DE PORTUGAL SANUANCE GROUP (CHICAGO) LLCNUANCE GROUP (ORLANDO) LLC 1OTHER ASSOCIATES2015Turnover 205.9 23.0 2.9 7.7 239.5 Depreciation, amortization and impairment(0.9)(4.2)(0.1)(1.6)(6.8)Income tax(3.2)–– 0.1 (3.1)Net earnings for the year (continuing operations) 9.2 (2.5) 0.2 (3.5) 3.4 Dufry’s share of the profit for the year 4.5 (0.9) 0.4 – 4.0 OTHER COMPREHENSIVE INCOMEExchange differences on translating foreign operations(1.6) 0.6 (1.2)(0.5)(2.7)Items to be reclassified to net income in subsequent periods(1.6) 0.6 (1.2)(0.5)(2.7)Total comprehensive income 2.9 (0.3)(0.8)(0.5) 1.3 1 Period from January 1, 2015 to March 15, 2015IN MILLIONS OF CHF 1LOJAS FRANCAS DE PORTUGAL SANUANCE GROUP (CHICAGO) LLCNUANCE GROUP (ORLANDO) LLCOTHER ASSOCIATES2014Turnover 78.3 8.1 6.8 4.2 97.4 Depreciation, amortization and impairment(0.7)(0.1)(0.2)(0.1)(1.1)Income tax(1.1)––(0.1)(1.2)Net earnings for the year (continuing operations) 3.6 0.9 1.2 (2.6) 3.1 Dufry’s share of the profit for the year 1.7 0.3 0.3 – 2.3 OTHER COMPREHENSIVE INCOMEExchange differences on translating foreign operations 0.8 0.8 1.2 0.6 3.4 Items to be reclassified to net income in subsequent periods 0.8 0.8 1.2 0.6 3.4 Total comprehensive income 2.5 1.1 1.5 0.6 5.7 1 Period from September 9, 2014 to December 31, 2014The information above reflects the amounts presented in the financial statements of the associates (and not Dufry’s share of those amounts) adjusted for differences in accounting policies between Dufry and the associates.131 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Reconciliation of the carrying amount of its investmentsIN MILLIONS OF CHFLOJAS FRANCAS DE PORTUGAL SANUANCE GROUP (CHICAGO) LLCNUANCE GROUP (ORLANDO) LLC 1OTHER ASSOCIATES 1TOTALBusiness combinations September 9, 2014 28.4 11.2 18.7 9.3 67.6 Net earnings 1.7 0.3 0.3 – 2.3 Dividends received–(0.1)(0.3)–(0.4)Other comprehensive income 0.8 0.8 1.2 0.6 3.4 Carrying value at December 31, 2014 30.9 12.2 19.9 9.9 72.9 Net earnings 4.5 (0.9) 0.4 – 4.0 Dividends received(3.6)(0.7)(0.5)–(4.8)Disposals––(18.6)(9.4)(28.0)Other comprehensive income(1.6) 0.6 (1.2)(0.5)(2.7)Carrying value at December 31, 2015 30.2 11.2 –– 41.4 1 The Nuance Group (Orlando) LLC and Broward Duty Free LLC were sold in March 2015.12. DEPRECIATION, AMORTIZATION AND IMPAIRMENT IN MILLIONS OF CHF2015RESTATED* 2014Depreciation(134.6)(86.8)Impairment(1.2)(1.4)Subtotal (note 18)(135.8)(88.2)Amortization(299.5)(159.1)Impairment(9.5)(1.6)Subtotal (note 20)(309.0)(160.7)Total(444.8)(248.9)* Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)132 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201513. LINEARIZATION AND OTHER OPERATIONAL RESULT13.1 LINEARIZATIONIN MILLIONS OF CHF20152014Linearization 1(29.2)–1 In cases where fees for the concession are based on fix or determinable amounts of money, the expenses paid are treated as operational lease. For these operational leases when the amounts are increasing or decreasing over the time, Dufry accrues the difference between the amount paid and the respective straight-line expense for the period calculated over the overall duration of the contract, as linearization. In addition, this line item includes the reduction in concession payments granted based on an upfront payment (prepaid lease) done at the inception of two Spanish contracts (Madrid and Barcelona as main airports), acquired as part of the World Duty Free acquisition.13.2 OTHER OPERATIONAL RESULTOther operational expenses and other operational income include non-recurring transactions, impairments of financial assets and changes in provisions.IN MILLIONS OF CHF20152014Acquisition-related costs(50.7)(13.1)Closing or restructuring of operations(30.0)(24.3)Consulting fees, expenses related to projects and start-up expenses(21.3)(16.4)Impairment of financial assets(6.9)(2.9)Losses on sale of non-current assets(1.7)(1.3)Other operating expenses(12.1)(9.8)Other operational expenses(122.7)(67.8)IN MILLIONS OF CHF20152014Insurance – compensation for losses 0.9 0.4 Gain on sale of non-current assets 0.8 2.2 Recovery of write offs / release of allowances 0.3 –Other income 3.6 4.1 Other operational income 5.6 6.7 IN MILLIONS OF CHF20152014Other operational expenses(122.7)(67.8)Other operational income 5.6 6.7 Other operational result(117.1)(61.1)133 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201514. INTERESTIN MILLIONS OF CHF20152014INCOME ON FINANCIAL ASSETSInterest income on short-term deposits 6.3 4.3 Other financial income 4.9 0.4 Interest income on financial assets 11.2 4.7 INCOME ON NON-FINANCIAL ASSETSInterest income 4.8 1.0 Total interest income 16.0 5.7 EXPENSES ON FINANCIAL LIABILITIESInterest expense(148.1)(119.7)Amortization / write off of arrangement fees(24.5)(20.1)Other financial expenses 1(6.7)(11.5)Interest expense on financial liabilities(179.3)(151.3)EXPENSES ON NON-FINANCIAL LIABILITIESInterest expense(9.1)(2.8)Other financial expenses 1(12.3)–Interest and other financial expenses on non-financial liabilities(21.4)(2.8)Total interest expense(200.7)(154.1)1 This position mainly includes financial costs and transaction taxes related to the financing of acquisitions134 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201515. INCOME TAXESINCOME TAX RECOGNIZED IN THE CONSOLIDATED INCOME STATEMENT IN MILLIONS OF CHF2015RESTATED* 2014Current income taxes(69.9)(57.6)of which corresponding to the current period(73.1)(57.1)of which adjustments recognized in relation to prior years 3.2 (0.5)Deferred income taxes 80.0 37.2 of which related to the origination or reversal of temporary differences 72.3 37.2 of which adjustments recognized in relation to prior years 0.2 –of which adjustments due to change in tax rates 7.5 –Total 10.1 (20.4)* Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)IN MILLIONS OF CHF2015RESTATED* 2014Consolidated earnings before income tax (EBT)(46.8) 107.0 Expected tax rate in %18.4 %15.8 %Tax at the expected rate 8.6 (16.9)EFFECT OFIncome not subject to income tax 3.8 7.5 Different tax rates for subsidiaries in other jurisdictions 28.4 12.9 Effect of changes in tax rates on previously recognized deferred tax assets and liabilities 7.5 –Non-deductible expenses(18.1)(4.1)Net change of unrealized tax loss carry-forwards(21.3)(12.7)Non recoverable withholding taxes(7.7)(7.1)Adjustments recognized in relation to prior year 3.4 (0.5)Other items 5.5 0.5 Total 10.1 (20.4)* Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)The expected tax rate approximates the average of the income tax rates of the countries where Dufry is active, weighted by the EBT of the respective operations. In 2015, there have been no significant changes in these income tax rates, with the exception of Greece (increase by 3 %) and UK (long-term decrease by 2 %).DEFERRED INCOME TAX RECOGNIZED IN OTHER COMPREHENSIVE INCOME / EQUITY IN MILLIONS OF CHF20152014RECOGNIZED IN OTHER COMPREHENSIVE INCOMEActuarial gains / (losses) on defined benefit plans(1.2) 4.5 Net gain / (loss) on hedge of net investment– 3.2 Cash flow hedges(0.3)–Total(1.5) 7.7 RECOGNIZED IN EQUITYTax effect on share-based payments(0.2) 0.1 Total(0.2) 0.1 135 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201516. EARNINGS PER SHAREEARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENTBASICBasic earnings per share are calculated by dividing the net earnings attributable to equity holders of the parent by the weighted average number of shares out-standing during the year.IN MILLIONS OF CHF / QUANTITY2015RESTATED* 2014Net earnings attributable to equity holders of the parent(79.3) 51.6 Weighted average number of ordinary shares outstanding 45,810 33,307 Basic earnings per share in CHF(1.73) 1.55 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)DILUTEDDiluted 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 / QUANTITY2015RESTATED* 2014Net earnings attributable to equity holders of the parent(79.3) 51.6 Weighted average number of ordinary shares outstanding adjusted for the effect of dilution 45,810 34,303 Diluted earnings per share in CHF(1.73) 1.50 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)EARNINGS PER SHARE FOR CONTINUING OPERATIONSBASIC IN MILLIONS OF CHF / QUANTITY2015RESTATED* 2014Net earnings attributable to equity holders of the parent from continuing operations(79.1) 52.4 Weighted average number of ordinary shares outstanding 45,810 33,307 Basic earnings per share in CHF(1.73) 1.57 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)136 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015DILUTED IN MILLIONS OF CHF / QUANTITY2015RESTATED* 2014Net earnings attributable to equity holders of the parent from continuing operations(79.1) 52.4 Weighted average number of ordinary shares outstanding adjusted for the effect of dilution 45,810 34,303 Diluted earnings per share in CHF(1.73) 1.53 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)EARNINGS PER SHARE ADJUSTED FOR AMORTIZATION (CASH EPS) Cash EPS are calculated by dividing net earnings attributable to equity holders of the parent, adjusted by the amortization effect generated by the intangible assets identified during the purchase price allocations of past acquisitions through weighted average number of ordinary shares outstanding. 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 / QUANTITY2015RESTATED* 2014Net earnings attributable to equity holders of the parent(79.3) 51.6 ADJUSTED FORDufry’s share of the amortization in respect of acquisitions 262.1 122.8 Adjusted net earnings 182.8 174.4 Weighted average number of ordinary shares outstanding 45,810 33,307 Cash EPS 3.99 5.24 Deferred tax on above mentioned amortization in CHF per share(1.32)(0.79)Linearization of Spanish contracts in CHF per share 0.64 –* Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES IN THOUSANDS20152014Outstanding shares 45,904 33,316 Less treasury shares(94)(9)Used for calculation of basic earnings per share 45,810 33,307 EFFECT OF DILUTIONCHF 275 million mandatory convertible notes at conversion price of CHF 152 per share– 996.0 Used for calculation of earnings per share adjusted for the effect of dilution 45,810 34,303 For movements in shares see note 27 Equity, note 28 Share-based payment and Treasury shares.137 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201517. COMPONENTS OF OTHER COMPREHENSIVE INCOME ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT2015 IN MILLIONS OF CHFEmployee benefit reserveHedging & revaluation reservesTranslation reservesTOTALNON-CONTROL-LING INTERESTSTOTAL EQUITYExchange differences on translating foreign operations––(75.8)(75.8)(7.9)(83.7)Subtotal––(75.8)(75.8)(7.9)(83.7)Net gain / (loss) on hedge of net investment in foreign operations–– 2.2 2.2 – 2.2 Subtotal–– 2.2 2.2 – 2.2 Changes in the fair value of forward exchange contracts held as cash flow hedges– 1.0 – 1.0 – 1.0 Income tax effect–(0.3)–(0.3)–(0.3)Subtotal– 0.7 – 0.7 – 0.7 Actuarial gains / (losses) on post-employment benefits 12.8 –– 12.8 – 12.8 Income tax effect(1.2)––(1.2)–(1.2)Subtotal 11.6 –– 11.6 – 11.6 Other comprehensive income 11.6 0.7 (73.6)(61.3)(7.9)(69.2)ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT2014 IN MILLIONS OF CHFEmployee benefit reserveHedging & revaluation reservesTranslation reservesTOTALNON-CONTROL-LING INTERESTSTOTAL EQUITYExchange differences on translating foreign operations–– 211.5 211.5 12.4 223.9 Subtotal–– 211.5 211.5 12.4 223.9 Net gain / (loss) on hedge of net investment in foreign operations––(102.4)(102.4)–(102.4)Income tax effect–– 3.2 3.2 – 3.2 Subtotal––(99.2)(99.2)–(99.2)Actuarial gains / (losses) on post-employment benefits(37.7)––(37.7)(0.2)(37.9)Income tax effect 4.5 –– 4.5 – 4.5 Subtotal(33.2)––(33.2)(0.2)(33.4)Other comprehensive income(33.2)– 112.3 79.1 12.2 91.3 138 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201518. PROPERTY, PLANT AND EQUIPMENT 2015 IN MILLIONS OF CHFLEASEHOLD IMPROVEMENTSFURNITURE FIXTURECOMPUTER HARDWAREVEHICLESWORK IN PROGRESSTOTALAT COST Balance at January 1 405.0 289.1 72.6 9.8 48.3 824.8 Business combinations (note 6) 29.6 131.3 5.7 0.6 23.2 190.4 Additions (note 19) 27.4 30.4 5.8 1.3 70.2 135.1 Disposals(61.5)(43.5)(10.7)(2.4)(1.4)(119.5)Reclassification within classes 47.5 28.9 1.8 –(78.2)–Reclassification to intangible assets––––(7.0)(7.0)Currency translation adjustments(14.2)(13.9)(4.5)(0.4)(0.9)(33.9)Balance at December 31 433.8 422.3 70.7 8.9 54.2 989.9 ACCUMULATED DEPRECIATION Balance at January 1(166.8)(160.2)(51.1)(6.3)–(384.4)Additions (note 12)(69.1)(54.6)(9.8)(1.1)–(134.6)Disposals 57.7 41.7 10.2 1.9 – 111.5 Reclassification within classes(0.2)(0.1)–––(0.3)Currency translation adjustments 9.3 11.5 4.2 0.3 – 25.3 Balance at December 31(169.1)(161.7)(46.5)(5.2)–(382.5)IMPAIRMENT Balance at January 1(3.2)(1.8)–––(5.0)Impairment (note 12)(0.7)(0.5)–––(1.2)Disposals 2.5 0.5 ––– 3.0 Reclassification within classes 0.2 0.1 ––– 0.3 Currency translation adjustments 0.3 (0.2)––– 0.1 Balance at December 31(0.9)(1.9)–––(2.8)139 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015 2014 IN MILLIONS OF CHFLEASEHOLD IMPROVEMENTSFURNITURE FIXTURECOMPUTER HARDWAREVEHICLESWORK IN PROGRESSTOTALAT COST Balance at January 1 316.5 226.1 59.6 8.8 29.4 640.4 Business combinations (note 6) 34.7 5.2 2.9 0.3 2.5 45.6 Additions (note 19) 21.8 17.0 6.7 1.2 87.0 133.7 Disposals(38.0)(10.6)(2.6)(1.2)–(52.4)Reclassification within classes 42.8 31.7 1.2 –(75.7)–Currency translation adjustments 27.2 19.7 4.8 0.7 5.1 57.5 Balance at December 31 405.0 289.1 72.6 9.8 48.3 824.8 ACCUMULATED DEPRECIATION Balance at January 1(142.7)(130.7)(42.4)(6.0)–(321.8)Additions (note 12)(48.8)(29.4)(7.6)(1.0)–(86.8)Disposals 36.9 9.6 2.1 1.2 – 49.8 Currency translation adjustments(12.2)(9.7)(3.2)(0.5)–(25.6)Balance at December 31(166.8)(160.2)(51.1)(6.3)–(384.4)IMPAIRMENT Balance at January 1(2.6)(1.7)(0.4)––(4.7)Impairment (note 12)(1.4)––––(1.4)Disposals 0.9 – 0.4 –– 1.3 Currency translation adjustments(0.1)(0.1)–––(0.2)Balance at December 31(3.2)(1.8)–––(5.0)CARRYING AMOUNT At December 31, 2015 263.8 258.7 24.2 3.7 54.2 604.6 At December 31, 2014 235.0 127.1 21.5 3.5 48.3 435.4 19. CASH FLOW USED FOR PURCHASE OF PROPERTY, PLANT AND EQUIPMENT IN MILLIONS OF CHF20152014Payables for capital expenditure at the beginning of the period(13.7)(23.8)Business combinations(16.1)–Additions of property, plant and equipment (note 18)(135.1)(133.7)Payables for capital expenditure at the end of the period 30.1 13.7 Currency translation adjustments–0.1Total Cash Flow(134.8)(143.7)140 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201520. INTANGIBLE ASSETS CONCESSION RIGHTS2015 IN MILLIONS OF CHFIndefinite livesFinite livesBRANDSGOODWILLOTHERTOTALAT COST Restated* Balance at January 1 61.2 3,315.4 174.3 1,670.2 193.2 5,414.3 Business combinations (note 6)– 1,893.7 105.5 1,130.7 7.4 3,137.3 Additions (note 21)– 19.9 –– 12.8 32.7 Disposals–(86.9)––(12.9)(99.8)Reclassification from prepayments– 16.1 ––– 16.1 Reclassification from property, plant & equipment–––– 7.0 7.0 Currency translation adjustments(4.6)(175.5) 1.0 (132.6)(2.4)(314.1)Balance at December 31 56.6 4,982.7 280.8 2,668.3 205.1 8,193.5 ACCUMULATED AMORTIZATION Restated* Balance at January 1–(576.2)(1.0)–(102.5)(679.7)Additions (note 12)–(271.0)(2.3)–(26.2)(299.5)Disposals– 86.6 –– 11.8 98.4 Reclassification– 0.5 ––(0.5)–Currency translation adjustments– 4.0 –– 1.9 5.9 Balance at December 31–(756.1)(3.3)–(115.5)(874.9)IMPAIRMENT Balance at January 1–(0.4)–(1.0)–(1.4)Impairment (note 12)–(9.5)–––(9.5)Disposals – 0.2 ––– 0.2 Currency translation adjustments– 0.3 ––– 0.3 Balance at December 31–(9.4)–(1.0)–(10.4)* Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)141 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015 CONCESSION RIGHTS2014 IN MILLIONS OF CHFIndefinite livesFinite livesBRANDSGOODWILLOTHERTOTALAT COST Balance at January 1 60.8 1,921.4 158.6 912.8 163.2 3,216.8 Business combinations (note 6)– 1,079.0 15.0 691.1 4.5 1,789.6 Additions (note 21)– 182.2 –– 17.4 199.6 Disposals(0.4)(1.3)––(0.7)(2.4)Currency translation adjustments 0.8 134.1 0.7 66.3 8.8 210.7 Restated * Balance at December 31 61.2 3,315.4 174.3 1,670.2 193.2 5,414.3 ACCUMULATED DEPRECIATION Balance at January 1–(410.1)––(72.5)(482.6)Additions (note 12)–(132.4)(1.0)–(25.7)(159.1)Disposals– 0.7 –– 0.6 1.3 Currency translation adjustments–(34.8)––(4.5)(39.3)Restated * Balance at December 31–(576.2)(1.0)–(102.5)(679.7)IMPAIRMENT Balance at January 1–(0.2)–––(0.2)Impairment (note 12)–(0.6)–(1.0)–(1.6)Disposals – 0.3 ––– 0.3 Currency translation adjustments– 0.1 ––– 0.1 Balance at December 31–(0.4)–(1.0)–(1.4)CARRYING AMOUNT At December 31, 2015 56.6 4,217.2 277.5 2,667.3 89.6 7,308.2 Restated* at December 31, 2014 61.2 2,738.8 173.3 1,669.2 90.7 4,733.2 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)142 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201520.1 IMPAIRMENT TEST Concession rights with indefinite useful lives, as well as brands and goodwill are subject to impairment testing each year. Concession rights with finite useful lives are tested for impairment whenever events or circumstances indicate that the car-rying amount may not be recoverable. 20.1.1 Impairment test of goodwillFor the purpose of impairment testing, goodwill recognized from business combi-nations has been allocated to the following cash generating units (CGU’s). These groups also reflect the reportable segments that are expected to benefit from the synergies of the business combinations:IN MILLIONS OF CHF31.12.2015RESTATED* 31.12.2014EMEA & Asia 293.1 319.5 America I 1 532.4 430.5 America II 1 51.5 149.8 United States & Canada 78.4 78.3 The Nuance Business 641.0 691.1 World Duty Free Business 1,070.9 –Total carrying amount of goodwill 2,667.3 1,669.2 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)1 The activities of Eurotrade have been transfered to International Operations & Services Corp. (IOSC). Eurotrade had an associated goodwill of CHF 98.6 million which in 2014 was presented under America II and now is presented within IOSC as part of America I. As of 2016, both regions will be presented as the new division Latin America.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 business 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 extrapolated 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 projections are based on actual net sales achieved in the year 2015 and latest estimations for the projected years. The intersegment results of the global distribution centers have been assigned / allocated to the respective geographi-cal segments.143 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015The key assumptions used for determining the recoverable amounts for these busi-ness units are:POST TAX DISCOUNT RATESPRE TAX DISCOUNT RATESGROWTH RATES FOR NET SALESGOODWILL IN PERCENTAGE (%)201520142015201420152014EMEA & Asia 9.69 10.37 11.59 11.90 4.4 – 15.9 4.2 – 8.4 America I 10.59 10.38 11.74 11.67 4.3 – 13.6 5.1 – 11.1 America II 8.48 7.98 8.48 8.79 6.0 – 11.4 5.8 – 16.6 United States & Canada 5.39 5.65 6.75 7.05 4.1 – 10.8 4.3 – 7.3 The Nuance Business 6.20 6.15 6.70 7.62 2.2 – 4.5 5.2 – 5.9 World Duty Free Business 6.20 – 6.96 – 4.3 – 4.5 –As basis for the calculation of these discount rates, the following risk free inter-est rates have been used (derived from past 5 year average of prime 10-year bonds rates): CHF 0.40 %, EUR 1.22 %, USD 2.16 % (2014: CHF 0.62 %, EUR 1.56 %, USD 2.13 %).For the calculation of the discount rates and WACC (weighted average cost of capital), the Company used the following re-levered beta:20152014Beta factor0.880.57Sensitivity to changes in assumptionsManagement believes that any reasonably possible change (+ / – 1 %) in the key assumptions, on which the recoverable amounts are based, would not cause the respective carrying amount to exceed its recoverable amount. For Regions America I, America II and the Nuance Group, where the actual recoverable amount exceed its carrying amount by CHF 291.2 million, 217.9 million and CHF 874 million respectively, an (unlikely) increase of the discount rate by 2 % would lead to an impairment of CHF 86.9 million, CHF 4.9 million and CHF 30.6 million respectively. The key assumptions used for the determination of the value-in-use are described in note 20.1.3.144 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201520.1.2 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 business segments. The following table illustrates the existing business units with concession rights with indefinite useful life:IN MILLIONS OF CHF20152014Italy43.648.2Middle East 13.0 13.0 Total carrying amount of concession rights 56.6 61.2 Certain concessions were granted by the non-controlling interest holder. Conse-quently these concession rights are assessed as having an indefinite useful life.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 covering 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 extrapolated 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 subsequently the value assigned. Net sales projections are based on actual net sales achieved in year 2015 and latest estimations for the years thereafter.The key assumptions used for determining the recoverable amounts for these busi-ness units are:POST TAX DISCOUNT RATESPRE TAX DISCOUNT RATES 1GROWTH RATES FOR NET SALESCONCESSION RIGHTS IN PERCENTAGE (%)201520142015201420152014Italy 7.19 7.43 8.52 8.77 – 1.5 – 3.0 2.8 – 3.1 Middle East 6.39 6.50 6.39 6.50 6.5 – 18.7 7.2 – 8.1 1 based on the country in which the concession is locatedSensitivity to changes in assumptionsWith regard to the assessment of value-in-use, Dufry believes that no reasonably possible change (+ / – 1 %) in any of the above key assumptions would cause the carrying value of the concession rights to materially exceed its recoverable amount.145 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201520.1.3 Key assumptions used for value-in-use calculationsThe 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 extrapolateSales growth Sales growth is based on statistics published by external experts, such as Air4cast or ACI (Airports Council International) to estimate the development of interna-tional passenger traffic per country where Dufry is active. For the budget year, the management also takes into consideration specific price inflation factors of the country, the cross currency effect and the expected potential changes to capture clients (penetration) per business unit.Dufry has used a growth rate of 2.0 % – 3.0 % (2014: 1.6 % – 2.1 %) to extrapolate the cash flow projections beyond the period covered by the most recent forecasts.Gross marginsThe expected gross margins are based on average product assortment values estimated by the management for the budget 2016. 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 com-pared to the historical data. The gross margin is also affected by supplier’s prices. Estimates are obtained from global negotiations held with the main suppliers for the products and countries for which products are sourced, as well as data relat-ing to specific commodities during the months before the budget. Concession fee levelsThese assumptions regarding the concession fee evolution are important and mon-itored in the specific market as well as the renewal conditions and competitor behavior where the CGU’s are active. For the CGU’s subject to a value-in-use cal-culation, the management expects the competitive position to remain stable over the budget period. Discount ratesSeveral factors affect the discount rates: –For the financial debt part, the rate is based on the average interest 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 and country risk 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 the management to determine 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. 146 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201520.1.4 BrandsIn October 2015, Dufry presented its updated brand strategy. While at corporate level, Dufry will be used as exclusive brand, the Group will apply a multi-brand retail concept including among others our brands including Dufry, Hudson, World Duty Free, Nuance, Hellenic Duty Free, Colombian Emeralds, do Brasil, Regstaer, Interbaires. Management believes that the benefits of the brands are reflecting the economic reality and are in accordance with Dufry’s respective markets, i.e. the airports or seaports where these brands are active. For impairment testing purposes the brand names are valued in relation with their respective sales poten-tial, based on sales projection covering a period of five years.The recoverable amount is determined using the Relief of Royalty method that con-siders a steady cash flow according to the discounted value of the royalty income after tax based on projected sales growth for each brand. The following table indicates the key assumptions used for the valuation of the main brands:ROYALTY INCOME AFTER TAXPOST TAX DISCOUNT RATESGROWTH RATES FOR NET SALESBRAND NAMES IN PERCENTAGE (%)201520142015201420152014Dufry 0.32 0.32 6.98 7.04 4.7 – 13.4 4.3 – 9.3 Hudson News 0.91 0.91 5.39 5.65 4.1 – 10.8 4.3 – 7.3 Colombian Emeralds 1.75 1.75 14.82 13.79 4.0 – 14.0 4.0 – 16.0 Nuance 0.30 0.30 6.20 6.15 2.2 – 4.5 5.2 – 5.9 World Duty Free 0.39 – 6.20 – 4.3 – 4.5 –These growth rates do not exceed the long term average growth rate for the respective brand business. The discount rates represent the weighted average cost of capital (WACC) of the markets where the brand is generating sales.21. CASH FLOWS USED FOR PURCHASE OF INTANGIBLE ASSETS IN MILLIONS OF CHF20152014Payables for capital expenditure at January 1(166.5)(1.4)Additions of intangible assets (note 20)(32.7)(199.6)Payables for capital expenditure at December 31 1.2 166.5 Currency translation adjustments 18.3 (22.5)Total Cash Flow(179.7)(57.0)147 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201522. DEFERRED TAX ASSETS AND LIABILITIESTemporary differences arise from the following positions:IN MILLIONS OF CHF31.12.2015RESTATED* 31.12.2014DEFERRED TAX ASSETSProperty, plant and equipment 48.6 10.0 Intangible assets 63.6 73.2 Provisions and other payables 67.2 65.2 Tax loss carry-forward 138.2 77.1 Other 46.4 30.0 Total 364.0 255.5 DEFERRED TAX LIABILITIESProperty, plant and equipment(75.1)(24.0)Intangible assets(740.6)(436.5)Provisions and other payables(25.3)(2.9)Other(12.2)(15.3)Total(853.2)(478.7)Deferred tax liabilities net(489.2)(223.2)* Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)Deferred tax balances are presented in the consolidated statement of financial position as follows:IN MILLIONS OF CHF2015RESTATED* 2014Deferred tax assets 203.9 195.9 Deferred tax liabilities(693.1)(419.1)Balance at December 31(489.2)(223.2)* Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)Reconciliation of movements to the deferred taxes:IN MILLIONS OF CHF2015RESTATED* 2014Changes in deferred tax assets 8.0 41.0 Changes in deferred tax liabilities(274.0)(157.4)Business combinations (note 6) 383.7 165.4 Currency translation adjustments(39.4)(4.0)Deferred tax income (expense) at December 31 78.3 45.0 THEREOFRecognized in the income statement 80.0 37.2 Recognized in equity(0.2) 0.1 Recognized in OCI(1.5) 7.7 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)148 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Tax loss carry-forwardsCertain subsidiaries incurred tax losses, which according to the local tax legisla-tion gives rise to a tax credit usable in future tax periods. However, the use of this tax benefit is limited in time (expiration) and by the ability of the respective sub-sidiary 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 accordance with the budget 2016 approved by the Board of Directors and the projections prepared by the management for these entities.The unrecognized tax loss carry-forwards by expiry date are as follows:IN MILLIONS OF CHF31.12.201531.12.2014Expiring within 1 to 3 years 35.3 75.4 Expiring within 4 to 7 years 63.9 153.1 Expiring after 7 years 178.6 67.9 With no expiration limit 315.6 41.8 Total 1 593.4 338.2 1 This amount includes CHF 164.7 (2014: 32) million added through business combinationUnrecognized deferred tax liabilitiesDufry has not recognized deferred tax liabilities associated with investments in subsidiaries where Dufry can control the reversal of the timing differences and where it is not probable that the temporary differences will reverse in the foresee-able future.Dufry does not expect that these differences result in taxable amounts in deter-mining taxable profit (tax loss) of future periods when the carrying amount of the investment is recovered.149 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201523. OTHER NON-CURRENT ASSETS IN MILLIONS OF CHF31.12.201531.12.2014Guarantee deposits 79.2 38.7 Loans and contractual receivables 32.8 35.9 Prepaid lease 1 221.9 16.5 Other 14.8 16.8 Subtotal 348.7 107.9 Allowances(1.3)(1.3)Total 347.4 106.6 1 Prepaid lease refers mainly to amounts paid in advance to the Spanish concesionaire, which is measured at amortized cost.MOVEMENT IN ALLOWANCES IN MILLIONS OF CHF20152014Balance at January 1(1.3)(1.7)Utilization– 0.5 Currency translation adjustments–(0.1)Balance at December 31(1.3)(1.3)150 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201524. INVENTORIES IN MILLIONS OF CHF31.12.201531.12.2014Purchased inventories at cost 927.3 758.0 Inventory allowance 1(20.0)(16.8)Total 907.3 741.2 1 The inventory impaired has a book value of CHF 63.0 (2014: 55.2) millionCASH FLOWS USED FOR INCREASE / FROM DECREASE IN INVENTORIES IN MILLIONS OF CHF2015RESTATED* 2014Balance at January 1 758.0 540.5 Balance at December 31 927.3 758.0 Gross change – at cost(169.3)(217.5)Business combinations (note 6) 206.3 210.6 Transfer to discontinued operations (note 40)–(1.8)Change in unrealized profit on inventory(4.0) 0.9 Utilization of allowances 5.1 0.2 Currency translation adjustments(22.8) 43.6 Cash Flow – (Increase) / decrease in inventories 15.3 36.0 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)Cost of sales includes inventories written down to net realizable value and inven-tory differences of CHF 16.5 (2014: 19.1) million.151 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201525. TRADE AND CREDIT CARD RECEIVABLES IN MILLIONS OF CHF31.12.201531.12.2014Trade receivables 86.9 74.4 Credit card receivables 46.4 44.5 Gross 133.3 118.9 Allowances(0.5)(0.2)Net 132.8 118.7 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 IN MILLIONS OF CHF31.12.201531.12.2014Not due 59.7 47.0 OVERDUEUp to 30 days 7.5 19.2 31 to 60 days 7.0 3.4 61 to 90 days 1.7 1.4 More than 90 days 1 11.0 3.4 Total overdue 27.2 27.4 Trade receivables, gross 86.9 74.4 1 The main overdue receivables are covered by bank guaranteesMOVEMENT IN ALLOWANCES IN MILLIONS OF CHF20152014Balance at January 1(0.2)(0.1)Creation(1.5)(0.2)Release 1.0 0.1 Utilized 0.1 –Currency translation adjustments 0.1 –Balance at December 31(0.5)(0.2)152 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201526. OTHER ACCOUNTS RECEIVABLE IN MILLIONS OF CHF20152014Receivables for refund from suppliers 96.7 47.0 Sales tax and other tax credits 87.6 74.0 Accrued concession fees and rental income 41.3 12.0 Prepaid lease 38.7 –Prepayments 30.8 29.8 Receivables from subtenants and business partners 13.0 24.2 Guarantee deposits 7.7 15.1 Loans receivable 6.2 3.2 Personnel receivables 4.2 4.8 Accrued income 3.8 4.2 Derivative financial assets 1 1.7 0.6 Other 16.5 16.5 Total 348.2 231.4 Allowances(12.2)(4.2)Total 336.0 227.2 1 See note 38 Financial instrumentsMOVEMENT IN ALLOWANCES IN MILLIONS OF CHF20152014Balance at January 1(4.2)(3.4)Creation (6.6)(1.6)Release 0.1 0.1 Utilized 0.3 0.6 Reclassification from receivables for refund from suppliers(2.3)–Currency translation adjustments 0.5 0.1 Balance at December 31(12.2)(4.2)153 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201527. EQUITY27.1 ISSUED CAPITAL IN MILLIONS OF CHF 31.12.201531.12.2014Share capital 269.4 179.5 Share premium 4,259.3 1,964.7 Total 4,528.7 2,144.2 27.1.1 Fully paid ordinary sharesIN MILLIONS OF CHFNUMBER OF SHARESSHARE CAPITALSHARE PREMIUMBalance at January 1, 2014 30,905,056 154.51,207.0Issue of shares 5,000,000 25.0785.0Share issuance costs––(27.3)Balance at December 31, 2014 35,905,056 179.51,964.7Conversion of mandatory convertible notes 1,809,188 9.1253.7Issue of shares 16,157,463 80.82,119.2Share issuance costs––(78.3)Balance at December 31, 2015 53,871,707 269.44,259.327.2 AUTHORIZED AND CONDITIONAL SHARE CAPITAL AUTHORIZED SHARE CAPITALNUMBER OF SHARESIN THOUSANDS OF CHFBalance at January 1, 2014 1,466,387 7,332 Expiration May 2, 2014(1,466,387)(7,332)Balance at December 31, 2014––Balance at December 31, 2015––CONDITIONAL SHARE CAPITALNUMBER OF SHARESIN THOUSANDS OF CHFBalance at January 1, 2014 2,697,620 13,488 Balance at December 31, 2014 2,697,620 13,488 Utilization June 18, 2015(1,809,188)(9,046)Balance at December 31, 2015 888,432 4,442 154 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Share capital increase2015The General Meeting held on April 29, 2015, approved the increase of the share cap-ital of Dufry from currently CHF 179.5 million by up to CHF 157.1 million to a maxi-mum amount of up to CHF 336.6 million through the issuance of fully paid-in new registered shares with a par value of CHF 5 each.On June 18, 2015, Dufry AG issued 16,157,463 new registered shares with a nomi-nal value of CHF 80.8 million, representing 45 % additional shares. After this share issuance and including the shares created by the conversion of the Mandatory Con-vertible Notes (see comments below), the share capital of Dufry AG amounts to CHF 269.4 million. The offer price for the rights offering as well as for the commit-ted investors was set at CHF 136.16 per new share. In the rights offering, 9,744,390 new shares were subscribed for by existing shareholders, while 6,413,073 new shares were purchased by committed investors, resulting in gross proceeds of CHF 2,200 million.The trading of the newly issued shares on the SIX Swiss Exchange commenced on June 25, 2015. The share issuance costs related with these transactions have been estimated at CHF 78.3 million and are presented in equity.2014The Extraordinary General Meeting held on June 26, 2014, approved the increase of the share capital of Dufry AG from currently CHF 154.5 million by up to CHF 27.3 million to a maximum amount of up to CHF 181.8 million through the issuance of fully paid-in new registered shares with a par value of CHF 5 each.On July 8, 2014, Dufry AG issued 5,000,000 new registered shares representing 16 % additional shares. After this share issuance, the share capital of the company amounts to CHF 179.5 million. The offer price for the rights offering as well as the public offering was set at CHF 162 per new share. In the rights offering, 3,623,976 new shares were subscribed for by existing shareholders, while 1,376,024 new shares were purchased by investors in the international offering, resulting in gross proceeds of CHF 810 million. The trading of the newly issued shares on the SIX Swiss Exchange commenced on July 9, 2014. The share issuance costs related with this transaction amounted to CHF 27.3 million and is presented in equity.Mandatory Convertible Notes (MCN)2015The Mandatory Convertible Notes amounting to CHF 262.8 million (net of issuance costs) were converted into 1,809,188 ordinary registered shares of Dufry during June 2015 at a conversion price of CHF 152 per share. Dufry issued the shares out of the existing conditional share capital.155 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201527.3 RESERVES IN MILLIONS OF CHF2015RESTATED* 2014Employee benefit reserve(21.3)(32.9)Hedging and revaluation reserves 0.7 –Capital reserve for mandatory convertible notes– 262.8 Translation reserves(185.8)(112.2)Retained earnings(1,158.9) 46.0 Balance at December 31(1,365.3) 163.7 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)27.3.1 Employee benefit reserveIN MILLIONS OF CHF20152014Balance at January 1(32.9) 0.3 Actuarial gains (losses) on defined benefit plans 12.8 (37.7)Income tax relating to components of other comprehensive income(1.2) 4.5 Balance at December 31(21.3)(32.9)27.3.2 Hedging and revaluation reservesIN MILLIONS OF CHF20152014Balance at January 1––Gain / (loss) arising on changes in fair value of financial instruments:– Interest rate swaps entered for as cash flow hedges 1.0 –Income tax relating to components of other comprehensive income(0.3)–Balance at December 31 0.7 –156 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201527.3.3 Capital reserve for mandatory convertible notesIN MILLIONS OF CHF20152014Balance at January 1 262.8 –Issuance of equity instruments– 269.6 Conversion of mandatory convertible notes 1(262.8)–Transaction costs for equity instruments–(6.8)Balance at December 31– 262.8 1 Details for the Mandatory Convertible Notes (MCN) are described in note 27.227.3.4 Translation reservesIN MILLIONS OF CHF20152014Balance at January 1(112.2)(224.5)Exchange differences arising on translating the foreign operations (attributed to equity holders of parent)(75.8) 211.5 Net gain / (loss) on hedge of net investments in foreign operations (note 31) 2.2 (102.4)Income tax related to net gains / (losses) on hedge of net investments of foreign operations– 3.2 Balance at December 31(185.8)(112.2)Foreign exchange gains and losses on financing instruments that are designated as hedging instruments for net investments in foreign operations are included in the translation reserves.157 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201528. SHARE-BASED PAYMENTS28.1 PSU PLAN OF DUFRY AGOn October 29, 2015, Dufry granted to the members of the GEC and selected mem-bers of the senior management the Award 2015 with 122,803 PSU free of charge. On May 3, 2018, (vesting date) each PSU will give the right to the holders to receive up to two shares of Dufry depending on the effective cumulative amount of cash earnings per share (Cash EPS) reached by Dufry during the years 2015 to 2017 com-pared with the target of about CHF 24. The Cash EPS equals the basic Earnings per Share adjusted for amortization of intangible assets identified during business combinations and non-recurring effects. If at vesting the cumulative adjusted Cash EPS is at target level, each PSU Award 2015 grants one share. If the cumulative adjustetd Cash EPS is at 150 % of the target (maximum threshold) or above, each PSU Award 2015 grants two shares at vesting, and if the adjusted Cash EPS is at 50 % of the target (minimum threshold) or below, no share will be granted at vest-ing. If the adjusted Cash EPS is in between 50 % and 150 % of the target, the num-ber of shares granted for each PSU will be allocated on a linear basis. Additionally, the allocation of shares is subject to an ongoing contractual relationship of the participant with Dufry throughout the vesting period. As of December 31, 2015, no PSU Award 2015 forfeited, so that 122,803 PSU remain outstanding.At grant date the fair value of one PSU Award 2015 represents the market value for one Dufry share at that date (CHF 116.20) adjusted by the probability that par-ticipants comply with the ongoing contractual relationship clause. At December 31, 2015, a probability of 90 % was determined by taking into account the projected adjusted Cash EPS at vesting. The contractual life of the PSU Award 2015 is 30 months. PSU don’t provide to its holders shareholder rights, like voting or a right to receive dividends. On October 1, 2014, Dufry granted 51,486 PSU Award 2014 to the members of the adjusted GEC. One PSU gives the right to receive in 2017, free of charge, up to two shares, based on the performance achieved by Dufry. For the PSU Awards 2014 the performance will be measured as the average yearly growth rate reached by the earnings per share adjusted for amortization of intangible assets identified during business combinations and non-recurrent effects (adjusted Cash EPS) of Dufry between 2013 and 2016. If the targeted average yearly growth of 7 % is achieved, one share will be granted for each PSU, whereas for an average yearly growth rate of 3.5 % or less, no shares will be granted and for a growth rate of 10.5 % or higher two shares will be granted. If the effective growth rate is in-between 3.5 % and 10.5 % the number of shares granted for each PSU will be allocated on a linear basis. Additionally, the allocation of shares is subject to an ongoing contractual relation-ship of the participant with Dufry from January 1, 2014, until January 1, 2017. As of December 31, 2015, 6,919 PSU Award 2014 forfeited, so that 44,567 PSU remain outstanding.At grant date the fair value of the PSU Award 2014 represents the market value for one Dufry share i.e. CHF 143.1. At December 31, 2015, a probability of 148 % was determined by taking into account the projected adjusted Cash EPS at vesting. The contractual life of the PSU Award 2014 is 27 months. There are no cash settlement alternatives for the participants. 158 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015With the PSU Award 2013 Dufry granted to the members of the GEC 42,957 PSU options. One PSU gives the right to receive in 2016, free of charge, up to two shares, based on the performance achieved by Dufry. For the PSU Award 2013, the perfor-mance will be measured as the average yearly growth rate reached by the earn-ings per share adjusted for amortization of intangible assets identified during busi-ness combinations and non-recurrent effects (adjusted Cash EPS) of Dufry in between 2012 and 2015. Each PSU will grant the right to receive one Dufry share if the targeted average yearly growth of 7 % is achieved, no share if the average yearly growth rate is 3.5 % or lower and two shares if the average growth rate is 10.5 % or higher. If the effective growth rate is in-between 3.5 % and 10.5 % the number of shares granted for each PSU will be allocated on a linear basis. Additionally, the allocation of shares is subject to an ongoing contractual relationship of the par-ticipant with Dufry from January 1, 2013, until January 1, 2016. As of December 31, 2015, 6,100 PSU Award 2013 forfeited, so that 36,857 PSU remain outstanding. At January 1, 2016, the PSU Award 2013 vested and the minimal threshold was not achieved so that no shares have been allocated to the participants and no liability was recognized at December 31, 2015, regarding this award. In 2015 the total expense recognized in the income statement against equity from share-based payment transactions was CHF 2.8 (2014: 2.4) million.28.2 TREASURY SHARESTreasury shares are valued at historical cost.NUMBER OF SHARESIN MILLIONS OF CHFBalance at January 1, 2014 120,269 18.1 Assigned to holders of RSU-Awards 2013 1(117,104)(17.6)Share purchases 91,000 13.8 Balance at December 31, 2014 94,165 14.3 Share purchases 4 –Balance at December 31, 2015 94,169 14.3 1 For description of RSU plan see note 29 in the Annual Report 2014. RSU plans were discontinued in 2014.159 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201529. BREAKDOWN OF TRANSACTIONS WITH NON-CONTROLLING INTERESTSThe following transactions have been recognized in equity attributable to non- controlling interests at fair value:IN MILLIONS OF CHF2015RESTATED* 2014World Duty Free Group acquisition through business combination (note 6.1) 37.7 –Non-controlling interests in World Duty Free Group after initial acquisition 1(9.0)–The Nuance Group acquisition through business combination (note 6.5)–(3.9)Dufry Lojas Francas Ltd 40 %– 36.6 Dufry Lojas Francas Ltd. 20 % Call option (note 6.4)–(19.8)Dufry France S.A. 30 % Guadeloupe business– 1.7 Hudson Group, increase in share capital of several subsidiaries 4.5 7.2 Other(0.3) 0.9 TOTAL 32.9 22.7 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)1 Change in non-controlling interests from August 7,2015, until the completion of the acquisition of the remaining interest.30. INFORMATION ON COMPANIES WITH NON-CONTROLLING INTERESTSThe non-controlling interests (NCI) comprise the portion of equity of subsidiaries that are not owned by Dufry. The net earnings attributable to non-controlling interests is CHF 42.4 (2014: restated 34.2) million and Dufry carefully assessed the significance of each subsidiary with non-controlling interests and concluded that none of them is individually material for Dufry.In 2015, the major part of the net earnings attributable to non-controlling inter-ests of CHF 23.7 (2014: 20.0) million relates to several legal entities with different non-controlling interest holders within Hudson Group. The remaining CHF 18.7 (2014: 14.0) million belongs to various other subsidiaries of Dufry.160 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201531. FINANCIAL DEBT IN MILLIONS OF CHF 31.12.201531.12.2014Bank debt (overdrafts) 23.3 13.7 Bank debt (loans) 51.1 28.7 Third party loans 2.9 3.2 Financial debt, short-term 77.3 45.6 Bank debt (loans) 2,537.7 1,738.3 Senior Notes 1,767.3 1,074.9 Third party loans 8.1 8.6 Financial debt, long-term 4,313.1 2,821.8 Total 4,390.4 2,867.4 OF WHICH AREBank debt 2,612.1 1,780.7 Senior Notes 1,767.3 1,074.9 Third party loans 11.0 11.8 BANK DEBT IN MILLIONS OF CHF 31.12.201531.12.2014MAIN BANK DEBTS ARE DENOMINATED INUS Dollar 1,035.8 1,053.5 Euro 802.6 601.4 British Pound Sterling 631.8 –Swiss Franc 100.0 110.0 Subtotal 2,570.2 1,764.9 LOCAL BANK DEBTS INDifferent currencies 73.1 40.1 Deferred bank arrangement fees 1(31.2)(24.3)Total 2,612.1 1,780.7 1 The arrangement fees relate only to the main bank debtSENIOR NOTES IN MILLIONS OF CHF 31.12.201531.12.2014SENIOR NOTES DENOMINATED INUS Dollar 499.8 496.9 Euro 1,303.6 601.4 Subtotal 1,803.4 1,098.3 Deferred arrangement fees(36.1)(23.4)Total 1,767.3 1,074.9 161 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015DETAILED CREDIT FACILITIESDufry negotiates and manages its key credit facilities centrally. Minor credit lines at local level are kept for practical reasons.The bank credit agreements and the bank guarantee facility (see note 36) contain covenants and conditions customary to this type of financing. During 2015 Dufry complied with the financial covenants and conditions contained in the bank credit agreements.Main bank credit facilitiesDRAWN AMOUNT IN CHFIN MILLIONS OFMATURITYCURRENCYCREDIT LIMIT IN LOCAL CURRENCY31.12.201531.12.2014Committed 5-year term loan31.07.2019USD 1,010.0 1,009.6 1,003.8 Committed 5-year term loan31.07.2019EUR 500.0 543.2 601.4 Committed 4-year term loan (multi-currency)31.07.2019EUR 800.0 835.9 –5-year revolving credit facility (multi-currency)31.07.2019CHF 900.0 181.5 159.7 Total 2,570.2 1,764.9 On March 27, 2015, a syndicate of banks with the London Branch of ING N.V. acting as agent, granted Dufry a committed 4-year term loan of EUR 800 million which was used to replace the bank debt of World Duty Free Group.Senior notesAMOUNT IN CHFIN MILLIONS OFMATURITYCOUPON RATECURRENCYNOMINAL IN LOCAL CURRENCY31.12.201531.12.2014Senior notes15.10.20205.50 %USD 500.0 499.8 496.9 Senior notes15.07.20224.50 %EUR 500.0 543.2 601.4 Senior notes01.08.20234.50 %EUR 700.0 760.4 –Total 1,803.4 1,098.3 On July 28, 2015, Dufry placed denominated Senior Notes of EUR 700 million with a maturity of eight years with qualified institutional investors in Switzerland and abroad.All notes are listed on the Dublin stock exchange and interests are payable semi-annually in arrears.162 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015WEIGHTED AVERAGE INTEREST RATEThe borrowings under these credit facilities bear interest at a floating rate (EURIBOR or LIBOR) plus spread. Below are the overall weighted average notional interest rates on the main currencies:INTEREST RATE IN PERCENTAGE (%)20152014Average on USD 3.45 2.70 Average on CHF 1.83 1.80 Average on EUR 3.53 2.40 Average on GBP 2.98 –Weighted Average Total 3.42 2.60 31.1 HEDGE OF NET INVESTMENTS IN FOREIGN OPERATIONSThe following net debt is designated as hedge in net investment in accordance with IAS 39, paragraph 102:AMOUNT IN HEDGING CURRENCYAMOUNT IN CHFIN MILLIONS OFCURRENCY31.12.201531.12.201431.12.201531.12.2014Dufry do Brasil and other companies 1USD 947.2 947.2 946.9 941.4 World Duty Free Group SAGBP 240.0 – 353.5 –Total 1,300.4 941.4 1 Alliance Inc., Interbaires SA, Navinten SA, Blaicor SA, International Operation & Services Corp., Duty Free Ecuador SA and Regstaer Ltd.31.2 NET INVESTMENT IN FOREIGN OPERATIONSDufry granted below mentioned long-term loans to subsidiaries. These loans are considered as part of Dufry’s net investment in foreign operations in accordance with IAS 21, paragraph 15, as settlement is neither planned nor likely to occur in the foreseeable future.AMOUNT IN HEDGING CURRENCYAMOUNT IN CHFIN MILLIONS OFCURRENCY31.12.201531.12.201431.12.201531.12.2014Dufry America Holding Inc.USD 17.2 19.6 17.2 19.5 Nuance Group (Australia) Pty Ltd.AUD 121.8 121.8 88.8 98.9 Nuance Group (Sverige) ABSEK 110.0 110.0 13.0 14.0 Total 119.0 132.4 163 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201532. PROVISIONS IN MILLIONS OF CHFCONTINGENT LIABILITIESONEROUS CONTRACTSCLOSEDOWNLAWSUITS AND DUTIESLABOR DISPUTESOTHERTOTALPublished at December 31, 2014 42.1 74.6 3.6 8.5 3.2 19.4 151.4 Restatement *– 12.6 ––––12.6Restated* Balance at January 1 42.1 87.2 3.6 8.5 3.2 19.4 164.0 Business combinations (note 6) 6.7 87.7 36.2 9.1 – 22.4 162.1 Charge for the year– 2.1 – 8.7 – 32.4 43.2 Utilized–(9.6)(7.7)(0.9)(0.9)(5.9)(25.0)Unused amounts reversed(3.9)–(0.4)(0.5)––(4.8)Interest discounted– 8.7 –––– 8.7 Reclassification from / to other accounts 1–– 1.5 ––(3.0)(1.5)Reclassification within classes 1.3 1.0 9.1 (2.3)–(9.1)–Currency translation adjustments(0.7)(5.8)(0.3)(0.9)–(1.4)(9.1)Balance at December 31 45.5 171.3 42.0 21.7 2.3 54.8 337.6 THEREOFCurrent – 48.5 42.0 21.7 0.2 41.3 153.7 Non-current 45.5 122.8 –– 2.1 13.5 183.9 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)1 From other payables (CHF 1.5 million) and to net defined benefit obligation (CHF – 3.0 million)Management believes that its provisions are adequate based upon currently avail-able information. However, given the inherent difficulties in estimating liabilities in the areas described below, actual costs may vary from the amounts provisioned.CONTINGENT LIABILITIESDufry as internationally operating company is exposed to contingent liabilities in respect of legal and tax claims in the ordinary course of business. It is not antici-pated that any material liabilities will arise from the contingent liabilities other than provided for.In 2015, the contingent liabilities increased by CHF 6.7 million based on findings in Europe recognized during the due diligence process made for the acquisition of the World Duty Free Group. In 2014, the contingent liabilities increased by CHF 1.0 mil-lion based on findings in Europe, Asia and Australia recognized during the due diligence process made for the acquisition of The Nuance Group.IFRS 3 Business combinations requires to reflect these liabilities with uncertain amounts 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 liabilities are subject to interpretations and uncertainties in the respective regu lations, the management made an estimation of the fair value. 164 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015ONEROUS CONTRACTSConcession agreements usually fix the fee for the locations as a percentage on net sales. Some of these long-term concession agreements, which Dufry has entered into, include clauses to ensure a minimal concession fee during the full term of the agreement. However, in certain circumstances the economic environ-ment around an activity deteriorates in such a way that it is highly unlikely that the operation will become profitable during the remaining concession duration. In such cases Dufry does impair the assets subject to amortization or depreciation and creates a provision for onerous contracts. This provision reflects the present value of the unavoidable cost (losses) of meeting the contractual obligation. At balance sheet date, an amount of CHF 171.3 (2014 restated: 87.2) million has been provided in relation to operations in Asia and Europe.CLOSE DOWNThe provision of CHF 42 (2014: 3.6) million relates mainly to the closing of opera-tions in Asia and Europe. LABOR DISPUTESThe provision of CHF 2.3 (2014: 3.2) million relates mainly to claims presented by sales staff based on disputes related to the termination of temporary labor con-tracts in Brazil.LAWSUITS AND DUTIESThese provisions of CHF 21.7 (2014: 8.5) million cover uncertainties dependent on the outcome of law suits in relation to taxes, duties or other claims in Brazil, Ecuador, India, Italy and Turkey.The increase in 2015 are mainly related to disputes with custom authorities in Ecuador, India and Turkey.OTHERThe charge for the year includes a provision for the expenses expected to be incurred in relation to the structural improvements and the integration of support functions of the organization.CASH OUTFLOWS OF NON-CURRENT PROVISIONSThe expected timing of the related cash outflows of non-current provisions as of December 31, 2015 is currently projected as follows:IN MILLIONS OF CHFEXPECTED CASH OUTFLOW2017 26.6 2018 15.2 2019 14.6 2020 13.7 2021 + 113.8 Total non-current 183.9 165 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201533. POST-EMPLOYMENT BENEFIT OBLIGATIONSDufry provides retirement benefits through a variety of arrangements comprised principally of stand-alone defined benefit or defined contribution plans, or state administered plans that cover a substantial portion of employees in accordance with local regulations and practices. The most significant plans in terms of the ben-efits accrued to date by participants are cash balance and final salary plans. Around 96.2 % (2014: 93.8 %) of the total defined benefit obligation and 100 % (2014: 100 %) of the plan assets correspond to pension funds in Switzerland (CH) and the United Kingdom (UK). 20152014IN MILLIONS OF CHFFundedUnfundedTOTALFundedUnfundedTOTALSWITZERLANDFair value of plan assets 179.2 – 179.2 181.1 – 181.1 Present value of defined benefit obligation 194.8 – 194.8 205.3 – 205.3 Financial (deficit) surplus(15.6)–(15.6)(24.2)–(24.2)UKFair value of plan assets 186.3 – 186.3 –––Present value of defined benefit obligation 209.8 – 209.8 –––Financial (deficit) surplus(23.5)–(23.5)–––OTHER PLANSFair value of plan assets––––––Present value of defined benefit obligation– 16.2 16.2 – 13.5 13.5 Financial (deficit) surplus–(16.2)(16.2)–(13.5)(13.5)TOTALFair value of plan assets 365.5 – 365.5 181.1 – 181.1 Present value of defined benefit obligation 404.6 16.2 420.8 205.3 13.5 218.8 Total net book value employee benefits(39.1)(16.2)(55.3)(24.2)(13.5)(37.7)166 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015A description of the significant retirement benefit plans is as follows:Reconciliation to the funded plansIN MILLIONS OF CHF20152014Net defined (obligation) / asset at January 1(24.2) 1.1 Net defined asset / (obligation) of acquired companies(25.6) 0.5 Pension expense through income statement(9.3) 8.2 Remeasurements through other comprehensive income 12.3 (29.7)Transfer payment–(8.0)Contributions paid by employer 7.2 3.7 Currency translation 0.5 –Net defined (obligation) / asset at December 31(39.1)(24.2)33.1 SWITZERLANDDufry operates two company sponsored pension funds in form of foundations in Switzerland that provide contribution-based cash balance retirement and risk benefits to employees. The Pension Fund Nuance (PVN) was integrated to the financial report in September 2014. All pension plans in Switzerland are governed by the Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG), which stipulates that pension plans are to be managed by indepen-dent, legally autonomous units. Pension plans are overseen by a regulator as well as by a state supervisory body. A pension plan’s most senior governing body (Board of Trustees) must be composed of equal numbers of employee and employer rep-resentatives. The various insurance benefits are governed in regulations, with the BVG specifying the minimum benefits that are to be provided. The employer and employees pay contributions to the pension plan. In case of an underfunding, various measures can be taken such as the adjustment of the pension benefits, by altering the actuarial assumptions or increasing future contributions. The employer can also make additional restructuring contributions. The BVG prescribes how employees and employer have to jointly fund potential restructurings.All actuarial risks are borne by the Pension funds Weitnauer (PKW) or PVN. These risks consist of demographic risks, primarily life expectancy, and financial risks such as the discount rate, future increases in salaries / wages, and the return on plan assets. These risks are regularly assessed by the Board of Trustees. In addi-tion, two annual actuarial reports are submitted, one in accordance with the requirements of the BVG, the other in accordance with IFRS requirements.167 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015The investment strategy is defined in form of a long-term target asset-, currency- and risk-structure (investment policy), which takes into account requirements from BVG, and aim to obtain a high long-term return on plan assets. The Board of Trustees is responsible for the investment of the assets, reviewing the investment port folio as often as necessary – especially in the case of significant changes in the expec-tations of market developments and at least once a year. When reviewing the investment portfolio, it takes into account the limitations set in the strategy. The Board of Trustees delegates the implementation of the investment policy – in accordance with the investment strategy as well as various principles and objec-tives – to an Investment Committee, which consists of two members of the Board of Trustees. They supervise the entire investment process. The plan assets are managed by several external specialized and independent asset managers in accordance with the investment strategy, whereby the investments in properties are directly managed by the fund.Under Swiss pension law Dufry cannot recover any surplus from the pension funds, because those belong to the foundations. The pension funds currently invest in a diverse portfolio of asset classes including equities, bonds, property and commodities but do not currently use any more explicit asset-liability matching strategy instruments such as annuity purchase products or longevity swaps. There have been the following changes made to the Swiss retirement benefit arrangements in the periods covered by these financial statements: –In October 2015 Dufry informed their employees about the planned transfer of the PKW into the PVN as of January 1, 2016. Combined with this transfer the foundation board of the Nuance Group pension plan decided to change some of the plan benefits as from January 1, 2016, resulting in a plan change for all pension plan members. The plan change resulted in a past service credit of CHF 3.3 million which has been recognized in the 2015 pension expenses. –As of December 2014 the PKW has made a final allocation of the retirement pensioners (retired before May 31, 2003). This final allocation resulted in a transfer of CHF 17.5 million in assets and CHF 25.5 million in liabilities. –In September 2014 the PKW changed its plan from a defined benefit plan (Leistungsprimat) to a cash balance plan (Beitragsprimat) starting on January 1, 2015. The new plan intended to keep the benefits granted at levels similar to the previous plan. From this plan change a net gain of CHF 12.3 million resulted, presented in the line pension expenses in the income state- ment. The plan changes did not result in a change in qualification as a defined benefit plan under IFRS. –As a result of the acquisition of The Nuance Group in August 2014, Dufry recognized a net defined benefit asset of the PVN in the amount of CHF 0.5 million. The actuarial assumptions applied were the same as for PKW.168 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201533.2 UNITED KINGDOM (UK)Dufry operates a defined benefit pension plan mainly in the UK under specific regulatory frameworks. The UK plan provides a retirement benefit in the form of a pension payment based on a guaranteed percentage of salary accruing for each year of service, revalued to and payable from retirement. In the UK plan, pension payments increase annually in line with the retail price index, subject to certain limits. The pension payments are made from trustee-administered funds; however, where plans are underfunded, the company meets the benefit payment obligation as it falls due. The plan is governed by local legislation and its own trust documen-tation. The responsibility for the governance of the plan, including investment decisions and contribution schedules, lies with the Board of Trustees. The Board of Trustees must be composed of representatives of the Company and plan par-ticipants in accordance with the plans’ regulations.Cost of defined benefit plans20152014IN MILLIONS OF CHFSwitzerlandUK 1TOTALSwitzerlandSERVICE COSTSCurrent service costs(10.7)(0.3)(11.0)(3.7)Past service costs 3.3 – 3.3 12.3 Fund administration(0.4)–(0.4)(0.3)Net interest (0.3)(0.9)(1.2)(0.1)Total pension expenses recognized in the income statement(8.1)(1.2)(9.3) 8.2 1 For the period August to DecemberThe current service costs, the change to cash balance plan and costs of funds administration of Dufry are included in personnel expenses (see note 9 retirement benefits).Remeasurements employee benefits20152014IN MILLIONS OF CHFSwitzerlandUK 1TOTALSwitzerlandActuarial gains (losses) – experience 3.6 1.0 4.6 (1.2)Actuarial gains (losses) – demographic assumptions 7.8 2.2 10.0 –Actuarial gains (losses) – financial assumptions(6.7) 3.0 (3.7)(33.2)Return on plan assets exceeding expected interest 5.1 (3.7) 1.4 4.7 Total remeasurements recorded in other comprehensive income 9.8 2.5 12.3 (29.7)1 For the period August to December169 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015The following tables summarize the components of the funded status and amounts recognized in the statement of financial position for the plan:Change in the fair value of plan assets20152014IN MILLIONS OF CHFSwitzerlandUK 1TOTALSwitzerlandBalance at January 1 181.1 – 181.1 63.8 Business combinations– 194.6 194.6 89.9 Interest income 2 2.2 6.9 9.1 2.1 Return on plan assets, above interest income 5.1 (3.7) 1.4 4.7 Contributions paid by employer 7.0 0.2 7.2 3.7 Contributions paid by employees 3.6 0.1 3.7 2.1 Benefits paid(19.8)(7.1)(26.9)(2.7)Transfer payment––– 17.5 Currency translation–(4.7)(4.7)–Balance at December 31 179.2 186.3 365.5 181.1 1 For the period August to December2 Expected interest income on plan assets based on discount rate. See actuarial assumptions.Change in present value of defined benefit obligation20152014IN MILLIONS OF CHFSwitzerlandUK 1TOTALSwitzerlandBalance at January 1 205.3 – 205.3 62.7 Business combinations– 220.2 220.2 89.4 Current service costs 10.7 0.3 11.0 3.7 Interest costs 2.6 7.8 10.4 2.1 Contributions paid by employees 3.6 0.1 3.7 2.1 Accrual of expected future administration costs 0.4 – 0.4 0.3 Actuarial losses / (gains) – experience(3.6)(1.0)(4.6) 1.2 Actuarial losses / (gains) – demographic assumptions(7.8)(2.2)(10.0)–Actuarial losses / (gains) – financial assumptions 6.7 (3.0) 3.7 33.2 Benefits paid(19.8)(7.1)(26.9)(2.7)Past service cost – plan amendments(3.3)–(3.3)(12.2)Transfer payment––– 25.5 Currency translation–(5.3)(5.3)–Balance at December 31 194.8 209.8 404.6 205.3 Net defined benefit (obligation) / asset at December 31(15.6)(23.5)(39.1)(24.2)1 For the period August to December170 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Actuarial assumptionsThe present value of the defined benefit obligation is determined annually by independent actuaries using the projected unit credit method. The main actuarial assumptions used are: 20152014IN PERCENTAGE (%)SwitzerlandUK 1SwitzerlandDiscount rates 1.00 3.85 1.25 Future salary increases 1.50 4.25 1.50 Future pension increases 0.25 2.20 0.50 Average retirement age (in years) 64 65 63 – 64 Mortality table (generational tables)2010201520101 For the period August to DecemberThe mortality table takes into account changes in the life expectancy. Plan asset structure The categories of plan assets in percentage of total value are as follows:20152014IN PERCENTAGE (%)SwitzerlandUK 1SwitzerlandShares30.929.430.1Bonds30.358.533.3Real estate28.10.023.5Other 210.712.113.1Total100.0100.0100.01 For the period August to December2 Includes liquid positions and alternative investments.All assets held by the Pension fund in Switzerland and UK are fair-value-level 1 (quoted prices in active markets), except certain real estate in Switzerland which are fair-value-level 2 (significant observable inputs) representing 13.9 % (2014: 23.5 %) of the total assets.The net outflow of funds due to pension payments can be planned reliably. Contri-butions are paid regularly to the funded pension plans in Switzerland and UK. Further more, the respective investment strategies take account of the need to guarantee the liquidity of the plan at all times. Dufry does not make use of any assets held by pension plans.171 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Plan participants20152014IN THOUSAND OF CHFSwitzerlandUK 1SwitzerlandACTIVE PARTICIPANTSNumber at December 31 (persons) 882 25 1,015 Average annual plan salary 70.3 70.0 59.9 Average age (years) 40.0 49.0 40.2 Average benefit service (years) 10.0 14.1 8.8 DEFERRED PARTICIPANTSNumber at December 31 (persons)– 1,397 –Average annual plan pension– 5.3 –BENEFIT RECEIVING PARTICIPANTSNumber at December 31 (persons) 137 910 123 Average annual plan rent 24.0 4.0 26.2 1 For the period August to December2015IN MILLIONS OF CHFSwitzerlandUK 1EXPECTED CONTRIBUTIONS FOREmployer 5.8 0.2 Employees 3.1 0.1 Weighted average duration of defined benefit obligation (years) 19.7 21.2 1 For the period August to December20152014IN MILLIONS OF CHFSwitzerlandSwitzerlandMATURITY PROFILE OF DEFINED BENEFIT OBLIGATIONExpected payments within 1 year 7.5 7.5 Expected payments in year 2 7.1 7.8 Expected payments in year 3 7.1 7.9 Expected payments in year 4 7.0 8.0 Expected payments in year 5 6.6 7.8 Expected payments beyond 5 years 36.7 41.6 172 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Sensitivities of significant actuarial assumptionsThe discount rate and the future salary increase were identified as significant actuarial assumptions.The following impacts on the defined benefit obligation are to be expected:SWITZERLANDUK2015 IN MILLIONS OF CHFIncreaseDecreaseIncreaseDecreaseA CHANGE OF 0.5 % IN THE FOLLOWING ASSUMPTIONS WOULD IMPLYDiscount rate(14.7) 16.9 n / a 22.0 Salary rate 4.3 (3.9)n / a n / a Inflation raten / a n / a 16.3 n / a The sensitivity analysis is based on realistically possible changes as of the end of the reporting year. Each change in a significant actuarial assumption was analyzed separately as part of the test. Interdependencies were not taken into account.Expected costs2016IN MILLIONS OF CHFSwitzerlandUKCurrent service cost7.30.4Fund administration expenses0.40.0Net interest expenses0.10.9Costs to be recognized in income statement7.81.334. OTHER LIABILITIES IN MILLIONS OF CHF31.12.201531.12.2014Other service related vendors 1 321.3 173.1 Concession fee payables 167.6 136.0 Personnel payables 165.6 134.4 Sales tax and other tax liabilities 98.4 47.7 Payables for capital expenditure 2 31.3 180.2 Accrual for lease expenses 61.9 –Interest payables 50.8 27.6 Payables for projects 19.5 18.1 Accrued liabilities 16.5 15.9 Financial derivative liabilities 2.6 0.1 Payables to local business partners 1.7 6.3 Payables for acquisitions 0.1 –Other payables 22.3 24.1 Total 959.6 763.5 THEREOFCurrent liabilities 894.7 760.2 Non-current liabilities 64.9 3.3 Total 959.6 763.5 1 Thereof WDF CHF 201.3 million2 Includes in 2014 CHF 162.2 million related to the Put option (see note 6.5)173 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201535. RELATED PARTIES AND RELATED PARTY TRANSACTIONSA party is related to Dufry if the party directly or indirectly controls, is controlled by, or is under common control with Dufry, has an interest in Dufry that gives it significant influence over Dufry, has joint control over Dufry or is an associate or a joint venture of Dufry. 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-employment benefit plans for the benefit of employees of Dufry.The related party transactions and relationships for Dufry are the following:IN MILLIONS OF CHF20152014PURCHASE OF GOODS FROMHudson Wholesale, purchase of merchandises 1 18.5 18.9 Hudson RPM, purchase of merchandises 1 4.1 4.0 Folli Follie Group, purchase of goods 2 3.7 4.9 PURCHASE OF OTHER SERVICES FROMTransportes Aereos de Xalapa de CV 3 2.3 3.4 Folli Follie Group, rent of building 2 0.6 0.8 Pension Fund Weitnauer, post-employment benefits 4.2 2.5 Pension Fund Nuance, post-employment benefits 6.5 1.2 Aeropuertos Siglo XXI SA, Concession fees 3 7.5 6.8 SALE OF GOODS TOFolli Follie Group 2– 0.7 OUTSTANDING PAYABLES AT DECEMBER 31Hudson Wholesale, trade payables 1 1.1 2.2 Hudson RPM, trade payables 1 0.3 0.4 Aeropuertos Siglo XXI SA, concession payables 0.9 0.9 Transportes Aereos de Xalapa SA de CV, other payables 0.7 1.3 Folli Follie Group, trade payables 2 4.2 5.3 Pension Fund Weitnauer, personnel payables– 0.5 Pension Fund Nuance, personnel payables 0.4 0.6 OUTSTANDING RECEIVABLES AT DECEMBER 31Folli Follie Group, trade receivables 2 0.3 4.6 1 These two Hudson companies are controlled by James S. Cohen, a member of the Board of Directors2 Folli Follie Group is controlled by George Koutsolioutsos, a member of the Board of Directors3 Aeropuertos Dominicanos Siglo XXI and Transportes Aereos de Xalapa SA de CV are subsidiaries of Latin America Airport Holding Ltd. Juan Carlos Torres Carretero and Andrés Holzer Neumann are member of the Board of Directors of this company.174 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015The compensation to members of the Board of Directors and the Group Executive Committee for the services provided during the respective years includes all forms of consideration paid, payable or provided by Dufry, including compensation in company shares as follows: IN MILLIONS OF CHF20152014BOARD OF DIRECTORSNumber of directors99Short-term employee benefits 1 5.6 4.9 Post-employment benefits 0.3 0.3 Share-based payments––Total compensation 5.9 5.2 GROUP EXECUTIVE COMMITTEENumber of members99Short-term employee benefits 16.1 16.9 Post-employment benefits 1.2 1.9 Share-based payments 2 2.8 2.4 Total compensation 20.1 21.2 1 In prior year, the short-term employee benefit of the Board of Directors includes a compensation for the strategic consulting service provided by Mr. Bouton of CHF 0.3 million. This service agreement was terminated on December 31, 2014.2 Expenses accrued during the year for members of the Group Executive CommitteeFor further information regarding participations and compensations to member of the Board of Directors or Group Executive Committee, please refer to the remu-neration report at the end of the annual report.175 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201536. COMMITMENTS AND CONTINGENCIESGUARANTEE COMMITMENTSSome long-term concession agreements, which Dufry has entered into, include obligations to fulfill minimal fee payments during the full term of the agreement. Some of these agreements have been backed with guarantees provided by Dufry or a financial institution. During the years 2015 or 2014, no party has exercised their right to call upon such guarantees. All accrued, but still unpaid fees are presented as liabilities in the balance sheet.37. FAIR VALUE MEASUREMENTFAIR VALUE OF FINANCIAL INSTRUMENTS CARRIED AT AMORTIZED COSTExcept as detailed in table Quantitative disclosures fair value measurement hier-archy for assets below, Dufry considers that the carrying amounts of financial assets and financial liabilities recognized in the financial statements approximate their fair values.The following tables provide the fair value measurement hierarchy of Dufry’s assets and liabilities, 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).176 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Quantitative disclosures fair value measurement hierarchy for assetsFAIR VALUE MEASUREMENT USINGDECEMBER 31, 2015 IN MILLIONS OF CHFDATE OF VALUATIONTOTALQuoted prices in active markets (Level 1)Significant observable inputs (Level 2)Significant unobservable inputs (Level 3)BOOK VALUESASSETS MEASURED AT FAIR VALUEDerivative financial assets (Note 38.5.2)Foreign exchange forward contracts – USD31.12.2015 0.5 0.5 0.5 Foreign exchange forward contracts – EUR31.12.2015 1.2 1.2 1.2 Financial assets valued at FVTPL (Note 38.2)Short-term deposits31.12.2015 29.5 29.5 – 29.5 Short-term financial investments31.12.2015 17.7 17.7 – 17.7 ASSETS FOR WHICH FAIR VALUES ARE DISCLOSEDLoans and receivablesCredit card receivables31.12.2015 45.5 45.5 46.4 FAIR VALUE MEASUREMENT USINGDECEMBER 31, 2014 IN MILLIONS OF CHFDATE OF VALUATIONTOTALQuoted prices in active markets (Level 1)Significant observable inputs (Level 2)Significant unobservable inputs (Level 3)BOOK VALUESASSETS MEASURED AT FAIR VALUEDerivative financial assets (Note 38.5.2)Foreign exchange forward contracts – USD31.12.2014 0.6 0.6 0.6 Financial assets valued at FVTPL (Note 38.2)Short-term deposits31.12.2014 23.9 23.9 23.9 ASSETS FOR WHICH FAIR VALUES ARE DISCLOSEDLoans and receivablesCredit card receivables31.12.2014 43.7 43.7 44.5 There were no transfers between the Level 1 and 2 during the period.177 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Quantitative disclosures fair value measurement hierarchy for liabilitiesFAIR VALUE MEASUREMENT USINGDECEMBER 31, 2015 IN MILLIONS OF CHFDATE OF VALUATIONTOTALQuoted prices in active markets (Level 1)Significant observable inputs (Level 2)Significant unobservable inputs (Level 3)BOOK VALUESLIABILITIES MEASURED AT FAIR VALUEDerivative financial liabilities (Note 38.5.2)Foreign exchange forward contracts – USD31.12.2015 0.9 0.9 0.9 Foreign exchange forward contracts – EUR31.12.2015 0.1 0.1 0.1 Foreign exchange forward contracts – GBP31.12.2015 0.1 0.1 0.1 Financial assets valued at FVTPL (Interest rate swaps)31.12.2015 1.5 1.5 1.5 LIABILITIES FOR WHICH FAIR VALUES ARE DISCLOSEDAt amortized costSenior Notes USD 50031.12.2015 519.2 519.2 493.2 Senior Notes EUR 50031.12.2015 569.3 569.3 529.6 Senior Notes EUR 70031.12.2015 792.4 792.4 744.4 Floating rate borrowings USD31.12.2015 1,089.5 1,089.5 1,019.2 Floating rate borrowings EUR31.12.2015 859.1 859.1 789.7 Floating rate borrowings CHF31.12.2015 102.4 102.4 98.4 Floating rate borrowings GBP31.12.2015 674.0 674.0 631.8 FAIR VALUE MEASUREMENT USINGDECEMBER 31, 2014 IN MILLIONS OF CHFDATE OF VALUATIONTOTALQuoted prices in active markets (Level 1)Significant observable inputs (Level 2)Significant unobservable inputs (Level 3)BOOK VALUESLIABILITIES MEASURED AT FAIR VALUEDerivative financial liabilities (Note 38.5.2)Foreign exchange forward contracts – USD31.12.2014 0.1 0.1 0.1 LIABILITIES FOR WHICH FAIR VALUES ARE DISCLOSEDAt amortized costSenior Notes USD31.12.2014 518.4 518.4 489.0 Senior Notes EUR31.12.2014 642.7 642.7 585.9 Floating rate borrowings USD31.12.2014 1,068.4 1,068.4 1,053.5 Floating rate borrowings EUR31.12.2014 652.5 652.5 601.4 Floating rate borrowings CHF31.12.2014 112.2 112.2 110.0 There were no transfers between the Level 1 and 2 during the period.178 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201538. FINANCIAL INSTRUMENTSSignificant accounting policies are described in note 2.3 t) and following notes.38.1 CAPITAL RISK MANAGEMENTCapital comprises equity attributable to the equity holders of the parent less hedg-ing and revaluation reserves for unrealized gains or losses on net investment, plus other equity-linked or equity-like instruments attributable to the parent.The primary objective of Dufry’s capital management is to ensure that it maintains an adequate credit rating and sustainable capital ratios in order to support its busi-ness and maximize shareholder value.Dufry manages its financing structure and makes adjustments to it in light of its strategy and the long-term opportunities and costs of each financing source. To maintain or adjust the financing structure, Dufry may adjust dividend payments to shareholders, return capital to shareholders, issue new shares or issue equity-linked instruments or equity-like instruments.Furthermore, Dufry monitors the financing structure using a combination of ratios, including a gearing ratio, cash flow considerations and profitability ratios. As for the gearing ratio Dufry includes within net debt, interest bearing loans and bor-rowings, less cash and cash equivalents, excluding discontinued operations. 38.1.1 Gearing ratioThe following ratio compares owner’s equity to borrowed funds:IN MILLIONS OF CHF31.12.2015RESTATED * 31.12.2014Cash and cash equivalents (432.5)(513.0)Financial debt, short-term 77.3 45.6 Financial debt, long-term 4,313.1 2,821.8 Net debt 3,957.9 2,354.4 Equity attributable to equity holders of the parent 3,149.1 2,293.6 ADJUSTED FORAccumulated hedged gains / (losses) 40.1 42.0 Effects from transactions with non-controlling interests 1 1,821.0 692.6 Total capital 2 5,010.2 3,028.2 Total net debt and capital 8,968.1 5,382.6 Gearing ratio 44.1 %43.7 %* Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)1 Represents the excess paid (received) above fair value of non-controlling interests on shares acquired (sold) as long as there is no change in control (IFRS 10.23)2 Includes all capital and reserves of Dufry that are managed as capitalDufry did not hold collateral of any kind at the reporting dates.179 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201538.2 CATEGORIES OF FINANCIAL INSTRUMENTS AT DECEMBER 31, 2015FINANCIAL ASSETSIN MILLIONS OF CHFLoans and receivablesat FVTPL 1SUBTOTALNON-FINANCIAL ASSETS 2TOTALCash and cash equivalents 403.0 29.5 432.5 – 432.5 Financial instruments at fair value through profit and loss– 17.7 17.7 – 17.7 Trade and credit card receivables 132.8 – 132.8 – 132.8 Other accounts receivable 131.8 1.7 133.5 202.5 336.0 Other non-current assets 109.4 – 109.4 238.0 347.4 Total 777.0 48.9 825.9 FINANCIAL LIABILITIESIN MILLIONS OF CHFat amortized costat FVTPL 1SUBTOTALNON-FINANCIAL LIABILITIES 2TOTALTrade payables 546.8 – 546.8 – 546.8 Financial debt short-term 77.3 – 77.3 – 77.3 Other liabilities 776.1 2.6 778.7 116.0 894.7 Financial debt long-term 4,313.1 – 4,313.1 – 4,313.1 Other non-current liabilities 3.0 – 3.0 61.9 64.9 Total 5,716.3 2.6 5,718.9 1 Financial assets and liabilities at fair value through income statement2 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 positionsAT DECEMBER 31, 2014FINANCIAL ASSETSIN MILLIONS OF CHFLoans and receivablesat FVTPL 1SUBTOTALNON-FINANCIAL ASSETS 2TOTALCash and cash equivalents 489.1 23.9 513.0 – 513.0 Trade and credit card receivables 118.7 – 118.7 – 118.7 Other accounts receivable 109.7 0.6 110.3 116.9 227.2 Other non-current assets 73.6 – 73.6 33.0 106.6 Total 791.1 24.5 815.6 FINANCIAL LIABILITIESIN MILLIONS OF CHFat amortized costat FVTPL 1SUBTOTALNON-FINANCIAL LIABILITIES 2TOTALTrade payables 418.3 – 418.3 – 418.3 Financial debt short-term 45.6 – 45.6 – 45.6 Other liabilities 695.9 0.1 696.0 64.2 760.2 Financial debt long-term 2,821.8 – 2,821.8 – 2,821.8 Other non-current liabilities 3.3 – 3.3 – 3.3 Total 3,984.9 0.1 3,985.0 1 Financial assets and liabilities at fair value through income statement2 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 positions180 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201538.2.1 Net income by IAS 39 valuation categoryFinancial Assets at December 31, 2015IN MILLIONS OF CHFLOANS AND RECEIVABLESAT FVTPLTOTALInterest income 5.6 0.7 6.3 Other finance income 0.4 4.5 4.9 From interest 6.0 5.2 11.2 Fair values gain (loss)– 4.9 4.9 Foreign exchange gain (loss) 1(148.3) 10.9 (137.3)Impairments / allowances 2(11.7)–(11.7)Total – from subsequent valuation(160.0) 15.8 (144.2)Net (expense) / income(154.0) 21.0 (133.0)Financial Liabilities at December 31, 2015IN MILLIONS OF CHFAT AMORTIZED COSTAT FVTPLTOTALInterest expenses(172.6)–(172.6)Other finance expenses(5.5)(1.2)(6.7)From interest(178.1)(1.2)(179.3)Foreign exchange gain (loss) 1 136.3 – 136.3 Total – from subsequent valuation 136.3 – 136.3 Net (expense) / income(41.8)(1.2)(43.0)1 This position includes the foreign exchange gain (loss) recognized on third party and intercompany financial assets and liabilities through consolidated income statement2 This position includes the income from the released impairments and allowances and recoveries during the period less the increase of impairments and allowances181 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Financial Assets at December 31, 2014IN MILLIONS OF CHFLOANS AND RECEIVABLESAT FVTPLTOTALInterest income 4.3 – 4.3 Other finance income 0.4 – 0.4 From interest 4.7 – 4.7 Fair values gain (loss)– 4.8 4.8 Foreign exchange gain (loss) 1 137.8 – 137.8 Impairments / allowances 2(2.9)–(2.9)Total – from subsequent valuation 134.9 4.8 139.7 Net income 139.6 4.8 144.4 Financial Liabilities at December 31, 2014IN MILLIONS OF CHFAT AMORTIZED COSTAT FVTPLTOTALInterest expenses(139.8)–(139.8)Other finance expenses(11.5)–(11.5)From interest(151.3)–(151.3)Fair values gain (loss)–(1.0)(1.0)Foreign exchange gain (loss) 1(139.9)–(139.9)Total – from subsequent valuation(139.9)(1.0)(140.9)Net expense(291.2)(1.0)(292.2)1 This position includes the foreign exchange gain (loss) recognized on third party and intercompany financial assets and liabilities through consolidated income statement2 This position includes the income from the released impairments and allowances and recoveries during the period less the increase of impairments and allowances182 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201538.3 FINANCIAL RISK MANAGEMENT OBJECTIVESAs a global retailer, Dufry has worldwide activities which need to be financed in different currencies and are consequently affected by fluctuations of foreign exchange and interest rates. Dufry’s treasury manages the financing of the oper-ations through centralized credit facilities to ensure an adequate allocation of these resources and simultaneously minimize the potential currency financial risk impacts.Dufry continuously monitors the market risk, such as risks related to foreign currency, interest rate, credit, liquidity and capital. Dufry seeks to minimize the currency exposure and interest rates risk using appropriate transaction structures or alternatively, using derivative financial instruments to hedge the exposure to these risks. The treasury policy forbids entering or trading financial instruments for speculative purposes.38.4 MARKET RISKDufry’s financial assets and liabilities are mainly exposed to market risk in foreign currency exchange and interest rates. Dufry’s objective is to minimize the 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 material exposure, Dufry may use financial instruments to hedge the respective exposure.Dufry may enter into a variety of financial instruments 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 Dufry utilized foreign currency forward contracts and options for hedging purposes.183 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201538.5 FOREIGN CURRENCY RISK MANAGEMENTDufry manages the cash flow surplus or deficits in foreign currency of the opera-tions 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 nego-tiated to match the terms of the forecasted transactions.38.5.1 Foreign currency sensitivity analysisAmong various methodologies to analyze and manage risk, Dufry utilizes a system based on sensitivity analysis. 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 CHFUSDEUROGBPBRLOTHERTOTALDECEMBER 31, 2015Monetary assets 1,655.2 1,897.9 659.0 20.2 256.8 4,489.1 Monetary liabilities 3,139.5 2,130.2 1,014.1 36.0 166.2 6,486.0 Net exposure before hedging(1,484.3)(232.3)(355.1)(15.8) 90.6 (1,996.9)Hedging 929.7 – 353.5 –(101.8) 1,181.4 Net exposure after hedging(554.6)(232.3)(1.6)(15.8)(11.2)(815.5)DECEMBER 31, 2014Monetary assets 1,253.6 1,427.7 – 44.3 275.5 3,001.1 Monetary liabilities 2,317.8 1,562.3 – 72.2 163.4 4,115.7 Net exposure before hedging(1,064.2)(134.6)–(27.9) 112.1 (1,114.6)Hedging 922.0 –––(79.1) 842.9 Net exposure after hedging(142.2)(134.6)–(27.9) 33.0 (271.7)The sensitivity analysis includes all monetary assets and liabilities irrespective of whether the positions are third party or intercompany. Dufry has considered some intercompany long-term loans as net investment in foreign operations (IAS 21, paragraph 15). Consequently, the related exchange differences are presented in other comprehensive income and thereafter as translation reserve in equity.The foreign exchange rate sensitivity is calculated by aggregation of the net for-eign exchange rate exposure of Dufry entities at December 31 of the respective year. The values and risk disclosed here are the hedged and not hedged positions assuming a 5 % appreciation of the CHF against all other currencies. 184 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015A positive result indicates a profit, before tax in the consolidated income state-ment or in the hedging and revaluation reserves when the CHF strengthens against the relevant currency.IN MILLIONS OF CHF31.12.201531.12.2014Effect on the Income Statement – profit (loss) of USD 27.7 7.2 Other comprehensive income – profit (loss) of USD 46.5 46.0 Effect on the Income Statement – profit (loss) of EUR 11.6 6.7 Reconciliation to categories of financial instruments:IN MILLIONS OF CHF31.12.201531.12.2014FINANCIAL ASSETSTotal financial assets held in foreign currencies (see above) 4,489.1 3,001.1 less intercompany financial assets in foreign currencies(4,278.6)(2,758.6)Third party financial assets held in foreign currencies 210.5 242.5 Third party financial assets held in reporting currencies 615.4 573.1 Total third party financial assets 1 825.9 815.6 FINANCIAL LIABILITIESTotal financial liabilities held in foreign currencies (see above) 6,486.0 4,115.7 less intercompany financial liabilities in foreign currencies(2,868.4)(2,057.9)Third party financial liabilities held in foreign currencies 3,617.6 2,057.8 Third party financial liabilities held in reporting currencies 2,101.3 1,927.2 Total third party financial liabilities 1 5,718.9 3,985.0 1 See note 38.2 Categories of financial instruments38.5.2 Forward foreign exchange contracts and foreign exchange options at fair valueAs the management of the company actively pursues to naturally hedge the posi-tions in each operation, the policy of Dufry is to enter into foreign exchange forward and options contracts only where needed.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 observable market inputs at December 31 of each year.IN MILLIONS OF CHFCONTRACT OR UNDERLYING PRINCIPAL AMOUNTPOSITIVE FAIR VALUENEGATIVE FAIR VALUEDecember 31, 2015 273.7 1.7 1.1 December 31, 2014 13.1 0.6 0.1 185 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201538.5.3 Financial instruments at fair value through profit and lossThe Argentinian subsidiary is subject to international cash transfer restrictions. Consequently excess of cash was placed in Bonds denominated in USD to reduce the currency exposure. The changes in fair value are booked through profit and loss.Denomination: Bono de la Nacion Argentina vinculado al dolar (BONAD 16)Issuer: Argentinian GovernmentFixed interest rate: 1.75 %Maturity date: 28.10.2016Currency: Issued in USD and settled in Argentinian PesosThe movements of the listed public bonds denominated in USD are as follows:IN MILLIONS OF CHF20152014Balance at January 1––Additions 11.7 –Fair value adjustment 4.9 –Currency translation 1.1 –Balance at December 31 17.7 –The fair value of the listed public bonds is based on their current bid prices in an active market.Purchases of and proceeds from the sale of financial assets at fair value through profit and loss are presented within investing activities in the statement of cash flows.186 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201538.6 INTEREST RATE RISK MANAGEMENTDufry manages the interest rate risk through interest rate swaps and options to the extent that the hedging cannot be implemented through managing the dura-tion of the debt drawings. The levels of the hedging activities are evaluated regu-larly and may be adjusted in order to reflect the development of the various parameters. Dufry had 9 outstanding interest swaps contracts during 2015 (none in 2014).38.6.1 Interest rate swap contractsThe 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 December 31. The fair values are determined by reference to market prices or standard pricing models that used observable market inputs at December 31.IN MILLIONS OF CHFCONTRACT OR UNDERLYING PRINCIPAL AMOUNTPOSITIVE FAIR VALUENEGATIVE FAIR VALUEDecember 31, 2015 195.5 – 1.5 December 31, 2014–––The interest rate swaps settle on a monthly basis. The floating rate on the interest rate swaps is the equivalent to one month GBP LIBOR rate. Dufry will settle the difference between the fixed and the floating interest rate on a net basis.All interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are designated as cash flow hedges in order to reduce Dufry’s cash flow exposure resulting from variable interest rates on borrowings. The interest rate swaps and the interest payments on the loan occur simultane-ously and the amount accumulated in equity is reclassified to the income state-ment over the period that the floating rate interest payments on debt affect the income statement.38.6.2 Interest rate sensitivity analysisThe sensitivity analysis below has 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, Dufry’s net earnings for the year 2015 would decrease by CHF 33.2 (2014: decrease by 15.9) million.187 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201538.6.3 Allocation of financial assets and liabilities to interest classesIN %IN MILLIONS OF CHFAT DECEMBER 31, 2015Average variable interest rateAverage fixed interest rateVariable interest rateFixed interest rateTotal interest bearingNon-interest bearingTOTAL Cash and cash equivalents0.4 %17.3 % 155.2 38.7 193.9 238.6 432.5 Financial instruments at fair value through profit and loss1.8 %– 17.7 17.7 – 17.7 Trade and credit card receivables––– 132.8 132.8 Other accounts receivable7.1 % 2.9 – 2.9 130.6 133.5 Other non-current assets3.1 %0.5 % 36.4 0.4 36.8 72.6 109.4 Financial assets 194.5 56.8 251.3 574.6 825.9 Trade payables––– 546.8 546.8 Financial debt, short-term6.1 % 74.4 2.5 76.9 0.4 77.3 Other liabilities1.3 %– 1.5 1.5 777.2 778.7 Financial debt, long-term2.6 %5.0 % 2,569.0 1,744.1 4,313.1 – 4,313.1 Other non-current liabilities––– 3.0 3.0 Financial liabilities 2,643.4 1,748.1 4,391.5 1,327.4 5,718.9 Net financial liabilities 2,448.9 1,691.3 4,140.2 752.8 4,893.0 IN %IN MILLIONS OF CHFAT DECEMBER 31, 2014Average variable interest rateAverage fixed interest rateVariable interest rateFixed interest rateTotal interest bearingNon-interest bearingTOTAL Cash and cash equivalents0.0 %0.3 % 400.4 41.5 441.9 71.1 513.0 Trade and credit card receivables––– 118.7 118.7 Other accounts receivable0.0 % 10.1 – 10.1 100.2 110.3 Other non-current assets3.2 %1.1 % 8.4 25.8 34.2 39.4 73.6 Financial assets 418.9 67.3 486.2 329.4 815.6 Trade payables––– 418.4 418.4 Financial debt, short-term3.0 %3.0 % 40.5 4.7 45.2 0.4 45.6 Other liabilities1.8 %– 0.1 0.1 695.9 696.0 Financial debt, long-term2.1 %5.0 % 1,738.2 1,083.5 2,821.7 – 2,821.7 Other non-current liabilities––– 3.3 3.3 Financial liabilities 1,778.7 1,088.3 2,867.0 1,118.0 3,985.0 Net financial liabilities 1,359.8 1,021.0 2,380.8 788.6 3,169.4 188 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201538.7 CREDIT RISK MANAGEMENTCredit risk refers to the risk that counterparty may default on its contractual obligations resulting in financial loss to Dufry. Almost all Dufry sales are retail sales made against cash or internationally recog-nized 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. Dufry monitors the credit ranking of these institutions and does not expect defaults from non-performance of these counterparties.38.7.1 Maximum credit riskThe carrying amount of financial assets recorded in the financial statements, after deduction of any allowances for losses, represents Dufry’s maximum exposure to credit risk.189 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201538.8 LIQUIDITY RISK MANAGEMENTDufry evaluates this risk as the ability to settle its financial 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 31).38.8.1 Remaining maturities for non-derivative financial assets and liabilitiesThe following tables have been drawn up based on the undiscounted cash flows of financial assets and liabilities (based on the earliest date on which Dufry can receive or be required to pay). The tables include principal and interest cash flows.AT DECEMBER 31, 2015 IN MILLIONS OF CHF1 – 6 MONTHS6 – 12 MONTHS1 – 2 YEARSMORE THAN 2 YEARSTOTAL Cash and cash equivalents 434.6 0.2 –– 434.8 Financial instruments at fair value through profit and loss– 17.9 –– 17.9 Trade and credit card receivables 132.0 0.8 –– 132.8 Other accounts receivable 131.8 0.1 –– 131.9 Other non-current assets 0.4 0.8 1.0 112.5 114.7 Total cash inflows 698.8 19.8 1.0 112.5 832.1 Trade payables 546.9 ––– 546.9 Financial debt, short-term 82.7 6.2 –– 88.9 Other liabilities 776.1 ––– 776.1 Financial debt, long-term 79.7 79.8 161.0 4,856.5 5,177.0 Other non-current liabilities––– 3.0 3.0 Total cash outflows 1,485.4 86.0 161.0 4,859.5 6,591.9 AT DECEMBER 31, 2014 IN MILLIONS OF CHF1 – 6 MONTHS6 – 12 MONTHS1 – 2 YEARSMORE THAN 2 YEARSTOTAL Cash and cash equivalents 513.6 ––– 513.6 Trade and credit card receivables 117.8 0.9 –– 118.7 Other accounts receivable 109.6 0.1 –– 109.7 Other non-current assets 0.8 0.9 4.5 76.6 82.8 Total cash inflows 741.8 1.9 4.5 76.6 824.8 Trade payables 418.1 0.2 –– 418.3 Financial debt, short-term 47.1 2.3 –– 49.4 Other liabilities 695.0 0.9 –– 695.9 Financial debt, long-term 46.9 46.3 152.4 3,195.0 3,440.6 Other non-current liabilities––– 3.3 3.3 Total cash outflows 1,207.1 49.7 152.4 3,198.3 4,607.5 38.8.2 Remaining maturities for derivative financial instrumentsDufry has derivative financial instruments at year-end of net CHF 1.0 million with maturities below 6 month.190 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201538.9 LEGAL RESTRICTIONS ON MONEY TRANSFERCash and cash equivalents at the end of the reporting period include CHF 71.7 (2014: 54.9) million held by subsidiaries operating in countries with exchange controls or other legal restrictions on money transfer.38.10 OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIESDufry’s notional cash pool is operated by a major finance institute. The respective balances at the end of the period have been set-off as follows, based on enforce-able master netting agreement:IN MILLIONS OF CHFBALANCE BEFORE GLOBAL POOLINGSET-OFFNET BALANCE 31.12.2015Cash and cash equivalents 1,009.7 (577.2) 432.5 Financial debt, short-term 654.5 (577.2) 77.3 31.12.2014Cash and cash equivalents 848.5 (335.5) 513.0 Financial debt, short-term 381.1 (335.5) 45.6 191 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201539. RESTATEMENTDufry revised the preliminary values of the purchase price analysis as presented at December 31, 2014 to reflect: –Change in deferred tax calculation due to timing limitations of current income taxes in Turkey –Inclusion of income tax effect on sale of investment in associates and –Enterprise valuation of a startup operation in India after assessing properly the market.39.1 CONSOLIDATED INCOME STATEMENT IN MILLIONS OF CHFPUBLISHED 2014RESTATEMENTRESTATED* 2014CONTINUING OPERATIONSNet sales 4,063.1 – 4,063.1 Advertising income 133.5 – 133.5 Turnover 4,196.6 – 4,196.6 Cost of sales(1,733.5) 0.5 (1,733.0)Gross profit 2,463.1 0.5 2,463.6 Selling expenses(1,023.7) 0.4 (1,023.3)Personnel expenses(609.7)–(609.7)General expenses(256.4)–(256.4)Share of result of associates 2.3 – 2.3 EBITDA 1 575.6 0.9 576.5 Depreciation, amortization and impairment(249.1) 0.2 (248.9)Linearization–––Other operational result(61.1)–(61.1)Earnings before interest and taxes (EBIT) 265.4 1.1 266.5 Interest expenses(154.1)–(154.1)Interest income 5.7 – 5.7 Foreign exchange gain / (loss)(11.1)–(11.1)Earnings before taxes (EBT) 105.9 1.1 107.0 Income tax(20.3)(0.1)(20.4)Net earnings from continuing operations 85.6 1.0 86.6 DISCONTINUED OPERATIONSNet earnings from discontinued operations(0.8)–(0.8)Net earnings 84.8 1.0 85.8 ATTRIBUTABLE TOEquity holders of the parent 50.8 0.8 51.6 Non-controlling interests 34.0 0.2 34.2 EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENTBasic earnings per share 1.53 0.02 1.55 Diluted earnings per share 1.48 0.02 1.50 Weighted average number of outstanding shares in thousands33,307– 33,307 EARNINGS PER SHARE FOR CONTINUING OPERATIONSBasic earnings per share attributable to equity holders of the parent 1.55 0.02 1.57 Diluted earnings per share attributable to equity holders of the parent 1.50 0.03 1.53 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)1 EBITDA is earnings before interest, taxes, depreciation, amortization, linearization and other operational result192 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201539.2 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME IN MILLIONS OF CHFPUBLISHED 2014RESTATEMENTRESTATED* 2014Net earnings 84.8 1.0 85.8 OTHER COMPREHENSIVE INCOMEActuarial gains / (losses) on post-employment benefits(37.9)–(37.9)Income tax 4.5 – 4.5 Items not being reclassified to net income in subsequent periods, net of tax(33.4)–(33.4)Exchange differences on translating foreign operations 223.9 223.9 Net gain / (loss) on hedge of net investment in foreign operations(102.4)(102.4)Income tax on above positions 3.2 – 3.2 Items to be reclassified to net income in subsequent periods, net of tax 124.7 – 124.7 Total other comprehensive income, net of tax 91.3 – 91.3 Total comprehensive income, net of tax 176.1 1.0 177.1 ATTRIBUTABLE TOEquity holders of the parent 129.9 0.8 130.7 Non-controlling interests 46.2 0.2 46.4 Total comprehensive income attributable to equity holders of the parent 129.9 0.8 130.7 ATTRIBUTABLE TOContinuing operations 130.7 0.8 131.5 Discontinued operations(0.8)–(0.8)* Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)193 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201539.3 CONSOLIDATED STATEMENT OF FINANCIAL POSITION IN MILLIONS OF CHFPUBLISHED 31.12.2014RESTATEMENTRESTATED* 31.12.2014ASSETSProperty, plant and equipment 435.4 – 435.4 Intangible assets 4,723.4 9.8 4,733.2 Investments in associates 72.9 – 72.9 Deferred tax assets 195.9 – 195.9 Other non-current assets 106.6 – 106.6 Non-current assets 5,534.2 9.8 5,544.0 Inventories 741.2 – 741.2 Trade and credit card receivables 118.7 – 118.7 Other accounts receivable 227.2 – 227.2 Income tax receivables 11.0 – 11.0 Cash and cash equivalents 513.0 – 513.0 Current assets 1,611.1 – 1,611.1 Assets of discontinued operations held for sale 1.8 – 1.8 Total assets 7,147.1 9.8 7,156.9 LIABILITIES AND SHAREHOLDERS’ EQUITYEquity attributable to equity holders of the parent 2,292.8 0.8 2,293.6 Non-controlling interests 165.8 (6.3) 159.5 Total equity 2,458.6 (5.5) 2,453.1 Financial debt 2,821.8 – 2,821.8 Deferred tax liabilities 416.4 2.7 419.1 Provisions 96.6 12.6 109.2 Post-employment benefit obligations 37.7 – 37.7 Other non-current liabilities 3.3 – 3.3 Non-current liabilities 3,375.8 15.3 3,391.1 Trade payables 418.3 – 418.3 Financial debt 45.6 – 45.6 Income tax payables 33.8 – 33.8 Provisions 54.8 – 54.8 Other liabilities 760.2 – 760.2 Current liabilities 1,312.7 – 1,312.7 Total liabilities 4,688.5 15.3 4,703.8 Total liabilities and shareholders’ equity 7,147.1 9.8 7,156.9 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)194 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201539.4 CONSOLIDATED STATEMENT OF CASH FLOWS IN MILLIONS OF CHFPUBLISHED 2014RESTATEMENTRESTATED* 2014CASH FLOWS FROM OPERATING ACTIVITIESEarnings before taxes (EBT) 105.9 1.1 107.0 Net earnings from discontinued operations(0.8)–(0.8)Total earnings before taxes (EBT) 105.1 1.1 106.2 ADJUSTMENTS FORDepreciation, amortization and impairment 249.1 (0.2) 248.9 Loss / (gain) on sale of non-current assets(0.9)–(0.9)Increase / (decrease) in allowances and provisions(16.0)–(16.0)Loss / (gain) on unrealized foreign exchange differences 9.1 – 9.1 Other non-cash items 2.4 – 2.4 Share of result of associates(2.3)–(2.3)Interest expense 154.1 – 154.1 Interest income(5.7)–(5.7)Cash flow before working capital changes 494.9 0.9 495.8 Decrease / (increase) in trade and other accounts receivable(32.0)–(32.0)Decrease / (increase) in inventories 36.5 (0.5) 36.0 Increase / (decrease) in trade and other accounts payable(43.1)(0.4)(43.5)Dividends received from associates 0.4 – 0.4 Cash generated from operations 456.7 – 456.7 Income taxes paid(65.2)(65.2)Net cash flows from operating activities 391.5 – 391.5 CASH FLOW FROM INVESTING ACTIVITIESPurchase of property, plant and equipment (143.7)–(143.7)Purchase of intangible assets(57.0)–(57.0)Proceeds from sale of property, plant and equipment 3.1 – 3.1 Interest received 4.9 – 4.9 Business combinations, net of cash(1,124.6)–(1,124.6)Proceeds from sale of interests in subsidiaries and associates 0.2 – 0.2 Net cash flows used in investing activities(1,317.1)–(1,317.1)CASH FLOW FROM FINANCING ACTIVITIESProceeds from issue of new shares 810.0 – 810.0 Proceeds from mandatory convertible notes 275.0 – 275.0 Transaction costs for issuance of financial instruments(75.9)–(75.9)Proceeds from bank loans 1,570.8 – 1,570.8 Proceeds from issuance of notes 606.8 – 606.8 Repayment of bank loans and senior notes(1,821.7)–(1,821.7)Proceeds from / (repayment of) 3rd party loans (5.7)–(5.7)Dividends paid to non-controlling interest(39.5)–(39.5)Net purchase of treasury shares(13.8)–(13.8)Net contributions from / (purchase of) non-controlling interests 31.1 – 31.1 Interest paid (107.8)–(107.8)Net cash flows (used in) / from financing activities 1,229.3 – 1,229.3 Currency translation on cash(37.1)–(37.1)(Decrease) / increase in cash and cash equivalents 266.6 – 266.6 CASH AND CASH EQUIVALENTS AT THE– beginning of the period 246.4 – 246.4 – end of the period 513.0 – 513.0 * Based on the final assessment of the Purchase Price Allocation related to the Nuance Group, certain amounts presented in the annual report 2014 have been restated (see note 39)195 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 201540. ASSETS OF DISCONTINUED OPERATIONS HELD FOR SALEAs part of the Nuance acquisition, Dufry acquired the operations in Sydney exclu-sively with the view to its subsequent disposal.These assets are presented as held for sale following the approval of the Dufry’s management on September 9, 2014 to sell this operation. The transaction was com-pleted by end of February 2015.a) Assets of discontinued operationsIN MILLIONS OF CHF31.12.201531.12.2014Operational assets in Sydney– 1.8 In accordance with IFRS 5, the assets held for sale were written down to the value agreed with the buyer and no further costs to sell are expected.b) Cash flowsIN MILLIONS OF CHF20152014Cash flows from operating activities 2.8 (1.9)Cash flows from investing activities 0.1 –Cash flows from financing activities(2.9) 1.8 Currency translation on cash– 0.1 Total cash flows ––There are no items recognized in equity relating to the assets of discontinued operations classified as held-for-sale.196 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015MOST IMPORTANT SUBSIDIARIESH = Holding R = Retail D = Distribution CenterAS OF DECEMBER 31, 2015LOCATIONCOUNTRYTYPEOWNER-SHIP IN %SHARE CAPITAL IN THOUSANDSCURRENCYEMEA & ASIAADF Shops CJSCYerevanArmeniaR100553,834AMDDufry (Cambodia) LtdPhnom PenCambodiaR801,231USDDufry (Shanghai) Commercial Co., LtdShanghaiChinaR10019,497CNYDufry France SANiceFranceR1008,291EURHellenic Duty Free Shops SAAthensGreeceR100397,535EURPT Dufrindo InternationalBaliIndonesiaR10062USDDufrital SpAMilanItalyR60258EURDufry Maroc SARLCasablancaMoroccoR802,500MADDufry East OOOMoscowRussiaR100712USDRegstaer LtdMoscowRussiaR1003,991EURDufry D.O.O.BelgradeSerbiaR100693,078RSDDufry Thomas Julie Korea Co. LtdBusanSouth KoreaR70100,000KRWDufry Basel-Mulhouse AGBaselSwitzerlandR100100CHFDufry Sharjah FZCSharjahU. Arab. EmiratesR512,054AEDAMERICA IInterbaires SABuenos AiresArgentinaR100306USDDufry Aruba N.V.OranjestadArubaR801,900USDDuty Free Caribbean Ltd.St. MichaelBarbadosR1005,000USDInversiones Tunc SRLSanto DomingoDominican RepublicR1000USDDufry Mexico SA de CVMexico CityMexicoR10027,429USDDufry Yucatan SA de CVMexico CityMexicoR1001,141USDAlliance Duty Free, Inc.San JuanPuerto RicoR1002,213USDDufry Trinidad LtdPort of SpainTrinidad and TobagoR60392USDNavinten SAMontevideoUruguayR100126USDFlagship Retail Services IncMiamiUSAR1000USDAMERICA IIDufry do Brasil DF Shop LtdaRio de JaneiroBrazilR1003,175USDDufry Lojas Francas LtdaSao PauloBrazilR8099,745USDUNITED STATES & CANADAHudson Group Canada Inc.VancouverCanadaR1000CADDufry O’Hare T5 JVChicagoUSAR800USDHG-Multiplex-Regali Dallas JVDallasUSAR750USDHudson Las Vegas JVLas VegasUSAR730USDHG Magic Concourse TBIT JVLos AngelesUSAR700USDLAX Retail Magic 2 JVLos AngelesUSAR800USDHudson Group (HG) Retail, LLCNew JerseyUSAH / R1000USDNew Orleans Air Ventures IINew OrleansUSAR660USDAirport Management Services LLCNew YorkUSAH / R1000USDJFK Air Ventures II JVNew YorkUSAR800USDHG-KCGI-TEI JFK T8 JVNew YorkUSAR850USDHudson-NIA JFK T1 JVNew YorkUSAR900USDHudson-Retail NEU LaGuardia JVNew YorkUSAR800USD197 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015Dufry Newark IncNewarkUSAR1001,501USDAMS-BW Newark JVNewarkUSAR700USDSeattle Air Ventures IIOlympiaUSAR750USDDufry Seattle JVSeattleUSAR880USDHudson News O’Hare JVChicagoUSAR700USDHG National JVVirginiaUSAR700USDTHE NUANCE BUSINESSNuance Group (Canada) Inc.TorontoCanadaR10013,260CADNuance Group (HK) LtdHong KongChinaR1000HKDNuance-Watson (Macau) LtdMacauChinaR10049HKDNuance Group (India) Pvt. LtdBangaloreIndiaR50828,200INRNuance Group (Malta) LtdMaltaMaltaR1002,796EURLenrianta CSJCSt. PetersburgRussiaR80315EURNuance Group (Sverige) ABStockholmSwedenR100100SEKThe Nuance Group AGZurichSwitzerlandH / R10082,100CHFNet Magaza Isletm. ve Ticaret A.S.AntalyaTurkeyR1003,886EURNuance Group (UK) LtdSouthamptonUKR10050GBPNuance Group Las Vegas PartnershipLas VegasUSAR73850USDNuance Group (Australia) Pty LtdMelbourneAustraliaR100210,000AUDWORLD DUTY FREE BUSINESSWorld Duty Free Group SA *LimaPeruR1001,163USDWorld Duty Free Group Vancouver LPVancouverCanadaR1009,500CADAldeasa Chile, LtdSantiago de ChileChileR1002,517USDWorld Duty Free Group Helsinki LtdVantaaFinlandR1002,500EURWorld Duty Free Group France SNCNeuilly Sur SeineFranceR1005EURWorld Duty Free Group Germany GmbHDüsseldorfGermanyR100250EURSociedad de Distribucion Comercial Aeroportuaria de Canarias, S.L.TeldeGran CanariaR60667EURAldeasa Jamaica, LtdSt. JamesJamaicaR100280USDAldeasa Jordan Airports Duty Free Shops LtdAmmanJordanR100705USDWorld Duty Free Group SA *Kuwait CityKuwaitR1002,383KWDAldeasa Mexico, S.A de C.V.CancunMexicoR1003,766USDWorld Duty Free Group SAMadridSpainR10019,832EURAutogrill Lanka PVT LtdColomboSri LankaR10030,000LKRWorld Duty Free Group UK LtdLondonUKR100360GBPGLOBAL DISTRIBUTION CENTERSInternational Operations & Services (CH) AGBaselSwitzerlandD1005,000CHFInternational Operations & Services Corp.MontevideoUruguayD10050USDInternational Operations & Services (USA) Inc.MiamiUSAD100398USDHEADQUARTERSDufry International AGBaselSwitzerlandH1001,000CHFDufry Management AGBaselSwitzerlandH100100CHFDufry Holdings & Investments AGBaselSwitzerlandH1001,000CHFDufry Financial Services B.V.AmsterdamNetherlandsH1000EUR* Branch of World Duty Free Group SA, SpainAS OF DECEMBER 31, 2015LOCATIONCOUNTRYTYPEOWNER-SHIP IN %SHARE CAPITAL IN THOUSANDSCURRENCY198 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015199 3 Financial Report Consolidated Financial StatementsDUFRY ANNUAL REPORT 2015200 3 Financial Report Financial Statements of Dufry AGDUFRY ANNUAL REPORT 2015INCOME STATEMENTFOR THE YEAR ENDED DECEMBER 31, 2015IN THOUSANDS OF CHF20152014*Dividend income– 30,000 Financial income 11,411 9,795 Management and franchise fee income 6,175 8,867 Total income 17,586 48,662 Personnel expenses(8,659)(7,731)General and administrative expenses(4,921)(4,039)Management and franchise fee expenses(15,965)(13,704)Amortization of intangibles(5,755)(5,755)Financial expenses(1,286)(421)Expenses related with capital increase(595)(29,297)Direct taxes(8,868)(3,181)Total expenses (46,049)(64,128)(Loss) / profit for the year(28,463)(15,466)* Prior year figures were adjusted to the new structure (see note 2.2)201 3 Financial Report Financial Statements of Dufry AGDUFRY ANNUAL REPORT 2015STATEMENT OF FINANCIAL POSITIONAT DECEMBER 31, 2015IN THOUSANDS OF CHFNOTE31.12.201531.12.2014*ASSETSCash and cash equivalents 10,746 730 Current receivables third parties 41 118 Current receivables participants and bodies 1 –Current receivables subsidiaries 980 1,661 Current receivables other group companies 11 87 Prepaid expenses and accrued income 7 14 Current financial assets subsidiaries 357,000 373,000 Current assets 368,786 375,610 Investments3 4,238,415 1,892,671 Intangible assets 82,006 87,761 Non-current assets 4,320,421 1,980,432 Total assets 4,689,207 2,356,042 LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent interest bearing liabilities– 6,811 Current liabilities third parties 2,626 872 Current liabilities participants and bodies 994 815 Current liabilities subsidiaries 12,788 10,653 Current liabilities other group companies 2 13 Deferred income and accrued expenses 13,347 11,093 Current liabilities 29,757 30,257 Total liabilities 29,757 30,257 Share capital5 269,359 179,525 Legal capital reservesReserve from capital contribution5 4,290,806 2,030,305 Legal retained earningsOther legal reserves 5,927 5,927 Voluntary retained earningsResults carried forward 136,098 139,594 (Loss) / profit for the year13(28,463)(15,466)Treasury shares6(14,277)(14,100)Shareholders’ equity 4,659,450 2,325,785 Total liabilities and shareholders’ equity 4,689,207 2,356,042 * Prior year figures were adjusted to the new structure (see note 2.2)202 3 Financial Report Financial Statements of Dufry AGDUFRY ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS1. CORPORATE INFORMATIONDufry AG (the company) is a publicly listed company. The shares of the Company are listed on the Swiss Stock Exchange (SIX) in Zurich and its Brazilian Depository Receipts on the BM&FBOVESPA in Sao Paolo.Dufry AG was incorporated in 1865 and is registered with the commercial register in the canton of Basel Stadt, Switzerland.2. ACCOUNTING POLICIES2.1 BASIS OF PREPARATIONThese financial statements of Dufry AG were prepared in accordance with the requirements of the Swiss law on Accounting and Financial Reporting (32nd title of the Swiss Code of Obligations).Where not prescribed by law, the significant accounting and valuation principles applied are described below.2.2 FIRST-TIME ADOPTION OF THE NEW SWISS LAW ON ACCOUNTING AND FINANCIAL REPORTINGThe 2015 financial statements of Dufry AG are the first statements in which Dufry AG adopts the new Swiss law on Accounting and Financial Reporting (32nd title of the Swiss Code of Obligations).To ensure comparability, the previous year’s figures have been adjusted to the new presentation requirements. In particular the following positions are affected: –Treasury shares are restated as a deduction in equity. The reserve for treasury shares were released accordingly.203 3 Financial Report Financial Statements of Dufry AGDUFRY ANNUAL REPORT 20152.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESFinancial AssetsFinancial assets include loans. A valuation adjustment reserve has not been accounted for. Loans granted in foreign currencies are translated at the rate at the balance sheet date, whereby unrealized losses are recorded. Unrealized profits are not recognized in the income statement but deferred within accrued liabilities.Treasury SharesTreasury shares are recognized at acquisition cost and deducted from shareholders’ equity at the time of acquisition. In case of a resale, the gain or loss is recognized through the income statement as financial income or financial expenses.Intangible assetsIntangible assets generated internally are capitalized if they meet the following conditions cumulatively at the date of recognition: –The intangible assets generated internally are identifiable and controlled by the entity; –the intangible assets generated internally will generate a measurable benefit for the entity for more than one year; –the expenses incurred in the creation of the intangible assets generated internally can be separately recognized and measured; –it is likely that the resources required to complete and market or use the intangible assets for the entity’s own purposes are available or will be made available.Intangible assets are amortized using the straightline method. As soon there are indicators that book values may be overstated, these are reviewed and, if necessary, adjusted.Share-based paymentsShould treasury shares be used for sharebased payment programs for Board members, the difference between the acquisition costs and any consideration paid by the employees at grant date is recognized as personnel expenses.Current interest-bearing liabilitiesInterestbearing liabilities are recognized in the balance sheet at nominal value.Exchange rate differencesExcept for investments in subsidiaries which are translated at historical rates, all assets and liabilities denominated in foreign currencies are translated into Swiss francs (CHF) using yearend exchange rates. Realized exchange gains and losses arising from these as well as those from business transactions denominated in foreign currencies are recorded in the income statement. Net unrealized exchange losses are recorded in the income statement; net unrealized gains, however, are deferred within accrued liabilities.Foregoing a cash flow statement and additional disclosures in the notesAs Dufry AG has prepared its consolidated financial statements in accordance with a recognized accounting standard (IFRS), it has decided to forego presenting additional information on interestbearing liabilities and audit fees in the notes as well as a cash flow statement in accordance with the law.204 3 Financial Report Financial Statements of Dufry AGDUFRY ANNUAL REPORT 20153. SIGNIFICANT INVESTMENTS SHARE IN CAPITAL AND VOTING RIGHTSSHARE CAPITALIN THOUSANDS OF CHF2015201420152014Dufry International AG, Switzerland100 %100 % 1,000 1,000 Dufry Management AG, Switzerland100 %100 % 100 100 Dufry Corporate AG, Switzerland100 %100 % 100 100 Dufry Holdings & Investments AG, Switzerland100 %100 % 1,000 1,000 Total 4. SIGNIFICANT SHAREHOLDERS’ PARTICIPATION IN PERCENTAGE (%) OF OUTSTANDING REGISTERED SHARES31.12.201531.12.2014Group of shareholders consisting of various companies and legal entities representing the interests of Andrés Holzer Neumann, Julián Díaz González, Juan Carlos Torres Carretero, George Koutsolioutsos, James S. Cohen, Nucleo Capital Co-Investment Fund I Ltd. and James S. Cohen Family Dynasty Trust 20.50 %26.80 %Temasek Holdings (Private) Ltd.8.55 %–Government of Singapore7.79 %–State of Qatar6.92 %–Black Rock, Inc.3.06 %–Credit Suisse Group–7.10 %Group of shareholders represented by Tarpon Gestora de Recursos S.A.–3.13 %T. Rowe Price Associates, Inc.–3.01 %205 3 Financial Report Financial Statements of Dufry AGDUFRY ANNUAL REPORT 20155. SHARE CAPITAL5.1 ORDINARY SHARES IN THOUSANDS OF CHFNUMBER OF SHARESSHARE CAPITALRESERVE FROM CAPITAL CONTRIBUTION *Balance at January 1, 2014 30,905,056 154,525 1,245,305 Issue of shares 5,000,000 25,000 785,000 Balance at December 31, 2014 35,905,056 179,525 2,030,305 Conversion of mandatory convertible notes 1,809,188 9,046 231,073 Issue of shares 16,157,463 80,788 2,119,213 Reclassification to retained earnings––(8,064)Share issuance costs not recognized as capital contribution––(81,721)Balance at December 31, 2015 53,871,707 269,359 4,290,806 * The amount of the reserve from capital contribution (share premium) is subject to a formal confirmation by the Swiss tax authorities. As of December 31, 2015, CHF 2,022,241,801 of the total amount disclosed are recognized by the Swiss tax authorities (2014: CHF 1,245,305,293).The General Meeting held on April 29, 2015, approved the increase of the share capital of Dufry from currently CHF 179,525,280 by up to CHF 157,142,860 to a maximum amount of up to CHF 336,668,140 through the issuance of fully paid-in new registered shares with a par value of CHF 5 each.On June 18, 2015, Dufry AG issued 16,157,463 new registered shares with a nomi-nal value of CHF 80,788 million, representing 45 % additional shares. After this share issuance and including the shares created by the conversion of the Manda-tory Convertible Notes (see comment below), the share capital of Dufry AG amount to CHF 269,358,535. The offer price for the rights offering as well as for the com-mitted investors was set at CHF 136.16 per new share. In the rights offering, 9,744,390 new shares were subscribed for by existing shareholders, while 6,413,073 new shares were purchased by committed investors, resulting in gross proceeds of CHF 2,200 million.During June 2015, the Mandatory Convertible Notes amounting to CHF 262,800 were converted into 1,809,188 ordinary registered shares of Dufry AG at a conver-sion price of CHF 152 per share. Dufry issued the shares out of the existing condi-tional share capital (see note 5.2).On June 26, 2014, the Extraordinary General Meeting approved the increase of the share capital of Dufry from CHF 154,525,280 by up to CHF 27,269,160 to a maxi-mum amount of up to CHF 181,794,440 through the issuance of fully paid-in new registered shares with a par value of CHF 5 each.On July 8, 2014, Dufry AG issued 5,000,000 new registered shares representing 16 % additional shares. The price obtained during the public offering was CHF 162.00 per share. During the rights offering, 3,623,976 shares were subscribed by existing shareholders, while 1,376,024 shares were purchased by third party investors resulting in a gross proceeds of CHF 810.0 million. The trading of the shares com-menced on July 9, 2014. The share issuance costs related with this transaction of CHF 29.3 million have been expensed.206 3 Financial Report Financial Statements of Dufry AGDUFRY ANNUAL REPORT 20155.2 CONDITIONAL SHARE CAPITAL IN THOUSANDS OFSHARESCHFBalance at January 1, 2014 2,698 13,488 Balance at December 31, 2014 2,698 13,488 Utilization June, 2015(1,809)(9,046)Balance at December 31, 2015 888 4,442 6. TREASURY SHARES IN THOUSANDS OFSHARESCHFBalance at January 1, 2014 120.3 18,444 Assigned to holders of RSU Awards 2013(117.1)(18,327)Share purchases 340.1 54,102 Share sales(249.1)(40,303)Revaluation– 183 Balance at December 31, 2014 94.2 14,100 Share purchases 0.0 1 Revaluation– 177 Balance at December 31, 2015 94.2 14,277 7. FULL-TIME EQUIVALENTSThe annual average number of full-time equivalents (FTE) for the reporting year, as well as the previous year, did not exceed 9 FTE’s.8. PLEDGED ASSETSIn 2015 and 2014, Dufry AG had no pledged assets.207 3 Financial Report Financial Statements of Dufry AGDUFRY ANNUAL REPORT 20159. GUARANTEE COMMITMENT REGARDING SWISS VALUE ADDED TAX (VAT)The following companies form a tax group for the Swiss Federal Tax Administra-tion – Main division VAT:DUFRY International AGDUFRY Management AGInternational Operations & Services (CH) AGDUFRY Corporate AGDUFRY Samnaun AGDUFRY Holdings & Investments AGDUFRY Participations AGDUFRY AGDUFRY Russia Holding AGDUFRY Altay AGDUFRY Trading AGThe Nuance Group AGDUFRY Basel Mulhouse AGThe Nuance Group (International) AG10. CONTINGENT LIABILITIESDufry AG jointly and severally with Dufry Holdings & Investments AG, Dufry Inter-national AG, Hudson Group (HG), Inc. and Dufry Financial Services B.V. guaranteed the following credit facility:DRAWN AMOUNT IN CHFIN MILLIONS OFMATURITYCOUPON RATECURRENCYNOMINAL IN LOCAL CURRENCY31.12.201531.12.2014MAIN BANK CREDIT FACILITIESCommitted 5-year term loan31.07.2019USD 1,010.0 1,009.7 1,003.8 Committed 5-year term loan31.07.2019EUR 500.0 543.2 601.4 Committed 4-year term loan31.07.2019EUR 800.0 835.9 –5-year revolving credit facility31.07.2019CHF 900.0 181.5 157.4 Subtotal 2,570.3 1,762.6 SENIOR NOTESSenior notes15.10.20205.50 %USD 500.0 499.8 496.9 Senior notes15.07.20224.50 %EUR 500.0 543.2 601.4 Senior notes01.08.20234.50 %EUR 700.0 760.4 –Subtotal 1,803.4 1,098.3 GUARANTEE FACILITYCommitted 5-year term guarantee line Unicredit AG09.09.2019EUR 250.0 103.7 278.5 Subtotal 103.7 278.5 Total 4,477.4 3,139.4 208 3 Financial Report Financial Statements of Dufry AGDUFRY ANNUAL REPORT 201511. PARTICIPATIONS OF THE MEMBERS OF THE BOARD OF DIRECTORS AND THE GROUP EXECUTIVE COMMITTEE IN DUFRY AGThe following members of the Board of Directors or of the Group Executive Com-mittee of Dufry AG (including related parties) hold directly or indirectly shares or share options of the Company as at December 31, 2015 or December 31, 2014:31.12.201531.12.2014IN THOUSANDSSHARESFINANCIAL IN-STRUMENTS 1PARTICIP.SHARESFINANCIAL IN-STRUMENTS 1PARTICIP.MEMBERS OF THE BOARD OF DIRECTORSJuan Carlos Torres Carretero, Chairman 982.2 257.1 2.38 % 743.0 164.4 2.53 %Andrés Holzer Neumann, Vice-Chairman 4,291.3 463.6 9.13 % 3,708.8 468.2 11.63 %Jorge Born, Director 21.9 30.9 20.10 %– 30.92 0.09 %James S. Cohen, Director 2,059.3 –3.96 % 2,089.0 93.4 6.08 %Julián Diáz Gonzalez, Director and CEO 284.5 92.6 0.72 % 286.9 43.8 0.92 %George Koutsolioutsos, Director 3 1,608.4 200.0 3.47 % 1,536.1 272.3 5.04 %Joaquin Moya-Angeler Cabrera, Director––0.00 % 6.0 –0.02 %Total Board of Directors 9,247.6 1,044.2 19.76 % 8,369.8 1,073.0 26.31 %MEMBERS OF THE GROUP EXECUTIVE COMMITTEEJulián Diáz Gonzalez, CEO 284.5 92.6 0.72 % 286.9 43.8 0.92 %Andreas Schneiter, CFO 6.1 –0.02 % 6.1 –0.02 %José Antonio Gea, GCOO 4.1 –0.01 % 4.1 –0.01 %Luis Marin, CCO 1.5 –0.00 % 1.5 –0.00 %Xavier Rossinyol, COO Region EMEA & Asia 4n / a n / a n/a 27.0 –0.08 %José C. Rosa, COO America II 5n / an / a n / a 4.6 6 –0.01 %Joseph Didomizio, COO United States & Canada––0.00 % 9.5 –0.03 %Total Group Executive Committee 296.2 92.6 0.73 % 339.7 43.8 1.07 %1 The detailed terms of the various financial instruments disclosed above are as disclosed to the SIX Swiss Exchange and published on July 9, 2015, for the year 2015 and on November 26, 2014, for the year 2014.2 European Capped Calls on 30,940 shares of Dufry AG. The transaction is divided into 5 tranches of 6,188 shares each, which expire on 29.07.2019, 30.07.2019, 31.07.2019, 04.08.2019 and 05.08.2019, respectively. Each tranche is automatically exercised, and the differences are to be cash settled. The strike price for each option is CHF 160, and the cap is CHF 260 per option.3 Director as of April 29, 20144 Member until March 31, 20155 Member until October 31, 20156 Includes 4.5 shares and 0.1 BDRsAt December 31, 2015, the Dufry share had a market value of CHF 120 (2014: 149) each.209 3 Financial Report Financial Statements of Dufry AGDUFRY ANNUAL REPORT 2015In addition to the above, the shareholders’ group consisting of different legal entities controlled by Andrés Holzer Neumann, Juan Carlos Torres Carretero, Julián Díaz González, James S. Cohen, James S. Cohen Family Dynasty Trust and George Koutsolioutsos holds sale positions of 8.81 % through options (4,589,120 voting rights) as of December 31, 2015 (as of December 31, 2014: sales positions of 10.80 % through options (3,877,480 voting rights)). The detailed terms of these financial instruments are as disclosed to the SIX Swiss Exchange and published on July 9, 2015 (for sale position as of December 31, 2014: publication of disclosure notice on November 26, 2014).Disclosure notices are available on the SIX Swiss Exchange website:https://www.six-exchange-regulation.com/en/home/publications/ significant-shareholders.html12. OPTIONS ON SHARES FOR THE GROUP EXECUTIVE COMMITTEEMembers of the Group Executive Committee received CHF 57.0 (2014: 51.5) thou-sands stock options with a value of CHF 6,288 (2014: 5,371) thousands.13. APPROPRIATION OF AVAILABLE EARNINGS IN THOUSANDS OF CHF20152014Result carried forward 124,128 121,486 Movement in reserves for treasury shares– 3,832 Reclassification former reserves from treasury shares to retained earnings– 14,276 Other 3,906 –Reclassification from reserve from capital contribution (see note 5.1) 8,064 –(Loss) / profit for the year(28,463)(15,466)Voluntary retained earnings at December 31 107,635 124,128 To be carried forward 107,635 124,128 210 3 Financial Report Financial Statements of Dufry AGDUFRY ANNUAL REPORT 2015211 3 Financial Report Financial Statements of Dufry AGDUFRY ANNUAL REPORT 2015The 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 2016 please refer to pages 246 / 247 of this Annual Report. 212 3 Financial Report Financial Statements of Dufry AGDUFRY ANNUAL REPORT 2015CORPORATE GOVERNANCE 1. GROUP STRUCTURE AND SHAREHOLDERS 1.1 GROUP STRUCTURE In fiscal year 2015, the Group was operationally struc- tured in 4 regions, with the newly acquired businesses of Nuance (acquired in 2014) and World Duty Free (ac- quired in 2015) being reported as additional separate entities, as shown in Note 5 “Segment information” of the Consolidated Financial Statements on page 119. As of January 1, 2016, the Group operates in 5 geo- graphic divisions as shown in the management orga- nizational chart on page 16 of this Annual Report. INTRODUCTION Listed company COMPANY This Report is prepared in accordance with the Cor- porate Governance Directive (DCG) of the SIX Swiss Exchange. All information within this Corporate Gov- ernance Report and within the Remuneration Report (see page 233) refers to the Company Organization, Internal Regulations and Articles of Incorporation that were in effect as of December 31, 2015 (if not spe- cifically mentioned otherwise). Dufry AG, Brunngässlein 12, 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 Dufry is committed to good Corporate Governance, Openness and Transparency. MARKET CAPITALIZATION CHF 6,464,604,840 as of December 31, 2015 PERCENTAGE OF SHARES HELD BY DUFRY AG 0.18 % of Dufry AG share capital as of December 31, 2015 SECURITY NUMBERS Registered shares: ISIN-Code CH0023405456, Swiss Security-No. 2340545 Ticker Symbol DUFN Brazilian Depositary Receipts (BDRs): ISIN-Code BRDAGBBDR008 Ticker Symbol DAGB33 The Articles of Incorporation are available on the Company website www.dufry.com section Investors – Articles of Incorporation. Non-listed companies For a table of the operational non-listed consolidated entities please refer to page 196 in the section Finan- cial Statements of this Annual Report*. Direct link: http://www.dufry.com/en/Investors/ Articlesofincorporation/index.htm * Including the company names, locations, percentage of shares held, share capital. 213 4 Governance ReportDUFRY ANNUAL REPORT 20151.2 SIGNIFICANT SHAREHOLDERS Pursuant to the information provided to the Company by its shareholders in compliance with the Swiss Stock Exchange Act during 2015, the following significant shareholders disclosed positions of more than 3 % of the voting rights as of December 31, 2015 (1). SHAREHOLDER Group of shareholders consisting of various companies and legal entities including Travel Retail Investment S.C.A., Folli Follie Commercial Industrial and Technical S.A. and Hudson Media, Inc., such group representing the interests of Andrés Holzer Neumann, Julián Díaz González, Juan Carlos Torres Carretero, James S. Cohen, James S. Cohen Family Dynasty Trust, Dimitrios Koutsolioutsos and Nucleo Capital Co-Investment Fund I Ltd. (4) Morgan Stanley Group (5) Temasek Holdings (Private) Limited (6) Government of Singapore (7) State of Qatar (8) BlackRock, Inc. (9) DISCLOSURE OF PURCHASE POSITIONS DISCLOSURE OF SALE POSITIONS (3) Through registered shares Through other financial instruments (2) Total Total 20.5 % 0.27 % 8.55 % 7.79 % 6.92 % 3.06 % 1.94 % 9.76 % – – – 0.00001 % 22.44 % 10.03 % 8.55 % 7.79 % 6.92 % 3.06 % 8.86 % 3.68 % – – – 1.76 % (1) The percentage of voting rights has to be read in context with the g) Dimitrios Koutsolioutsos holds his shares and financial instruments relevant and applicable stock exchange and disclosure rules. 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 Article 120 of the Financial Market Infrastructure Act is crossed. Percentages have been calculated on the basis of the number of shares recorded in the Commercial Register. (2) Financial instruments such as conversion and share purchase rights, granted (written) share sale rights. (3) Share sale rights (especially put options) and granted (written) con- version and / or share purchase rights as well as financial instruments that provide for or permit cash settlement as well as other differential transactions (e.g. contracts for difference and / or financial futures). (4) Shares held through: a) Travel Retail Investment S.C.A. (Luxembourg / Grand Duchy of Luxembourg) holds shares and financial instruments. Shares in Travel Retail Investment S.C.A. are held by: 1) Petrus Pte. Ltd. (Singapore), which in turn is held by The Bingo Trust (New Zealand). Travel Retail S.á.r.l. is the general partner and sole manager of Travel Retail Invest- ment S.C.A. Petrus Pte. Ltd. holds the majority of the shares in Travel Retail Investment S.C.A. and Travel Retail S.á.r.l. Mr. Andrés Holzer Neumann is the settlor of The Bingo Trust and exercises indirect control over the trust. 2) Witherspoon Investments LLC (Wilmington, DE / USA), which is held directly by Mr. Juan Carlos Torres Carretero. 3) Mr. Julián Díaz González (Lachen / Switzerland). b) Mr. Julián Díaz González holds certain shares directly. c) Mr. Juan Carlos Torres Carretero holds certain shares directly. d) Petrus Pte. Ltd., Grupo Industrial Omega, S.A. de C.V. (Cuidad de Mexico / Mexico), various companies held directly by Grupo Industrial Omega, S.A. de C.V., and Consorcio Ann Taylor S.A. de C.V., all of which are controlled by Mr. Andrés Holzer Neumann. Mr. James S. Cohen holds his shares partly directly, partly through Hudson Media, Inc. (East Rutherford, NJ / USA), which he controls. James S. Cohen Family Dynasty Trust (East Rutherford, NJ / USA) holds all its shares directly. Mr. James S. Cohen is the Grantor of this trust, but is not a beneficiary of the trust. e) f) indirectly through Folli Follie Commercial Industrial and Technical S.A. (Agios Stephanos / Greece), which he controls, and Strenaby Finance Ltd. (British Virgin Islands), fully controlled by Folli Follie Commercial Industrial and Technical S.A. Dimitrios Koutsolioutsos holds shares in Folli Follie Commercial Industrial and Technical S.A. through Cordial Worldwide Ltd (British Virgin Islands), which he fully owns. Nucleo Capital Co-Investment Fund I Ltd (Grand Cayman / Cayman Islands), which holds the shares directly. h) (5) Morgan Stanley, The Corporation Trust Company (Wilmington, DE / USA) holds the shares and financial instruments indirectly through several subsidiaries. (6) Shares held through Kinder Investments Pte. Ltd. (Singapore). The indirect holder of the shares is Temasek Holdings (Private) Limited (Singapore). Temasek Holdings (Private) Limited is owned by the Minis- ter of Finance of the Republic of Singapore. Kinder Investment Pte. Ltd. is wholly owned by Tembusu Capital Pte. Ltd., which in turn is wholly owned by Temasek Holdings (Private) Limited (Singapore). (7) Shares held through GIC Private Limited (“GIC”) (Singapore) and Purple Green Investment Pte. Ltd. (Singapore). Both companies are owned (directly and indirectly) by the Government of Singapore (“GoS”). GIC is wholly owned by the GoS and manages the reserves of Singapore. GIC acts as the fund manager for GoS and the Monetary Authority of Singapore. Purple Green Investment Pte. Ltd. is an invest- ment holding company wholly owned by GIC Blue Holdings Pte. Ltd., which in turn is wholly owned by GIC (Ventures) Pte. Ltd., which in turn is wholly owned by the GoS. Purple Green Investment Pte. Ltd. is managed by GIC. (8) Shares held through Qatar Holding LLC. The indirect holder of the shares is the State of Qatar (Qatar). Qatar Holding LLC is owned by the Qatar Investment Authority, which was founded and is owned by the State of Qatar. (9) BlackRock, Inc. (New York, NY/USA) holds the shares, financial instruments and sale positions (contracts of difference) indirectly through several subsidiaries. 214 4 Governance ReportDUFRY ANNUAL REPORT 2015Further details regarding these shareholders and shareholder groups as well as additional information regarding the individual disclosures notices in 2015 are available on the website of SIX Swiss Exchange on: https://www.six-exchange-regulation.com/en/home/ publications/significant-shareholders.html Shareholders agreements The group of shareholders consisting of various com- panies and legal entities representing the interests of Andrés Holzer Neumann, Julián Díaz González, Juan Carlos Torres Carretero, James S. Cohen, James S. Cohen Family Dynasty Trust, Dimitrios Koutsolioutsos and Nucleo Capital Co-Investment Fund I Ltd have four different shareholders agreements. Shareholders agreement among Petrus Pte. Ltd., Wither- spoon Investment LLC, Mr. Díaz González, Mr. Torres and Travel Retail S.à.r.l. 1.3 CROSS-SHAREHOLDINGS Dufry AG has not entered into cross-shareholdings with other companies in terms of capital sharehold- ings or voting rights in excess of 5 %. 2. CAPITAL STRUCTURE 2.1 SHARE CAPITAL As of December 31, 2015 the Company’s capital struc- ture is as follows: ORDINARY SHARE CAPITAL CHF 269,358,535 (nominal value) divided in 53,871,707 fully paid registered shares with nominal value of CHF 5 each CONDITIONAL SHARE CAPITAL CHF 4,442,160 (nominal value) divided in 888,432 fully paid registered shares with nominal value of CHF 5 each Shareholders agreement among Travel Retail Invest- ment S.C.A., James S. Cohen, James S. Cohen Family Dynasty Trust, and Hudson Media, Inc. AUTHORIZED SHARE CAPITAL None Shareholders agreement between Travel Retail Invest- ment S.C.A. and Folli Follie Commercial Industrial and Technical S.A. 2.2 DETAILS TO CONDITIONAL AND AUTHORIZED SHARE CAPITAL Shareholders agreement among Travel Retail Invest- ment S.C.A., Mr. Torres and Nucleo Capital Co-Invest- ment Fund I Ltd. Nucleo Capital Ltda. is only a party to that agreement as investment manager of Nucleo Capital Co-Investment Fund I Ltd. Travel Retail Investment S.C.A. (interests of Messrs. Holzer Neumann, Torres and Díaz González), Mr. Torres, Nucleo Capital Co-Investment Fund I Ltd, Nucleo Capital Ltda., James S. Cohen, James S. Cohen Family Dynasty Trust, Hudson Media, Inc. (interests of Mr. Cohen) and Folli Follie Commercial Industrial and Technical S.A. (interests of Mr. Koutsolioutsos) entered into an additional agreement that limits the number of equity securities these parties and their affiliates may hold in Dufry AG to prevent that a mandatory offer thresh- old is crossed, and provides for an automatic exclu- sion of shareholders from the group reported herein in case of a breach of such a limit. Under this additional agreement, Nucleo Capital Ltda. has to make sure that other funds for which it is the investment manager comply with such limit as well. Conditional share capital Article 3bis of the Articles of Incorporation, dated June 24, 2015, 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 conver- sion and / or option rights granted in connection with the issuance of newly or already issued con- vertible 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 share- holders shall be excluded in connection with the issuance of convertible debentures, debentures with option rights or other financing instruments. The then current owners of conversion and / or option rights shall be entitled to subscribe for the new shares. 3. The acquisition of shares through the exercise of conversion and / or option rights and each subse- quent transfer of the shares shall be subject to the restrictions set forth in Article 5 of these Articles of Incorporation. 215 4 Governance ReportDUFRY ANNUAL REPORT 20154. 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 preferential subscription rights seems to be the most appropriate 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 par- ticipations or new investments of the Company. 5. If advance subscription rights are denied by the Board 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 is- sued at the relevant market conditions. Authorized share capital As of December 31, 2015, the Company has no autho- rized share capital. 2.3 CHANGES IN CAPITAL OF DUFRY AG NOMINAL SHARE CAPITAL December 31, 2013 December 31, 2014 December 31, 2015 CONDITIONAL SHARE CAPITAL December 31, 2013 December 31, 2014 December 31, 2015 AUTHORIZED SHARE CAPITAL December 31, 2013 December 31, 2014 December 31, 2015 CHF 154,525,280 CHF 179,525,280 CHF 269,358,535 CHF CHF CHF 13,488,100 13,488,100 4,442,160 CHF 7,331,940 None None Changes in capital in 2013 On December 13, 2013, Dufry issued 1,231,233 shares with nominal value of CHF 5 from the authorized capi- tal. Hence, the existing authorized share capital de- creased from CHF 13,488,105 to CHF 7,331,940, and the ordinary share capital increased from CHF 148,369,115 to CHF 154,525,280. Changes in capital in 2014 At the Extraordinary General Meeting of Shareholders on June 26, 2014, shareholders approved the Board of Directors’ proposal to increase the ordinary share capital of the Company from CHF 154,525,280 by up to CHF 27,269,160 to a maximum amount of up to CHF 181,794,440. This proposal by the Board of Direc- tors was made in connection with the acquisition of The Nuance Group. On July 8, 2014, the Company is- sued 5,000,000 shares with nominal value of CHF 5, and the ordinary share capital increased from CHF 154,525,280 to CHF 179,525,280. Changes in capital in 2015 At the Ordinary General Meeting of Shareholders on April 29, 2015, shareholders approved the Board of Di- rectors’ proposal to increase the ordinary share cap- ital of the Company from CHF 179,525,280 by up to CHF 157,142,860 to a maximum amount of up to CHF 336,668,140. This proposal by the Board of Direc- tors was made in connection with the acquisition of the World Duty Free Group. In June 2015, Mandatory Convertible Notes matured and were converted into 1,809,188 shares with nomi- nal value of CHF 5. On June 18, 2015, the Company is- sued 16,157,463 shares with nominal value of CHF 5 in connection with the capital increase mentioned above. From these two transactions, the ordinary share cap- ital of the Company increased from CHF 179,525,280 to CHF 269,358,535. The conditional share capital de- creased (due to the conversion of the Mandatory Con- vertible Notes) from CHF 13,488,100 to CHF 4,442,160. Note that the additional 1,809,188 shares, while validly issued, were not yet reflected in the Commercial Reg- ister as of December 31, 2015 (total number of shares as per the Commercial Register was 52,062,519). In line with Art. 653h of the Swiss Code of Obligations, this registration will occur in the course of March 2016, to reflect the total amount of 53,871,707. 216 4 Governance ReportDUFRY ANNUAL REPORT 20152.4 SHARES As of December 31, 2015, the share capital of Dufry AG is divided into 53,871,707 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 its holder to one vote. The Company maintains a share register showing the name and address of the share- holders or usufructuaries. Only persons registered as shareholders or usufructuaries of registered shares in the share register shall be recognized as such by the Company. 2.5 PARTICIPATION CERTIFICATES AND PROFIT SHARING CERTIFICATES The Company has not issued any non-voting equity securities, such as participation certificates (“Par- tizipationsscheine”) 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 share- holders 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 reg- istered 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 reg- istered in the share register with the right to vote if the nominee discloses the names, addresses and number of shares of the persons for whose account it holds 0.2 % or more of the registered share capi- tal as set forth in the commercial register. Nominees within the meaning of this provision are persons who do not explicitly declare in the request for registra- tion to hold the shares for their own account and with whom the Board of Directors has entered into a corresponding agreement (see also Article 5 of the Articles of Incorporation). Nominees are only enti- tled 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 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 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 partner- ships who act in concert to circumvent the regula- tions 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 regis- tration 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 en- tries occurred in consequence of false statements by the purchaser. The purchaser must be informed immediately of the deletion. 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 Unibanco 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 Mellon, in London (“Custodian”). BDR holders do not own, from a legal point of view, the Dufry AG shares underlying their BDRs. As a con- sequence, BDR holders are prevented from directly exercising 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 General Meetings of the Company. However, BDR holders are entitled to instruct the Depositary Insti- tution to vote the Dufry AG shares underlying their BDRs, according to the instructions sent to them by the Depositary Institution. To facilitate voting by BDR holders, the Company en- tered into arrangements with the Depositary Institu- tion and the Custodian to enable, by way of exception, registration of The Bank of New York Mellon in the share register as nominee with voting rights for the 217 4 Governance ReportDUFRY ANNUAL REPORT 2015number of registered shares corresponding to the to- tal number of outstanding BDRs. Otherwise, no excep- tions 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 In- corporation must convert their BDRs into shares of Dufry AG and ask to be registered in the share register of the Company, pursuant to Article 5 of the Compa- ny’s Articles of Incorporation. Required quorums for a change of the limitations of transferability A change of the limitations on the transfer of registered shares or the removal of such limitations requires 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. 2.7 CONVERTIBLE BONDS AND OPTIONS As of December 31, 2015, there are no outstanding bonds that are convertible into, or warrants or options to acquire shares issued by or on behalf of the Com- pany. Dufry has a Performance Share Unit (PSU) plan, the essentials of which are disclosed in the “Remuner- ation Report” on page 233 ff. 218 4 Governance ReportDUFRY ANNUAL REPORT 20153. BOARD OF DIRECTORS 3.1 MEMBERS OF THE BOARD OF DIRECTORS NAME PROFESSION NATIONALITY POSITION WITH DUFRY DATE OF FIRST ELECTION Juan Carlos Torres Carretero Executive at Advent International Spanish Chairman Andrés Holzer Neumann President of Grupo Industrial Omega Mexican Vice-Chairman CEO of Bomagra S.A. Argentinian Director French American Spanish Brazilian Greek Spanish Director Director Director, CEO Director Director Director 2003 2004 2010 2005 2009 2013 2010 2014 2005 OTHER POSITIONS WITH DUFRY AC ¹ NRC ² AC ¹ | NRC ², ³ NRC ² NRC ² None AC ¹, ³ None AC ¹ Jorge Born Xavier Bouton James S. Cohen Consultant CEO of Hudson Media Inc Julián Díaz González CEO of Dufry AG José Lucas Ferreira de Melo Consultant George Koutsolioutsos CEO of Folli Follie Group Joaquín Moya-Angeler Cabrera Consultant ¹ AC: Audit Committee ² NRC: Nomination and Remuneration Committee ³ Committee Chairman 3.2 EDUCATION, PROFESSIONAL BACKGROUND, OTHER ACTIVITIES AND FUNCTIONS JUAN CARLOS TORRES CARRETERO Chairman, born 1949 ANDRÉS HOLZER NEUMANN Vice-Chairman, born 1950 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 man- agement operating experience. 1988 Joined Advent International, a private equity firm, in Boston as a partner. 1991 – 1995 Partner at Advent International in Madrid. Since 1995 Managing Director and Senior Partner in charge of Advent International Corporation’s investment activities in Latin America. Current Board Mandates Dufry AG, Latin American Airport Holding, Ltd., Aeropuertos Dominicanos Siglo XXI, S.A., TCP Participações S.A., InverCap Holdings, S.A. de C.V., Grupo Biotoscana, S.L.U. Graduate of Boston University, holds an MBA from Columbia University. B.S. in economics from the Wharton School of the University of Pennsylvania. Professional Background 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 Metro- politano Inmobiliario, S.A. de C.V., Inmobiliara Coapa Larca, S.A. de C.V., Inmobiliara Castel- lanos, S.A. de C.V., and Negocios Creativos, S.A. de C.V. Current Board Mandates Dufry AG, Latin American Airport Holding, Ltd. and Opequimar, S.A. de C.V. 2001 – 2010 Deputy Chairman of Bunge Ltd. 1992 – 1997 Head of Bunge’s European opera- tions. 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 Executive Officer of Bomagra S.A., Argentina. Current Board Mandates Dufry AG, Hochschild Mining, Ltd., Latin American Executive Board at Wharton Busi- ness School, Board of 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. 219 4 Governance ReportDUFRY ANNUAL REPORT 2015XAVIER BOUTON Director, born 1950 JAMES S. COHEN Director, born 1958 JULIÁN DÍAZ GONZÁLEZ Director, Chief Executive Officer, born 1958 Education Education 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 General 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) (Chairman of the Supervisory Board). Bachelor’s degree in economics from the Whar- ton School of the University of Pennsylvania. Degree in business administration from Univer- sidad Pontificia Comillas I.C.A.D.E., de Madrid. 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. 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 Gen- eral Manager of Latinoamericana Duty-Free, S.A. de C.V. Since 2004 Chief Executive Officer at Dufry AG. Current Board Mandates Dufry AG, Distribuidora Internacional de Ali- mentacion, S.A. (DIA). JOAQUÍN MOYA-ANGELER CABRERA Director, born 1949 Education Master’s degree in mathematics from the University of Madrid, diploma in economics and forecasting from the London School of Eco- nomics and Political Science and an MBA from MIT’s Sloan School of Management. JOSÉ LUCAS FERREIRA DE MELO Director, born 1956 Professional Background Education Mr. Moya-Angeler has focused his career on the technology and real estate industries, including having founded a number of companies. He has been the Chairman of the Board of various companies: IBM Spain (1994 – 1997), Leche Pas- cual (1994 – 1997), Meta4 (1997 – 2002), TIASA (1996 – 1998), and Hildebrando (2003 – 2014). To date Chairman of Redsa (since 1997), Presenzia and Pulsar Technologies (since 2002), La Quinta Real Estate (since 2003), Inmoan (since 1989), Avalon Private Equity (since 1999) and Corpo- ración Tecnológica Andalucía (since 2005). Current Board Mandates Dufry AG, La Quinta Group (Chairman), Palamon Capital Partners, Corporación Tecnológica Andalucia (Chairman), Board of Trustees of the University of Almeria (Chairman), Fundación Mediterránea (Honorary Chairman), Redsa S.A. (Chairman), Inmoan SL (Chairman), Avalon Pri- vate Equity (Chairman), Spanish Association of Universities Governing Bodies (Honorary Chair- man), Calidad Pascual (Vice Chairman), Sarqua- vitae (Board of Advisors), AGS Nasoft (Board of Advisors) and Corporación Gropo Leche Pas- cual (Vice Chairman). Bachelor’s degree in accounting from Associa- ção de Ensino Unificado do Distrito Federal, Brazil. Professional Background 1979 – 1991 various positions at Pricewater- house Coopers Auditores Independentes. 1992 Director of Brazilian Exchange Commission (CVM). 1993 – 1997 Partner at Pricewaterhouse- Coopers Auditores Independentes. 1998 Part- ner at Global Control Consultoria. 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 Alimen- tação, S.A., Cetip S.A. – Balcão Mercados Orga- nizados and Restoque Comércio e Confecções de Roupas 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 & Invest- ments AG in March 2010. GEORGE KOUTSOLIOUTSOS Director, born 1968 Education Degree in Economics, University of Hartford, Hartford, USA / Paris and Master’s degree in Busi- ness Administration and Marketing, University of Hartford, USA. Professional Background Mr. Koutsolioutsos’ professional career started in New York working two years in the jewelry industry. 1992 – 2011 held various key positions at Folli Follie Group, including supervising and managing local and international distribution, investor relations, and leading the international expansion. Since January 2011 Chief Executive Officer of Folli Follie Group. Current Board Mandates Dufry AG, Folli Follie Group. 220 4 Governance ReportDUFRY ANNUAL REPORT 2015 Messrs. Juan Carlos Torres Carretero (Chairman), Andrés Holzer Neumann (Vice-Chairman), Julián Díaz González, James S. Cohen and George Koutsolioutsos are members of a group of shareholders, which held a 22.44 % purchase position of Dufry AG as of De- cember 31, 2015 (participation mentioned includes financial instruments). See for details the disclosure under “1.2 Significant Shareholders” on page 214 of this Annual Report. Due to his intense involvement with the Company’s management the Chairman of the Board of Directors, Mr. Juan Carlos Torres Carretero is considered an ex- ecutive Chairman. Mr. Julián Díaz González acts as Chief Executive Officer of the Company. All other members of the Board of Directors are non-executive members. Mr. George Koutsolioutsos, in his function as CEO of the Folli Follie Group, oversaw the opera- tions of Hellenic Duty Free Shops SA prior to its ac- quisition by Dufry in 2013 (no executive function for Dufry AG or any of its subsidiaries in 2014 or 2015). Otherwise, none of the members of the Board of Di- rectors have ever been in a managerial position at Dufry AG or any of its subsidiaries. For information on related parties and related party transactions please refer to Note 35 on page 173 and to the information provided in the Remuneration Report on page 233 ff. of this Annual Report. 3.3 RULES IN THE ARTICLES OF INCORPORATION REGARDING THE NUMBER OF PERMITTED MANDATES OUTSIDE THE COMPANY In accordance with Article 24 para. 2 of the Articles of Incorporation, dated June 24, 2015, no member of the Board of Directors may hold more than four additional mandates in listed companies and ten additional man- dates in non-listed companies. The following mandates are not subject to the limitations under para. 2 of this Article: a) mandates in companies which are controlled by the Company or which control the Company; b) mandates held at the request of the Company or any company controlled by it. No member of the Board of Directors may hold more than ten such mandates; and c) mandates in associations, charitable organizations, foundations, trusts and employee welfare founda- tions. No member of the Board of Directors may hold more than ten such mandates. Mandates shall mean mandates in the supreme gov- erning body of a legal entity which is required to be registered in the commercial register or a comparable foreign register. Mandates in different legal entities that are under joint control or the same beneficial ownership are deemed one mandate. 3.4 ELECTION AND TERMS OF OFFICE In accordance with Article 13 of the Articles of Incor- poration, dated June 24, 2015: – The Board of Directors shall consist of at least three and at most nine members. – Members of the Board of Directors and the Chairman of the Board shall be elected for a term of office ex- tending until completion of the next Ordinary Meet- ing of Shareholders. – The members of the Board of Directors and the Chairman of the Board may be re-elected without limitation. – If the office of the Chairman of the Board of Direc- tors is vacant, the Board of Directors shall appoint a Chairman from among its members for a term of office extending until completion of the next Ordi- nary Meeting of Shareholders. – Except for the election of the Chairman of the Board of Directors and the members of the Remuneration Committee by the Meeting of Shareholders, the Board of Directors determines its own organization. The Board of Directors shall elect a Vice-Chairman. It shall appoint a Secretary who does not need to be a member of the Board of Directors. Article 24 para. 1 of the Articles of Incorporation stip- ulates the following: As members of the Board of Di- rectors only persons may be elected who served a minimum of four years in aggregate on the Board of Directors or on the Executive Management of each of (i) one or several travel retail company(ies) with oper- ations in more than one continent at the end of at least one year of the years of activity of such person, and (ii) one or several publicly listed retail company(ies) with an annual turnover of at least CHF 3 billion at the end of at least one year of the years of activity of such person. The requirements under (i) and (ii) above can be fulfilled by the same or several cumulated position(s) held by such person. All members of the Board of Directors were elected in individual elections at the Ordinary General Meeting of Shareholders held on April 29, 2015. The same Gen- eral Meeting elected Juan Carlos Torres Carretero as Chairman of the Board of Directors. Messrs. Jorge Born, Xavier Bouton, James Cohen and Andrés Holzer Neumann were elected in individual elections as mem- bers of the Nomination and Remuneration Committee. 221 4 Governance ReportDUFRY ANNUAL REPORT 20153.5 INTERNAL ORGANIZATIONAL STRUCTURE Except for the election of the Chairman of the Board of Directors and the members of the Nomination and Remuneration Committee (which are to be elected by the General Meeting of Shareholders), the Board of Di- rectors determines its own organization. It shall elect its Vice-Chairman, the members of the Audit Commit- tee, and appoint a Secretary who does not need to be a member of the Board of Directors. The Board of Directors has established two commit- tees: the Audit Committee and the Nomination and Re- muneration Committee. Both Committees are assisting the Board of Directors in fulfilling its duties and have also decision authority to the extent described below. Audit Committee Members as of December 31, 2015: José Lucas Ferreira de Melo (Chairman Audit Committee), Jorge Born, Joaquín Moya-Angeler Cabrera, Juan Carlos Torres Carretero. The members of the Audit Committee, with the excep- tion of Juan Carlos Torres Carretero (who is considered an executive Chairman), are non-executive and inde- pendent members of the Board of Directors. Pursuant to item 14 of the Swiss Code of Best Practice for Cor- porate Governance (SCBP), an independent member is a non-executive member, has not been an executive member of the Dufry Group in the last three years and has no or comparatively minor 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 independence 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 find- ings by management, the review of the internal audit plan, the assessment of the risk management and the decision on proposed measures 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 Company’s accounts. The Audit Committee regularly reports to the Board of Directors on its decisions, assessments, findings and proposes appropriate actions. The Audit Commit- tee generally meets at the same dates the Board of Directors meetings take place, although the Chair- man may call meetings as often as business requires. The length of the meetings lasted usually for approxi- mately 2 to 3 hours in fiscal year 2015, during which the Audit Committee held 5 meetings. The average attendance ratio of the Audit Committee members at its meetings was 100 %. The auditors attended 3 meet- ings of the Audit Committee in 2015. Members of the Group Executive Committee attended meetings of the Audit Committee as follows: CEO 5 meetings, the CFO (who acts as Secretary of the Audit Committee meetings) 5 meetings. Nomination and Remuneration Committee Members as of December 31, 2015: Jorge Born (Chair- man Nomination and Remuneration Committee), Xavier Bouton, James S. Cohen, Andrés Holzer Neumann. The members of the Nomination and Remuneration Committee are all non-executive and independent members of the Board of Directors. Pursuant to item 14 of the Swiss Code of Best Practice for Corporate Governance (SCBP), an independent member is a non- executive member, has not been an executive member of the Dufry Group in the last three years and has no or comparatively minor business relations with the Company. The members shall be appointed by the shareholders’ meeting until the next Ordinary General Meeting of Shareholders and be re-eligible. 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 CEO and the Board of Di- rectors, 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 Nomination and Remuneration Committee makes recommendations regarding the proposals of the Board of Directors in relation to the maximum aggregate amount of com- pensation of the Board and of the Group Executive Committee to be submitted to the general Meeting of Shareholders of the Company for approval, as well as in relation to the remuneration package of the CEO and the members of the Board. The Nomination and Remuneration Committee makes proposals on the grant of options or other securities under any other management incentive plan of the Company, if any. The Nomination and Remuneration Committee meets as often as business requires. The 4 meetings held in the fiscal year 2015 lasted about 1 to 3 hours. The average attendance ratio of the Nomination and Remuneration Committee members at its meetings was 100 %. The Chairman of the Board of Directors usually partici- pates as a guest in the Nomination and Remuneration Committee meetings. Members of the Group Execu- tive Committee attended meetings of the Nomination 222 4 Governance ReportDUFRY ANNUAL REPORT 2015and Remuneration Committee as follows: CEO 4 meet- ings. External advisors attended 2 meetings of the Nomination and Remuneration Committee in 2015. 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 necessary. The Board of Directors held 13 meetings during fiscal year 2015. The meetings of the Board of Directors usually lasted half a day. The aver- age attendance ratio of the Board members at the Board of Directors’ meetings was 100 %. The Chair- man determines the agenda and items to be dis- cussed at the Board meetings. All members of the Board of Directors can request to add further items on the agenda. The CEO, the CFO, the GCOO and the GC, also acting as Secretary to the Board, attend the meetings of the Board of Directors. Other members of the Group Exec- utive 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 2015 as follows: CEO 13 meetings, CFO 11 meetings, GCOO 10 meetings, GC 11 meetings, GCCO 1 meeting, COOs of the regions 1 meeting. The Board of Directors also engages specific advisors to address specific matters when required. External advisors attended pertinent portions of 2 meetings of the Board of Directors in 2015 in connection with the acquisition projects of the Company. The exter- nal Auditors attended 3 meetings of the Audit Com- mittee in 2015. 3.6 DEFINITION OF AREAS OF RESPONSIBILITY The Board of Directors is the ultimate corporate body of Dufry AG. It further represents the Company to- wards third parties and shall manage all matters which by law, Articles of Incorporation or Board reg- ulations have not been delegated to another body of the Company. In accordance with the Board regulations (“Organisa- tionsreglement”), the Board of Directors has delegated the operational management of the Company to the CEO who is responsible for overall management 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 members of the committees installed by itself as well as 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 respect to their compliance with the law, the Articles of Incorporation, regulations and directives; – Preparation of the business report, the compensa- tion 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 payment 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 Incorporation entailed thereby; – Non-delegable and inalienable duties and powers of the Board of Directors pursuant to the Swiss Merger Act; – To approve any non-operational or non-recurring transaction not included in the annual budget and exceeding the amount of CHF 10,000,000; – 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; – To approve the executive regulations promulgated in accordance with the board regulations; and – To propose an independent voting rights represen- tative for election to the Meeting of Shareholders, and to appoint an independent voting rights repre- sentative in the event of a vacancy. 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. 3.7 INFORMATION AND CONTROL INSTRUMENTS VIS-À-VIS THE SENIOR MANAGEMENT The Board of Directors ensures that it receives suffi- cient information from the management to perform its supervisory duty and to make the decisions that are reserved to the Board through several means. – Dufry Group has an internal management informa- tion system that consists of financial statements, performance indicators and risk management. In- formation to management is provided on a regular 223 4 Governance ReportDUFRY ANNUAL REPORT 2015executed during the year is based on specific meth- odology throughout the Dufry Group and includes the consideration of internal and external factors. In fiscal year 2015, Internal Audit conducted over 60 reviews, examining more than 30 operations in all regions, representing a coverage of above 90 % of 2015 group net sales, in which the newly acquired business of Nuance was already included. The WDF group was integrated in the Dufry governance structure in December 2015, nevertheless its oper- ations are already part of the 2016 Dufry Internal Audit annual plan. Regular follow-up is performed to ensure that risk mitigation and control improve- ment measures are implemented on a timely basis. – The Global Loss Prevention activity was created to prevent losses and misappropriations within the group. The day-to-day work is designed to leverage profitability using advanced data mining and anti- fraud techniques. Currently, validations are per- formed monthly or bimonthly for all group compa- nies and results are proven to provide valuable information for loss prevention purposes. Addi- tionally, we are continuously trying to use new data mining techniques to establish validations that can enhance our coverage and create a higher as- surance level over our key retail risks. – We have in place an Enterprise Risk Management program which sets out our approach for assessing compliance with: relevant laws, corporate policies and procedures, tax regulations, agreements or contracts and integrity policy, anticipating exter- nally imposed guidelines and preventing losses. The program is sponsored by the Group Executive Com- mittee and based on the concept of direct stake- holder assurance feedback, and is distributed among all operations and areas. – All the results of these Group Internal Audit activi- ties are communicated to key management in charge and to the Group’s senior management on an on-going basis, and regular briefings are done to the Audit Committee. – Detailed information on the financial risk manage- ment is provided in Note 38 in the Financial State- ments of this Annual Report. basis according to the cycles of the business: sales on a weekly basis; income statement, cash manage- ment and key performance indicator (KPI) including customer, margins and investment information, bal- ance sheet and other financial statements on a monthly basis. The management information is pre- pared on a consolidated basis as well as per busi- ness 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 management 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 information concerning the course of business of the Company and the Group and, with the authori- zation of the Chairman, about specific matters. – The CEO reports at each meeting of the Board of Di- rectors 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 CEO. Apart from the meetings, the CEO reports immediately any ex- traordinary event and any change within the Com- pany and within the Dufry Group to the Chairman. – For attendance of the members of the Group Exec- utive Committee at meetings of the Board of Di- rectors or meetings of the Audit Committee or Nomination and Remuneration Committee please refer to section “3.5 Internal organizational struc- ture” above. – The Audit Committee met 5 times in 2015 with management to review the business, better under- stand laws, regulations and policies impacting the Dufry Group and its business and support the man- agement in meeting the requirement and expecta- tions of stakeholders. In meetings of the Audit Committee, the CFO acts as Secretary to the Com- mittee. The Auditors are invited to the meetings of the Audit Committee and attended 3 meetings of the Audit Committee in 2015. Among these meet- ings some or part of them are also held without management. – The Global Internal Audit department provides in- dependent risk-based and objective assurance re- views, loss prevention advice, and risk exposure analysis to group companies through 3 different activities streams: Internal Audit, Loss Prevention and Enterprise Risk Management. – Internal auditing is an independent function that provides objective assurance and consulting ac- tivity, aiming to improve our organization’s opera- tions. The selection of Internal Audit reviews to be 224 4 Governance ReportDUFRY ANNUAL REPORT 20154. GROUP EXECUTIVE COMMITTEE 4.1 MEMBERS OF THE GROUP EXECUTIVE COMMITTEE As of December 31, 2015, the Group Executive Com- mittee (GEC) comprised seven executives. As of Jan- uary 1, 2016, Dufry regrouped its business into 5 geo- graphic divisions (previously 4 regions with Nuance and Word Duty Free operations reported as separate entities). The Group Executive Committee was ex- panded to twelve members, taking into account the larger group structure as a result of the Nuance Group and World Duty Free acquisitions. The Group Executive Committee, under the control of the CEO, conducts the operational management of the Company pursuant to the Company’s board regula- tions. The CEO reports to the Board of Directors on a regular basis. The following table sets forth the name and year of appointment of the 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 Luis Marin Jordi Martin-Consuegra Pascal C. Duclos Pedro J. Castro Benitez Eugenio Andrades Andrea Belardini René Riedi Joseph DiDomizio Gustavo Magalhães Fagundes Spanish Swiss Spanish Spanish Spanish Swiss Spanish Spanish Italian Swiss American Brazilian Chief Executive Officer (CEO) Chief Financial Officer (CFO) Global Chief Operating Officer (GCOO) Global Chief Corporate Officer (GCCO) Global Resources Director (GRD) General Counsel (GC) Chief Executive Officer (DCEO) Division Southern Europe and Africa Chief Executive Officer (DCEO) Division UK, Central and Eastern Europe Chief Executive Officer (DCEO) Division Asia, Middle East and Australia Chief Executive Officer (DCEO) Division Latin America Chief Executive Officer (DCEO) Division North America General Manager (GM) Brazil and Bolivia GEC MEMBER SINCE YEAR 2004 2012 2004 2014 2016 1 2005 2016 1 2016 1 2016 1 2000 2008 2016 1 1 Appointment to Group Executive Committee as of January 1, 2016 All agreements entered into with the members of the Group Executive Committee are entered for an indef- inite period of time. Mr. Xavier Rossinyol, former Chief Operating Officer of Region EMEA & Asia, left the Company effective March 31, 2015. Mr. José Carlos Costa da Silva Rosa, former Chief Operating Officer of Region America II, has become active for Dufry in Portugal and left the Group Executive Committee effective October 31, 2015. 225 4 Governance ReportDUFRY ANNUAL REPORT 20154.2 EDUCATION, PROFESSIONAL BACKGROUND, OTHER ACTIVITIES AND VESTED INTERESTS JULIÁN DÍAZ GONZÁLEZ Chief Executive Officer, born 1958 ANDREAS SCHNEITER Chief Financial Officer, born 1970 JOSÉ ANTONIO GEA Global Chief Operating Officer, born 1963 Education Education Education Degree in business administration from Univer- sidad 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 Gen- eral Manager of Latinoamericana Duty-Free, S.A. de C.V. Since 2004 Chief Executive Officer at Dufry AG. Current Board Mandates Dufry AG, Distribuidora Internacional de Ali- mentacion, S.A. (DIA). Degree in business administration and special- ization in finance at School of Economy and Business Administration Berne. Degree in economics and business sciences from Colegio Universitario de Estudios Financie- ros. Professional Background Professional Background 1998 – 2003 various positions at UBS Warburg in Zurich in the area of Mergers and Acquisi- tions. Joined Dufry in 2003 as Head Corporate Controlling. 2004 – 2012 Head Group Treasury and since 2005 additionally Investor Relations at Dufry. Since July 2012 Chief Financial Offi- cer at Dufry AG. 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 Operat- ing Officer at Dufry AG. PASCAL C. DUCLOS General Counsel, born 1967 LUIS MARIN Global Chief Corporate Officer, born 1971 Education Degree in Economic Sciences and Business Administration from Universidad de Barcelona. Education Professional Background 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 admitted to the New York Bar. Professional Background 1991 – 1997 Senior attorney at law at Geneva law firm Davidoff & Partners. Also academic assis- tant 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. 1995 – 1998 Auditor at Coopers & Lybrand. 1998 – 2001 Financial Controller at Derbi Moto- cicletas – Nacional Motor S.A. 2001 – 2004 Head of Finance and Administration of Spanish subsidiaries of Areas (member of the French group Elior). Joined Dufry in 2004, as Business Controlling Director and since 2012, also re- sponsible for mergers and acquisitions. Since January 2014 Gobal Chief Corporate Officer at Dufry AG. JORDI MARTIN-CONSUEGRA Global Resources Director, born 1972 Education Executive MBA from Instituto de Empresa, Madrid. Degree in economics from Universi- dad Complutense de Madrid and Bachelor of Arts in Combined Studies from University of Wolverhampton, UK. Professional Background 1996 – 1998 Business Consultant at Burke in Madrid (today Burke is part of ALTEN Group in Spain). 1998 – 2000 Director of Consultancy Services at Burke. 2001 – 2002 Lawson Soft- ware Product Manager at Burke in Madrid. 2003 – 2005 Director of Business Solutions at Burke. 2005 – 2008 Global Information Tech- nology Director at Dufry AG. 2008 – 2009 Global Integration Director at Dufry AG. 2009 – 2012 Global Organization and Human Resources Director at Dufry AG. Since 2012 Global Resources Director at Dufry AG. 226 4 Governance ReportDUFRY ANNUAL REPORT 2015PEDRO J. CASTRO BENITEZ Chief Executive Officer Division Southern Europe and Africa, born 1967 EUGENIO ANDRADES Chief Executive Officer Division UK, Central and Eastern Europe, born 1968 ANDREA BELARDINI Chief Executive Officer Division Asia, Middle East and Australia, born 1968 Education Education Education Masters degree in international relations, spe- cializing in foreign trade, from Spanish Diplo- matic School in Madrid. Degree in administration and political science, specializing in foreign af- fairs, from Complutense University in Madrid. Professional Background 1998 – 2000 General Manager Chile at Aldeasa. 2000 – 2003 Managing Director Canariensis at Aldeasa. 2003 – 2006 Chief Executive Officer at Aldeasa Jordan. 2006 – 2010 Director Opera- tions Spain at Aldeasa. 2011 – 2015 Chief Operat- ing Officer International at World Duty Free. Since January 2016 Chief Executive Officer Divi- sion Southern Europe and Africa at Dufry AG. Degree in Mining Engineering at Politécnica University of Madrid. MS of Economics and Strategy of Colorado School of Mines, Colorado/ USA. Professional Background Prior to 1996 Consultant at McKinsey & Co and Carboex, a subsidiary of Endesa. 1996 – 2001 Director of Strategy & Development and In- vestor Relations at Aldeasa. 2001 Chief Ex- ecutive Officer Jordan and Middle East region at Aldeasa. 2002 – 2007 Director of Strategy & Development and Investor Relations at Aldeasa. 2007 – 2010 Commercial Director and Operations Coordinator at Aldeasa. 2011 – 2014 Chief Commercial Officer at World Duty Free Group. 2014 – 2015 Chief Executive Officer at World Duty Free Group. Since January 2016 Chief Executive Officer Division UK, Central and Eastern Europe at Dufry AG. Degree in Business and Economics, University of Rome (La Sapienza). Professional Background 1991 – 1996 various positions as Controller and Project Manager at Carlson Wagonlit Travel. 1997 – 1999 Director of Operations Italy at Carl- son Wagonlit Travel. 1999 – 2000 Vice President Operations South Europe at Carlson Wagonlit Travel. 2000 – 2004 Executive Vice President Strategy & Development at Aeroporti di Roma. 2004 – 2009 Executive Vice President Commer- cial Business Management & Development at Aeroporti di Roma. 2009 – 2015 Chief Executive Officer Europe at Nuance Group (since 2013 also Global Chief Commercial Officer at Nuance Group). Since January 2016 Chief Executive Officer Division Asia, Middle East and Australia at Dufry AG. RENÉ RIEDI Chief Executive Officer Division Latin America, born 1960 Education Degree in business administration from the School of Economy and Business Administra- tion Zurich. JOSEPH DIDOMIZIO Chief Executive Officer Division North America, born 1970 Professional Background Education 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 Eastern Europe. Product Category Manager Spirits & Tobacco (1995 – 1996). Head of Product Marketing (1996 – 1997). Director Division Spirits & Tobacco (Weitnauer Distribu- tion Ltd. 1998 – 2000). 2000 – 2012 Chief Oper- ating Officer Region Eurasia at Dufry AG. 2012 – 2015 Chief Operating Officer Region America I at Dufry AG. Since January 2016 Chief Executive Officer Division Latin America at Dufry AG. Bachelor’s of Arts degree in Marketing and Business Administration from the University of Bridgeport. Professional Background 1992 – 2008 several managerial positions in Hudson Group (April–September 2008: President and Chief Executive Officer). 2008 - 2015 Chief Operating Officer Region United States & Canada at Dufry AG. Since January 2016 Chief Executive Officer Division North America at Dufry AG. GUSTAVO MAGALHÃES FAGUNDES General Manager Brazil and Bolivia, born 1967 Education Degree in business administration and man- agement and post-graduate degree in HR and marketing from EAESP/Fundação Getúlio Vargas in São Paulo, Master in international economics and management from Bocconi University in Milan, executive MBA from AmBev Corporate University in São Paulo, general management degree from Harvard Business School in Massachusetts, USA. Professional Background 1996 – 2002 Head of Marketing at AmBev. 2002 – 2009 Chief Operating Officer at Travel Retail, Brasif. 2010 – 2014 Chief Operating Officer at Brasif Holding. 2014 – 2015 COO Dufry Brazil and Bolivia. Since January 2016 General Manager Brazil and Bolivia at Dufry AG. 227 4 Governance ReportDUFRY ANNUAL REPORT 2015Other activities and vested interests As of December 31, 2015, none of the members of the Group Executive Committee of Dufry AG has had other activities in governing and supervisory bodies of important Swiss or foreign organizations, institutions or foundations under private and public law with the exception of the Board mandates of Mr. Julián Díaz mentioned above. 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. 4.3 RULES IN THE ARTICLES OF INCORPORATION REGARDING THE NUMBER OF PERMITTED MANDATES OUTSIDE THE COMPANY In accordance with Article 25 para. 1 of the Articles of Incorporation, dated June 24, 2015, no member of the Group Executive Committee may hold more than two additional mandates in listed companies and four ad- ditional mandates in non-listed companies. The follow- ing mandates are not subject to the limitations under para. 1 of this Article: a) mandates in companies which are controlled by the Company or which control the Company; 5. COMPENSATION, SHAREHOLDINGS AND LOANS 5.1 CONTENT AND METHOD OF DETERMINING THE COMPENSATION AND SHAREHOLDING PROGRAMS Detailed information of compensation, shareholdings and loans to active and former members of the Board of Directors and of the Group Executive Committee in fiscal year 2015 is included in the Remuneration Re- port on pages 233 to 244 of this Annual Report. b) mandates held at the request of the Company or any company controlled by it. No member of the Group Executive Committee may hold more than ten such mandates; and 5.2 DISCLOSURE OF RULES IN THE ARTICLES OF INCORPORATION REGARDING COMPENSATION OF THE BOARD OF DIRECTORS AND OF THE EXECUTIVE MANAGEMENT c) mandates in associations, charitable organizations, foundations, trusts and employee welfare founda- tions. No member of the Group Executive Commit- tee may hold more than ten such mandates. For definition of “mandate” please refer to section 3.3 above. 4.4 MANAGEMENT CONTRACTS Dufry AG does not have management contracts with companies or natural persons not belonging to the Group. For rules in the Articles of Incorporation regarding the approval of compensation by the Meeting of Share- holders, the supplementary amount for changes in the Executive Management as well as the general compen- sation principles please refer to Articles 20 – 22 of the Articles of Incorporation. The Articles of Incorpora- tion do not contain any rules in association with loans, credit facilities or post-employment benefits for the members of the Board of Directors and Executive Management. The rules regarding agreements with members of the Board of Directors and of the Execu- tive Management in terms of duration and termination are stipulated in Article 23. Dufry’s Articles of In- corporation are available on the Company website www.dufry.com – section Investors – Articles of In- corporation. Direct link: http://www.dufry.com/en/Investors/ Articlesofincorporation/index.htm 228 4 Governance ReportDUFRY ANNUAL REPORT 20156. SHAREHOLDERS’ PARTICIPATION RIGHTS 6.1 VOTING RIGHTS AND REPRESENTATION 6.2 THE INDEPENDENT VOTING RIGHTS REPRESENTATIVE In accordance with Article 10 para. 3 of the Articles of Incorporation, dated June 24, 2015, the independent voting rights representative shall be elected by the Meeting of Shareholders for a term of office extend- ing until completion of the next Ordinary Meeting of Shareholders. Re-election is possible. If the Company does not have an independent voting rights represen- tative, the Board of Directors shall appoint the inde- pendent voting rights representative for the next Meeting of Shareholders. The Company may also make arrangements for elec- tronic voting (Article 11 para. 5). Resolutions passed by electronic voting shall have the same effect as votes by ballot. The Ordinary General Meeting of Shareholders held on April 29, 2015, re-elected the law firm Buis Bürgi AG, Zurich, as the independent voting rights representative until the completion of the Ordinary General Meeting of Shareholders in 2016. Buis Bürgi AG is independent from the Company and has no further mandates for Dufry AG. For the upcoming General Meeting of Shareholders on April 28, 2016, the Company will enable its sharehold- ers to send their voting instructions electronically to the independent voting rights representative Buis Bürgi AG through the platform: https://www.netvote.ch/dufry The corresponding instructions regarding registration and voting procedures on this electronic platform will be sent to the shareholders together with the invita- tion to the General Meeting. 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 the independent voting rights representative or any person who is authorized to do so by a written proxy. A proxy does not need to be a shareholder. Shareholders entered in the share register as shareholders with voting rights on a spe- cific 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 Article 5 para. 4 of the Articles of Incorporation and if they hold a valid written proxy granted by the beneficial owner of the registered shares instructing the nominee how to vote at the Meeting of Sharehold- ers. Shares held by a nominee for which it is not able to produce such a proxy count as not being repre- sented 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 exercising directly any of the shareholders’ rights pro- vided 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 Gen- eral Meetings of the Company. However, BDR holders are entitled to instruct the Depositary Institution to vote the Company’s shares underlying their BDRs, ac- cording to the instructions sent to them by the Depos- itary Institution. See section 2.6 above or the Articles of Incorporation on our website: http://www.dufry.com/en/Investors/ Articlesofincorporation/index.htm 229 4 Governance ReportDUFRY ANNUAL REPORT 20156.3 QUORUMS 6.4 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 repre- senting in the aggregate not less than 10 % of the share capital can request, in writing, that a Meeting of Share- holders be convened. Such request must be submit- ted to the Board of Directors, specifying the items and proposals to appear on the agenda. The Meeting of Shareholders shall be convened by no- tice in the Swiss Official Gazette of Commerce (SOGC) not less than 20 days before the date fixed for the Meeting. Registered shareholders will also be informed by ordinary mail. 6.5 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 proposals of the shareholders who demand that the Meeting of Shareholders be called or that items be included in the agenda. One or more shareholders with voting rights whose combined 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 Share- holders. 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. 6.6 REGISTRATION INTO THE SHARE REGISTER The record date for the inscription of registered shareholders into the share register in view of their participation in the Meeting of Shareholders is de- fined by the Board of Directors. It is usually around 2 weeks before the Meeting. Shareholders who dis- pose of their registered shares before the Meeting of Shareholders are no longer entitled to vote with such disposed shares. 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 Incorporation provide for a qualified majority, an ab- solute majority of the votes represented at a Meeting of Shareholders is required for the adoption of reso- lutions or for elections, with abstentions, blank and in- valid votes having the effect of “no” votes. The Chair- man 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 rep- resented shall be required for: 1. a modification of the purpose of the Company; 2. 3. the creation of shares with increased voting powers; restrictions on the transfer of registered shares and the removal of such restrictions; restrictions on the exercise of the right to vote and the removal of such restrictions; 4. 5. an authorized or conditional increase in share 6. capital; 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. a modification of the eligibility requirements of the members of the Board of Directors (Article 24 para. 1 of the Articles of Incorporation); 12. the dissolution of the Company; 13. other matters where statutory law provides for a corresponding quorum. 230 4 Governance ReportDUFRY ANNUAL REPORT 20157. CHANGE OF CONTROL AND DEFENCE MEASURES 7.1 DUTY TO MAKE AN OFFER 8. AUDITORS 8.1 AUDITORS, DURATION OF MANDATE AND TERM OF OFFICE OF THE LEAD AUDITOR An investor who acquires more than 33 ¹⁄³ % of all vot- ing rights (directly, indirectly or in concert with third parties) whether they are exercisable or not, is re- quired to submit a takeover offer for all shares out- standing (Article 135 Financial Market Infrastructure Act, FMIA). The Articles of Incorporation of the Com- pany contain neither an opting-out nor an opting-up provision (Article 125 para. 4 FMIA). Pursuant to the Articles of Incorporation, the Audi- tors 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. Bruno Chiomento has been the Lead Auditor in charge for the consoli- dated financial statements of the Company and the statutory financial statements as of December 31, 2015. Mr. Chiomento took the existing auditing man- date in 2015. 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 FMIA with respect to the Company, the Performance Share Units awarded to the PSU Plan Participants shall vest immediately. In case of change of control, all amounts drawn under the CHF 2,500,000,000, USD 1,010,000,000, EUR 500,000,000, and EUR 3,600,000,000 multicur- rency term and revolving credit facilities agreements and the EUR 250,000,000 letter of credit and bank guarantee facility agreement shall become immedi- ately due and payable. Furthermore, upon the occur- rence of a change of control, Dufry may be required to repurchase the USD 500,000,000 Senior Notes due 2020, the EUR 500,000,000 Senior Notes due 2022 and the EUR 700,000,000 Senior Notes due 2023 at a purchase price equal to 101 % of their principal amount, plus accrued and unpaid interest. According to Article 23 of the Articles of Incorpora- tion, employment and other agreements with the members of the Group Executive Committee may be concluded for a fixed term or for an indefinite term. Agreements for a fixed term may have a maximum du- ration of one year. Renewal is possible. Agreements for an indefinite term may have a notice period of maxi- mum twelve months. The current contracts with the members of the Group Executive Committee contain termination periods of twelve months or less. 8.2 AUDITING FEE During fiscal year 2015, Dufry agreed with Ernst & Young Ltd to pay a fee of CHF 3.4 million for services in connection with auditing the statutory annual fi- nancial statements of Dufry AG (including quarterly reviews) and its subsidiaries, as well as the consoli- dated financial statements of Dufry Group and a fee of CHF 0.1 million for audit related services. 8.3 ADDITIONAL FEES Additional fees amounting to CHF 0.6 million were paid to Ernst & Young Ltd for transaction services and CHF 0.7 million 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 recom- mends to the Board of Directors, which external Au- ditor should be proposed for election at the General Meeting of Shareholders. The decision regarding this agenda item is then taken by the Board of Directors. When evaluating the performance and independence of the Auditors, the Audit Committee puts special em- phasis 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 inde- pendence of the audit firm as a company, co-ordina- tion of the Auditors with the Audit Committee and the Senior Management / Finance Department of Dufry Group, practical recommendations with respect to the application of IFRS regulations. 231 4 Governance ReportDUFRY ANNUAL REPORT 2015Details and information on the business activities, Company structure, financial reports, media releases and investor relations are available on the Company’s website: https://www.dufry.com The official means of publication of the Company is the Swiss Official Gazette of Commerce: http://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.bmfbovespa.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 Communi- cations contacts as well as a summary of anticipated key dates in 2015 please refer to pages 246 /247 of this Annual Report. Within the yearly approved budget, there is also an amount permissible for non-audit services that the Auditors may perform. Within the scope of the ap- proved and budgeted amount, the Chief Financial Officer can delegate non-audit related mandates to the Auditors. The Audit Committee determines the scope of the ex- ternal 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 Committee once per year, informing them in detail on the result of their audit. The Auditors also re- view the interim quarterly reports before these publi- cations 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 commu- nicated to management in charge and the Company’s senior management on an on-going basis and regular briefings are done to the Audit Committee. During the fiscal year 2015, the Audit Committee held 5 meetings. The Auditors were present at 3 of those meetings. 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 2015. 9. INFORMATION POLICY Dufry is committed to an open and transparent com- munication with its shareholders, financial analysts, potential investors, the media, customers, suppliers and other interested 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 infor- mation are available on the Company website. In addition, Dufry AG organizes presentations and conference calls with the financial community and media to further discuss details of the reported earn- ings or on any other matters of importance. The Com- pany undertakes roadshows for institutional investors on a regular basis. 232 4 Governance ReportDUFRY ANNUAL REPORT 2015REMUNERATION REPORT DEAR SHARE- HOLDERS 2015 was a transformational year for Dufry. The inte- gration of the Nuance acquisition on one hand and the acquisition of WDF on the other hand, were the key topics for both Management and the Board of Directors along 2015. The final result of these transformational transactions will be only seen in 2017 and 2018, once all businesses are fully integrated and all synergies have been implemented. Nevertheless, important work has been done by Dufry in 2015, and 2016 will be critical to achieve the stated targets which are expected to reflect value creation in the coming years. In 2015, the Nomination and Remuneration Committee of Dufry focused to further improve the compensation programs for both the Board of Directors as well as the Group Executive Committee and to adapt them to the new increased size of the Group. In this context, the Nomination and Remuneration Committee mandated PwC to carry out a compensa- tion benchmarking for the Board of Directors and the Group Executive Committee, based on a group of 18 companies, which are comparable in size, geographic reach and market profile. At the same time, we also asked external expert opinion to review our compen- sation systems. Such benchmarking and external ad- vice is requested periodically to update and adjust compensation to current market trends. After the successful implementation of the Ordi- nance against Excessive Compensation (Minder Ini- tiative) in the 2015 Annual General Meeting, Dufry plans also to hold a consultative vote on the Compen- sation Report 2015 in the Annual General Meeting 2016. We believe that this step provides shareholders with a further option to express their views on Dufry’s compensation model. In 2015, the Board of Directors approved a proposal by the Nomination and Remuneration Committee to in- crease the compensation for Board members of Dufry, based on the PwC benchmarking. Dufry has almost tri- pled its size in the last few years and has further ex- panded its global reach. As a consequence, the level of preparation has increased on one hand and the com- plexity of risk assessment has risen on the other hand. These two points, as well as the increased number of meetings, have made the Dufry Board mandate more time consuming and the new Board fees are designed to compensate for this. The Board of Directors held 13 meetings, the Audit Committee 5 meetings and the Nomination and Remuneration Committee 4 meetings in 2015. The average attendance ratio was 100 % for the Board and each of the Committee meetings. In 2015, we abolished a project started the year before to partially compensate Board members with shares. After a detailed review, this option was considered not to be best practice for compensation and therefore Dufry’s Board of Directors decided not to pursue this option any longer. We also launched a project in 2015 to split the Nomi- nation and Remuneration Committee in two separate bodies, which will become effective in 2016. Given the higher intensity of each of the functions in today’s en- vironment, we believe that it is more effective to ad- dress the two topics separately. It will allow the Com- mittee members to dedicate more time to their respective topic, and with this, to assess a broader range of aspects including current market trends. Last but not least, we also adapted the long-term in- centive plan (PSU plan) for Dufry management. In or- der to recognize the broader management team as well as to ensure that we can attract the best talents in our industry, we have broadened the PSU plan to include 233 4 Governance ReportDUFRY ANNUAL REPORT 2015about 60 senior managers below the Group Executive Committee. The second change in the PSU plan was done in relation to the PSU calculation. Whereas the old program was based on a normalized Cash EPS of a given year, the new plan uses a three year Cumulative nor- malized Cash EPS. We implemented the change because the previous plan proved to be very volatile partially due to consolidation effects of the acquisitions and had a very low visibility along the vesting period. The new metric results in a flatter pay-out curve, i.e. the likeli- hood of both, the plan not vesting and the plan vesting at maximum is considerably lower. We are convinced that the new metric will provide a better measure to reflect the long-term value creation of the Group. will carefully monitor the compensation aspects of this transformation. Furthermore, we also will review the regulatory and industry developments in relation to compensation. In both cases, we plan to address any points pro-actively in case any change is warranted. We would like to thank our shareholders for their contribution and the trust they have put in Dufry. Yours Sincerely, 2016 and beyond will be important years for Dufry, as the enlarged group will become fully integrated. Dufry’s Nomination and Remuneration Committees Jorge Born Committee. Since January 1, 2015, the Meeting of Shareholders has to approve the proposal of the Board of Directors in relation to the maximum aggregate amount of compensation of the Board of Directors for the period until the next Ordinary Meeting of Share- holders and of the Group Executive Committee for the following financial year. The vote at the Ordinary Meet- ing of Shareholders has binding effect for these total maximum amounts of compensation. Thereafter, the ap- proval of the individual compensation to the members of the Board of Directors and of the Group Executive Board (within the limits approved by the Meeting of Shareholders) is directly with the Board of Directors. The Nomination and Remuneration Committee sup- ports the Board of Directors in fulfilling its nomination and remuneration related matters. The Committee consists of four non-executive members of the Board of Directors. The General Meeting of Shareholders held on April 29, 2015, elected Messrs. Jorge Born and Xavier Bouton, and re-elected Messrs. James Cohen and Andrés Holzer Neumann (all individually elected) as members of the Nomination and Remuneration Com- mittee for a term of office until completion of the next Ordinary Meeting of Shareholders in 2016. Jorge Born has been appointed by the Board of Directors as Chair- man of the Nomination and Remuneration Committee. INTRODUCTION The success of Dufry is dependent on its ability to at- tract, motivate and retain outstanding individuals. It is Dufry’s aim to provide appropriate and competitive remuneration to its employees and to support their development in a high performance environment. This Remuneration Report provides information on the remuneration system and compensation paid to the members of the Board of Directors and of the Group Executive Committee in fiscal year 2015. The Report is prepared in accordance with Articles 13 – 17 of the Ordinance against excessive Compensation (OaeC) and item 5 of the Annex to the Corporate Governance Directive (DCG) of the SIX Swiss Exchange, governing disclosure of remuneration systems and compensa- tion paid to members of the Board of Directors and the Group Executive Committee. The Remuneration Report will be presented to the General Meeting of Shareholders on April 28, 2016, for a consultative vote. GOVERNANCE Based on Dufry’s Articles of Incorporation and in line with the OaEC, the Board of Directors has the overall responsibility for defining the personnel and remuner- ation policy used for the entire Group, as well as the general terms and conditions of employment for members of the Group Executive Committee. It ap- proves the individual compensation of the members of the Board of Directors and of the Group Executive 234 4 Governance ReportDUFRY ANNUAL REPORT 2015COMMITTEES AND COMMITTEE MEMBERSHIPS AS OF DECEMBER 31, 2015 MEMBER OF THE BOARD OF DIRECTORS Juan Carlos Torres Carretero, Chairman Andrés Holzer Neumann, Vice-Chairman Jorge Born, Director Xavier Bouton, Director James S. Cohen, Director Julián Díaz González, Director / CEO José Lucas Ferreira de Melo, Director George Koutsolioutsos, Director Joaquín Moya-Angeler Cabrera, Director NOMINATION & REMUNERATION COMMITTEE – Committee Member Committee Chairman Committee Member Committee Member – – – – AUDIT COMMITTEE Committee Member – Committee Member – – – Committee Chairman – Committee Member For further details regarding the responsibilities of the Nomination and Remuneration Committee and the meetings held in fiscal year 2015, please refer to section 3.5 Internal Organizational Structure of the Corporate Governance Report. COMPENSATION COMPARISONS During the course of 2015, the Board of Directors of Dufry consulted PricewaterhouseCoopers AG (PwC) on the structure and level of Executive compensation arrangements, with a particular focus on the Executive PSU plan. PwC also conducted a benchmark analysis on compensation levels for both members of the Board of Directors and of the Group Executive Committee using third party compensation survey data and dis- closed information from 18 companies with a similar size, geographical reach and / or complexity, mostly from the SMI and SMIM universe. Other divisions of PwC also provided services as Tax and HR Advisors for other internal projects. REMUNERATION TO THE MEMBERS OF THE BOARD OF DIRECTORS REMUNERATION SYSTEM The remuneration of the members of the Board of Di- rectors is set to attract and retain highly qualified in- dividuals to serve on the Board of Directors. The Board of Directors determines the amount of 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 total compensation to the members of the Board of Directors, except for the Chief Executive Officer who does not receive any compensation in relation to his po- sition as member of the Board, included the following elements in fiscal year 2015: – Fixed fee in cash as member of the Board of Directors and members of Board Committees; and – Mandatory social security contributions In addition, the Chairman of the Board of Directors, who due to his intense involvement with the Company’s management is considered an executive Chairman, may also receive a performance bonus. This perfor- mance bonus is related to financial performance of the Company (performance objective: EBITDA) and is capped at 130 % of the target bonus. The target bonus for fiscal year 2015 was set at 100 % of the Chairman’s board fee (2014: target bonus also 100 % of Chairman’s board fee). With the exception of the variable compen- sation to the Chairman and to the CEO (each in their capacity as Chairman and Chief Executive Officer), the 235 4 Governance ReportDUFRY ANNUAL REPORT 2015POSITION / RESPONSIBILITY Chairman ¹ Vice-Chairman ² Member of the Board of Directors ², ³ Member of the Audit Committee Member of the Nomination and Remuneration Committee ¹ The Chairman receives no fees as a Committee member. ² Increased Board fee of TCHF 250 for period from AGM 2015 to AGM 2016. ³ The CEO does not receive additional compensation as a Board member. FEE 2015 IN THOUSANDS OF CHF FEE 2014 IN THOUSANDS OF CHF 1,914.8 250.0 250.0 50.0 50.0 1,665.0 175.0 175.0 50.0 50.0 compensation for the members of the Board of Di- rectors is not tied to particular targets. Extraordinary assignments or work which a member of the Board of Directors would perform for the Company outside of his activity as a Board member can be specifically re- munerated and has to be approved by the Board of Di- rectors. No extraordinary assignments outside Board activities have taken place in fiscal year 2015. In addi- tion, the members of the Board of Directors are reim- bursed all reasonable cash expenses incurred by them in the discharge of their duties. The Nomination and Remuneration Committee (“NRC”) discusses the annual compensation (board fees, com- mittee fees, target bonus for Chairman) in separate NRC meetings. The Chairman usually participates as a guest in these meetings without any voting rights. The Nomination and Remuneration Committee then makes proposals in relation to the compensation of each Board member to the entire Board of Directors. Thereafter, the Board of Directors decides collectively on the compensation of its members once per year, with all Board members being present during such meeting (CEO compensation reviewed and decided separately as described in section Remuneration to the members of the Group Executive Committee). In fiscal year 2015, the Board of Directors decided to raise the fee for the Chairman to TCHF 1,915 (increase of TCHF 250 compared to previous fee for the Chair- man). The Board of Directors further decided to in- crease the Board fee for the members of the Board of Directors for the period from the Annual General Meet- ing of Shareholders, held on April 29, 2015, to the next Annual General Meeting in 2016. Each member of the Board of Directors (except the Chairman and the CEO) receives a Board membership fee of TCHF 250 in cash (representing an increase of TCHF 75 compared to the previous Board fee) and an additional TCHF 50 in cash as a member of a Board Committee (no increase in the Committee fee). The Chairman fee and Board fee were raised to reflect the complexity of tasks and high in- tensity of the work done by the Board, also due to the increased size of the Company (see also section 236 “Changes in the Remuneration System in 2015 – Board of Directors” below). For fiscal year 2015, the Chair- man of the Board of Directors will receive a cash bonus of TCHF 1,943, based on profit targets (EBITDA) of the Group. The bonus amounts to 101.5 % of the Chairman’s board fee (2014: TCHF 1,595 and 96 % of board fee). CHANGES IN THE REMUNERATION SYSTEM IN 2015 – BOARD OF DIRECTORS The Nomination and Remuneration Committee had an- alyzed in a project whether to include share-based re- muneration by granting shares of Dufry AG to the members of the Board of Directors in the amount of TCHF 75 per Board member (except for the Chairman and the CEO). After a thorough analysis, the Nomina- tion and Remuneration Committee concluded that it will not introduce such share grants for the members of the Board of Directors. Due to the high intensity of the work done by the Board, and due to the increased size and geographical diversification of the Company, as well as the monitoring of risks becoming more ex- tensive, the Board of Directors approved a proposal by the Nomination and Remuneration Committee to increase the cash fees for membership in the Board to TCHF 250 (as of AGM 2015). The CEO (who does not re- ceive a fee as Board member) is excluded from such increase in the Board fees. SUMMARY OF REMUNERATION IN FISCAL YEAR 2015 AND 2014 On December 31, 2015, the Board of Directors com- prised 9 members (December 31, 2014: also 9 Board members). For fiscal year 2015 and 2014, covering the period between January 1 and December 31, the re- muneration for the members of the Board of Directors is shown in the table below. The remuneration differ- ence compared to the previous year is mainly due to the increased remuneration for the Chairman and the Board members as explained above. 4 Governance ReportDUFRY ANNUAL REPORT 2015COMPENSATION TO THE BOARD OF DIRECTORS (AUDITED) 2015 NAME, FUNCTION IN THOUSANDS OF CHF REMUNERATION POST- EMPLOYMENT BENEFITS 5 TOTAL REMUNERATION POST- EMPLOYMENT BENEFITS 5 2014 TOTAL Juan Carlos Torres Carretero, Chairman 1 3,857.8 Andrés Holzer Neumann, Vice-Chairman Jorge Born, Director Xavier Bouton, Director 2 James S. Cohen, Director Julián Díaz González, Director and CEO 3 José Lucas Ferreira de Melo, Director George Koutsolioutsos, Director 4 Joaquin Moya-Angeler Cabrera, Director 275.4 309.0 259.0 275.4 – 275.4 225.4 275.4 197.1 14.8 18.2 15.4 16.3 – 16.3 13.5 13.3 4,054.9 3,260.2 169.5 3,429.7 290.2 327.2 274.4 291.7 – 291.7 238.9 288.7 225.0 213.7 425.0 225.0 – 225.0 117.6 225.0 13.5 12.8 10.6 13.5 – 13.5 7.2 12.8 238.5 226.5 435.6 238.5 – 238.5 124.8 237.8 Total 5,752.8 304.9 6,057.7 4,916.5 253.4 5,169.9 1 The remuneration for Mr. Torres Carretero includes Board fee of CHF 1.915 million and bonus of CHF 1.943 million (2014: CHF 1.665 million Board fee and CHF 1.595 million bonus). 2 In 2014, the remuneration for Mr. Bouton included fees for consulting services of CHF 0.25 million. These consulting services have been terminated as per December 31, 2014. 3 Mr. Díaz González (CEO of the Company) does not receive any additional compensation as Board member. 4 Director as of April 29, 2014. 5 Amount includes mandatory employer social security contributions. RECONCILIATION BETWEEN REPORTED BOARD COMPENSATION FOR 2015 AND THE AMOUNT APPROVED BY THE SHAREHOLDERS AT THE AGM 2015 UNTIL THE AGM 2016 of office from the AGM 2015 to the AGM 2016 of CHF 7.4 million. The following table shows the recon- ciliation between the reported Board compensation for fiscal year 2015 and the amount approved by the shareholders at the AGM 2015. The Ordinary Meeting of Shareholders held on April 29, 2015, approved a maximum aggregate amount of compensation of the Board of Directors for the term BOARD COMPENSATION IN FISCAL YEAR 2015 AS REPORTED LESS BOARD COMPENSATION TO BE ACCRUED FOR THE PERIOD JANUARY 1, 2015 TO THE AGM IN APRIL 2015 (4 MONTHS) PLUS BOARD COMPENSATION TO BE ACCRUED FOR THE PERIOD JANUARY 1, 2016 TO THE AGM IN APRIL 2016 (4 MONTHS) TOTAL BOARD COMPENSATION FOR THE PERIOD FROM AGM 2015 TO AGM 2016 TOTAL MAXIMUM AMOUNT AS APPROVED BY SHAREHOLDERS AT THE AGM 2015 FOR PERIOD OF AGM 2015 TO AGM 2016 COMPEN- SATION RATIO IN THOUSANDS OF CHF Total Board of Directors 6,057.7 1,190.4 1,409.8 6,277.1 7,400 84.8 % OTHER COMPENSATION, LOANS OR GUARANTEES (AUDITED) In the years 2015 and 2014, there was no other compen- sation paid directly or indirectly to active or former members of the Board of Directors, or to their related parties. There are also no loans or guarantees received or provided to these Board members, nor to their re- lated parties. 237 4 Governance ReportDUFRY ANNUAL REPORT 2015REMUNERATION TO THE MEMBERS OF THE GROUP EXECUTIVE COMMITTEE REMUNERATION SYSTEM Dufry aims to provide internationally competitive compensation to the members of its Group Executive Committee (as of January 1, 2016, CEO, CFO, GCOO, GC, GCCO, GRD, five Divisional CEOs and one GM Bra- zil & Bolivia; for the structure during fiscal year 2015 see also Corporate Governance Report on page 225) that reflects the experience and the area of responsi- bility of each individual member. Members of the Group Executive Committee (GEC) receive compensation packages, which consist of a fixed basic salary in cash, social benefits, allowances in kind, a performance re- lated bonus and share-based incentive plans. BASIC SALARY reaches the objectives in full, the bonus pay-out will correspond to the targeted level. If one or more ob- jectives are not reached, the bonus will be reduced. The bonus pay-out can be between a minimum of zero and the maximum capped amount of 130 % of the tar- get bonus for all members of the Group Executive Committee, including the CEO. PERFORMANCE OBJECTIVES GROUP EXECUTIVE COMMITTEE (2015) EBITDA NON- FINANCIAL Chief Executive Officer Chief Financial Officer Global Chief Operating Officer Global Chief Corporate Officer General Counsel 2 Regional Chief Operating Officers (one of them until March 31, 2015) 2 Regional Chief Operating Officers (one of them until October 31, 2015) 100 % – 50 % 50 % The annual basic salary is the fixed compensation re- flecting the scope and key areas of responsibilities of the position, the skills required to perform the role and the experience and competencies of the individual person. The basic salary is reviewed annually. ANNUAL BONUS The target bonus amounted to 200 % of the basic sal- ary for the CEO and to between 60 % and 200 % of the basic salary for the other members of the Group Ex- ecutive Committee in fiscal year 2015 (Fiscal Year 2014: 200 % for the CEO and between 60 % and 200 % for the other members of the Group Executive Committee). The annual bonus is defined once per year and is based on a bonus target expressed in percentage of the an- nual basic salary. The target bonus corresponds to the bonus award at 100 % achievement of the pre-defined objectives. Each member of the Group Executive Com- mittee has its own bonus. In case that an executive The main part of the bonus is related to measures re- garding financial performance, which in fiscal year 2015 and 2014 was based on EBITDA, for both, the Group and the respective Region in the case of the Re- gional Chief Operating Officers (RCOOs). Such finan- cial measures were weighted for the CEO, CFO, GCOO, REMUNERATION COMPONENTS Basic salary Bonus Share-based incentives PSUs INSTRUMENT PURPOSE INFLUENCED BY – Basic compensation – Paid in cash on monthly basis – To attract and retain management – Position – Competitive market environment – Experience of the person – Annual bonus – Usually paid in cash after completion of the relevant year – Performance Share Units (PSU) if any, vesting conditional on performance – Pay for performance – Achievement of financial results of the Group and of specific Regions and of defined goals by each individual person – Rewarding long-term – PSU Awards 2013/2014: Cash performance – Aligning compensation to shareholder interests EPS growth over 3 years – PSU Awards 2015/following years: Cumulative Cash EPS in CHF over 3 years – Market practice and position – Legal requirements of social benefits Other indirect benefits, post-employment benefits – Allowances in kind – Social pension and insurance – To attract and retain management prerequisites 238 4 Governance ReportDUFRY ANNUAL REPORT 2015GC, GCCO and 2 of the 4 RCOOs (one of these two RCOOs was a GEC member until March 31, 2015) as fol- lows: 100 % EBITDA; for 2 of the 4 RCOOs (one of these two RCOOs was a GEC member until October 31, 2015) 50 % EBITDA and 50 % non-financial oriented targets in form of individual and general performance of the busi- ness as evaluated by the CEO (Fiscal Year 2014: 100 % EBITDA for the CEO, CFO, GCOO, GC, GCCO and 2 of the 4 RCOOs. 50 % EBITDA and 50 % non-financial oriented targets for 2 of the 4 RCOOs). CEO’s bonus compensation is determined based on achieved targets and proposed by the Nomination and Remuneration Committee and decided by the Board of Directors once per year. The Nomination and Remu- neration Committee as well as the Board of Directors review the compensation of the CEO, CFO, GCOO, GCCO and the GC (as of January 1, 2016 also the GRD) yearly. The compensation of the RCOOs is reviewed once per year by the CEO (as of January 1, 2016 all five Divisional CEOs including the GM Brazil & Bolivia). The bonus accrued as part of the compensation for the members of the Group Executive Committee rep- resented in 2015 between 61 % and 203 % of their basic salary and amounted to CHF 9.7 million in the aggre- gate (2014: between 55 % and 201 % of their basic salary and an amount of CHF 9.9 million in the aggregate). The achievement ratio regarding the EBITDA target was 101.5 % for fiscal year 2015. RANGE OF BONUS COMPONENTS IN % OF BASIC SALARY 2015 2014 2013 Group Executive Committee 61 – 203 % 55 – 201 % 17 – 100 % SHARE-BASED INCENTIVES (PSU ) In 2013, the Company introduced a Performance Share Unit (PSU) plan for the members of the Group Executive Committee. The purpose of the plan is to provide the members of the Group Executive Commit- tee (and since fiscal year 2015 also selected members of the Senior Management team) with an incentive to make significant and extraordinary contributions to the long-term performance and growth of Dufry Group, enhancing the value of the shares for the benefit of the shareholders of the Company. The share-based incentive is also increasing the ability of Dufry Group to attract and retain persons of excep- tional skills. The bonus compensation for each of the members of the Group Executive Committee, other than the CEO bonus, is approved by the Nomination and Remunera- tion Committee in coordination with the CEO. The From an economic point of view, the PSUs are stock options with an exercise price of nil. However, they are expected to have no dilutive effect, as the shares for TIMING OF THE PSU PLANS YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016 YEAR 2017 YEAR 2018 PSU Award 2013 Grant date Vesting period PSU Award 2013 Vesting condition not reached PSU Award 2013 No vesting PSU Award 2014 Grant date Vesting period PSU Award 2014 Vesting condition reached (Yes / No?) PSU Award 2014 PSU Award 2015 Grant date Vesting period PSU Award 2015 Vesting condition reached (Yes / No?) PSU Award 2015 239 4 Governance ReportDUFRY ANNUAL REPORT 2015share-based incentives historically have been sourced from treasury shares, held by the Company. Details of the Performance Share Units (PSU) The number of PSUs allocated to each member of the Group Executive Committee in any given year takes into account the base salary as well as the prevailing share price, i.e. an assumption of one share for every PSU. The accrued value of the PSU awards 2015 rep- resented about 119 % of the basic salary for the CEO and between 62 % and 117 % of the basic salary for the other members of the Group Executive Committee (2014: 89 % for the CEO and between 62 % and 90 % for the other members of the Group Executive Committee). The PSU awards will only vest in the third year of the award and are linked to specific performance criteria (see below). Vesting conditions of the PSUs are: – The participant’s ongoing contractual relationship on the vesting date; and – The achievement of the performance target as de- scribed below. Performance target for 2013 and 2014 PSU grants The number of shares allocated for each PSU for the 2013 and 2014 PSU grants directly depends on the av- erage growth rate reached of the Company’s basic earnings per share adjusted for acquisition-related amortization and normalized for non-recurring effects (Cash EPS). For the calculation of the relevant EPS growth for the PSU awards 2013 and 2014, the follow- ing metrics are used: – Cash EPS of the fiscal year directly preceding the grant date (i.e. for the PSU Award 2014 Cash EPS of 2013; for the PSU Award 2013 Cash EPS of 2012) is used as a basis and is compared to the Cash EPS of the fiscal year preceding the vesting date (i.e. for the PSU Award 2014: respective metric in 2016; for the PSU Award 2013: respective metric in 2015). Depending on the average growth achieved, each PSU will convert according to the following grid: – Minimum threshold of average Cash EPS growth of 3.5 % per annum must be achieved; otherwise the PSU shall not vest and will become nil and void. The participant will not be allocated any shares from the PSU. – For a Cash EPS growth of 7 % per annum (target), the participant shall be allocated one share for every PSU that has vested. – For a Cash EPS growth of 10.5 % per annum or above (maximum threshold), the participant shall be allo- cated two shares for every PSU that has vested. – For a Cash EPS growth of between 3.5 % and 7 % per annum or between 7 % and 10.5 % per annum the number of shares allocated from vested PSUs is calculated on a linear basis. – The maximum number of shares allocated is capped at two shares per vested PSU. CASH EPS GROWTH PER ANNUM PSU GRANTS 2013 /2014 PSU VESTING < 3.5 % (minimum threshold) No vesting Between 3.5 % and 7 % =7 % (at target) Between 7 % and 10.5 % Linear calculation (between 0 % and 100 % vesting) 100 % vesting (1 share per PSU) Linear calculation (between 100 % and 200 % vesting) ≥ 10.5 % (maximum threshold) 200 % vesting (2 shares per PSU) Performance target for 2015 and following years’ grants The number of shares allocated for each PSU for the 2015 grants (and following years’ grants) directly de- pends on the Company’s Cumulative Normalized Cash EPS as a nominal amount in Swiss Francs of the three year period preceding the vesting date (see also sec- tion “Changes in the Remuneration System in 2015 – Group Executive Committee” on page 241). – For the 2015 grants, the Target Cumulative Cash EPS has been set at a nominal amount in Swiss Francs that was based on the cumulative cash EPS of the years 2012 to 2014 and applied a growth rate of 5 % per annum. This amount which is about CHF 24, and the derived figures below are subject to change from year to year by the Nomination and Remuner- ation Committee. Depending on the Cumulative Normalized Cash EPS achieved, each PSU will convert according to the fol- lowing grid: – Minimum threshold of 50 % of target must be achieved; otherwise the PSU shall not vest and will become nil and void. The participant will not be al- located any shares from the PSU. – For a Cumulative Cash EPS at target, the participant shall be allocated one share for every PSU that has vested. – For a Cumulative Cash EPS of 150 % of target or above, which represents the maximum threshold, the participant shall be allocated two shares for every PSU that has vested. – For a Cumulative Cash EPS higher than the minimum threshold but lower than the maximum threshold, the number of shares allocated from vested PSUs is calculated on a linear basis. – The maximum number of shares allocated is capped at two shares per vested PSU. 240 4 Governance ReportDUFRY ANNUAL REPORT 2015CUMULATIVE CASH EPS PSU GRANTS 2015 < minimum threshold (50 % of target) at target ≥ maximum threshold (150 % of target) PSU VESTING No vesting 100 % vesting (1 share per PSU) Maximum vesting (2 shares per PSU) Between minimum threshold and maximum threshold Linear calculation (between 0 and maximum 2 shares per PSU) In 2015, the members of the Group Executive Commit- tee have been granted, in the aggregate 56,965 PSU. Out of this amount, 18,347 PSU were granted to the CEO. The total maximum number of shares that can be allocated to the members of the Group Executive Committee (maximum 2 shares per vested PSU) would amount to 113,930 shares for the PSU Award 2015, 89,134 shares for the PSU Award 2014 and to nil shares for the PSU Award 2013 (as the PSU Award 2013 will not vest). The PSU plans have been approved by the Nomination and Remuneration Committee and the Board of Direc- tors. The Nomination and Remuneration Committee reviews achievement of the respective performance target at a specific vesting date, upon proposal of the CEO, who as plan administrator will analyze and ad- just potential exceptional and non-recurring events to normalize Cash EPS in relation to the PSU plan. The CEO acts as Plan Administrator and therefore pro- poses the amount of each specific grant to each indi- vidual plan participant, which are reviewed by the Nomination and Remuneration Committee. The grants made to the CEO are decided by the Nomination and Remuneration Committee. OTHER INDIRECT BENEFITS The Company limits further benefits to a minimum. Fringe benefits such as health insurance, company car, or housing allowances have been granted to certain members of the Group Executive Committee. The to- tal amounted to CHF 0.54 million in the aggregate in fiscal year 2015 (2014: CHF 0.66 million). CHANGES IN THE REMUNERATION SYSTEM IN 2015 – GROUP EXECUTIVE COMMITTEE The Nomination and Remuneration Committee has de- cided on some changes to the remuneration system in fiscal year 2015: The Restricted Share Units (RSU) program that was in place from 2005 until 2013 was terminated in 2013 and no awards were made since. In 2015, the Nomination and Remuneration Committee considered an alterna- tive program going forward, but decided that the share- based compensation for the members of the Group Executive Committee should consist of Performance Share Units (PSUs) only. Based on a proposal by the Nomination and Remuner- ation Committee, the Board of Directors decided to adapt the metrics for the PSU plan from fiscal year 2015 onwards. As described above the adaption to the PSU plan was to change from the annual growth rate of Cash EPS of the one year directly preceding the date of grant and the vesting date, respectively, to the Cumu- lative Cash EPS in Swiss Francs of the three years pre- ceding the vesting date. The change is intended to re- duce the volatility of the PSU plan as the original plan has a very steep pay-out curve, which is likely to re- sult in the maximum or non-vesting scenario, respec- tively. The new metric also rewards continuous and sustainable improvements in the Cash EPS generation over time. The duration of the PSU plan (PSUs vest in the third year of the award) remained unchanged. The number of persons qualified to PSU awards has been broadened and includes since fiscal year 2015 not only the members of the Group Executive Committee, but also further selected members of the Senior Man- agement team of Dufry (about 60 senior managers). In addition to the PSUs awarded to the members of the Group Executive Committee as detailed above, this further group of Senior Managers received in aggre- gate 65,838 PSU from the Award 2015. The conditions of the PSU plans are identical for all plan participants (whether members of the Group Executive Committee or Senior Managers). The total maximum number of shares that can be allocated to all participants of the PSU Awards 2015 and 2014 (maximum 2 shares per vested PSU) would amount to 334,740 shares, repre- senting together a total of 0.62 % of outstanding shares as at December 31, 2015. The PSU Awards 2013 will not vest as the vesting conditions were not reached. Historically, Dufry has always sourced its share based compensation from treasury shares, so that no dilutive effect is expected from the PSUs. 241 4 Governance ReportDUFRY ANNUAL REPORT 2015REMUNERATION STRUCTURE GROUP EXECUTIVE COMMITTEE IN 2015 BASIC SALARY BONUS SHARE-BASED PAYMENTS IN THOUSANDS OF CHF POST-EMPLOYMENT BENEFITS, OTHER INDIRECT BENEFITS 8 % POST-EMPLOYMENT BENEFITS, OTHER INDIRECT BENEFITS 26 % BASIC SALARY 26 % SHARE-BASED INCENTIVES 40,000 30,000 GEC 2,014 20,000 7,150 10,000 10,940 6,711 0 CEO 477 2,025 3,402 1,701 GEC 2,280 14,300 14,222 6,711 CEO 566 4,051 4,423 1,701 GEC 1,818 6,288 9,732 6,159 CEO 483 2,025 3,453 1,701 Target (100%) Maximum potential Accrued compensation 2015 40 % BONUS COMPARISON AND COMPOSITION OF REMUNERATION TO THE GROUP EXECUTIVE COMMITTEE IN FISCAL YEAR 2015 SUMMARY OF REMUNERATION IN FISCAL YEAR 2015 The charts above reflect the composition of the dif- ferent remuneration components as well as the actual remuneration of the seven active members and two former members of the Group Executive Committee (as of December 31) for fiscal year 2015. In the chart, this actual remuneration is also compared to the po- tential compensation (for all nine members) if 100 % of the target bonus was reached, and the maximum po- tential of compensation possible based on the capped bonus and the share-based compensation. PAY-OUT COMPONENTS FOR FISCAL YEAR 2015 For fiscal year 2015, the achievement ratio in conjunc- tion with the EBITDA target was 101.5 %. Based on this, the pay-out of the bonus component for the CEO amounts to CHF 3.5 million, which represents 203 % of the CEO’s basic salary. As mentioned before, the PSU Awards 2013 have not vested and there will be no pay- out for the CEO or any other members of the Group Executive Committee from the PSU Awards 2013. Therefore, the pay-out for the entire Group Executive Committee for fiscal year 2015 amounts to a total of CHF 17.7 million, of which CHF 5.6 million is the pay- out to the CEO. For fiscal year 2015, the remuneration of the Group Ex- ecutive Committee includes the compensation to the seven active GEC members (as of December 31) for the entire year, and to the two former GEC members on a pro rata basis up to the dates on which they left the GEC (fiscal year 2014: includes compensation to the nine Executives for the entire year). The remuneration for fiscal years 2015 and 2014, mentioned in the ta- ble on the opposite page covers the period between January 1 and December 31. The remuneration difference compared to the previous year are mainly due to the change in the number of the Executives during the year, regular salary increases based on annual performance review and individual bonus payments based on achievement of yearly ob- jectives set in advance, as well as the different values of the PSU awards. The Ordinary Meeting of Shareholders held on April 29, 2015, approved a maximum aggregate amount of com- pensation for the members of the Group Executive Committee for the financial year 2016 of CHF 50.5 mil- lion. The approved maximum aggregate amount re- flects the maximum possible pay-out calculated for each compensation element and takes into account twelve members of the Group Executive Committee in fiscal year 2016. As of January 1, 2016, the Group Ex- ecutive Committee has been expanded to a total of twelve members (see also page 225 in the Corporate Governance section of this Annual Report), taking into account the larger group structure as a result of the 242 4 Governance ReportDUFRY ANNUAL REPORT 2015COMPENSATION TO THE MEMBERS OF THE GROUP EXECUTIVE COMMITTEE (AUDITED) REMUNERATION COMPONENT IN THOUSANDS OF CHF Basic salary Bonus Post-employment benefits 3 Other indirect benefits Share-based payments 4 Total compensation accrued 2015 2014 GEC 1 CEO 2 GEC CEO 2 6,158.7 9,732.3 1,281.0 537.1 6,288.4 23,997.5 1,701.2 3,452.6 447.1 35.5 2,025.3 7,661.7 6,264.0 9,935.0 1,896.9 660.7 5,370.9 24,127.5 1,675.1 3,209.9 527.3 35.0 1,497.7 6,945.0 Total compensation pay -out 17,709.1 5,636.3 18,756.6 5,447.3 Number of performance share units awarded (in thousands) 57.0 18.3 51.5 14.4 1 Compensation in 2015 includes remuneration of Mr. Rossinyol (former COO Region EMEA & Asia until March 31, 2015) and Mr. Rosa (former COO Region America II until October 31, 2015) on a pro rata basis up to these dates. 2 The CEO has the highest compensation of the Group Executive Committee. 3 Amount includes employer social security contributions and pension contributions. 4 For valuation details see Note 28 of the consolidated financial statements. recent acquisitions of the Nuance Group and World Duty Free. The compensation ratio, including the dis- tribution among the different compensation compo- nents, will be disclosed in detail in the Remuneration Report 2016. OTHER COMPENSATION, LOANS OR GUARANTEES (AUDITED) In the years 2015 and 2014, there were no other com- pensations paid directly or indirectly to active or for- mer members of the Group Executive Committee, or to their related parties. There are also no loans or guarantees received or provided to the Group Execu- tive Committee members, or to related parties. CONTRACTS OF EMPLOYMENT TERMS According to Article 23 of the Articles of Incorpora- tion, employment and other agreements with the members of the Group Executive Committee may be concluded for a fixed term or for an indefinite term. Agreements for a fixed term may have a maximum du- ration of one year. Renewal is possible. Agreements for an indefinite term may have a notice period of maxi- mum twelve months. The current contracts with the members of the Group Executive Committee contain termination periods of twelve months or less. 243 4 Governance ReportDUFRY ANNUAL REPORT 2015PARTICIPATIONS IN DUFRY AG The following members of the Board of Directors or of the Group Executive Committee of Dufry AG (includ- ing related parties) hold directly or indirectly shares or share options of the Company as at December 31, 2015 or December 31, 2014 (members not listed do not hold any shares or options): DECEMBER 31, 2015 DECEMBER 31, 2014 SHARES FINANCIAL IN- STRUMENTS 1 PARTICIP. SHARES FINANCIAL IN- STRUMENTS 1 PARTICIP. IN THOUSANDS MEMBERS OF THE BOARD OF DIRECTORS Juan Carlos Torres Carretero, Chairman Andrés Holzer Neumann, Vice-Chairman Jorge Born, Director James S. Cohen, Director Julián Díaz González, Director and CEO George Koutsolioutsos, Director 3 Joaquin Moya-Angeler Cabrera, Director 982.2 4,291.3 21.9 2,059.3 284.5 1,608.4 - 257.1 463.6 30.9 2 - 92.6 200.0 - Total Board of Directors 9,247.6 1,044.2 MEMBERS OF THE GROUP EXECUTIVE COMMITTEE Julián Díaz González, CEO Andreas Schneiter, CFO José Antonio Gea, GCOO Luis Marin, CCO Xavier Rossinyol, COO Region EMEA & Asia 4 José C. Rosa, COO America II 5 Joseph DiDomizio, COO United States & Canada Total Group Executive Committee 284.5 92.6 6.1 4.1 1.5 n/a n/a – 296.2 - - - n/a n/a – 92.6 2.38 % 9.13 % 0.10 % 3.96 % 0.72 % 3.47 % 0.00 % 19.77 % 0.72 % 0.01 % 0.01 % 0.00 % n/a n/a 0.00 % 0.73 % 743.0 3,708.8 - 2,089.0 286.9 1,536.1 6.0 164.4 468.2 30.9 2 93.4 43.8 272.3 - 2.53 % 11.63 % 0.09 % 6.08 % 0.92 % 5.04 % 0.02 % 8,369.8 1,073.0 26.31 % 286.9 43.8 0.92 % 6.1 4.1 1.5 27.0 4.6 6 9.5 339.7 - - - - - - 43.8 0.02 % 0.01 % 0.00 % 0.08 % 0.01 % 0.03 % 1.07 % 1 The detailed terms of the various financial instruments disclosed below are as disclosed to the SIX Swiss Exchange and published on July 9, 2015, for the year 2015 and on November 26, 2014, for the year 2014. 2 European Capped Calls on 30,940 shares of Dufry AG. The transaction is divided into 5 tranches of 6,188 shares each, which expire on 29.07.2019, 30.07.2019, 31.07.2019, 04.08.2019, and 05.08.2019, respectively. Each tranche is automatically exercised, and the differences are to be cash settled. The strike price for each option is CHF 160, and the cap is CHF 260 per option. 3 Director as of April 29, 2014. 4 Member until March 31, 2015. 5 Member until October 31, 2015. 6 Includes 4.5 shares and 0.1 BDRs. In addition to the above, the shareholders’ group con- sisting of different legal entities controlled by Andrés Holzer Neumann, Juan Carlos Torres, Julían Díaz González, James S. Cohen, James S. Cohen Family Dynasty Trust and Dimitrios Koutsolioutsos holds sale positions of 8.81 % through options (4,589,120 voting rights) as of December 31, 2015 (as of December 31, 2014: sale positions of 10.80 % through options (3,877,480 voting rights)). The detailed terms of these financial instruments are as disclosed to the SIX Swiss Exchange and published on July 9, 2015 (for sale position as of December 31, 2014: publication of disclosure notice on November 26, 2014). Disclosure notices are available on the SIX Swiss Exchange website: https://www.six-exchange-regulation.com/en/home/ publications/significant-shareholders.html 244 4 Governance ReportDUFRY ANNUAL REPORT 2015245 4 Governance ReportDUFRY ANNUAL REPORT 2015INFORMATION FOR INVESTORS AND MEDIA REGISTERED SHARES Issuer Listing Type of security Ticker symbol ISIN-No. Swiss Security-No. Reuters Bloomberg Dufry AG SIX Swiss Exchange Registered shares DUFN CH0023405456 2340545 DUFN.S DUFN:SW BRAZILIAN DEPOSITARY RECEIPTS (BDRS) Issuer Listing Type of security Ticker symbol ISIN-No. Reuters Bloomberg Dufry AG BM&FBOVESPA Brazilian Depositary Receipts (BDRs) DAGB33 BRDAGBBDR008 DAGB33.SA DAGB33:BZ KEY DATES IN 2016 March 16, 2016 Results Fiscal Year 2015, Publication of Annual Report Annual General Meeting Results First Three Months 2016 Results First Half Year 2016 April 28, 2016 May 3, 2016 July 29, 2016 November 3, 2016 Results First Nine Months 2016 246 SENIOR NOTES Issuer Listing Type of security Size of issue Interest rate Maturity ISIN-No. Bloomberg Dufry Finance SCA ISE Irish Stock Exchange Senior Notes USD 500 million 5.5 % p.a., paid semi-annually October 15, 2020 USL2660RAA25 (Serie REG S) US26433UAA34 (Serie 144A) DUFSCA Issuer Listing Type of security Size of issue Interest rate Maturity ISIN-No. Bloomberg Dufry Finance SCA ISE Irish Stock Exchange Senior Notes EUR 500 million 4.5 % p.a., paid semi-annually July 15, 2022 XS1087753353 (Serie REG S) XS1087754245 (Serie 144A) DUFSCA Issuer Listing Type of security Size of issue Interest rate Maturity ISIN-No. Bloomberg Dufry Finance SCA ISE Irish Stock Exchange Senior Notes EUR 700 million 4.5 % p.a., paid semi-annually August 1, 2023 XS1266592457 (Serie REG S) XS1266592705 (Serie 144A) DUFSCA 4 Governance ReportDUFRY ANNUAL REPORT 2015 ADDRESS CORPORATE HEADQUARTERS INVESTOR AND MEDIA CONTACTS Renzo Radice Global Head Investor Relations and Corporate Communications Phone + 41 61 266 44 19 renzo.radice@dufry.com DUFRY AG Brunngässlein 12 P.O. Box 4010 Basel Switzerland Phone +41 61 266 44 44 INVESTOR RELATIONS Sara Lizi Head Investor Relations Phone + 55 21 21 57 99 01 sara.lizi@br.dufry.com Rafael Duarte Investor Relations Phone + 41 61 266 45 77 rafael.duarte@dufry.com CORPORATE COMMUNICATIONS Renzo Radice Global Head Corporate Communications Phone + 41 61 266 44 19 renzo.radice@dufry.com Mario Rolla Corporate Communications Brazil Phone + 55 21 21 57 96 11 mario.rolla@br.dufry.com DUFRY.COM Company’s website: Latest news: Articles of incorporation: Financial reports: 247 4 Governance ReportDUFRY ANNUAL REPORT 2015This 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 Production, Print Neidhart + Schön AG, Zurich © Dufry AG 2016 Let’s build the future of travel retail together.

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