Governance Information • Oct 6, 2013
Governance Information
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ARYZTA is committed to best practice in corporate governance.
The primary corporate governance instruments adopted by ARYZTA (namely the Articles of Association, Organisational Regulations and Terms of Reference for the Committees of the Board) are available on the Company website at www.aryzta.com/about-aryzta/ corporate-governance.aspx. While recognising the importance of these formal instruments, good corporate governance in practice requires a commitment to, and the practice of, values that guide the Group in serving the needs of its stakeholders, be they shareholders (institutional or retail), customers, consumers, suppliers, employees or other interested groups.
ARYZTA is committed to continually reviewing its corporate governance framework, with a view to related developments, including, but not limited to, the 'Minder Initiative'. The Board's policy is that a majority of its membership, excluding the Chairman, shall consist of independent non-executive directors (as determined in accordance with the Swiss Code of Best Practice for Corporate Governance).
At the ARYZTA 2012 Annual General Meeting, one new independent non-executive director was appointed by the shareholders.
Since the ARYZTA Annual General meeting in December 2012, the Group has engaged a leading international search firm to advise and assist the board in its ongoing renewal program. The aim of this program is to ensure that ARYZTA is served by a Board whose members possess the right mix of skills, experience and talent and who share ARYZTA's values.
At the 2012 Annual General Meeting, the shareholders ratified the 2012 Compensation Report through a separate advisory vote. In keeping with good corporate governance practice, the Board has decided to also submit the 2013 Compensation Report to a separate advisory vote of the shareholders at the 2013 Annual General Meeting. The 2013 Compensation Report is included on pages 44 to 51 of this Annual Report.
The ARYZTA Corporate Governance Report follows the SIX Swiss Exchange Directive on Information Relating to Corporate Governance and takes into account the Swiss Code of Best Practice for Corporate Governance.
The ARYZTA Group consolidated financial statements are prepared in accordance with International Financial Reporting Standards ('IFRS') and the requirements of Swiss law. The ARYZTA AG Company financial statements are prepared in accordance with the requirements of Swiss Law and the Company's Articles of Association. Where necessary, the financial statement disclosures have been extended to comply with the requirements of the SIX Swiss Exchange Directive on Information Relating to Corporate Governance.
In this report, the terms 'ARYZTA' and the 'Company' refer to ARYZTA AG, whereas the 'Group' and the 'ARYZTA Group' refer to ARYZTA AG and its subsidiaries. The 'Board' refers to the Board of Directors of the Company. 'Origin' means Origin Enterprises plc (ARYZTA has a 68.6 % holding in Origin Enterprises plc), and the 'Origin Board' means the Board of Directors of Origin Enterprises plc. To avoid duplication, in some sections cross-references are made to the 2013 Financial Statements (comprising the Group consolidated financial statements and Company financial statements of ARYZTA AG), as well as to the Articles of Association of ARYZTA AG (available on the Company website at www.aryzta.com/about-aryzta/corporate-governance.aspx).
The Group is structured conventionally. The ARYZTA General Meeting is the supreme corporate body and the Board is accountable and reports to the shareholders, by whom it is elected. The Board, while entrusted with the ultimate direction of ARYZTA, as well as the supervision and control of management, has delegated responsibility for the day-today management of the Group, to the extent allowed under Swiss law, through the Chief Executive Officer ('CEO'), to Executive Management. The Group's management and organisational structure corresponds to its segmental reporting lines: Food Europe, Food North America, Food Rest of World and Origin.
Each segment's management team is responsible for the day-to-day activities of their segment and reports to Executive Management, which in turn reports through the CEO to the Board. Origin constitutes an exception, as it is a public company in its own right, with its own Board of Directors, separate executive management team, governance structure and ring-fenced financing arrangements. The executive management team within Origin reports to the Origin Board. The Origin Board is accountable and reports to its shareholders, including ARYZTA. Owen Killian (CEO) and Patrick McEniff, Chief Financial Officer ('CFO') and Chief Operations Officer ('COO'), are ARYZTA Board members and are also members of the Origin Board. Pat Morrissey, ARYZTA General Counsel, Company Secretary and Chief Administration Officer ('CAO') is also Company Secretary of Origin.
| Name and domicile: | ARYZTA AG, 8001 Zurich, Switzerland |
|---|---|
| Primary listing: | SIX Swiss Exchange, Zurich, Switzerland |
| Swiss Security number: | 4 323 836 |
| ISIN: | CH0043238366 |
| Cedel / Euroclear common code: | 037252298 |
| Secondary listing: | ISE Irish Exchange, Dublin, Ireland |
| SEDOL Code: | B39VJ74 |
| Swiss Stock Exchange symbol: | ARYN |
| Irish Stock Exchange symbol: | YZA |
Stock market capitalisation as of 31 July 2013: CHF 5,044,846,528 or €4,079,937,017 based on 88,119,590 registered shares (i.e. disregarding 3,690,944 treasury shares) and closing prices of CHF 57.25 or €46.30 per share.
Stock market capitalisation as of 31 July 2012:
CHF 4,274,229,121 or €3,552,760,375 based on 88,037,675 registered shares (i.e. disregarding 3,772,859 treasury shares) and closing prices of CHF 48.55 or €40.355 per share.
| Name and domicile: | Origin Enterprises plc, Dublin 8, Ireland |
|---|---|
| Holding: | ARYZTA Group has a 68.6 % holding in Origin Enterprises plc |
| Dual primary listing: | ESM Irish Exchange, Dublin, Ireland AIM London Stock Exchange, London, United Kingdom |
| ISIN: | IE00B1WV4493 |
| SEDOL Code: | B1WV449 |
| Irish ESM exchange symbol: | OIZ |
| London AIM symbol: | OGN |
Stock market capitalisation as of 31 July 2013:
€830,994,930 based on 138,499,155 ordinary shares and closing price of €6.00 per share.
Stock market capitalisation as of 31 July 2012: €503,768,657 based on 138,018,810 ordinary shares and closing price of €3.65 per share (excluding 480,345 deferred convertible ordinary shares).
Details of the significant subsidiaries and associated companies of ARYZTA (being their company names, domicile, share capital, and the Company's participation therein) are set out in note 35 of the ARYZTA Group consolidated financial statements for 2013 on page 139.
As at 31 July 2013, the Company has been notified of the following shareholdings or voting rights, which amount to 3 % or more of the Company's issued ordinary share capital:
| Number of shares 2013 |
Number of shares % 2013 |
Number of shares 2012 |
Number of shares % 2012 |
|
|---|---|---|---|---|
| ARY LTIP Trustee (treasury shares) | 3,690,944 | 4.02% | 3,772,859 | 4.11% |
| MassMutual | 2,799,110 | 3.05% | Less than 3% | |
| Invesco Limited | Less than 3% | 4,373,010 | 4.76% | |
| Fidelity Management and Research LLC | Less than 3% | 2,785,897 | 3.03% |
Any significant shareholder notifications during the year and since 31 July 2013 are available from the Group's website at:
www.aryzta.com/investor-centre/shareholder-notifications.aspx.
The ARYZTA Group has no interest in any other company exceeding five percent of voting rights of that other company, where that other company has an interest in the ARYZTA Group exceeding five percent of the voting rights in ARYZTA.
The registered share capital of the Company amounts to CHF 1,836,210.68 and is divided into 91,810,534 registered shares with a par value of CHF 0.02 per share. The share capital is fully paid-up.
ARYZTA has no conditional share capital.
Pursuant to Article 5 of the Articles of Association (governing Authorised Share Capital for General Purposes), the amount by which the share capital of the Company may be increased for general purposes may not exceed CHF 170,089.60 (through the issue of up to 8,504,480 registered shares). Authority for this purpose expires on 30 November 2013.
The Board has the power to determine the issue price, the period of entitlement to dividends and the type of consideration or the contribution in kind for such an issue. The Board may withdraw the pre-emptive rights and allocate them to third parties in the event of the use of those shares for acquisitions or for the purposes of employee participation, provided that in the latter case the withdrawal of pre-emptive rights is limited to 2,551,343 registered shares. For further details, refer to Article 5 of the Articles of Association, which is available on the Company website at www.aryzta.com/aboutaryzta/corporate-governance.aspx.
Trading in ARYZTA shares on the SIX Swiss Exchange and the Irish Stock Exchange commenced in August 2008.
The subsequent changes in share capital, treasury shares and the allocation of treasury shares to awards granted in connection with the ARYZTA Long-Term Incentive Plans (Matching Plan and Option Equivalent Plan) are as follows:
| Nominal value CHF |
Shares in issue | Shares outstanding |
Treasury shares | Matching Plan Allocation |
Option Plan Allocation |
Unallocated Treasury shares |
|
|---|---|---|---|---|---|---|---|
| Issuance of shares | |||||||
| on formation of ARYZTA | 0.02 | 78,940,460 | 78,940,460 | – | – | – | – |
| Issuance of shares to subsidiary |
0.02 | 2,240,000 | – | 2,240,000 | – | – | 2,240,000 |
| Treasury share disposal | – | 5,641 | (5,641) | – | – | (5,641) | |
| Granting of LTIP awards | – | – | – | 1,035,000 | – | (1,035,000) | |
| As of 31 July 2009 | 81,180,460 | 78,946,101 | 2,234,359 | 1,035,000 | – | 1,199,359 | |
| Issuance of shares on acquisition of Fresh Start Bakeries |
0.02 | 3,864,335 | 3,864,335 | – | – | – | – |
| Forfeitures of LTIP awards | – | – | – | (60,000) | – | 60,000 | |
| Granting of LTIP awards | – | – | – | – | 1,200,000 | (1,200,000) | |
| As of 31 July 2010 | 85,044,795 | 82,810,436 | 2,234,359 | 975,000 | 1,200,000 | 59,359 | |
| As of 31 July 2011 | 85,044,795 | 82,810,436 | 2,234,359 | 975,000 | 1,200,000 | 59,359 | |
| Vesting of LTIP awards | – | 975,000 | (975,000) | (975,000) | – | – | |
| Issuance of shares to subsidiary |
0.02 | 2,513,500 | – | 2,513,500 | – | – | 2,513,500 |
| Granting of LTIP awards | – | – | – | 944,250 | 1,569,250 | (2,513,500) | |
| Forfeitures of LTIP awards | – | – | – | (194,250) | (259,250) | 453,500 | |
| Issuance of shares to broaden the shareholder |
|||||||
| constituency | 0.02 | 4,252,239 | 4,252,239 | – | – | – | – |
| As of 31 July 2012 | 91,810,534 | 88,037,675 | 3,772,859 | 750,000 | 2,510,000 | 512,859 | |
| Granting of LTIP awards | – | – | – | 222,750 | 222,750 | (445,500) | |
| Exercise of LTIP awards | – | 81,915 | (81,915) | – | (370,000) | 288,085 | |
| Forfeitures of LTIP awards | – | – | – | (246,750) | (123,250) | 370,000 | |
| As of 31 July 2013 | 91,810,534 | 88,119,590 | 3,690,944 | 726,000 | 2,239,500 | 725,444 |
Of the 91,810,534 registered shares, 88,119,590 are outstanding and 3,690,944 are classified as treasury shares. As of 31 July 2013, 725,444 of the treasury shares remain unallocated.
ARYZTA's capital is composed of registered shares only. As at 31 July 2013, ARYZTA has 91,810,534 fully paid-up, registered shares (including 3,690,944 treasury shares) with a nominal value of CHF 0.02 each. Each share entered in the share register with voting rights entitles the holder to one vote at the General Meeting and all shares have equal dividend rights. ARYZTA has not issued any participation certificates1 .
ARYZTA has not issued any profit-sharing certificates1 .
Article 7 of the Articles of Association deals with the Shareholders' Register and Transfer Restrictions and is available on the Company website at www.aryzta.com/about-aryzta/ corporate-governance.aspx.
Pursuant to Article 7 b) of the Articles of Association, persons acquiring registered shares are, on application, entered in the share register without limitation as shareholders with voting power, provided they comply with the disclosure requirement stipulated by the Federal Act on Stock Exchanges and Securities Trading (Stock Exchange Act) of 24 March 1995 and expressly declare that they have acquired the shares in their own name and for their own account.
As part of the establishment of ARYZTA, former holders of IAWS Group plc shares and options received ARYZTA registered shares, delivered initially in the form of Capita Depository Interests and since replaced by CREST2 Depository Interests ('CDIs')3 .
A CDI represents an entitlement to an ARYZTA registered share. CDI holders are not the legal owners of the shares represented by the CDIs. They are not in a position to directly enforce or exercise rights like a shareholder. However, CDI holders do maintain an interest in the shares represented by the CDIs.
1 Participation and profit-sharing certificates are instruments which have similar features to shares, but may differ with regard to their entitlement to dividend payments, voting rights, preferential rights to company assets or other similar rights.
2 The CREST system, operated by Euroclear UK and Ireland, is the system for the holding and settlement of transactions in uncertificated (UK, Irish and Channel Island) securities.
3 ARYZTA shares are held in trust by Euroclear UK and Ireland for the benefit of CREST members who have been issued with dematerialised interests representing entitlements to ARYZTA registered shares in the form of CDIs.
To facilitate voting by CDI holders, the Company has entered arrangements with Euroclear UK and Ireland to enable, by way of exception, registration of CREST International Nominees Limited ('CREST') in the share register as nominee with voting rights for the number of registered shares corresponding to the number of CDIs on the CDI register. There were no other exceptions to the provisions of section 2.6.1 above granted in the year under review.
CDI holders who wish to be in a position to directly enforce or exercise their rights must have their interests entered in the share register in accordance with Article 7 of the Articles of Association and effectively hold their shares through a member of the Swiss SIS Settlement System.
Pursuant to Article 7 c) of the Articles of Association, nominee shareholders are entered in the share register with voting rights without further inquiry up to a maximum of 1.5 % of the outstanding share capital available at the time. Above this 1.5 % limit, registered shares held by nominees are entered in the share register with voting rights only if the nominee in question (at the application for registration or thereafter upon request by the Company) discloses the names, addresses and shareholdings of the persons for whose account the nominee holds 0.3 % or more of the outstanding share capital available at that time and provided that the disclosure requirement stipulated by the Stock Exchange Act is complied with. The Board has the right to conclude agreements with nominees concerning their disclosure requirements.
Pursuant to Article 7 d) of the Articles of Association, the limit of registration in Article 7 c) of the Articles of Association described above also applies to the subscription for or acquisition of registered shares by exercising option or convertible rights arising from registered or bearer securities issued by the Company, as well as by means of purchasing pre-emptive rights arising from either registered or bearer shares.
Pursuant to Article 7 e) of the Articles of Association, legal entities, or partnerships, or other associations or joint ownership arrangements, which are linked through capital ownership or voting rights, through common management or in like manner, as well as individuals, legal entities or partnerships that act in concert with intent to evade the entry restriction, are considered as one shareholder or nominee.
Pursuant to Article 7 f) of the Articles of Association, the Company may in special cases approve exceptions to the regulations described in section 2.6.3 above. After due consultation with the person concerned, the Company is further authorised to delete entries in the share register as shareholder with voting rights with retroactive effect if they were effected on the basis of false information or if the respective person does not provide the information pursuant to Article 7 c) described in section 2.6.3 above.
As of 31 July 2013, ARYZTA has not issued any convertible bonds or warrants.
As of 31 July 2013, a total of 726,000 Matching Plan awards and a total of 2,239,500 Option Equivalent Plan awards granted to executives and senior management remain outstanding, subject to fulfilment of predefined vesting conditions in connection with these ARYZTA Long Term Incentive Plans.
Please refer to the Compensation Report on pages 44 to 51 of this Annual Report for further information pertaining to options granted as an element of executive and management compensation.
At 31 July 2013, the Board of ARYZTA consists of two executive directors and seven non-executive directors, each of whom is considered by the Board to be independent in character and judgement. Moreover, none of the non-executive directors are party to relationships or circumstances with ARYZTA which, in the Board of Directors' opinion, are likely to affect their judgement. All interests linked to each individual director in this section correspond to the nationality of that director, unless otherwise stated.
Diploma in Dairy Science from University College Cork
Denis Lucey has a background in the agricultural co-operative movement in Ireland. In 1982, he was appointed Chief Executive Officer of Mitchelstown Co-Operative Agricultural Society Limited, a position he held until the merger of that co-operative with the Ballyclough Co-Operative Creamery Limited in 1990 and the formation of Dairygold Co-Operative Society Limited. He served as Chief Executive Officer of Dairygold Co-Operative Society Limited until March 2003. He joined the Board of IAWS Group plc as a non-executive director in September 2000, and was elected Chairman of the Board in 2005. He has served as Chairman of ARYZTA since its admission to trading on the SIX Swiss Exchange and the Irish Stock Exchange in August of 2008. He is also currently Chairman of the Milk Quota Appeals Tribunal for the Irish Department of Agriculture, Fisheries and Food.
Bachelor of Arts in Biology from North Park College and a Master of Science from Michigan State University in Resource Economics
Charles Adair is Vice-Chairman of BMO Capital Markets, a full-service investment bank headquartered in Toronto, Canada. He began his career in the agricultural commodity trading and transportation industries in the U.S. and joined BMO Capital Markets in 1984 in Chicago. He was a leader in the formation of BMO's initial U.S. investment banking effort as one of the senior members of the Chicago investment banking platform in 1995. In addition, he started and continues to lead BMO's Food & Agribusiness Mergers & Acquisitions practice from Chicago. With over 30 years of experience in the food and agribusiness industries, he continues to focus on advising public and private companies on financing and mergers & acquisitions. He became a member of the ARYZTA Board of Directors in December 2010.
Hugh Cooney is a Certified Accountant with more than 40 years' experience working with a number of major professional advisory firms, including NCB Corporate Finance, Arthur Andersen and BDO in Ireland. He retired from practice in 2008 and is now a consultant with KPMG, Ireland, and a non-executive director of Aon MacDonagh Boland Group (since 2008) and Bio-Medical Research Limited (since 2012), all Irish companies. He became a member of the ARYZTA Board of Directors in December 2011.
Bachelor of Commerce from University College Dublin
Brian Davy is Chairman of Davy, Ireland's leading provider of stockbroking, wealth management and financial advisory services, and the sponsor of ARYZTA on the Irish Stock Exchange. He graduated from University College Dublin with a Bachelor of Commerce Degree and has spent his entire working career in building up the business and executive team of Davy, where he has worked since 1965. He is a former director of the Irish Stock Exchange and Arnotts plc. He joined the Board of IAWS Group plc as a non-executive director in December 1995. He became a member of the ARYZTA Board of Directors in August 2008.
Term of office expires at 2014 AGM Bachelor of Business Administration, Public Accounting, Pace University, New York; Advanced Management Program from INSEAD, in addition to executive programs at Harvard, Columbia, Duke and IMD
Shaun B. Higgins qualified as a Certified Public Accountant while training and working with Ernst & Young, New York, USA, from 1972 to 1977. He worked in the beverage industry from 1977 to 2008, holding various senior finance and operating positions in the Coca-Cola and Seven-Up bottling enterprises in North America and Europe, culminating in the position of Executive Vice President and European President of Coca-Cola Enterprises, Inc. Shaun B. Higgins is a member of the Advisory Board of Carmine Labriola Contracting Corp., and operating partner of Marvin Traub Associates. He became a member of the ARYZTA Board of Directors in December 2011.
Owen Killian (1953, Irish) CEO and executive member Term of office expires at 2013 AGM
Bachelor of Agricultural Science from University College Dublin
Owen Killian is CEO of ARYZTA AG and has been since its admission to trading in 2008. He was previously CEO of IAWS Group plc since 2003. Prior to this, he held several executive positions within IAWS Group plc since it was listed in 1988. He has also served as the Chairman of the Origin Board of Directors since 2008.
Fellow of the Chartered Institute of Management Accountants; Master of Business Administration from Dublin City University
Patrick McEniff joined IAWS Group plc after its listing on the Irish Stock Exchange in 1989 and has fulfilled various senior management roles, focused on finance and systems development. In 2004, he was appointed to the board of IAWS Group plc as its Group Finance Director. In 2008, upon the formation of ARYZTA AG, he was also appointed as CFO and member of the Board of Directors and in 2012 was also appointed as COO of the Group. He has also served as a member of the Origin Board of Directors since 2008.
Götz-Michael Müller (1948, German) Non-executive member Term of office expires at 2014 AGM
Diplom-Kaufmann Westfälische Wilhelms-Universität, Münster, Germany Götz-Michael Müller has 30 years' experience working in fast-moving consumer goods companies in Germany. He worked from 1975 to 1996 with Kraft Foods (formerly Kraft Jacobs Suchard) in various marketing and management positions, culminating in the role of Executive Vice-President and Area Director for Kraft Jacobs Suchard, Germany. From 1997 to 2001, he served as member of the executive management (Vice-President of marketing & sales) with Brauerei Beck & Co, Bremen, Germany, and from 2001 to 2003 as Managing Director Germany, Coca-Cola GmbH, Berlin, Germany. From 2006 to 2007, Götz-Michael Müller served as a member of the Board of SIG Combibloc AG (previously SIG Holding AG), Schaffhausen, Switzerland. He is a member of the "Wissenschaftliche Gesellschaft für Marketing und Unternehmensführung" (Academic Society for Marketing and Business Leadership) at the University of Münster, Germany, and the Advisory Board of the Bremen branch of Deutsche Bank, Germany. He became a member of the ARYZTA Board of Directors in December 2011.
Term of office expires at 2015 AGM
Wolfgang Werlé has held several positions within the Food and Beverage and Services industries including President and CEO of Gate Gourmet International from 1992 to 1995 and as President and CEO of SAir Relations from 1996 to 2001, both within the Swissair / SAir-Group. From 2001 to 2008, he then served as CEO and Delegate of the Board of Hiestand International and from 2007 to 2008 as Chairman of Hiestand Holding AG. He also served as a member of the Board of Directors of ARYZTA AG from August 2008 to December 2008. He has also served on the Board of Schweizerische Post / Swiss Post Services from 2002 to 2010 and as a member of the Board of Directors of Grand Resort Bad Ragaz since 2005 and of Cat Holding AG since 2012. He became a member of the ARYZTA Board of Directors in December 2012.
None of the non-executive members of the Board of Directors has fulfilled any operational management functions for companies of the ARYZTA Group in the three years immediately preceding the period under review. There were no related-party transactions between the ARYZTA Group and Board members during the year ended 31 July 2013 (2012: none).
The General Meeting has the competence to appoint and remove the members of the Board. The term of office shall correspond to the maximum term legally allowed, but shall not exceed three years. The Board determines the first term of office of each director in such a way that, each year, an appropriate portion of directors will be elected or re-elected at the Annual General Meeting of ARYZTA. Each director's remaining term of office is referred to in section 3.1 of the Corporate Governance Report.
The Board has adopted Organisational Regulations that define the essential roles and responsibilities of the Board, the Chairman, the Committees of the Board and Executive Management. The office of Chairman, together with membership of the Committees of the Board and the Chair thereof, are, under the Organisational Regulations, determined annually by the Board following the Annual General Meeting. The Organisational Regulations are available on the ARYZTA website at www.aryzta.com/about-aryzta/ corporate-governance.aspx.
ARYZTA has an Audit Committee and a Nomination and Remuneration Committee. The powers and responsibilities of each Committee are set out in their respective Terms of Reference, as approved by the Board and are available on the ARYZTA website at www.aryzta.com/about-aryzta/corporate-governance.aspx.
As of 31 July 2013, these Committees are comprised as follows:
| Audit Committee |
Nomination & Remuneration Committee |
|
|---|---|---|
| Denis Lucey (Chairman) | X | |
| Charles Adair | X | |
| Hugh Cooney | X | |
| J. Brian Davy | X1 | |
| Shaun B. Higgins | X1 | |
| Owen Killian (CEO) | ||
| Patrick McEniff (CFO/COO) | ||
| Götz-Michael Müller | ||
| Wolfgang Werlé | X | |
X denotes that the Board Member is on the applicable Committee.
1 denotes the Board Member who chairs the applicable Committee.
As of 31 July 2013, the Audit Committee is comprised of three non-executive directors, namely Shaun B. Higgins (Chairman), Hugh Cooney and Wolfgang Werlé. Each of these directors is considered by the Board to be independent in judgement and character. From 1 August 2012 until the Annual General Meeting on 11 December 2012, the Audit Committee was comprised of three non-executive directors, namely Shaun B. Higgins (Chairman), Hugh Cooney and William Murphy. In the 2013 financial year, the Audit Committee met four times and the average duration of the meetings was approximately three hours.
The Audit Committee's role includes reviewing the Group consolidated financial statements and Company financial statements, the interim and full-year results and the significant financial reporting judgements contained therein. The Audit Committee also reviews the Group's internal controls, and the scope and effectiveness of the Group's Internal Audit function. The Head of Internal Audit has access to the Audit Committee at all times and he and the CFO/COO regularly attend meetings of the Audit Committee by invitation.
In the financial year 2013, the Audit Committee, operating under its Terms of Reference, discharged its responsibilities by reviewing:
As of 31 July 2013, the Nomination and Remuneration Committee is comprised of three non-executive directors namely J. Brian Davy (Chairman), the Company Chairman, Denis Lucey and Charles Adair. Each of these directors is considered by the Board to be independent in judgement and character. In the 2013 financial year, the Nomination and Remuneration Committee met five times and the average duration of the meetings was approximately one and a half hours.
The Nomination and Remuneration Committee is responsible for determining the remuneration of the executive and non-executive members of the Board, for nominating for the approval of the Board and ultimately the shareholders candidates to fill Board vacancies, and for the continuous review of senior management succession plans. The Group's remuneration policy for executive and non-executive directors and details of directors' remuneration are contained in the Compensation Report on pages 44 to 51 of this Annual Report, in accordance with the Swiss Code of Obligations and the SIX Directive on Information Relating to Corporate Governance.
Seven Board meetings were held during the year. The average duration of regular Board meetings is approximately five hours. In addition, the Board held a two-day meeting during the year to consider ARYZTA Group strategy. At each meeting, the Chairs of the Committees report to the Board on their activities as necessary. Details of the work methods of the Committees are set out in Section 3.4.2.
| Board | Audit | Nomination & Remuneration |
|||
|---|---|---|---|---|---|
| Eligible to | Eligible to | Eligible to | |||
| attend | Attended | attend | Attended | attend | Attended |
| 7 | 7 | 5 | 5 | ||
| 7 | 7 | 5 | 5 | ||
| 7 | 6 | 4 | 4 | ||
| 7 | 6 | 5 | 5 | ||
| 7 | 7 | 4 | 4 | ||
| 7 | 7 | ||||
| 7 | 7 | ||||
| 7 | 7 | ||||
| 2 | 2 | 2 | 2 | ||
| 2 | 1 | ||||
| 5 | 5 | 2 | 2 | ||
The Board of Directors is the ultimate governing body. It has the power and competencies afforded by Swiss law (art. 716a of the Swiss Code of Obligation (CO)) including in particular: 1) to approve the strategic objectives, annual budget and capital allocations;
The following fall within the exclusive competency of the Board of Directors:
The Board has delegated responsibility for the day-to-day management of the Group, through the CEO, to Executive Management to the extent allowed by Swiss law.
Group Executive Management report in a regular and structured manner to the Board of Directors. The CEO and CFO/COO report to the Board on a systematic basis. At each Board Meeting, the CEO informs the Board of the status of current business operations, significant developments and major business transactions. Likewise, the CFO/COO reports on financial performance across the Group and key financial figures and parameters. In addition, executives within the Group regularly deliver presentations to the Board. The Board approves the formal Risk Assessment, which is required by Article 663b of the Swiss Code of Obligations. The Board has approved the design, implementation and maintenance of the Internal Control System required under Swiss law.
The ARYZTA Internal Audit function reports directly to the Audit Committee and to the Group General Counsel, Company Secretary and CAO. Internal Audit may audit all Group activities and regularly meets with Group Executive Management. Internal Audit discusses audit plans with the Audit Committee on at least an annual basis, but may discuss them more frequently should circumstances require.
The external auditors, PricewaterhouseCoopers AG (the Auditors of the ARYZTA Group consolidated financial statements and the Company financial statements), conduct their audits in compliance with the auditing standards referenced in their respective opinions.
For the financial years 2013 and 2012, the Group Executive Management consists of Owen Killian (CEO), Patrick McEniff (CFO/COO) and Pat Morrissey (Group General Counsel, Company Secretary and CAO). Details of Owen Killian, Patrick McEniff and Pat Morrissey are provided in Section 3.1.
No member of the Group Executive Management holds management contracts for any company outside the ARYZTA Group.
Please refer to note 10 of the ARYZTA AG Company financial statements on page 149 to 153 for details of Board members' shareholdings and to the Compensation Report on pages 44 to 51 for disclosures pertaining to compensation, as well as the content and method of determining the compensation and share-ownership programmes. No loans or advances were made by the ARYZTA Group to members of the Board of Directors or to Executive Management during the financial year, or were outstanding at 31 July 2013 (2012: none).
Each ARYZTA share registered as a share conferring a voting right entitles the holder to one vote at a General Meeting. Proxies are entitled to attend shareholders' meetings and exercise all rights of the represented shareholders at such meetings.
As indicated previously in paragraph 2.6.2, ARYZTA pursues arrangements with Euroclear UK and Ireland to enable investors whose interests in ARYZTA are represented by CDIs to exercise their voting rights. CDI holders who wish to be in a position to directly enforce or exercise their rights must have their interests entered in the share register in accordance with Article 7 of the Articles of Association and effectively hold their shares through a member of the Swiss SIS Settlement System.
Pursuant to Article 14 of the Articles of Association, resolutions at the General Meeting calling for a quorum of at least two-thirds of the votes represented are required for:
General Meetings are convened by the Board of Directors and, if need be, by the Auditors. Notice of the General Meeting is given by publication in the Swiss Official Gazette of Commerce and on the Group's homepage (www.aryzta.com) at least 20 days before the date of the meeting. The notice must state, inter alia, the day, time and place of the Meeting and the agenda.
The Board states the items on the agenda. One or more registered shareholders who jointly represent at least ten percent of the share capital of the Company registered in the Commercial Register may request items to be included in the agenda. Such requests must be in writing, specifying the items and the proposals, and be submitted to the Chairman at least 45 days before the date of the General Meeting.
The relevant date to determine the shareholders' right to participate in the General Meeting on the basis of the registrations appearing in the share register is set by the Board in the invitation to the General Meeting.
ARYZTA does not have a provision on opting out or opting up in the Articles of Association. Thus, the provisions regarding the legally prescribed threshold of 33 1 /3 % of the voting rights for making a public takeover offer set out in Article 32 of the Swiss Stock Exchange Act are applicable.
Benefits under the ARYZTA LTIP vest upon a change of control. Otherwise, the agreements and plans benefiting the members of the Board or the Group Executive Management are unaffected by a change of control. Further details regarding the benefits under the ARYZTA LTIP are set out in the Compensation Report on pages 44 to 51 of this Annual Report.
Following a formal tender process, PricewaterhouseCoopers AG, Zurich, was elected as statutory auditor and Group auditor in December 2009. The term of office is one year. Patrick Balkanyi has been the lead auditor since PricewaterhouseCoopers AG's appointment in 2009. At the 2012 AGM, PricewaterhouseCoopers AG, Zurich, was re-elected as statutory auditor and Group auditor for the 2013 financial year.
The total audit and audit-related fees charged by the Group auditors in financial year 2013 amounted to €2,532,000. Of these fees, €263,000 were charged to Origin Enterprises plc.
The total audit and audit-related fees charged by the Group auditors in the financial year 2012 amounted to €2,621,000. Of these fees, €299,000 were charged to Origin Enterprises plc.
The Group's policy is to manage its relationship with the Group's external auditor to ensure their independence is maintained. In order to achieve this, the Board has determined limits on the type and scale of non-audit work that can be provided by the auditor.
Contracts to the auditor for other non-audit work are deemed to be pre-approved by the Audit Committee, up to an aggregate limit of 100% of the audit fee for the current year. This is subject to the requirement that all contracts for specific pieces of non-audit work with fees exceeding €250,000 be awarded on the basis of competitive tendering. Where the awarding of a contract for non-audit work to the auditor is to be made that is likely to increase total fees for non-audit work above this aggregate limit, the Group CFO notifies the Chairman of the Audit Committee in advance of such a contract being awarded.
Fees for additional services rendered by the auditors to the ARYZTA Group in the financial year 2013 totalled €1,900,000 (2012: €2,182,000). The largest portion of these fees related to tax return preparation or review in over 20 countries, covering more than 100 legal entities. Of these fees, €6,000 (2012: €16,000) were charged to Origin Enterprises plc.
| Auditor's remuneration | ||
|---|---|---|
| in EUR `000 | 2013 | 2012 |
| – Auditor's remuneration for audit and audit-related services | 2,532 | 2,621 |
| – Auditor's remuneration for tax compliance and related services | 1,214 | 1,178 |
| – Auditor's remuneration for tax consulting services | 686 | 904 |
| – Auditor's remuneration for advisory services | – | 100 |
| 4,432 | 4,803 | |
| – Total other fees / audit and audit-related services | 75% | 83% |
PricewaterhouseCoopers presents to the Audit Committee a detailed report on the results of the 2013 Group consolidated and Company financial statement audits, the findings on significant financial accounting and reporting issues, as well as the findings on the Group's internal control system ('ICS').
– Tax consulting or advisory services / audit and audit-related services 27% 38%
In 2013, both PricewaterhouseCoopers and the Group Head of Internal Audit participated in all four Audit Committee meetings. Other members of the Group Executive Management attended the meetings as invited. In addition, the Group Head of Internal Audit regularly met with the Chairman of the Audit Committee for interim updates.
On an annual basis, the Board of Directors reviews the selection of the auditors, in order to propose their appointment to the Annual General Meeting of ARYZTA. The Audit Committee assesses the effectiveness of the work of the auditors in accordance with Swiss law. The lead auditor rotates every seven years in accordance with Swiss law.
During meetings of the Audit Committee, audit and non-audit-related fees to be charged by PricewaterhouseCoopers during the year are reviewed to mitigate the risk of any potential impairment to PricewaterhouseCoopers' independence. PricewaterhouseCoopers monitors its independence throughout the year and confirms its independence to the Audit Committee annually.
ARYZTA is committed to pursuing an open and consistent communication policy with shareholders, potential investors and other interested parties. The objective is to ensure that the perception of those parties about the historical record, current performance and future prospects of ARYZTA is in line with management's assessment of the current situation at ARYZTA. The guiding principles of this policy are that ARYZTA gives equal treatment to shareholders in equal situations, that any price-sensitive information is published in a timely fashion and that the information is provided in a format that is as complete, simple, transparent and consistent as possible.
ARYZTA publishes its first-quarter trading update, half-year results, third-quarter trading update and full-year results (including the Annual Report) on the occasion of its quarterly announcement cycle (see details on page 42). These quarterly announcements are each accompanied by a news release. Additionally, a presentation and conference call, which is broadcast live on the internet (webcast) and which anyone can choose to access, whether a shareholder or not, are held on a half-yearly basis, or as deemed necessary by the Board. These webcasts can be replayed at any time on the ARYZTA website (www.aryzta.com). An automatic alerting service is also provided through the website. This ensures that interested parties can sign-up to be automatically alerted to results and events announcements published on the website. ARYZTA also ensures that news releases are distributed to major wire and news services. These news releases are also made available in the News & Media section of the website immediately after release to the SIX Swiss Exchange and ISE Irish Exchange (www.aryzta.com/news-andmedia.aspx). In this way, the Company utilises its website and ancillary communications infrastructure to ensure a rapid and equitable distribution of information for all interested parties.
ARYZTA's Investor Relations programme for institutional investors is carried out in line with the quarterly announcement cycle, with management time allocated accordingly and not on an ad-hoc basis. ARYZTA has appointed a dedicated communications officer to focus on the management of the communication process with investors and the media, and to support ARYZTA's efforts to strike a balance between the needs of managing a business and regular transparent communication with investors. ARYZTA's policy regarding investor meetings (i.e. Group meetings, one-to-one meetings and conference calls) is that these will not be held on an ad-hoc basis. These will be organised following quarterly announcements, save as mentioned below. Investors wishing to meet the Group subsequent to such quarterly announcements should e-mail the Group's Communications Officer (see details on page 42). These investor communications focus either on recently announced financial results, recent corporate activity or the longer-term strategy of the Group. They do not serve the purpose of disclosing new information that might encourage an investment decision.
The Group accepts invitations to investor conferences. Attendance at conferences by the Group will be on a planned and agreed basis in advance of its quarterly announcement cycle. The Company also communicates with analysts and stockbrokers who follow ARYZTA to facilitate third-party research on the Company. ARYZTA assumes no responsibility for any statements, expectations, or recommendations made by analysts and stockbrokers. The Group will communicate to investors at the time of any potentially price-sensitive event, such as significant acquisitions and divestments, agreements and alliances.
Communications Officer
Talacker 41 8001 Zurich Switzerland Tel: +41 (0) 44 583 42 00 Fax: +41 (0) 44 583 42 49 E-mail: [email protected]
| Announcement of the 2013 annual results | 30 September 2013 |
|---|---|
| Issue of the 2013 annual report | 7 October 2013 |
| First-quarter trading update | 25 November 2013 |
| Annual General Meeting 2013 | 10 December 2013 |
| Payment of dividend | 3 February 2014 |
| Announcement of half-year results 2014 | 10 March 2014 |
| Third-quarter trading update | 3 June 2014 |
| Announcement of the 2014 annual results | 29 September 2014 |
| Issue of the 2014 annual report | 6 October 2014 |
| First-quarter trading update | 2 December 2014 |
| Annual General Meeting 2014 | 2 December 2014 |
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