Notes to the Consolidated Financial Statements

1. Organization, Business Activities, and Lindt & Sprüngli GROUP Companies

Chocoladefabriken Lindt & Sprüngli AG and its subsidiaries manufacture and sell premium chocolate products. The products are sold under the brand names Lindt, Ghirardelli, Russell Stover, Whitman’s, Caffarel, Hofbauer, Küfferle, and Pangburn’s. The Lindt & Sprüngli Group has twelve manufacturing plants worldwide (six in Europe and six in the United States) and mainly sells in countries within Europe and the NAFTA countries.

Chocoladefabriken Lindt & Sprüngli AG is incorporated and domiciled in Kilchberg ZH, Switzerland.

The Company has been listed since 1986 on the SIX Swiss Exchange (ISIN number: registered shares CH0010570759, participation certificates CH0010570767).

These consolidated financial statements were approved for publication by the Board of Directors on March 6, 2017.

The subsidiaries of Chocoladefabriken Lindt & Sprüngli AG as at December 31, 2016 are:

Country

Domicile

Subsidiary

Business activity

Percentage of ownership

Currency

Capital in million

Switzerland

Kilchberg

Chocoladefabriken Lindt & Sprüngli (Schweiz) AG

P&D

100

CHF

10.0

Indestro AG 1

M

100

CHF

0.1

Lindt & Sprüngli (International) AG 1

M

100

CHF

0.2

Lindt & Sprüngli Financière AG 1

M

100

CHF

5.0

Germany

Aachen

Chocoladefabriken Lindt & Sprüngli GmbH 1

P&D

100

EUR

1.0

France

Paris

Lindt & Sprüngli SAS

P&D

100

EUR

13.0

Italy

Induno

Lindt & Sprüngli SpA 1

P&D

100

EUR

5.2

Luserna

Caffarel SpA

P&D

100

EUR

2.2

Great Britain

London

Lindt & Sprüngli (UK) Ltd. 1

D

100

GBP

1.5

USA

Kansas City, MO

Lindt & Sprüngli (North America) Inc. 1

M

100

USD

0.1

Stratham, NH

Lindt & Sprüngli (USA) Inc.

P&D

100

USD

1.0

San Leandro, CA

Ghirardelli Chocolate Company

P&D

100

USD

0.1

Kansas City, MO

Russell Stover Chocolates, LLC

P&D

100

USD

0.1

Spain

Barcelona

Lindt & Sprüngli (España) SA

D

100

EUR

3.0

Austria

Vienna

Lindt & Sprüngli (Austria) Ges.m.b.H. 1

P&D

100

EUR

4.5

Poland

Warsaw

Lindt & Sprüngli (Poland) Sp. z o.o. 1

D

100

PLN

17.0

Canada

Toronto

Lindt & Sprüngli (Canada) Inc. 1

D

100

CAD

2.8

Australia

Sydney

Lindt & Sprüngli (Australia) Pty. Ltd. 1

D

100

AUD

1.0

Mexico

Mexico City

Lindt & Sprüngli de México SA de CV 1

D

100

MXN

248.1

Sweden

Stockholm

Lindt & Sprüngli (Nordic) AB 1

D

100

SEK

0.5

Czech Republic

Prague

Lindt & Sprüngli (Czechia) s.r.o. 1

D

100

CZK

0.2

Japan

Tokyo

Lindt & Sprüngli Japan Co., Ltd.

D

100

JPY

1,227.0

South Africa

Capetown

Lindt & Sprüngli (South Africa) (Pty) Ltd. 1

D

100

ZAR

100.0

Hong Kong

Hong Kong

Lindt & Sprüngli (Asia-Pacific) Ltd. 1

D

100

HKD

248.3

China

Shanghai

Lindt & Sprüngli (China) Ltd.

D

100

CNY

199.5

Russia

Moscow

Lindt & Sprüngli (Russia) LLC 1

D

100

RUB

15.0

Brazil

São Paulo

Lindt & Sprüngli (Brazil) Holding Ltda.

D

100

BRL

49.1

Lindt & Sprüngli (Brazil) Comércio de Alimentos S.A. 2

D

51

BRL

39.1

D – Distribution, P – Production, M – Management

1 Subsidiaries held directly by Chocoladefabriken Lindt & Sprüngli AG.

2 The Joint Venture with the CRMPAR Holding S.A. is a subsidiary with substantial non-controlling interests and is therefore fully consolidated according to IFRS 10 Consolidated Financial Statements. The non-controlling interests are CHF 6.8 million. These are not material to the Group.

2. Accounting Principles

Basis of preparation

The consolidated financial statements of Chocoladefabriken Lindt & Sprüngli AG (“Lindt & Sprüngli Group”) were prepared in accordance with International Financial Reporting Standards (IFRS).

With the exception of the marketable securities, financial assets and the derivative financial instruments, which are recognized at fair value, the consolidated financial statements are based on historical costs.

When preparing the financial statements, Management makes estimates and assumptions that have an impact on the assets and liabilities presented in the annual report, the disclosure of contingent assets and liabilities and the disclosure of income and expenses in the reporting period. The actual results may differ from these estimates.

New IFRS standards and Interpretations

New and amended IFRS and interpretations (effective as of January 1, 2016 and thereafter)

The Lindt & Sprüngli Group has applied the following new IFRS standards and interpretations in 2016:

  • Various revised standards and interpretations related to the annual improvements to IFRS of the Cycle 2012 to 2014
  • Disclosure initiative: Amendments to IAS 1 – “Presentation of Financial Statements”.
  • None of these changes had a significant impact on the Lindt & Sprüngli Group’s financial position or performance.

    New and amended IFRS and interpretations that are required in future periods

    The following standards have already been published and are required in future periods, but have not been early adopted by the Lindt & Sprüngli Group:

  • IFRS 9 – “Financial Instruments” addresses classification, measurement, and recognition of financial assets and financial liabilities. The new standard will fully replace IAS 39 – “Financial instruments: Recognition and measurements” in 2018;
  • IFRS 15 – “Revenue from contracts with customers” will replace IAS 11 – “Construction Contracts”, IAS 18 – “Revenue”, and related interpretations in 2018; and
  • IFRS 16 – “Leases” will replace IAS 17 and become effective on January 1, 2019. The new standard will change the presentation in the financial statements as the majority of leases will become on-balance sheet liabilities with corresponding right of use assets. Early adoption is permitted for companies that also apply IFRS 15 – “Revenue from contracts with customers”.
  • These new standards may be relevant to the consolidated financial statements. The Lindt & Sprüngli Group is currently assessing the impact of the adoption.

    Consolidation method

    The consolidated financial statements include the accounts of the parent company and all the entities it controls (subsidiaries) up to December 31 of each year. The Lindt & Sprüngli Group controls an entity when it is exposed to, or has the rights to variable returns from its involvement with the entity, and has the ability to affect those returns through its power over the entity.

    Non-controlling interests are shown as a component of equity on the balance sheet and the share of the profit attributable to non-controlling interests is shown as a component of profit for the year in the income statement.

    Newly acquired companies are consolidated from the effective date of control using the acquisition method. Identifiable assets, liabilities and contingent liabilities acquired are recognized in the balance sheet at fair value. Acquisition costs exceeding the Lindt & Sprüngli Group’s share of the fair value of the identifiable net assets are allocated to goodwill. Transaction costs are shown as an expense in the period in which they are incurred.

    Foreign currency translation

    The consolidated financial statements are presented in Swiss francs, which is the parent company’s functional and reporting currency. In order to hedge against currency risks, the Lindt & Sprüngli Group engages in currency forwards and options trading. The methods of recognizing and measuring these derivative financial instruments in the balance sheet are explained below.

    Foreign exchange differences arising from the translation of loans that are held as net investments in a foreign operation are recognized separately in other comprehensive income. The repayment of these loans is not considered as a divestment (partial or full). As a consequence, the respective accumulated currency translation differences are not recycled from other comprehensive income to the income statement.

    Foreign exchange rates

    The Lindt & Sprüngli Group applied the following exchange rates:

    Balance sheet year-end rates

    Income statement average rates

    CHF

    2016

    2015

    2016

    2015

    Euro zone

    1 EUR

    1.07

    1.08

    1.09

    1.07

    USA

    1 USD

    1.02

    0.99

    0.99

    0.97

    Great Britain

    1 GBP

    1.25

    1.47

    1.32

    1.48

    Canada

    1 CAD

    0.76

    0.71

    0.75

    0.75

    Australia

    1 AUD

    0.74

    0.72

    0.73

    0.72

    Poland

    100 PLN

    24.30

    25.42

    24.97

    25.54

    Mexico

    100 MXN

    4.92

    5.70

    4.44

    5.02

    Sweden

    100 SEK

    11.23

    11.77

    11.43

    11.47

    Czech Republic

    100 CZK

    3.97

    4.00

    4.03

    3.94

    Japan

    100 JPY

    0.87

    0.82

    0.90

    0.80

    South Africa

    100 ZAR

    7.48

    6.36

    6.77

    7.53

    Hong Kong

    100 HKD

    13.15

    12.76

    10.58

    10.32

    China

    100 CNY

    14.72

    15.24

    14.63

    15.48

    Russia

    100 RUB

    1.67

    1.35

    1.50

    1.53

    Brazil

    100 BRL

    31.19

    25.21

    28.91

    27.75

    Property, plant, and equipment

    Property, plant, and equipment are valued at historical cost, less accumulated depreciation. The assets are depreciated using the straight-line method over the period of their expected useful economic life. Depreciation on assets other than land is calculated using the straight-line method to write down their cost to their residual values. The following useful lives have been applied:

  • Buildings (incl. installations) 5 – 40 years
  • Machinery 10 – 15 years
  • Other fixed assets 3 – 8 years
  • Land is not depreciated. Profits and losses from disposals are recorded in the income statement.

    Intangible assets

    Goodwill

    Goodwill is the excess of the costs of acquisition over the Lindt & Sprüngli Group’s interest in the fair value of the net assets acquired. Goodwill is not amortized, but is tested for impairment in the fourth quarter of each reporting period instead.

    Other intangible assets

    “EDP Software” and “customer relationships” are recognized at cost and amortized on a straight line basis over their economic life from the initial date on which the Lindt & Sprüngli Group can use them. “EDP Software” is amortized over a period of three to five years, “customer relationships” over a period of 10 to 20 years. The economic life of the intangible asset is regularly reviewed. “Brands and intellectual property rights” are not amortized but tested for impairment at each balance sheet date instead. All identifiable intangible assets (such as “brands and intellectual property rights” and “customer relationships”) acquired in the course of a business combination are initially recognized at fair value.

    Impairment

    The Lindt & Sprüngli Group records the difference between the realizable value and the book value of fixed assets, goodwill or intan­gible assets as impairment. The valuation is made for an individual asset or, if this is not possible, on a Lindt & Sprüngli group of assets to which separate sources of cash flows are allocated. In order to establish the future benefits, the expected future cash flows are discounted. Assets with undefined utilization periods as for example goodwill or intangible assets, and which are not in use yet, are not depreciated and are subject to a yearly impairment test. Depreciable assets are tested for their recoverability, if there are signs, that the book value is no longer realizable.

    Leasing

    The Lindt & Sprüngli Group distinguishes between lease liabilities resulting from finance and operating leases.

    Inventories

    Inventories are valued at the lower of cost and net realizable value. Costs include all direct material and production costs, as well as overhead, which are incurred in order to bring inventories to their current location and condition. Costs are calculated using the FIFO method. Net realizable value equals the estimated selling price in the ordinary course of business less cost of goods produced and applicable variable selling and distribution expenses.

    Cash and cash equivalents

    Cash and cash equivalents includes cash on hand, cash in bank, and other short-term highly liquid investments with an original maturity period of up to 90 days.

    Financial assets

    The Lindt & Sprüngli Group recognizes, measures, impairs (if required), presents and discloses financial assets as required by IAS 39 “Financial Instruments: Recognition and Measurement”, IAS 32 “Financial Instruments: Presentation” and IFRS 7 “Financial Instruments: Disclosures”. Loans and recei­vables are categorized as short-term assets, unless their remaining post-balance sheet date life exceeds twelve months. Within the reporting period the majority of loans and receivables have been accounted for as short-term commitments; they were included in the balance sheet items “Accounts receivable” and “Other receivables”. Value adjustments are made to outstanding recei­vables for which repayment is considered doubtful. Purchases and sales of financial assets are recorded on trade-date – the date on which the Lindt & Sprüngli Group has committed to buy or sell the asset. Investments in financial assets are initially recognized at fair value plus transaction costs for all financial assets not carried “at fair value through profit or loss”. The derecognition of a financial investment occurs at the moment when the right to receive future cash flows from the investment expires or has been transferred to a third party and the Lindt & Sprüngli Group has transferred substantially all risks and benefits of ownership. Financial investments categorized as “available-for-sale” and “at fair value through profit or loss” are valued at fair value. “Loans and receivables” and “held-to-maturity” investments are valued at amortized cost using the effective interest method. Realized and unrealized profits and losses arising from changes in the fair value of financial investments categorized as “fair value through profit or loss” are reflected in the income statement in the reporting period in which they occur.

    The fair value of listed investments is defined by using the current paid or, if not available, bid price. If the market for a financial asset is not active and/or the security is unlisted, the Lindt & Sprüngli Group can determine the fair value by using valuation procedures. These are based on recent arm’s length transactions, reference to similar financial instruments, the discounting of the future cash flows and the application of the option pricing models.

    “Available-for-sale financial assets” which have a market value of more than 40 % below their original costs or are, for a sustained 18-months period, below their original costs are considered as impaired and the accumulated fair value adjustment in equity will be recognized in the income statement. Impairment losses recognized in the income statement for an investment in an equity instrument classified as “available-for-sale” shall not be reversed through the income statement. If, in a subsequent period, the fair value of a debt instrument classified as “available-for-sale” increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in the income statement, the impairment loss shall be reversed in the income statement.

    Provisions

    Provisions are recognized when the Lindt & Sprüngli Group has a legal or constructive obligation arising from a past event, where it is likely that there will be an outflow of resources and a reasonable estimate can be made thereof.

    Dividends

    In accordance with Swiss law and the Articles of Association, dividends are treated as an appropriation of profit in the year in which they are ratified at the Annual Shareholders’ Meeting and subsequently paid.

    Financial liabilities

    Financial liabilities are recognized initially when the Lindt & Sprüngli Group commits to a contract and records the amount of the proceeds (net of transaction costs) received. Borrowings are then valued at amortized cost using the effective interest method. The amortized cost consists of a financial obligation at its initial recording, minus repayment, plus or minus accumulated amortization (the difference possible between the original amount and the amount due at maturity). Gains or losses are recognized in the income statement as a result of amortization or when a borrowing is written off. A borrowing is written off when it is repaid, abandoned or when it expires.

    Employee benefits

    The expense and defined benefit obligations for the significant defined benefit plans and other long-term ­employee benefits in accordance with IAS 19 (revised) are determined using the Projected Unit Credit Method, with independent actuarial valuations being carried out at the end of each reporting period. This method takes into account years of service up to the reporting period and requires the Lindt & Sprüngli Group to make estimates about demographic variables (such as mortality or turnover) and financial variables (such as future salary increase and the long-term interest rate on pension assets) that will affect the final cost of the benefits. The valuation of the pension asset is carried out yearly and recognized at its fair market value.

    The cost of defined benefit plans has three components:

  • service cost recognized in profit and loss;
  • net interest expense or income recognized in profit and loss; and
  • remeasurement recognized in other comprehensive income.
  • Service cost includes current service cost, past service cost and gains or losses on settlements. Past service cost is recognized in the period the plan amendment occurs.

    Curtailment gains and losses are accounted for as past service cost. Contributions from plan participants’ or a third party reduce the service cost and are therefore deducted if they are based on the formal terms of the plan or arise from a constructive obligation.

    Net interest cost is equal to the discount rate multiplied by the net defined benefit liability or asset. Cash flows and changes during the year are taken into account on a weighted basis.

    Remeasurements of the net defined benefit liability (asset) include actuarial gains and losses on the defined benefit obligation from:

  • changes in assumptions and experience adjustments;
  • return on plan assets excluding the interest income on the plan assets that is included in the net interest; and
  • changes in the effect of the asset ceiling (if applicable) excluding amounts included in the net interest.
  • Remeasurements recorded in other comprehensive income are not recycled.

    The Lindt & Sprüngli Group presents both components of the defined benefit costs in the line item “Employee benefits expense” in its consolidated income statement. Remeasurements are recognized in other comprehensive income. The retirement benefit obligation recognized in the consolidated statement of financial position represents the actual deficit or surplus in the Lindt & Sprüngli Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans. Payments to defined contribution plans are reported in personnel expenses when employees have rendered service entitling them to the contributions.

    A liability for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognizes any related restructuring costs.

    For the other long-term employee benefits the present value of the defined benefit obligation is recognized at the balance sheet date. Changes of the present value are recorded as personnel expenses in the income statement.

    Revenue recognition

    Revenue consists of delivery of goods and services to third parties net of value-added taxes and minus price reductions, returns and all payments to trade partners with the exception of payments for distinctly and clearly identifiable services, rendered by trade partners, which could also be rendered by third parties at comparable costs. Revenue is to be recorded in the income statement once the risks and rewards of the goods are transferred to the buyer. For returns of goods or other types of payments regarding the sales, adequate accruals are recorded.

    Interest income is recognized on an accrual basis, taking into consideration the outstanding sums lent and the actual interest rate to be applied.

    Dividend income resulting from financial investments is recorded upon approval of the dividend distribution.

    Operating expenses

    Operating expenses include marketing, distribution and administrative expenses.

    Borrowing costs

    Interest expenses incurred from borrowings used to finance the construction of fixed assets are capitalized for the period in which it takes to build the asset for its intended purpose. All other borrowing costs are immediately expensed in the income statement.

    Taxes

    Taxes are based on the yearly profit and include non-refundable taxes at source levied on the amounts received or paid for dividends, interests, and license fees. These taxes are levied according to a country’s directives.

    Deferred income taxes are accounted for according to the “balance-sheet-liability method”, and arise on temporary differences between the tax and IFRS bases of assets and liabilities. In order to calculate the deferred income taxes, the legal tax rate in use at the time or the future tax rate announced is applied.

    Deferred tax assets are recorded to the extent that it is probable that future taxable profit is likely to be achieved against which the temporary differences can be offset.

    Deferred taxes also arise due to temporary differences from investments in subsidiaries and associated companies. Deferred taxes are not recognized if the following two conditions are met: the parent company is able to manage the timing of the release of temporary differences and, it is probable that the temporary differences are not going to be reversed in the near future. Deferred tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable.

    Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.

    Research and development costs

    Development costs for new products are capitalized if the relevant criteria for capitalization are met. There are no capitalized development costs in these consolidated financial statements.

    Share-based payments

    The Lindt & Sprüngli Group grants several employees options on officially listed participation certificates. These options have a blocking period of three to five years and a maximum maturity of seven years. The options expire once the employee leaves the company. Cash settlements are not allowed. The disbursement of these equity instruments is valued at fair value at grant date. The fair value determined at grant date is recorded in a straight-line method over the vesting period. This is based on the estimated number of participation certificates, which entitles a holder to additional benefits. The fair value was defined with the help of the binomial model used to determine the price of the options. The anticipated maturity period included the conditions of the employee option plan, such as the blocking period and the non-transferability.

    Accounting for derivative financial instruments and hedging activities

    Derivative financial instruments are recorded when the contract is entered into and valued at fair value. The treatment of recognizing the resulting profit or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Lindt & Sprüngli Group designates certain derivative financial instruments as hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (securing the cash flow).

    At the beginning of the business transaction, the Lindt & Sprüngli Group documents the relationship between the hedge and the hedged items, as well as its risk management targets and strategies for undertaking the various hedging trans­actions. Furthermore, the Lindt & Sprüngli Group also documents its assessment, both at hedge inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are effective in offsetting changes in fair values or cash flows of hedged items.

    The effective portion of changes in fair value of derivatives which are designated and qualify as cash flow hedges is accounted for in other comprehensive income. Profit and loss from the ineffective portion of the value adjustment are recognized immediately in the income statement.

    Amounts accumulated in equity are recognized in the income statement in the same reporting period when the hedged item affects profit and loss.

    Critical accounting estimates and judgments

    When preparing the consolidated financial statements in accordance with IFRS, management is required to make estimates and assumptions. The estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the given circumstances. Actual values may differ from these estimates. Estimates and assumptions significantly affect the following areas:

  • Pension plans: the calculation of the recognized assets and liabilities from defined benefit plans is based on statistical and actuarial calculations performed by actuaries. The present value of defined benefit liabilities in particular is heavily dependent on assumptions such as the discount rate used to calculate the present value of future pension liabilities, future salary increases and changes in employee benefits. In addition, the Lindt & Sprüngli Group’s independent actuaries use statistical data such as probability of withdrawals of members from the plan and life expectancy in their assumptions.
  • When testing goodwill and other intangible assets with indefinite useful life, parameters such as future discounted cash flows, discount rates and the underlying growth rates are based on estimates and assumptions.
  • The Lindt & Sprüngli Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining deferred tax assets and deferred tax liabilities or current income tax accruals. There are many transactions and calculations for which the determination of the applicable tax rate and the expected current income tax position.
  • In the course of restructuring the pension fund schemes within the Lindt & Sprüngli Group in 2013, two non-profit funds were founded. According to IFRS 10 “Consolidated financial statements” it is not required to consolidate these two funds because amongst other things, the Lindt & Sprüngli Group is not exposed to variable returns.

    3. Risk Management

    Due to its global activity, the Lindt & Sprüngli Group is exposed to a number of risks: strategic, operational, and financial. Within the scope of the annual risk management process, the individual risk positions are classified into these three categories, where they are assessed, limited, and responsibilities assigned.

    In view of the existing and inevitable strategic and operating risks of the core business, Management’s objective is to minimize the impact of the financial risks on the operating and net profit for the reporting period.

    The Lindt & Sprüngli Group is exposed to financial risks. The financial instruments are divided, in accordance with IFRS 7, into the following categories: market risks (commodities, exchange rates, interest rates) credit risks, and liquidity risks. The ­central treasury department (Corporate Treasury) is responsible for the coordination of risk management and works closely with the operational Lindt & Sprüngli Group companies. The decentralized Lindt & Sprüngli Group structure gives strong autonomy to the individual operational Lindt & Sprüngli Group companies, particularly with regard to the management of exchange rate and commodity risks. The risk policies issued by the Audit Committee serve as guidelines for the entire risk management.
Centralized systems and processes, specifically for the ongoing recognition and consolidation of the Group-wide foreign exchange and commodity positions, as well as regular internal reporting, ensure that the risk positions are consolidated and managed in a timely manner. The Lindt & Sprüngli Group only engages in derivative financial instruments in order to hedge against market risks.

    Market risk

    Commodity price risk

    The Lindt & Sprüngli Group’s products are manufactured with raw materials (commodities) that are subject to strong price fluctuations due to climatic conditions, seasonal conditions, seasonal demand, and market speculation. In order to mitigate the price and quality risks of the expected future net demand, the manufacturing Lindt & Sprüngli Group companies enter into contracts with suppliers for the future physical delivery of the raw materials. Commodity futures are also used, but only processed centrally by Corporate Treasury. The commodity futures for cocoa beans of a required quality are always traded for physical-delivery agreements. The number of outstanding commodity futures is dependent on the expected production volumes and price development and may therefore vary significantly throughout the year. Based on the existing contract volume as of December 31, 2016 and 2015, no material sensitivities exist on these positions. The changes in commodity prices include the fair value of the futures since entering into the agreement and are recognized in accordance with IAS 39.

    Exchange rate risks

    The Lindt & Sprüngli Group’s reporting currency is the Swiss franc, which is exposed to fluctuations in foreign exchange rates, primarily with respect to the euro, the various dollar currencies, and pound sterling. Foreign exchange rate risk is not generated from sales, since the operational Group companies invoice predominantly in their local functional currencies. On the other hand, the Lindt & Sprüngli Group is exposed to exchange rate risk on trade payables for goods and services that arise from the trade within the Lindt & Sprüngli Group and outside partners. These transactions are hedged using forward currency contracts. The operational Lindt & Sprüngli Group companies transact all currency instruments with Corporate Treasury, which hedges these positions by means of financial instruments with credit-worthy financial institutions (short-term rating A1/P1).

    Since the operational Lindt & Sprüngli Group companies transact the majority of their transactions in their own functional currencies and any remaining non-functional currency-based transactions are hedged with currency forward contracts, the exchange rate risk at balance sheet date is not material. The changes, in exchange rates, include the fair value of the currency forward contracts since entering into the contract and are recognized in accordance with IAS 39.

    Interest rate risks

    Corporate Treasury monitors and minimizes interest rate risks from a mismatch of quality, maturity period, and currency of the financial position on a continuous basis. Corporate Treasury may use derivative financial instruments in order to manage the interest rate risk of balance sheet assets and liabilities, and future cash flows. As of December 31, 2016 and 2015, there were no such transactions.

    The most material financial assets as of December 31, 2016 and 2015 are not interest-bearing. These include predominantly cash and cash equivalents in Swiss franc. The acquisition of Russell Stover Chocolates, LLC in 2014 caused a reduction of liquid funds and the issuance of long-term bonds with a fixed interest rate by the Lindt & Sprüngli Group. The Lindt & Sprüngli Group faces a risk of a rise in the interest rate at maturity of these bonds.

    Credit Risks

    Credit risks occur when a counterparty, such as a financial institute, supplier or a client is unable to fulfil its contractual duties. Financial credit risks are mitigated by investing (liquid funds and/or derivative financial instruments) with various lending institutions holding a short-term A1/P1-rating only. The maximum default risk of balance sheet assets is limited to the carrying values of those assets in the balance sheet as reflected in the notes to the financial statements (including derivative financial instruments). The operating companies of the Lindt & Sprüngli Group have implemented processes for defining credit limits for clients and suppliers and monitor adherence to these processes on an ongoing basis. Due to the geographical spread of the turnover and the large number of clients, the Lindt & Sprüngli Group’s concentration of risk is limited.

    Liquidity risks

    Liquidity risk exists when the Lindt & Sprüngli Group or a Lindt & Sprüngli Group company does not settle or meet its financial obligations (untimely repayment of financial debt, payment of interest). The Lindt & Sprüngli Group’s liquidity is ensured by means of regular group wide monitoring and planning of liquidity as well as an investment policy coordinated on a timely basis by Corporate Treasury. The net financial position (defined as cash and cash equivalents plus marketable securities less financial debt), is monitored on a company-by-company basis by Corporate Treasury. As of December 31, 2016, the net financial position amounted to CHF 472.9 million (CHF 681.5 million in 2015). For extraordinary financing needs, adequate credit lines with financial institutes have been arranged.

    The tables below present relevant maturity groupings as at December 31, 2016 and 2015, of the contractual maturity date:

    CHF million

    < 3 months

    Between 3 and 12 months

    Between 1 and 3 years

    Over 3 years

    2016Total

    Bond (including interests)

    0.1

    255.3

    10.0

    765.0

    1,030.4

    Loans

    1.2

    1.2

    Accounts payable

    177.1

    3.2

    180.3

    Other accounts payable

    45.6

    1.1

    46.7

    Derivative assets

    – 6.1

    – 3.1

    – 0.8

    – 10.0

    Derivative liabilities

    13.9

    41.7

    2.0

    57.6

    Bank and other borrowings

    66.1

    0.4

    66.5

    Total contractually fixed payments

    296.7

    298.6

    12.4

    765.0

    1,372.7

    CHF million

    < 3 months

    Between 3 and 12 months

    Between 1 and 3 years

    Over 3 years

    2015Total

    Bond (including interests)

    0.1

    5.3

    260.5

    770.0

    1,035.9

    Loans

    1.6

    0.2

    1.8

    Accounts payable

    177.4

    6.0

    183.4

    Other accounts payable

    48.9

    1.1

    50.0

    Derivative assets

    – 6.2

    – 19.5

    – 0.4

    – 26.1

    Derivative liabilities

    25.7

    3.3

    0.4

    29.4

    Bank and other borrowings

    86.6

    0.5

    87.1

    Total contractually fixed payments

    332.5

    – 3.3

    262.1

    770.2

    1,361.5

    4. Capital Management

    The goal of the Lindt & Sprüngli Group with regards to capital management is to support the business with a sustainable and risk adjusted capital basis and to achieve an accurate return on the invested capital. The Lindt & Sprüngli Group assesses the capital structure on an ongoing basis and makes adjustments in view of the business activities and the changing economical environment.

    The Lindt & Sprüngli Group monitors its capital based on the ratio of shareholders’ equity in percentage to total assets, which was 57.1% as of December 31, 2016 (55.7% in 2015).

    The objectives, policies, and procedures as of December 31, 2016, related to capital management have not been changed compared to the previous year.

    5. Segment information: According to geographic segments

    The Lindt & Sprüngli Group is organized and managed by means of individual countries. For the definition of business segments to be disclosed, the Lindt & Sprüngli Group has aggregated companies of individual countries on the basis of similar economic structures (foreign exchange risks, growth perspectives, element of an economic area), similar products and trade landscapes, and economic attributes (gross profit margins).
The three business segments to be disclosed are:

  • “Europe”, consisting of the European companies and business units including Russia;
  • “NAFTA”, consisting of the companies in the USA, Canada, and Mexico; and
  • “All other segments”, consisting of the companies in Australia, Japan, South Africa, Hong Kong, China, and Brazil as well as the business units Distributors and Duty Free.
  • The Lindt & Sprüngli Group considers the operating result as the segment result. Transactions between segments are valued and recorded in accordance with the cost-plus method.

    Segment income

    Segment Europe

    Segment NAFTA

    All other segments

    Total

    CHF million

    2016

    2015

    2016

    2015

    2016

    2015

    2016

    2015

    Sales

    2,051.4

    1,924.6

    1,670.5

    1,588.7

    457.1

    414.0

    4,179.0

    3,927.3

    Less sales between segments

    269.3

    261.4

    8.8

    12.6

    278.1

    274.0

    Third party sales

    1,782.1

    1,663.2

    1,661.7

    1,576.1

    457.1

    414.0

    3,900.9

    3,653.3

    Operating profit

    301.4

    263.7

    197.7

    205.7

    63.4

    49.4

    562.5

    518.8

    Net financial result

    – 8.4

    – 7.3

    Income before taxes

    554.1

    511.5

    Taxes

    – 134.3

    – 130.5

    Net income

    419.8

    381.0

    The following countries achieved the highest sales group wide in 2016:

  • USA CHF 1,471.3 million (CHF 1,407.2 million in 2015)
  • Germany CHF 549.9 million (CHF 492.0 million in 2015)
  • Balance sheet and other information

    Segment Europe

    Segment NAFTA

    All other segments

    Total

    CHF million

    2016

    2015

    2016

    2015

    2016

    2015

    2016

    2015

    Assets 1

    3,919.2

    3,935.1

    2,278.5

    2,107.4

    231.1

    216.5

    6,428.8

    6,259.0

    Liabilities 1

    2,172.1

    2,295.5

    384.1

    335.8

    198.6

    138.0

    2,754.8

    2,769.3

    Investments

    117.5

    116.4

    104.0

    94.8

    12.6

    41.6

    234.1

    252.8

    Depreciation and amortization

    90.0

    78.5

    53.2

    44.0

    5.6

    3.5

    148.8

    126.0

    Impairment

    1.1

    0.9

    1.2

    0.4

    0.1

    2.7

    1.0

    1 Assets of CHF –10.1 million (CHF 4.9 million in 2015) and liabilities of CHF 130.1 million (CHF 71.3 million in 2015) which cannot be clearly allocated to a particular segment are disclosed in the category “All other segments”.

    The following countries held the greatest portion of fixed and intangible assets group wide in 2016:

  • USA CHF 1,408.6 million (CHF 1,326.6 million in 2015)
  • Germany CHF 258.6 million (CHF 257.5 million in 2015)
  • 6. Financial Instruments, FAIR VALUE, AND hIERARCHY LEVELS

    The following table shows the carrying amounts and fair values of financial instruments recognized in the consolidated balance sheet, analyzed by categories and hierarchy levels at year-end:

    2016

    2015

    CHF million

    Level 1

    Carrying amount

    Fair value

    Carrying amount

    Fair value

    Financial assets

    At fair value through profit or loss

    Derivative assets

    1

    0.3

    0.3

    10.7

    10.7

    Derivative assets

    2

    9.8

    9.8

    15.4

    15.4

    Marketable securities and short-term financial assets

    1/2

    0.2

    0.2

    0.2

    0.2

    Total

    10.3

    10.3

    26.3

    26.3

    Available-for-sale

    Investments third parties

    3

    1.3

    1.3

    1.3

    1.3

    Total

    1.3

    1.3

    1.3

    1.3

    Other financial assets 2

    Total

    1,649.1

    1,649.1

    1,377.2

    1,377.2

    Total financial assets

    1,660.7

    1,660.7

    1,404.8

    1,404.8

    Financial liabilities

    At fair value through profit or loss

    Derivative liabilities

    1

    21.0

    21.0

    0.2

    0.2

    Derivative liabilities

    2

    36.6

    36.6

    29.2

    29.2

    Total

    57.6

    57.6

    29.4

    29.4

    Other financial liabilities

    Bonds 3

    1

    997.6

    1,031.2

    997.1

    1,029.1

    Loans 3

    1.2

    1.2

    1.8

    1.8

    Other non-current liabilities

    7.6

    7.6

    8.4

    8.4

    Accounts payable

    180.4

    180.4

    183.3

    183.3

    Other accounts payable

    46.8

    46.8

    50.6

    50.6

    Bank and other borrowings 3

    66.5

    66.5

    87.1

    87.1

    Total

    1,300.1

    1,333.7

    1,328.3

    1,360.4

    Total financial liabilities

    1,357.7

    1,391.3

    1,357.7

    1,389.7

    1 Level 1 – The fair value measurement of same financial instruments is based on quoted prices in active markets. Level 2 – The fair value measurement of same financial instruments is based on observable market data, other than quoted prices in Level 1. Level 3 – Valuation technique using non-observable data. For financial instruments with a short term maturity date it is expected that the carrying amounts are a reasonable approximation of the respective fair values.

    2 Contains cash and cash equivalents, accounts receivable, other receivables (excluding prepayments and current tax assets) and loans to third parties.

    3 See note 17.

    7. Property, plant, and equipment

    CHF million

    Land/ buildings

    Machinery

    Other fixed assets

    Construction in progress

    2016Total

    Acquisition costs as at January 1, 2016

    932.5

    1,149.1

    213.1

    141.2

    2,435.9

    Additions

    41.2

    48.8

    17.7

    109.1

    216.8

    Retirements

    – 9.6

    – 41.7

    – 5.6

    – 56.9

    Transfers

    36.8

    39.7

    4.6

    – 81.8

    – 0.7

    Currency translation

    8.6

    5.0

    1.3

    3.6

    18.5

    Acquisition costs as at December 31, 2016

    1,009.5

    1,200.9

    231.1

    172.1

    2,613.6

    Accumulated depreciation as at January 1, 2016

    408.4

    713.3

    163.9

    1,285.6

    Additions

    43.3

    70.1

    18.7

    132.1

    Impairments

    1.4

    1.0

    0.1

    2.5

    Retirements

    – 6.0

    – 41.0

    – 5.5

    – 52.5

    Currency translation

    2.4

    2.8

    0.3

    5.5

    Accumulated depreciation as at December 31, 2016

    449.5

    746.2

    177.5

    1,373.2

    Net fixed assets as at December 31, 2016

    560.0

    454.7

    53.6

    172.1

    1,240.4

    CHF million

    Land/ buildings

    Machinery

    Other fixed assets

    Construction in progress

    2015Total

    Acquisition costs as at January 1, 2015

    927.7

    1,117.8

    207.4

    116.7

    2,369.6

    Additions

    64.7

    48.2

    16.7

    105.4

    235.0

    Retirements

    – 31.5

    – 7.0

    – 2.3

    – 1.4

    – 42.2

    Transfers

    16.0

    55.0

    4.7

    – 75.6

    0.1

    Currency translation

    – 44.4

    – 64.9

    – 13.4

    – 3.9

    – 126.6

    Acquisition costs as at December 31, 2015

    932.5

    1,149.1

    213.1

    141.2

    2,435.9

    Accumulated depreciation as at January 1, 2015

    420.1

    701.3

    160.1

    1,281.5

    Additions

    36.0

    58.5

    16.4

    110.9

    Impairments

    0.1

    0.9

    1.0

    Retirements

    – 28.1

    – 6.5

    – 2.0

    – 36.6

    Transfers

    0.1

    – 0.1

    0.0

    Currency translation

    – 19.8

    – 40.9

    – 10.5

    – 71.2

    Accumulated depreciation as at December 31, 2015

    408.4

    713.3

    163.9

    1,285.6

    Net fixed assets as at December 31, 2015

    524.1

    435.8

    49.2

    141.2

    1,150.3

    Advance payments of CHF 95.4 million (CHF 89.9 million in 2015) are included in the position construction in progress. No mortgages exist on land and buildings.

    The impairment charge totals CHF 2.5 million (CHF 1.0 million in 2015) and consists of writedowns of land and buildings amounting CHF 1.4 million (CHF 0.1 million in 2015) and of machinery and other fixed assets amounting CHF 1.1 million (CHF 0.9 million in 2015).

    The net book value of capitalized assets, under financial lease, amounted to CHF 1.1 million (CHF 1.9 million in 2015). Operating lease commitments are not capitalized.

    8. Intangible Assets

    CHF million

    EDP software & consultancy

    Customer relationships

    Brands & intellectual property

    Goodwill

    Other intangible assets

    2016Total

    Acquisition costs as at January 1, 2016

    77.9

    132.3

    459.8

    779.5

    13.6

    1,463.1

    Additions

    11.8

    5.5

    17.3

    Retirements

    – 5.2

    – 5.2

    Transfers

    0.7

    0.7

    Currency translation

    0.1

    4.1

    24.1

    1.7

    30.0

    Acquisition costs as at December 31, 2016

    85.3

    136.4

    459.8

    803.6

    20.8

    1,505.9

    Accumulated depreciation as at January 1, 2016

    57.2

    11.8

    0.2

    69.2

    Additions

    7.6

    8.8

    0.2

    16.6

    Impairments

    0.1

    0.1

    0.2

    Retirements

    – 5.2

    – 5.2

    Currency translation

    0.1

    0.6

    0.7

    Accumulated depreciation as at December 31, 2016

    59.8

    21.2

    0.5

    81.5

    Net intangible assets as at December 31, 2016

    25.5

    115.2

    459.8

    803.6

    20.3

    1,424.4

    CHF million

    EDP software & consultancy

    Customer relationships

    Brands and intellectual property

    Goodwill

    Other intangible assets

    2015 Total

    Acquisition costs as at January 1, 2015

    78.0

    132.3

    459.8

    779.7

    8.0

    1,457.9

    Additions

    10.5

    7.3

    17.8

    Retirements

    – 5.6

    – 5.6

    Transfers

    – 0.1

    – 0.1

    Currency translation

    – 4.9

    – 0.2

    – 1.7

    – 6.8

    Acquisition costs as at December 31, 2015

    77.9

    132.3

    459.8

    779.5

    13.6

    1,463.1

    Accumulated depreciation as at January 1, 2015

    60.3

    3.0

    0.1

    63.4

    Additions

    6.3

    8.6

    0.2

    15.1

    Retirements

    – 5.6

    – 5.6

    Currency translation

    – 3.8

    0.2

    – 0.1

    – 3.7

    Accumulated depreciation as at December 31, 2015

    57.2

    11.8

    0.2

    69.2

    Net intangible assets as at December 31, 2015

    20.7

    120.5

    459.8

    779.5

    13.4

    1,393.9

    Research and development expenditures amounted to CHF 11.6 million (CHF 10.5 million in 2015) and are expensed as incurred.

    Impairment test of goodwill and other intangible assets with infinite life

    The impairment test of goodwill and other intangible assets with infinite life (i.e. brands and intellectual property) relates to the acquisition of Russell Stover Chocolates, LLC in 2014. The cash generating unit consists of the acquired company plus parts of the Canadian subsidiary which will be distributing Russell Stover Chocolate products in Canada from 2017 onwards.

    The recoverable amount equals to the net present value of discounted future cash flows. It was determined based on planning assumptions over the next years plus a residual value. The EBIT-margin is based on historical data and industry specific benchmarks of the Lindt & Sprüngli Group. The main planning assumptions are summarized as follows:

    2016

    2015

    Period of cash flow projections

    5 years

    10 years

    Annual sales growth

    3.0%

    5.0%

    Annual EBIT-margin evolution

    Improvement

    Improvement

    Terminal growth

    2.3%

    2.5%

    Discount rate post tax

    6.2%

    6.1%

    The recoverable amount for goodwill and intangible assets with infinite life is CHF 50.0 million above the carrying amount. The following changes to the main planning assumptions lead to a situation where the recoverable amount equals the carrying amount:

    Sensitivity

    Annual sales growth

    Decrease by 85 basis points

    Annual EBIT-margin evolution

    Decrease by 15 basis points

    Terminal growth

    Decrease by 15 basis points

    Discount rate post tax

    Increase by 10 basis points

    9. Financial Assets

    CHF million

    2016

    2015

    Pension assets 1

    1,300.9

    1,565.1

    Loans to third parties

    4.9

    Investments third parties (available-for-sale)

    1.3

    1.3

    Total

    1,302.2

    1,571.3

    1 See note 18.

    10. Taxes

    10.1 Deferred Tax Assets and Liabilities

    The net value of deferred tax liabilities is as follows:

    CHF million

    2016

    2015

    At January 1

    429.9

    310.5

    Deferred income tax expense

    18.1

    29.6

    Tax charged to comprehensive income

    – 79.6

    102.2

    Tax charged to other components of equity

    – 22.5

    – 14.6

    Currency translation

    0.3

    2.2

    At December 31

    346.2

    429.9

    Deferred tax assets and liabilities were generated from the following balance sheet positions:

    CHF million

    2016

    2015

    Deferred tax assets

    Property, plant, and equipment

    7.3

    2.5

    Pension assets and liabilities

    48.9

    44.7

    Receivables

    8.3

    7.1

    Inventories

    22.7

    19.9

    Payables and accruals

    58.3

    45.1

    Other

    17.8

    45.3

    Deferred tax assets gross

    163.3

    165.0

    Netting

    – 76.0

    – 133.2

    Total

    87.3

    31.8

    Deferred tax liabilities

    Property, plant, and equipment

    40.0

    35.1

    Intangible assets

    58.4

    45.9

    Pension assets and liabilities

    390.1

    469.4

    Receivables

    2.9

    6.9

    Inventories

    3.9

    4.1

    Payables and accruals

    13.9

    14.0

    Derivative assets and liabilities

    0.1

    Other

    0.2

    19.5

    Deferred tax liabilities gross

    509.5

    594.9

    Netting

    – 76.0

    – 133.2

    Total

    433.5

    461.7

    Net deferred tax

    346.2

    429.9

    Tax loss carry-forwards

    The tax loss carry-forwards of which no deferred tax assets are recognized expire as follows:

    CHF million

    2016

    2015

    Between 1 and 5 years

    9.3

    6.2

    Between 6 and 10 years

    6.4

    12.6

    Over 10 years

    2.8

    2.9

    Total

    18.5

    21.7

    Tax loss carry-forwards utilized in 2016 amount to CHF 2.4 million (CHF 1.1 million in 2015).

    10.2 Tax Expense

    CHF million

    2016

    2015

    Current tax expense

    110.5

    94.8

    Deferred income tax expense

    18.1

    29.6

    Other taxes

    5.7

    6.1

    Total

    134.3

    130.5

    The tax on the Lindt & Sprüngli Group’s income before taxes differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated companies as follows:

    CHF million

    2016

    2015

    Income before taxes

    554.1

    511.5

    Expected tax 1

    109.6

    119.2

    Change in applicable tax rates on temporary differences

    – 0.4

    – 1.8

    Utilization of unrecognized tax loss carry-forwards from prior years

    – 0.7

    – 0.2

    Adjustments related to prior years

    – 1.0

    – 2.5

    Non-taxable items

    9.0

    0.9

    Withholding tax levied and other taxes

    5.7

    6.1

    Income components with lower tax rates

    2.4

    – 3.0

    Other

    9.7

    11.9

    Total

    134.3

    130.5

    1 Based on the average applicable tax rate of 19.8% in 2016 (23.3% in 2015).

    The tax for each component of other comprehensive income is:

    2016

    2015

    CHF million

    Before tax

    Tax

    After tax

    Before tax

    Tax

    After tax

    Hedge accounting

    – 63.0

    – 63.0

    10.9

    – 0.2

    10.7

    Defined benefit plan

    – 251.5

    79.6

    – 171.9

    339.0

    – 102.0

    237.0

    Currency translation

    44.6

    44.6

    – 67.2

    – 67.2

    Total

    – 269.9

    79.6

    – 190.3

    282.7

    – 102.2

    180.5

    11. Inventories

    CHF million

    2016

    2015

    Raw material

    119.3

    113.9

    Packaging material

    96.8

    96.9

    Semi-finished and finished products

    484.1

    478.5

    Value adjustment

    – 42.6

    – 41.8

    Total

    657.6

    647.5

    In 2016, CHF 7.9 million (CHF 6.3 million in 2015) of the value adjustment as at the end of 2015 have been released to the income statement.

    12. Accounts receivable

    CHF million

    2016

    2015

    Accounts receivable, gross

    1,024.2

    934.2

    Value adjustment

    – 29.7

    – 27.1

    Total

    994.5

    907.1

    Value adjustment as at January 1

    – 27.1

    – 27.4

    Addition

    – 6.4

    – 6.7

    Utilization

    3.5

    4.8

    Release

    0.3

    0.9

    Currency translation

    1.3

    Value adjustment as at December 31

    – 29.7

    – 27.1

    The following table presents the aging of accounts receivable:

    CHF million

    2016

    2015

    Not yet past due

    849.1

    756.0

    Past due 1–30 days

    123.6

    130.2

    Past due 31–90 days

    31.6

    29.0

    Past due over 91 days

    19.9

    19.0

    Accounts receivable gross

    1,024.2

    934.2

    Historically, the default rate for accounts receivable in the category “Not yet past due” was lower than 1%. Hence, the default risk is considered to be low. Value adjustments are calculated based on the assessment of the default risk with regards to accounts receivable balances already past due.

    The carrying amounts of accounts receivable are denominated in the following currencies:

    CHF million

    2016

    2015

    CHF

    52.5

    48.6

    EUR

    334.3

    312.3

    USD

    364.5

    340.6

    GBP

    60.8

    57.3

    Other currencies

    182.4

    148.3

    Accounts receivable net

    994.5

    907.1

    13. Derivative FinanCIAL INSTRUMENTS ANd Hedging RESERVES

    At the balance sheet date, the fair value of derivative financial instruments was as follows:

    2016

    2015

    CHF million

    Assets

    Liabilities

    Assets

    Liabilities

    Derivatives for hedging (currencies and raw material)

    8.0

    57.4

    26.1

    7.3

    Other derivatives

    2.1

    0.2

    22.1

    Total

    10.1

    57.6

    26.1

    29.4

    The carrying amount (contract value) of the outstanding forward-currency and raw material contracts as at December 31, 2016, is CHF 1,275.7 million (CHF 1,531.2 million in 2015). The majority of gains and losses recognized in the hedging reserve, as shown in the Consolidated Statement of Changes in Equity amounting to a net loss of CHF 43.5 million as of December 31, 2016 (net gains of CHF 19.5 million in 2015), will be released to material expenses in the income statement at various dates within the next 24 months. Other derivative instruments which have been executed in accordance with the risk policy and do not qualify for hedge accounting under the criteria of IAS 39 as well as the ineffective portion of designated derivative instruments, have been recognized immediately in the income statement.

    14. MARKETABLE SECURITIES and short-term financial assets

    CHF million

    2016

    2015

    Fair-value-through-profit-or-loss financial assets

    0.2

    0.2

    Total

    0.2

    0.2

    Fair-value-through-profit-or-loss financial assets (held for trading)

    CHF million

    2016

    2015

    CHF equity securities

    0.2

    0.2

    Total

    0.2

    0.2

    The carrying amounts of the above financial assets are designated as at fair-value-through-profit-or-loss upon initial recognition. Changes in the fair values of these assets are recorded in the positions “income from financial assets” and “expense from financial assets” in the income statement.

    15. CASH AND CASH EQUIVALENTS

    CHF million

    2016

    2015

    Cash at bank and in hand

    151.8

    141.9

    Short-term bank deposits

    440.4

    262.4

    Total

    592.2

    404.3

    The effective interest rate on short-term bank deposits reflects the average interest rate of the money market as well as the development of the currencies invested with an original maturity period of up to three months.

    16. Share and participation capital

    Number of registered shares (RS) 1

    Number of participation certificates (PC) 2

    Registered shares (CHF million)

    Participation certificates (CHF million)

    Total (CHF million)

    At January 1, 2015

    136,111

    956,066

    13.6

    9.6

    23.2

    Capital increase

    45,139

    0.451

    0.5

    Cancellation of shares

    – 23

    – 12,730

    – 0.002

    – 0.127

    – 0.1

    At December 31, 2015

    136,088

    988,475

    13.6

    9.9

    23.5

    Capital increase

    24,661

    0.247

    0.2

    At December 31, 2016

    136,088

    1,013,136

    13.6

    10.1

    23.7

    1 At par value of CHF 100.–

    2 At par value of CHF 10.–

    The conditional capital has a total of 459,106 participation certificates (PC) (483,767 in 2015) with a par value of CHF 10.–. Of this total, 204,656 (229,317 in 2015) are reserved for employee stock option programs; the remaining 254,450 participation certificates (254,450 in 2015) are reserved for capital market transactions. There is no other authorized capital. In 2016, a total of 24,661 (45,139 in 2015) of the employee options were exercised at an average price of CHF 2,631 (CHF 2,297 in 2015). The participation certificate has no voting right, but otherwise has the same ownership rights as the registered share.

    The number of own registered shares and participation capital (treasury stock) of the Lindt & Sprüngli Group are as follows:

    2016

    2015

    Inventory of treasury stock

    Registered shares

    Participation certificates

    Registered shares

    Participation certificates

    Inventory as at January 1

    2,584

    2,558

    12,730

    Additions

    150

    139

    Retirements

    – 825

    – 90

    Cancellation of shares

    – 23

    – 12,730

    Inventory as at December 31

    1,909

    2,584

    Average cost of additions (in CHF)

    66,889

    72,316

    Average sales price of retirements (in CHF)

    68,079

    58,171

    Average cost of cancellation of shares (in CHF)

    50,076

    4,200

    17. financial liabilities

    CHF million

    2016

    2015

    Non-current

    CHF 250 million floating rate bond, 2014–2017

    249.8

    CHF 500 million 0.5% Bond, 2014–2020

    499.3

    499.1

    CHF 250 million 1.0% Bond, 2014–2024

    248.4

    248.2

    Loans

    1.2

    1.8

    Current

    Bank and other borrowings

    66.5

    87.1

    CHF 250 million floating rate bond, 2014–2017

    249.9

    Total borrowings

    1,065.3

    1,086.0

    In September 2014 the Lindt & Sprüngli Group placed bonds of CHF 1 billion in order to finance the acquisition of Russell Stover Chocolates, LLC. The bonds consist of the following three tranches:

  • CHF 250 million floating rate bond with a term of 3 years and a floating interest rate based on 3-month CHF LIBOR plus 0.18% per annum. The interests are paid quarterly. The tranche is due for repayment in October 2017;
  • CHF 500 million bond with a term of 6 years and a fixed coupon of 0.5% per annum. The interests are paid annually on October 8; and
  • CHF 250 million bond with a term of 10 years and a fixed coupon of 1.0% per annum. The interests are paid annually on October 8.
  • The carrying amounts of the Lindt & Sprüngli Group’s financial liabilities are denominated in the following currencies:

    CHF million

    2016

    2015

    CHF

    997.6

    997.1

    EUR

    65.7

    4.5

    USD

    0.6

    83.7

    Other currencies

    1.4

    0.7

    Total

    1,065.3

    1,086.0

    18. Pension plans and other long-term employee benefits

    The Lindt & Sprüngli Group operates in and outside of Switzerland different pension plans for employees that satisfy the participation criteria. Among these plans are defined contribution and defined benefit plans that cover most of the employees against retirement, disability, and death.

    18.1 Defined contribution plans

    The Lindt & Sprüngli Group offers to employees that satisfy the eligibility criteria defined contribution plans. The Lindt  & Sprüngli Group is obliged to pay a fixed percentage of the annual pay to these pension schemes. To some of these plans, the employees also have to make contributions. These are typically deducted by the employer from the monthly salary and paid to the pension fund. Apart from the payment of the contributions, the employer has no further obligation to these pension funds or to the employees.

    In 2016 the employer contributions to defined contribution plans amounted to CHF 11.9 million (CHF 10.6 million in 2015).

    18.2 Defined benefit plans and other long-term employee benefits

    The Lindt & Sprüngli Group finances defined benefit plans for the employees that satisfy the criteria to join such plans. The most significant defined benefit plans are located in Switzerland, Germany, USA, France, Italy, and Austria.

    In addition to these plans, the Lindt & Sprüngli Group operates jubilee benefit plans and other plans with benefits depending on the past years of service. These plans qualify as other long-term employee benefits.

    18.2.1 Employee benefits plans in Switzerland

    The Lindt & Sprüngli Group operates different pension schemes in Switzerland. They are either organized through a separate foundation or through an affiliation to a collective foundation of an insurance company. The foundations are governed by foundation boards. The foundation boards are made up by an equal number of employee and employer representatives. The members of the foundation board are obliged by the law and the plan rules to act in the interest of the member (active employees and pensioners) only. Since the decisions are taken by the foundation boards, the only influence of the Lindt  & Sprüngli Group is through its representatives.

    The main duties of the foundation boards include the decision about the plan rules including the level of the contributions, the organization and the investment strategy.

    The benefits are mainly depending on the insured salary and the years of service. For some of the plans the benefits are depending on retirement savings account. At retirement age, the insured members can choose whether to take a pension for life, which includes a spouse’s pension, or a lump sum. In addition to retirement benefits, the plan benefits also include disability and death benefits. Insured members may also buy into the scheme to improve their pension provision up to the maximum amount permitted under the rules or may withdraw funds early for the purchase of a residential property for their own use. On leaving the company, the retirement savings will be transferred to the pension institution of the new employer or to a vested benefits institution. This type of benefit may result in pension payments varying considerably between individual years.

    In defining the benefits, the minimum requirements of the Law on Occupational Retirement, Survivors and Disability Pension Plans (BVG) and its implementing provisions must be observed. The BVG defines the minimum pensionable salary and the minimum retirement credits. The interest rate applicable to these minimum retirement savings is set by the Swiss Federal Council at least once every two years. In 2016, the rate was 1.25% (1.75% in 2015). The structure of the plan and the legal provisions of the BVG mean that the employer is exposed to actuarial risks. The main risks are investment risk, the inflation risk if it results in a salary increase, the interest risk, the disability risk and the risk of longevity.

    The employee and employer’s contributions are set by the foundation board. The employer has to finance at least 50% of the total contributions. Contributions can also be financed through employer welfare fund or finance foundations of the employer. In the event of a shortfall, recapitalization contributions to eliminate the gap in coverage may be levied from both the employer and the employee.

    In the year 2016, the foundation board decided to change the pension benefits in view of lower interest rates leading to an one-time expense of CHF 1.3 million.

    Beside the pension schemes, there are employer foundations that have as a main task to finance the pension schemes. The board members of these foundations are appointed exclusively by the employer.

    18.2.2 Employee benefits plans in Germany

    In Germany the Lindt & Sprüngli Group operates different company pension plans. These plans are based on different rules and agreements between the employer and employees. For certain management employees individual agreements are applied. The plan provides benefits in the event of retirement, disability and death. Depending on the plan rules, the benefits are either paid as pensions for life or as lump sums. The most significant plans are financed directly by the employer. Upon termination of the employment prior to retirement, the vested benefits remain preserved as required by the German pension law (Betriebsrentengesetz).

    The plans are regulated by the German pension law. The most significant risks related to actuarial gains or losses within these plans are born by the employer. The risk of life expectancy, the salary increase risk and the inflation risk might result in pension adjustments.

    18.2.3 Employee benefits plans in the USA

    In the USA, several defined benefit plans exist. The largest plan is a multi-employer plan. The employer contribution to this plan is calculated based on the working hours of the active employees. For each hour a fixed contribution is paid which is determined in the collective agreement with the unions. At retirement, a life-long pension is paid based on the contributions made.

    Further, there is a closed defined benefit plan. The old age benefits are calculated based on the years of service and a fixed USD amount. The benefits are typically provided as annual old age pensions for life. Next to the old age benefits, the plan provides death benefits. The plan is financed in full by the employer. Plan participant’s contributions are not allowed. Due to the plan characteristics, the employer is exposed to different actuarial risks, in special to the risk of the development of the future life expectancy. Due to the pooling, the assets of the plan can be influenced by the other employers.

    In another defined benefit plan, the employee receives a lump sum equal to the savings account at retirement. In addition to the savings account, the return on the investments chosen by the employee are reimbursed. The underlying assets are separated in a trust but do not qualify as defined benefit assets under IAS 19 as the assets are available to the creditors. Nevertheless, the trust reimburses the Company for the payments of the benefits. For this plan there is no actuarial risk, as long as the investments of the trust cover the investments chosen by the employees.

    18.2.4 Other employee benefits plans

    The other plans are located in France, Italy and Austria. These plans are based on the local legal requirements.

    The last actuarial valuation was prepared by independent actuaries at December 31, 2016. The market value of assets at December 31, 2016 was estimated based on the information available at the moment of preparing the results.

    18.2.5 Actuarial calculations

    The main assumptions on which the actuarial calculations are based can be summarized as follows:

    Pension plans

    Other long-term employee benefits

    2016

    2015

    2016

    2015

    Discount rate

    1.6%

    2.0%

    1.5%

    2.0%

    Future salary increases

    0.9%

    1.3%

    Future pension adjustments

    0.2%

    0.4%

    For the countries with material pension obligations the following assumptions about the life expectancy at age 65 were taken into account:

    2016

    2015

    Switzerland

    Germany

    USA

    Switzerland

    Germany

    USA

    Retirement in 20 years (age of 45 at balance sheet date)

    Men

    24.18

    21.77

    19.94

    23.24

    21.64

    19.36

    Women

    26.22

    25.70

    22.21

    25.67

    25.58

    21.51

    Retirement at balance sheet date (age of 65)

    Men

    22.26

    19.13

    18.14

    21.49

    18.99

    17.69

    Women

    24.32

    23.19

    20.66

    23.96

    23.06

    20.41

    The amounts recognized in the income statement and in the other comprehensive income (OCI) can be summarized as follows:

    Pension plans

    Other long-term employee benefits

    CHF million

    2016

    2015

    2016

    2015

    Employee benefits expense

    Total service cost

    Current service cost

    17.4

    17.1

    0.6

    0.5

    Past service cost and curtailments

    1.3

    0.1

    0.1

    Plan settlements

    – 0.8

    Net interest cost

    – 16.9

    – 16.0

    0.1

    0.1

    Liability management cost

    0.6

    0.6

    Actuarial gains (–)/losses (+)

    0.4

    0.2

    Total defined benefit cost (+)/gain (-) of the period

    2.4

    1.0

    1.2

    0.8

    Valuation components accounted for in OCI

    Actuarial gains (–)/losses (+)

    Arising from changes in demographic assumptions

    – 6.1

    1.5

    Arising from changes in financial assumptions

    0.3

    11.4

    Arising from experiences

    – 3.3

    – 0.6

    Return on plan assets (excluding amounts in net interest)

    260.7

    – 351.9

    Return on reimbursement (excluding amounts in net interest)

    – 0.1

    0.6

    Total defined benefit cost (+)/gain (-) recognized in OCI

    251.5

    – 339.0

    Total defined benefit cost (+)/gain (-)

    253.9

    – 338.0

    The changes in pension obligations, pension assets, and the asset ceiling can be summarized as follows:

    Changes in the present value of the defined benefit obligation

    Pension plans

    Other long-term employee benefits

    CHF million

    2016

    2015

    2016

    2015

    Defined benefit obligation as at January 1

    607.4

    542.3

    7.3

    8.1

    Current service cost

    17.4

    17.1

    0.6

    0.5

    Plan participants’ contributions

    4.6

    4.1

    Interest expense on the net present value of the obligation

    11.4

    10.3

    0.1

    0.1

    Actuarial gains (–)/losses (+)

    – 8.9

    12.3

    0.4

    0.2

    Past service gains (–)/losses (+)

    1.3

    0.1

    0.1

    Gains (-)/losses (+) on settlements

    – 0.8

    Benefits paid through pension assets

    – 18.3

    – 18.3

    Benefits paid by employer

    – 5.0

    – 10.1

    – 0.7

    – 1.0

    Recognition of defined benefit plan 1

    61.3

    Currency exchange differences

    2.0

    – 10.9

    – 0.6

    Defined benefit obligation as at December 31

    611.9

    607.4

    7.8

    7.3

    1 See explanation in paragraph 18.2.

    Changes in the fair value of plan assets

    Pension plans

    CHF million

    2016

    2015

    Fair value of plan assets as at January 1

    1,970.2

    1,578.5

    Plan participants’ contributions

    4.6

    4.1

    Contributions by employer

    4.8

    3.6

    Interest income

    27.7

    25.9

    Return on plan assets (excluding interest income)

    – 260.7

    351.9

    Benefits paid through pension assets

    – 18.3

    – 18.3

    Liability management cost

    – 0.6

    – 0.6

    Recognition of defined benefit plan 1

    25.5

    Currency translations

    1.2

    – 0.4

    Fair value of plan assets as at December 31

    1,728.9

    1,970.2

    1 See explanation in paragraph 18.2.

    Development of reimbursement rights 1

    CHF million

    2016

    2015

    Reimbursement rights as at January 1

    12.0

    13.1

    Employer contributions

    0.7

    0.8

    Interest income on reimbursements

    0.5

    0.6

    Return on reimbursement (excluding interest income)

    0.1

    – 0.6

    Reimbursements to employer

    – 1.9

    – 1.8

    Currency translation

    0.4

    – 0.1

    Reimbursement rights as at December 31

    11.8

    12.0

    1 Relates exclusively to reimbursement rights of the company Russell Stover Chocolates, LLC.

    The net position of pension obligations in the balance sheet can be summarized as follows:

    Amount recognized in the balance sheet

    Pension Plans

    Other long-term employee benefits

    CHF million

    2016

    2015

    2016

    2015

    Present value of funded obligation

    583.6

    579.4

    Fair value of plan assets

    – 1,728.9

    – 1,970.2

    Underfunding (+)/overfunding (–)

    – 1,145.3

    – 1,390.8

    Present value of unfunded obligations

    28.3

    28.0

    7.8

    7.3

    Net pension liability (+)/asset (-)

    – 1,117.0

    – 1,362.8

    7.8

    7.3

    Thereof pension liabilities

    183.9

    202.4

    7.8

    7.3

    Thereof pension assets 1

    – 1,300.9

    – 1,565.1

    1 See note 9.

    The plan assets are mainly managed by the Swiss pension plans and employer funds. The foundation boards issue investment guidelines for the plan assets which include the tactical asset allocation and the benchmarks for comparing the results with a general investment universe. The pension plans are also subject to the legal requirements on diversification and safety required by the BVG. Investment in bonds have in general at least an A rating, investments in real estate are typically held directly by the plans.

    The foundation boards of the pension funds regularly review whether the chosen investment strategy is appropriate in view of the pension benefits to be provided and whether the risk capability is in line with the demographic structure. Compliance with the investment guidelines and the investment results of the investment advisors are reviewed by the foundation boards of the pension funds on a quarterly basis.

    The investments in the employer foundation and primarily in the finance foundation are mainly invested in shares of the Lindt & Sprüngli Group.

    The pension assets mainly consist of the following asset categories:

    2016

    2015

    CHF million

    Listed

    Not listed

    Total

    Listed

    Not listed

    Total

    Equities

    1,410.9

    1,410.9

    1,661.0

    1,661.0

    Bonds

    132.6

    132.6

    106.4

    106.4

    Alternative investments

    11.7

    11.7

    5.8

    5.8

    Real estate

    17.2

    108.1

    125.3

    3.4

    105.0

    108.4

    Qualified insurance policies

    18.5

    18.5

    18.2

    18.2

    Liquidity and other

    29.9

    29.9

    70.4

    70.4

    Total

    1,572.4

    156.5

    1,728.9

    1,776.6

    193.6

    1,970.2

    The plan assets include investments in the Lindt & Sprüngli Group with a market value of CHF 1,267.4 million at December 31, 2016 (CHF 1,514.4 million at December 31, 2015). Moreover, the Lindt & Sprüngli Group has occupied property from the pension funds with a market value of CHF 16.5 million at December 31, 2016 (CHF 16.8 million at December 31, 2015).

    The revaluation of assets resulted in a loss of CHF 233.0 million in 2016 and a gain of CHF 380.5 million in 2015 respectively. In 2017 the expected employer contributions amount to CHF 5.0 million and the expected payments for pensions by the employer to CHF 4.1 million.

    The following table provides a breakdown of the defined benefit obligations among active insured members, former members with vested benefits, and members receiving pensions:

    Pension plans

    CHF million

    2016

    2015

    Active employees

    337.5

    345.9

    Vested terminations

    22.1

    23.2

    Pensioners

    252.3

    238.3

    Total

    611.9

    607.4

    The average duration of the liabilities at December 31, 2016 is 17.1 years (17.5 years at December 31, 2015).

    The following table shows the impact of the change of the discount rate, salary increase, and pension indexation on the present value of the defined benefit obligation:

    CHF million

    2,016

    2015

    Increase (+)/decrease (-) of assumptions by

    +0,25%

    -0,25%

    +0,25%

    -0,25%

    Technical interest rate

    – 24.1

    26.0

    – 24.9

    26.8

    Salary increase

    8.4

    – 7.5

    9.5

    – 9.4

    Pension indexations

    14.3

    – 2.4

    14.5

    – 13.8

    19. Provisions

    CHF million

    Business risks

    Other

    Total

    Provisions as at January 1, 2015

    60.3

    17.1

    77.4

    Addition

    39.7

    6.0

    45.7

    Utilization

    – 1.5

    – 2.9

    – 4.4

    Release

    – 14.2

    – 14.2

    Currency translation

    – 0.7

    – 0.2

    – 0.9

    Provisions as at December 31, 2015

    83.6

    20.0

    103.6

    Addition

    22.0

    18.0

    40.0

    Utilization

    – 7.1

    – 2.9

    – 10.0

    Release

    – 19.6

    – 19.6

    Currency translation

    0.1

    0.1

    0.2

    Provisions as at December 31, 2016

    79.0

    35.2

    114.2

    Other provisions for business risks include unsettled claims, onerous contracts as well as legal and administrative proceedings, which arise during the normal course of business. Provisions are recognized at balance sheet date when a present legal or constructive obligation as a result of past events occurs and the expected outflow of resources can be reliably estimated. The timing of outflows is uncertain as it depends upon the outcome of the proceedings.

    In Management’s opinion, after taking appropriate legal and administrative advice, the outcome of these business risks will not give rise to any significant loss beyond the amounts provided at December 31, 2016.

    20. Accounts payable

    Accounts payable to suppliers are denominated in the following currencies:

    CHF million

    2016

    2015

    CHF

    11.8

    13.3

    EUR

    96.1

    97.5

    USD

    43.2

    50.6

    GBP

    13.0

    8.6

    Other currencies

    16.3

    13.3

    Total

    180.4

    183.3

    21. Accrued liabilities

    CHF million

    2016

    2015

    Trade related accrued liabilities

    342.5

    335.2

    Salaries/wages and social costs

    105.4

    107.0

    Other

    170.4

    166.4

    Total

    618.3

    608.6

    "Trade related accrued liabilities" comprise year-end rebates, returns, markdowns on seasonal products, and other services provided by trade partners.

    “Salaries/wages and social costs” is related to bonuses, overtime, and outstanding vacation days, whereas the position “other” comprises accruals for third-party services rendered as well as commissions.

    22. Other income

    CHF million

    2016

    2015

    Fees from third parties

    3.0

    2.8

    Insurance reimbursements

    1.1

    3.5

    Other

    13.1

    11.6

    Total

    17.2

    17.9

    “Fees from third parties” comprise mainly the reimbursement of freight charges. The position “other” includes mainly license fees, company-produced additions involving investments in fixed assets, and gain on sale of assets.

    23. Personnel expenses

    CHF million

    2016

    2015

    Wages and salaries

    631.3

    604.5

    Social benefits

    124.7

    123.6

    Other

    90.3

    79.0

    Total

    846.3

    807.1

    For the year 2016, the Lindt & Sprüngli Group employed an average of 13,539 people (13,180 in 2015).

    24. Net financial result

    CHF million

    2016

    2015

    Interest income

    2.3

    0.6

    Interest expense

    – 14.1

    – 11.0

    Income from other financial instruments

    3.4

    3.1

    Total

    – 8.4

    – 7.3

    25. Earnings Per Share/Participation certificate (PC)

    2016

    2015

    Non-diluted earnings per share/10 PC (CHF)

    1,791.3

    1,645.7

    Net income (CHF million)

    419.7

    380.4

    Weighted average number of registered shares/10 PC

    234,298

    231,149

    Diluted earnings per share/10 PC (CHF)

    1,766.8

    1,612.4

    Net income (CHF million)

    419.7

    380.4

    Weighted average number of registered shares/10 PC and outstanding options on 10 PC

    237,546

    235,920

    26. Dividend per share/Participation Certificate (PC)

    CHF

    2016

    2015

    Dividend per share/10 PC

    880.001

    800.00

    1 Proposal of the Board of Directors.

    During the period January 1 to record date (April 25, 2017), the dividend-bearing capital (the number of registered shares and participation certificates) can change as a result of additions and retirements within either class of treasury stock (registered shares and participation certificates) as well as the exercise of options, granted through the employee stock option plan.

    27. Share-based payments

    Options on participation certificates of Chocoladefabriken Lindt & Sprüngli AG are only outstanding within the scope of the existing employee stock option program. An option entitles an employee to a participation certificate at an exercise price, which consists of an average of the price of the five days preceding the issue date. The options have a blocking period during the vesting period of three to five years and if not exercised, they expire after seven years. Changes in outstanding options can be viewed in the table below:

    2016

    2015

    Number of options

    Weighted average
    exercise price (CHF/PC)

    Number of options

    Weighted average
    exercise price (CHF/PC)

    Outstanding options as at January 1

    120,888

    3,416

    144,425

    2,809

    New option rights

    26,830

    5,401

    25,465

    4,811

    Exercised rights

    – 24,661

    2,631

    – 45,139

    2,297

    Cancelled rights

    – 4,825

    4,027

    – 3,807

    2,977

    Expired rights

    – 56

    3,149

    Outstanding options as at December 31 1

    118,232

    4,005

    120,888

    3,416

    of which exercisable at December 31

    21,018

    2,739

    13,354

    2,421

    Average remaining time to expiration (in days)

    735

    743

    1 The exercise price varies between CHF 2,200 to CHF 5,401 as at December 31, 2016.

    Options expenses are charged to the income statement proportionally according to the vesting period. The recorded expenses amount to CHF 13.9 million (CHF 14.0 million in 2015). The assumptions used to calculate the expenses for the grants 2013 to 2016 are listed in the following table:

    Date of issue

    21.1.2016

    28.1.2015

    13.1.2014

    11.1.2013

    Number of issued options

    26,830

    25,465

    19,550

    33,450

    of which in bracket A (blocking period 3 years)

    9,353

    8,847

    6,787

    11,649

    of which in bracket B (blocking period 4 years)

    9,444

    8,962

    6,883

    11,758

    of which in bracket C (blocking period 5 years)

    8,033

    7,656

    5,880

    10,043

    Issuing price in CHF

    5,401

    4,811

    4,062

    3,123

    Price of participation certificates on date of issue in CHF

    5,285

    4,730

    4,036

    3,159

    Value of options on issuing date

    bracket A (blocking period 3 years) in CHF

    637

    607

    634

    568

    bracket B (blocking period 4 years) in CHF

    697

    654

    692

    588

    bracket C (blocking period 5 years) in CHF

    747

    688

    735

    592

    Maximum life span (in years)

    7

    7

    7

    7

    Form of compensation

    PC from conditional capital

    Expected life span (in years)

    5–6

    5–6

    5–6

    5–6

    Expected rate of retirement per year

    2.1%

    2.2%

    2.3%

    2.4%

    Expected volatility

    21.4%

    21.3%

    22.1%

    22.9%

    Expected dividend yield

    1.57%

    1.53%

    1.49%

    1.45%

    Risk-free interest rate

    (0.51)–(0.36)%

    (0.53)–(0.38)%

    0.66–0.92%

    0.46–0.57%

    Model

    Binomial model

    28. Contingencies

    The Lindt & Sprüngli Group is exposed to a contingency in respect to the funding bank of the Lindt Chocolate Competence Foundation’s construction project. No guarantees in favor of third parties or other contingencies existed as of December 31, 2015.

    29. Commitments

    Capital expenditure contracted for at the balance sheet date but not yet incurred is:

    CHF million

    2016

    2015

    Property, plant, and equipment

    32.1

    62.4

    The future lease payments under operating lease commitments are:

    CHF million

    2016

    2015

    Up to one year

    66.9

    54.8

    Between one and five years

    176.4

    141.0

    Over five years

    72.6

    66.0

    Total

    315.9

    261.8

    Leasing commitments are related to the rental of retail stores, warehouse and office space, vehicles and IT hardware.

    30. Transactions with related parties

    A family member of a member of the Board of Directors has a majority share in a company, to which products were sold at arm’s length for the value of CHF 18.8 million (CHF 17.4 million in 2015) and license fee income of CHF 0.6 million (CHF 0.6 million in 2015) were generated. Receivables outstanding against this company were CHF 13.7 million (CHF 12.6 million in 2015) at the balance sheet date.

    The Lindt & Sprüngli Group sold 180 registered shares to the “Finanzierungsstiftung für die Vorsorgeeinrichtungen der Chocoladefabriken Lindt & Sprüngli AG” in 2016 (Nil in 2015) at a price of CHF 68,470 per share (including stamp duty), which corresponds to the five-day average of the closing prices of the share at the SIX Swiss Exchange for the period July 25 to 29, 2016.

    The Lindt & Sprüngli Group has provided the “Lindt Chocolate Competence Foundation” with the building right for the Chocolate Competence Centre. The conditions of this contract are agreed at arm’s length. In addition, the Lindt  & Sprüngli Group purchased 150 shares (Nil in 2015) at a price of CHF 66,889 per share (including stamp duty), which corresponds to the five-day average of the closing prices of the share at the SIX Swiss Exchange for the period September 19 to 23, 2016. The prior year loan to the Foundation of CHF 4.9 million has been repaid in 2016.

    Remuneration of the Board of Directors, Group Management, and Extended Group Management

    In 2016 the Lindt & Sprüngli Group consisted of 6 non-executive and executive directors (6 in 2015). The number of executive officers is 8 in 2016 (8 in 2015). The compensation paid to non-executive directors and executive officers is shown below:

    CHF thousand

    2016

    2015

    Fixed cash compensation 1

    7,085

    6,937

    Variable bonus component 2

    4,786

    4,676

    Other compensation 3

    598

    1,747

    Options 4

    6,913

    6,804

    Registered shares

    3,232

    2,859

    Total

    22,614

    23,023

    1 Total gross cash compensation and allowances for Officers and Directors including pension benefits paid by employer (excluding social charges paid by employer) for the Officers.

    2 Accrual at year end for expected pay-out in April of following year (excluding social charges paid by employer).

    3 Employees part of social charges (AHV) related to exercising of options and grant of registered shares, paid by employer.

    4 The valuation of Option grants on Lindt & Sprüngli participation certificates is based on the market value at grant date.

    Apart from the payments mentioned above, no payments were made on a private basis or via consulting companies to either an executive or non-executive member of the Board or a member of Group Management or Extended Group Management. As of December 31, 2016, there were no loans, advances or credits due to the Lindt & Sprüngli Group or any of its subsidiaries by any of the members of the Board, the Group Management or the Extended Group Management.

    31. Events after the balance sheet date

    The consolidated financial statements were approved for publication by the Board of Directors on March 6, 2017. The approval of the consolidated financial statements by the shareholders will take place at the Annual Shareholders’ Meeting. No events have occurred up to March 6, 2017, which would necessitate adjustments to the carrying values of the Lindt & Sprüngli Group’s assets or liabilities, or which require additional disclosure.