2016 Annual Report
Growing with our customers

Givaudan – 2016 Annual ReportPerformance highlights

Performance highlights
In line with our 2020 guidanceSales of CHF

Group sales and growth rate

4.7billion

2016
2015

up 4.2% on a LFL1 basis

4,396

2.7

2014

4,404

3.7

up 5.2% in Swiss francs

1,126 million

Net income of CHF

up 3.1% year-on-year

Free cash flow of2012

Givaudan – 2016 Annual Report

39

2015

24.3

1,070

2014

23.9

1,053
970

22.2

889

20.4
EBITDA margin in %Free cash flow
2016

597

12.8

2015

720

16.4

2014

604

13.7

2013

662

15.2

2012

512

12.0
Free cash flow in millions of Swiss francs% of sales

Dividend per share

56.00

Production
sites

1,126

EBITDA in millions of Swiss francs

in Swiss francs

1. LFL: Like-for-Like, excludes the impact of currency, acquisitions and disposals.
2. Subject to shareholder approval at the AGM meeting on 23 March 2017.

98

24.1

2012

per share, an increase of 3.7% year-on-year

Locationsworldwide

2016

2013

12.8% of sales

Proposed dividend of CHF% growth LFL1

EBITDA and margin

644 million

2

4,257

6.6
Group sales in millions of Swiss francs

24.1%

EBITDA margin of

4,369

5.5

2013

EBITDA of CHF

4,663

4.2

~25%
Market
share

2016

56 2

2015

54

2014

50

2013

47

2012

36

10,476
Employees

17.9 M

hours worked
safelyKey figures

Key figures
Solid financial performanceOur 2016 full year results are a convincing demonstration of
the continued value we bring to our customers, across all regions
and segments.

20162015 2

PercentagechangeGroup Sales

4,663

4,396

6.1%

Flavour sales

2,433

2,300

5.8%

Fragrance sales

2,230

2,096

6.4%

Like-for-like sales growth

4.2%

2.7%

For the year ended 31 December, in millions of Swiss francs, except for capital markets and employee data

Sales and results

Gross profit

2,128

2,030

as % of sales

45.6%

46.2%

EBITDA 1

1,126

1,070

as % of sales

24.1%

24.3%

Operating income
as % of sales
Income attributable to equity holders of the parent
as % of sales

875

794

18.8%

18.1%

644

625

13.8%

14.2%

4.8%
5.2%
10.2%
3.1%

Balance sheet and cash flows
Operating cash flow
as % of sales
Free cash flow
as % of sales

805

915

17.3%

20.8%

597

720

12.8%

16.4%

(12.0%)(17.1%)Net debt

930

677

Leverage ratio

19%

15%

37.4%

Market capitalisation

17,23016,833

2.4%

Share price as at 31 December

1,866

1,823

2.4%

Capital Markets

Cash dividend 3
Earnings per share − basic (CHF)

56

54

3.7%

69.95

67.89

3.0%

10,476

9,907

5.7%

0.36

0.42

(14.3%)

Employees
Number of Employees as at 31 December
Lost time injury rate

1.	EBITDA: Earnings Before Interest (and other financial income (expense), net), Tax, Depreciation and Amortisation. This corresponds to operating income before depreciation,amortisation and impairment of long-lived assets.
2.	Previous year figures have been restated in accordance with early adoption of IFRS 9 (see Note 2).
3.	Subject to shareholder approval at the AGM meeting on 23 March 2017.

Givaudan – 2016 Annual ReportOur businessOur business
An invitation to engage your senses
Our markets

Our customers

Our consumers

Our brand

Serving customers’ and consumers’ growing demand
Mature markets: 55% of annual sales
High growth markets: 45% of sales
Sales in high growth markets are driven by the rising consumer
demand from an increasing urban middle class. In both high growthand mature markets, increasing demand for health and well-being
products, such as lower salt, sugar and fat in food, and anti-ageing
effects in cosmetics offer a significant potential for growth.
Through targeted investment, we focus our efforts on best serving
our customers and maximising our growth opportunities.

We bring the realm of taste and scent to life
Givaudan impacts the lives of millions of consumers around theworld with the flavour and fragrances we create hand in handwith our customers. We unveil the tastes and scents that suit you
best, and that you love most. We bring them to you every day,everywhere and in every way.

Our divisions

Flavour Division
We make life taste delicious
Bringing moments of delight with delicious flavour and taste
experiences, we are dedicated to expanding the world’s
expression through flavours. We explore the globe for ingredients,
innovate to bring our customers unique propositions, and delightmillions of consumers around the world.

Sales breakdown by division
Flavours

15%

Confectionery
Confectionery
Baked goods
Sugar confectionery
Chocolate
Chewing gum

14%

Dairy
Ice cream and yoghurt
Desserts
Yellow fats (margarines)

Givaudan – 2016 Annual ReportSuperior customer experience
Working hand in hand with our customers, our tastes and scents
inspire the creation of products that delight consumers the world
over. Our customers – global, international, regional and local –serve end-consumer markets with fragrances for personal, homeand laundry care brands as well as prestige perfumes. Active
Beauty offers an extensive portfolio of award-winning active
cosmetic ingredients for an expanded range of benefits including
anti-ageing, self-tanning and more. In flavours, our customers arein the food and beverage industry and span across key segments
including beverages, sweet goods, savoury, snacks and dairy.

The brand which helps you express yourself
Focused on consumer desires and preferences we highlight theemotional impact of our creations. Our “G” is filled withexpression and our images stir emotions. Our brand distinguishes
us as creative, innovative and emotional and expresses what westand for: engage your senses.

Fragrance Division
We live to perfume life
The artistry of our perfumers encompasses a myriad of scented
stories for brands everywhere. From prestige and designer
perfumes to the scent of functional cleaners, laundry and personalcare products worldwide, our fragrances bring pleasure tomillions daily. And for nature-derived beauty performance, ourActive Beauty teams are harnessing the power of nature forcutting-edge cosmetics.

Fragrances

35%

Beverages
Soft drinks
Fruit juices
Instant beverages
Total 52%of Group
sales

36%

Savoury
Ready-made meals
SnacksSoups and sauces
Meat and poultry

13%

18%

Fragrance Ingredientsand Active Beauty

Fine Fragrances
Signature fragrancesLine extensions
Total 48%of Group
sales

69%

Consumer Products
Fabric and personal care
Hair and skin careHousehold and air care
Oral care12016 Annual Report
Growing with our customers
Global trends are shaping how consumers
live, consume and do business. Our uniquecapabilities, our knowledge of markets
and our in-depth understanding of consumer
preferences sets us in a strong position tocapture growth across multiple productcategories and markets, and to continue toinnovate in helping our customers meet
consumer demands.
By delivering innovative, sustainable andhigh quality products, we meet and anticipate
these demands and help our customers growtheir brands to be successful in their markets.
Growing with our customers is a strategicpillar that is supported by our strong focus onpartnering for shared success and deliveringwith excellence, the two other pillars ofour 2020 strategy.

Givaudan – 2016 Annual Report

2StrategyCEOstatement
reportonSimos
Integrated
soloriberis
Reportingquate

CEO statement
on Integrated Reporting“Integrated Reporting is thinking
more holistically about thebusiness: communicating onvalue creation for the Company,
the environment and society”

Corporate reporting has become more complex
and extensive, not least because of theincreasing number of regulations. With somuch information, stakeholders are forced tosearch for what matters most to them. Ourpriority is to provide information that ismeaningful, easily accessible and readable.
We aim to offer high quality information
presented in a more concise way. Integrated
Reporting, with its core aspect of value
creation, offers the possibility of presenting
what matters most. This year’s report isour first step towards enhanced and morecomprehensible reporting.

Gilles Andrier
Chief Executive Officer

Givaudan – 2016 Annual ReportAbout this report3

About this report
Communicating value creation
Towards Integrated Reporting

This report is about how our Company’s strategy, governance,
performance and prospects lead to the creation of value in the short,medium and long term. Givaudan has embarked on the journey
towards Integrated Reporting based on the framework of theInternational Integrated Reporting Council (IIRC). In the coming
years, business-relevant sustainability information will be further
integrated into our Annual Report to demonstrate how nonfinancial capitals contribute to our strategy, growth and businessdevelopment. Both financial and non-financial KPIs are essential
contributors in measuring the achievements regarding our
responsible growth and shared success. Integrated Reporting is an
ideal way of expressing this and offers an improved platform tocommunicate how we create value for our Company, ourstakeholders, the environment and society.

What’s new this year

The 2016 Annual Report is the first step towards Integrated
Reporting and focuses on Givaudan’s value creation. Whilst we
continue meeting legal requirements, we started implementing
aspects of Integrated Reporting in this 2016 Annual Report. Our
focus is on showing how financial and non-financial capitals (inputs)
are transformed through our business model into value for our
stakeholders (outcomes). We have also placed stronger emphasis ona more concise presentation of our strategic objectives andachievements.
Sustainability is the backbone and an integral part of our long-term
financial and operational success. It is embedded in our 2020
ambition. For the first time, relevant sustainability performanceindicators will be published in the Annual Report only. The GRI Index
Table and the navigation in our Sustainability Report will show
where the answers to each indicator can be found. The two
publications function as one reporting suite with complementary
information, avoiding repetition. GRI -Icons in the Annual Reportmark the GRI aspects. These changes mean it is necessary to refer toboth reports for the full picture of Givaudan’s sustainability
activities. The Company’s Sustainability Report is published on
23 March 2017.

What’s next?

Over the coming years, in our journey towards a fully integrated
report we intend to emphasise the aspects that are material to ourvalue creation and further demonstrate how integrated thinking isembedded in the Company.

Table of contents
Vision | mission | culture4

Our capabilities

5

Chairman’s introduction

6

Chief Executive Officer’s review

8

Our business model and value creation

12

Our focus on customers

13

Stepping stones towards value creation

14

Our 2020 strategy

16

Growing with our customers

17

Delivering with excellence

19

Partnering for shared success

20

Success stories 201623

Performance review

38

Business environment and markets

40

Business performance – Group

42

Business performance – Flavour Division

44

Business performance – Fragrance Division

46

Capital market

48

Risk management

51

Compliance

54

Regulatory and public policy

56

Sustainable business model

60

Striving for a better tomorrow

62

Innovation for tomorrow’s business

63

From sourcing to supply

66

Creating a great place to work

69

Adapting with agility to the digital world

74

Governance report

76

Compensation report

100

Financial report

114

Appendix

194

Givaudan – 2016 Annual Report

4Strategy
Ourvisionreport| Our mission
Simos soloriberis| Our culture
quate

Givaudan, an invitation to
Engage your senses
Our vision

To inspire emotion through our creations every day, everywhere, as we
strive for a better tomorrow.

Our mission

Together with our customers, we craft memorable experiences that bring
moments of delight to consumers.

Our culture

By being inspiring, we foster a positive environment of openness and curiosity, where
we shape and share innovative ideas that foster sustainable growth and create
memorable flavours and fragrances. By being challenging, we perform with a mindsetof best and see challenges as opportunities for a better future. We anticipate what’s
next, welcome debate and challenge the way business is done. And by acting withheart and soul, we drive positive change, establish true partnerships, takeresponsibility for our actions and act with empathy and humility. At Givaudan,
everyone impacts the world through their contribution to the creation of inspiring
taste and scent experiences, helping our customers build their brands and delight
consumers. Our talented and creative professionals feel passionate and proud of thework they do and are empowered to contribute to a sustainable society.
We are a global company of over 10,000 employees: it is a world of diversity, withpeople from different cultures, countries and backgrounds, representing around 90
nationalities. All work together with a wide variety of skills to help our customers
build their brands, from researchers to perfumers, evaluators and sensory
scientists and from flavourists and food technologists to production workers andcommercial teams.

Givaudan – 2016 Annual Report

Challenging

InspiringWith heartand soulOur capabilities

5

Our capabilities
Surprising and delighting consumers
with creative solutions

As our customers’ loyal partner, we are committed to their success andtranslate our knowledge of local preferences into creations thatdelight consumers around the world. Extensive consumer insights drive
our capabilities in creation, innovation and operational excellence.

Consumerunderstanding

Creation

Innovation

Operational
excellence

We travel the minds andlives of consumers aroundthe world to create
uniquely relevant anddifferentiated tastes andscents for our customers’
brandsWe are motivated every
day to inspire delightand touch consumers’emotions

Our culture ofinnovation drives us toenhance our competitive
advantage sustainably,
create new horizons forour business and offer
leading-edge solutions
to our customers

Our global operations andrapid speed to market makeus a partner of choice,at our customers’ service
wherever they may be,whenever they need us

Global team experts in
category understanding,cultural insight andsensorial decoding

A team of passionate
flavourists and perfumers

Pioneering research anddevelopment teams

Global spread of operations,with local presence allowing
rapid speed to market

Close partnership withour customers

Focus on the science oftaste and smell

Unique product paletteand ingredients

Broad product offering fordiverse customer portfolio

Insights across countries,
lifestages and gender
Agile global consumertesting network

Supply chain excellence,
addressing customers’ needs
Sustainable sourcing of
raw materials

Givaudan – 2016 Annual Report

6

Chairman’s introduction

Chairman’s introduction
Solid performance, continued value creation

Givaudan concluded a successful
first year of its 2020 strategy cycle,delivering healthy financial
performance despite a continued
unstable market environment.

On the basis of Givaudan’s strong performance in 2016,
and its continued solid financial position, the Board of
Directors will propose an increase in the dividend to
CHF 56.00 at the Annual General Meeting on 23 March 2017,
the sixteenth consecutive increase since our listing on the
Swiss stock exchange.

industries and in certain regions, the world will be underpressure from ongoing political, policy and economic
uncertainties. World economic growth is predicted to be3 – 4%, with China and India being the countries offering thehighest growth in the range of 6 – 7%, while predictions forother high growth markets in Asia and Latin America are in
the range of low single-digit growth. Mature markets are also
expected to deliver low single-digit growth, with a slightly
higher growth rate in the USA. Global megatrends willcontinue to influence our society and consequently the Flavour
and Fragrance industry. Against this backdrop, the increase of
the global population, rising life expectancy and ongoingurbanisation will continue to drive demand for personal
hygiene and fragranced products, as well as convenience foodand beverages. I am confident that, as industry leader,
Givaudan is in a strong position to create consumer preferredflavours and fragrances that grow our customers’ brands andbring about shared success as we move forward on the road toour 2020 ambition.

The first year of our new 5-year strategy cycle was marked
by both business continuity and change. Givaudan continued
to deliver a strong financial performance while focusing on
long-term value creation for all stakeholders. Despite an
ongoing unstable market environment, we made significant
investments in future growth: the expansion of our footprint
with new innovation and application centres, especially inhigh-growth markets, the expansion of our business throughacquisitions, and the decision to evolve our organisation
through Givaudan Business Solutions, a new global unit being
designed and gradually implemented to ensure a superior
customer experience by offering more agile and flexible
processes, services and solutions.

In October 2016, I announced my intention to retire as
Chairman and a member of the Board of Directors. Looking
back over the past 18 years, both as CEO and as Chairman ofGivaudan, I am humbled to have been entrusted to lead thisCompany through many challenges and successes and to havebeen able to ensure ongoing investment and growth in allareas of our business, along with continued value creation – inform of dividends and share price appreciation – since the IPO
in 2000. I draw my confidence in Givaudan’s future growthfrom its 250-year history, a story that has been built upona culture of mutual respect, passion for value creation and an
unwavering commitment to satisfy consumer desires andcustomer demands.

It is likely that 2017 will be another year of low growth for the
global economy. While we may see growth in some niche

Givaudan’s next chapter of value creation rests upon theprinciple of ‘Responsible growth’ and ‘Shared success’. I am

The 2016 full-year results demonstrate solid topline growthand free cash flow generation, both in line with our projected
average 2020 financial targets.

Givaudan – 2016 Annual ReportChairman’s introduction

7

I have every
confidence that
Givaudan willcontinue its
path of value
creation in theyears to come.
Dr Jürg Witmer, Chairman

particularly pleased with our recent achievements in the areasof governance, responsible sourcing and succession planning.
In 2016, we further enhanced our governance model through a
newly created Science and Innovation Committee, which
advises the Board of Directors in scientific matters, identifies
opportunities and screens potential partners and projects in
the innovation space. In addition, we reconfirmed ourcommitment to high ethical standards by updating our
Principles of Conduct. Given our own commitment, we want
to work with partners who aspire to the same ideals as we do.
In 2016, we further strengthened this commitment by issuing a
Responsible Sourcing Policy that seeks to ensure that our
suppliers comply with strict requirements for health, safety,social, environmental and business integrity. I am also proud of
our programmes to ensure industry-leading sourcing at origin,securing our supply of the most vulnerable natural ingredients,
like vanilla, patchouli or ylang ylang, while creating local value
and supporting communities at source.

We will continue to thrive based on our
unique business model, ongoinginvestment, capabilities and highly
skilled teams.
Succession planning remains a strong focus for our future
success. I am very pleased that Givaudan has been able todevelop its own strong leaders, and in particular, that ourcurrent Vice-Chairman, Calvin Grieder, accepted to stand forelection as new Chairman at the Annual General Meeting inMarch 2017. With the retirements in 2016 of Adrien Gonckel,
Chief Information Officer, and Matthias Währen, Chief
Financial Officer, both of whom receive my warmest thanks,
we have been able to expand our Executive Committee andensure seamless transitions with key management
appointments from within: Tom Hallam, who became Chief
Financial Officer in January 2017, and Anne Tayac, appointed inJuly 2016 as Head of Givaudan Business Solutions.
Looking forward, I have every confidence that Givaudan willcontinue to grow with its customers based on a uniquebusiness model, strong capabilities, solid financial position andhighly skilled teams. Rooted in sensory expertise and deep
consumer understanding, we will continue to invest ininnovation, inspiring creations that delight consumers andcultivating a mindset that puts customers at the heart ofeverything we do.
My sincere appreciation and gratitude go to my fellow
members of the Board of Directors, the Executive Committee
members and all 10,476 employees worldwide. Their dailycommitment and passion make Givaudan all it is today, and allthat it can be tomorrow, by engaging people’s senses, every
day, everywhere.
Finally, allow me to express my sincere thanks to ourshareholders for your trust. I am confident that Givaudan willcontinue its path of value creation in the years to come.

Dr Jürg Witmer
Chairman

Givaudan – 2016 Annual Report

8

Chief Executive Officer’s review

Chief Executive Officer’s review
Starting our five year strategy with a solid
first year

Gilles Andrier, Chief Executive
Officer, answers our shareholders’questions about Givaudan’s
performance in 2016, early
achievements towards our 2020
strategy, and outlook on key
priorities for 2017.
What were Givaudan’s major financial
achievements in 2016?

Despite a continued volatile and challenging market
environment in 2016, we made a solid start towards achieving
our 2020 strategy. Our financial ambitions and roadmap for the
five-year cycle seek to ensure responsible growth and sharedsuccess for shareholders, customers and all key stakeholders.
Our topline growth is well on track, with sales of CHF 4,663
million showing an increase of 4.2% on a like-for-like basis 1 and6.1% in Swiss francs, and we achieved free cash flow of 12.8% ofsales – both results are in line with the average financial
targets we set for 2020. Finally, in 2016 we made strong
operational progress in each of our strategic pillars – growing
with our customers, delivering with excellence and partnering
for shared success.

What did you accomplish in terms of growing
with customers?

Customers are the very heart of our business and there areseveral ways in which we are growing with them.
The first way is to continue growing in high growth markets,
where we further expanded our footprint in 2016. Beyond

Givaudan – 2016 Annual Report

opening several new offices in Latin America and Africa, we
became the first global flavours company to open laboratory
and office facilities in Pakistan, enabling our customers toaccess Givaudan’s industry-leading capabilities locally. We also
expanded our Flavour Innovation Centre (FIC) in Singapore,
where our flavourists leverage the latest ingredients andtechnologies to develop holistic customer solutions that can gostraight to market. In Fragrances, we continued to strengthen
our manufacturing capacity for fragrance ingredients inhigh-growth markets.
Another way of growing with our customers is to anticipate
and develop consumer-preferred products. Consumer
preferences are not only rapidly evolving but are very specificto each region. We support our customers’ growth byleveraging consumer insights and in-depth knowledge of local
markets, and by harnessing our innovation and unique creative
capabilities. Recent examples include new captive fragrances
molecules, introduced in 2016, a new generation of
encapsulated fragrances, a new delivery system for snacks
offering authentic flavour profiles and ease of use in processing,as well as new dairy-free solutions.
Health and well-being is an area that offers us many
opportunities to grow with customers in both flavours andfragrances. Givaudan’s active cosmetics business was
rebranded in 2016 as ‘Active Beauty’, with the mission to bring
beauty to the world. To further reinforce our innovation in the
research, development and production of active cosmetics
ingredients, we expanded our collaboration with the industrial
bioscience company Amyris, Inc. In Flavours, we introduced
several innovations to support consumer trends for health andwell-being. Examples include a new ingredient that helps toenhance sweetness while reducing calories and a ‘non-dairy
dairy’ solution for customers seeking to offer products withauthentic dairy flavours while addressing allergens andChief Executive Officer’s review

9Givaudandelivered asolid financial
performance,in line with our2020 targets.
Gilles Andrier, Chief Executive Officer

vegetarian preferences. We also advanced the development of
new solutions which provide more protein and functional foodingredients, help to mask bitterness, and continued to further
strengthen our natural flavours platform.

What role did acquisitions play in supporting
customer growth in 2016?

We continuously look at opportunities to grow our businessboth within and beyond our core fragrance and flavour
capabilities, for example by expanding our offering in integrated
solutions and Active Beauty.
The acquisition of Spicetec Flavors & Seasonings, completed in2016, further supports our customers by offering integrated
solutions. Combining our leading flavour expertise with
Spicetec’s portfolio of products enables us to deliver a broader
range of solutions to our customers in processed meat, savoury
retail and foodservices. Furthermore, these additional
capabilities help us strengthen the breadth of our industryleading natural ingredients, flavour and taste solutions. This
represents a significant opportunity to grow and expand ourexisting business. In terms of Fragrances, our earlier acquisitionsof Induchem in 2015 and Soliance in 2014 are now combined
into Givaudan’s Active Beauty business, offering acomprehensive range of innovative technologies and solutionsin the area of anti-ageing, self-tanning, skin-soothing andmoisturing to customers and consumers around the world.
Over the coming years, we will continue to build bothbusinesses.

You announced the creation of Givaudan Business
Solutions (GBS). How does this support your2020 strategy?

To succeed in a market that is daily becoming more competitive,
dynamic and fast-moving, we must ensure that every customer

interaction is excellent at every touch point. We must create amemorable experience that drives our customers’ desire towork with us. GBS is all about harnessing our expertise andtalents in a more efficient, customer-focused and agile way,
creating a platform for continuous improvement. The step-wise
implementation of Givaudan Business Solutions will support theCompany in delivering on this commitment by reducing internal
complexity, offering best-in-class business processes toour customers, and solutions to both divisions and corporate
functions, and driving excellence across the organisation.
Building a global platform with standardised processes andsolutions will also allow us to apply and leverage automation
and big data more consistently, while making it quicker andeasier to integrate new acquisitions – all of which contributes
to operating more efficiently and in a more agile way.
GBS will become the heart of our strategy pillar, ‘Delivering
excellence.’

How important are partnerships to Givaudan andwhat did you achieve in this area?

Partnerships are crucial to driving responsible and sustainablegrowth over the next five years and that is why we haveembedded becoming the ‘partner of choice’ in our 2020 ambition.
We made good progress in building and expanding collaborations
with all of our key stakeholder groups in 2016.
Innovation is an area where partnerships play a key role infuelling growth. Beyond our commitment to invest significant
resources in our own science and technology – approximately
CHF 400 million annually – it is vital we continue expanding thecollaborations with external partners who can speed our accessto new technology and innovations. Following an intensive
Innovation Trek that took all of the Executive Committee
members to San Francisco, we signed an agreement with

Givaudan – 2016 Annual Report

10

Chief Executive Officer’s review

IndieBio, a leading biotechnology accelerator in the US. Givaudan
also became a founding partner of MassChallenge, giving us
access to hundreds of thoroughly evaluated and expertly
accelerated start-ups. In fact, we are already collaborating withsensorwake, one of the 2016 winners. We are rethinking thefuture of food through our participation in the EIT Food
Knowledge and Innovation Community, a powerful collaborative
network to drive sustainable transformation towards amore consumer-centric and resource-efficient food sector, as
well as RocketSpace, an accelerator for food andagriculturethat harnesses the ideas of disruptive start-ups andprogressive corporations.
We also announced the investment into building a new
innovation centre for flavours and fragrances in Switzerland,
which will open in 2019. Its innovative research areas will spanfrom organic chemistry, naturals such as fermentation andbiocatalysis, to flavour creation and application science, as well
as delivery systems.
In 2016, we expanded our partnerships with suppliers focusing onsome of our most vulnerable raw materials. We strengthened ourfootprint in Madagascar through two initiatives with our partner
Henri Fraise Fils (HFF): NATEMA, our joint venture plant forprocessing clove leaf oil, will enable us to establish and grow ourcapacity to develop and process natural ingredients; a further
agreement will allow us to leverage the local expertise andinfrastructure of HFF to secure vanilla bean supply directly from
Malagasy smallholder producers. Both examples demonstrate
our commitment to establish direct sourcing models in countriesof origin that offer the best ingredients to our customers andcreate value in our partner communities. In addition, we are
actively pursuing supplier-enabled innovation, leveraging
opportunities to collaborate with our suppliers on common
innovation goals.
A strong, motivated workforce is among our most valuableassets. At Givaudan, we aim to foster a great place to workwhere every employee contributes to our success. Our second
global employee engagement survey, conducted in September
2016, demonstrated an increase over 2013 with an industryleading 81% engagement rate. We take pride in offeringinteresting career opportunities to employees and managers
with knowledge and potential, and continue to prepare our
future leaders with strong internal Learning & Development
initiatives. The success of our Leadership Senses programme canbe seen in the fact that many of our senior managers arerecruited from within Givaudan.

Sustainability is increasingly important to yourcustomers. How is this reflected in your strategy?

Givaudan is in the process of fully integrating sustainability into
all key programmes of our 2020 strategy, and this is reflected
throughout the business value chain. Consumers are demanding
more transparency around the products they buy; they expect
them to be more sustainable, and also expect companies toGivaudan – 2016 Annual Report

operate more responsibly. We want to help our customers offer
brands that satisfy these consumer demands. There arethree key areas in which we believe our progress is of high value
to our customers: responsible sourcing, innovation, andenvironmental stewardship.
Responsible sourcing is essential for Givaudan: we buy morethan 10,000 different natural and synthetic ingredients sourced
from 2,000 suppliers in over 100 countries, and we want tomake a positive impact on those communities while preserving
the environment for future generations. To this end, we
introduced a Responsible Sourcing policy in 2016, the first of its
kind in the fragrance and flavour industry. We are working toensure that all of our suppliers achieve compliance with thispolicy. Supplier audits of specific supply chains for key raw
materials are part of this responsible sourcing programme.
Brands with purpose need to harness innovation to stand out
from competitors, and our aspiration is to support ourcustomers in their sustainability goals with innovative tools andapproaches. Examples of areas we are exploring include green
chemistry or cleaner processes that generate less waste,resource recovery that transforms low-value materials into
high-value products, circular economy practices that avoid
pollution by design, and new ways to address the future foodand health needs of a growing world population.
Givaudan is industry-leading in our eco-efficiency performance.
In 2015, after successfully delivering against our original targets
ahead of time, we set even more ambitious eco-efficiency
targets for 2020. The new targets reflect our ambition tostabilise environmental impact while increasing production
volumes. We fully support CDP’s new scoring system,
introduced in 2016 to encourage companies to be more
ambitious in their response to climate change. Givaudan
achieved an overall ranking of A- at the Leadership level andwere named a country leader for Switzerland in 2016.

What challenges did you encounter in 2016 andhow did you master them?

In 2016, we were able to compensate for continued weak sales
in the European region with very solid growth in North
America. Our sales in Asia and Latin America continued overall
to be very strong, while certain high growth markets declined
compared to the relatively high growth rates seen in previous
years. Our broad exposure to diverse markets, currencies,
customers and segments allowed us to improve our growthand performance throughout the year, demonstrating theresilience of our business.

Consumer desires, market trends and customer
needs are evolving faster than ever before.
How do you address these changes?
Givaudan has several key strengths that make us well
positioned to adapt to the rapid pace of change in today’s
evolving landscape.

Chief Executive Officer’s review

We put the customer at the heart of our business and,collaborating closely with them, customise our offers to their
specific and evolving needs. For our customers, partnering with
Givaudan must continue to mean something out of theordinary – a choice that removes complexity and risk for themand gives them confidence that working with us means agreater likelihood of product success. We strive to earn
their trust every day with a mindset of delivering a superior
customer experience.
We appreciate that consumer preferences vary from region toregion and evolve quickly, often inspired and influenced by local
culture, fashion or food trends. To anticipate and develop
consumer-preferred flavours and fragrances, our teams closely
follow these trends as well as product offerings in key markets,
and we invest in market research and consumer understanding.
We use these insights not only to develop fragrances andflavours that meet evolving consumer desires, but also to advise
our customers on these trends and how to use them in thedevelopment of their brands.
Our approach of being close to consumers, customers andmarkets is backed by a solid strategy that gives us a clear
roadmap, while preserving our agility and nimbleness to adapt
to market changes. We also have the financial means to drive
growth, by investing in innovation, infrastructure, partnerships
and acquisitions. Most importantly, we have a highly dedicatedteam with a mindset that is truly committed to serving ourcustomers, delivering a superior experience and helping them tomake their brands desirable and successful.

11value and agility these companies have to offer. We will
welcome the step-wise implementation of GBS, Givaudan’s neworganisation delivering best-in-class processes, services andsolutions, to internal and external customers.
Finally, we will focus on further embedding a mindset to delivera truly superior customer experience, and in doing so drive ourcompetitive advantage beyond the high quality of our products
and services. Our top priority for 2017 will be excelling in theway we engage with each and every one of our customers.
I look forward to an exciting year for Givaudan and am confident
that we will continue on our growth path as we pursue
our strategy of ‘Responsible Growth, Shared Success’ in 2017.

Gilles Andrier
Chief Executive Officer

1. L ike-for-like excludes the impact of currency, acquisitions and disposals.

GRI

G4 – 13 Changes; pages 9 and 11

The past two years have seen several changes inthe Executive Committee. What impact does thishave on the 2020 strategy?

Leading Givaudan on our journey to 2020 and beyond will bechallenging, but as CEO I am confident that we are firmly
supported by our dynamic and experienced executive team.
Over the past two years, Givaudan’s leadership team has grownand evolved to include new members from areas not historically
represented at the Executive Committee level. Thanks to thisexpansion, we now have a voice at the highest level of ourCompany for innovation, procurement and most recently, GBS.
We are especially fortunate to have effective succession
planning that has enabled us to appoint strong and very
experienced leaders from within Givaudan. This allows us toaddress the challenging market environment, and ensure that
we are able to successfully execute our 2020 strategy.

What are the priorities for the business in 2017?

The year ahead will be marked by ongoing change in the market
and our response to it. While continuing along the path ofexecuting our 2020 strategy, we will remain attuned to themarket environment and adapt our business approach. As we
pursue opportunities to acquire companies to further build our
Active Beauty business and offering in Integrated Solutions, wewill actively embrace change, striving to best integrate theGivaudan – 2016 Annual Report

12 Our
Strategybusiness
reportmodel
Simos
andsoloriberis
value creation
quate

Our business modeland value creation

Capital input

Value creation

Value outcome

Financial

Financial

We strive for an efficient use
of funds available to the Group.
–  Free cash flow of CHF 597 million

Constant delivery of solid
cash returns and an increased
profitability.
–  Free cash flow of 12.8% of sales

Social environment

v ic

ls

es

in
W

ur

xce

So

e

C reati

on

g

Su

Re

sea r

ch

Superior
customerexperienceP r o du c t io n

Innovation drives the creationof leading-edge and sustainable
solutions for our customers.
–  CHF 400 million invested inresearch and development

D is
co
ve
ry
C on
s
und um e
e
r
r
s
ta
nd
i

Innovation

Human
A well trained, diversified andfairly compensated workforce
empowered to impact their world.
– Learning and development
offering is above industry norm
– 1,609 new hires

ly

ng

pp

Continuous development of ouremployees and recruitment of
new talent.
–  Leadership development at
all levels– Masterclasses for al l functions

lle n c

c in

Human

Mutually beneficial partnerships
with all our stakeholders.
–  Collaboration with local NGOs
– Creation of joint ventures

le

n

Ser

r ia

Social environment

pe

ni

eb

O

na

th

f
r ie

Ra
w
ma
te

t io

g

Customerordersra

Our reputation and the trust of our
stakeholders are vital for success.
–  Stakeholder engagement– E xpanding collaboration with all
key stakeholder groups

Innovation

Revenues

Finance ouroperations

Returns toshareholders

Re-invest
in innovation

Innovation is central to driving
current and future growthand enhancing our competitive
advantage.
–  29 new patent applications filed

Operations

Operations

Operational excellence enables us
to decouple environmental impact
from growth.
– 39 production sites– Working towards 100%
renewable electricity at all sites

Excellence in operations andlocal presence makes us a partnerof choice.
–  Reduction of energy andwater use–  Reduction of CO2 emission
and waste

Control mechanism
Givaudan – 2016 Annual ReportOur focus on customers

13

Our focus on customers
Superior customer experience

We aim to deliver innovative,
sustainable and high quality
products to our customers,
creating value through superior
customer experience.

Our 2020 ambition of ‘Responsible growth. Shared success.’ is acommon goal that is about creating and sharing success withour customers. For us, success depends on how we best place
our customers at the centre of everything we do – in our
strategy, in our execution and in our day-to-day activities. We
seek to go beyond this and be recognised by our customers forthe way we truly engage with them across all touch points in
our value chain. It’s about caring to win with our customers.

“We know the importance of being able
to customise our offerings and ourcollaboration to the needs of ourglobal, international, local
and regional customers.”

Gilles Andrier, CEOIn putting customers at the heart of what we do, we want tomake them feel valued, confident and understood. This means
we are an active listener, a true partner at each step of thecreation and value chain, flexible and agile in offering
customised solutions to their needs, whether they are global,
international, regional or local customers. We want to create
positive experiences every time we work with customers and at
every point of contact. In working with them, we will shareconsumer insights, knowledge and expertise. Our employees
will act with a customer-focused mindset for customers,
internal or external. This is a mindset we will continue to driveand embed within our organisation. Ultimately, it’s about
delivering success.

In Flavours, we are looking to help our customers create thefuture generation of food and beverage products thatwill capture consumers in an environment where the pace ofchange and the scale of disruption is unprecedented, from how
food ingredients are sourced to how products are developed,
produced and distributed. Flavour, taste and food technology
will continue to be fundamental in balancing the needs
for nutrition, mobility, sustainability and feeding a growing
global population.
In Fragrances, we will continue to help our customers build
memorable brands and craft scents that surprise and delight. It
is the creative ideas and passion that lie behind our products
and their creators that drives our customer’s trust in us.
The care and concern we show for our customers, keeping our
promises and delivering results is at the core of a superior
customer experience.
Both divisions have put customers and a superior customer
experience at the heart of their 2020 strategy, believing that ina highly competitive and changing market, implementing
this strategy with excellence will enable them to deliver thisdifferentiation.
At the Group level, Givaudan is focusing on driving excellenceacross the organisation to create significant value for bothinternal and external customers. Our planned Givaudan
Business Solutions (GBS, see page 19) will support the Company
in delivering on this commitment by taking a holistic approachin reducing our internal complexity and simplifying certain
processes, services and solutions. By becoming more flexible
and agile, we will be delivering with excellence and providing a
superior customer experience.

Givaudan – 2016 Annual Report

14

Stepping stones towards value creation

Stepping stones
towards value creation
Creating value for our many stakeholders throughacquisitions and key investments.
2,000

November 2006:
New flavour
production centre
opens in Shanghai,
China
X
X
X

1,800

1,600

1,400

1,200

June 2000:
Givaudan SA
listed on the Six Swiss
Exchange
X
X
X
X
May 2002:
Acquisition of FIS,
the flavour divisionof Nestlé
X
X
X
X

1,000

800

April 2005:
Jürg Witmer
becomes Chairman,
Gilles Andrier
becomes CEO
X
X
X

600

March 2007:
Acquisition of
Quest
International
X
X
X
X

400

200

2000

2001

2002

Givaudan share price development, in CHF
Givaudan – 2016 Annual Report

2003

2004

2005

2006

2007

2008

Stepping stones towards value creation

15

August 2015:
Givaudan announces
its 2020 strategy
Acquisition of Induchem
Holding AG and its
subsidiaries
X

October 2012:
New flavour
production
facility opens in
Makó, Hungary
X
X
X

August 2010:
Givaudan presents
its 2015 five-pillar
growth strategy
X
X
X
X

July 2016:
Acquisition of
Spicetec Flavors &Seasonings
X
X
June 2015:
X
Savoury flavours
X
manufacturing

2013:
All countries
running on
single instance
SAP platform
X
X
X

2009

2010

2011

2012

2013

facility opens inNantong, China
X
X
Xx
June 2014:
Acquisitionof Soliance
X
X
X
X
X

2014

2015

October 2015:
Fragrance creative
centre, perfumery
school andproduction hub
opens in Singapore
X
X

2016

2017

Givaudan – 2016 Annual Report16

Strategy
Our2020 report
StrategySimos soloriberis quate

Our 2020 strategy
Responsible growth. Shared success.
We want to be the partner of choicefor our customers, and the measureof this 2020 ambition is the value
we create with them throughsustainable, responsible growth.
Being the partner of choice is also about shared successwith our employees, suppliers, and our partners in scienceand technology, all of whom are critical in deliveringon this ambition.

Our 2020 ambition is to create further value throughprofitable, responsible growth by building on the threestrategic pillars of growing with our customers, delivering withexcellence, and partnering for shared success. This growthambition translates into financial targets of an average 4 – 5%growth and an average 12 – 17% free cash flow until 2020.
The following pages describe these strategic pillars andtheir drivers for success, as well as some of our achievements
in 2016.

4 – 5%

Average organic
sales growth 1

12 – 17%Growing withour customers

Deliveringwith excellenceHigh growthmarkets

Average free cash
flow as % of sales 1

Health andwell-being

Partner ofchoicePartnering forshared success

Innovators

Suppliers

PeopleCommunities

Excellencein execution

Consumerpreferredproducts

1. Over a five-year period by 2020.

Givaudan – 2016 Annual Report

Integrated
solutionsGrowing with our customers

17

Growing with our customers
Leveraging capabilities to drive successHigh growthmarkets

Health andwell-being

Consumerpreferredproducts

Integrated
solutionsWith customers at the heartof our business, we leverage ourknowledge of markets andconsumer preferences to help
customers grow their brands.

We set an ambitious financial target of 4 – 5% average organic
sales growth over the five-year period, and we are well on trackwith sales of CHF 4,663 million, an increase of 4.2% on a
like-for-like basis.
We made significant investments for future growth with newacquisitions and expanding our commercial footprint with the
opening of new offices and innovation centres, mostly in highgrowth markets
Below are the key achievements per driver.

High growth markets

Progress in meeting our 2020 ambition rests largely on our
success in high growth markets, a key opportunity and the firstof four key drivers in our strategic pillar of growing withcustomers. We achieved a number of milestones in thesemarkets during the year.
We recently opened new offices in Guatemala, Ivory Coast andAlgeria, and became the first global flavours company to open
laboratory and office facilities in Pakistan. For the first time,customers in Pakistan will be able to access our industry-leading
capabilities locally. The new 800 square metre facility in Karachi
strengthens Givaudan’s capabilities in beverages, snacks andsweet goods in the region, offering flavour application services
for all sectors with a strong focus on sweet goods andbeverages. Customers will benefit from a faster response to theirrequirements and gain access to fully halal-compliant
international flavour profiles as well as to Givaudan’s capabilities
and training for local technologists and manufacturers.

The Flavour Innovation Centre (FIC) in Singapore is home to the
Asia Pacific campus of our Givaudan Flavourist School, which istraining the next generation of flavourists in the region. In
2016, the FIC facility was renovated and extended, and includes
a new fully integrated culinary space for concept development
as well as new or expanded savoury, bakery, confectionery,
beverage and dairy facilities to serve all market sectors. The
investment enhances Givaudan’s innovation capabilities in Asia
Pacific, enabling a regional focus on applied innovation,
collaboration and knowledge sharing to complement its global
network.

Enhancing innovation capabilities in
Asia Pacific to facilitate a regional focus
on applied innovation, collaborationand knowledge sharing.
We continue to focus on our manufacturing strategy forfragrance ingredients to reinforce our position in the highgrowth markets of Asia Pacific. In China, for example, we havea joint venture with Zhejiang Xinhua Chemical for the
production of fragrance ingredients that enables us tomeet demand in the region and improve our competitive
position globally.

Health and well-being

We work with our customers to develop and maximise thegrowth of their brands by providing solutions that help
them meet the increasing demand of consumers for health andwell-being products that contribute to a healthy, active
and balanced life. This is our second key driver for success,one which offers many opportunities in both flavours
and fragrances.
Following the acquisition of French bio-sourced active
cosmetic ingredients company Soliance in 2014 and sciencebased cosmetic ingredients firm Induchem in 2015, our newly

Givaudan – 2016 Annual Report

18

Growing with our customers

formed Active Beauty business now offers customers andconsumers around the world a range of innovative products
and technology under one roof. The mission of Givaudan
Active Beauty is simple: to bring beauty to the world.
Additionally, we expanded our existing collaboration with
Amyris in the USA in the research, development and productionof active cosmetic ingredients.
In Flavours, we focus on ‘less is better’ as well as on ‘more isbetter’. In advocating ‘less is better’, we develop flavours,
ingredients and solutions that enable the reduction of sugar,
fat and salt. In 2016, we introduced several innovations to
support consumer trends in health and well-being, ranging
from a new ingredient that helps to enhance sweetness while
reducing calories to a ‘non-dairy dairy’ solution for customers
seeking rich, creamy or authentic dairy flavours for theirproducts while addressing issues related to allergens andvegetarian preferences.
The additional focus area of ‘more is better’ involves the use of
more protein and more functional food ingredients to provide
health benefits. Flavour challenges in terms of bitterness orother off-notes represent opportunities for us to surprise ourcustomers with delightful solutions.
We are also investing in the development of next generation
tools for protein palatability and bitter receptor modulation.
These new TasteSolutions® ingredients will ultimately enable
the replacement of animal proteins with plant based proteins
to continue to address an ever-growing world population withgreat tasting and nutritious products.
Finally, we will use innovative development technologies tostrengthen our Naturals platform in two areas and further
build a robust natural flavour ingredient palette. Specificallythese are areas where the cost reduction advantage isconsiderable and where security of supply is critical, forexample plant cell culture, agricultural intensification,
extraction and concentration.

Consumer preferred products

In putting customers at the heart of what we do, we makethem feel valued, confident and understood. By doing this weare a true partner at each step of the creation and value
chain. We are flexible and agile in offering customised
solutions to meet the needs of our global, international,
regional or local customers.

Customers are at the heart of what
we do. We make them feel valued,
confident and understood. We are atrue partner at each step.
Givaudan – 2016 Annual Report

Our tailored solutions for consumer preferred products
continued to be successful in helping our customers grow theirbrands and delight customers around the world. This success
was also seen in our collaboration with external partners
and is set to drive new business value for our Company.
In Fragrances, following Mahonial™ and Rosyfolia®, welaunched Nympheal™ in 2016, our new floral captive moleculethat completes the floral trilogy of new synthetic ingredients.
The three ingredients were designed, developed and quickly
launched to perfumers, providing them with answers toexisting and future regulatory restrictions on certain whitefloral molecules. These captives bring new olfactory
perspectives for our customers in growing their brands.
We have also provided customers with leading edge
technology for their brands through the development of a newgeneration of encapsulates that enhance the perception of
long-lasting freshness in the fabric care category as well as inpersonal care. Innovation in natural ingredients was alsoachieved through crafting new qualities in the citrus family,
where we explored its various facets during the year.
New ingredients are important in building the best palette ofingredients for our perfumers, who strive to create thefragrances that offer customers innovative and safe scentsfor their consumers around the world.

Integrated solutions

The acquisition of Spicetec Flavors & Seasonings in the USA in2016 supports our growth in integrated solutions. We now
have the opportunity to expand our integrated savoury
solutions by moving beyond flavours, combining exceptional,
complementary resources to provide our customers withunrivalled creative and innovative capabilities. We will
use the expertise of Spicetec globally to grow in the expanding
processed meat and spice and seasoning market.

Delivering with excellence

19

Delivering with excellenceSuperior customer experience
Excellencein execution

With customer needs in mind,
we drive excellence across the value
chain in delivering our products,
services and business processes.
We have set an ambitious financial target of 12 – 17% average
free cash flow as a percentage of sales. With 12.8% of sales in
2016, we are on track to achieve our 2020 target.
We continued to make signigicant invesments in our
infrastructure, global footprint and supply chain to support our
growth, particularly in high growth markets.

commitment by reducing internal complexity, offering best-inclass business processes to our customers and solutions toboth divisions and our corporate functions, and driving
excellence across the organisation.
GBS is represented on the Executive Committee by Anne Tayac,
appointed to the new role of Head of Givaudan Business
Solutions with responsibility for its design, gradual
implementation and management. More about Anne and her
background can be found on page 95.
As part of our global strategy to engage with customers andpartners in key markets, in 2016 we expanded our digitalpresence and shared tailored content in local languages bylaunching our websites in China and Japan.

Delivering with excellence

We strive for excellence at every touch point with ourcustomers by creating a memorable experience and a desire forthem to work with us again. In a market that is morecompetitive, dynamic and fast moving, we must find ways ofbringing all of our talent and experience to the fore. This needs
to be done with agility to operate efficiently while offering
customised solutions that meet our customers’ needs.

We seek to bring all of our talent andexperience to bear for customers.
We want every customer interaction to
be excellent at every touch point.
Both divisions are driving a number of initiatives to address thisneed, from innovation to sourcing to commercial, to ensurethat we deliver with excellence and offer a superior customer
experience. At Group level, Givaudan Business Solutions (GBS)
will become the foundation of our commitment to deliver withexcellence. Fully operational by 2020, the implementation of
GBS will support the Company in delivering on thisGivaudan – 2016 Annual Report

20Partnering for shared success

Partnering for shared success
Building to be the partner of choice
Innovators

Suppliers

PeopleCommunities

True partnerships with our key
stakeholder groups are nurtured
and valued in driving responsible
and sustainable growth and forshared success.
Being the partner of choice is a critical success factor in driving
our business growth and involves building strong partnerships
with innovators, suppliers, employees and communities inwhich we operate.

Innovators

Givaudan is known for its innovation, and this is something
we are very proud of and which we don’t take for granted intoday’s fast-changing world. We have excellent in-house teams
and a record of innovation excellence, but we know thatseeking inspiration from the external world can open new
possibilities in innovative solutions for our customers.
Good progress was made in 2016 with this more open
approach to innovation and in establishing collaborative
innovation partnerships with external partners who can speed
our access to new technology and disruptive innovations.
For example, we became a Founding Partner of MassChallenge
Switzerland, which will widen access and exposure to aninternational network of emerging start-ups. As an example,
we worked with a young French entrepreneur oncommercialising his olfactory alarm clock, Sensorwake (seepage 26).
All members of our Executive Committee together with anumber of senior business leaders visited the USA to personallyexperience the potential of this collaborative approach toinnovation and hear from a number of start-up companies,
incubators and venturing enterprises. We already have acontractual agreement with one of these incubators, IndieBio,

Givaudan – 2016 Annual Reportwhich focuses on funding and building start-ups that address arange of humanity’s most pressing problems and biotechnology
topics. Terra Rocketspace is an example of a programme inwhich we are a collaborator that brings together the industry’s
most disruptive start-ups and progressive corporations.
This will accelerate cross-industry innovation and set a new
standard for food and agriculture.
In the context of the European Institute of Innovation andTechnology (EIT) Innovation Hub, Givaudan has worked forover a year with food partners to build a European consortium
to define the future of food. In 2016, this EIT Knowledge andInnovation Community FoodConnects (KIC) was chosen as thepan-European winning KIC to drive sustainable transformation
towards a more consumer-centric, resource-efficient andinnovative food sector. The EIT KIC FoodConnects is a uniquepartnership of 50 leading companies, universities and scientificpartners covering the entire food value chain.

Suppliers

We seek to create closer long-term partnerships with our
suppliers, knowing that solid and open partnerships within our
supplier base have significant potential to boost our mutual
innovation power. Suppliers can genuinely be our partners andbecome an extension of our business through Supplier Enabled
Innovation, which is about motivating our suppliers to use
their R&D resources to help us achieve a level of innovationthat is beyond what we can do on our own. This different way
of working with our suppliers will increase our intellectual
resources and innovation momentum.
Through our Responsible Sourcing programme we maintaincompliance to high ethical standards with our suppliers,
working with them to create traceability and adherence tosocial, health and safety, environment and business integrity
standards. In 2016, we launched our Responsible Sourcing
Policy, an industry first which informs and requests our
suppliers and service providers to adhere to our responsible
sourcing principles and requirements in all core areas of
responsible sourcing.

Partnering for shared success

We are committed to establishing direct sourcing models incountries of origin that offer the best ingredients to ourcustomers and create value in our partner communities. In
recent years we have established direct partnerships with anumber of specified villages in Madagascar to support local
people and ensure a reliable vanilla supply chain within theGivaudan ethical sourcing project. In 2016, we inaugurated the
NATEMA plant, one of the largest clove leaf oil processing
plants in the world. NATEMA (Natural Extracts Madagascar) isa joint venture with Henri Fraise Fils and will enable Givaudan
to establish and grow its capacity to develop and process
natural ingredients sourced in Madagascar. A further
agreement with Henri Fraise Fils will allow us to leverage thelocal expertise and infrastructure of HFF to secure vanilla bean
supply directly from Malagasy smallholder producers.

PeopleStrong partnerships with our people are important for our
success. There are two areas on which we focus:
Firstly, employee engagement. Creating a stimulating andengaging workplace is vital for our success, driving theachievement of our 2020 ambitions and enabling our people toachieve their goals. We measure our progress in this area
through our employee engagement surveys. In 2016, wecompleted our second Employee Engagement Survey, which
offers all employees the opportunity to have their say. The
impressive 80% response rate – an increase of 10% on 2013,
when our first survey was conducted – showed that ouremployees feel empowered to speak and create change.
One result was that 87% of employees feel proud to work for
Givaudan. Another was that 78% would recommend Givaudan
as a great place to work. The results overall were clear inshowing that our strengths of 2013 continued as strengths
in 2016.

21

Communities

We are committed to strengthening and improving the social,economic and environmental fabric of the communities where
we operate and where we source our raw materials. We have abroad network of Green Teams, which are cross-functional siteteams dedicated to driving local sustainability activities.

We are committed to strengthening
and improving the social, economicand environmental fabric of thecommunities where we operate andwhere we source our raw materials.
Case studies of these activities can be found in our annual
Sustainability Report, but one example in India during 2016highlights the sort of project that may be undertaken by ourGreen Teams: In local schools in Daman, western India, there
is a lack of awareness about food safety and hygiene among
food handlers who prepare midday meals for students,
so a food safety and hygiene programme was developed by our
local Green Team in partnership with the government
education department. The programme was conducted overtwo days, reaching more than 200 food handlers who work at
about 40 schools that serve meals to approximately 10,000
children each day.

Creating a stimulating and engaging
workplace for our employees is vital forour success.
The second area of focus is the development of our people. Thisis achieved through bespoke leadership and technicaldevelopment programmes and job rotations with the following
outcomes: firstly to make sure that our people have the skills
and expertise necessary to do their jobs; secondly to preparethem for the future so they can fulfil their career aspirations;and finally this enables us to build a strong pipeline ofsuccessors to key leadership positions and technical positions

Givaudan – 2016 Annual Report2016
Success stories

Expanding capabilities
in integrated solutions

Celebrating
innovation in naturals
and synthetics

Captivating amarvellous journey

Stepping out for
innovation inspiration

24

2016 Success
Milestones
2016
stories

Givaudan – Annual Report 2016

2016Milestones
Success stories
2016

25

From celebrating 70 years of excellence at theGivaudan Perfumery School to expanding
capabilities in integrated solutions andseeking innovation inspirations outside ourCompany… we have many exciting stories
from 2016 that tell of our success as the leader
in the global flavour and fragrance industry,and some of them can be found in thefollowing pages.

The stories:
Collaborative innovationin fragrances helps to start the day

26

Exciting trends in plant-based protein

26

Responsible sourcing.
Preparing for the future

27

Givaudan Perfumery School

27

Expanding capabilities in
integrated solutions

28

Captivating a marvellous journey

30

Stepping out for
innovation inspirations

32

Global change is a focus for Flavours

33

Celebrating innovation innaturals and synthetics

34

Engaging the voiceof employees

36

Givaudan – 2016
AnnualAnnualReportReport2016

262016 Success stories

Collaborative innovation infragrances helps to start the dayPartnerships will play an increasing role as we accelerateinnovation in our Company, but these collaborations to ‘bringthe outside in’ may involve the surprising and unconventional,
as experienced by our Fragrance teams in 2016.
In France, teenager Guillaume Rolland was fed up with being
woken by the sound of his standard alarm, so he set aboutdeveloping a clock that could ease the sleeper awake by scentinstead. Quickly raising funds for his idea, Guillaume’s olfactory
alarm clock, Sensorwake, was one of Google’s top 15 inventionsof 2014.
When Guillaume started looking for different fragrances to use
in his new clock, our Fragrance teams swung into action. We
have established a small innovation ideas team that is on thelookout for start-ups like Guillaume’s – and our team knew thatspeed and agility were essential for this collaboration to
succeed. Even Guillaume himself commented on the flexibilityof the team, given the size of Givaudan, and praised theunderstanding we showed about the start-up environment
from which Sensorwake had emerged.
Three of our leading perfumers from Fine Fragrances andConsumer Products worked with Guillaume and his team toquickly create a palette of delicious morning scents for whichpeople around the world might leave their beds, including
fresh coffee, buttered toast and hot croissant. Guillaume’sentrepreneurialism has been enriching for us, and thisenterprising collaboration in innovation continues, withmore Sensorwake fragrances to come. The possibilities seem
unlimited. One day you may be woken by the scent of…
well, anything you wish.

Sensorwake, the first olfactory alarm clock

Givaudan – 2016 Annual Report

Exciting trends inplant-based protein

Are you a flexitarian? You may well be, without even knowing
it. Being a flexitarian means you are semi-vegetarian, or
somebody whose diet is mostly vegetarian but occasionally
includes fish and meat. Many people are turning to thisapproach to their diet because of health-related concerns
or economic, animal welfare and environmental questions.
Whatever the reasons, it’s a trend that we consider tobe exciting.

“Together with our customers, wewant to target new opportunities bydesigning delicious high protein
products, and seek to be partners
in creating these products that bring
the full experience of traditional
tastes to consumers.”

Flavio Garofalo Ph.D,
Global Business Development Manager

Protein is essential for a healthy diet, and deficiency leads
to fatigue, muscle weakness, hair loss and other problems.
As demand for protein continues to increase, the traditionalsource (animal protein) will need to be replaced by moresustainable plant protein. So what’s the challenge with
substituting animal protein with plant protein? The answer
is that the texture and taste of plant protein is notalways appealing: there are a number of taste challenges
like astringency, bitterness or general off-notes.
This is a challenge for Givaudan but it is also a major
opportunity, and for the last few years we have been working
in collaboration with our customers to craft great-tastingproducts using alternative sources of protein. 15 years ago,
Givaudan pioneered innovation in the area of taste, and hassince developed a number of unique ingredients that provide
solutions for products with high plant protein content. In 2016,using our TasteSolutions® technology, our Flavour Divisiondeveloped a number of maskers and flavours to address taste
challenges of high protein beverages such as astringency,
acidity and bitterness. We also continued to build prospective
collaborations with customers and ingredient innovatorsfor good tasting, nutritious and sustainable proteins andproducts. These flavours are currently in stability tests in viewof a market launch in 2017 and will make a step change inthe performance of plant proteins, helping consumers reacha sustainable and flavourful future.

2016 Success stories

27

Responsible sourcing
Preparing for the future

Global consumers are better informed and they take more
conscious decisions. They consider their own role in addressing
social and environmental issues. They understand thatthey have an obligation to change their purchasing behaviour:
to purchase fair and responsible products.
Our customers in turn seek solutions to answer thesedemands for more transparency about their products, and wehave taken the opportunity to engage with our customers
and suppliers to push the boundaries of responsible sourcing.

Our suppliers are key partners
in sourcing of materials and services
essential for our business. Strong
partnerships are needed to shapedifferentiating products that better
respond to accelerated consumer
demand for more sustainable products.
We source our direct and indirect materials as well as services
from 15,000 suppliers. For our flavour and fragrance creations
we source more than 10,000 raw materials from over 100
countries. These materials often involve long journeys fromlocal producers to our warehouses, involving thousands ofpeople and their wider communities. It is essential that highethical standards and practices are upheld throughout our
supply base.
Continuing to prepare our value chain for the future, our
Responsible Sourcing programme strives for compliance of ourdirect suppliers and of key raw materials supply chains to
responsible sourcing guidelines.
In 2016, we launched our Responsible Sourcing Policy, the firstof its kind in the flavour and fragrance industry. The policy
informs and asks our suppliers and service providers to adhere
to four core areas of responsible sourcing: health & safety,social, environment and business integrity.
We strive to be our customers’ and suppliers’ partner of choice
and build a portfolio of materials and services that are under
our Responsible Sourcing programme. It shows more than ever
our commitment to providing safe products of consistentquality that meet or exceed the expectations of our customers.

Givaudan Perfumery School in Argenteuil, France

Givaudan Perfumery School
70 years of excellence

It is 1946 and the world is recovering and readying itself
for new bright horizons. In Grasse in the same year, Roureperfumer Jean Carles takes young perfumers under his
wing and guides their training in what was to become theGivaudan Perfumery School.
Today, the olfactive study methods developed by Jean
Carles – sniffing a whiff of a single ingredient and training
a nose to distinguish from a palette of some 500 raw
ingredients – remains an industry standard and the basis
for the study undertaken by our perfumery students.
Since its foundation, the Givaudan Perfumery School has
gone from strength to strength, moving from Grasse tomodern facilities in Paris in 1997 and training many of theworld’s leading perfumers. We opened our perfumery schoolin Singapore in 2015, the first to be opened outside of France,
and in 2016 we marked the 70th anniversary of a school that
continues to provide excellence in teaching the craftsmanshipof perfumery. The anniversary was an opportunity for us toembrace the significance of our history and prepare thenext generation of perfumers that will go on to hone theircraft in our creative centres around the world.

“The school is the past, present andfuture of Givaudan Fragrances. We arevery proud of this achievement.”

Maurizio Volpi,
President, Fragrance Division

Givaudan – 2016 Annual Report

28 2016 Success stories

Expertise in processed meats

Expanding capabilities
in integrated solutions

Integrated solutions is a part of our 2020
strategy that allows us to grow our businessin ways which go beyond our core flavour andfragrance capabilities to enhance ourCompany’s value proposition to customers
and enable new opportunities for growth.
In Flavours, we want to differentiate our offerings bydeveloping multi-ingredient solutions where flavour andtaste play a key role in formulations. One avenue of creating
incremental value in this area of integrated solutions forfood and beverages is through acquisitions. In 2016, we tooka significant step forward as part of this strategy by acquiring
Spicetec Flavors & Seasonings from ConAgra of the USA for
USD 340 million (about CHF 331 million).
Spicetec brings complementary capabilities with its strong
portfolio of spices, seasoning blends and natural solutions, andstrengthens our offering to deliver integrated solutions
where flavour and taste play a key role. We can now offer atailored combination of flavour and functional ingredients thatprovide optimal performance to meet customers’ needs.
By combining the synergies of flavours and taste with

Givaudan – 2016 Annual Reportherbs and spices, gums and starches, we ensure differentiating
performance in the finished food application.

47% of consumers would be encouraged
to buy food and drinks with theclaim ‘contains natural ingredients’.
This acquisition also strengthens our presence with existingand potential customers in North America which can beleveraged through the global Givaudan network. With 280
employees, Spicetec operates from three locations in Omaha,
Nebraska; Carol Stream, Illinois; and Cranbury, New Jersey.
Natural solutions
Spicetec brings an extensive portfolio of natural ingredientsto the Givaudan portfolio. Economic trends and an increasein consumer focus on health and well-being in recent years
have reminded many consumers of the benefits of going ‘back
to basics’ with homemade products ‘just like mother used to
make’ that evoke feelings of nostalgia and comfort.
Naturalness is one of the most important demand drivers inmodern fast moving consumer goods markets as consumers
look for products they can trust from recognised natural
sources. And products tend to be trusted more if they are2016 Success stories

29

deemed to be natural: globally, 47% of consumers would be
encouraged to buy food and drinks with the claim ‘contains
natural ingredients’; and also globally, 46% of consumers
would be encouraged to buy food and drinks with the claim‘from natural sources’. (Datamonitor report on ingredients
across FMCG).
For consumers, natural means ‘as intended by nature’ and isassociated with healthy, fresh and organic. The less processedor complex the product, the more natural it is perceived.
Consumers think differently about the role of natural flavours
in different categories: Givaudan research in Europe indicatesthat natural flavours are seen as having a higher impact ontaste in yoghurts and processed meat than in carbonateddrinks and fruit juices, for example.

“Combining Givaudan’s leading flavour
expertise with Spicetec’s portfolio of
products enables us to deliver a broader
range of solutions to our customers
in processed meats, savoury retailand foodservice.”

Fresh herbs and spices

Mauricio Graber,
President, Flavour Division

Natural flavours have always been important to Givaudan.
We do not view such flavours through the narrow prism of an
opportunity today to be capitalised on. Instead we have always
focused on natural flavours and as a result have an equallythorough approach grounded in our heritage as the leaders in
the natural flavour market. As the largest flavour company inthe world, we are the biggest buyer of natural raw materials in
the industry. Through long-standing relationships, partnerships
and collaborations, we ensure sustainable quality and supply ofnatural ingredients. In fact over 96% of our innovation
resources are dedicated to naturals.
Our approach to natural flavours has a strong customer andconsumer-centric foundation that is reflected in our broad,multi-faceted consumer understanding and R&D programmes.
We work with our customers to bring them the best solutions
from nature to their products, offering the broadest range ofnatural flavours in the industry. Our acquisition of Spicetec has
broadened the range of what we can offer and strengthened
our market position.

Specialities in seasoning

Givaudan – 2016 Annual Report302016 Success stories

Captivating amarvellous journey

Flavours and fragrances have helped shape the way people
perceive the world and how they express themselves in the
foods we savour and the aromas that surround and delight us.
The sensations of taste and smell have always fascinated us.
Tradesmen, philosophers, scientists and historians have
marvelled at the ways we sense our chemical surroundings,
and the potency of the emotions that can be evoked. Since thevery roots of our existence, we have tasted and smelled theworld around us, and the way in which we ‘sense’ has become
intrinsically interwoven with our most affecting memories
and emotions.
Perfume has always proved to be a priceless record of ancientcivilisations. The ancient Egyptians used resins, aromatic gums,
and unguents to anoint their dead ‘perfumed ones’ (gods,
essentially) in the hope they would find immortality in theafterlife, and the Persians and Assyrians created wines
flavoured with roses and figs.
The first perfume was created in Europe in the middle ages.
The distilling of rosemary flowers in ethyl alcohol created‘Hungary water’, which was said to have cured the Queen of
Hungary of many of her illnesses. Later, people tried to protect
themselves from rampant epidemics using powders, perfumed
gloves, aromatic vinegars and scented masks. Perfume became
synonymous with sensuality during the Enlightenment, when
perfumers created light fragrances designed to intoxicate andseduce, such as ‘L’Eau Sensuelle’, worn by Marie-Antoinette.
It was the start of something great, and our industry started totake shape.
Historic roots
For over 250 years, the long journey to the modern day
international flavour and fragrance industry is punctuated byground-breaking milestones that led to Givaudan. Our historic

Factory at Roure-Betrand Fils, Grasse

Givaudan – 2016 Annual Reportroots can be traced to Grasse in France in 1768, when Antoinede Chiris undertook a new venture of harvesting flora andfauna and turning them into raw ingredients for perfumery –taking the first steps into a new world of fragrances. From thento the purchase of Spicetec in 2016, Givaudan has pursued anhistoric policy of invention and acquisition, of creativity, passion
and innovation, always with an eye to the future, enriching theworld of taste and scents.
Kaleidoscopes of senses
Over these years, scientists and the industry have come torecognise that our senses of taste and smell are closelyinterconnected yet psychologically distinct. The way wedevelop and feed these two senses has changed throughout
our history, prompting our most ambitious thinkers to ponder
what these shifting societal sands say about us and the ways
we perceive our world.
There are challenges, however, in trying to capture theenormous sensory kaleidoscope of taste and smell in words.
While the philosophical community struggled to conceptualise
taste and smell, figurative phrases like ‘smells fishy’ and ‘leaves
a sour taste’ were common. Much philosophical discussion of
taste and smell relates to our separation from the animal
kingdom – the idea that both senses are ‘linked with our wild
instincts’. This is mainly based in them being most relevant tohunting. Their close relationship to biological needs meantflavours and scents were often perceived as being incompatible
with pure thought.
The brain has a central role in this process of perception. Itsability to understand information from chemical substances
has always been essential for our survival, and understanding
this process is also essential for the art of creating cosmetic
and cuisine products. When we smell something, it’s because
an odorous object has released some of its molecules into theair, which are then detected by our nostrils. Above each nostril,
we have a sensitive area (inside a mucous membrane) callednasal epithelial tissue. Imagine a tiny bed of sea anemones,
constantly picking up molecules and sending information up to
the brain. The twin olfactory bulbs in our brains pick up thisinformation and ‘light up’ a corresponding three-dimensional
pattern, which the brain then uses to understand andremember the smell. And when it comes to taste, did you
know, for example, that each of us has an average of 10,000
taste buds on our tongue, along with extra ones on the palate,pharynx and upper oesophagus? It is just one more fascinating
fact in this kaleidoscope of senses and engaging sensory
journey over thousands of years.
‘An Odyssey of Flavours and Fragrances’,
a book by Ed. La Martinière, Abrams
The journey described above is drawn from an exclusive
Givaudan anthology, ‘An Odyssey of Flavours and Fragrances’,
which was published in 2016 and is the result of a three-year
project with French publisher Editions de La Martinière in2016 Success stories

31

Chocolate. Illustration by Lionel Favre for Givaudan

partnership with US publisher Abrams, and brings together
five renowned writers, all of whom share a passion for
sensory exploration“The foods we savour and the fragrancesthat surround and delight us are at theheart of what it is to be human. This
book is our invitation to everyone todiscover the profound impact smell andtaste has on so many facets of our life.

Gilles Andrier,CEO, Givaudan

Through evocative writing and fascinating imagery, the bookshows how Givaudan has helped shape the flavour andfragrance industry as we know it today and captures ourcontribution to the industry, from our know-how and creativity
to the work we have undertaken to protect the natural
resources that are used in our creations. Accompanying thestory are beautiful images that showcase the essence offlavours and fragrances. Photography and illustrations reveal
the people, places and ingredients that have helped to establish
our Company as it is today.

The three images are taken from the book ‘An Odyssey of Flavours and Fragrances’Olfactive portrait of the perfume Infusion d’iris

Givaudan – 2016 Annual Report322016 Success stories

start-ups and companies involved in biotechnology,
diagnostics, digital solutions and other scientific areas.
The team heard from IndieBio, which focuses on funding andincubating start-ups that address a wide range of
biotechnology topics.

When it comes to innovation, we areproud of our track record of excellence,
yet we know we need to ‘step outside
the box’ and seek inspiration from theexternal world.

Inspirations for innovation can come from inside and out

Stepping out for
innovation inspirations

We are rightly proud of our own track record of excellence
when it comes to innovation, but we know we don’t have amonopoly and that we need to continuously ‘step outside thebox’ to seek inspiration from the external world. We also know
our resources are not unlimited and that we have to innovate
faster and in wider spaces – and the only way we can do this isthrough collaborative innovation.
Against this background, all members of the Executive
Committee and senior business leaders stepped out in 2016 toexperience for themselves exciting new possibilities for a futureworld of flavours and fragrances on an Innovation Trek in theUSA, the first of its type for our Company. It was an intensive
three-day experience in San Francisco that explored newhorizons in innovation and technologies and left the teaminspired by the opportunities and collaboration possibilities topartner for shared success that will help drive further growth
as part of our 2020 strategy.
The 19-strong team heard from venture capital managers,
incubators, start-up companies and enterprises about theirexpertise and technologies that might be applied to the flavour
and fragrance industry. They were the type of organisations
that Givaudan is looking to for possible investments and direct
collaborations for future business growth through innovation:

Givaudan – 2016 Annual Report

A further example of our increased external engagement
during the year was our founding membership of the
MassChallenge Switzerland accelerator. Our membership will
help foster a culture of open innovation and widen access to aninternational network and exposure to start-ups. We also
formed a partnership with a young French entrepreneur, whoparticipated in the MassChallenge accelerator, to provide
fragrances for his new olfactory alarm clock, Sensorwake. Moredetails on this unusual application of our innovative fragrance
creations can be found on page 26.
Collaborative innovations can also be internal, where we
encourage cross-divisional communities of our people working
on similar topics to share their knowledge and capabilities andexperiment together to speed up their own projects.

“We know we can’t know and do
everything on innovation ourselves.
We just can’t. We have limited
resources internally even though
we’re the biggest player in theindustry, therefore we need to partnerand collaborate with the best outsideof Givaudan.”Chris Thoen,
Head of Global Science and Technology

Overall, successful external and internal collaborative
innovation will drive new business value for our Company.
It is an avenue of inspiration that will create a new senseof possibility and opportunity, and be a continued route toinnovation excellence and leadership.

2016 Success stories

Global change is afocus for Flavours

A shift in global economic power is transforming businessand society as countries such as China and India challenge
traditional strongholds. In high growth markets, consumer
demand continues to rise as increasing numbers of people
move from rural to urban areas, where the middle class is
growing. With more disposable income and higher aspirations,these consumers look for items such as convenience foods
and beauty products. People are living longer and lifestyles arechanging, with overweight and obesity becoming a problem incountries where traditionally they were not, and with healthand well-being increasingly a feature.

33

Middle income consumers in China are seeking new taste andflavour experiences, and in 2016 we marked an importantmilestone in the expansion of our business in this country withthe opening of a new office along with sweet and savoury
application laboratories in Zhengzhou.
Expansions of our local capabilities and innovation programmes
played a large role in our success in many other parts of theworld as well. In Mexico and Brazil during the year, we expanded
our flavour creation and application resources to support thegrowth in beverage, dairy and processed meat, and increased
the geographic reach of our commercial organisation. We held
health and well-being symposiums in four Latin Americancountries that were highly successful in creating customer
intimacy and demonstrating strategic directions for healthierconsumer products.

We will focus our resources on further
building our presence in markets where
we see high growth opportunities
and can accompany our customers ingrowing their business.

A new flavour creation and application laboratory in Delhi,
India enables closer customer interactions, faster turnarounds
and higher quality solutions, and our newly renovated Flavour
Innovation Centre in Singapore will provide differentiatedflavour solutions for consumer preferred products in the region.
We also opened a new facility in Karachi, becoming the firstglobal flavours company to do so in Pakistan. In Egypt, we
upgraded our factory and increased capacity, and we plan toinvest in new commercial and FC&A facilities at the site.

This changing global scene is a real opportunity for our Flavour
Division. We will focus resources on further building ourpresence in markets where we see high growth opportunities
and can accompany our customers in growing their business –we want to be by our customers’ side. Central to our highgrowth markets strategy is our ability to understand local
market trends, strengthen our presence and adapt our businessmodel accordingly.

These multi-tiered investments in 2016 are part of the Flavour
Division’s ‘1–5–5’ strategy of focusing on 11 markets in which itaims to grow at an accelerated pace to 2020. China (the ‘1’ ofthe strategy) is the most significant investment focus becauseof its population size and consumer growth. The first tier of fivecountries are large and fast-growing (India, Indonesia, Thailand,Brazil and Mexico). There will be a gradual build-up of ourpresence in the second tier of five countries (Nigeria, Egypt,
Pakistan, Vietnam and the Philippines).

Givaudan’s world-class flavours manufacturing facility in Nantong, China

Givaudan – 2016 Annual Report

34 2016 Success stories

A selection of our natural ingredients

Celebrating innovation innaturals and synthetics
Creativity, insight and innovation form
the backbone of our culture that inspires our
perfumers to create beautiful scents forcustomers, whether it is an exquisite finefragrance or a long-lasting laundry detergent.

Using their creativity and the best palette to craft fragrancesthat bring moments of delight, these perfumers use-ingredients that are the building blocks of perfumery – andthese can be both synthetic and natural.
In 2016, we celebrated the 10th anniversary of our ethicalsourcing of natural ingredients and a breakthrough in ouroffering of captive molecules with the launch of three newflorals that enhance our perfumers’ palette of ingredients.

Ethical sourcing: 10-year milestone

By looking in Nature for inspiration, our perfumers are able tocraft memorable fragrances and expand their palette ofGivaudan – 2016 Annual Reportpossibilities. We use several hundred natural perfumery
materials such as patchouli, tonka beans and ylang ylang, often
sourced from fragile eco-systems. We take our passion andexpertise to source these ingredients that inspire our
perfumers and be directly involved with our growers.
We started pioneering an ethical sourcing approach in theflavour and fragrance industry 10 years ago, starting withpartnerships with local producers and today using different
sourcing models, including our own collection networks. In thisway, we are able to influence the market in a positive way andmaintain a long-term vision, bringing benefits for ourcustomers and suppliers and helping to preserve the magic offragrance for consumers worldwide. Through this approach wehave reinforced traceability and secured key supply chains fornaturals used in perfumery. We have also developed a focus on
supporting communities that grow these crops, fosterednatural ingredient innovation and forged unique partnerships.
Today we can celebrate solid, sustainable practices in oursourcing, and we are proud that these approaches go beyond
economic considerations to include environmental, social andethical factors. Our ethical sourcing comprises our Responsible
Sourcing programme, which is about driving compliance in our2016 Success stories

supply chains; our Sourcing at Origin initiatives, in which themain priority is securing the supply of strategic naturals; andCommunities at Source projects, which involves supporting
communities that produce key natural ingredients.

“We are proud to mark this milestone
in our journey to sustainable naturalingredients. By taking a long-term
approach to securing the mostfragile natural supply chains andsupporting local communities,
Givaudan is working to create avirtuous circle in line with our 2020
strategy of responsible growth andshared success for customers,
communities and the Company.”Gilles Andrier,CEO, Givaudan



Sourcing natural ingredients also provides new opportunities
for creative stimulation and innovation. Exploring raw
materials at their source and treating them with the latest
techniques including bioscience has led to natural innovations.
These provide Givaudan’s perfumers and flavourists with newsources of inspiration to craft flavours and fragrances thatdelight customers around the world.

Nympheal ™

Rosyfolia ®

35

Looking to science for inspiration

Science also provides new opportunities for creative
stimulation and innovation, as we have found recently
through the development of three new captive molecules by
our Fragrance teams. This trilogy of floral captive ingredientsbuilds our perfumers’ palette of ingredients and provides
them with an innovative and competitive edge.
Developed by our research laboratories in Zurich andShanghai, one of these molecules has won many awards
and underlined our well-established innovation capabilities.
Mahonial™ is a muguet molecule bringing a white floral
density to creations with magnolia facets and enriching
Givaudan’s palette of iconic synthetic materials.
A second ingredient, a new Givaudan blockbuster, is more
floral, fresh and crisp. With its linden blossom and floral
aldehydic green accents, it allows perfumers to create floral
green backbones in their scents. Added to the Cardex in 2016,
Nympheal™ is a versatile ingredient and provides our
perfumers with a strong competitive edge, especially in thepossible replacement of Lilial.
Last but not least is Rosyfolia® with its fresh, diffusive rosy,muguet top note. Its unique rosy character and strong
performance in application brings new perspectives in floral
notes to our perfumers.
These new molecules are examples of our distinctive olfactive
signature and show how we innovate to offer ingredientsthat support current trends and maintain olfactive presence
and performance.

Mahonial ™

Givaudan – 2016 Annual Report

36 2016 Success stories

Engaging the voiceof employees

What is it like to work at Givaudan? What’s being done well andwhere can we still improve? These are the sort of questions
that can be answered only by those at the heart of ourCompany – our employees. Their input is vital in continuing tobuild Givaudan as a great place to work.
Our second Employee Engagement Survey, conducted in
September 2016, offered all employees the opportunity to havetheir say. The survey is anonymous and conducted by an
external agency, providing employees with an assurance they
can speak freely and that their voice will be heard. The
impressive 80% response rate – an increase of 10% on 2013,
when our first survey was conducted – shows us that ouremployees feel empowered to speak up and create change. Aspart of the survey and linked to our support for communities
where we operate, the Company gave CHF 10 for each survey
participant and enabled a total of CHF 86,700 to be donated to
the Givaudan Foundation.

87% of employees stated they were
proud to work for Givaudan.
The responses were consolidated by the agency and compared
to external benchmarks as well as to the 2013 survey.

Nanako, Givaudan employee

This allows us to measure how we have progressed in addition
to enabling us to form clear action plans to implement further
improvements and reinforce areas of strength.
The results were clear in showing that our strengths of 2013
continued as strengths in 2016: we continue to build on ourstrengths and out-perform external global high-performing
benchmarks within the categories of Engagement, Strategic
Alignment, and Work Environment.
Strong improvements were made across all other survey
categories including our priority areas from 2013 of Career,
Inclusiveness and Collaboration. These will continue to befocus areas over the next few years. Opportunities for
improvement include continuing to build cross-functional
collaboration and communication, and flexibility within our
processes and procedures.

78% of employees said theywould recommend Givaudan as agreat place to work.

Olivier, Givaudan employee

Givaudan – 2016 Annual Report

In steps taken following the survey, the results werecommunicated to employees; local sites and countries were
empowered to take ownership of their results to build on
their strengths and address opportunities; and global actions
are to be reviewed by the Executive Committee.

2016 Success stories

3738 Performance review

Simos soloriberis quate

Performance
review
The 2016 business performance for theGroup and our divisions are detailed
in the following section. Also included isan overview of our business environment
in addition to our risk management,compliance and regulatory.

In this section:

Givaudan – 2016 Annual Report

Business environment and markets

40

Business performance – Group

42

Business performance – Flavour Division

44

Business performance – Fragrance Division

46

Capital markets

48

Risk management

51

Compliance

54

Regulatory and public policy

56

Management report

Simos soloriberis quate

39

Our value creation
through financial
performanceand outcomesOur business and financial performance measurement
system helps us understand what drives value andwhat managers must have in place to measure performanceand capture information on all aspects of the business.

CHF 597 million
Free cash flow

Our free cash flow position is in line with the average
financial targets we aim to achieve by 2020.

CHF 56

proposed cash dividend per share
This proposed cash return for 2016 will be the 16th consecutive
increase in earnings distributed to shareholders since theCompany’s listing on the Swiss stock exchange, if approvedat the Annual General Meeting in March 2017.

Givaudan – 2016 Annual Report

40

Performance review

Business environment and markets

Business environment and markets
Operating in a fast-changing landscapeWe operate in a landscape of fastchanging demographics; shifting
consumer preferences that are
driven by influences such as anageing population, risingurbanisation and increased
demand for natural and healthy
products; and continuouschange from new technologies
and digitalisation.
Economic and regulatory environment

Givaudan is the leading company in the flavour and fragrance
industry with approximately 25% market share. We create andsell flavours for the food and beverage industry, andfragrances for personal, home and laundry care brands. We are
expanding these traditional segments to include active
cosmetic ingredients.
We have a global presence with over 10,000 employees in 49
countries at 98 sites, 39 of which are production sites. In Groupsales, 52% are in Flavour Division and 48% are in Fragrance
Division; 45% of our sales are in the high growth markets ofAsia, Latin America, Africa, the Middle East and Eastern Europe,
while 55% are in the mature markets of Western Europe,
North America and Oceania.
Through targeted investments, we focus our efforts on best
serving our customers and maximising our growth
opportunities. Acquisitions are an important part ofour growth model, with our acquisition in 2016 of Spicetec
following those of Soliance and Induchem in 2014 and2015 respectively.

Givaudan – 2016 Annual Report

Through targeted investments, we focus
our efforts on best serving
our customers and maximising our
growth opportunities.
The flavour and fragrance industry has grown steadily for atleast the past four years and is estimated to be worth
approximately CHF 18 billion. The largest companies, which
include Givaudan, Firmenich, IFF and Symrise, make up morethan two-thirds of the market while the rest of the industry
is fragmented with many smaller players. Local taste
preferences and consumer behaviours influence our industry,
but there are also trends that affect the demand for products
and services in which flavours and fragrances are used. In thefollowing section we describe three megatrends that we
see as the most relevant for our business: the growing consumer
base, people’s longer and more responsible lives, and theincreasingly connected world.

Market developments, industry trends andcompetitive environment

The world’s population is to rise by 2020 to an estimated 7.7
billion, of whom 55% will live in cities. In a complex and volatile
world, we see growth for our industry in Africa and Asia,
increased relevance for local and regional companies inemerging markets, and more demand for convenience products.
In the fragrance industry, an evolution in retailing is being seen
with the development of speciality retailers and the growth of
e-commerce. Local brands are also quickly gaining more
relevance with consumers, and innovation is moving at a fasterpace. Growth in flavours will come mostly from high growthmarkets, where local and regional brands are gaining relevancewith consumers.
A second megatrend influencing the flavour and fragrance
industry is the fact that we are all living longer and more
responsibly. By 2020, almost 20% of the population will be over
60, yet 50% of adults are expected to be overweight or obese.

Performance review

Consumers are more aware of healthier products and arequestioning labels, and transparency is a growing expectation.
The sustainability agenda continues to gain momentum andpeople are concerned about the environment and want to
identify with companies taking a lead. For fragrances, thismegatrend will mean strong demand for cosmetic products
in high growth markets, and significant growth in thecosmetics market where the ageing population seeks to look
beautiful for longer. In flavours, it means the role of food ischanging with a focus on health and well-being, a growing
popularity for functional foods, and an increased demand for
healthier products.

By 2020, 50% of adults are expected to
be overweight or obese.
We live in an increasingly interconnected world, and this is thethird megatrend that is shaping the future. About 40% of theworld’s population uses the internet, and two-thirds of theseusers are in the developing world. Increased digitalisation isdriving big data, which can be used to understand consumers’
habits and preferences more fully and can lead to changes inofferings to customers. Consumers also have easier access to
information, and social media is changing the way knowledge isshared. For the food and beverage industry, this trend alsomeans increased consumer empowerment and a desire fortransparency and authenticity as customers move towards
more natural and clean label products. In fragrances,consumers are empowered in seeking more knowledge about
what is in their products and can ‘vote with a click’, andbloggers have a growing role in shaping fine fragrances, beauty
care and cosmetics.

Market sharein %Business environment and markets

41

~25%

of the the market value which isestimated at approximate CHF 18 billion

Givaudan sales development by region
in CHF million

2016 1,601

1,320

591

1,151

4,663

2015 1,567

1,238

571

1,020

4,396

2014 1,686

1,188

579

951

4,404

2013 1,653

1,180

578

958

4,369

2012 1,588

1,147

570

952

4,257

Europe, Africa and Middle East
Asia Pacific

Latin America
North America

Givaudan sales: mature vs high growth markets
in %2016 55

45

2007 64

36

Mature markets

High growth markets

Givaudan – 2016 Annual Report

42

Performance review

Business performance – Group

Business performance – Group
Solid financial performance –in line with 2020 guidanceSales

Givaudan Group full year sales were CHF 4,663 million, an
increase of 4.2% on a like-for-like basis and 6.1% in Swiss francs
when compared to 2015.
Fragrance Division sales were CHF 2,230 million, an increase of
5.6% on a like-for-like basis and 6.4% in Swiss francs.
Flavour Division sales were CHF 2,433 million, an increase of
3.0% on a like-for-like basis and 5.8% in Swiss francs.

Gross margin

The gross margin declined to 45.6% from 46.2% in 2015, mainly
as a result of the lower gross margin on the acquired Spicetec
Flavors business.

Earnings before Interest, Tax, Depreciation
and Amortisation (EBITDA)

The EBITDA increased to CHF 1,126 million in 2016 from
CHF 1,070 million in 2015, an increase of 5.2% in Swiss francs
and 3.7% in local currency. The EBITDA margin declined slightly
to 24.1% in 2016 from 24.3% in 2015. In 2016 the Group
recognised one-off non-cash gains of CHF 62 million, mainly
following a change in pension plans. As a reminder, in 2015 theGroup recognised a net one-off non-cash gain of
CHF 20 million, mainly following a change in pension plans.

Operating income

The operating income increased by 10.2% to CHF 875 million
from CHF 794 million for the same period in 2015. Whenmeasured in local currency terms, the operating income
increased by 8.1%. The operating margin increased to 18.8% in2016 from 18.1% in 2015.

Financial performance

Financing costs in 2016 were CHF 51 million, versus
CHF 61 million for the same period in 2015. In 2016 the Group
continued to refinance at lower interest rates. Other financial
expense, net of income, was CHF 40 million in 2016, up versus
the CHF 37 million reported in 2015, as a result of increased

Givaudan – 2016 Annual Report

hedging costs and exchange losses in markets where
currencies could not be hedged.
The income tax expense as a percentage of income before
taxes was 18%, flat when compared to the underlying rate in2015. As a reminder, in 2015 income tax expense was impacted
by one-time items following changes in Swiss Accounting
Law and the Group’s operating structure.

Net income

The net income increased to CHF 644 million in 2016 from
CHF 625 million in 2015, an increase of 3.1%. This results in a net
profit margin of 13.8%, versus 14.2% in 2015. Basic earnings per
share increased to CHF 69.95 versus CHF 67.89 for the same
period in 2015.

Cash flow

Givaudan delivered an operating cash flow of CHF 805 million
in 2016, compared to CHF 915 million in 2015. The decrease wasmainly as a result of higher working capital and taxes paid. As
a percentage of sales, working capital was flat when compared
to 2015.
Total net investments in property, plant and equipment were
CHF 135 million, compared to CHF 125 million in 2015. During
2016 the Group continued its investments to support growth inhigh growth markets, most notably the start of a new flavours
savoury facility in Pune, India and the investment in the Zurich
Innovation Centre (ZIC).
Intangible asset additions were CHF 40 million in 2016
compared to CHF 35 million in 2015 as the Company continued
to invest in its IT platform. Total net investments in tangible
and intangible assets were 3.8% of sales in 2016, compared to
3.6% in 2015.
Operating cash flow after net investments was CHF 630 million
in 2016, versus the CHF 756 million recorded in 2015. Free
cash flow, defined as operating cash flow after investments
and interest paid, was CHF 597 million in 2016, versus

Performance review

CHF 720 million for the comparable period in 2015. As apercentage of sales, free cash flow in 2016 was 12.8%, compared
to 16.4% in 2015.

Financial position

Givaudan’s financial position remained solid at the end of theyear. Net debt at December 2016 was CHF 930 million,
compared to CHF 677 million at December 2015. At the end of
December 2016 the leverage ratio was 19%, compared to 15% at
the end of 2015.

Dividend proposal

Business performance – Group

43

Group sales
in millions of Swiss francs
2016 2,433

2,230

4,663

2015 2,300

2,096

4,396

2014 2,296

2,108

4,404

2013 2,286

2,083

4,369

2012 2,236

2,021

4,257

Flavours

Fragrances

Gross profit
in millions of Swiss francs

At the Annual General Meeting on 23 March 2017, Givaudan’s
Board of Directors will propose a cash dividend of CHF 56.00
per share for the financial year 2016, an increase of 3.7% versus
2015. This is the 16th consecutive dividend increase following
Givaudan’s listing at the Swiss stock exchange in 2000.

2016

2,128

2015

2,030

2014

2,027

2020 guidance –Responsible growth. Shared success

2013

1,954

2012

1,798

The Company’s 2020 ambition is to create further value
through profitable, responsible growth. Capitalising on the
success of the 2011 – 2015 strategy, Givaudan’s 2020 ambition isbuilt on the three strategic pillars of growing with its
customers; delivering with excellence; and partnering forshared success.
Ambitious financial targets are a fundamental part ofGivaudan’s strategy. We aim to outpace the market with 4 – 5%
sales growth and a free cash flow of 12 – 17% of sales, bothmeasured as an average over the five-year period of ourstrategy cycle. It is Givaudan’s intention to maintain its current
dividend practice as part of this ambition.
Future results may be affected by a range of factors, forexample political conditions; local or global economic changes,
including financial risks; interruptions to supply andproduction; R&D project withdrawals; product recalls;
information technology security issues; exposures to productliability; changes in law; inabilities to recruit and retain skilledemployees; and failures to maintain a culture of compliance.
Givaudan is in continuous dialogue with frameworks andstandard setters. We feel well prepared to meet these sorts ofuncertainties and challenges and have in place detailed
instructions in the different risk areas, along with experienced
employees and well-developed internal control systems to
mitigate risks and conduct remedial actions to contain impacts
where required.

EBITDA
in millions of Swiss francs
2016

1,126

2015

1,070

2013

1,053

2014

970

2012

889

Operating income
in millions of Swiss francs
2016

875

2015

794

2014

760

2013

693

2012

626

Note: Like-for-like excludes the impact of currency, acquisitions and disposals

G4 – DMA Economic performance

Givaudan – 2016 Annual Report

44

Performance review

Business performance – Flavour Division

Business performance
Flavour Division

Flavour Division sales increased by
3.0% on a like-for-like basis,including Spicetec, the growth
was 6.0% in local currencies.
Sales

Flavour Division sales were CHF 2,433 million, an increase of
3.0% on a like-for-like basis and 5.8% in Swiss francs. Including
Spicetec, which was acquired on 1 August and contributed
CHF 71 million of sales, the growth was 6.0% in local currency.
From a segment perspective, Sweet Goods, Dairy and Snacks
were strong contributors to the division growth. Beverages
was slightly positive and Savoury was flat. Asia Pacific provided
a robust growth while Latin America sales expanded rapidly.
Europe, Africa and the Middle East was flat with reductions in
Savoury and Beverages compensated by the other segments.
All regions delivered a high level of new wins in the key
segments. In line with our strategy, sales in Health andWell-being increased double-digit on a like-for-like basis.

Sweet goods, dairy and snacks
were strong contributors to the Flavour
Division’s growth.
EBITDA decreased by 8.7% to CHF 523 million from
CHF 572 million in 2015. The EBITDA margin was 21.5% in 2016,
down from 24.9% in 2015. As a reminder, in 2015 the division
recognised a one-off non-cash gain of CHF 32 million following
a change in pension plans.
The operating income decreased by 9.2% to CHF 382 million in2016 from CHF 420 million for the same period in 2015. The
operating margin decreased to 15.7% in 2016 from 18.3% in 2015.

Givaudan – 2016 Annual Report

Asia Pacific

Sales in Asia Pacific grew 5.1% on a like-for-like basis. India
delivered strong double-digit performance whilst Indonesia
and Thailand delivered a high single-digit increase. Despite
challenging market conditions, China reported good growthin the second half of the year. Growth in the mature markets
was fuelled by strong double-digit growth in South Korea,
with positive performance coming from Japan and Oceania.
Sweet goods, Dairy and Snacks contributed significantly tothe overall growth followed by Savoury and Beverages. Local
and regional customers continued to grow strongly.

India delivered strong doubledigit performance.
Europe, Africa and Middle East

Sales in Europe, Africa and Middle East were flat. Sales
performance in the high growth markets of Russia andUkraine improved, however Africa and the Middle East
declined slightly due to the difficult economic conditions.
Maghreb, Egypt and South Africa achieved good
performance fuelled by new wins. Mature market sales
declined versus prior year driven mainly by France, Germany
and UK. Low single-digit increases in Italy, Iberia andBenelux compensated for the downturn in those Western
European markets.

Performance review

North America

On a like-for-like basis, sales in North America declined 1.0%
in 2016. The overall performance was as a result of thesoftness in the US food and beverage market coupled witha strong prior year comparable.

Strong performance in Latin America inall segments.
Latin America

Latin America delivered a strong sales performance with anincrease of 17.1% on a like-for-like basis. All segments grew
double-digit fuelled by strong new wins. Double-digit
growth in Guatemala, Colombia and Peru largely
compensated a decline in Venezuela. Argentina and Brazil
realised double-digit growth driven by new wins and existing
volume growth, supported by good growth in Mexico.

Business performance – Flavour Division

45

Sales
in millions of Swiss francs
2016

2,433

2015

2,300

2014

2,296

2013

2,286

2012

2,236

EBITDA
in millions of Swiss francs
2015

523

2016

572

2014

548

2013

467

2012

454

Operating income
in millions of Swiss francs
2016

382

2015

420

2014

390

2013

313

2012

311

Givaudan – 2016 Annual Report

46

Performance review

Business performance – Fragrance Division

Business performance
Fragrance Division

Fragrance Division sales increased
5.6% on a like-for-like basis,all business units contributed tothis growth.
Sales

Fragrance Division sales were CHF 2,230 million, an increase of
5.6% on a like-for-like basis and 6.4% in Swiss francs. Including
Induchem, the growth was 6.4% in local currency.
Total sales for Fragrance Compounds (Fine Fragrances andConsumer Products combined) increased by 6.3% on a like-forlike basis. In Swiss francs, sales of compounds increased to
CHF 1,933 million from CHF 1,823 million in 2015.
Fine Fragrances sales grew 7.2% on a like-for-like basis, driven byboth strong new business and low erosion.
Consumer Products sales increased by 6.1% on a like-for-likebasis, mainly driven by a double-digit growth with local
and regional customers and sustained by a solid increase withinternational customers.

Consumer Products increased by 6.1%
on a like-for-like basis, driven by
double-digit growth with local andregional customers.
Sales of Fragrance Ingredients and Active Beauty increased by
1.0% on a like-for-like basis. The sales of Induchem, which was
acquired on 31 August 2015, amounted to CHF 24 million for2016. Including Induchem, the growth of Fragrance Ingredientsand Active Beauty was 6.7% in local currency.

Givaudan – 2016 Annual Report

The EBITDA increased to CHF 603 million in 2016 from
CHF 498 million in 2015. In 2016 the division recognised one-off
non-cash gains of CHF 62 million following a change in pension
plans. As a reminder, the division incurred a one-off non-cash
charge of CHF 12 million in 2015. The EBITDA margin increased to
27.0% in 2016 from 23.7% in 2015, mainly as a result of the one-off
non cash gains.
The operating income increased by 32.1% to CHF 493 million in2016, versus CHF 374 million for the same period in 2015. The
operating margin increased to 22.1% in 2016 from 17.8% in 2015.

Fine Fragrances

Fine Fragrances sales grew 7.2% on a like-for-like basis withstrong growth delivered in both high growth and mature
markets. Growth in high growth markets was driven by Latin
America and the Middle East which saw a combination of new
business and volume gains at a number of customers. In mature
markets, strong double-digit growth in North America wasdelivered by new business and the continued solid performanceof existing fragrances. These gains more than compensated fora slight sales decrease in Western Europe where new business
was not sufficient to offset erosion.

A number of Givaudan fine fragrances
recognised in major award ceremonies.
At the major award ceremonies in the USA and Europe a numberof Givaudan fragrances were recognised including: Tom Ford
Noir Pour Femme, Tom Ford Venetian Bergamot, Valentino
Donna, Narciso Rodriguez L’Absolu, James Bond 007 for Women,
Bottega Veneta Pour Homme Extreme, Armani Privè Ambre
Eccentrico, La Collection 34 and Prada Infusion d’Oeillet.

Consumer products

The Consumer Products Business increased by 6.1% on a
like-for-like basis with strong growth in both high growth andPerformance review

mature markets. This performance was supported by a doubledigit growth with local and regional customers and sustained bya solid increase with international customers.
Latin America continued to deliver a double-digit growth acrossall customer groups and all sub-regions against strong
comparables. Fabric care, personal care and home care segments
posted double-digit sales growths in the region. The growth in
Asia was across all product segments, with local and regionalcustomers growing double-digit, led in particular by North Asia
sub-region.
In Europe, Africa and Middle East, sales growth was reported on
all customer groups and led by the fabric care segment. Both
Africa-Middle East and Europe sub-regions posted strong growthagainst last year. Sales in North America increased compared toprior year thanks to all customer groups and a strong
performance in the home care segment.

Business performance – Fragrance Division

47

Sales
in millions of Swiss francs
2016

2,230

2015

2,096

2014

2,108

2013

2,083

2012

2,021

EBITDA
in millions of Swiss francs
2016

603

2015

498

2014

505

2013

503

2012

435

On a product segment basis the growth was led by a doubledigit increase in the fabric care and home care segments,
whilst personal care and oral care segments also contributed to
the growth.

Operating income
in millions of Swiss francs

Fragrance Ingredients and Active Beauty

2016

493

2015

374

2014

370

2013

380

2012

315

Sales of Fragrance Ingredients and Active Beauty increased by
1.0% on a like-for-like basis. The Cosmetic Ingredients businessshowed good growth with the recent launches, but faced strong
comparables with the established product portfolio. Sales ofFragrance Ingredients increased slightly in most regions with the
exception of Latin America.

The joint venture in China and theplant in Mexico enables the Group to
meet demand and improve theCompany’s competitive position in the
manufacture of fragrance ingredients.
Proportionally more of the fragrance ingredients produced in2016 were from the Mexican plant and the joint venture in China,
allowing the Group to remain competitive in the fragrance
ingredients market.

Givaudan – 2016 Annual Report

48

Performance review

Capital markets

Capital markets
Creating shareholder value

Givaudan’s strong financial
performance since 2000, hasresulted in both a rising shareprice and a year-on-year dividend
pay-out to shareholders.
We are proud of the value we have created over the last
16 years and we work to ensure that this success continues.

SharesGivaudan has created over CHF 15 billion in value forshareholders in the form of dividend payments and share priceappreciation since the Company’s spin-off in 2000 and theend of 2016.

At the end of 2016, Givaudan had approximately 27,514
registered shareholders owning 63% of the capital.
The top 20 registered and non-registered shareholders owned
58% of the capital. Swiss and US shareholders held
approximately 59% of all shares.
Market capitalisation
Givaudan’s market capitalisation amounted to CHF 17,229,871,476
as at 31 December 2016 which was the last trading day of theyear. This corresponds to an increase of 2.4% compared to theprevious year.
Market capitalisation refers to the value of the Company’s
outstanding shares. The calculation is based on the number ofshares issued and the share price on the last trading day of theyear which was CHF 1,866.

Key share figures
For the year ended 31 December. In Swiss francs except for number of shares

2016

2015

Share capital (in millions)

17,23016,833

Number of issued shares

9,233,586

9,233,586

Share price as at 31 December

1,866

1,823

Share price, highest

2,106

1,829

Share price, lowest

1,674

1,511

Earnings per share – basic

69.95

67.89

Total shareholder return

5.32%

2.86%

Givaudan – 2016 Annual ReportPerformance review

Capital markets

49

Share price development – 5 years
in %
250
200
150
100
50
2012
Givaudan

2013

2014

2015

2016

SMI

Dividend per share and free cash flowin Swiss francs | in millions of Swiss francs

54

561

50

47
36

15.4
6.5

7

340
203

2000

2001

16.3

17.6

19.5

18.8

20.6

20

549

Free cash flow

295

2003

289

2004

720
604

597

512
437

390

2002

22
662

8.1

273

21.5

2005

262

2006

157

145

2007

2008

117

2009

2010

2011

2012

2013

2014

2015

2016

Dividend

1. Subject to shareholder approval at the AGM meeting on 23 March 2017.

Market capitalisation*in millions of Swiss francs

Investor relations meetings
Number of meetings held

2016

17,2302015

16,833

2014

16,5562013

11,7642012

8,891*At the last trading day of the year

2016

578
278

2015

552
213

2014

447
133

2013

438
223

2012

357
132
One-on-ones
With CEO / CFO

Givaudan – 2016 Annual Report

50

Performance review

Capital markets

Dividend policy and total shareholder return
Givaudan is strongly committed to return surplus cash toshareholders and year‑on‑year the dividend has risen since
2000. In 2016, Givaudan’s free cash flow was CHF 597 million.
At the Annual General Meeting on 23 March 2017, Givaudan’s
Board of Directors will propose a cash dividend of CHF 56.00
per share for the financial year 2016, an increase of 3.7%
versus 2015. If approved, this will be the 16th consecutive
dividend increase following Givaudan’s listing on the Swissstock exchange.

Investor relations

Givaudan adheres to good corporate governance and follows
best practices consistent with those of major international
companies. All information published in our Annual Reportcomplies with the Swiss Code of Best Practice for Corporate
Governance and the SIX Directives for Corporate Governance.
Further information can be found in a separate section on
Corporate Governance starting on page 76.
We use investor news, teleconferences and publications on our
website to disseminate material information about our
performance and activities, helping us to inform different
stakeholders in a timely and responsible manner and ensuringtransparency and equal treatment. The principles of ourdisclosure and information policy can be found on
www.givaudan.com – our company– corporate governance –rules and policies.
In 2016, the CEO, the CFO, the Group Controller and the Headof Investor Relations participated in roadshows andconferences in 23 financial centres globally, meeting existingand potential shareholders. Two conference calls and 33 Group
presentations were held, attracting a total of over 1,500
participants. Over 500 individual meetings and conference callswith fund managers globally contributed to improved
awareness about Givaudan. In addition, 12 visits to Givaudan
sites globally, with a total of 100 participants, mainly fundmanagers, were organised to provide an in-depth view of
our activities.
The 2016 site visit programme included a two-day investor
event in Shanghai and Nantong, where we visited our new
flavour facility. In Shanghai management explained our positive
outlook on the Chinese market and its strong growth potential,
especially with local customers.
In April, at our annual investor conference, held at ourheadquarters in Vernier, the Company presented its long-term
strategy to serve local and regional customers. This strategy
means that 50% of today’s revenues are generated with thesecustomers, compared to 30% ten years ago. An impressive
display of products from these categories was displayed during
the conference.

Givaudan – 2016 Annual Report

At our half year conference in Zurich at the end of August,
we explained our strategy in Savoury and Beverage integrated
solutions.
For the seventh consecutive year, Givaudan organised apresentation in our fragrance creation centre in Paris. The
agenda and events for the financial community for 2017 are
published on www.givaudan.com – investors – shareholder
information – investor calendar.
Key significant shareholders
2016
in %

Nortrust Nominees Ltd (nominee)

15.49

William H. Gates III - Cascades investment

13.86

Chase Nominees Ltd (nominee)

6.47BlackRock Inc.

5.08

Messieurs Pictet & Cie (nominee)

4.17

MFS Investment Management

3.00

Performance review

Risk management

51

Risk management
Integral to Givaudan’s businessWe have robust structures andprocesses in place to ensure theeffective management of risks toour business, and are committed
to the highest ethical standards
in the conduct of our business.
The pace of new legislation in our industry has increased
markedly in recent years, and so it is critical that our efforts inrisk management and compliance keep up with and evenanticipate these changes. However, efficiency and effectivenessin these areas also allows us to identify business opportunities
to the benefit of all stakeholders.

Enterprise risk management

Managing risk is an integral part of Givaudan’s business.
The Company operates a structured system of identifying,assessing and deciding on responses to mitigate key risks
at all levels. The reporting of the opportunities and threatsthat these risks create and how they might hinder thebusiness in achieving its objectives is also part of the risk
management process.
Risk management is one of the responsibilities of the Boardof Directors, which mandates the Executive Committee
to manage the overall Company risk management process.
The Company promotes the continuous monitoringand management of risks at an operational level.

Principles and responsibilities

Enterprise Risk Management (ERM) at Givaudan is based on
our Enterprise Risk Management Charter. The charter
describes the principles, framework and process of theGivaudan Enterprise Risk Management which ensures thatmaterial risks are identified, managed and reported. It defines

the associated roles and responsibilities which are reflected in
the delegated authorities. ERM encompasses both the Flavour
and Fragrance businesses, as well as Givaudan Group functions.
It includes all types of risks in terms of their nature, their sourceor their consequences.
The Board of Directors is responsible for defining and approving
the Givaudan Enterprise Risk Management approach as
articulated in this Charter. Execution of the overall risk
management process is delegated to the Executive Committee.
The Givaudan ERM approach is compliant with applicable laws,
SIX Directives, the Swiss Code of Best Practice for Corporate
Governance and in line with best practice. Givaudan uses the
COSO framework and ISO 31000 as references and adopts
compatible processes and terminology.
The overall approach to risk management at Givaudan is basedon the following principles:– is pragmatic and tailored to the Company– aims at value creation and protection– is an integral part of processes and decision-making– addresses uncertainty explicitly– is structured, dynamic, iterative and responsive to change– is based on the best available information.

The Company operates a structured
system of identifying, assessing
and deciding on responses to mitigate
risk at all levels.
The framework outlined on the opposite page describes therespective roles and responsibilities of each function. The
ERM process, which is annual, includes the structured andcontinuous identification of risk on the basis of an overall risk
universe, the analysis and assessment of the risks tounderstand the underlying drivers, the formulation of theGivaudan – 2016 Annual Report

52 Performance review

Risk management

Enterprise Risk Management Framework

Board /Audit Committee
Executive Committee
1st Line:
Risk ownership

2nd Line:
Functional risk
management support

3rd Line:
Internal
assurance– Line management– Core value chain
– Certain support functions(Finance, HR, IT)– ERM function– Legal and compliancefunctions, including
Regulatory, EHS– Sustainability– Internal audit– Other internal
audit functions☑ Responsible for identifying,assessing, exploiting/mitigating, monitoring andreporting risk in own area

☑ E xpertise in analysing
specific risk categories☑ Independent
reviews andassurance☑ Implements processes andprocedures in own area

☑ Guidance and support for
managing specific risk
categories– E xternalfinancial audit

Regulators/other external stakeholders

Mandatory
external
assurance
requirements

appropriate risk exploitation and/or mitigating responses
and the tracking and reporting of risks and mitigation
actions to provide comfort regarding the achievement ofcorporate objectives. The process aims to becomprehensive, organised and documented in order toimprove compliance with corporate governance regulations,guidelines and good practices; better understand the risk
profile of the business; and provide additional risk-based
management information for decision-making.

of the Company and its assets, and protects the interestsof shareholders.

The objectives of the ERM process
are to continuously ensure and improve
compliance with good corporate
governance guidelines and practices.

For further information about the risk management process,please refer to page 90.

The objectives of the ERM process are to continuously
ensure and improve compliance with good corporate
governance guidelines and practices as well as laws andregulations, where applicable; facilitate disclosure to key
stakeholders of potential risks and the Company’s approachto dealing with them. At the same time, the process creates
the awareness of all key executives of the magnitudeof risks; provides risk-based management information for
effective decision-making; and safeguards the values

Givaudan – 2016 Annual Report

Givaudan’s management, at all levels, is accountable for
ensuring the appropriateness, timeliness and adequacy of
the risk analysis. Mitigation decisions are taken at individualand combined levels. This management is also responsiblefor implementing, tracking and reporting the risk mitigation
directives of the Executive Committee, including periodic
reporting to the Board.

Risk categories
Top Company risks
The Company has recognised a number of top risks thatmight prevent the Company from reaching its strategic
targets. For each top-level Company risk a member of the
Executive Committee is designated as the risk owner withthe responsibility for managing the risk on a Group-widebasis. The assessment and management process, which isannual, is coordinated by the Corporate Compliance Officer.
Corporate Internal Audit provides assurance on theeffectiveness of the risk management process. The 2016
strategic risk management process re-evaluated andconfirmed the top Company risks and focused on furtherPerformance review

risk mitigation actions for the top Company risks on the basis of
the work done in previous years.
Financial risk
Please consult pages 136-144 of the Financial Report regarding ourfinancial risk management.
Operational risk
Risks of climate change
We have a comprehensive programme designed to minimise our
impact on climate change by stabilising our CO2 emissions by 2020
and then reducing our emissions thereafter, which is aligned withthe 2015 United Nations Climate Change Conference, COP 21.
Please see page 72 for further details on the management of ourclimate change risks and activities to reduce the Company’s
carbon footprint.
Environment, Health and Safety and operational risk
management
Environment, Health and Safety (EHS) regularly carries out
comprehensive risk assessments at the Company’s production andmajor commercial sites. In 2016, the EHS Centre of Expertisefurther enhanced our process risk analysis methodology andcapabilities in line with leading industry standards in order to
identify actions and manage them internally using a proprietary
EHS Management System with formally documented solutions
and closure records. Its main focus is the chemical and powder
handling processes.

Risk management

53

for consumer use. At the core of the programme is asystematic safety evaluation of the ingredients used in our
flavour and fragrance products, and control of their use which
is managed by our global IT systems. All new ingredients areevaluated for human and environmental safety, as required,prior to their use. Our flavour and fragrance products are
created to comply with all appropriate end consumer productsafety regulations in the markets in which they will be sold.
In addition, Givaudan supports, and in many cases leads,
industry-wide programmes of the respective industry
associations (the International Fragrance Association and theInternational Organization of the Flavor Industry) for assuring
the safe use of flavours and fragrances in consumer products.
Legal and compliance risks
The Compliance function undertakes regular assessment ofGivaudan’s legal and compliance risks at local and global levels.

G4 – 14 Precautionary approach

Plese consult pages 72-73 for more information on our EHS
activities.
Procurement and supply chain risk management
Please see pages 66-68 for management of procurement andsupply chain risks.
Information technology risk
In a fast moving digital world, information and communication
technologies are critical for Givaudan to address new consumer
behaviours and to collaborate with its customers to give them thebest experience. However, digitalisation also creates new threats
and requires a permanent monitoring of information security risks
and an extension of the risk assessment scope.
In addition to continuously adapting its information and network
systems, Givaudan focuses on extensive awareness programmes
to all employees as critical stakeholders in the protection of thedigital space. There is also strong alignment with the top risk
management process and with the work of the Givaudan Data
Protection Officer. For more information about data protection
activities, please refer to page 74.
Legal and regulatory risks
Product safety risk
Our flavour and fragrance product safety assessment
programme is designed to ensure that all products are safe

Givaudan – 2016 Annual Report

54

Performance review

Compliance

ComplianceBeing open, transparent and honest

Givaudan’s good name andreputation has been built with
our partners over a long andrich history.

is assisted by a global compliance team and a network of
local compliance officers and regional compliance coordinators
to further enhance the function.
The Corporate Compliance Officer carries out regularcompliance risk assessments with the help of the local
compliance officers and corporate functions.

To preserve it, we are committed to adhere to the highest
ethical standards in the way we interact with all our
stakeholders – customers, suppliers, shareholders, employees,
competitors, government agencies and the communities inwhich we operate. Being open, transparent and honest in ourdealings with these stakeholders allows us to growresponsibly and share our success.

The Company has a Group-wide Compliance Helpline
system, which allows employees to report suspected or
actual misconduct or violations of the Company’s policies
on a confidential basis and without fear of retaliation.
Other compliance processes include the process forselection and engagement of third-party agents anddistributors and the global vendor selection process of the
Procurement organisation.

We are committed to high ethicalstandards in business conduct.

Focus 2016

The Principles of Conduct, as well as the underlying policies, areavailable in 14 major company languages and can be found on:
www.givaudan.com – our company – corporate governance –rules and policies.

Organisation and processes

Givaudan recognises different aspects of risk-based compliancemanagement, from general compliance management tocompliance management regarding specific areas of risk suchas product safety/regulatory, trade affairs, environment, andoccupational health and safety (EHS). For these specific areas,
compliance is ensured by dedicated corporate functions,
including the regulatory product safety team, the trade affairs
team or the EHS team.
The Corporate Compliance Officer oversees measures
to ensure compliance with the Principles of Conduct andcoordinates with the dedicated functions for effective
compliance management. The Corporate Compliance Officer

Givaudan – 2016 Annual Report

Revised Principles of Conduct and Responsible
Sourcing Policy
One of the main developments in 2016 was the adoption of a
new Group Principles of Conduct by the Board of Directors.
These principles replace our previous Principles of BusinessConduct of 2009. The Principles of Conduct have beencommunicated to all employees by the Chief Executive Officer
and are available in 14 major company languages. The new
document updates our Principles taking into account theCompany’s stated values and DNA. It can be downloaded fromour website: www.givaudan.com – our company – corporate
governance – principles of conduct.
In addition, the Group has issued its Responsible Sourcing
Policy, a code of conduct for its suppliers, to ensurethat the partners we are dealing with abide by the samehigh standards we do.

Performance review

Compliance55

For more information on the Responsible Sourcing Policy andthe related programme, please see page 67, or visit our website:www.givaudan.com - our company - corporate governance.

Our Responsible Sourcing Policy
demonstrates our commitment toproviding safe products of consistentquality that meet or exceed ourcustomers’ expectations.
Compliance organisation
2016 saw the Corporate Compliance team being reinforced andregional coordination functions established to support theexisting corporate and local compliance officers.
To further support the Group’s data protection policy andprogramme, the Group also appointed a Group Data
Protection Officer reporting to the Corporate Compliance
Officer. The Group Data Protection Officer oversees
the implementation of a Group Data Protection strategy toaddress changes that will happen upon the entry into
force of new legislation in the European Union as well as
in Switzerland.
Training and monitoring
New mandatory compliance training for all employees on the
new Principles is currently being developed and is expected
to be launched in 2017. The training material will be available inall 14 major company languages.
The existing mandatory training on the previous principles ofbusiness conduct was first rolled out to all locations outside of
the US, who have their own programme, in 2012. Between 2012
and the end of 2016 the training was completed by 8,419
employees outside of the United States (out of 9,351 employees
invited). All of the senior management of the Group completed
the training.
Specific anti-bribery training also continued in 2016. Since 2013,
5,040 senior managers, including all members of the Executive
Committee and other employees whose work involves
regular and direct contact with external stakeholders, havecompleted this specific anti-bribery training (out of 5,164 whohave been invited).
Also in 2016, the process for investigating and responding
to compliance complaints was reviewed and the existingprocedure updated.

G4 – 14 Precautionary approach

Givaudan – 2016 Annual Report

56

Performance review

Regulatory and public policy

Regulatory and public policy
Ensuring compliance and safety

Our Regulatory and Product
Safety teams support the twobusiness divisions by ensuring
globally compliant and safe
products in markets aroundthe world.
In addition, our Regulatory teams provide customers withcritical information that enables them to use our products inover 200 countries around the world.
At over 25 locations we have more than 200 employees with arange of different skills, from toxicologists and environmental
scientists to food chemists and regulatory affairs experts, whoprovide consumer safety reassurance, regulatory complianceand guidance for our flavour and fragrance customers,
wherever they are.
Our experts also play a leading role in supporting industry
efforts, as well as those of regulatory authorities, tocontinuously evaluate the materials we use, through the latest
scientific methods, for consumer safety reassurance.

Flavours

The flavour and food industry is undergoing significant
regulatory changes on a scale not seen since the middle of the20th century. Consumer perception and expectations are
influencing the demand for greater healthiness andtransparency of ingredients used in foods and the regulatory
authorities around the world are responding to these consumer
demands. This is clearly demonstrated in several key matureand high growth markets. In the USA, we saw the passing of
the GMO food labelling bill that will require the US Departmentof Agriculture to develop requirements for distinguishing
between GMO and non-GMO foods as well as associatedlabelling for consumer products. In addition, the FDA has been

Givaudan – 2016 Annual Report

asked to define ‘natural’ foods – a challenging task and onethat will impact the overall food industry and provide us withadditional opportunities in the area of natural flavours. In Asia
and Africa, we have seen the continued interest in harmonising
regulations to meet the CODEX standard for improved foodsafety standards. This trend will allow the flavour and foodindustry to more easily commercialise new technology andflavourings as local regulatory inconsistencies are reduced, andwill ensure we are meeting the highest standards for foodsafety on a global scale.
Following the increased regulatory push on GMO and naturallabelling, there continues to be increased activity by
independent third party certifiers for speciality products suchas organic certified. We have been active in supporting tradeassociations to educate and inform government authorities,
NGO representatives and the general public about the safety
and quality of flavours sold today. Our efforts are receiving
positive responses from regulatory authorities around theworld as new regulations are developed.
In addition to potential changes in food labelling regulations,
Givaudan maintains leadership positions within national,
regional and international trade associations that have beeneffective in working with government authorities to ensurethat new regulations and flavour requirements are harmonised
around the world. This will enable a consistent approach to thecommercialisation of new flavour technology and the free flowof flavours on a global basis. Through the efforts of the Flavor
and Extract Manufacturers Association (FEMA), Givaudan
continues to support the FEMA GRAS™ programme which has
been identified by the FDA and NGOs as the ‘gold standard’ for
GRAS (generally recognised as safe) determinations.
In Europe, 2016 saw successful approvals for an additional 12
flavourings that were provisionally accepted by the European
Commission in 2012. These substances have been permanently
added to the European positive lists of flavourings. Through ouractive support of the industry trade associations, we areworking to gain approval of the remaining substances that arePerformance review

under evaluation by the European Food Safety Authority. It is
expected that the review and approval of the remaining
substances will continue through 2018. In all regions, ourscience and advocacy efforts are focused on supporting a
global, harmonised list of approved ingredients and we haveseen positive gains in India and other Asian markets that are
adopting or accepting the Global Reference List (GRL) of theInternational Organization of the Flavor Industry (IOFI) for
approved flavourings.

Givaudan maintains leadership positions
within trade associations that have beeneffective in working with government
authorities to ensure new regulations areharmonised around the world.
Another important aspect of our advocacy activities is thesharing of knowledge and expertise about the use of flavourings
in foods with members of the broader food industry andregulatory authorities. Givaudan supports several associations
including IOFI, the China Association of Fragrance Flavor andCosmetic Industries (CAFFCI) and the European Flavour
Association (EFFA) in meetings with regulatory authorities andinternational scientific organisations. The result of our advocacy
programme has significantly improved the understanding of theuse and safety of flavourings and has led to the adoption of
more harmonised regulations around the world. Continuing
advocacy activities focus on allowing the use of newtechnologies in the development and production of new
flavouring ingredients.
The acquisition of Spicetec in 2016 expanded our product andingredient portfolio and we have already begun the integrationof the new business into the existing Givaudan platforms. Froma regulatory perspective, the acquisition brings us new talentand knowledge of the spice and seasonings business that willcomplement our existing regulatory expertise. We arescheduled to complete the integration of the Spicetec productportfolio by the second quarter of 2017.
In 2016, we also completed the integration of a state-of-the-art
SAP-based Flavours Compliance Engine, enabling us to rapidly
evaluate the regulatory status of our flavour products created,
produced and used anywhere in the world. Our ComplianceEngine provides a consistent and seamless platform of
regulatory knowledge that supports product development,from the initial stages of flavour creation to productcertification at the operations level. With the completion of theCompliance Engine integration, we are entering our next phaseof systems development that will provide seamless capabilities
to rapidly respond to customer service requests for technicalinformation on demand. This industry-leading capability will

Regulatory and public policy

57

provide a significantly improved customer experience as ourcustomers’ product development cycle times are reduced.

Fragrances

Givaudan and the fragrance industry saw increasing pressureduring 2016 on the use of specific raw materials because ofregulatory actions in Europe, the USA and Asia. This was being
driven mainly by REACH requirements, but also by emerging
chemical controls in countries such as Korea as well as new
regulations in China and Japan. This is also creating pressure on
fragrance suppliers, particularly small and medium-sizedenterprises (SMEs). In this environment of increasing scrutiny,
the burden on the industry to demonstrate the safety of its
products has escalated dramatically – certainly well beyond
historical obligations.
However, Givaudan is determined to continue its support ofindustry efforts to defend materials and its leadership in the
product stewardship and advocacy of materials in the market.
We have seen recent success in defending key materials such as
geraniol and citronellol following focused investment andsupport activities. As well as existing materials, we have been
experiencing significant headwinds in new emerging concerns,
particularly with regulations such as Korea REACH, which isbased on European REACH. The industry is being required toinvest in new testing and data generation to meet regulators’
demands, an example of which is a renewed interest by the US
Environmental Protection Agency (EPA) in the common
perfume ingredient Iso E Super (OTNE). These heightenedlevels of interest from REACH, EPA and others require large
investments for new molecule innovations as well as for the
support of existing materials in commerce to ensure thecontinued support of their safe use in the market. Givaudan iscommitted to its active role in this.

Givaudan is determined to continue its
support of industry efforts to defendmaterials and its leadership in the
product stewardship and advocacy ofmaterials in the market.
In addition, we continue to invest in the development ofsustainable new molecules, particularly in the replacement ofmaterials where significant safety concerns are raised. For
example, with a view to replacing Lilial we launched
Nympheal™ in 2016. This product is a high-performing floral
aldehydic with a lily-of-the-valley note that was developed
using green chemistry principles to design-in safety, as well as
developing improved performance versus its legacy
counterpart Lilial. We will continue to focus on novel andstrategic materials where we see threats to our portfolio andthe industry.

Givaudan – 2016 Annual Report

58 Performance review

Regulatory and public polic

We have completed the integration of the Induchem businessfrom a regulatory point of view, and continue to harmonise
our raw material platforms across our new Active Beauty
business.
While we remain confident of meeting our REACH obligations
by 2018, we are now seeing REACH evaluations being
completed that will need us to further defend certain
materials such as Aldehyde C12 MNA and cyclamen aldehyde.
We are putting pressure on our supply chain to ensure
suppliers are meeting their obligations in the final phase of
REACH, where high numbers of registrations are expected.
Our support for the International Fragrance Association(IFRA) deepened in 2016 with our involvement in the
restructuring of the organisation’s technical programmes andcommittee organisation. The new structure will enable amore efficient and effective global organisation that will be
integrated with IFRA’s regional partners. As part of the neworganisation, Givaudan will be playing a leading role in the
newly formed Executive Technical Committee that advises
the IFRA board. We also increased our financial support for
IFRA during the year to help the organisation continue its
important work of representing the industry and anticipating
and managing issues that affect the industry globally andregionally.
Givaudan also continued to invest in the Research Institute for
Fragrance Materials (RIFM) and ongoing programmes tore-evaluate fragrance material safety, and also to build a moretransparent platform of publication for these evaluations toenable external stakeholders to understand the strong data
supporting our raw materials.

Givaudan – 2016 Annual Report

Public policy

Givaudan does not fund any political party in any country. We
have an internal policy on charitable giving and community
support that excludes any direct or indirect political donations
or support. However, we support, and in many cases lead, thedevelopment of public policies that impact the flavour andfragrance industry.
We also support and often lead industry-wide programmeswith international industry associations such as theInternational Fragrance Association (IFRA) and theInternational Organization of the Flavor Industry (IOFI). In
addition, we work with many national associations to help
ensure the safe use of flavours and fragrances in consumer
products.
More details on our regulatory advocacy activities can befound in the preceding section on regulatory.

G4 – DMA Public policy
G4 – SO6

59

Givaudan – 2016 Annual Report

60 Sustainable business model

Simos soloriberis quate

Sustainablebusiness model
Our business model aims to create value
for our shareholders, customers,
employees and partners. At the sametime, it calls for the sourcing of materials
in a responsible way, the creation of a safe
environment for our employees,
innovating for tomorrow’s business andadapting to the fast-moving digital world.

In this section:

Striving for a better tomorrow

62– Sustainability mission and governance– Value added statement
Innovation for tomorrow’s business63– Givaudan science and technology– Technologies and products
From sourcing to supply

66– Procurement– Supply chain
Creating a great place to work69

– Our people– Environment, health and safety
Adapting with agility to the digital world– Information management & technology

Givaudan – 2016 Annual Report74Sustainable business model

Simos soloriberis quate

61

Our value creation
through a sustainablebusiness model

We generate solid business performance and growth without
depleting resources and taking into account the needs ofpresent and future generations. An integrated approach tosustainability needs to inspire our people, adjust to new
customer expectations and make a positive impact in our
global and local communities. In this way we can ensure
Givaudan’s short- and long-term success.

CHF 400 million
invested in R&D in 2016
Our Science and Technology teams in the two businessdivisions drive value in innovation so we can engage anddelight the senses of consumers around the world.

Our diverse workforce

Our talent pool is made up of creative and innovative
professionals with diverse backgrounds and cultures. Our morethan 10,000 employees work in over 90 sites spread across
47 countries.

Givaudan – 2016 Annual Report

62 Sustainable business model

Striving for a better tomorrow

Striving for a better tomorrow
Long-term stakeholder benefit“Operating sustainably at alllevels of the organisation is an
integral part of who we are.”Joe Fabbri, Head of Sustainability

Sustainability mission

At Givaudan, we approach sustainability by generating solid
business performance and growth without depleting resources
and taking into account the needs of present and future
generations. An integrated approach to sustainability, unifying
economic success, environmental and social stewardship,needs to inspire our people, adjust to new customer
expectations and make a positive impact in our global and local
communities. In this way we can ensure Givaudan’s short-,
medium- and long-term success.
As a business driver, sustainability contributes to value creationand is an integral part of our business model. When producing
flavours and fragrances we collaborate with our suppliers toensure they reach best practice in responsible sourcing
standards. We constantly look at reducing water use andenergy use, waste and carbon emissions at our operations. And
our leading scientific research means that customers are
benefiting from products that use fewer resources and have alower environmental impact.
The future still holds new challenges for us, which we are keen
to address. We’re working hard to meet the needs of a growing
population, discover innovative ways to keep providing a richvariety of flavours and fragrances, and significantly reduce theenvironmental impact of the materials we manufacture.
Complex challenges require holistic thinking. So we’re working
with employees, customers, suppliers, local people in thecommunities in which we are present, and many otherstakeholders all over the world, because only together can we
make a positive difference. Visit our website for stories on our
local initiatives: www.givaudan.com - sustainability.

Givaudan – 2016 Annual Report

Our Sustainability Report, written according to the GRI G4
reporting guidelines with ‘Core’ option, will be published in
March 2017. In this report we disclose our management andperformance information about our environmental, social andeconomic impacts in 2016.

Sustainability governance

Our Sustainability programme is headed by our Head of Global
Environment, Health and Safety and Sustainability, who is amember of the Executive Committee. He is supported by our
corporate sustainability steering team (SST) whose members
are drawn from all areas of the Company. The implementationof the strategy is coordinated by our Sustainability programmemanagement organisation (PMO) made up of internal
specialists in corporate responsibility and sustainability.
To ensure alignment between the SST and PMO, both groups
are sponsored by a member of the Executive Committee. The
Head of Global Environment, Health and Safety andSustainability, reports annually to the Board of Directors.
Value added statement
The value added is defined as the value created by the activitiesof our business and its employees. Givaudan’s economic value
retained of CHF 232 is the sum of the elements disclosed in thetable below:
Direct economic value generated and distributed
2016

2015

2014

4,738

4,439

4,459

(2,830)(2,653)(2,684)

Payments to governments

(106)

(109)

(111)

Payments to providersof capital

(546)

(522)

(496)

(1,024)(981)(1,003)

232

174

165

in millions of Swiss francs

Revenue
Operating costs

Employee wages and benefits
Economic value retained

G4 – DMA Economic performance
G4 – EC1

Sustainable business model

Innovation for tomorrow’s business

63

Innovation for tomorrow’s business
Improving our offer to our customers

Innovation is central to our
success in driving current andfuture growth and enhancing ourcompetitive advantage.
It is central to what we commit to our customers, and is morethan simply creating something new – for Givaudan,
innovation is about doing things differently as well as doing it
better and before the competition. It is this culture ofinnovation that drives us in creating new horizons for ourbusiness and offering leading-edge and sustainable solutions
to our customers.

As the industry leader, we are expected to be an innovator andour customers look to us to be an innovation partner able tosuccessfully anticipate the future market and customer needs.
Our Science and Technology teams help meet these
expectations by creating value through innovation that
supports and grows the business today and looks as well for
opportunities for business growth tomorrow.

“We are committed to be the partner ofchoice by expanding our presence in
relevant innovation ecosystems
and strengthening our network withstrategic partnerships.”

Chris Thoen,
Head of Global Science and Technology

In the following sections we outline the approaches
we are taking to ensure our long-term innovation successand highlight examples of our innovative technologies
and products that underpin our current leadership.

Givaudan Science and Technology

Our innovation is guided centrally by Givaudan Science andTechnology (GST), which has among its responsibilities toprioritise innovation opportunities, leverage internal andexternal capabilities across our two business divisions, andidentify together with the divisions strategic opportunities forcompetitiveness. Led by Chris Thoen, a member of the
Executive Committee, GST also aims to strengthen Givaudan’s
network of strategic partnerships to become the undisputed
partner of choice.
GST’s mission is to drive the long-term development of
cost-effective and memorable innovations that surprise andcaptivate the senses and create new business value. Its
strategy is aligned with the 2020 business ambition and has
four pillars to guide Givaudan’s innovation.
We seek to ensure a transparent fragrance and flavours
portfolio that will drive our mid- to long-term choices ininnovation. We want seamless connections between the
Science and Technology organisations and our businessdivisions so we can have a clear view on the choices to makeand where we are heading. But how do we know if we aremaking the right choices? Ways of measuring the success of ourinnovation decisions will be developed, and this is the second
pillar of the GST strategy.

CHF 400 million invested in
R&D in 2016.
The third pillar is taking the longer term view in shaping thefuture of our innovation and going beyond our current core
activities. We want to prioritise the long-term success of ourinnovation portfolio and build the required technologicalcapabilities to achieve this vision.

Givaudan – 2016 Annual Report64

Sustainable business model

Innovation for tomorrow’s business

Finally, by connecting and collaborating, we want tostrengthen internal collaboration so that we have united andholistic approaches to potential external partners, customers
and suppliers. We also want to be more active in the innovation
landscape outside Givaudan. More details on our approach tocollaborative innovation can be found on page 20.

We filed 29 new patent applicationsin 2016.
The scientists, technologists, flavourists and perfumers in our
Science and Technology community are central to the successof our innovation strategy, and we will continue to promote anenvironment where their learning, creativity and interactions
can flourish so they can respond with agility to the ever fasterchanging needs of the business.
Some of the platforms and products that further establish ourinnovation leadership position and deepen our capabilities tobe the innovative partner of choice are detailed below.

Technologies and products

Using world-class technology platforms, our Science andTechnology teams in the two business divisions drive value ininnovation so we can engage and delight the senses ofconsumers around the world. Achievements by these teams
during 2016 helped to further establish our leadership positionand deepen our capability to be the innovation partner ofchoice. The following section covers some of these successes.
Flavour Division
Sustainable citrus
Citrus is arguably the most versatile and culturally diverse
flavour in the world and is embedded in so many foods andbeverages. Givaudan has formidable strengths in citrus, somethat have been built in partnership with the University ofCalifornia, Riverside (UCR) and feature a combination ofadventure, inspiration and technical solutions. The 10th
anniversary of this collaboration and TasteTrek® Citrus wasmarked in 2016, along with the launch of our Global Citrus
Flavour Collection, which brings together for the first time
remarkable citrus flavours developed around the globe.
However, citrus raw materials are vulnerable to the effects ofnatural events such as storms or drought and diseases such as
greening, leading to volatile market conditions. Through ourcollaboration with UCR and our TasteEssentials® Citrus
programme, we launched a new ingredient in 2016 thatenhances juiciness and offers cost advantages for ourcustomers as well as an improved flavour profile. This andother developments during the year provide sustainableenablers for our customers that mitigate the scarcity of citrus
raw materials.

Givaudan – 2016 Annual Report

Beyond sweetness
As with citrus, we have a decade of experience in taste
research and front-line experience when it comes to sugar andsweetness. Attitudes among consumers have evolved overrecent years and today they are looking for something insweetness that is more than simply reducing sugar. We areresponding to these needs with innovation that aims to buildon sweetness quality and develop flavours that go beyond
sweetness intensity and capture the essence of enjoyment.
We continuously expand our sweet taste offering to address
intensity and quality, ultimately leading to complete consumer
satisfaction. In 2016, we launched a new ingredient that helps
to enhance the sugar impact, achieving sweetness
enhancement while reducing calories. We are also developing a
new approach to flavour design in this area that we will
launch in 2017. These new concepts will be aimed at driving
preference in low sugar products by using a holistic
approach to flavour creation that balances taste, aroma andapplication requirements.
Cleaner labels
Growing consumer trends in health and well-being andconcerns about what we eat have led to higher expectations
around transparency and information on ingredients used infoods. The resulting move to cleaner and clearer labelling andthe use of recognisable ingredients on pack declarations can be
an opportunity for Givaudan.
In savoury, we have many well-established solutions forcustomers in their search for growth opportunities. These
solutions are developed in response to their needs but are
innovations that also anticipate tomorrow’s requirements. Ourcontinuous research into taste enhancement alternatives has
led us to develop a new range of TasteSolutions® Umami
flavours based on yeast-free capabilities. The range combines
scientific understanding with culinary expertise and knowledgeof taste enhancement in food, and offers our customers
advantages in clean label performance and cost. This offeringof delicious taste profiles was inspired from our CulinaryTrek®
and TasteTrek® journeys of discovery that captured longestablished cooking traditions using umami.
Givaudan continues to lead the industry in naturals and natural
solutions. Again in 2016 we closely focused all areas of ourresearch on natural solutions and dedicated the vast majorityof our resources to naturals. Additionally, we expanded our
naturals and integrated solutions offering with the acquisition
of Spicetec (see page 28).
Dairy-free solutions‘Non-dairy dairy’ may seem a contradiction, but it is a flavour
innovation that offers new opportunities for customers seeking
rich, creamy or authentic dairy flavours for their products withno dairy content. This 2016 addition to our TasteEssentials®
Dairy programme helps to address needs concerning allergens

Sustainable business modeland vegan products, as well as around shipping, because dairy
is a challenge in countries that may restrict dairy imports. This
new dairy-free solution also offers unique mouthfeel qualities
which help our customers formulate nutritional products withlower fat and sugar content. It is a starting point for further
innovations in this area from our Flavours teams.
Fragrance Division
Captives
Three new captive molecules reinforce Givaudan’s success inthe muguet family and provide perfumers with answers toexisting and future restrictions on certain white floral
molecules. The captives, which were designed, developed andmade available to perfumers in record time are:– Mahonial™, which has replaced Lyral/Cyclohexal, is a linear
green muguet note that brings a white floral density tocreations with magnolia facets. The success of Mahonial™
has resulted in numerous fine fragrance wins across theworld by using this novel material at high dosage – to thedelight of customers and consumers.
– Nympheal™ brings a floral creaminess to the composition andhigh diffusivity. Developed in two years, it is ‘safe by design’
and a possible replacement to Lilial with the potential of
becoming a ‘blockbuster’. Nympheal™ is more natural,more linden blossom and more floral aldehydic green, and willallow perfumers to create floral green backbones intheir scents’.
Nympheal™, with its clear, high-performing and wellaccepted character, allows us to create fantastic florals in all
domains, pushing back on the dominance of fruity notes andeven revisiting the green florals.
– Rosyfolia® is the bloomiest of the three in the muguet area.
With a fresh, diffusive rosy, muguet top note, it has a strong
natural/rosy character and a performance in application thatbrings new perspectives in rosy notes to our perfumers.
This was discovered by our team in Shanghai while searchingfor one of the most important attributes of a natural muguet
odour: its floral, rosy, citrus character. Rosyfolia® is agood alternative to geraniol and citronellol and has no
regulatory limitation.

Innovation for tomorrow’s business65

at low dosage. Both feminine and masculine, this ingredientreleases an incredible energy.
Perfume benefits
We continue our efforts to understand the connections
between fragrances and consumer behaviours. This includes
the human perception of odours and their influence on
well-being, consumer behaviours and other important
category attributes. We are doing this by using a range of
implicit and explicit techniques. In well-being, our focus is in
the area of helping sleep, reducing stress and improving
cognition. We have also been active in partnering with anacademic institution on developing ways of measuringwell-being. In driving consumer behaviours, we are looking at
the influence of fragrance in helping consumers to follow
desired usage instructions such as dosage and time in contact
for optimal product performance, as well as positive habits andrituals. And in driving important category attributes,
we are examining a range of objective techniques on theconnection between fragrance and multidimensional andemotional descriptors.

Encapsulates
A recent innovation with encapsulated fragrances is in the
fabric care category, which has given rise to best-in-classperforming capsules for all segments – fabric softeners,
powder and liquid detergents including unit doses. Our delivery
systems team has developed a new generation of Mechacaps®
that enhances olfactive impact and improves performance of
capsules on dry clothes before rubbing and upon gentle friction
when handling or wearing.
Active Beauty
Our leadership in marketing and innovation in cosmetic active
ingredients was highlighted in 2016 when Givaudan Active
Beauty won gold for Neurophroline™ in the active ingredients
category of the in-cosmetics® Innovation Zone awards.
Neurophroline™ is an active that can combat the signs ofenvironmental aggressors such as pollution and climate.

Laminaria
Laminaria Seaweed Absolute MD Orpur® is our first marine
origin ingredient for the perfumers’ Cardex. Until recently there
was no natural ingredient from the sea for perfumers to use.
Sourced on the Brittany coast of France, Laminaria enriches
the olfactory repertoire by bringing an iodine note with leathery
inflections, and Laminaria Seaweed Absolute – part of
the Orpur® range – is an exclusive natural ingredient for our
perfumers. Our new Laminaria Seaweed Absolute has avibrational force and mossy undertones that take part in thesubstitution of oak moss and bring a natural marine freshness

Givaudan – 2016 Annual Report

66

Sustainable business model

From sourcing to supply

From sourcing to supply
Ensuring excellence and agility

Our supply chain is underincreasing pressure, compelling
us towards excellence and agility.
Changes in the external environment and global trends
are creating challenges for companies such as ours. The
following sections on procurement and supply chain outline
how we are meeting these challenges and turning theminto opportunities.

Procurement

We source more than 10,000 different synthetic and naturalingredients from over 100 countries. Our network includes morethan 3,000 raw material suppliers and more than 12,000 indirectmaterial and services suppliers. These procurement activities are
influenced by a changing external environment: the fastgrowing global population is increasing demand; consumers are
more connected and better informed, driving us to higher
standards of compliance with sustainability specifications; anddigitalisation is enhancing business intelligence and support tomeet consumers’ need for transparency.

Procurement by numbers

Spend
Analysis

We manage

CHF

2.5bn

spend per year

Givaudan – 2016 Annual Report

People195>

procurement
employees in

34 sites

Raw
Materials

Supplier
Management

We source

3,000

10,000>different raw
materials in100>

countries

raw material
suppliers

12,000〜Indirect
Materials andServices

Contract
Management

We manage

25,000>contracts

Sustainable business model

To prepare for the future, we are going beyond the
traditional approach to procurement by creating closer
partnerships with suppliers, based on solid governance andinnovative business models.

“Our mission is to maximise value
with suppliers to create profitablebusiness and deliver thebest ingredients, enabling us todifferentiate our products.”

Willem Mutsaerts,
Head of Global Procurement

This new approach ensures that our activities create sharedvalue with our customers, our business and our suppliers. It is
the underlying theme of our new procurement strategy
developed in 2016.
Guided by this strategy, our team will focus on four key areas:
cost and cash, risk, innovation and responsible sourcing. In all
four areas we will ensure excellence and differentiation
through talent development, state-of-the-art systems andbusiness intelligence.
Through cost and cash leadership we aim to secure meaningful
financial results for the business divisions. An increased focus
on collaborative value creation on top of traditional supplier
relationship management will make Givaudan and its suppliersconnect as their mutual partner of choice.
Supply or price volatility will be mitigated through a robust
cross-functional risk management process, differentiating
business models such as long-term partnerships, and direct
presence and collaboration in countries of origin withproducers and suppliers.
In 2016, we held the inauguration ceremony for our NATEMA
joint venture with Henri Fraise Fils (HFF). It is one of the largest
clove leaf oil processing plants in the world. NATEMA (Natural
Extracts Madagascar) is part of our commitment to establish
direct sourcing models in countries of origin that offer the best
ingredients to our customers and create value in our partner
communities. This plant will enable Givaudan to establish andgrow its capacity to develop and process natural ingredientssourced in Madagascar.
To better address vanilla crises like the one we are currently
facing and to meet ever growing customer expectations on
iconic vanilla, we further expanded our footprint in
Madagascar. We concluded another strategic agreement toleverage the local expertise and infrastructure of our partner

From sourcing to supply 67

HFF and secure 100% vanilla bean supply directly from
Malagasy smallholder producers.
We are also experiencing headwinds with increasing scarcity of
citrus materials due to crop volatility and plant diseases andwith limitations on availability of natural specialties. Our teams
are therefore developing robust and long-term partnerships inmarkets such as citrus, florals and spices.
Our indirect materials and services team manage risk as well.
Last year our logistics procurement experts successfully
improved cost transparency and reduced logistics risks througha pan-European road transport tender. This moved us from asingle-sourced situation to multiple engaged partners.
By unlocking capabilities through supplier-enabled innovation,
we maximise the contribution of suppliers to Givaudan’s
innovation ambitions. We know that solid and open
partnerships within our supplier base have significant potential
to boost our mutual innovation power.
During the year we expanded our existing collaboration with
the US industrial bioscience company Amyris in the research,development and production of active cosmetic ingredients.
The partnership anticipates the launch of target products thatpromise significant performance, cost and sustainability
advantages over existing ingredients. Amyris will use its strainengineering platform to design cosmetic active targets andscale them up at its manufacturing facility in Brotas, Brazil for
exclusive commercialisation by Givaudan.
Through our Responsible Sourcing programme, we engage
with our suppliers to create traceability and adherence tosocial, health and safety, environment and business integrity
standards. In 2016, we published our Responsible Sourcing
Policy, the first of its kind in the flavour and fragrance industry.
Our goal is to make sure that all our suppliers of goods andservices work towards compliance with this policy. It informs
and asks our material and service providers to adhere to our
responsible sourcing principles and requirements in four coreareas of responsible sourcing: social, health and safety,
environment and business integrity.
In addition, we support local communities where we havedirect presence in our supply chains by jointly developing
projects around local education, health and nutrition andenvironmental protection. Since 2011, Givaudan has
collaborated with a local NGO in Madagascar on a natural
resources preservation programme, with the objective ofcontributing to reducing the environmental impact from clove
leaf oil distillation, and supporting local producers. The
programme involves 22 village associations, and for every
kilogram of clove leaf oil produced, producers taking part in the
programme plant one tree and are paid a premium. In 2016,
86,000 trees were planted.

Givaudan – 2016 Annual Report

68 Sustainable business model

From sourcing to supply

We will continue to build on our four strategy pillars, creating
value for our customers, business and suppliers. We seek tocollaborate with suppliers and key stakeholders in ways thatenable us to contribute to a profitable business for Givaudan
and best palette of ingredients, enabling us to differentiate
our products.

Supply chain

In 2016, building on the solid foundations of the global supply
chain excellence programme of 2011-2015, we defined ourinternal 2020 strategy for the supply chain function, to aim at
improving customer service levels and satisfaction while
optimising inventory and supply chain costs.
Both business divisions improved their service levels during
the year and continued work on further reducing supply
chain cost ratios. This was done through a combined effortof the Flavour Division and Fragrance Division and supportedby the fully deployed SAP platform and leveraging on thetools and processes developed by the supply chain
excellence programme.
The strong collaboration between the divisional supply chainorganisations and procurement is resulting in valuable
synergies on risk management, supplier inbound optimisationand transport costs transparency.

Our supply chain teams are determined
to continually adapt their models
to meet changing customers’ andmarket needs.
Collaboration with sales teams and customers is vital in our
strategy to collect reliable forecast information as part of thesales and operations process.
Agility and a customer-centric mindset will be central themes
to our supply chain journey in 2017-2020. Our shared mission isto deliver superior value to our customers through agile,
reliable service and continuity of supply at optimised cost andwith minimal environmental impact.

G4 – 12 Supply chain; pages 66 – 68

Givaudan – 2016 Annual Report

Sustainable business model

Creating a great place to work 69

Creating a great place to work
Development, empowerment, safety

It is our mission to foster a greatplace to work where our people
impact their world and contributeto making a positive difference.
We value our employees around the world, which is why it is
our mission to foster an environment where our people cangrow and shape their world and feel empowered to contributeto the Company’s success. This environment must also be safeand healthy and we encourage responsible practices at theworkplace and beyond. Safety behaviour and awareness areembedded in Givaudan’s culture.

Fundamental to our success is our morethan 10,000 employees working in our
98 sites in 49 countries.
Our employees are creative and innovative professionals whoare passionate and proud of the work they do in our Company.
We embrace diversity throughout our organisation and focus
on creating an engaged and inclusive workforce.
Critical to this strategy are our leaders. We are therefore
committed to developing visionary, inspiring and challenging
leaders who will achieve our ambitious targets and ensure our
future success.
The following sub-chapters on our people and on environment,
health and safety provide further information and examples on
our 2016 progress on key commitments.

Our people

At Givaudan we understand that fostering a great place towork where our people impact their world and contribute toour success is an important driver for growth. We build upon
the successful foundations of our existing approaches to ensurethat we improve how we manage and motivate our people. In
2016, we revised our Human Resources strategy in line with our2020 business ambitions, to capitalise on internal opportunities
and embrace external trends.
Our 2020 people strategy is developed around three themes
which support our business, our people and our culture toadapt to future demands. These themes, with examples andhighlights of some initiatives, are outlined below.
TalentWe believe in unlocking the potential that lies within all our
employees, helping them achieve professional and personal
growth to give them the foundation to impact and shape theirworld. To do this we focus on both attraction and developmentof talent. We ensure that we have the right methods to attract
the right people to work for Givaudan, while at the same time
nurturing our internal pipeline by increasing skills andcapabilities. This way we secure our long-term success.
Employees receiving regular performance and careerdevelopment reviews
2016

2015

Female

92

86

Male

63

52

in %

G4 – LA11

Givaudan – 2016 Annual Report

70

Sustainable business model

Creating a great place to work

New employee hires by age group, gender and region in 2016
Age range<30

Age range
30–50

Age range>50

Female

Male

Total

Asia Pacific

193

202

6

164

237

401

Europe, Africa and Middle East

216

253

19

230

258

488

Latin America

127

111

2

82

158

240

North America

117

245

118

159

321

480

Total 2016 1

653

811

145

635

974

1,609

Total 2015

471

567

36

411

663

1,074

1. Large increase in 2016 is primarily due to the acquisition of Spicetec.

G4 – LA1-a

We want to find the best possible people to apply for jobs at
Givaudan. We recognise the increasing importance of online
platforms as job seekers use social media to find out more about
a company, and to influence their decision on whether they are agood cultural fit for an organisation. The official launch of several
social media channels last year offered us a new opportunity tobuild Givaudan as an employer of choice and attract talent toapply for roles. We have chosen an active presence on these sites,
seeing it as a way to start a dialogue with potential employees
and as an opportunity to promote our Company as an attractive
place to work.

“In addition to bringing in great talentfrom outside, we’re seeking to nurtureinternal talent, developing ourpipeline in order to be able to equip ourleaders for the future.”

Jane Djate,
Head of Learning and Development

When it comes to leadership talent, the flavour and fragrance
industry has unique needs and there are challenges in recruiting
the right people and knowledge. To help meet this challenge,
we are continuing to develop our global Leadership Senses
programmes to foster essential management and leadershipskills, from self-awareness to the strategic competencies
needed to lead a global organisation. In cycles of Begin, Grow,
Evolve and Enhance, these four programmes nurture strong,cross-functional relationships within our Company and provide
our managers with the tools and guidance to become
inspirational and challenging leaders. In 2016, we piloted
Leadership Senses Grow, aimed at supporting managers with
continued self-reflection and refined leadership skills as theygrow into their roles.

Givaudan – 2016 Annual Report“Evolve is a terrific programme. It wasan honour to be part of it. Seeing
the commitment of the Executive
Committee and others in thisprogramme and in my development
is inspiring and so motivating.”
Leadership Senses Evolve participant

In addition to leadership development, we invest in targeted
technical and functional skills. For example, our global
Flavourist training programme is a comprehensive and modular
three-year curriculum that focuses on technical capabilities aswell as interpersonal skills and business acumen. The
programme, part of the Global Flavourist School, was extended
into Latin America during the year to support our strategy forcontinued growth in this market. Seven trainees from acrossthe region, who are specialists in areas such as chemistry, foodengineering and food technology, are taking part in the
programme which involves intensive hands-on experiences andclassroom courses.
In addition to formal learning programmes, we also invest in
individualised development activities. For example, following
the successful pilot of a mentoring programme in Fragrances
North America, the division introduced a global mentoring
programme in 2016. Employees have been matched withmentors who have the expertise relevant to their individual
development areas. The aim of the mentoring programme is tohelp employees develop their leadership or technical skills,
support them to navigate across the organisation and improvetheir understanding of our Company culture, while promoting
knowledge sharing.

Sustainable business model

Creating a great place to work 71

Staff turnover by age group, gender and region in 2016
Age range<30

Age range
30–50

Age range>50

Female

Male

Total

Asia Pacific

11%

9%

Europe, Africa and Middle East

17%

8%

8%

8%

10%

9%

8%

7%

10%

9%

Latin America

14%

10%

13%

11%

12%

11%

North America

15%

9%

8%

10%

9%

9%

Total 2016

15%

8%

8%

8%

10%

9%

Total 2015

17%

8%

8%

9%

10%

9%

GRI

G4 – LA1-b

Performance
We aim to create an environment where people are motivated toperform at their best. This motivation is achieved in part throughcontinuous feedback and coaching, and by ensuring strong links
between performance and recognition. We continue to focus on
individual performance and career discussions, ensuring that
regular individual feedback leads to the best possible outcomes
and customer experience.
We are committed to ensuring employees have a goodunderstanding of our pay and compensation principles and how
they affect individuals. Increasing knowledge of our compensation
practices will improve the links between performance andrecognition. In particular, in 2016 our HR teams equipped ourmanagers with the knowledge and tools to have targeted
conversations on compensation, helping people to understandhow their performance impacts their pay.

“Our business success depends every
day on our employees and I’m proud
to have colleagues who help
bring Givaudan to greater heights.”
Fabrizio Raho,
Commercial Head and Company Manager, Japan

CultureWe promote a diverse workforce which operates in an agile
and collaborative way. We do this by ensuring that employees
have the right opportunities to learn about Givaudan, haveaccess to the information they need to do their job, andexperience open and honest leadership communication.
In 2016, our Learning and Development organisation designed a
global onboarding event with the aim of ensuring that new
employees have an engaging start at Givaudan by learning
about our business and the way we work. We believe that we
can decrease the time it takes for a new hire to perform well at
Givaudan by creating a programme which helps an individual toquickly learn about our business, build a network in Givaudan
and build excitement for the challenges ahead. This programme
will be piloted in Latin America and will be rolled out in all
regions during 2017.
We are also working on other measures to boost engagement
across our locations and sites. In North America, our HR teams
have introduced a range of engagement activities aimed at
fostering a great place to work. In Flavours, an internal online
platform has been introduced to help employees stay informed

Employee by region

13%

43%

21%

23%

Latin America

In addition to financial recognition, we are also encouraging
managers to reward employees for their contribution to Givaudan
in other ways. For example, our Asia Pacific ‘Mindset of Best’employee recognition programme aims to express appreciation
for people or teams who demonstrate the Company DNA in
day-to-day work and go above and beyond to make a realdifference to our business. In Japan in 2016, for example,
five awards were made to commend exemplary employees for arange of initiatives.

North America

Europe, Africa andMiddle East

Asia PacificGivaudan – 2016 Annual Report

72

Sustainable business model

Creating a great place to work

about organisation changes including new employees andpromotions; find opportunities to get involved; connect withother areas of the business; stay up-to-date on the division andits industry; and access important documents. In Fragrances,for example, a new internal Culture Committee has been
established in the Ridgedale site ‘to value you, the core ofGivaudan’s DNA, through active listening and dedication’.
This informal committee, comprised of people from different
functions, organises on-site events and activities.

G4 – DMA Employment; pages 69 to 72
G4 – DMA Training and education; pages 69 to 72

Environment, health and safety (EHS)The EHS function creates value for the Company bysafeguarding the health and safety of its people, assets and theenvironment.
Our mission goes beyond rules and processes, aiming at
empowering all employees to take responsibility insafeguarding the environment and protecting people’s healthand safety. EHS is an integral part of our Company culture.

“Environment, Health and Safety are
key values for us and they are
evolving as a permanent focus andmindset for all employees.”

Hallvard Bremnes,
Head of Global EHS Centre of Expertise

We are well on our way to achieving excellence in safety, an
example being the reduction of 65% in lost-time injuries at the
global level. Another example is in Brazil, where in 2016,
Givaudan was awarded first place in the category of Safety
Management and Occupational Health in the DuPont annual
safety and health awards for 2015. The award acknowledged
work over the previous five years for developing an
EHS strategy, reducing accidents and promoting a better
safety culture.

“The focus on safety has delivered
results across the business. In
addition, our campaigns in 2016
included more emphasis on
employee health and well-being,
and investments in air
quality and ergonomics in ourfactories contributed tocontinuous improvement in theworking environment.”

John Pares,
Head of EHS Field Organisation

After the successful conclusion of our 2011-2015 strategy, EHS
launched a revised 2020 strategy in 2016 which goes beyond
the traditional focus on manufacturing. This strategy isbased on the three pillars of safeguarding our ability to deliver
to customers, implementing a risk management system,and embedding EHS in our business culture.
Safeguarding our ability to deliver to customers
We continue to build trust with all our stakeholders tosafeguard our Company’s ability to deliver to customers. This
includes the complete implementation of our EHS
management system covering elements like EHS Directives,
Standards and regulatory requirements. Compliance is a key
driver of this pillar, and our EHS internal audits are now
standard practice throughout our organisation and help toconfirm the successful implementation of these requirements.
The communities and neighbourhoods where we operate are
critical to our long-term success. We take every precaution
to operate safely in these communities while providing socialand economic value.
In 2015, Givaudan announced strengthened eco-efficiency
targets for the five-year period to 2020, including a target ofstabilising its carbon footprint, a commitment to reduce waste
generation and energy consumption per tonne of product, anda renewed commitment to reduce water usage per tonne ofproduct. In 2016, all our production sites developed ecoefficiency plans, and improvements included more energyefficient equipment and control systems.
Givaudan is also working towards 100% renewable electricity
at all its sites. Over the last few years, we have consistently
made progress by increasing the percentage of our renewable
portfolio in purchased electricity. By the end of 2016, almost
half of our electricity purchased was from renewable sources1 .
Our contribution to mitigating the negative effects of climate

Givaudan – 2016 Annual Report

Sustainable business modelchange is our effort to stabilise CO2 emissions while increasing
production volumes. To compensate for this growth, we
improve our processes to save energy, increase use ofrenewable energy sources and invest in efficient technologies.
Since the start of our climate change mitigation programme in2009, our absolute CO2 emissions have reduced byapproximately 15% even with a significant volume growth2 .
Implementing a risk management system
Givaudan’s growth path of organic expansion and acquisitions
inevitably involves some essential large-scale projects. EHS, asa full team member, is involved from the beginning of eachproject to assess and minimise risks. Our EHS teams support
the design of all new building activities so that, in EHS terms,
the plants we build today use learnings from the past
and are fit for the future. In India, for example, a new EHS
programme designed specifically for contractors was asignificant success in a large-scale construction site project.
Another example was in North America, where an assessmentof workplace back injuries was undertaken and resulted in an
ergonomic education and training programme for all sites. We
expect this intervention will have a material impact on thelong-term health of our employees.
Embedding EHS every day in our culture
We have a fundamentally strong EHS culture. Survey feedback
from employees consistently reinforces this and theimportance they put on having a safe place to work. Our goal isto enhance this EHS mindset in the daily activities of all
employees so it becomes habit, second nature and the rightthing to do every day at work. This approach places anemphasis on the positive aspects of safety throughengagement activities, well beyond highlighting accident rates.

Creating a great place to work 73

management systems. Listening to our stakeholders keeps
us grounded in providing services and solutions that meet
expectations.
Our Global EHS Centre of Expertise oversees areas such asenvironmental protection, material stewardship, industrial
hygiene, process safety management and odour emissions
control, and manages our Global Safety Laboratory. To cast awider net of expertise across the organisation in 2016 we madeuse of internal volunteer specialists who were keen to offer
their knowledge and experience as a contribution to EHS
performance. These regional champions work in process safety,
occupational health and hazardous materials compliance, andare an additional source of enthusiastic expertise.
Despite all these great processes, systems and metrics, we still
believe ‘getting everyone home safe every day’ comes down towhat each and every one of us believes in and focuses on: We
believe safety is everyone’s responsibility.
Looking ahead
Our EHS teams and business leadership will continue to embeda culture that empowers everybody to safeguard theenvironment and protect people’s health and safety. A safe
place to work is also a great place to work. Our site EHS Weeks
in 2016 energised the entire organisation and had a multiplying
effect on the number of people engaged in watching out forthemselves and their colleagues.
1. For final figures, please refer to the Sustainability Report published on
23 March 2017.
2. For more information and final figures on our GHG performance during 2016,
please refer to the Sustainability Report published on 23 March 2017.

EHS engagement activities, including EHS Weeks organised on
our sites, are instrumental in demonstrating employees’
renewed commitment and action in EHS.

We are passionate about ensuring
Everyone gets Home Safe every day.
EHS Organisational Continuous Improvement
We are a signatory to the Responsible Care® Global Charterand are committed to driving continuous improvement in EHS
performance. We value and invest in our EHS talent throughtraining and our EHS Academy.
We continuously look to strengthen the efficiency of oursystems and processes through which we operate with thegoal to maximise the ‘hands-on time’ of all our EHS field
professionals. A range of internal checks and audits help
measure the effectiveness and robustness of our EHS

Givaudan – 2016 Annual Report

74 Sustainable business model

Adapting with agility to the digital world

Adapting with agility to the digital world
Embracing digitalisation to create opportunities

Innovative technologies, big dataand predictive analytics
will change the way companies
do business.
In 2016, in pursuing our goal to better leverage innovativetechnology and offer superior business services, the Global IT
organisation adopted its strategy accordingly and amended its
name to Global Information Management & Technology(IM&T). It is also the first function to join Givaudan Business
Solutions, the new global business organisation announced in2016 to respond to the fast-evolving trends that will shape ourindustry and our business.
Read more on GBS in our strategy section on page 19.

Global Information Management & Technology
Information Management and Technology (IM&T) betterreflects the solutions and services offered that go beyond puretechnical services. Fabien Jaunault, Head of IM&T, is responsiblefor driving the strategy and day-to-day business operations in
IM&T, bringing the right vision to lead the Company
successfully through the rapid digital revolution we arewitnessing today.
In 2016, we continued to support our business in developing
differentiating services and new ways of working with ourcustomers, partners and employees by optimally leveraging
digital trends and technology. For example, during the year, welaunched mobile versions of our brief management tools (iBeefor Fragrances and iAtlas for Flavours) to help commercial anddevelopment teams collaborate on customer briefs in real time,on the bench, or on the move. In supporting the business toprovide the best customer experience, our lavender and citrus
360° videos were introduced to take customers on a journey
discovering our naturals in the field through virtual reality.

Givaudan – 2016 Annual Report

To better engage with our customers in key markets, welaunched the Japanese version of our Corporate website
specifically tailored to the needs of our customers, partners
and key stakeholders in the Japanese market.
IM&T continued strengthening our big data capabilities.
We have identified a number of opportunities and executed
several projects as predictive analysis touching different
domains of the value chain such as procurement, sales orcreation. The IM&T team has also been working to support
Givaudan’s growth with the integration of Spicetec into oursystems platform; this integration will continue in 2017.
Similarly, our Active Beauty business is benefiting from its
integration into our global systems, as are our Soliance andInduchem North America activities; the integration ofInduchem in Europe will continue in 2017.

“As we design more agile and lesscomplex business processes, services
and solutions across the Company,
IM&T will ensure that we leveragebusiness opportunities stemming fromthe rapid digital evolution and enable
us to quickly deploy innovative digitaltechnologies across all areas.”

Fabien Jaunault,
Head of IM&T

IM&T aims to continue delivering competitive advantage
through innovative IT solutions, accompanying Givaudan in its
growth and adapting quickly to the digital world.

75

Givaudan – 2016 Annual Report

76

Wed Moluptatur Ditia

Simos soloriberis quate

GovernancereportGivaudan’s corporate governance system
is aligned with international standards
and practices to ensure proper checks
and balances and to safeguard theeffective functioning of the governing
bodies of the Company.

In this section:

Givaudan – 2016 Annual Report

Group structure and shareholders

78

Capital structure79

Board of Directors

80

Executive Committee

91

Compensation, shareholdings and loans

96

Shareholders’ participation

96

Change of control and defence measures

97

Auditors

97

Information policy

98Wed Moluptatur Ditia

Simos soloriberis quate

77

Value creation
through corporate
governanceWe continuously strive to improve our robust frameworkof corporate governance. A good governance system is an
important prerequisite for shared success for all our
stakeholders.

New science andinnovation committee
established

Created in 2016, this committee acts as a sounding board to
the Board of Directors offering different perspectives
and identifies opportunities in the innovation space. It also
proposes and screens potential innovation partners andvalidates and reviews projects on request of management.

Givaudan – 2016 Annual Report

78

Corporate governanceCorporate governanceOur framework of checks and balances

The Governance chapter is alignedwith international standards
and has been prepared inaccordance with the ‘Swiss Codeof Obligations, the Directive on
Information Relating to Corporate
Governance’ issued by the
SIX Swiss Exchange and the‘Swiss Code of Best Practice for
Corporate Governance’.
The internal corporate governance framework is based on
Givaudan’s Articles of Incorporation. The ‘Board Regulations ofGivaudan SA’, the Company’s organisational regulation, further
clarifies the duties, powers and regulations of the governing
bodies of the Company.
Except when otherwise provided by law, the Articles ofIncorporation and Givaudan’s Board Regulations, all areas ofmanagement are fully delegated by the Board of Directors,
with the power to sub-delegate to the Chief Executive Officer,
the Executive Committee and its members. The Board
Regulations of Givaudan also specifies the duties and thefunctioning of its four Board Committees.
The Articles of Incorporation, Board Regulations of Givaudan
and other documentation regarding Givaudan’s principles ofcorporate governance can be found at:
www.givaudan.com  – our company – corporate governance –rules and policies.

Givaudan – 2016 Annual Report

1. Group structure and shareholders
1.1 Group structure
1.1.1 Description of the issuer’s operational Group structure
Givaudan SA , Chemin de la Parfumerie 5, 1214 Vernier,
Switzerland (‘the Company’), the parent company of theGivaudan Group (the ‘Group’), is listed on the SIX Swiss
Exchange under security number 1064593, ISIN CH0010645932.
The Company is the global leader in the flavour and fragrance
industry, offering its products to global, regional and local food,beverage, consumer goods and fragrance companies. The
Company operates around the world and has two principal
divisions: Flavour and Fragrance. The Flavour Division consistsof four business units: Beverages, Dairy, Savoury and Sweet
Goods. The Fragrance Division has three business units: Fine
Fragrances, Consumer Products, as well as Fragrance
Ingredients and Active Beauty.
Both divisions have a sales and marketing presence in all
major countries and markets and operate separate Researchand Development organisations. Whenever appropriate, thedivisions share resources and knowledge in the areas ofresearch, consumer understanding and purchasing. Corporate
functions include finance, information technology, legal,
compliance and communications, as well as human resources.
1.1.2 Listed companies within the scope of consolidation
The Company does not have any publicly listed subsidiaries.
1.1.3 Unlisted companies within the scope of consolidation
The list of principal consolidated companies, their domiciles andthe shareholding is presented in appendix page 196 to theconsolidated financial statements of the 2016 Financial Report.
Note 1 to the consolidated financial statements as well as note
3 to the statutory financial statements offer more details
regarding the structure of the Group. All unlisted subsidiaries
are wholly-owned, unless otherwise indicated in notes 3 and 5
to the statutory financial statements mentioned above.
The 2016 Financial Report is printed in English as part of theCorporate governance2016 Annual Report or can be downloaded on the Company
website: www.givaudan.com - investors - online annual
report - download centre
G4 – 17 Entities

1.2 Significant shareholders
To the knowledge of the Company, the following were the only
shareholders holding more than 3% of the share capital ofGivaudan SA as at 31 December 2016 (or as at the date of theirlast notification under article 20 of the Stock Exchange Act):
William H. Gates III - Cascades investment (13.86%),BlackRock Inc. (5.08%), MFS Investment Management (3.00%),
Nortrust Nominees Ltd (nominee; 15.49%), Chase Nominees Ltd(nominee; 6.47%) and Messieurs Pictet & Cie (nominee: 4.17%).
The notifications can be viewed on the following site:www.six-swiss-exchange.com – market date – shares –givaudan – overview – significant shareholders.
The Company has not entered into any shareholder
agreements with any of its key shareholders.
1.3 Cross-shareholdings
The Company does not have any cross-shareholdings withany other company.

2. Capital structure
2.1 Capital on the disclosure deadline
Ordinary share capital
As at 31 December 2016, the Company’s ordinary share capitalamounted to CHF 92,335,860 fully paid in and divided into
9,233,586 registered shares with a par value of CHF 10.00 each.
The market capitalisation of the Company at 31 December 2016
was CHF 17,229,871,476.
2.2 Authorised and conditional capital in particular
Authorised share capital
The Company does not have any authorised share capital.
Conditional share capital
The Company’s share capital can be increased by:– issuing up to 161,820 shares through the exercise of
option rights granted to employees and/or the membersof the Board of Directors of the Group– issuing up to 463,215 shares through the exercise of
option or conversion rights granted in connection withbond issues of Givaudan SA or a Group company.
The Board of Directors is authorised to exclude theshareholders’ preferential right to subscribe to such bonds
if the purpose is to finance acquisitions or to issue

79

convertible bonds or warrants on the international capital
market. In that case, the bonds or warrants must be
offered to the public at market conditions, the deadline forexercising option rights must be not more than six years
and the deadline for exercising conversion rights must be
not more than 15 years from the issue of the bond or
warrants and the exercise or conversion price for new
shares must be at a level corresponding at least to themarket conditions at the time of issue– issuing up to 123,163 shares through the exercise of option
rights granted to the shareholders of Givaudan SA.
For the conditional share capital, the subscription rights ofthe shareholders are excluded.
The acquisition of shares through the exercise of option orconversion rights and the transfer of such shares are subject
to restrictions as described in the next section.
2.3 Changes in capital
The information regarding the year 2014 is available in notes
9 and 10 to the statutory financial statements of the 2014
Financial Report. Details of the changes in equity for the years
2015 and 2016 are given in notes 8 and 9 to the statutoryfinancial statements of the 2016 Financial Report.
2.4 Shares and participation certificates
The Company has one class of shares only. All shares areregistered shares with a par value of CHF 10.00 each. Subject tothe limitations described below, all shares have the same rights
in all respects. Every share gives the right to one vote and to an
equal dividend.
2.5 Dividend-right certificates
Other than the registered shares, dividend-right certificatesand participation certificates do not exist.
2.6 Limitations on transferability and nominee
registrations
2.6.1 Limitations on transferability for each sharecategory; indication of statutory group clauses andrules for granting exceptions
At the Annual General Meeting of shareholders on
20 March 2014, the previously existing registration and voting
rights restrictions were abolished. Today, the Company nolonger has limitations on transferability.
2.6.2 Reasons for granting exceptions in the year
under review
This is not applicable because there are no longer any
limitations on transferability.
2.6.3 Permissibility of nominee registrations; indicationof any percent clauses and registration conditions
Subject to the provisions mentioned in the next paragraph,

Givaudan – 2016 Annual Report

80

Corporate governanceregistration with voting rights in the Company’s shareregister is conditional on shareholders declaring that they
have acquired the shares in their own name and for theirown account.
Based on a regulation of the Board of Directors, nominee
shareholders may be entered with voting rights in the shareregister of the Company for up to 2% of the share capital
without further condition, and for more than 2% if they
undertake to disclose to the Company the name, address,
nationality and number of shares held by the beneficial owners.
2.6.4 Procedure and conditions for cancelling statutory
privileges and limitations on transferability
The limitations on transferability and nominee registrations
may be changed by a positive vote of the absolute majority ofthe share votes represented at a shareholders’ meeting.
2.7 Convertible bonds and warrants/options
There are no bonds or warrants outstanding that areconvertible into shares of Givaudan SA.

3.1 Members of the Board of Directors

3. Board of Directors

Dr Jürg Witmer

According to the Articles of Incorporation of Givaudan, theBoard of Directors may consist of between seven and nine
members.
Givaudan’s eight Board members have an in-depth knowledgeof their relevant areas of expertise, and provide contributions in
the areas of strategy, the flavour and fragrance industry,finance, research and innovation, marketing and regulatory
affairs. The Board’s knowledge, diversity and expertise make animportant asset in leading a company of Givaudan’s size in acomplex and fast-changing environment.
As of 31 December 2016, the following were members of theBoard of Directors:

Chairman
Attorney

Swiss national, born 1948
Non-executive
First elected 1999

In 1978, Jürg Witmer joined Hoffmann-La-Roche in Basel andsubsequently held a number of positions including LegalCounsel, Assistant to the CEO, General Manager and China
Project Manager of Roche Far East based in Hong Kong, Headof Corporate Communications and Public Affairs at Roche
headquarters in Basel, Switzerland, and General Manager ofRoche Austria. From 1999 to 2005 he acted as Chief Executive
Officer of the Givaudan Group in Vernier/Geneva and since thenas Chairman of the Board. From 2008 to 2012 he was also
Chairman of the Board of Directors of Clariant AG, Basel.
Jürg Witmer holds the following mandates in companies thatare quoted on an official stock exchange: Vice-Chairman of
the Board of Syngenta AG, Basel. He holds the following
mandates in companies that are non-quoted: non-executive
Director of A. Menarini IFR, Florence, Italy.
Jürg Witmer has a Doctorate in law from the University of
Zurich, as well as a degree in international studies from the
Graduate Institute of the University of Geneva.

Givaudan – 2016 Annual ReportCorporate governance81

Calvin Grieder

Victor BalliEngineerBusinessman

Swiss national, born in 1955 in the USA

Swiss national, born in 1957

Non-executive

Non-executive

First elected in 2014

First elected in 2016

In 1980, Calvin Grieder started his career as Marketing Manager
with Georg Fischer Ltd in Switzerland and continued in various
executive positions at Swiss and German companies including
Bürkert Controls Ltd., Mikron Machines Ltd, Swiss Industrial
Company (SIG) Ltd and Swisscom Telecom Ltd, where he served
as Head of the Mobile and Internet business and Member of the
Executive Board. He has been CEO of the international
engineering group Bühler from 2001 to 2016.

Victor Balli started his professional career in 1985, working asa Financial Analyst & Business Development Manager with
EniChem International SA in Zurich and Milan. From 1991 to
1995, he worked as a Principal with Adinvest AG, a corporate
finance advisory company with offices in Zurich, San Francisco,
New York, and London. Victor Balli held various positions at
Minibar between 1996 and 2005, the latest of which as Chief
Executive Officer EMEA as of 2005. Since 2007 Victor Balli has
been Chief Financial Officer and member of the Executive
Committee of Barry Callebaut.

Vice-Chairman

Calvin Grieder holds the following mandate in companies thatare quoted on an official stock exchange: Vice-Chairman of theBoard of Implenia AG.
He holds the following mandates in companies that are
non-quoted: Chairman of the Board of the Bühler Group,
member in the Advisory Board of Swissmem, member of theBoard of Trustees of Avenir Suisse, owner and member ofthe Board of CGTech in Küsnacht, and member of the Advisory
Board of the ETH, Department of Mechanical and Process
Engineering.

Director

Victor Balli does not hold any mandates in companies that arequoted on an official stock exchange.
He holds the following mandates in companies that are
non-quoted: Member of the Board of Niantic Finance AG.
Victor Balli has a Master’s degree in Economics from the
University of St. Gallen and a Master’s degree as a Chemical
Engineer from the Swiss Federal Institute of Technology
in Zurich.

Calvin Grieder holds a Master of Science from the ETH Zurich
and has completed an Advanced Management Program (AMP)
at Harvard University.

Givaudan – 2016 Annual Report

82

Corporate governanceProf. Dr-Ing. Werner Bauer

Lilian Biner

Businessman

Businesswoman

German and Swiss national, born in 1950

Swedish national, born 1962

Non-executive

Non-executive

First elected 2014

First elected 2011

Prof. Dr-Ing. Werner Bauer started his career as a university
professor in chemical engineering at the Technical University in
Hamburg, Germany. After serving as the Director of the
Fraunhofer Institute for Food Technology & Packaging and asProfessor in Food Processing Technology at the Technical
University of Munich from 1985 to 1990, he joined Nestlé as
Head of the Nestlé Research Centre in Lausanne in 1990. After
heading commercially Nestlé South and East Africa he joined
general management as Executive Vice-President in 2002,
responsible for technical, production, environment and R&D. In
2007 he became Executive Vice-President and Head of
Innovation, Technology, Research and Development, a postfrom which he retired in September 2013.

Lilian Biner has senior management experience from retail andconsumer goods companies. These posts have most recently
included Chief Financial Officer and Executive Vice President
with Axel Johnson AB in 2007 and Head of Strategic Pricing forElectrolux Major Appliances Europe, a company she joined in2000 as head of HR and Organisational Development.

Director

Prof. Bauer holds the following mandates in companies that arequoted on an official stock exchange: member of the Boards of
Lonza Group AG and GEA Group AG. He holds the following
mandates in companies that are non-quoted: Chairman of theBoard of Nestlé Deutschland AG, and member of the Board of
Bertelsmann SE & Co. KGaA.
Prof. Dr-Ing. Werner Bauer received a Diploma and a PhD in
Chemical Engineering from the University Erlangen-Nürnberg
in Germany.

Givaudan – 2016 Annual Report

Director

Lilian Biner holds the following mandates in companies thatare quoted on an official stock exchange: chairman of theBoard of Cloetta AB, member of the Boards of Thule Group AB,
LE Lundbergföretagen and Nobia AB. She will leave the Boardof Thule Group AB in April 2017.
She holds the following mandates in companies that are
non-quoted: member of the Board of a-connect (group) ag.
Lilian Biner is a graduate of the Stockholm School of Economics.

Corporate governance83

Michael Carlos

Ingrid Deltenre

Businessman

Businesswoman

French national, born in 1950

Dutch and Swiss national, born in 1960

Non-executive

Non-executive

First elected 2015

First elected 2015

Michael Carlos started his career with Givaudan in 1984 as
General Manager in Hong Kong. He became Head of theEuropean Creative Centre in Argenteuil in 1992 where he was incharge of integrating the creative resources from Givaudan andRoure. In 1999, he was appointed Global Head of Consumer
Products and then President of the Fragrance Division in 2004.

Ingrid Deltenre has held several executive positions in the press
and media including Director of Publisuisse from 1999 to 2004,
and Director of the leading public TV broadcaster in German
speaking Switzerland, Schweizer Fernsehen, from 2004 to
2009. In 2010, she became Director General of the Genevabased European Broadcasting Union (EBU) a position she holds
until June 2017.

Director

Michael Carlos holds the following mandates in companies thatare quoted on an official stock exchange: member of the Boardof Deinove SA. He also holds the following mandates: Chairmanof the International Fragrance Association (IFRA) and
Chairman of the Research Institute of Fragrance Materials.
Michael Carlos holds an MBA from the Indian Institute ofManagement and a degree in chemical engineering from theIndian Institute of Technology.

Director

She holds the following mandates in companies that arequoted on an official stock exchange: Member of the Board of
Banque Cantonale Vaudoise, and member of the Supervisory
Board of Deutsche Post/DHL.
Ingrid Deltenre holds a Bachelor of Arts in Journalism and
Educational Sciences from the University of Zurich.

Givaudan – 2016 Annual Report

84

Corporate governanceThomas Rufer
Director

Certified Public Accountant
Swiss national, born 1952
Non-executive
First elected 2009

Thomas Rufer joined Arthur Andersen in 1976, where he held
several positions in audit and business consulting (accounting,organisation, internal control and risk management). He wasCountry Managing Partner for Arthur Andersen Switzerlandfrom 1993 to 2001. Since 2002, he has been an independent
consultant in accounting, corporate governance, risk
management and internal control.
Until May 2015, Thomas Rufer held the following mandates incompanies that are quoted on an official stock exchange:
Vice-Chairman of the Board of Directors and Chairman of the
Audit Committee of the Berner Kantonalbank.
He holds the following mandates in non-listed companies:
Chairman of the Board of Directors of the Federal Audit
Oversight Authority and member of the Swiss Takeover Board.
Thomas Rufer has a degree in business administration(économiste d’entreprise HES) and is a Swiss Certified Public
Accountant.

Givaudan – 2016 Annual ReportCorporate governance

85

Board of Directors and its committees 2016
Board of Directors 1
Dr Jürg Witmer
ChairmanSwissborn 1948
Member since 1999

Calvin Grieder
Swissborn 1955
Member since 2014

Victor BalliSwissborn 1957
Member since 2016

Prof. Dr-Ing. Werner Bauer
German and Swissborn 1950
Member since 2014

Lilian Biner
Swedishborn 1962
Member since 2011

Michael Carlos
Frenchborn 1950
Member since 2015

Ingrid Deltenre
Dutch and Swissborn 1960
Member since 2015

Thomas Rufer
Swissborn 1952
Member since 2009

Audit Committee

Compensation Committee

Thomas Rufer (Chairman), entire year
Lilian Biner, entire year
Calvin Grieder, until March 2016
Victor Balli, from March 2016

André Hoffmann (Chairman), until March 2016
Peter Kappeler, until March 2016
Prof. Dr-Ing. Werner Bauer, entire year (Chairman since March 2016)
Calvin Grieder, from March 2016
Ingrid Deltenre, from March 2016

– A ssists the Board in its oversight responsibilities withrespect to financial reporting– Ensures effectiveness and efficiency of internal control,risk management and compliance systems– A ssesses and overviews the internal and external
audit processes– Reviews and recommends the compensation policies tothe Board– Approves the remuneration for the Executive Committee– Prepares the Compensation Report

Nomination and Governance Committee

Science and Innovation Committee

Dr Jürg Witmer (Chairman), entire year
Michael Carlos, until March 2016
Lilian Biner, from March 2016
Ingrid Deltenre, entire year

Michael Carlos (Chairman), from March 2016
Calvin Grieder, from March 2016
Prof. Dr-Ing. Werner Bauer, from March 2016

– A ssists the Board in applying principles of good
corporate governance– Prepares appointments to the Board and the
Executive Committee– A ssists the Board in scientific matters relating to theflavours, fragrances and cosmetics Industry– Identifies opportunities, proposes and screens potential
innovation partners

1. A ndré Hoffman retired as Board member, as Vice-Chairman and as Chairman of the Compensation Committee on 17 March 2016. Peter Kappeler retired as Board member andmember of the Compensation Committee also on 17 March 2016.

Givaudan – 2016 Annual Report

86

Corporate governance

Meetings: attendance 2016
Number of
Board meetings / calls
attended
Board member

Jan – MarMar – Dec

Number of
Audit Committee
meetings attended

Number ofCompensation
Committee meetings
attendedNumber of
Nomination and
GovernanceCommittee meetings
attendedNumber of Scienceand Innovation
Committee meetings
attended

Jan – MarJan – MarJan –MarMar – Dec

Jan – MarMar – Dec

n/a

3

2

3

Dr Jürg Witmer

2

5

Calvin Grieder

2

5

1

n/a

Victor Balli

n/a

5

n/a

3

1

3

Prof. Dr-Ing. Werner Bauer

2

5

2

5

Michael Carlos

2

5Ingrid Deltenre

2

5

n/a

3

André Hoffmann

2

n/a

2

n/a

Peter Kappeler

2

n/a

2

n/a

Tomas Rufer

2

5

1

3

Meetings held in period

2

5

1

3

2

3

Average length ofmeetings

2
1
2
2
2

0

2

2

n/a

7

4

5

2

2

1.5 days

0.5 days

1 hour

1 hour4 hours

3.2 Other activities and vested interests
Please refer to the biographies of the Board members describedin section 3.1 for their other activities and vested interests.
Except for those described in section 3.1, no Board member ofGivaudan SA holds any material permanent management or
consultancy functions for significant domestic or foreigninterest groups nor any significant official functions or politicalposts. The Board of Directors assesses the independence of its
members.
As at 31 December 2016, all members of the Board of Directors
were non-executive. None of the Board members has
important business connections with Givaudan SA or any of its
affiliates. Dr Jürg Witmer, non-executive Chairman, was theChief Executive Officer of Givaudan until 27 April 2005 andMichael Carlos was President of the Fragrance Division of theCompany until the end of 2014.
3.3 Rules in the Articles of Incorporation on the numberof permitted activities pursuant to Art. 12 para. 1 point 1 of
the Ordinance against Excessive Compensation (OaEC)
Article 32 of the Articles of Incorporation of the Company
permits the following external mandates for members of theBoard of Directors:– Members of the Board of Directors may not hold more thanfour additional mandates in companies that are quoted on an
official stock exchange and seven additional mandates in
non-quoted companies

Givaudan – 2016 Annual Report

Mar – Dec

2

Lilian Biner

Meetings held in the year

Mar – Dec

– The following mandates are not subject to these limitations: mandates in companies which are controlled by the
corporation mandates held by order and on behalf of the corporation or
any controlled company. No member of the Board of
Directors or of the Executive Committee shall hold morethan ten such mandates
 mandates in associations, foundations, charitableorganisations, trusts, employee welfare foundations andother comparable structures. No member of the Board of
Directors or of the Executive Committee shall hold morethan 15 such mandates.
‘Mandates’ mean mandates in the supreme governing bodyof a legal entity which is required to be registered in the Swisscommercial register or a corresponding foreign register.
Mandates in different legal entities which are under joint
control are deemed one mandate.
3.4 Elections and terms of office
3.4.1 Principles of the election procedure, rules differingfrom the statutory legal provisions with regard to
the appointment of the Chairman, the members of theCompensation Committee and the independent proxy
The Company amended its Articles of Incorporation at theAnnual General Meeting 2014 to align with the newrequirements of the OaEC. There are no differing rules from thestatutory legal provisions with regard to the appointment of
the Chairman, the members of the Compensation Committee
and the independent proxy. All Board members, the Chairman,

Corporate governancethe members of the Compensation Committee and the
independent proxy are elected annually and individually for one
year, being the time between one Annual General Meeting andthe next one.
3.4.2 For each Board member: date of first election
to Board and attendance of meetings
For the dates of first election to the Board and attendance ofBoard and committee meetings, please refer to the tables on
pages 85 – 86.
3.5 Internal organisational structure
3.5.1 Allocation of tasks among the Board members
The Chairman is elected annually at the Annual General
Meeting. He convenes, prepares and chairs the meetings of theBoard of Directors, prepares and supervises theimplementation of resolutions of the Board of Directors (to theextent not delegated to a committee), supervises the course ofbusiness and the activities of the Executive Committee,
proposes succession candidates for appointment to the Boardof Directors or to the Executive Committee, proposes theglobal remuneration of the Chief Executive Officer and othermembers of the Executive Committee to the Compensation
Committee and coordinates the work of the Committees of theBoard of Directors.
The Chairman receives all invitations and minutes of Committee
meetings and is entitled to attend these meetings. The
Chairman further decides in cases which fall under the tasks
and powers of the Board of Directors, but in which a timely
decision of the Board of Directors cannot be made because ofurgency. In such cases, the Chairman informs the members of
the Board of Directors as quickly as possible and thecorresponding resolution is minuted at the next Board meeting.
If the Chairman is unable to act, the Vice-Chairman exercises
his functions, assuming all his tasks and powers.
3.5.2 For each committee of the Board of Directors:
list of members – tasks – areas of responsibility
The Board of Directors has established four Committees:
an Audit Committee, a Nomination and GovernanceCommittee, a Compensation Committee and a Science andInnovation Committee. Each committee is led by a Committee
Chairman whose main responsibilities are to organise, leadand minute the meetings. For the participation of theBoard members in the committees, please refer to the tableon page 86.
Audit Committee
The primary function of the Audit Committee is to assist theBoard in fulfilling its oversight responsibilities by reviewing thefinancial information, the systems of internal controls and theaudit process. It carries out certain preparatory work for the
Board of Directors as a whole. The Audit Committee currently
consists of three members of the Board.

87

The Audit Committee ensures that the Company’s risk
management systems are efficient and effective. It promotes
effective communication among the Board, management, theinternal audit function and external audit. It reviews andapproves the compensation of the external auditors for theannual audit. The Chief Financial Officer attends the meetingsof the Audit Committee on the invitation of its chairman.
The Audit Committee met four times in 2016. Each meeting
lasted approximately half a day. The Head of Internal Audit, theChief Financial Officer, the Corporate Compliance Officer andthe External Lead Audit Partner attended all meetings, apartfrom certain private sessions.
Compensation Committee
The Compensation Committee reviews and recommends thecompensation policies to the Board of Directors. It approves the
remuneration of the Chief Executive Officer and the othermembers of the Executive Committee as well as all performancerelated remuneration instruments and pension fund policies.
Since the OaEC came into force, the Committee prepares theCompensation Report to be established by the Board.
The Compensation Committee consists of three members of
the Board. The Committee takes advice from external
independent compensation specialists and consults with the
Chairman and the Chief Executive Officer on specific matterswhere appropriate. Since the Annual General Meeting 2014, themembers of the Compensation Committee are elected by theshareholders from the re-elected Board members.
In 2016, the Compensation Committee met five times. The
average duration of each meeting was approximately one hour.
During these meetings and among other things, the Committee
reviewed short and long term incentive plan parameters as wellas the alignment of Executive Committee compensation with
the Company’s principles and policy. Where appropriate, theChairman, the Chief Executive Officer, the Head of Global
Human Resources and the Head of Compensation and Benefits
attended the meetings.
For further information on the work of the Compensation
Committee, please see page 102.
Nomination and Governance Committee
The Nomination and Governance Committee assists the Board
in applying the principles of good corporate governance. It
prepares appointments to the Board of Directors and the
Executive Committee and advises on the succession planning
process of the Company. It consists of three members of
the Board.
The Nomination and Governance Committee met twice during
2016 to prepare changes in the composition of the Boardand senior management succession. The meeting lasted forapproximately one hour.

Givaudan – 2016 Annual Report

88 Corporate governance

Science and Innovation Committee
The Science and Innovation Committee advises the Board on
scientific matters relevant to the flavour and fragrance andcosmetics industry, or other additional fields the Board may
request. It acts as a sounding board to the Board of Directors
offering different perspectives and identifies opportunities in
the innovation space. It also proposes and screens potential
innovation partners and validates and reviews projects onrequest of management.
The Science and Innovation Committee met twice during 2016
to discuss innovation strategies for different areas of theCompany. Each meeting lasted for approximately four hours.
The Head of Global Science and Technology attended both
meetings. Further members of senior management as well as
external advisors also attended one or more of the meetings.
More information on the Board of Directors and the roles of theCommittees are described in the following sections ofGivaudan’s website: www.givaudan.com – our company  –management – board of directors and www.givaudan.com –our company – management – committees of the board.
3.5.3 Work methods of the Board and its Committees
Board meetings are held periodically and also when mattersrequire a meeting, or on the written request of one of themembers of the Board. Ordinary Board meetings are held on
average once a quarter plus one additional ordinary Board
meeting to approve the Annual Report. The Chairman, after
consultation with the Chief Executive Officer, determines theagenda for the Board meetings. Decisions may also be taken by
circulation (including telefax and electronic data transmission)or by telecommunication (including telephone and videoconference), provided that none of the Board members
requests a formal meeting.

to sites and strategic locations and discussion with the
management of the visited region. Extraordinary meetings
are usually shorter.
In October 2016, the Board visited the Company’s flavour andfragrance operations in Japan.
Apart from the constitutive meeting directly following thegeneral meeting of shareholders and the extraordinary
meeting by telephone, the Company’s operational andfinancial performance was presented by management andreviewed by the Board during each Board meeting. The Board
was also informed about, and discussed, various aspects of
the Company’s future strategy, all major investment projects,
management succession planning and compensation andother major business items as well as the findings of Internal
Audit and risk management. Except for the constitutive
meeting, the extraordinary meeting by telephone and certain
closed sessions, the Chief Executive Officer, the Chief Financial
Officer and the presidents of the two divisions were present
at all regular meetings. The other members of the Executive
Committee attended three meetings. Selected senior
managers were invited to address specific projects at regular
Board meetings. The Head of Corporate Internal Audit and the
Corporate Compliance Officer each reported once to theBoard of Directors.
In 2016, the Board conducted one annual self-assessment andhad continuous discussion of its own succession planning.
The attendance of Board members at Board and Committee
meetings in 2016 as well as the average duration of themeetings can be seen in the table on page 86.

The minutes of all Committee meetings are circulated to all
Board members.

3.6 Definition of areas of responsibility
The Board of Directors is responsible for the ultimate
direction, strategic supervision and control of the
management of the Company, as well as other matters which,by law, are under its responsibility. This includes theestablishment of medium- and long-term strategies and of
directives defining Company policies and the giving of thenecessary instructions in areas such as acquisitions, major
investments and long-term financial commitments exceedingcertain thresholds.

In preparation for Board and committee meetings, the Board
members involved receive pertinent information for prereading via a secure electronic document sharing system.

In accordance with Swiss law, the Articles of Incorporationand the Board Regulations of Givaudan, the duties of theBoard of Directors include the following matters:

In 2016, the Givaudan Board of Directors held seven meetings,
including one constitutive meeting directly following thegeneral meeting of shareholders and one extraordinary
meeting by telephone. Regular meetings in Switzerland usually
last for one to one and a half days, Board meetings at Givaudan
locations outside Switzerland last for two days, including visits– the ultimate management of the Company and, inparticular, the establishment of medium- and long-term
strategies and of directives defining Company policies andthe giving of the necessary instructions

Meetings of Board Committees are usually held directly
before or directly following a Board meeting, with additional
meetings scheduled as required. The Board of Directors
receives regular reports from its Committees and the
Chairman, as well as from the Executive Committee.

Givaudan – 2016 Annual Report– the establishment of the organisation

Corporate governance– the approval of the annual Group budget– the structuring of the accounting system and of the financial
controlling, as well as the financial planning– the assessment of the Company’s risk management– the decision on investments in, or divestments of, fixed andtangible assets of a global amount exceeding the limit set by
the corporate investment guidelines established by the Boardof Directors– the appointment and removal of the persons entrusted withthe management and representation of the Company, inparticular the Chief Executive Officer and the other membersof the Executive Committee–the ultimate supervision of the persons entrusted with the
management, in particular with respect to compliance withthe law, the Articles of Incorporation, regulations andinstructions given in any areas relevant to the Company,
such as working conditions, environmental protection,
trade practices, competition rules, insider dealing and ad
hoc publicity

89

that materially impact Givaudan. To ensure this, the Board
has at its disposal an information and control system which
comprises the following instruments:
Management information system
The Board ensures that it has sufficient information for
appropriate decision-making through a management
information system with wide-ranging information rights for
the Board members:– the Chairman of the Board receives invitations and minutesof Executive Committee meetings on a regular basis and theChief Executive Officer and the Chief Financial Officer report
regularly to the Chairman of the Board of Directors– the Chief Executive Officer and the Chief Financial Officer arepresent and report at all regular Board meetings and answer
all requests for information by the Board members about any
matter concerning Givaudan that is transacted. Other
members of the Executive Committee and selected senior
managers are regularly invited to address specific projects atregular Board meetings. All members of the Executive
Committee have a duty to provide information at meetingsof the Board of Directors on request– the preparation of the annual business report, as well as the– the Head of Internal Audit and the Corporate Compliancepreparation of the Annual General Meeting of shareholders andOfficer report to the Board once a year. The Board also
the implementation of its resolutions
receives annual reports on Environment, Health and Safety,
Sustainability and Risk Management– the notification of the court in case of insolvency– the Head of Internal Audit is present and reports at each– the decisions regarding the subsequent performance ofmeeting of the Audit Committee. The Chief Financial Officer
contributions on shares not fully paid inand the Corporate Compliance Officer are also present
at all meetings of the Audit Committee, as are the external– the ascertainment of share capital increases to the extent that
auditors. The Head of Human Resources, the Head ofthese fall under the powers of the Board of Directors andCompensation & Benefits and the Chief Executive Officer are
resulting confirmations and modifications to the Articles ofpresent at each Compensation Committee meeting, except
Incorporation
when questions of compensation for Executive Committee
members are being deliberated. The Chairman also attends– the verification of the special professional qualifications ofregularly the meetings of the Compensation Committee
the auditors.
– all Board members have access to all Committee
Except as otherwise provided by Swiss law, the Articles ofmeeting minutes
Incorporation and the Board Regulations, all other areasof management are fully delegated by the Board of Directors– the Board of Directors receives summarised monthly reports
to the Chief Executive Officer, the Executive Committee andincluding performance against key performance indicators
its members.
from the Executive Committee. All Board members are
immediately informed on extraordinary events. They also
The Board Regulations can be found at: www.givaudan.com –have direct access to the Givaudan intranet where all internal
our company – corporate governance – rules and policies.
information on key events, presentations and organisationalchanges are posted. In addition, the Board members receive
3.7 Information and control instruments vis-à-vis
relevant information, including media releases andsenior management
information to investors and financial analysts
The Board recognises that in order to be able to carry out its
tasks of ultimate direction of the Company and supervision of– in preparation for each Board meeting, the Board members
the management, it needs to be fully informed about all matters
receive information and reports from the Executive

Givaudan – 2016 Annual Report

90

Corporate governanceCommittee and other members of senior management via asecure electronic document sharing system and other meansof communication– the Board of Directors visits at least one Givaudan country
operation per year, where it meets members of senior local
management. Additionally, Board members are encouraged
to visit country operations when travelling and meet withlocal and regional senior management directly to allow Board
members the opportunity of getting first-hand information
on local and regional developments and interacting directlywith management across the globe.
– the Board has regular access to the Chief Executive Officer,
Chief Financial Officer and the other members of the
Executive Committee. Any Board member may request fromthe Chief Executive Officer and other members of the
Executive Committee information concerning the course of
the business.
Risk management
Givaudan has established an internal risk management processthat is based on the Givaudan Enterprise Risk Management
Charter. It focuses on identifying and managing/exploiting risks.
The Board of Directors defines the strategic risk management
framework. This process is under the responsibility of the
Executive Committee. The risk management process follows astructured assessment, review and reporting cycle that iscoordinated by the Corporate Compliance Officer to ensure aharmonised Group-wide approach.
For each identified strategic top-level Company risk a memberof the Executive Committee is designated as the risk ownerwith the responsibility to manage the risk on a Group-widebasis. Once a year the Executive Committee reports to theBoard on the risk management process, the strategic risks andthe mitigation actions. Corporate Internal Audit provides
assurance on the effectiveness of the risk management process.
For further information on risk management please refer topages 51 – 53.
Internal audit
The Corporate Internal Audit function is established as anindependent and objective corporate function reporting
directly to the Audit Committee.
Its role is to evaluate and contribute to the continuous
improvement of the Company’s risk management and control
systems. This specifically includes the analysis and evaluation of
the effectiveness of business processes and recommendations
for adjustments where necessary.
Corporate Internal Audit uses a risk-based audit approach
aimed at providing assurance on all relevant business processes

Givaudan – 2016 Annual Reportacross Givaudan entities. This approach follows a businessprocess audit methodology that provides value to the local
entities and to the Group’s management.
Givaudan corporate strategy, risk management findings, past
audit results, management input, changes in organisation andCorporate Internal Audit experience are the elements taken
into account to build the annual internal audit plan. Effective
communication and reporting ensure an efficient
implementation of the audit recommendations. For specificaudits of affiliates, the internal audit function is supported bydedicated staff from EY. The internal audit activity is reported
to the full Board of Directors once a year.

G4 – 34 Governance structure; pages 80 to 90

Corporate governance91

4. Executive Committee
The Executive Committee, under the leadership of the Chief
Executive Officer, is responsible for all areas of operational
management of the Company that are not specifically reservedto the Board of Directors.
The Chief Executive Officer is appointed by the Board of
Directors upon recommendation of the Nomination
Committee. Subject to the powers attributed to him, he has
the task of achieving the strategic objectives of the Company
and determining the operational priorities. In addition, heleads, supervises and coordinates the other members of the
Executive Committee, including convening, preparing andchairing the meetings of the Executive Committee.
The members of the Executive Committee are appointed by
the Board of Directors on recommendation of the Chief
Executive Officer after evaluation by the Nomination
Committee. The Executive Committee is responsible fordeveloping the Company’s strategic as well as long-termbusiness and financial plans. Key areas of responsibility
also include the management and supervision of all areas of
the business development on an operational basis, andapproving investment decisions.
The tasks and powers of the Executive Committee include theapproval of investments, leasing agreements and divestments
within the corporate investment guidelines. The Executive
Committee approves important business projects, prepares
the business plan of the Company and the budgets of theindividual divisions and functions.
In addition, it plays a key role – together with the Human
Resources organisation – in the periodic review of the talentmanagement programme, including succession planning for
key positions. Alliances and partnerships with outside
institutions, such as universities, think tanks and other business
partners, are also monitored by the Executive Committee.
The members of the Executive Committee are individually
responsible for the business areas assigned to them.
The Executive Committee meets generally on a monthly basis
to discuss general Company business and strategy. In 2016, theCommittee held eight meetings at Company sites around theworld, each meeting lasting between one and three days. In
addition, the Chief Executive Officer, the Chief Financial Officer
and the presidents of the two divisions held an additional
five meetings.

4.1 Members of the Executive Committee

Gilles Andrier

Chief Executive Officer
French national
Born in 1961
Appointed in 2005
Gilles Andrier spent the first part of his career with Accenture
in management consulting before joining Givaudan in 1993 as
Fragrance Division Controller and Assistant to the Chief
Executive Officer. He later held various positions including
Head of Fragrance Operations in the USA and Head ofConsumer Products in Europe. He was appointed Head of Fine
Fragrances, Europe in 2001 before becoming Global Head ofFine Fragrances in 2003 and then CEO of Givaudan in 2005.
Other mandates held by Gilles Andrier are: Independent
non-executive Director of Albea SA, member of the Board of
the Swiss-American Chamber of Commerce, and Co-Chairmanof the Board of the Natural Resources Stewardship Circle.
Gilles Andrier graduated with two Masters in Engineering fromENSEEIH Toulouse.

These meetings are an opportunity to interact with local
management and to visit Givaudan locations across the globe.
Each major region is visited at least once a year to ensure aclose interaction with all the different business areas.

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92

Corporate governanceMatthias Währen

Mauricio Graber

Swiss national

Mexican national

Born in 1953

Born in 1963

Appointed in 2004

Appointed in 2006

Matthias Währen started his career in Corporate Audit in 1983
with Roche, and became Finance Director in 1988 of Roche
Korea and then Head of Finance and Information Technology in1990 at Nippon Roche in Tokyo. In 1996, Matthias Währen was
appointed Vice President Finance and Information Technology
at Roche USA and then Head of Finance and Informatics of theRoche Vitamins Division in 2000. He was involved in the sale ofthis business to DSM in 2003 before joining Givaudan in 2004.

Mauricio Graber began his career with Givaudan in 1995 as
Managing Director for Latin America with Tastemaker. When
Tastemaker was acquired by Givaudan, Mauricio Graberbecame Managing Director for Mexico, Central America andthe Caribbean before becoming Vice-President for Latin
America in 2000. He was appointed President of the Givaudan
Flavour Division in 2006.

Chief Financial Officer

Other mandates held by Matthias Währen are: member of theRegulatory Board SIX Exchange Regulation, and a member ofthe Boards of scienceindustries Switzerland, SwissHoldings,
and the Givaudan Foundation.
Matthias Währen is a graduate of the University of Basel.

Givaudan – 2016 Annual Report

President Flavour Division

Other mandates held by Mauricio Graber are: member of theBoard of the International Organization of the Flavor Industry(IOFI) for a three-year period.
Mauricio Graber holds a BSc in Electronic Engineeringfrom Universidad Autónoma Metropolitana and a Masters
in Management from the JL Kellogg Graduate School ofManagement, Northwestern University, USA.

Corporate governance

93

Maurizio Volpi

Joe Fabbri

Italian national

Canadian national

Born in 1969

Born in 1958

Appointed in 2015

Appointed in 2008

Maurizio Volpi began his career in consumer goods with P&G
and Reckitt Benckiser in Italy, working in various marketingroles. In 2000, he joined Givaudan Italy as Account Manager in
Milan before moving to Argenteuil in 2003 as Head ofMarketing Consumer Products Europe. Maurizio Volpi
subsequently took on roles of increasing responsibility at the
global level: Head of Global Marketing Consumer Products,
Head of Global Marketing and Consumer Market Research forboth Consumer Products and Fine Fragrances, and World
Account Manager for Unilever. He was appointed Regional
Head of Western and Eastern Europe (WEE) for the Consumer
Products business in 2012 and in 2015 became President of
the Givaudan Fragrance Division.

Joe Fabbri spent the first years of his career in various
engineering roles before moving into operations management.
Joe Fabbri joined Givaudan in 1989 as Operations Director
responsible for commissioning the Canadian manufacturing
facility. Moving to the USA in 1996, he was appointed Head ofOperations at East Hanover, New Jersey. He later led various
regional operations projects in Switzerland before becoming
Head of Flavours Operations, EAME in 2001. In 2004, he wasappointed Head of Global Flavours Operations, and then Headof Global Human Resources from 2008 to 2015. In addition to
his Human Resources responsibilities in 2008, he became Headof Global Sustainability and in 2010 he was appointed Head of
Global Environment, Health and Safety (EHS) alongside his
Sustainability role.

President Fragrance Division

Maurizio Volpi holds a degree in Economics from the Bocconi
University in Milan, Italy.

Head of Global EHS and Sustainability

Joe Fabbri graduated in mechanical engineering technology,
and is a licensed Professional Engineer of Ontario, Canada.

Givaudan – 2016 Annual Report94 Corporate governance

Simon Halle-Smith

Willem Mutsaerts

British national

Dutch national

Born in 1966

Born in 1962

Appointed in 2015

Appointed in 2015

Simon Halle-Smith began his career in 1991 in thepharmaceutical industry with Eli Lilly & Company in the UK,
working in Clinical Trial Project Management, Sales and Human
Resources. In 2004 he joined Quest as HR Director for the UK,
before being appointed European HR Director in 2005.
In 2007, when Quest was acquired by Givaudan, he continued
as European HR director before being appointed Head of
Human Resources for the Fragrance Division in 2009. In 2015
he was appointed Head of Global Human Resources.

Willem Mutsaerts joined Givaudan in 1989, initially withresponsibility for sales in Benelux, then moving on to become
Regional Account Manager for the APAC region in Singapore
before being appointed Head of Global Purchasing for
Fragrances. In 2001, he took commercial responsibility forfragrance consumer products in the EAME region. Willem has
been based in Geneva since 2007 as Head of Global Operations
Fragrances, and was appointed Head of Global Procurementin 2015.

Simon Halle-Smith holds a bachelors’ degree in Biology
and Chemistry and a PhD in biochemistry from the Universityof East Anglia in the UK.

Willem Mutsaerts has a degree in international marketingand is the holder of an MBA obtained at Golden Gate University
in Singapore.

Head of Global Human Resources

Givaudan – 2016 Annual Report

Head of Global Procurement

Corporate governance95

Anne Tayac

Chris Thoen

French national

American and Belgian national

Born in 1968

Born in 1960

Appointed in 2016

Appointed in 2015

Anne Tayac began her career as a Quality Assurance
coordinator with Robertet in Grasse. She joined Givaudan
France in 1996 as Head of Quality Management before being
promoted to Global Head of Fragrance Quality Management in1998. Anne relocated to Vernier in 2003 where she assumedroles of increasing responsibility in Quality Management,
Customer Care, SAP deployment change management,
Fragrance and Flavour Supply Chain Excellence and was mostrecently responsible for leading Global Fragrance Operations.
She was appointed as Head of Givaudan Business Solutions(GBS) in July 2016.

Chris Thoen began his career in enzymology and plant genetics
with Plant Genetic Systems in Ghent before joining Procter &Gamble in Brussels in 1988. At P&G, he took on positions ofincreasing responsibility in the Fabric & Home Care andPersonal Health Care division. In 2009, he became Managing
Director of the Global Connect + Develop Office responsible for
the Open Innovation with external partners at corporate level.
Chris Thoen joined Givaudan as Head of Science andTechnology for Flavours in 2011. He was appointed Head of
Global Science and Technology in 2015.

Head of Givaudan Business Solutions

Anne Tayac has a Master’s degree in Flavours and Fragrancesfrom Sciences University in Le Havre, France and in
Analytical Control and Quality from Sciences University inMarseille, France.

Head of Global Science and Technology

Chris Thoen holds a Master’s degree in Chemistry and a PhD in
Biochemistry from the University of Antwerp, Belgium.

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96

Corporate governance

4.2 Other activities and vested interests
Please refer to the biographies of the members of the Executive
Committee described in section 4.1 for their other activities andvested interests.
Except for those described in section 4.1, no member ofthe Executive Committee of Givaudan SA holds any material
permanent management or consultancy functions for
significant domestic or foreign interest groups nor any
significant official functions or political posts.
4.3 Rules in the Articles of Incorporation on the numberof permitted activities pursuant to Art. 12 para. 1 point 1
OaEC
Article 32 of the Articles of Incorporation of the Company
permits the following external mandates for members of the
Executive Committee:– members of the Executive Committee may, subject toapproval by the Board of Directors, hold up to two mandates
in quoted or non-quoted companies– the following mandates are not subject to these limitations: mandates in companies which are controlled by the
corporation mandates held by order and on behalf of the corporation or
any controlled company. No member of the Board of
Directors or of the Executive Committee shall hold morethan ten such mandates mandates in associations, foundations, charitableorganisations, trusts, employee welfare foundations andother comparable structures. No member of the Board of
Directors or of the Executive Committee shall hold morethan 15 such mandates.
‘Mandates’ mean mandates in the supreme governing bodyof a legal entity which is required to be registered in the Swisscommercial register or a corresponding foreign register.
Mandates in different legal entities which are under joint
control are deemed one mandate.
4.4 Key elements of all management contracts between
the issuer and companies (or natural persons) not
belonging to the GroupThe Company has not entered into any management contracts
with third parties that fall within the scope of Subsection
4.4 of the SIX Directive on Information Relating to Corporate
Governance.

G4 – 34 Governance structure; pages 91 to 96

Givaudan – 2016 Annual Report

5. Compensation, shareholdings and loans
In accordance with the Swiss Code of Obligations and the SIX
Directive on Corporate Governance, Givaudan publishes thedetails of the remuneration of its Board of Directors and its
Executive Committee in the separate ‘Compensation Report’ inthis Annual Report as well as in the 2016 Financial Report.

6. Shareholders’ participation
6.1 Voting rights and representation restrictions
6.1.1 All voting rights restrictions; indication of any
statutory group clauses and rules on granting exceptions,particularly in the case of institutional voting rights
representatives
At the Annual General Meeting of shareholders on 20 March
2014, the previously existing registration and voting rights
restrictions were removed. Today, the Company no longer has
limitations on voting rights for ordinary shareholders.
For the restrictions on nominee shareholders, see point 2.6.3.
6.1.2 Reasons for granting exceptions in the year
under review
Not applicable as there are no longer any voting rights
restrictions.
6.1.3 Procedure and conditions for abolishing statutory
voting rights restrictions
Any change in the above rules requires a positive vote of theabsolute majority of the share votes represented at ashareholders’ meeting, as prescribed by Swiss law.
6.1.4 Statutory rules on participation in the general
meeting of shareholders if they differ from applicablelegal provisions
There are no restrictions of the Swiss legal provisions.
Any shareholder who, on the day determined by the Board of
Directors, is registered as a shareholder with voting rights has
the right to attend and to vote at the shareholders’ meeting.
Each shareholder may be represented at the shareholders’meeting by another shareholder who is authorised by a writtenproxy, by a legal representative or by the independent voting
rights representative (‘independent proxy’) elected by the
Annual General Meeting of shareholders.
6.1.5 Information on any rules which might be laid downin the Articles of Incorporation on the issue of instructions
to the independent proxy, and any rules in the Articles ofIncorporation on the electronic participation in thegeneral meeting of shareholders
Article 10 of the Articles of Incorporation of the Company
states that the Board of Directors establishes the rules
regarding participation and representation of the shareholders

Corporate governancein the shareholders’ meeting, including the rules regarding
proxies and voting instructions (by electronic means orotherwise).
6.2 Statutory quorums
The Articles of Incorporation of Givaudan SA follow the
majority rules prescribed by Swiss law for decisions of general
meetings of shareholders.
6.3 Convocation of the general meeting of shareholders
Shareholders registered with voting rights are convened togeneral meetings by ordinary mail and by publication in the
Swiss official trade journal (SHAB/FOSC) at least 20 days prior
to the day of the meeting. Shareholders representing at least
10% of the share capital may demand in writing that ashareholder meeting be convened, setting forth the items to
be included on the agenda and proposals.
6.4 Agenda
Shareholders representing shares for a nominal value of at least
CHF 1 million may demand in writing at least 45 days before themeeting that an item be included in the agenda, setting forth
the item and the proposals
6.5 Inscriptions into the share register
Shareholders will be registered with a right to vote in the shareregister of Givaudan SA until the record date set by the Boardof Directors. The specified date for the ordinary general
meeting is specified in the invitation and is set approximately
two weeks before the meeting. Only shareholders who holdshares registered in the share register with a right to vote at a
certain date, or their representatives, are entitled to vote.
Givaudan SA has not granted any exceptions from this rule.

7. Change of control and defence measures
7.1 Duty to make an offer
The Articles of Incorporation of Givaudan SA do not containany rules on opting out or opting up under Swiss law.

97

8. Auditors
8.1 Duration of the mandate and term of office of thelead auditor
At the Annual General Meeting of shareholders on 26 March
2009, Deloitte SA was first appointed as Group and statutory
auditor of Givaudan SA and its affiliates and has held the audit
mandate since that time. At the Annual General Meeting ofshareholders on 17 March 2016, Deloitte SA was reappointed forthe business year 2016. Since March 2016, the responsible lead
auditor for the Givaudan audit at Deloitte has been Ms Karine
Szegedi Pingoud, Partner.
8.2 Auditing fees
The fees of Deloitte for professional services related to theaudit of the Group’s annual accounts for the year 2016 were
CHF 3.6 million. This amount includes fees for the audit ofGivaudan SA, its subsidiaries, and of the consolidated financial
statements.
8.3 Additional fees
In addition, for the year 2016, Deloitte rendered tax andcompliance related services for a total of CHF 0.2 million.
8.4 Informational instruments pertaining to theexternal audit
The external auditor presents the outcome of the audit directly
to the Audit Committee after the end of each reporting year.
The Audit Committee is also responsible for evaluating theperformance of Deloitte as external auditors pursuant to a setof defined criteria. In addition, the Committee reviews andapproves the compensation and evaluates and approves otherservices provided by the external auditor. During 2016, Deloitte
attended all four of the Audit Committee meetings.
The scope of the audit is defined in an engagement letter
signed by the Chairman of the Audit Committee and the Chief
Financial Officer.

The Swiss legal provisions apply, by which anyone who acquires
more than 33.3% of the voting rights of a listed company isrequired to make a public offer to acquire all listed securities of
the Company that are listed for trading on the SIX Swiss
Exchange.
7.2 Clauses on changes of control
In the event of a change of control, share options, restricted
share units (RSU) and performance shares granted, as the casemay be, by the Company to members of the Board of Directors
and to a total of 401 senior management and employees may
vest immediately. All other defence measures against change ofcontrol situations previously in effect were deleted by the
Board of Directors in 2007.

Givaudan – 2016 Annual Report

98 Corporate governance

9. Information policy
Givaudan’s Principles of Disclosure and Transparency aredescribed in detail at: www.givaudan.com – our company  –
corporate governance – rules and policies.
Articles of Incorporation: www.givaudan.com – our company  –
corporate governance – rules and policies.
Hard copies of Company publications such as the Annual Report
are available on request.
All Corporate publications such as the Annual Report, the Half
Year Report and the Sustainability GRI Report can also be
downloaded from Givaudan’s website at: www.givaudan.com  –
media – publications.
Quarterly sales information and other media releases can befound at: www.givaudan.com – media – media releases.
All relevant information can also be found at:www.six-swiss-exchange.com – market data – shares –Givaudan - company details.
The complete calendar of events is available at:www.givaudan.com – investors – shareholder information –investor calendar.
For further information please contact:
Peter Wullschleger, Givaudan Media and Investor Relations
Chemin de la Parfumerie 5, 1214 Vernier, Switzerland
T +41 22 780 9093
E group.investors@givaudan.com

Givaudan – 2016 Annual Report

99

Givaudan – 2016 Annual Report

100

Wed Moluptatur Ditia

Simos soloriberis quate

Compensation
reportFair and competitive compensation isessential to attract, motivate and retain
the best talent in the industry.

In this section:

Givaudan – 2016 Annual Report

Compensation governance

102

Compensation principles

103

Compensation of Givaudan executives

104

Compensation of the Executive Committee

108

Compensation of the Board of Directors

109

Share ownership guidelines

110

Ownership of Givaudan securities

110

Statutory Auditor's Report112

Wed Moluptatur Ditia

Simos soloriberis quate

101

Our value creation
through thebest professional andexecutive talent

Our long-term success is built on the strength of ouremployees. By developing, motivating and retaining thebest executive talent, we foster a performance-driven
organisation and a great place to work.

Givaudan – 2016 Annual Report102 Compensation report

Compensation Report
Attract, motivate and retain

Givaudan aims to attract,
motivate and retain the highest
calibre of professional andexecutive talent to sustain its
leadership position within theflavour and fragrance industry.
The Company’s compensation
policies are an essential
component of this strategy,
as well as key drivers oforganisational performance.

Prof. Dr-Ing. Werner Bauer. The Chief Executive Officer isregularly invited to Compensation Committee meetings, butdoes not participate in discussions regarding his own
compensation. The Head of Global Human Resources acts as
secretary of the Committee.
The Compensation Committee supports the Board inestablishing and reviewing compensation policies. It regularly
reviews Company-wide programmes in regard to base salary,pension and benefit plans. The Compensation Committee also
regularly reviews and approves annual incentives and sharebased long-term incentives, while the applicable performance
criteria and targets are set by the Board.
The Compensation Committee is also responsible for reviewing
and approving individual compensation and benefits ofeach Executive Committee member as well as recommending
compensation for the Board.

Our compensation programmes reflect the performance ofthe business and of individuals, and we have put in place
rigorous governance, processes and policies to ensure that ourcompensation practices are aligned with our principles.

The Compensation Committee meets three to five times a year
and informs the Board of its deliberations, recommendations
and resolutions after each meeting. It utilises independent
external consultants to benchmark the compensation of senior
management. For further information on the work of theCompensation Committee, please see page 87.

This report on compensation, complementing our businessand financial reports, has been prepared in compliancewith the Ordinance against Excessive Compensation at Listed
Stock Companies (OaEC).

Table I on the next page summarises the Compensation
Committee standing agenda items and approvals.

1. Compensation governance
1.1 Overview
The Compensation Committee of the Board of Directors(Board) consists of three members of the Board, all of whom
are independent, and is currently chaired by

Givaudan – 2016 Annual Report

1.2 Key changes implemented during 2016
No changes in respect of Board of Director or Executive
Committee compensation system were made in thereporting year.
Overall reported Executive Committee compensation increased
due to the reporting of full year compensation for the threeCompensation report

103

I. Compensation Committee standing agenda items and approvals
Timing

Agenda items

Proposed 1

Beginning ofyear

Compensation Report

Compensation Committee

Board of Directors

Prior year annual incentive achievement

CEO 2

Compensation Committee

Set current year performance targets

CEO 2

Compensation Committee

Long-term incentive award allocation

CEO 2

Compensation Committee

Maximum amounts for shareholder voting on
Executive Committee and Board compensation

Compensation Committee

Board of Directors(preliminary) 3

Long-term incentive achievement
against targets

CEO 2

Compensation Committee

Compensation of the Executive Committee

CEO 2

Compensation Committee

Compensation of the Board of Directors

Compensation Committee

Changes to compensation system (if any)Compensation Committee

Preview of key items for next year–

Mid-year /end of year

Consultation

Approved

Board of Directors
Chairman

Board of Directors–

1. CEO compensation proposed by Chairman of the Compensation Committee.
2. Individual concerned does not attend/abstains.
3. Final approval by shareholders

Executive Committee members who joined during 2015 andthe appointment of a new member in August 2016. Details
are provided in section 4 of this report, 'Compensation of
the Executive Committee'.
Overall reported Board of Directors’ compensation
decreased, which is explained by the reduction of thenumber of members by one, to eight members. With theestablishment of a new Science and Innovation Committee
at the beginning of 2016 additional Committee fees
according to the Givaudan policy are now applicable.
1.3 Governance rules
The Articles of Incorporation of Givaudan include rules on
the principles applicable to performance-related pay and to
the allocation of equity securities, convertible rights andoptions (Arts. 23-25), additional amounts for payments to
Executive Committee members appointed after the voteon pay at the shareholders’ meeting (Art. 27), loans, credit
facilities and post-employment benefits for the Executive
Committee and Board (Arts. 30 and 31) and the vote on pay
at the shareholders’ meeting (Art. 26).
Full details on these rules are available on the Givaudan’s
website: www.givaudan.com – our company – corporate
governance – rules and policies.
In line with Givaudan’s Articles of Incorporation, at the 2017
Annual General Meeting the Board will submit thefollowing maximum aggregate amounts for shareholder
approval:– Compensation of the Board for the period until the 2018
ordinary shareholders’ meeting– Short-term variable compensation of the Executive
Committee for the 2016 fiscal year
– Fixed and long-term variable compensation of the Executive
Committee for the 2017 fiscal year.
The calculation approach to be applied for determining theamounts to be approved by shareholders is aligned with theCompensation Report valuation methodologies.
Givaudan will also submit the 2016 Compensation Report to a
consultative vote at the 2017 Annual General Meeting.

2. Compensation principles
The ability to attract, motivate and retain the right talented
employees globally is key to the future success of Givaudan.
A competitive remuneration policy supports this ambition andis therefore based on the following principles:– Pay for performance: employees are rewarded for theircontribution to business results. This is achieved through thevariable pay plans described below–E xternal competitiveness: total compensation positioning
should enable Givaudan to attract and retain highly talented
individuals critical to its success– Internal consistency and fairness: internal salary scales
reflect job level, function and geographic market– Alignment of interests: Givaudan seeks to align management
and shareholders’ interests by rewarding long-term value
creation through share-based programmes.

Givaudan – 2016 Annual Report104 Compensation report

Givaudan’s total compensation offering in 2016 is composed of
the following elements:

As illustrated in the following table, every Givaudan employee’s
remuneration is linked to Company performancethrough cash-based and/or share-based variable pay plans
and is aligned with Givaudan’s compensation principles.

– Base salary: base salaries are regularly benchmarked in eachlocation and pay scales are reviewed annually according to local
market evolution. As a general rule, pay scales are built aroundmarket median.

3. Compensation of Givaudan executives
The compensation of Givaudan executives, in terms ofboth structure and level, is regularly benchmarked against
individuals in similar positions within listed European
companies that are comparable in size and internationalpresence. Comparable companies included in ourcompensation surveys may consist of:– Profit Sharing Plan: non-management employees participate in
the global Profit Sharing Plan. Pay-outs are based on yearly
evolution of Group EBITDA.
– Annual Incentive Plan: this plan covers all managers andexecutives globally. It rewards participants for the achievementof financial targets and other organisational and individual
objectives. Depending on the achievement of performance
criteria, pay-outs can vary between 0% and 200% of
target pay-out.

– Flavour and fragrance companies,– European companies in related industries:• consumer products• food and beverage• speciality chemicals– Performance Share Plan (PSP): this plan links executives
and selected manager compensation to the evolution of theGivaudan share price and long-term business objectives
through the award of performance shares. Depending on theachievement of performance criteria, participants may receive
between zero and two Givaudan shares per performance
share at the end of the three-year vesting period.

– Swiss multinational companies of a size similar to Givaudan(excluding the financial sector).
To   the extent that the median size of the peer group ofcompanies differs from Givaudan’s size (taking into accountrevenue, market capitalisation and number of employees),
regression techniques are applied to adjust raw survey results
for strict comparability.

– Restricted Stock Unit (RSU) Plan: this plan links Board member
compensation with share price evolution by awarding a right toreceive Givaudan shares after a three-year vesting period.

All benchmarking activity for Executive Committee members is
performed by independent consultants. Benchmarking forother executives is performed internally by the Compensation
unit, using survey data provided by external consultants.
Givaudan’s executive compensation targets base pay at themarket median. Executives have the opportunity to be– Benefits (indirect compensation): benefit plans seek toaddress current and future security needs of employees. These
generally include retirement, health, death and disability
benefits. Benefits-in-kind such as Company vehicles are offeredto certain employees according to local market practice.

II. Givaudan compensation

Compensation

Participants (numberof participants)

PayoutBase salary

All employees (10,500)

Cash

Attract and retain highly talented
individuals. Provides internalconsistency and fairness

Nurture a pipeline ofindustry experts and future
leaders to develop skills forsustained successProfit Sharing Plan

Non-management
employees (7,000)

Cash

Contribution to financial and key
qualitative objectives

Reward our people to share inGroup profit

Annual Incentive Plan 1

Manager and executives(3,500)Cash

Contribution tofinancial objectives

Achieve annual organic sales
growth and EBITDA targets

Performance
shares 2

Alignment of managementwith long-term targets
and shareholders’ interests

Achieve long-term organic
sales growth and free cash
flow targets

Performance Share Plan 1 Executives and selected(PSP)managers (380)

Link to compensation
principles

1. The Annual Incentive Plan and PSP plan are described in more detail in the next sections.
2. Unless local laws prevent allocation of Givaudan shares, in which case pay-out is in cash.

Givaudan – 2016 Annual Report

Alignment with the business strategy

Compensation report

rewarded with above-median pay for sustained outstanding
performance from a number of variable compensation
components. These variable elements reflect achievements
against quantitative targets established by the Board, as well as
the contribution and leadership qualities of individual executives.
Variable compensation, particularly long-term components,
represents a significant portion of an executive’s totalcompensation. The weight of variable compensation increases
with executives’ level of responsibility and the impact of theirposition on Company results.
In 2016, Executive Committee compensation was benchmarked
against a peer group of 19 other Swiss multinational companies ofa size similar to Givaudan. This peer group consisted of Swiss
Leader Index (SLI) companies, excluding the five largest companies
and financial services institutions.
The results confirm that all compensation elements are positioned
around or below the median with some exceptions. Total
compensation of the Executive Committee is aligned with themarket. The long-term incentive compensation appears above
median, which is in line with Givaudan policy and reflects our strong
focus on rewarding outstanding performance over the long term.
To achieve our 2020 strategy of responsible growth and sharedsuccess through an ambitious setting of free cash flow and sales
growth targets, we have taken the position that increasing focus
on long-term incentives is appropriate. As part of a longer-term
programme to align all Executive Committee fixed compensation
with the market, pension increases had been implemented. This
programme came to a conclusion at the end of 2015.

In 2016, independent consulting services were contractedwith EY to conduct this Executive Committee benchmark.
EY provide additional advisory and tax services.
III. Executive compensation benchmark
Below
medianFixed pay1
Short-term incentive2

Median■■■Long-term incentive3
Total compensation

Above
median■1. Includes base salary, pension and other benefits
2. Annual Incentive Plan (please refer to section 3.2)
3. Performance Share Plan (please refer to section 3.3)

The total compensation of Givaudan executives consists ofdirect and indirect compensation components.
– Direct compensation consists of base salary, annual incentive
and share-based components– Indirect compensation includes retirement coverage, healthbenefits, death and disability protection as well as certain
benefits-in-kind according to local market practice.

105

The chart below illustrates the direct compensation mix attarget for Givaudan executives in 2016.
IV. Direct compensation mix policy guidelines
CEO

30%

18%

52%

Executive Commitee*

33%

15%

52%

Divisional Comittees

43%

Key Functional Heads

55%

Other Executives

65%

15%

42%
15%

30%
15%

20%

* Excluding CEO
Fixed pay

Annual incentive

Performance shares

3.1 Base salary
Base salary adjustments are based primarily onmarket evolution, taking into consideration the executive’s
performance and contribution to Company results.
Salary adjustments for Executive Committee members are
decided by the Compensation Committee.
3.2 Annual Incentive Plan
The Annual Incentive Plan is designed to reward managers’
and executives’ individual performance and contribution to
Givaudan annual objectives.
Performance criteria
Annual targets for Executive Committee members are set
by the Board based on recommendations by theCompensation Committee. In 2016, the Annual Incentive Planfor Executive Committee members was based on the following
performance criteria:– S ales Growth targets in local currencies: 50%– EBITDA margin targets: 50%
For the purpose of the Annual Incentive Plan, EBITDA isexpressed as a percentage of sales. Achievements
against these targets are reviewed and approved by theCompensation Committee.
Annual incentive pay-outs for lower level managers andexecutives are based on a mix of organisational performance
objectives cascaded from Givaudan Group objectives andoverall performance taking into consideration achievement of
personal objectives, day-to-day job responsibilities and theGivaudan core values. Expressed as a percentage ofbase salary, annual incentives at target were the following
in 2016:

Givaudan – 2016 Annual Report106 Compensation report– Chief Executive Officer: 80%– Chief Financial Officer and Division Presidents: 60%– Other Executive Committee members: 50%–D ivision Management Committee members: 35%-50%– Other executives and managers: 10%-35%
Incentive caps and pay-outs
Based on the performance achievements, incentive pay-outs
may vary between 0% and a cap of 200% of target incentive.
Minimum threshold achievement is required, otherwise noannual incentive is paid.
In 2016, the sales growth and the EBITDA were above target.
This resulted in an average of 114% of target pay-out for themembers of the Executive Committee and 113% of target
pay-out for the Chief Executive Officer. The table below
summarises historical annual incentive achievement against
target for the past six years.
V. Historical annual incentive achievement
2016

114%
113%

2015

104%
104%
101%

2014

3.3 Performance Share Plan
Executives and selected management are eligible to participate
in the Performance Share Plan (PSP). The PSP is designed to
reward executives and key talent who significantly influence
the long-term success of the business.
Within the plan, participants are granted performance sharesannually. The total number of performance shares granted, andthe plan parameters generally, are approved each year by theCompensation Committee. Givaudan applies a policy to cap
the maximum value of PSP allocations from year to year.
The performance shares vest three years from grant date,based on the achievement of performance criteria measured
over the performance period. The operation of the new PSP issummarised in the following diagram:
VI. Operation of the new PSP
Performance criteria

2016

2017

2018

2019

March
Grant date

March
Vesting date

Receiveperformance
shares

Receive 0–2
Givaudan shares
per performance
share, based on
the achievementof performance
criteria

101%
135%

2013

134%

2012

104%
102%

2011

82%
82%
Executive Committee
CEO

Target 100%

Performance is measured on the vesting date based on theextent performance criteria have been met over the previous
four years. Measuring performance over an extended four-year
period is consistent with the long-term outlook of thebusiness. The performance criteria that apply to grants are a
combination of:– Relative average sales growth as compared to the sales
growth of selected peer group companies; and– Cumulative Free Cash Flow (FCF) margin, expressed as apercentage of cumulative sales.
The peer group include companies selected from the flavour
and fragrance industry that publish sales in local currency.
These companies represent in total approximately 75%of this market. The peer companies currently included in thegroup are Firmenich, Hasegawa, IFF, Robertet, Sensient,Symrise and Takasago.
The structure of performance criteria calculation has
specifically been designed to be challenging. In the case of
Cumulative Free Cash Flow (FCF) margin, final achievement iscalculated as the average of the reported FCF margin
for each of the four performance years. This means that theGivaudan – 2016 Annual ReportCompensation report

Givaudan’s FCF for each year of the performance period issummed, and this cumulative result is divided by the sum ofGivaudan’s sales in each year of the performance period.
The assessment over four years ensures that the performancetargets are stringent and reward sustained Company
performance.
Share pay-out caps
Based on the extent that performance criteria are met, theactual number of shares vesting at the end of the performance
period will vary between 0% and 200% of the performance
shares initially granted. The level of vesting is dependent on the
combination of performance criteria that are satisfied.
The performance range for relative sales growth extends from
-2% to +2%. This represents annualised sales growth versus
peer group over the four-year performance period.
The performance range for FCF margin, measured over the
four-year performance period, extend from 9% to 19%.
A pay-out of 200% would require an achievement level above
the maximum threshold for both measures, relative sales
growth and FCF margin.
A 0% pay-out would be obtained if the achievement level on
either measure were below the minimum threshold.

107

other provided both minimum thresholds are reached, suchthat 100% pay-out may occur when relative average sales
growth is above the peer group, or FCF/Sales is above 14%(and vice versa).
Participants do not receive any dividends or have any
voting rights in respect of performance shares during thevesting period.
In general, performance shares lapse on cessation of
employment. In specific circumstances such as death, disabilityor retirement, performance shares may vest subject tosatisfaction of the performance criteria.
Target setting and achievement
Target setting and testing against targets follows adherence tostrict governance policies. For the first year of PSP grants in
2013, targets were set at the median of the peer group for Sales
Growth and at 10% Cumulative FCF/Sales. The cumulative FCF/
Sales target was set above our achievement for the four-year
periods immediately prior to the introduction of theplan. Since introduction of the plan, these targets have been
set to be increasingly challenging in line with Givaudan’shigh performance.
VIII. Basis of the cumulative FCF margin target setting:Historical FCF margin vs set target

Different combinations of relative sales growth and FCF
achievements within the above ranges lead to pay-outs
between 0% and 200%, ranked according to their long-term
economic value generation for the Company.

Basis fortarget setting1

A 100% pay-out can be obtained where a target combination of
the performance criteria is met, such as when relative averagesales growth is in line with the peer group and cumulative FCF
margin is 14%. High achievement against one performance
criteria can be counterbalanced by low achievement on theTarget2013 PSP

2014 PSP

2015 PSP

9.2%

10.3%

11.2%

10%

13%

14%

1. Cumulative FCF margin of the related previous 4 years

Average Sales Growth compared to peer group

VII. Performance Share Plan pay-out matrix
2

200%

1.5

The 2013 PSP vested on 29 March 2016 with a 145% pay-out.
This reflects strong overachievement against targets on both
performance measures. In contrast, in the event of lower levelsof achievement the PSP will vest below target (or not at all)such as was the case for the PSP having vested in 2013 at 50%
achievement.

1
0.5

100%

0
-0.5
-1
-1.5
-2

0%
9

11

13

Considering Givaudan historical cumulative FCF margin
performance, PSP targets have been set on a challenging basis.

15

17

19

Cumulative FCF / Sales
Darker region represents target achievement region for 100% payout

For reference, Givaudan tests performance against otherbenchmark metrics, including relative total shareholder return(TSR), and we continue to outperform the market in many
regards. For instance, Givaudan’s TSR measured over the period
from 2012 to 2016 has been above third quartile compared toour benchmark peer group.

Givaudan – 2016 Annual Report108 Compensation report

IX. 2013 PSP achievement
Criteria

Performance Pay-out

Average sales growth
0.1%
compared to peer group
Cumulative
FCF/sales*

14.3%

Pay-out

145%
of performance
shares granted

Formula = Σ (Free cash flow margin reporting year x sales inreporting currency in year / Σ Sales in reporting currency in year)
X. Variable compensation overview
AnnualIncentive Plan

Performance
Share Plan

Participants

Managers andexecutives

Key talent andexecutives

PurposeTo reward managers
and executives for theachievement of annualorganisational targets
and overall individual
performance

To link compensation
to shareholder value
creation andachievement ofbusiness objectives

GrantsAnnual grant

Annual grantVesting

End of each year

3 years

Conditions forvesting

Achievement ofannual EBITDA andsales growth targets

Achievement relative
sales growthand FCF/sales targets
over 4 years

Pay-out

Cash

Shares 1

1. Unless local laws prevent allocation of Givaudan shares, in which casepay-out is in cash.

3.4 Previous long-term incentive plan arrangements
The PSP, which was introduced for grants in 2013, replacing all
existing LTIP arrangements. Any awards under the previous LTIPs
were not cancelled, but rather continued to be held in accordancewith the rules of those plans. All awards under the previous
plans have now vested.
Previous awards under LTIP arrangements included stock-options,
restricted share units and Performance Shares. The previous
Performance Shares granted in 2008 vested in 2013 to an
achievement level of 50% based on testing against the predefined
economic value generation measured over a five-year period.

4. Compensation of the Executive Committee
4.1 Compensation levels in 2016
In 2016, total compensation reported increased due to thereporting of full year compensation for the three Executive
Committee members who joined during 2015 and theappointment of Anne Tayac as Head of Givaudan Business
Solutions in August 2016. Additional compensation above theshareholder approved amount was paid in accordance with
our Articles of Incorporation (Art. 27). Further details are

Givaudan – 2016 Annual Reportprovided in section 4.6. The compensation package for the newly
appointed Executive Committee member has been set inaccordance with our compensation principles, including
consideration of roles and responsibilities and with reference to
our compensation benchmarks.
4.2 Highest total compensation
The Chief Executive Officer, Gilles Andrier, received the highest
total compensation in 2016. For compensation details, please referto table XI.
4.3 Other compensation, fees and loans to members orformer members of the Executive Committee
No other compensation or fees were accrued for or paid to any
member or former member of the Executive Committee during
the reporting period. No member or former member of the
Executive Committee or related parties had any loan outstanding
as of 31 December 2016.
4.4 Special compensation of Executive Committee members
who left the Company during the reporting period
Adrien Gonckel retired from his role as Chief Information Officer
on 1 August 2016. He did not receive any special compensation as aresult of his retirement. All compensation is included in thecompensation table XI.
4.5 Employment contract termination clauses of Executive
Committee members
Employment contracts of Executive Committee members havebeen amended for compliance with the OaEC and our Articles ofIncorporation. Accordingly, contractual entitlements are within
the specified thresholds, in particular the maximum contractual
notice period is six months and any non-compete clause does notexceed 12 months. No additional compensation or benefits areprovided in the case of change in control, except for long-term
incentive awards that may vest immediately.
All contractual arrangements of Executive Committee members
are approved by the Compensation Committee of the Board.

4.6 Compensation voting for Executive Committee
members
As indicated in section 4.1, a new member joined the Executive
Committee in 2016. Consequently, additional compensation above
the shareholder approved amount has been paid in accordancewith the Givaudan Articles of Incorporation (Art. 27), which
provides that certain supplementary amounts may be paid for
newly appointed Executive Committee members within certain
thresholds. The total supplementary amount used for the relevant
period amounts to CHF 142,204.
The fixed and long term variable compensation approved for 2016
was CHF 19,800,000 (2015: CHF 15,500,000).
The annual incentive, short term variable compensation for 2016
was CHF 3,287,520 and will be submitted for approval at the 2017
Annual General Meeting (2015: CHF 2,392,716).

Compensation report

109

XI. Executive Committee compensation summary

in Swiss francs
Base salary

Gilles Andrier
CEO 2016

Executive
Executive
Committee members Committee members
1
Gilles Andrier(excluding CEO)(excluding CEO) 2
CEO 2015
2016
2015

Total
2016

Total
2015

1,035,599

1,027,689

3,819,306

2,662,741

4,854,905

3,690,430

Pension benefits 3

442,705

459,199

1,558,506

1,119,563

2,001,211

1,578,762

Other benefits 4

111,061

100,616

792,134

591,992

903,195

692,608

Total fixed compensation

1,589,365

1,587,504

6,169,946

4,374,296

7,759,311

5,961,800

Annual incentive 5

944,804

854,544

2,342,717

1,538,172

3,287,521

2,392,716

1,686

1,446

5,441

4,396

7,127

5,842

2,882,048

2,307,671

9,300,845

7,015,576

12,182,893

9,323,247

Number of performance shares granted 6
Value at grant 7
Total variable compensation

3,826,852

3,162,215

11,643,562

8,553,748

15,470,414

11,715,963

Total compensation

5,416,217

4,749,719

17,813,508

12,928,044

23,229,725

17,677,763

438,000

382,000

1,427,000

1,064,000

1,865,000

1,446,000

Employer social security 8

1.	Represents full year compensation of eight Executive Committee members and partial year compensation of the new Executive Committee member in 2016. Adrien Gonckel
retired from his role as Chief Information Officer on 1 August 2016. Part of his total compensation for 2016 relates to the period from the time he ceased to be an EC member
until 31 December 2016.
2.	Represents full year compensation of five Executive Committee members and partial year compensation of the three new Executive Committee members in 2015.
3.	Company contributions to broad-based pension and retirement savings plans and annualised expenses accrued for supplementary executive retirement benefit.
4.	Represents annual value of health and welfare plans, international assignment benefits and other benefits in kind.
5.	A nnual incentive accrued in reporting period based on 2016 performance.
6.	2016 Performance shares vest on 15 April 2019, 2015 Performance shares vest on 31 March 2018.
7.	Value at grant calculated according to IFRS methodology and based on 100% achievement of performance targets.
8.	2016 estimated social security charges based on 2016 compensation; 2015 estimated social security charges based on 2015 compensation.

5. Compensation of the Board of Directors
Compensation of Board members consists of Director fees,
Committee fees and restricted share units (RSUs). Fees are paid
at the end of each year in office completed. RSUs give
participants the right to receive Givaudan shares (or a cash
equivalent in countries where securities laws prevent theoffering of Givaudan securities) at the end of a three-year
vesting period.
With the exception of the Chairman and outgoing Board
members, each Board member receives an additional amountof CHF 10,000 to cover out-of-pocket expenses. This amount is
paid for the coming year in office. The equity awards are also
granted for the same period. The compensation paid out to theBoard members for the reporting period is shown in table XII.
5.1 Compensation of the Board member withthe highest compensation
The Board member with the highest compensation in 2016 was
Dr Jürg Witmer, Chairman of the Board since 28 April 2005. For
compensation details please refer to table XII.

5.2 Other compensation, fees and loans to members orformer members of the Board
No additional compensation or fees were paid to any memberof the Board. No Board member or related parties had any loan
outstanding as of 31 December 2016.
5.3 Special compensation of members of the Board who
left the Company during the reporting period
No such compensation was incurred during the reporting
period.
5.4 Compensation voting for members of the Board
The compensation paid to the Board members for the period
between the 2015 and 2016 Annual General Meetings is within
the amount approved by shareholders at the 2015 Annual
General Meeting (CHF 3,300,000). Amounts approved at the2016 Annual General Meeting (CHF 3,300,000) will be paid by
the end of the year in office and validated in the 2016
Compensation Report. Such approved and paid amounts will
differ from those shown in the Board of Directors
compensation summary table which, according to the OaEC,
must include compensation paid in the reporting year.

Givaudan – 2016 Annual Report110Compensation report

XII. Board of Directors compensation summary

2016
in Swiss francs

Dr Jürg
WitmerChairman 7

André
Hoffmann
6,7

Victor
Balli 5,7

Prof.
Dr-Ing.
WernerBauer 7

LilianBiner 7

MichaelCarlos 7

IngridDeltenre 7

CalvinPeter
Grieder 7 Kappeler 6,7

ThomasRufer 7Total
2016 1
1,125,000

Director fees 2400,000

25,00075,000100,000

100,000

100,000

100,000

100,000

25,000100,000

Committee fees 2

40,00010,00018,75065,00050,00040,00050,00050,0006,250

55,000385,000

Total fixed (cash)

440,000

35,00093,750165,000

150,000

140,000

150,000

150,000

31,250155,000

1,510,000

340

85

85

85

85

85

85

85

935

581,196

145,299

145,299

145,299

145,299

145,299

145,299

145,299

1,598,289

239,049

310,299295,299285,299295,299295,299

300,299

3,108,289

Number of RSUs granted 3
Value at grant 4
Total compensation

1,021,196

35,00031,2501.	Represents total compensation for the Board of Director paid in respect of the reporting year, reported in accordance with the accrual principle.
2.	Represents Director and Committee fees paid in respect of the reporting year, reported in accordance with the accrual principle.
3.	R SUs vest on 15 April 2019.
4.	Economic value at grant according to IFRS methodology, with no discount applied for the vesting period.
5.	Elected at the Annual General Meeting in March 2016.
6.	Retired at the Annual General Meeting in March 2016.
7.	The function of each member of the Board of Directors are indicated on pages 80-84 in the Corporate Governance section of the 2016 Annual Report.

Estimated social security charges based on 2016 compensation amounted to CHF 221,000 (2015: CHF 232,000).
In addition to the above, payments to Board members for out-of-pocket expenses amounted to CHF 70,000 (2015: 80,000).

2015
in Swiss francs

Dr Jürg
AndréWitmerChairman 7 Hoffmann 7

Prof.
Dr-Ing.
WernerBauer 7

LilianBiner 7

MichaelCarlos5,7IngridDeltenre5,7

CalvinGrieder 7Peter
Kappeler 7

ThomasRufer 7

Nabil
Sakkab 6,7

Total
2015 1
1,175,000

Director fees 2400,000

100,000

100,000

100,000

75,00075,000100,000

100,000

100,000

25,000Committee fees 2

40,00040,00025,00031,25018,75018,75025,00025,00055,0006,250

285,000

Total fixed (cash)

440,000

140,000

125,000

131,250

93,75093,750125,000

125,000

155,000

31,2501,460,000

364

91

91

91

91

91

91

91

91

1,092

580,908

145,227

145,227

145,227

145,227

145,227

145,227

145,227

145,227

1,742,724

1,020,908

285,227

270,227

276,477

238,977

238,977

270,227

270,227

300,227

Number of RSUs granted 3
Value at grant 4
Total compensation

31,2503,202,724

1.	Represents total compensation for the Board of Director paid in respect of the reporting year, reported in accordance with the accrual principle.
2.	Represents Director and Committee fees paid in respect of the reporting year, reported in accordance with the accrual principle.
3.	R SUs vest on 31 March 2018.
4.	Economic value at grant according to IFRS methodology, with no discount applied for the vesting period.
5.	Elected at the Annual General Meeting in March 2015.
6.	Retired at the Annual General Meeting in March 2015.
7.	The function of each member of the Board of Directors are indicated on pages 74-78 in the Corporate Governance section of the 2015 Annual Report.

6. Share ownership guidelines

7. Ownership of Givaudan securities

Givaudan introduced share ownership guidelines in 2013, underwhich Executive Committee members must holdapproximately one times their annual base salary in Givaudan
shares. This requirement should be met by 2016, or within three
years from the beginning of the calendar year after joining the
Executive Committee. Ownership of Givaudan shares by
Executive Committee members as per 31 December 2016 isshown in table XIII.

7.1 Board of Directors
As per 31 December 2016, the Chairman and other Board
members, including persons closely connected to them held
5,546 Givaudan shares in total. For further details, please referto table XIII showing:– The shares held individually by each Board member as per 31
December 2016
– The RSUs that were granted in 2014-2016 and were still
owned by members of the Board as per 31 December 2016

Givaudan – 2016 Annual ReportCompensation report

111

XIII. Board of Directors: ownership of Givaudan securities

XIV. Executive Committee: ownership of Givaudan securities

2016
in numbers

SharesUnvested RSUs

2016
in numbers

SharesDr Jürg Witmer, Chairman

1,500

1,180

Gilles Andrier, CEO

2,400

5,032

85

Matthias Waehren

300

3,293
2,929

Victor Balli

Unvested
performance shares

Prof. Dr-Ing. Werner Bauer

970

295

Mauricio Graber

550

Lilian Biner

377

295

Maurizio Volpi

486

1,710

Michael Carlos1

2,083

176

Joe Fabbri

100

2,287

Ingrid Deltenre

26

56

1,312

Calvin Grieder

176

Simon Halle-Smith

295

Willem Mutsaerts

943

Thomas Rufer

590

295

Anne Tayac

104

529

Total 2016

5,546

2,797

Chris Thoen

464

1,243

Total 2015

93,901

3,526

Total 2016

4,460

19,278

Total 2015

3,575

21,845

1.	Mr Carlos also held 1,750 unvested performance shares as per 31 December 2016
granted to him during his tenure as an Executive Committee member.

The Company is not aware of any other ownership of shares,
share options/option rights, RSUs or performance shares as per
31 December 2016 by persons closely connected to members of
the Board.

No member of the Executive Committee held any share options
or option rights as at 31 December 2016 (31 December 2015: nomember of the Executive Committee held any share options or
option rights).

7.2 Executive Committee
The Chief Executive Officer and other members of the
Executive Committee, including persons closely connected tothem, held 4,460 Givaudan shares. For further details, pleaserefer to table XIV showing:

Two people closely connected to members of the Executive
Committee owned Givaudan securities as at 31 December 2016:- One person owned 859 shares- One person owned 264 unvested performance shares.

– The shares held individually by each member of the Executive
Committee as per 31 December 2016– The unvested performance shares that were granted in
2014–2016 and were still owned by members of the
Executive Committee as per 31 December 2016

The Company is not aware of any other ownership of shares,
share options/option rights, RSUs or performance shares as per
31 December 2016 by persons closely connected to members of
the Executive Committee.

Givaudan – 2016 Annual Report112Compensation report

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Phone: +41 (0)58 279 8000
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Statutory Auditor’s Report
To the General Meeting of Givaudan SA, Vernier
Report of the statutory auditor in relation to sections 4 and 5 of the Compensation Report inaccordance with the Ordinance against Excessive Compensation in Stock Exchange Listed Companies(Ordinance)
We have audited sections 4 and 5 of the Compensation Report of Givaudan SA for the year ended December 31, 2016, presented on pages 108 to 110.

Responsibility of the Board of Directors
The Board of Directors is responsible for the preparation and overall fair presentation of the Compensation Report in accordance with Swiss law and
the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible fordesigning the remuneration system and defining individual remuneration packages.

Auditor’s Responsibility
Our responsibility is to express an opinion on the Compensation Rieport. We conducted our audit in accordance with Swiss Auditing Standards.
Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether
the Compensation Report complies with Swiss law and articles 14 – 16 of the Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the Compensation Report with regard tocompensation, loans and credits in accordance with articles 14 – 16 of the Ordinance. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatements in the Compensation Report, whether due to fraud or error. This audit also includes
evaluating the reasonableness of the methods applied to value components of remuneration, as well as assessing the overall presentation of theCompensation Report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

OpinionIn our opinion, sections 4 and 5 of the Compensation Report of Givaudan SA for the year ended December 31, 2016 comply with Swiss law andarticles 14 – 16 of the Ordinance.

Deloitte SA

Karine Szegedi PingoudJoëlle Herbette

Licensed Audit Expert
Auditor in Charge

Licensed Audit Expert

Geneva, 27 January 2017

Givaudan – 2016 Annual Report

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Givaudan – 2016 Annual Report

114

Financial
ReportDetailed contents:
Consolidated financial statements

Consolidated Income Statement for the year
ended 31 December

116

Consolidated Statement of Comprehensive
Income for the year ended 31 December

117

Consolidated Statement of Financial Position
as at 31 December

118

Consolidated Statement of Changes in Equity
for the year ended 31 December

119

Consolidated Statement of Cash Flows for theyear ended 31 December

120

Notes to the consolidated financial statements

9. Share-Based Payments

155

10. Jointly Controlled Entities

156

11. Other Operating Income

156

12 Other Operating Expense

156

13. Expenses by Nature

157

14. Financing Costs

157

15. Other Financial (Income) Expense, Net

157

16. Income Taxes

158

17. Earnings per Share

160

18. Cash and Cash Equivalents

160

19. Accounts Receivable – Trade161

20. Inventories

161

21. Property, Plant and Equipment

162

1. Group Organisation

121

2. Summary of Significant Accounting Policies

121

3. Critical Accounting Estimatesand Judgments

135

4. Foreign Exchange Rates

136

22. Intangible Assets

163

5. Financial Risk Management

136

23. Debt

165

6. Acquisitions

146

24. Provisions

167

7. Segment Information

146

25. Own Equity Instruments

168

8. Employee Benefits

148

26. Equity

168

Givaudan – 2016 Annual ReportWed Moluptatur Ditia

27. Commitments

169

28. Contingent Liabilities

169

29. Related Parties

170

30. Board of Directors and Executive
Committee Compensation

171

31. List of Principal Group Companies

174

32. Disclosure of the Process of Risk
Assessment

175

33. Subsequent Event

175

Simos soloriberis quate

115

Report of the Statutory Auditor

Statutory Auditor’s Report on theConsolidated Financial Statements

176

Statutory Financial Statements ofGivaudan SA (Group Holding Company)

Income Statement for the year ended
31 December

182

Statement of Financial Position as at
31 December

183

Notes to the Statutory Financial Statements

1. General Information

184

2. Summary of accounting principles adopted

184

3. List of Direct Subsidiaries

185

4. Cash and cash equivalents

186

5. Jointly Controlled Entities

186

6. Debt

186

7. Indirect Taxes

186

8. Equity

187

9. Own Shares

188

10. Board of Directors and Executive
Committee Compensation

188

11. E xceptional Events

188

12. S
 ubsequent Event

188

Appropriation of available earnings anddistribution from the statutory capitalreserves from contributions – additional
paid-in capital of Givaudan SA

Proposal of the Board of Directors to theGeneral Meeting of Shareholders

189

Report of the Statutory Auditor

Statutory Auditor’s Report on the Financial
Statements

190

Givaudan – 2016 Annual Report

116

Financial report

Consolidated financial statements

Consolidated financial statements
Consolidated Income Statement
For the year ended 31 Decemberin millions of Swiss francs, except for earnings per share data

Sales

Note

2016

2015 a

7

4,663

4,396
(2,366)

Cost of sales(2,535)Gross profit

2,128

2,030

as % of sales

45.6%

46.2%

Selling, marketing and distribution expenses

(640)

(608)

Research and product development expenses

(400)

(366)

Administration expenses

(186)

(169)

Share of (loss) profit of jointly controlled entities

10

(1)

(2)

Other operating income

11

75

41

Other operating expense

12

(101)

(132)

Operating income
as % of sales

875

794

18.8%

18.1%

Financing costs

14

(51)

(61)

Other financial income (expense), net

15

(40)

(37)

784

696

16

(140)

(71)

644

625

Income before taxes
Income taxes
Income for the period
Attribution
Income attributable to equity holders of the parent
as % of sales

644

625

13.8%

14.2%

Earnings per share − basic (CHF)

17

69.95

67.89

Earnings per share − diluted (CHF)

17

69.34

67.06

a)	Previous year figures have been restated in accordance with early adoption of IFRS 9 (see Note 2).
The notes on pages 121 to 175 form an integral part of these financial statements.

Givaudan – 2016 Annual ReportFinancial report

Consolidated financial statements

117

Consolidated Statement of Comprehensive Income
For the year ended 31 Decemberin millions of Swiss francs

Note

Income for the period

20162015 a644

625

Items that may be reclassified to the income statement
Cash flow hedges
(14)

(15)

Gains (losses) removed from equity and recognised in the consolidated income statement

Movement in fair value, net
15

10

11

Movement on income tax

16

1

1

Exchange differences arising on translation of foreign operations
Change in currency translation

(125)

(206)

16

2

5

Remeasurement gains (losses) of post employment benefit obligations

8

(148)

67

Movement on income tax

16

33

(24)

Other comprehensive income for the period

(241)

(161)

Total comprehensive income for the period

403

464

403

464

Movement on income tax
Items that will not be reclassified to the income statement
Defined benefit pension plans

Attribution
Total comprehensive income attributable to equity holders of the parenta)	Previous year figures have been restated in accordance with early adoption of IFRS 9 (see Note 2).
The notes on pages 121 to 175 form an integral part of these financial statements.

Givaudan – 2016 Annual Report

118

Financial report

Consolidated financial statements

Consolidated Statement of Financial Position
As at 31 Decemberin millions of Swiss francs

Note

31 December 31 December
2016
2015 a1 January
2015 aCash and cash equivalents

18

328

478

412

Derivative financial instruments

5

9

17

21

Derivatives on own equity instruments

25

3

6

10

Financial assets at fair value through income statement

5

1

2

64

Accounts receivable - trade

5, 19

996

901

911

Inventories

20

788

716

771

Current tax assets

16

26

16

22

Other current assets

5

192

143

146
2,357

Current assets

2,343

2,279

Property, plant and equipment

21

1,442

1,384

1,430

Intangible assets

22

2,311

2,197

2,293

Deferred tax assets

16

259

260

258

Post-employment benefit plan assets

8

12

15

7

Financial assets at fair value through income statement

5

59

76

76

Jointly controlled entities

10

Other long-term assets

35

27

17

53

44

34

Non-current assets

4,171

4,003

4,115

Total assets

6,514

6,282

6,472

5, 23

7

208

57

Derivative financial instruments

5

32

18

19

Accounts payable - trade and others

5

494

400

423
119

Short-term debt

Accrued payroll & payroll taxes

143

120

Current tax liabilities

16

46

70

82

Financial liability: own equity instruments

25

57

48

54

Provisions

24

Other current liabilities
Current liabilities
Derivative financial instruments
Long-term debt

6

12

12

174

138

155
921

959

1,014

5

62

62

50

5, 23

1,251

947

1,150

Provisions

24

59

51

36

Post-employment benefit plan liabilities

8

722

637

735

Deferred tax liabilities

16

88

Other non-current liabilities
Non-current liabilities
Total liabilities

93

92

75

64

79

2,262

1,853

2,138
3,059

3,221

2,867

Share capital

26

92

92

92

Retained earnings and reserves

26

5,477

5,373

5,209

Own equity instruments

26

(109)

(79)

(78)

25, 26(2,167)(1,971)(1,810)Equity attributable to equity holders of the parent

3,293

3,415

3,413

Total equity

3,293

3,415

3,413

Total liabilities and equity

6,514

6,282

6,472

Other components of equitya)	Previous year figures have been restated in accordance with early adoption of IFRS 9 (see Note 2).
The notes on pages 121 to 175 form an integral part of these financial statements.

Givaudan – 2016 Annual ReportFinancial report

Consolidated financial statements

119

Consolidated Statement of Changes in Equity
For the year ended 31 December

2016
in millions of Swiss francs

Share
CapitalRetainedearnings
and reserves

Own equity
instruments

Cash
flow
hedgesAvailablefor-salefinancialassets

12

Note

26

26

25, 26

Balance as at 1 January published

92

5,361

(79)

(70)

Balance as at 1 January restated

92

5,373

(79)

Income for the period
Total comprehensive income for the period

644

Dividends paid

(495)

3,415

(70)

(1,396)

(505)

3,415

(3)

(123)

(115)

(241)

(3)

(123)

(115)

(30)

92

Share
Capital

403
(495)
(30)

(45)

Net change in other equity items

2015 ain millions of Swiss francs

8
(505)

644

Movement on own equity instruments, net
Transfers

Total
equity(1,396)644

Other comprehensive income for the period

Balance as at 31 December

Remeasurement of post
Currency employmenttranslation
benefitdifferences
obligations

45

(540)

(30)

5,477

(109)

Retainedearnings
and reserves

Own equity
instruments

25, 26

(73)

45

(525)

(575)

3,293

Remeasurement of post
Currency employmenttranslation
benefitdifferences
obligations

Total
equity(1,519)CashflowhedgesAvailablefor-salefinancialassets

22

Note

26

26

Balance as at 1 January published

92

5,187

(78)

(67)

(1,195)

(548)

3,413

Balance as at 1 January restated

92

5,209

(78)

(67)

(1,195)

(548)

3,413

(3)

(201)

43

(161)

(3)

(201)

43

Income for the period

625

625

Other comprehensive income for the period
Total comprehensive income for the period

625

Dividends paid

(461)

Movement on own equity instruments, net
Net change in other equity items
Balance as at 31 December restated

92

464
(461)

(1)

(1)

(461)

(1)

(462)

5,373

(79)

(70)

(1,396)

(505)

3,415

a)	Previous year figures have been restated in accordance with early adoption of IFRS 9 (see Note 2).
The notes on pages 121 to 175 form an integral part of these financial statements.

Givaudan – 2016 Annual Report

120

Financial report

Consolidated financial statements

Consolidated Statement of Cash Flows
For the year ended 31 Decemberin millions of Swiss francs

Note

Income for the period

20162015 a

644

625
71

Income tax expense

16

140

Interest expense

14

42

47

14, 1549

51

Non-operating income and expense
Operating income

875

794

Depreciation of property, plant and equipment

21

113

112

Amortisation of intangible assets

22

132

157

21, 22

6

7

33

40

- pension expense

8

(23)

1

- additional and unused provisions, net

24

10

30

Impairment of long-lived assets
Other non-cash items- share-based payments- other non-cash items

(10)

43

Adjustments for non-cash items

261

390

(Increase) decrease in inventories

(38)

4

(Increase) decrease in accounts receivable

(107)

(76)

(Increase) decrease in other current assets

(53)

3

Increase (decrease) in accounts payable

55

(7)

Increase (decrease) in other current liabilities(Increase) decrease in working capital
Income taxes paid

52

(4)

(91)

(80)

(127)

(107)

Pension contributions paid

8

(45)

(45)

Provisions used

24

(8)

(12)

Purchase and sale of own equity instruments, net

(48)

(43)

Impact of financial transactions, net

(12)

18

Cash flows from (for) operating activities

805

915

Increase in long-term debt

299

200

(Decrease) in long-term debt

–

(202)

Increase in short-term debt

463

506

(Decrease) in short-term debt

(663)

(564)

Interest paid

(33)

(36)

(495)

(461)

Purchase and sale of derivative financial instruments, net

(8)

(16)

Others, net

–

(5)

(437)

(578)

Distribution to the shareholders paid

26

Cash flows from (for) financing activities
Acquisition of property, plant and equipment

21

(136)

(126)

Acquisition of intangible assets

22

(40)

(35)

Increase in share capital of jointly controlled entities

10

(9)

(14)

Acquisition of subsidiary, net of cash acquired

6

(331)

(91)

Proceeds from the disposal of property, plant and equipment

21

1

1

Interest received

2

1

Purchase and sale of financial assets at fair value through income statement, net

23

52

(13)

(13)

Cash flows from (for) investing activities

(503)

(225)

Net increase (decrease) in cash and cash equivalents

(135)

112

Net effect of currency translation on cash and cash equivalents

(15)

(46)

Purchase and sale of derivative financial instruments, net–

Others, net

Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the perioda)	Previous year figures have been restated in accordance with early adoption of IFRS 9 (see Note 2).
The notes on pages 121 to 175 form an integral part of these financial statements.
Givaudan – 2016 Annual Report

18

478

412

328

478

Financial report

Notes to the consolidated financial statements

121

Notes to the consolidated financial statements
1. Group Organisation

Givaudan SA and its subsidiaries (hereafter ‘the Group’) operate under the name Givaudan. Givaudan SA is a limited liability
company incorporated and domiciled in Switzerland. The Group is headquartered in Vernier, near Geneva, Switzerland.
Givaudan is a leading supplier of creative fragrance and flavour products to the consumer goods industry. It operates in over
100 countries and has subsidiaries and branches in more than 40 countries. Worldwide, it employs 10,476 people. A list of theprincipal Group companies is shown in Note 31 to the consolidated financial statements.
The Group is listed on the SIX Swiss Exchange (GIVN).

2. Summary of Significant Accounting Policies

The significant accounting policies applied in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all years presented, unless otherwise stated.

2.1 Basis of Preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)
as issued by the IASB and Swiss law.
They are prepared under the historical cost convention as modified by the revaluation of financial assets and financial liabilities atfair value through the income statement, and of own equity instruments classified as derivatives. Historical cost is generally basedon the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sellan asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardlessof whether that price is directly observable or estimated using another valuation technique.
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, andreported amounts of revenues and expenses during the reporting period. It also requires management to exercise its judgment in
the process of applying the Group’s accounting policies. Critical accounting estimates and judgments are disclosed in Note 3.
Givaudan SA’s Board of Directors approved these consolidated financial statements on 27 January 2017.
2.1.1 Changes in Accounting Policies and Disclosures
Standards, amendments and interpretations effective in 2016
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2015, as
described in the 2015 consolidated financial statements, with the exception of the adoption as of 1 January 2016 of the standards andinterpretations described below:
Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation prohibit entities fromusing a revenue-based depreciation method for items of property, plant and equipment and introduce the rebuttable presumptionthat revenue is not an appropriate basis for amortisation of an intangible asset. The adoption of these amendments does not result ina change in the financial information currently disclosed because the long-lived assets are depreciated / amortised on a straight-line
basis over the estimated economic useful life of the asset (see Notes 2.15 and 2.17).
Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations clarify that the acquirer of an interest in ajoint operation in which the activity constitutes a business, as defined in IFRS 3, is required to apply all of the principles on businesscombinations accounting in IFRS 3. The adoption of these amendments has no impact on the joint arrangements currently held by
the Group.

Givaudan – 2016 Annual Report

122

Financial report

Notes to the consolidated financial statements

IFRS 14 Regulatory Deferral Accounts permits an entity which is a first-time adopter of International Financial Reporting Standards
to continue to account, with some limited changes, for ‘regulatory deferral account balances’ in accordance with its previous GAAP.
This standard does not affect the Group as it is not a first-time adopter of IFRS.
Amendments to IAS 27: Equity Method in Separate Financial Statements reinstate the equity method as an accounting option forinvestments in subsidiaries, joint ventures and associates in an entity’s separate financial statements. The adoption of theseamendments has no impact because the Group does not prepare separate financial statements in accordance with IFRS.
Amendments to IAS 16 and IAS 41: Agriculture: Bearer Plants require bearer plants to be accounted for as property, plant andequipment. The produce growing on bearer plants remains in the scope of agriculture activities. The adoption of these amendments
has no impact because the Group does not hold bearer plants.
Annual Improvements to IFRSs 2012-2014 Cycle include amendments to a number of IFRSs (IFRS 5 Non-current Assets Held for Saleand Discontinued Operations, IFRS 7 Financial Instruments: Disclosures with consequential amendments to IFRS 1, IAS 19 Employee
Benefits and IAS 34 Interim Financial Reporting) which do not affect the information currently disclosed by the Group.
Amendments to IAS 1: Disclosure Initiative are designed to address concerns expressed by constituents about existing presentationand disclosure requirements and to encourage entities to use judgement in the application of IAS 1 when considering the layout andcontent of their financial statements. The Group assessed that the adoption of these amendments does not result in a change in theinformation currently disclosed.
Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception introduce a requirementthat if an entity met the definition of an ‘investment entity’ it would be required to measure and present its investments in particularsubsidiaries at fair value through the income statement in its consolidated and separate financial statements, rather thanconsolidating them. The adoption of these amendments has no impact because the Group does not hold investment entities.
IFRS 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities
and introduces new rules for hedge accounting. As at 1 January 2016, the Group has early adopted IFRS 9 as issued inJuly 2014. As a result of the adoption of IFRS 9, the Group classifies all financial assets as financial assets at fair value through theincome statement except for trade receivables which are classified at amortised cost.
The adoption of IFRS 9 helps to align the accounting of financial assets with the objectives to collect contractual cash flows as theycome due and to sell financial assets.
Financial assets at fair value through the income statement
Financial assets that are used to fund the settlements of long-term incentive plans recognised in the liabilities fulfil theobjectives of collecting contractual cash flows and selling financial assets. Investments accounted for as available-for-salefinancial assets in accordance with IAS 39 change their measurement category to “at fair value through the income
statement” which is more consistent, in the Group’s opinion, with the Group’s strategic investments objectives.
 erivative financial assets accounted for at fair value through the income statement in accordance with IAS 39 remain inD
the same measurement category unless they are designated as effective hedging instruments.
Financial assets at amortised cost
Trade receivables reach the objective of collecting contractual cash flows over their life. Trade receivables accounted
for as “loans and receivables” financial assets in accordance with IAS 39 change their measurement category to “atamortised cost”.

Givaudan – 2016 Annual ReportFinancial report

Notes to the consolidated financial statements

123

The new hedging rules align hedge accounting more closely with the Group’s risk management practices. The hedging strategy of
the Group is not changed.
The new impairment model is an expected credit loss (ECL) model which may result in the earlier recognition of credit losses than
the incurred loss impairment model used in IAS 39. The Group applies a simplified approach for trade receivables, for which the
tracking of changes in credit risk is not required but instead the base lifetime expected credit loss at all times is applied. The current
practice for measuring the trade receivables does not change.
For financial liabilities, there is no change in their classification and measurement except for liabilities designated at fair value
through the income statement for which the amount of change in the fair value that is attributable to changes in own credit risk ispresented in other comprehensive income. The Group has currently only financial liabilities at amortised cost and therefore there is
no impact in their classification.
The following tables summarise the impact of the above changes on the Group’s financial position, on the statement ofcomprehensive income, and on earnings per share.

Givaudan – 2016 Annual Report

124

Financial report

Notes to the consolidated financial statements

Financial position as at 1 January 2015
in millions of Swiss francs

Available-for-sale financial assets

Reported Adjustments

64

Financial assets at fair value through income statement

Restated

(64)
64

64

Current assets
Financial assets at fair value through income statement

35

41

76

Other long-term assets

75 a

(41)

34

Non-current assets
Retained earnings and reserves

5,187

22

5,209

Other components of equity(1,788) a(22)(1,810)

Reported Adjustments

Restated

Equitya)	Including available-for-sale financial assets.

Comprehensive income for the year ended 31 December 2015
in millions of Swiss francs

Income statement
Total other financial income (expense), net

(27)

(10)

2

(2)

(12)

12

(37)

Other comprehensive income
Available-for-sale financial assets
Movements in fair value, net(Gains) losses removed from equity and recognised in the consolidated income statement

Earnings per sharein Swiss francs

Reported

Restated

Basic earnings per share

68.98

67.89

Diluted earnings per share

68.14

67.06

Financial position as at 31 December 2015
in millions of Swiss francs

Available-for-sale financial assets

Reported Adjustments

2

Financial assets at fair value through income statement

Restated(2)2

2

Current assets
Financial assets at fair value through income statement

35

41

76

Other long-term assets

85 a

(41)

44

Non-current assets
Retained earnings and reserves

5,361

12

5,373

Other components of equity(1,959) a(12)(1,971)Equitya)	Including available-for-sale financial assets.

Givaudan – 2016 Annual ReportFinancial report

Notes to the consolidated financial statements

125

2.1.2. IFRSs and IFRICs issued but not yet effective
New and revised standards and interpretations, issued but not yet effective, have been reviewed to identify the nature of the futurechanges in accounting policy and to estimate the effect of any necessary changes in the consolidated financial statements andsupporting notes upon their adoption.
a) Issued and effective for 2017
Amendments to IAS 7: Disclosure Initiative improve the information provided to the users of financial statements on an entity’s
financing activities. Entities shall provide disclosures to enable users of financial statements to evaluate changes in liabilities arisingfrom financing activities. The Group is currently evaluating the disclosure impact of the adoption of this standard.
Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses clarify that unrealised losses on debt
instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardlessof whether the debt instrument’s holder expects to recover the carrying amount of the debt instrument by sale or by use. The
adoption of these amendments do not change the current practice applied by the Group.
Annual Improvements to IFRS Standards 2014-2016 Cycle set out amendments across three different standards, related basis forconclusions and guidance, out of which one is effective in 2017, amendments to IFRS 12 Disclosure of Interests in Other Entities. The
Group has not yet evaluated the impact of these amendments on its consolidated financial statements.
b) Issued and effective for 2018 and after
IFRS 9 Financial Instruments (as revised in 2014). The Group has early adopted this standard (see Note 2.1.1).
Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts do not change the impact of
the earlier adoption of IFRS 9 as the Group is not exposed to IFRS 4.
IFRS 15 Revenue from Contracts with Customers. The Group has evaluated the impacts of this standard on its consolidated
financial statements. IFRS 15 deals with revenue recognition and establishes principles for reporting useful information to users offinancial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’scontracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability todirect the use and obtain the benefits from the good or service. The standard replaces existing revenue recognition guidance
including IAS 18 Revenues, IAS 11 Construction Contracts and IFRIC 13 Customers Loyalty Programme.
The Group has assessed that the adoption of IFRS 15 does not impact its consolidated financial statements. Contracts withcustomers relate primarily to the delivery of manufactured products and molecules of fragrance and flavour to the agreed upon
specifications and may contain additional performance obligations for certain clients such as the assignment of specific application
technologies, joint market research and particular stock conditions. Most of these additional performance obligations are notdistinct because they are highly dependent on the delivery of manufactured product and molecules of fragrance and flavour.
Generally, the transaction price includes estimating variable consideration such as rebates granted to customers.
The clarifications to IFRS 15 issued in April 2016 do not change the above described assessment.
Amendments to IFRS 10 and IAS 28: Sales or Contribution of Assets between an Investor and its Associate or Joint Venture
clarify that in a transaction involving an associate or joint venture the extent of gain or loss recognition depends on whether theassets sold or contributed constitute a business. The adoption of these amendments has no impact on the joint arrangements
currently hold by the Group.
IFRS 16 Leases provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases, andlessors confirm the continuation of classifying leases as operating or finance. The Group is currently evaluating the accounting
impact of the adoption of this standard.

Givaudan – 2016 Annual Report126 Financial report

Notes to the consolidated financial statements

Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions clarify the accounting forcash-settled share-based payment transactions that include a performance condition, the classification of share-based paymenttransactions with net settlement features, and the accounting for modifications of share-based payment transactions fromcash-settled to equity-settled. The adoption of these amendments has no impact on the current share-based payments
programmes held with the Group.
Annual Improvements to IFRS Standards 2014-2016 Cycle set out amendments across three different standards, related basis forconclusions and guidance, out of which two are effective in 2018, amendments to IFRS 1 First-time Adoption of International
Financial Reporting Standards and amendments to IAS 28 Investments in Associates and Joint Ventures. The Group has not yet
evaluated the impact of these amendments on its consolidated financial statements.
Amendments to IAS40: Transfers of Investment Property reinforce the principle for transfers into, or out of, investment
property in IAS 40. The Group has not yet evaluated the impact of these amendments on its consolidated financial statements.
IFRIC 22: Foreign Currency Transactions and Advance Consideration sets out requirements about which exchange rate to use
when recording a foreign currency transaction on initial recognition in an entity’s functional currency. The Group has not yet
evaluated the impact of this interpretation on its consolidated financial statements.

2.2 Consolidation
The subsidiaries that are consolidated are those companies controlled, directly or indirectly, by Givaudan SA. The Group controls anentity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability toaffect those returns through its power over the entity. The Group reassesses whether or not it controls an investee if there areindications of a change in facts and circumstances.
Companies acquired during the year are consolidated from the date on which operating control is transferred to the Group, andsubsidiaries to be divested are included up to the date on which control passes to the acquirer.
The acquisition method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured
as the fair value of the assets acquired, shares issued and liabilities undertaken or assumed at the date of acquisition. Identifiable
assets acquired and liabilities and contingent liabilities assumed are measured initially at their fair values at the acquisition date.
Acquisition related costs are expensed as incurred. The excess of the cost of acquisition over the fair value of the Group’s share of
net assets of the subsidiary acquired is recognised as goodwill.
Where necessary, changes are made to the accounting policies of subsidiaries to bring and ensure consistency with the policies
adopted by the Group.
Assets and liabilities, equity, income, expenses and cash flows resulting from inter-company transactions are eliminated in fullon consolidation.

2.3 Interest in a Joint Venture
A joint venture is a joint arrangement whereby the Group and other parties that have joint control of the arrangement have rights
to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which
exists when the strategic, financial and operating decisions relating to the activities of the joint venture require the unanimous
consent of the parties sharing control.
The results and assets and liabilities of joint ventures are incorporated in the consolidated financial statements using the equity
method of accounting until the date on which the Group ceases to have joint control over the joint venture. Under the equity
method, an investment in a joint venture is initially recognised at cost and adjusted thereafter to recognise the Group’s share of theincome statement and the other comprehensive income of the joint venture. Adjustments are made where necessary tobring the accounting policies in line with those adopted by the Group. Unrealised gains and losses on transactions between theGroup and a jointly controlled entity are eliminated to the extent of the Group’s interest in the joint venture.

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2.4 Foreign Currency Valuation
2.4.1 Functional and presentation currency
Items included in the financial statements of each entity in the Group are measured using the functional currency of that entity.
The functional currency is normally the one in which the entity primarily generates and expends cash. The consolidated financial
statements are presented in millions of Swiss francs (CHF), the Swiss franc being the Group’s presentation currency.
2.4.2 Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the dates of thetransactions, or using a rate that approximates the exchange rates on the dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at the reporting period-end rates of monetary assets andliabilities denominated in foreign currencies are recognised in other financial income (expense), net, except for:– Exchange differences deferred in equity as qualifying cash flow hedges on certain foreign currency risks and qualifying net
investment hedges.
– Exchange differences on monetary items to a foreign operation for which settlement is neither planned nor likely to occur,
therefore forming part of the net investment in the foreign operation, which are recognised initially in other comprehensive
income and reclassified from equity to the income statement on disposal of the net investment or on partial disposal when
there is a loss of control of subsidiary or a loss of joint control over a jointly controlled entity.
­– Exchange differences on foreign currency borrowings relating to assets under construction which are included in the cost of
those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
Non-monetary items that are measured in terms of historical cost in foreign currencies are not retranslated.
2.4.3 Translation of the financial statements of foreign subsidiaries
For the purpose of presenting consolidated financial statements, the assets and liabilities of Group companies reporting incurrencies other than Swiss francs (foreign operations) are translated into Swiss francs using exchange rates prevailing at the endof the reporting period. Cash flows, income and expenses items of Group companies are translated each month independently at
the average exchange rates for the period when it is considered a reasonable approximation of the underlying transaction rate. All
resulting exchange differences are recognised in other comprehensive income and accumulated in equity.

2.5 Segment Reporting
The operating segments are identified on the basis of internal reports that are regularly reviewed by the Executive Committee, themembers of the Executive Committee being the chief operating decision makers, in order to allocate resources to the segments
and to assess their performance. The internal financial reporting is consistently prepared along the lines of the two operating
Divisions: Fragrances and Flavours.
The business units of each Division, respectively Fine Fragrances, Consumer Products and Fragrance and Active Beauty for the
Fragrance Division and Beverages, Dairy, Savoury and Sweet Goods for the Flavour Division, are not considered as separately
reportable operating segments as decision making about the allocation of resources and the assessment of performance are notmade at this level.
Inter-segment transfers or transactions are set on an arm’s length basis.
Information about geographical areas is determined based on the Group’s operations; Switzerland, Europe, Africa and Middle-East;
North America; Latin America and Asia Pacific. Revenues from external customers are shown by destination.

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2.6 Sales of Goods
Revenue from sales of goods is measured at the fair value of the consideration received or receivable in the ordinary course of theGroup’s activities. Sales of goods are reduced for estimated volume discounts, rebates, and sales taxes. The Group recognises
revenue when the amount can be reliably measured, it is probable that future economic benefits will flow to the entity and whensignificant risks and rewards of ownership of the goods are transferred to the buyer.
2.7 Research and Product Development
The Group is active in research and in formulas, technologies and product developments. In addition to its internal scientificefforts, the Group collaborates with outside partners.
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Internal developments or developments obtained through agreements on formulas, technologies and products costs arecapitalised as intangible assets when there is an identifiable asset that will generate probable economic benefits and when thecost can be measured reliably. When the conditions for recognition of an intangible asset are not met, development expenditure isrecognised in the income statement in the period in which it is incurred.

2.8 Employee Benefit Costs
Wages, salaries, social security contributions, annual leave and paid sick leave, bonuses and non-monetary benefits are expensed
in the year in which the associated services are rendered by the Group’s employees.
2.8.1 Pension obligations
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement,
principally dependent on an employee’s years of service and remuneration at retirement. Plans are usually funded by paymentsfrom the Group and employees to financially independent trusts. The liability recognised in the statement of financial position isthe aggregate of the present value of the defined benefit obligation at the statement of financial position date less the fairvalue of plan assets. Where a plan is unfunded, only a liability representing the present value of the defined benefit obligation isrecognised in the statement of financial position. The present value of the defined benefit obligation is calculated by independentactuaries using the projected unit credit method twice a year, at interim and annual publication. This reflects the discounted
expected future payment required to settle the obligation resulting from employee service in the current and prior periods. The
future cash outflows incorporate actuarial assumptions primarily regarding the projected rates of remuneration growth, andlong-term indexation rates. Discount rates, used to determine the present value of the defined benefit obligation, are based on themarket yields of high quality corporate bonds in the country concerned. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period
in which they arise. Past service costs are recognised immediately in the income statement. Pension assets and liabilities indifferent defined benefit schemes are not offset unless the Group has a legally enforceable right to use the surplus in one plan tosettle obligations in the other plan.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into publicly or privately
administrated funds. The Group has no further payment obligations once the contributions have been made. The contributions arecharged to the income statement in the year to which they relate.
2.8.2 Other post-retirement obligations
Some Group companies provide certain post-retirement healthcare and life insurance benefits to their retirees, the entitlement towhich is usually based on the employee remaining in service up to retirement age and completing a minimum service period. The
expected costs of these benefits are accrued over the periods in which employees render service to the Group.

2.9 Share-Based Payments
The Group has established share option plans and a performance share plan to align the long-term interests of key executives andmembers of the Board of Directors with the interests of the shareholders.

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Key executives are awarded a portion of their performance-related compensation in equity-settled share-based paymenttransactions. The costs are recorded in each relevant functions part of the employees’ remuneration as personnel expenses with acorresponding entry in equity in own equity instruments for equity-settled share-based payment transactions. The different
share-based payments are described below:
2.9.1 Performance Share Plan
Key executives are awarded a portion of their performance-related compensation in equity-settled share-based paymenttransactions in the form of a performance share plan.
The performance share plan is established with Givaudan registered shares and a vesting period of three years. The Group has at
its disposal either treasury shares or conditional share capital.
The cost of equity-settled instruments is expensed as employee remuneration over the vesting period, together with acorresponding increase in equity in own equity instruments. The cost is determined by reference to the fair value of the shares
expected to be delivered at the date of vesting. Performance conditions are included in the assumptions in which the number ofshares varies. No market conditions are involved.
The fair value is determined as the market price at grant date reduced by the present value of dividends expected or any otherexpected distribution to the shareholders to be paid during the vesting period, as participants are not entitled to receive dividends
or any other distribution to the shareholders during the vesting period.
At each statement of financial position date, the Group revises its estimates of the number of shares that are expected to bedelivered. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation.
2.9.2 Restricted Shares Plan
The members of the Board of Directors receive a portion of their compensation in equity-settled share-based paymenttransactions in the form of restricted share units.
Restricted shares are set generally with a vesting period of three years, during which the restricted shares cannot be settled ortransferred. The Group has at its disposal treasury shares for the delivery of the restricted shares.
The cost of these equity-settled instruments to be expensed, together with a corresponding increase in equity, over the vesting
period, is determined by reference to the fair value of the restricted shares granted at the date of the grant. Service conditions areincluded in the assumptions about the number of restricted shares that are expected to become deliverable. No performance
conditions are included.
The fair value is determined as the market price at grant date reduced by the present value of dividends expected or any otherexpected distribution to the shareholders to be paid during the vesting period, as participants are not entitled to receive dividends
or any other distribution to the shareholders during the vesting period.
At each statement of financial position date, the Group revises its estimates of the number of restricted shares that are expected
to be delivered. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation.

2.10 Taxation
Income taxes include all taxes based upon the taxable profits of the Group, including withholding taxes payable on the distributionof retained earnings within the Group. Other taxes not based on income, such as property and capital taxes, are included either inoperating expenses or in financial expenses according to their nature. The Group’s liability for current income tax is calculatedusing tax rates that have been enacted or substantively enacted by the end of the reporting period.

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Deferred income taxes are provided based on the full liability method, under which deferred tax consequences are recognised for
temporary differences between the tax bases of assets and liabilities and their carrying values. Deferred tax liabilities are generally
recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary
differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against
which those items can be utilised. Management considers that these tax benefits are probable on the basis of business projections
on the relevant entities.
Such deferred tax assets and liabilities are not recognised if the temporary difference arises from initial recognition of an asset or
liability in a transaction other than a business combination that at the time of the transaction affects neither the accounting nor
the taxable income.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset isrealised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and interests in jointly controlled
entities, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that thetemporary difference will not reverse in the foreseeable future. Current tax assets and liabilities are offset and deferred income tax
assets and liabilities are offset when the income taxes are levied by the same taxation authority and when there is a legally
enforceable right to offset them.
Current and deferred tax are recognised as an expense or income in the income statement, except when they relate to items thatare recognised outside the income statement, in which case the tax is also recognised outside the income statement.

2.11 Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and demand deposits with banks and similar institutions. Cash equivalents areheld for the purpose of meeting short-term cash commitments (maturity of three months or less from the date of acquisition) andare subject to an insignificant risk of changes in value.
2.12 Financial Assets
Financial assets are classified as financial assets at fair value through the income statement except for trade receivables which areclassified at amortised cost. The classification depends on the nature and purpose of the financial assets and is determined at thetime of initial recognition.
Regular way purchases or sales of financial assets require delivery of assets within the time frame established by regulation orconvention in the marketplace. All regular way purchases or sales of financial assets are recognised and derecognised at thesettlement date i.e. the date that the asset is delivered to or by the Group. Financial assets are classified as current assets, unlessthey are expected to be realised beyond twelve months of the statement of financial position date.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers
the financial asset and substantially all the risks and rewards of ownership of the asset to another party. On derecognition of afinancial asset in its entirety, the following amounts are recognised in the income statement: (i) the difference between the asset’s
carrying amount and the sum of the consideration received and receivable; (ii) the cumulative gain or loss that had beenrecognised in other comprehensive income and accumulated in equity.
Dividend income from investments is recognised in the line Other financial income (expense), net when the right to receive payment
has been established. Interest income is accrued on a time basis and included in the line Other financial income (expense), net.
2.12.1 Financial assets at fair value through the income statement
Financial assets such as debt instruments, equity securities, investment funds and derivatives not designated as effective hedging
instruments are classified in this category.

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Debt instruments are held with the objective to manage cash flows by both collecting their contractual cash flows and sellingthem at market price when needed. The main purpose of such instruments is to fund obligations related to employees. They aredesignated as financial assets measured at fair value through the income statement to avoid recognition inconsistency resulting
from changes in fair values of the financial assets and the obligations.
Other financial assets which are not debt instruments are held with the main objectives to participate in long-term partnerships,
to hedge certain financial risks, and to fund obligations related to employees. Their designation as financial assets measured at fairvalue through the income statement is in line with management intentions to hold such assets.
These financial assets are initially measured at fair value whereas directly attributable transaction costs are expensed in theincome statement. At the end of each period, the carrying value is adjusted to the fair value with a corresponding entry in theincome statement until the investment is derecognised.
The subsidiaries in the United States of America entered over the years into various life insurance contracts called corporateowned life insurance (COLI) to fund long-term obligations related to employees. For both the COLI contracts and the associatedlong-term obligations, adjustments to the fair value, gains and losses, are recognised in the income statement.
For quoted equity instruments, the fair value is the market value, being calculated by reference to share exchange quoted selling
prices at close of business on the statement of financial position date. Non-quoted financial assets are valued at fair value based on
observable market transactions or if not available based on prices given by reputable financial institutions or on the price of thelatest transaction.
2.12.2 Financial assets at amortised cost
Trade receivables are the only financial assets classified as subsequently measured at amortised cost. They reach the objective ofcollecting contractual cash flows over their life.
Trade receivables are carried at amortised cost less allowances for loss. They generally do not contain a significant financing
component. The allowance loss measurement is then determined by applying a simplified approach equalling the lifetime expectedcredit losses. Under this approach the tracking of changes in credit risk is not required but instead the base lifetime expected credit
loss at all times is applied. An allowance for loss is made for potentially impaired receivables during the year in which they are
identified based on a periodic review of all outstanding amounts. Allowance losses are recorded within selling, marketing anddistribution expenses in the income statement. Trade receivables are deemed as impaired when there is an indication of significant
financial difficulties of the debtor (delinquency in or default on payments occurs, probability of bankruptcy or need for financial
reorganisation).
Trade receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

2.13 Derivative Financial Instruments and Hedging Activities
Most derivative instruments are entered into to provide economic hedges. They are initially recognised at fair value on the date aderivative contract is entered into and are subsequently measured at their fair value. The method to recognise the resulting gain orloss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged.
The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items,
as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents
its assessment, both at hedge inception and on an ongoing basis, as to whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
Movements on the hedging reserve in shareholders’ equity are shown in the statement of changes in equity. These derivatives arepresented as current or non-current on the basis of their settlement dates.

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2.13.1 Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in
the cash flow hedge reserve within other comprehensive income, limited to the cumulative change in fair value of the hedged item
on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is immediately
recognised in financing costs in the income statement.
Amounts accumulated in equity are reclassified to the income statement when the hedged transaction affects income, such as
when hedged financial income (expense), net is recognised or when a forecast sale or purchase occurs.
When forward contracts are used to hedge forecast transactions such as future debt issuance, management assumes that thesources of hedge effectiveness in regards of the characteristics of the hedging relationship is sufficiently immaterial to exclusively
perform a qualitative assessment.
When the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the ultimate
forecast transaction occurs. If the forecast transaction is no longer expected to occur, any cumulative gain or loss existing in equity
is immediately taken to the income statement.
2.13.2 Derivatives at fair value through the income statement
Certain derivative instruments do not qualify for hedge accounting and are accounted for at fair value through the income statement.
At each statement of financial position date, these derivative instruments are valued at fair value based on quoted market prices,with the unrealised gain or loss recognised in the income statement. They are derecognised when the Group has lost control of thecontractual rights of the derivatives, at which time a realised gain or loss is recognised in the income statement.

2.14 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using a weighted average cost formula. The
cost of finished goods and work in process comprises raw materials, direct labour, other direct costs and related production
overheads but excludes borrowing costs. Cost of sales includes the corresponding direct production costs of goods manufactured
and services rendered as well as related production overheads. Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs necessary to make the sale.
2.15 Property, Plant and Equipment
Property, plant and equipment are initially recognised at cost of purchase or construction and subsequently at cost lessaccumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment includes
expenditure that is attributable to the purchase or construction. It includes, for qualifying assets, borrowing costs in accordancewith the Group’s accounting policy (see Note 2.19), and cost of its dismantlement, removal or restoration, related to the obligation
for which an entity incurs as a consequence of installing the asset.
The assets are depreciated on a straight-line basis, except for land, which is not depreciated. Estimated useful lives of major classesof depreciable assets are as follows:– Buildings and land improvements– Machinery and equipment– Office equipment– Motor vehicles

40 years5 – 15 years
3 years
5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date.
The carrying values of plant and equipment are written down to their recoverable amount when the carrying value is greater thantheir estimated recoverable amount (see Note 2.18).

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Gains and losses on disposals are determined by comparing the proceeds with the carrying amount with gains being recognised
within other operating income and losses being recognised within other operating expense within the income statement.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it isprobable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. Subsequent costs such as repairs and maintenance are recognised as expenses as incurred.

2.16 Leases
Leases of assets are classified as operating leases when substantially all the risks and rewards of ownership of the assets are
retained by the lessor. Operating lease payments are charged to the income statement on a straight-line basis over the term of thelease. The Group holds only operating leases.
2.17 Intangible Assets
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of theacquired subsidiary at the date of acquisition. Goodwill on acquisitions is recognised in the statement of financial position as anintangible asset. Goodwill is tested annually for impairment or more frequently when there are indications of impairment, andcarried at cost less accumulated impairment losses. Impairment charges on goodwill are not reversed. Any goodwill or fair value
adjustments to the carrying amounts of assets and liabilities arising on the acquisition of a foreign operation are recognised in thelocal currency at the effective date of the transaction and translated at year-end exchange rates. For the purpose of impairment
testing, goodwill is allocated to the cash-generating units being the Group’s reportable operating segments: Fragrance Division
and Flavour Division.
Intangible assets acquired in a business combination are identified and recognised separately from goodwill when they satisfy thedefinition of an intangible asset and their fair values can be measured reliably.
Internal developments are capitalised as intangible assets when there is an identifiable asset that will generate probable economic
benefits and when the cost can be measured reliably. Costs include all costs directly attributable to preparing the asset for use.
Development costs previously recognised as an expense are not recognised as an asset in subsequent periods.
Separately acquired intangible assets are capitalised when the identifiable asset will generate probable economic benefits andwhen its cost can be measured reliably.
Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is on astraight-line basis over the estimated economic useful life of the asset. Useful life is determined based on the character of theasset. Estimated definite useful lives of major classes of amortisable assets are as follows:– Name and product brands– Software/ERP system– Process-oriented technology– Client relationships

3 – 7 years
3 – 7 years
5 – 20 years
15 – 23 years

Gains or losses arising on the disposal of intangible assets are measured as the difference between the net disposal proceeds andthe carrying amount with gains being recognised within other operating income and losses being recognised in other operating
expense within the income statement.

2.18 Impairment of Long-Lived Assets
Non-financial assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. When the recoverable amount of a non-financial asset,
being the higher of its fair value less cost to sell and its value in use, is less than its carrying amount, then the carrying amount isreduced to the asset’s recoverable value. This reduction is recognised as an impairment loss within other operating expense within
the income statement. Value in use is determined by using pre-tax cash-flow projections over a five-year period and a terminal
value. These are discounted using a pre-tax discount rate that reflects current market conditions of the time value of money andthe risks specific to the asset.

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An impairment loss is reversed if there has been a change in the circumstances used to determine the recoverable amount.
A previously recognised impairment loss is reversed only to the extent that the asset’s carrying amount does notexceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss has
been recognised.

2.19 Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets thatnecessarily take a substantial period of time to prepare for their intended use, are added to the cost of those assets, until such timeas the assets are substantially ready for their intended use.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets isdeducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in the income statement in
the period in which they are incurred.

2.20 Accounts Payable – Trade and Others
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business fromsuppliers and are carried at amortised cost.
2.21 Debt
The proceeds of straight bonds, of private placements and of debt issued are recognised as the proceeds received, net oftransaction costs incurred. Any discount arising from the coupon rate, represented by the difference between the net proceeds andthe redemption value, is amortised using the effective interest rate method and charged to interest expense over the life of thebonds or the private placements. Debt is derecognised at redemption date.
Debt is classified within current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
twelve months after the statement of financial position date.

2.22 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, for which
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and for which areliable estimate of the amount of the obligation can be made. Provisions are reviewed regularly and are adjusted where necessary
to reflect the current best estimates of the obligation.
Restructuring provisions comprise lease termination penalties, employee termination payments and ‘make good’ provisions. They
are recognised in the period in which the Group becomes legally or constructively committed to payment.

2.23 Own Equity Instruments
Own equity instruments are own shares and derivatives on own shares. Purchases and sales are accounted for at the settlement date.
Purchases of own shares are recognised at acquisition cost including transaction costs as a deduction from equity. The original cost of
acquisition, results from resale and other movements are recognised as changes in equity, net. Treasury shares acquired by the executionof own equity derivatives are recognised at the execution date market price.
The settlement and the contract for derivatives on own shares determine the categorisation of each instrument. When the contract
assumes the settlement is made by exchanging a fixed amount of cash for a fixed number of treasury shares, the contract is recognisedin equity except for a forward contract to buy and write puts which is recognised as a financial liability.
When the contract assumes the settlement either net in cash or net in treasury shares or in the case of option of settlement, thecontract is recognised as a derivative. Instruments recognised in equity are recognised at acquisition cost including transaction costs.
Instruments recognised as financial liabilities are recognised at the net present value of the strike price of the derivative on own shareswith the interest charge recognised over the life of the derivative in the line Financing costs of the income statement. They are
derecognised when the Group has lost control of the contractual rights of the derivative, with the realised gain or loss recognisedin equity.

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At each statement of financial position date, instruments recognised as derivatives are valued at fair value based on quoted market
prices, with any unrealised gain or loss recognised in the line Other financial income (expense), net in the income statement. They are
derecognised when the Group has lost control of the contractual rights of the derivatives, with any realised gain or loss recognised.

2.24 Share Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown inequity as a deduction, net of tax, from the proceeds.
2.25 Distribution to the Shareholders
Dividend distributions or distributions out of statutory capital reserves from capital contributions - additional paid-in capital arerecognised in the period in which they are approved by the Group’s shareholders.

3. Critical Accounting Estimates and Judgments

The estimates and underlying assumptions are reviewed on an ongoing basis and are based on historical experience and otherfactors, including expectation of future events that are believed to be reasonable under the circumstances.

3.1 Critical Accounting Estimates and Assumptions
The key assumptions concerning the future, and other key sources of estimation uncertainty at the statement of financial positiondate, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year, are for the most part related to:1)	The impairment of goodwill requiring estimations of the value in use of the cash-generating units to which goodwill
is allocated (see Note 22)2)	The impairment of long-lived assets requiring estimations to measure the recoverable amount of an asset or group of assets(see Note 21 and 22)3)	The calculation of the present value of defined benefit obligations requiring financial and demographic assumptions(see Note 8)4)	The determination and provision for income taxes requiring estimated calculations for which the ultimate tax determinationis uncertain (see Note 16)
5)

The provisions requiring assumptions to determine reliable best estimates (see Note 24)6)	The contingent liabilities assessment (see Note 28)
If, in the future, estimates and assumptions, which are based on management’s best judgement at the date of the financial
statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in theyear in which the circumstances change.

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3.2 Critical Judgments in Applying the Entity’s Accounting Policies
In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those
involving estimates, which have the most significant effect on the amounts recognised in the consolidated financial statements:– Computer software and Enterprise Resource Planning: Computer software is internally developed programmes or modifications
that result in new or in substantial improvements of existing IT systems and applications. Enterprise Resource Planning relates
to the implementation of an ERP system that is changing the way the business is done in the areas of Finance, Supply Chain andCompliance. The Group has determined that the development phase of internally developed software and the ERP business
transformations will provide future economic benefits to the Group and meet the criterion of intangible assets (see Note 22).
– Internal developments on formulas, technologies and products: The outcome of these developments depends on their final
assemblage and application, which varies to meet customer needs, and consequently the future economic benefits of thesedevelopments are not certain. Thus the criteria for the recognition as an asset of the internal developments on formulas,technologies and products are generally not met. The expenditures on these activities are recognised as expense in the period inwhich they are incurred.

4. Foreign Exchange Rates
ISO code

Units

31 Dec 2016

Average 2016

Dollar

USD

1

1.02

0.99

1.00

0.96

0.99

0.92

Euro

EUR

1

1.07

1.09

1.09

1.07

1.20

1.21

Pound

GBP

1

1.25

1.34

1.48

1.47

1.55

1.51

Yen

JPY

100

0.87

0.91

0.83

0.80

0.83

0.86

Singapore dollar

SGD

1

0.70

0.71

0.71

0.70

0.75

0.72

Real

BRL

1

0.31

0.29

0.25

0.29

0.37

0.39

Foreign currency to Swiss francs exchange rates

31 Dec 2015 Average 201531 Dec 2014 Average 2014

Renminbi

CNY

1

0.15

0.15

0.15

0.15

0.16

0.15

Mexican peso

MXN

100

4.93

5.33

5.83

6.09

6.74

6.88

RupiahIDR

10,000

0.75

0.74

0.73

0.72

0.80

0.77

5. Financial Risk Management
5.1 Capital Management
The objective of the Group when managing capital is to maintain the ability to continue as a going concern whilst maximising
shareholder value through an optimal balance of debt and equity.
In order to maintain or adjust the capital structure, management may increase or decrease leverage by issuing or reimbursing
debt, and may propose to adjust the amounts distributed to the shareholders, return capital to shareholders, issue new shares andcancel shares through share buyback programmes.
The Group monitors its capital structure on the basis of a leverage ratio, defined as net debt divided by the equity plus net debt.
Net debt is calculated as the total of the consolidated short-term and long-term debt, less cash and cash equivalents.
Equity is calculated as the total equity attributable to equity holders of the parent excluding the defined benefit pension plans
remeasurement elements.
The Group has entered into several private placements which contain various covenants with externally imposed capitalrequirements. The Group was in compliance with these requirements as at 31 December 2016 and 2015.

Givaudan – 2016 Annual ReportFinancial report

Notes to the consolidated financial statements

137

The leverage ratio as at 31 December was as follows:
Note

2016

2015

Short-term debt

23

7

208

Long-term debt

23

1,251

947

Less: cash and cash equivalents

18

(328)

(478)

in millions of Swiss francs

Net Debt
Total equity attributable to equity holders of the parent
Remeasurement of post employment benefit obligations

930

677

3,293

3,415

575

505

Equity

3,868

3,920

Net Debt and Equity

4,798

4,597

Leverage ratio

19%

15%

The Group intends to maintain its medium term leverage ratio below 25%.

5.2 Financial Risk Management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk),credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the Group’s financial performance. The Group generally enters into financial
derivative transactions to hedge underlying business related exposures.
Risk management is carried out by a team within the central treasury department (hereafter “Group Treasury”) under the risk
management policies approved by the Board of Directors. The Board of Directors provides written principles for overall risk
management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk and credit risk, useof derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
Group Treasury monitors and manages financial risks relating to the operations of the Group through internal risk reports
which analyse exposures by degree and magnitude of risk. To manage the interest rate and currency risk arising from theGroup’s operations and its sources of finance, the Group enters into derivative transactions, primarily interest rate swaps,
forward currency contracts and options. Compliance with policies and exposure limits is reviewed by the treasury controllingon a continuous basis. Group Treasury issues monthly reports for the Chief Financial Officer and quarterly reports for the
Audit Committee.

Givaudan – 2016 Annual Report

138

Financial report

Notes to the consolidated financial statements

Categories of financial instruments
The accounting policies for financial instruments have been applied to the line items below:

2016
in millions of Swiss francs

At fair value
through theincomestatement

Note

At amortised
cost

Cash and cash equivalents

18

328

Derivative financial instruments

5.3

9

Financial assets at fair value through income statement

5.3

1

Accounts receivable – trade

19

Derivatives
used forhedge
accounting

Otherfinancialliabilities

Total

Current assets

Other current assets a

328
9
1

996

996

192

192

Non-current assets
Financial assets at fair value through income statement

5.3

Total assets as at 31 December

1,516

59

59

69

1,585

Current liabilities
Short-term debt

23

Derivative financial instruments

5.3

7
32

7
32

Accounts payable

494

494

1,251

1,251

1,752

1,846

Other
financialliabilities

Total

Non-current liabilities
Derivative financial instruments b

5.3

Long-term debt

23

62

Total liabilities as at 31 December

32

62

62

a) Other current assets consist of other receivables non trade.
b) Derivatives qualified as hedge accounting on non-current transactions are classified and presented as non-current liabilities (see Note 2.13).

2015 cin millions of Swiss francs

At amortised
Note
cost

At fair value
through theincomestatement

Derivatives
used forhedge
accounting

Current assets
Cash and cash equivalents

18

Derivative financial instruments

5.3

17

Financial assets at fair value through income statement

5.3

2

Accounts receivable – trade19

Other current assets a

478

478
17
2

901

901

143

143

Non-current assets
Financial assets at fair value through income statement

5.3
1,522

Total assets as at 31 December c

76

76

95

1,617

Current liabilities
Short-term debt

23

Derivative financial instruments

5.3

208

208

400

400

947

947

1,555

1,635

18

18

Accounts payableNon-current liabilities
Derivative financial instruments b

5.3

Long-term debt

23

Total liabilities as at 31 December

6
24

56
56

a)	O ther current assets consist of other receivables non trade.
b)	Derivatives qualified as hedge accounting on non-current transactions are classified and presented as non-current liabilities (see Note 2.13).
c)	Previous year figures have been restated in accordance with early adoption of IFRS 9 (see Note 2).

Givaudan – 2016 Annual Report62Financial report

Notes to the consolidated financial statements

139

The carrying amount of each class of financial assets and liabilities disclosed in the previous tables approximates the fair value. The fairvalue of each class of financial assets and liabilities, except financial assets at amortised cost, is determined by reference to published pricequotations and is estimated based on valuation techniques using the quoted market prices. Given the nature of the Group’s accounts
receivable trade items, the carrying value is considered as equivalent to the fair value.
5.2.1 Market Risk
The Group’s activities primarily expose it to the financial risks of changes in foreign currency exchange rates, interest rates and commodity
prices. The Group enters into a number of derivative financial instruments to manage its exposure to foreign currency risk and interest raterisk, including:– Currency derivatives, mainly forward foreign exchange contracts, to hedge the exchange rate risk arising from recorded transactions.
– Interest rate swaps and other instruments to mitigate the risk of interest rate increases and/or to optimally manage interest rate costs
depending on the prevailing interest rate environment.
Market risk exposures are measured using sensitivity analysis. There has been no change during the year in the structure of the Group’s
exposure to market risks or the manner in which these risks are managed.
5.2.1.1 Foreign Exchange Risk
The Group operates across the world and is exposed to movements in foreign currencies affecting its net income and financial position. Foreignexchange risk arises from future commercial transactions, recognised assets and liabilities, and net investments in foreign operations.
It is the Group’s policy to enter into derivative transactions to hedge current, forecasted foreign currency transactions, and translation risk
arising from certain investments in foreign operations with a functional currency different from the Group’s presentation currency.
While these are hedges related to underlying business transactions, the Group generally does not apply hedge accounting on transactions
related to management of its foreign exchange risk.
Group Treasury centrally manages foreign exchange risk management activities against the functional currency of each subsidiary, and isrequired to hedge, whenever cost-effective, their largest exposures.
The measurement of the foreign currency risk expresses the total exposure by currency, which is in the opinion of Group Treasury arepresentative manner to monitor the risk. It measures the cumulative foreign exchange risk of all subsidiaries of recognised assets andliabilities that are denominated in a currency (e.g. USD) that is not the subsidiary’s functional currency (e.g. other than USD).

Givaudan – 2016 Annual Report140 Financial report

Notes to the consolidated financial statements

The following table summarises the significant exposures to the foreign currency risk at the date of the consolidated statement offinancial position:
Currency exposure 2016
in millions of Swiss francs

USD

EUR

CHF

GBP

SGD

Currency exposure without hedge a

388

(42)

(6)

(149)

121

Hedged amount

(406)

22

4

148

(127)

Currency exposure including hedge

(18)b

(20)

(2)

(1)

(6)

a) + long position; - short position.
b) Mainly due to unhedged positions in countries where hedging is not cost-effective.
Currency exposure 2015
in millions of Swiss francs

USD

EUR

CHF

GBP

SGD

Currency exposure without hedge a

23

(25)

(11)

(147)

117

Hedged amount

(64)

26

(4)

146

(121)

Currency exposure including hedge

(41)b

1

(15)

(1)

(4)

a)	+ long position; - short position.
b)	Mainly due to unhedged positions in countries where hedging is not cost-effective.

In the exposure calculations, the intra Group positions, except those related to net investments in foreign operations, are included.
The following table summarises the sensitivity to transactional currency exposures of the main currencies at 31 December.
The sensitivity analysis is disclosed for each currency representing significant exposure:
Currency risks 2016
in millions of Swiss francs

USD

EUR

CHF

GBP

SGD

Reasonable shift

13%

8%

8%

11%

7%

Impact on income statement if the currency strengthens against all othercurrencies

(4)

(2)

–

–

–

Impact on income statement if the currency weakens against all other currencies

4

2

–

–

–

Currency risks 2015
in millions of Swiss francs

USD

EUR

CHF

GBP

SGD

Reasonable shift

24%

9%

9%

11%

11%

Impact on income statement if the currency strengthens against all othercurrencies

(13)

–

(1)

–

–

Impact on income statement if the currency weakens against all other currencies

13

–

1

–

–

The sensitivity is based on the exposure at the date of the consolidated statement of financial position and based on assumptions
deemed reasonable by management, showing the impact on income before tax. Management uses historical volatilities of thesignificant currencies contributing to the exposure to determine the reasonable change.

Givaudan – 2016 Annual ReportFinancial report

Notes to the consolidated financial statements

141

5.2.1.2 Interest Rate Risk
The Group is exposed to interest rate risk because entities in the Group borrow funds at both fixed and floating interest rates,
and invests in debt financial instruments. Borrowings issued at variable rates expose the Group to cash flow interest rate risk
which is partially counterbalanced by cash held at variable rates. Borrowings issued at fixed rates expose the Group to fair valueinterest rate risk.
Group Treasury manages interest rate risk centrally by simulating various scenarios on liabilities taking into consideration
refinancing, renewal of existing positions and hedging. Hedging strategies are applied by either positioning the liabilities orprotecting interest expense through different interest cycles. Hedging activities are regularly evaluated to align interest rateviews and defined risk limits. Group Treasury manages interest rate risk mainly by the use of interest rate swap contracts andforward interest rate contracts.
The following table shows the sensitivity to interest rate changes:
As at 31 December 2016
in millions of Swiss francs

150 basis points increase

25 basis points decrease

Impact on income statement––

Impact on equity

64

(13)

150 basis points increase

25 basis points decrease

As at 31 December 2015
in millions of Swiss francs

Impact on income statement2–

Impact on equity

59

(12)

The sensitivity is based on exposure on liabilities at the date of the consolidated statement of financial position using assumptions
which have been deemed reasonable by management showing the impact on the income before tax.

Givaudan – 2016 Annual Report142 Financial report

Notes to the consolidated financial statements

Cash flow hedges
Inception Hedged items
dateHedge instruments

Objectives

2009Highly probable future
debt issuances in 2011.

Several forward starting interest rate swaps
commencing in 2011, totalling CHF 200 million
with an average rate of 2.69% and a 5 year
maturity.

Protection against future
In June 2011, the Group issued a 2.50% 7 year
increases in CHF interest rates public bond (maturity 15 June 2018) with aand to fix the interest rates.
nominal value of CHF 300 million.
Correspondingly, hedge positions assigned tothis bond issuance of CHF 200 million have beenclosed. The amortisation of the realised loss of
CHF 14 million was recognised in Financing costs
over 5 years until 15 June 2016.

2009

Highly probable future debt
issuances in 2012.

Several forward starting interest rate swaps
commencing in 2012, totalling CHF 250 million
with an average rate of 2.70% and a 5 year
maturity and CHF 50 million with an averagerate of 2.45% and a 3 year maturity.

Protection against future
In December 2011, the Group issued a dual
increases in CHF interest rates tranche public bond, totalling CHF 300 million,
and to fix the interest rates.
respectively of CHF 150 million at a rate of
1.250% for 5 years and CHF 150 million at therate of 2.125% for 10 years. Correspondingly,
hedge positions assigned to this bond issuance
have been closed. The amortisation of therealised loss was recognised in Financing costs
for CHF 4 million over 3 years until 7 December
2014, and CHF 28 million over 5 years until 7
December 2016.

2011/
2012

Highly probable future
debt issuances in 2014.

Several forward starting interest rate swaps
commencing in 2014, totalling CHF 250 million
with an average rate of 1.54% and a 5 year
maturity.

Protection against future
In March 2014, the Group issued a 1.00%
increases in CHF interest rates 6.5 year public bond with a nominal value of CHF
and to fix the interest rates.
100 million; and a 1.75% 10 year public bondwith a nominal value of CHF 150 million.
Correspondingly, hedge positions assigned tothis bond issuance have been closed.
The amortisation of the realised loss of
CHF 15 million is recognised in Financing costs
over 5 years until 19 March 2019.

2012

Highly probable future
debt issuances in 2016.

Several forward starting interest rate swaps
commencing in 2016, totalling CHF 75 million
with an average rate of 1.63% and a 5 year
maturity.

Protection against future
In December 2016, the Group issued a 0.000 %increases in CHF interest rates 6 year public bond with a nominal value of CHF
and to fix the interest rates.
100 million; and a 0.625% 15 year public bondwith a nominal value of CHF 200 million.
Correspondingly, hedge positions assigned tothis bond issuance have been closed.
The amortisation of the realised loss of
CHF 8 million is recognised in Financing costs
over 5 years until 7 December 2021.

2012

Highly probable future
private placements
issuance in the USA in2013.

Several derivatives instruments fixing theinterest rate at 1.80% on average for a total
amount of USD 100 million.

Protection against
short-term increases in USD
interest rates and to fix theinterest rates.

2012/
2014

Highly probable future
debt issuances in 2018.

Several forward starting interest rate swaps
commencing in 2018, totalling CHF 150 million
with an average rate of 1.90% and a 5 year
maturity.

Protection against future
The cash flow hedges were effective
increases in CHF interest rates during the year.
and to fix the interest rates.

2014/
2015

Highly probable future
debt issuances in 2020.

Several forward starting interest rate swaps
commencing in 2020, totalling CHF 75 million
with an average rate of 2.12% and a 10 year
maturity.

Protection against future
The cash flow hedges were effective
increases in CHF interest rates during the year.
and to fix the interest rates.

2014/
2015

Highly probable future
debt issuances in 2021.

Several forward starting interest rate swaps
commencing in 2021, totalling CHF 125 million
with an average rate of 2.05% and a 10 year
maturity.

Protection against future
The cash flow hedges were effective
increases in CHF interest rates during the year.
and to fix the interest rates.

2014/
2015

Highly probable future
debt issuances in 2024.

Several forward starting interest rate swaps
commencing in 2024, totalling CHF 100 million
with an average rate of 2.35% and a 10 year
maturity.

Protection against future
The cash flow hedges were effective
increases in CHF interest rates during the year.
and to fix the interest rates.

2016

Highly probable future
debt issuances in 2031.

Several forward starting interest rate swaps
Protection against future
The cash flow hedges were effective
commencing in 2031, totalling CHF 75 million with increases in CHF interest rates during the year.
an average rate of 0.90% and a 10 year maturity.
and to fix the interest rates.

Givaudan – 2016 Annual Report

Comments

The cash flow hedges were effective during theperiod. The amount of USD 1 million(equivalent to CHF 1 million) deferred in
hedging reserve in other comprehensive income
is recycled over the next 10 years as Financing
cost from 6 February 2013, date when theproceeds were received.

Financial report143

Notes to the consolidated financial statements

5.2.1.3 Price Risk
The Group is exposed to equity price risk arising from equity investments held classified at fair value through income statement.
The Group manages its price risk through a diversification of portfolios within the limits approved by the Board of Directors.
The Group holds its own shares to meet future expected obligations under the various share-based payment schemes.
Sensitivity analysis
The Group’s equity portfolio is composed exclusively of US shares. The benchmark for the reasonable change is an average ofhistorical volatility of US indexes (16% for the last three years).
The sensitivity analysis has been determined based on the exposure to equity price risks at the end of the reporting period:
2016 − reasonable shifts: 16%US
in millions of Swiss francs

Equity priceincrease

Equity pricedecrease5(5)Equity priceincrease

Equity pricedecrease

6(6)Impact on income statement
2015 − reasonable shifts: 15%US
in millions of Swiss francs

Impact on income statement

5.2.2 Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group.
Commercial Credit risk is managed by the Group’s subsidiaries and monitored on a Group basis whilst counterparty risk related tofinancial institutions is centrally managed within the Group Treasury function.
Trade receivables are subject to a policy of active risk management which focuses on the assessment of country risk, credit limits,ongoing credit evaluation and account monitoring procedures. Generally, there is no significant concentration of trade receivables
or commercial counterparty credit risk, due to the large number of customers that the Group deals with and their wide
geographical spread with the exception of one single external customer that generates revenues, mainly attributable to the
Fragrance Division, of approximately CHF 552 million (2015: CHF 545 million). Countries, credit limits and exposures arecontinuously monitored.
The credit risk on liquid funds, derivatives and other monetary financial assets is limited because the counterparties are financial
institutions with investment grade ratings.
The following table presents the credit risk exposure to individual financial institutions:
2016
Total
in Mio CHF

Max. with any
individual bankin Mio CHF

Numberof banks

2015
Total
in Mio CHF

Max. with any
individual bankin Mio CHF

Numberof banks

AAA − range

46

46

1

79

79

1

AA − range

60

59

2

145

140

2

A − range

47

41

5

99

48

4

BBB − range

169

76

6

157

68

7

The carrying amount of financial assets recognised in the consolidated financial statements which is net of impairment losses,
represents the Group’s maximum exposure to credit risk.

Givaudan – 2016 Annual Report144 Financial report

Notes to the consolidated financial statements

5.2.3 Liquidity Risk
The Group manages liquidity risk by maintaining sufficient cash, marketable securities, availability of funds through an adequate
amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying
businesses, Group Treasury maintains flexibility in funding by maintaining availability under committed and uncommitted credit lines.
Group Treasury monitors and manages cash at the Group level and defines the maximum cash level at subsidiary level. Cash surpluses
held by subsidiaries over and above amounts required for working capital management are transferred to the central treasury centre.
The surplus of cash is generally invested in interest bearing current accounts, time deposits, money market deposits and funds. Whennecessary, intercompany loans are granted by the Group to subsidiaries to meet their non-recurrent payment obligations.
The following table analyses the Group’s remaining contractual maturity for financial liabilities and derivative financial instruments.
The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which theGroup is obliged to pay. The table includes both interest and principal cash flows:2016
in millions of Swiss francs

Accounts payable
Net settled derivative financial instruments

Up to 6months6 − 12months1−5
yearsOver 5
years

(494)

Total

(494)

–

(14)

(48)

(62)

Gross settled derivative financial instruments − outflows(1,335)(266)

Gross settled derivative financial instruments − inflows

1,314

264

(19)

(5)

(662)

(702)

(1,388)

Balance as at 31 December

(534)

(7)

(676)

(750)

(1,967)2015
in millions of Swiss francs

Up to 6months6 − 12months1−5
yearsOver 5years

Short-term debt (excluding bank overdraft)

(58)

(152)

Accounts payable(400)

Long-term debt

Net settled derivative financial instruments(1,601)
1,578

Total

(210)
(400)

(3)

(3)

Gross settled derivative financial instruments − outflows(1,267)(147)

Gross settled derivative financial instruments − inflows

(14)

(43)

(63)
(1,414)

1,268

146

Long-term debt

(17)

(3)

(515)

(549)

(1,084)

1,414

Balance as at 31 December

(477)

(159)

(529)

(592)

(1,757)

5.3 Fair Value Measurements
The following tables present the Group’s assets and liabilities that are measured subsequent to initial recognition at fair value,grouped into levels 1 to 3 based on the degree to which the fair value is measured:–  Level 1 inputs to measure fair value are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities;–  Level 2 inputs to measure fair value are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and–  Level 3 inputs to measure fair value are those derived from valuation techniques that include inputs for the asset or liability thatare not based on observable market data (unobservable inputs).

Givaudan – 2016 Annual ReportFinancial report2016
in millions of Swiss francs

Level 1

Notes to the consolidated financial statements

Level 2

Level 3

145

Total

Financial assets at fair value through income statement
Forward foreign exchange contracts

99Corporate owned life insurance

29

29

Equity securities

1

13

14

Debt securities

–

17

17

Total assets

1

68

69

Financial liabilities at fair value through income statement
Forward foreign exchange contracts

31

31

Swaps (hedge accounting)62

62

Swaps (no hedge accounting)1

1

Total liabilities

94

942015 ain millions of Swiss francs

Level 1

Level 2

Level 3

Total

Financial assets at fair value through income statement
Forward foreign exchange contracts

17

17

Corporate owned life insurance

35

35

Equity securities

1

21

22

Debt securities

1

20

21

Total assets

2

93

95

Financial liabilities at fair value through income statement
Forward foreign exchange contracts

18

18

Swaps (hedge accounting)

56

56

Swaps (no hedge accounting)6

6

Total liabilities

80

80

Financial assets and liabilities at fair value through income statement are measured with Level 2 inputs. They consist of forward
foreign exchange contracts that are measured using quoted forward exchange rates and yield curves derived from quoted interest
rates matching maturities of the contracts, of interest swaps that are measured using quoted interest rates and yield curves
derived from quoted interest rates matching maturities of the contracts, and of corporate owned life insurance (COLI) that aremeasured on quoted instruments with similar credit ratings and terms in a mix of money market, fixed income and equity funds
managed by unrelated fund managers.
There was no transfer between Level 1 and 2 in the period. The Group did not carry out any transactions on level 3 type assets
during 2016 and 2015, nor did it have any assets in this category at 31 December 2016 and 2015.

Givaudan – 2016 Annual Report146 Financial report

Notes to the consolidated financial statements

6. Acquisitions

On 25 July 2016, Givaudan acquired assets and liabilities of Spicetec Flavors and Seasonings from ConAgra Foods, incorporated in the
United States of America for a purchase price of CHF 331 million. Spicetec offers a range of flavours, spices and savoury seasoning solutions
to customers, primarily in North America and operates from locations in Omaha, Nebraska; Carol Stream, Illinois and Cranbury, New
Jersey, employing 280 people. The transaction is expected to add approximately CHF 178 million to Givaudan’s revenue on a full year basis.
From 25 July 2016, the acquisition contributed CHF 71 million of sales and CHF 8 million of EBITDA to the Group’s consolidated results.
The goodwill of CHF 150 million on the acquisition relates mainly to the value of the qualified workforce and expected synergies that do
not meet the criteria for recognition as separable intangible assets. None of the goodwill arising from the acquisition is expected to be tax
deductible.
The Group incurred transaction related costs of CHF 1 million related to external legal fees and due diligence. These expenses are reported
within other operating expense in the consolidated income statement.
The identifiable assets and liabilities of Spicetec acquired are recorded at fair value at the date of acquisition. Total net assets acquired of
CHF 181 million consist of working capital (CHF 43 million), fixed assets (CHF 30 million), intangible assets which are made up of process
knowledge, research expertise, client relationships, name and product brands (CHF 112 million), and other liabilities(CHF 4 million). The total purchase price of CHF 331 million was settled in cash, resulting in a goodwill of CHF 150 million.
In compliance with IFRS 3, these values determined are provisional and the Group has twelve months from the date of acquisition to
finalise the allocation of the acquisition price.

7. Segment Information

Management has determined the operating segments based on the reports reviewed by the Executive Committee that are used toallocate resources to the segments and to assess their performance. The Executive Committee considers the business from a divisional
perspective:
Fragrances

Manufacture and sale of fragrances into three global business units: Fine Fragrances, Consumer Products and,Fragrance and Active Beauty; andFlavours
Manufacture and sale of flavours into four business units: Beverages, Dairy, Savoury and Sweet Goods.
The information of these business units are reviewed by the Executive Committee primarily by region.
The performance of the operating segments is based on EBITDA as a percentage of sales.

Business segments
Fragrancesin millions of Swiss francs

Note

Segment sales
Less inter segment sales a
Segment sales to third parties
EBITDA
as % of sales

Flavours

Group

2016

2015

2016

2015

2016

2015

2,230

2,096

2,446

2,311

4,676

4,407

–

–

(13)

(11)

(13)

(11)

2,230

2,096

2,433

2,300

4,663

4,396

603

498

523

572

1,126

1,070

27.0%

23.7%

21.5%

24.9%

24.1%

24.3%

Depreciation

21

(51)

(50)

(62)

(62)

(113)

(112)

Amortisation

22

(59)

(73)

(73)

(84)

(132)

(157)

(1)

(6)

(6)

(6)

(7)

59

66

113

77

172

143

2

30

30

2

41

18

7

20

48

38

38

112

112

38

100

124

262

97

362

221

Impairment of long-lived assets

21, 22

Addition to Property, plant and equipment

21

Acquisition of Property, plant and equipment

6, 21

Addition to Intangible assets

22

Acquisition of Intangible assets

6, 22

Total Gross Investmentsa)	Transfer prices for inter-divisional sales are set on an arm's length basis.

Givaudan – 2016 Annual ReportFinancial report

Notes to the consolidated financial statements

147

The amounts by division provided to the Executive Committee are measured in a consistent manner in terms of accounting policies
with the consolidated financial statements.

Reconciliation table to Group’s operating income
Fragrancesin millions of Swiss francs

2016

2015

Flavours
2016

Group

2015

2016

2015 aEBITDA

603

498

523

572

1,126

1,070

Depreciation

(51)

(50)

(62)

(62)

(113)

(112)

Amortisation

(59)

(73)

(73)

(84)

(132)

(157)

(1)

(6)

(6)

(6)

(7)

493

374

382

420

875

794

22.1%

17.8%

15.7%

18.3%

18.8%

18.1%

Impairment of long-lived assets
Operating income
as % of sales
Financing costs

(51)

(61)

Other financial income (expense), net

(40)

(37)

Income before taxes
as % of sales

784

696

16.8%

15.8%

2016

2015

1,933

1,823

297

273

a)	Previous year figures have been restated in accordance with early adoption of IFRS 9 (see Note 2).

Entity-wide disclosures
The breakdown of revenues from the major group of similar products is as follows:in millions of Swiss francs

Fragrance Division
Fragrance Compounds
Fragrance Ingredients and Active Beauty
Flavour Division
Flavour Compounds

2,433

2,300

Total revenues

4,663

4,396

The Group operates in five geographical areas: Switzerland (country of domicile); Europe, Africa and Middle-East;
North America; Latin America; and Asia Pacific.
Segment sales ain millions of Swiss francs

Switzerland
EuropeAfrica and Middle-East
North America

Non-current assets b

2016

2015

2016

2015

45

42

1,435

1,445

1,205

1,176

436

549

351

349

50

63

1,151

1,020

1,235

954
120

Latin America

591

571

135

Asia Pacific

1,320

1,238

497

477

Total geographical segments

4,663

4,396

3,788

3,608

a) 	Segment sales are revenues from external customers and are shown by destination.
b) 	Non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets. They consist of property, plant and equipment, intangible assets
and investments in jointly controlled entities.

Revenues of approximately CHF 552 million (2015: CHF 545 million) are derived from a single external customer. These revenues aremainly attributable to the Fragrance Division.

Givaudan – 2016 Annual Report148 Financial report

Notes to the consolidated financial statements

8. Employee Benefits

The following amounts related to employee remuneration and benefits are included in determining operating income:in millions of Swiss francs

2016

2015

Wages and salaries

783

722
104

Social security costs

115

Post-employment benefits: defined benefit plans

(23)

1

Post-employment benefits: defined contribution plans

19

18

Equity-settled instruments

44

35

Cash-settled instruments(5)2

Change in fair value on own equity instruments––

Other employee benefits
Total employees' remuneration

91

99

1,024

981

Defined Benefit Plans
The Group operates a number of defined benefit and defined contribution plans throughout the world, the assets of which are
generally held in separate trustee-administered funds. The pension plans are generally funded by payments from employees andby the relevant Group companies, taking account of the recommendations of independent qualified actuaries. The most significant
plans are held in Switzerland, United States of America and United Kingdom (further information by country is disclosed at the endof this note).
The defined benefit plan held in the Netherlands has been transferred in the first six months of 2015 to a multi-employer plan
which by its nature is a defined contribution plan. The transfer resulted in a one-off non-cash gain of CHF 32 million, net ofcompensation, recognised in the line “other operating income” in the consolidated income statement. The related contribution
expensed in the income statement was CHF 5 million.
During 2016, the defined benefit plans held in the United States of America and United Kingdom have been frozen which meansthat no further build up of benefits will occur in the arrangements. These freezes resulted in one-off non-cash gains of
CHF 55 million in the United States of America and CHF 7 million in the United Kingdom recognised in the line “other operating
income” in the consolidated income statement.
Non-pension plans consist primarily of post-retirement healthcare and life insurance schemes, principally in the
United States of America.

Givaudan – 2016 Annual ReportFinancial report

Notes to the consolidated financial statements

149

The amounts recognised in the consolidated income statement are as follows:2016
in millions of Swiss francs

Pension Non-pension
Plans
Plans

Current service cost

37

Gain arising from settlement

(62)

2

Total

2015
Pension Non-pension
Plans
Plans

39

42

(62)

(43)

2

Total

44
(43)

Total included in employees' remuneration

(25)

2

(23)

(1)

2

1

Net interest cost included in financing costs

10

3

13

13

3

16

Total components of defined benefit cost

(15)

5

(10)

12

5

17

Of which arising from:
Funded obligations

(17)

5

(12)

7

5

12

Unfunded obligations

2

–

2

5

–

5

The amounts recognised in other comprehensive income are as follows:2016
in millions of Swiss francs

Pension Non-pension
Plans
Plans

Total

2015
Pension Non-pension
Plans
Plans

Total

(Gains) losses from change in demographic assumptions

25

(1)

24

(28)

–

(28)

(Gains) losses from change in financial assumptions

188

2

190

(50)

(1)

(51)

Experience (gains) losses

11

(6)

5

3

(4)

(1)

Return on plan assets less interest on plan assets

(71)

–

(71)

13

–

13

Remeasurement (gains) losses of post employment benefit
obligations

153

(5)

148

(62)

(5)

(67)

Funded obligations

148

(5)

143

(54)

(5)

(59)

Unfunded obligations

5

–

5

(8)

–

(8)

Of which arising from:

Givaudan – 2016 Annual Report

150

Financial report

Notes to the consolidated financial statements

The amounts recognised in the statement of financial position are as follows:2016
in millions of Swiss francs

Pension Non-pension
Plans
Plans

Total

2015
Pension Non-pension
Plans
Plans

Total

Funded obligations(2,094)(70)(2,164)(1,961)(72)

Fair value of plan assets

Present value of funded obligations

1,538

1

1,539

1,491

1

(2,033)
1,492

Recognised asset (liability) for funded obligations, net

(556)

(69)

(625)

(470)

(71)

(541)

Unfunded obligations
Present value of unfunded obligations

(80)

(11)

(91)

(77)

(12)

(89)

Recognised asset (liability) for unfunded obligations

(80)

(11)

(91)

(77)

(12)

(89)

Total defined benefit asset (liability)

(636)

(80)

(716)

(547)

(83)

(630)

Deficit recognised as liabilities for post employment benefits

(648)

(80)

(728)

(562)

(83)

(645)

12

15

(716)

(547)

(83)

(630)

Surplus recognised as part of the other long-term assets
Total net asset (liability) recognised

12
(636)

(80)

15

Amounts recognised in the statement of financial position for post-employment defined benefit plans are predominantly noncurrent. The non-current portion is reported as non-current assets and non-current liabilities. The current portion is reported as
current liabilities within other current liabilities.
Changes in the present value of the defined benefit obligation are as follows:2016
in millions of Swiss francs

Pension Non-pension
Plans
Plans

Balance as at 1 January

2,038

84

2,122

Current service cost

37

2

Interest cost

46

3

Total

2015
Pension Non-pension
Plans
Plans

Total

2,495

88

2,583

39

42

2

44

49

49

3

52

Amounts recognised in the income statement

Amounts recognised in the other comprehensive income(Gains) losses from change in demographic assumptions

25

(1)

24

(28)

–

(28)

(Gains) losses from change in financial assumptions

188

2

190

(50)

(1)

(51)

Experience (gains) losses

11

(6)

5

3

(4)

(1)

Employee contributions

10

1

11

10

1

11

Benefit payments

(66)

(4)

(70)

(74)

(4)

(78)

Settlements a

(62)

(62)

(355)

Currency translation effects

(53)

–

(53)

(54)

(1)

(55)

Balance as at 31 December

2,174

81

2,255

2,038

84

2,122

(355)

a)	Settlements related to the transfer of the pension plan in the Netherlands (2015) and the freeze in the United States of America (2016) and United Kingdom (2016).

Givaudan – 2016 Annual ReportFinancial report

151

Notes to the consolidated financial statements

Changes in the fair value of the plan assets are as follows:
2016

2015

in millions of Swiss francs

Pension Non-pension
Plans
Plans

Balance as at 1 January

1,491

1

1,492

1,848

1

1,849

36

–

36

36

–

36

Return on plan assets less interest on plan assets

71

–

71

(13)

–

(13)

Employer contributions

42

3

45

43

2

45

Employee contributions

10

1

11

10

1

11

Benefit payments

(66)

(4)

(70)

(74)

(4)

Total

Pension Non-pension
Plans
Plans

Total

Amounts recognised in the income statement
Interest income
Amounts recognised in the other comprehensive income(312)

Settlements a

(78)
(312)

Currency translation effects

(46)

–

(46)

(47)

1

(46)

Balance as at 31 December

1,538

1

1,539

1,491

1

1,492

Debt

489

32%

476

32%

Equity

602

39%

533

36%

Property

215

14%

199

13%

a)	Settlements related to the transfer of the pension plan in the Netherlands (2015).

Plan assets are comprised as follows:2016

in millions of Swiss francs

Insurances policies and other
Total

2015

233

15%

284

19%

1,539

100%

1,492

100%

The investment strategies are diversified within the respective statutory requirements of each country providing long-term
returns with an acceptable level of risk. The plan assets are primarily quoted in an active market with exception of the property
and insurance policies.
The plan assets do not include Givaudan registered shares. They do not include any property occupied by, or other assets used by,
the Group.
The Group operates defined benefit plans in many countries for which the actuarial assumptions vary based on local economic andsocial conditions. The assumptions used in the actuarial valuations of the most significant defined benefit plans, in countries withstable currencies and interest rates, were as follows:
Weighted percentage

2016

2015

Discount rates

1.9%

2.5%

Projected rates of remuneration growth

1.7%

2.6%

Future pension increases

0.8%

0.8%

Healthcare cost trend rate

5.0%

5.0%

The overall discount rate and the overall projected rates of remuneration growth are calculated by weighting the individual rates
in accordance with the defined benefit obligation of the plans.

Givaudan – 2016 Annual Report

152

Financial report

Notes to the consolidated financial statements

Sensitivity analysis
The defined benefit obligations are calculated on the basis of various financial and demographic assumptions. The below
information quantifies the consequences of a change in some key assumptions.
The effects ((gain)/loss) of the change in assumptions are as follows:in millions of Swiss francs

Change inassumption

Discount rate

0.5%

Salary increases

0.5%

Pension increases

0.5%

Medical cost trend

1.0%Life expectancy

1 yearEffects of the change

Increase inassumption

Decrease inassumption

on the current service cost(4)4

on the defined benefit obligation

(179)

197

on the current service cost1

(1)

on the defined benefit obligation

7

(14)

on the current service cost2–

on the defined benefit obligation

110

(30)

on the current service cost––on the defined benefit obligation

4(4)

on the current service cost1

(1)

on the defined benefit obligation

72

(74)

Information by country
Switzerland
According to the Swiss Federal Law on Occupational Retirement, Survivors and Disability (LPP/BVG), the pension plan is managed byan independent, legally autonomous entity which has the legal structure of a foundation.
The Board of Trustees of the foundation is composed of equal numbers of employee and employer representatives. Each year the
Board of Trustees decides the level of interest, if any, to apply to the retirement accounts in accordance with the pension policy. It isalso responsible for the investment of the assets defining the investment strategy for long-term returns with an acceptable level ofrisk. The foundation provides benefits on a defined contribution basis.
The majority of the employees are participants to the plan and are insured against the financial consequences of old age,disability and death. The employer and employees pay contributions to the pension plan at rates set out in the foundation rules
based on a percentage of salary. The amount of the retirement account can be taken by the employee at retirement in theform of pension or capital.
Under IAS19 employee benefits, the pension plan is classified as defined benefit plan due to the promises and underlying benefits
guarantees. Consequently the pension obligation is calculated by using the projected unit credit method.
The Group expects to contribute CHF 18 million to these plans during 2017 (2016: CHF 18 million).
United States of America
The main US pension plan is qualified under and is managed in accordance with the requirements of US federal law. In accordancewith federal law the assets of the plan are legally separate from the employer and are held in a pension trust. The plan was frozen
during the first six months of 2016 and consequently no further accrual of benefits will continue as at the date of enforcement of theplan change.

Givaudan – 2016 Annual ReportFinancial report

Notes to the consolidated financial statements

153

The law requires minimum and maximum amounts that can be contributed to the trust, together with limitations on the amount ofbenefits that may be provided under the plan. There are named fiduciaries that are responsible for ensuring the plan is managed inaccordance with the law. The fiduciaries are responsible for the investment of the assets defining the investment strategy forlong-term returns with an acceptable level of risk. The plan provides benefits on a defined benefit basis.
The accrued benefits based on service to the plan freeze are payable at retirement and on death in service. With exceptions for
optional lump sum amounts for certain sections of the plan, the benefits are paid out as annuities.
Under IAS19 employee benefits, the pension obligations are calculated by using the projected unit credit method.
The Group expects to contribute CHF 6 million to these plans during 2017 (2016: CHF 16 million).
United Kingdom
The two occupational pension schemes (Quest UK Pension Scheme and Givaudan UK Pension Plan) are arranged under theapplicable UK Pension Schemes and Pensions Acts and managed as legally autonomous pension trusts by the Boards of Trustees.
The plans were frozen during the second half of 2016 and consequently no further accrual benefits will continue as at the date ofenforcement of the plan change.
The Boards of Trustees are composed of two employee representatives and four employer representatives, for the Quest UK
Pension Scheme, and three employee representatives, three employer representatives plus two pensioner representatives for theGivaudan UK Pension Plan. The Boards of Trustees are responsible for the investment of the assets defining the investment
strategy for long-term returns with an acceptable level of risk. In their respective sections, both trusts provide benefits on adefined benefit basis and are now frozen to future accruals and members.
The accrued benefits based on service to the plan freeze are payable at retirement and on death in service. With exceptions fortrivial amounts, transfer values, lump sum death benefits and tax free lump sums, the benefits are paid out as annuities.
Under IAS19 employee benefits, the pension obligations in the defined benefit sections of both the Quest UK Pension Scheme and
the Givaudan UK Pension Plan are calculated by using the projected unit credit method.
The Group expects to contribute CHF 9 million to these plans during 2017 (2016: CHF 13 million).
Rest of the world
The Group operates other retirement plans classified either as defined benefit or defined contribution plans in some othercountries. No individual plan other than those described above is considered material to the Group.
The Group expects to contribute CHF 3 million to these plans in 2017 (2016: CHF 3 million).

Givaudan – 2016 Annual Report

154

Financial report

Notes to the consolidated financial statements

The funding position of the funded defined benefit plans are as follows:
As at 31 December 2016
in millions of Swiss francs

Switzerland

United States ofAmerica

United Kingdom

Other countries

Total

1,208

442

366

78

2,094

Fair value of plan asset

797

382

316

43

1,538

Deficit / (surplus)

411

60

50

35

556

66.0%

86.4%

86.3%

55.1%

73.4%

Switzerland

United States ofAmerica

United Kingdom

Other countries

Total

1,089

458

339

75

1,961

Fair value of plan asset

779

362

307

43

1,491

Deficit / (surplus)

310

96

32

32

470

71.5%

79.0%

90.6%

57.3%

76.0%

Present value of defined benefit obligation

Funding ratio
As at 31 December 2015
in millions of Swiss francs

Present value of defined benefit obligation

Funding ratio

Key assumptions
2016
in percentage

Switzerland

United Statesof America

UnitedKingdom

2.60

Discount rate

0.60

4.25

Future salary increases

2.00

n/a

n/a

Future pension increases

0.00

n/a

2.55

Future average life expectancy for a pensioner retiring at age 65

23.3

21.8

23.2

Switzerland

United Statesof America

UnitedKingdom

3.70

2015
in percentage

Discount rate

1.00

4.60

Future salary increases

2.00

3.50

3.75

Future pension increases

0.00

n/a

3.10

Future average life expectancy for a pensioner retiring at age 65

22.8

22.2

23.1

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics andexperience in each territory. Mortality assumptions for the most important countries are based on the following tables:
(i)
(ii)
(iii)

Switzerland: BVG2015
United States of America: RP2014
United Kingdom: S2PA

Allowance for future improvements in mortality have been allowed for as appropriate in each country. In Switzerland the generational
rates have been used. In the United States of America the published rates have been adjusted and projected in accordance with the
MP2016 scale. In the United Kingdom the rates reflect the latest (2015) CMI projections with a 1.25% long term rate of improvement.

Givaudan – 2016 Annual ReportFinancial report

Notes to the consolidated financial statements

155

9. Share-Based Payments
Performance share plan
Performance share plans are granted on a yearly basis. The performance shares are converted into tradable and transferable
shares of Givaudan SA after the vesting period, subject to performance conditions. The performance metric is a combination of theaverage sales growth of selected peer companies and the cumulative free cash flow margin. There is no market vesting condition
involved and participation in this plan is mandatory.
Year of grantCommencing date

Vesting date

Number of shares expected
to be delivered at vesting date

Fair value
at grant date (CHF)

1,214.4

2014

31 Mar 2014

31 Mar 201733,3012015

31 Mar 2015

31 Mar 2018

23,6281,595.92016

31 Mar 201615 Apr 201922,181

1,709.4

The cost of the equity-settled instruments of CHF 42 million (2015: CHF 33 million) has been expensed in the consolidated income
statement. A marginal portion of the number of shares expected to be delivered can be settled in cash in the jurisdictions where aphysical delivery is not admitted.

Equity-settled instruments related to restricted shares
Restricted shares shown in the table below have been granted on a yearly basis. These shares are tradable and transferable after
the vesting period. Participation in these plans is mandatory.
Restricted shares outstanding at the end of the year have the following terms:

Year of grant

Restricted shareat grant date
(CHF)

Number of
restricted
share 2016

Number of
restricted
share 2015

Commencing date

Vesting date2013

29 Mar 2013

1 Mar 2016

970.4

2014

31 Mar 2014

31 Mar 2017

1,214.4

1,190

1,190

2015

31 Mar 2015

31 Mar 2018

1,595.9

1,092

1,092

2016

31 Mar 201615 Apr 2019

1,709.4

935

1,125

Of the 3,217 outstanding restricted shares (2015: 3,407), no share (2015: none) was deliverable. The cost of these equity-settled
instruments of CHF 2 million (2015: CHF 2 million) has been expensed in the consolidated income statement.
Movements in the number of restricted shares outstanding are as follows:
Number of restricted shares

As at 1 January
GrantedDelivered/Sold

2016

2015

3,407

12,674935

1,092(1,125)(10,359)

3,217

3,407

Lapsed/cancelled
As at 31 December

For these plans, the Group has at its disposal treasury shares.

Givaudan – 2016 Annual Report

156

Financial report

Notes to the consolidated financial statements

10. Jointly Controlled Entities
Year ofincorporation

Name of Joint ventures

Principal activity

Country ofincorporation

Ownership
interest

Production of fragrance ingredients

China

49%

Innovative natural ingredients

USA

49%

2014

Jiangsu Xinrui Aromatics Ltd

2014

BGN Tech LLC

2015

Natural Extracts International Ltd

Natural ingredient derivatives production

Mauritius

49%

2016

Vanilla International Ltd

Natural ingredient collection and extract

Mauritius

49%

Summarised financial information in respect of the Group’s joint ventures is set out below. The following net assets represent 100%of the jointly controlled entities:
in millions of Swiss francs

2016

Current assets

114

42

Non-current assets

41

34

2015

Current liabilities

(79)

(14)

Non-current liabilities

(5)

(6)

Total net assets of joint ventures

71

56

2016

2015

As at 31 Decemberin millions of Swiss francs

Income95

Expenses

(11)

(10)

2016

2015

11. Other Operating Income
in millions of Swiss francs

Other income

7541

Total other operating income

75

41

For the year ended 31 December 2016, the Group recognised one-off non-cash gains of CHF 55 million in the United States ofAmerica and CHF 7 million in the United Kingdom (2015: CHF 32 million in the Netherlands).

12. Other Operating Expense
2016

2015

Amortisation of intangible assets

47

79

Impairment of long-lived assets

6

7Losses on disposal of fixed assets

43

Environmental provisions

4

15

Other project related expenses

14

3

Acquisition related costs

1

1

Other expenses

25

24

Total other operating expense

101

132

in millions of Swiss francs

Givaudan – 2016 Annual ReportFinancial report

Notes to the consolidated financial statements

157

13. Expenses by Naturein millions of Swiss francs

2016

2015

1,769

1,642

8

1,024

981

21, 22

251

276

Note

Raw materials and consumables used
Total employee remuneration
Depreciation, amortisation and impairment charges
Transportation expenses

45

37

Freight expenses

89

86

Consulting and service expenses

116

109

Other expenses

494

471

3,788

3,602

2016

2015

Total operating expenses by nature

14. Financing Costs
in millions of Swiss francs

NoteInterest expense
Net interest related to defined benefit pension plans

8

42

47

13

16
(3)

Derivative interest (gains) losses(5)

Amortisation of debt discounts

1

1

Total financing costs

51

61

2016

2015 aFair value and realised (gains) losses from derivatives instruments, net (at fair value through income statement)

88

(41)

Exchange (gains) losses, net

(59)

71

Realised (gains) losses from financial instruments measured at fair value through income statement–(2)

Unrealised (gains) losses from financial instruments measured at fair value through income statement

(4)

(2)

Interest (income) expense

1

(2)
9

15. Other Financial (Income) Expense, Net
in millions of Swiss francs

Capital taxes and other non business taxes

9

Other (income) expense, net

54

Total other financial (income) expense, net

4037a)	Previous year figures have been restated in accordance with early adoption of IFRS 9 (see Note 2).

Givaudan – 2016 Annual Report158 Financial report

Notes to the consolidated financial statements

16. Income Taxes

Amounts charged to (credited in) the consolidated statement of comprehensive income are as follows:2016

in millions of Swiss francs

Other
Income comprehensive
statement
incomeOwn equity
instruments

Total

2015
Other
Income comprehensive
statement
incomeOwn equity
instruments

Total

Current taxes- in respect of current year

117

- in respect of prior years

(10)

–

117

115

(10)

(1)

(3)

(39)

(5)

110
(1)

Deferred taxes- in respect of current year

33

(36)

–

- attributable to changes in tax rates

2- reclassified from equity to income statement–- in respect of prior years–

Total income tax expense

140

(36)

20

(3)

(22)
2

–

3

3

(6)

3

3

107

71

18

–
(3)
(3)

86

Since the Group operates globally, it is subject to income taxes in many different tax jurisdictions. As such, in determining theprovision for income taxes, judgment is required as there are transactions for which the ultimate tax determination is uncertain at thetime of preparing the financial statements. As a result, any differences between the final tax outcome and the amounts that were
initially recorded impact the current and deferred taxes in the period in which such final determinations are made.
The Group calculates on the basis of the income statement its average applicable tax rate as a weighted average of the tax rates in the
tax jurisdictions in which the Group operates, including research tax credits and withholding tax on dividends, interest and royalties.
The Group’s average applicable tax rate differs from the Group’s effective tax rate as follows:
2016

2015

20%

19%

Income not taxable

(2%)

(2%)

Expenses not deductible

1%

Group's average applicable tax rate
Tax effect of

Tax losses on changes in the valuation of subsidiaries
Tax on unremitted earnings not recognised in previous periods
Other adjustments of income taxes of prior years
Other differences
Group's effective tax rate

1%
(11%)

–

3%

(1%)

(1%)

–

1%

18%

10%

The variation in the Group’s average applicable tax rate arises due to changes in the composition of the Group’s profitability within
the Group’s subsidiaries, in accordance with the Group’s business profile in terms of geographical presence, product mix andcustomer portfolio, as well as external factors related to changes in local statutory tax rates.
In 2015, the tax losses relating to adjustments in the value of the parent company’s interests in subsidiaries arose from changes in Swiss
Accounting Law and from changes in the Group’s legal entity structure.

Givaudan – 2016 Annual ReportFinancial report

Notes to the consolidated financial statements

159

Income tax assets and liabilities
Amounts recognised in the statement of financial position related to income taxes are as follows:
As at 31 Decemberin millions of Swiss francs

2016

2015

Current income tax assets

26

16

Current income tax liabilities

(46)

(70)

Total net current income tax asset (liability)

(20)

(54)

Other
differences

Total

89

168

7

(33)

2016
in millions of Swiss francs

Net deferred tax asset (liability) as at 1 January

Property,plant &
equipment

Intangible
assets

(89)

(64)

173

59

(6)

6

(15)

(25)

Pension Tax loss carryplans
forwardAcquisition(Credited) debited to consolidated income statement(Credited) debited to other comprehensive income

33(Credited) debited to own equity instruments
Currency translation effects
Net deferred tax asset (liability) as at 31 December

3

36

(3)

(3)

1

–

(1)

(2)

–

(2)

(94)

(58)

190

32

96

166

Deferred tax assets

259

Deferred tax liabilities(93)

Net deferred tax asset (liability) as at 31 December

166

2015
in millions of Swiss francs

Net deferred tax asset (liability) as at 1 January

Property,plant &
equipment

Intangible
assets(94)(52)

Acquisition(Credited) debited to consolidated income statement

Pension Tax loss carryplans
forward

202

9

(8)
2

(2)

(Credited) debited to other comprehensive income

51
(24)

(Credited) debited to own equity instruments
Currency translation effects
Net deferred tax asset (liability) as at 31 December

Other
differences

Total

105

170

(1)

(9)

(8)

43

1

(23)

3

3

3

(2)

(5)

(1)

(11)

(16)

(89)

(64)

173

59

89

168

Deferred tax assets

260

Deferred tax liabilities(92)

Net deferred tax asset (liability) as at 31 December

168

Amounts recognised in the statement of financial position for deferred taxes are reported as non-current assets and non-current
liabilities; the current portion will be charged or credited to the consolidated income statement during 2017.
Deferred tax assets on loss carry forwards of CHF 32 million (2015: CHF 59 million) and on tax credits of CHF 59 million(2015: CHF 53 million) have been recognised. Deferred tax asset on unused tax losses of CHF 4 million (2015: CHF 5 million) has notbeen recognised.
A deferred tax liability of CHF 24 million has been recognised in 2016 (2015: CHF 24 million) for certain foreign subsidiaries which have
undistributed earnings subject to withholding tax when paid out as dividend as the parent entity is in a position to forecast the timingof distributions expected in the foreseeable future, whereas no deferred tax liability could be recognised for undistributed earnings of
CHF 429 million (2015: CHF 300 million).

Givaudan – 2016 Annual Report160 Financial report

Notes to the consolidated financial statements

17. Earnings per Share
Basic earnings per share
Basic earnings per share is calculated by dividing the net income attributable to shareholders by the weighted average number ofshares outstanding:
20162015 a644

625

Ordinary shares

9,233,586

9,233,586

Treasury shares(27,646)(27,964)

Income attributable to equity holder of the parent (in millions of Swiss francs)
Weighted average number of shares outstanding

Net weighted average number of shares outstanding
Basic earnings per share (CHF)

9,205,940 9,205,622
69.95

67.89

a)	Previous year figures have been restated in accordance with early adoption of IFRS 9 (see Note 2).

Diluted earnings per share
For the calculation of diluted earnings per share, the weighted average number of shares outstanding is adjusted to assume
conversion of all potentially dilutive shares:
Income attributable to equity holder of the parent (in millions of Swiss francs)
Weighted average number of shares outstanding for diluted earnings per share of 81,316 (2015: 114,050)
Diluted earnings per share (CHF)20162015 a644

625

9,287,256 9,319,672
69.34

67.06

a)	Previous year figures have been restated in accordance with early adoption of IFRS 9 (see Note 2).

18. Cash and Cash Equivalents
in millions of Swiss francs

2016

2015

Cash on hand and balances with banks

207

302

Short-term investments

121

176

Balance as at 31 December

328

478

Givaudan – 2016 Annual ReportFinancial report

Notes to the consolidated financial statements

161

19. Accounts Receivable – Tradein millions of Swiss francs

2016

2015

Accounts receivable

1,009

911

1

1

Less: provision for impairment

Notes receivable

(14)

(11)

Balance as at 31 December

996

901

Ageing list:in millions of Swiss francs

2016

2015

Neither past due nor impaired

939

847

Less than 30 days48

46

30 − 60 days

9

11

60 − 90 days

4

3

Above 90 days

10

5

Less: provision for impairment

(14)

(11)

Balance as at 31 December

996

901

in millions of Swiss francs

2016

2015

Balance as at 1 January

(11)

(9)

Increase in provision for impairment recognised in consolidated income statement

(5)

(5)

Amounts written off as uncollectible–

1

Reversal of provision for impairment

1

1

Movement in the provision for impairment of accounts receivable – trade:

Currency translation effects

1

1Balance as at 31 December

(14)

(11)

No significant impairment charge has been recognised in the consolidated income statement in 2016 or in 2015. Past due andimpaired receivables are still considered recoverable. The carrying amount of accounts receivable – trade is considered tocorrespond to the fair value.

20. Inventories
in millions of Swiss francs

2016

2015

Raw materials and supplies

312

267

Work in process26

22Intermediate and finished goods

482

459

Less: allowance for slow moving and obsolete inventories

(32)

(32)

Balance as at 31 December

788

716

In 2016 the amount of write-down of inventories was CHF 36 million (2015: CHF 31 million). At 31 December 2016 and 2015 nosignificant inventory was valued at net realisable value.

Givaudan – 2016 Annual Report162 Financial report

Notes to the consolidated financial statements

21. Property, Plant and Equipment

Land

Buildings
and land
improvements

Balance as at 1 January

91

708

530

55

1,384

Additions

3

9

3

157

172

Acquisition

3

17

10

–

(1)

(4)
81

2016
in millions of Swiss francs

Machinery,equipment Construction
and vehicles
in progress

Total

Net book value

Disposals
Transfers

35

Impairment(6)

Depreciation

(33)

30
(5)

(116)
(6)

(80)

(113)

Currency translation effects

(2)

(7)

(9)

(2)

(20)

Balance as at 31 December

95

722

531

94

1,442

Cost

95

1,180

1,598

94

(440)

(1,063)

Accumulated depreciation
Accumulated impairment

2,967(1,503)

(18)

(4)

95

722

531

Land

Buildings
and land
improvements

Balance as at 1 January

97

650

540

143

1,430

Additions

–

1

5

137

143

Balance as at 31 December

2015
in millions of Swiss francs

(22)
94

1,442

Machinery,equipment Construction
and vehicles
in progress

Total

Net book value

Acquisition
Disposals

–

(1)

2

2

(3)

(4)

Transfers

118

97

Impairment

–

(3)

(215)
(3)

Depreciation

(32)

(80)

(112)

Currency translation effects

(6)

(28)

(28)

(10)

(72)

Balance as at 31 December

91

708

530

55

1,384

Cost

91

1,147

1,642

55

(424)

(1,105)

Accumulated depreciation
Accumulated impairment
Balance as at 31 December

91

(15)

(7)

708

530

At 31 December 2016, no significant capitalised borrowing costs was amounted (2015: CHF 1 million).

Givaudan – 2016 Annual Report

2,935(1,529)
(22)

55

1,384

Financial report

Notes to the consolidated financial statements

163

22. Intangible Assets
2016
in millions of Swiss francs

Goodwill

Process-oriented
technology andother

Client relationships

Name and productbrandsSoftware/ERP
system

Total

1,707

173

143

3

171

2,197

Net book value
Balance as at 1 January
Additions
Acquisition

12
150

Amortisation

36

30

81

1

48
262

(30)

(24)

(1)

(77)

Currency translation effects

(66)

(1)

3

–

–

(64)

Balance as at 31 December

1,791

184

203

3

130

2,311

Cost

1,791

Accumulated amortisation
Accumulated impairment
Balance as at 31 December

2015
in millions of Swiss francs

(132)

823

415

4

624

3,657

(635)

(212)

(1)

(494)

(1,342)

(4)

(4)

1,791

184

203

3

130

2,311

Goodwill

Process-oriented
technology andother

Client relationships

Name and productbrandsSoftware/ERP
system

Total

1,718

187

153

235

2,293

Net book value
Balance as at 1 January
Additions38

Acquisition

62

23

3
–

(102)
–

(73)

3

171

2,197

Impairment(4)

Amortisation

(33)

(22)

173

143

Currency translation effects(73)

Balance as at 31 December

1,707

Cost

1,707

Accumulated amortisation
Accumulated impairment
Balance as at 31 December

38

12

100
(4)

–

(157)

779

331

3

588

3,408

(602)

(188)

–

(417)

(1,207)

143

3

171

2,197

(4)
1,707

(4)

173

Classification of amortisation expenses is as follows:2016
in millions of Swiss francs

Fragrances

Flavours

Total

2015
Fragrances

Flavours

Total

Cost of sales

10

6

16

8

2

10

Selling, marketing and distribution expenses

16

20

36

16

17

33

Research and product development expenses

8

21

29

9

24

33

Administration expenses

2

2

4

1

1

2

Other operating expenses

23

24

47

39

40

79

Total

59

73

132

73

84

157

Givaudan – 2016 Annual Report

164

Financial report

Notes to the consolidated financial statements

Impairment test for goodwill
Goodwill is allocated to the Group’s cash-generating units (CGUs), which are defined as the Fragrance Division and the Flavour
Division. Goodwill allocated to these two CGUs was CHF 572 million (2015: CHF 632 million) to the Fragrance Division and
CHF 1,219 million (2015: CHF 1,075 million) to the Flavour Division.
The recoverable amount of each CGU has been determined based on value in use calculations. These calculations use pre-tax cash
flow projections based on financial business plans and budgets approved by management covering a five year period, as well as aterminal value. The basis of the key assumptions is market growth adjusted for estimated market share gains. The terminal value
assumes no further growth beyond the five year period. The discount rate used to discount the estimated future cash flows has anumber of components which are derived from capital market information where the cost of equity corresponds to the return
expected by the shareholders by benchmarking with comparable companies in the fragrance and flavour industry, and where thecost of debt is based on the conditions on which companies with similar credit rating can obtain financing.
A discount rate of 9.7% (2015: 9.6%) was applied to cash flow projections of the Fragrance Division and to cash flow projections of
the Flavour Division. These discount rates are pre-tax.
No impairment loss in either division resulted from the impairment tests for goodwill. The outcome of the impairment test was
not sensitive to reasonable changes in the cash flows and in the discount rate in the periods presented.

Process-oriented technology and other
This consists mainly of process-oriented technology, formulas, molecules, delivery systems as well as process knowledge andresearch expertise in innovative cosmetic solutions, acquired when the Group purchased Food Ingredients Specialties (FIS),
International Bioflavors (IBF), Quest International, Soliance, Induchem and Spicetec.
In 2016, the Group invested CHF 12 million in bioscience through agreement with outside partner to apply strain technology toactive beauty.
Client relationships
As part of the acquisition of Quest International, Induchem and Spicetec, the Group acquired client relationships in the Flavour andFragrance Divisions, mainly consisting of client relationships with key customers.
Name and product brands
In connection with the acquisition of Induchem and Spicetec, the Group acquired name and product brands in active beauty
business, which is part of Fragrance Division.
Software/ERP system
This consists of internally generated intangible assets associated with the development of identifiable software products and
ERP systems.
The residual useful lives of the acquired intangible assets carried at cost, being their fair value at acquisition date, are determined inaccordance with the principles set out in Note 2.17. Remaining useful lives of major classes of amortisable intangible assets are as
follows:­– Software/ERP system 			
2.7 years­– Name and product brands 		
3.9 years­– Process-oriented technology and other
5.4 years­– Client relationships 			12.9 years

Givaudan – 2016 Annual ReportFinancial report

Notes to the consolidated financial statements

165

23. Debt
2016
in millions of Swiss francs

Within1 to 3 years

Within3 to 5 years

Short-term
within 1 year

Total

Bank overdrafts

7

7

Total floating rate debt

77Thereafter

Total
long-term

Floating rate debt
Bank facility

Fixed rate debt
Bank borrowings
Straight bonds

299

Private placements

248

450

997

997

41

213

254

254

Total fixed rate debt

299

289

663

1,251

Balance as at 31 December

299

289

663

1,251

7

1,258

Within1 to 3 years

Within3 to 5 years

Thereafter

Total
long-term

Short-term
within 1 year

Total

2015
in millions of Swiss francs

1,251

Floating rate debt
Bank facility––

Bank overdrafts
Total floating rate debt

–

–
3

3

–

3

3

Fixed rate debt
Bank borrowings
Straight bonds

299

Private placements

100

298

697

150

847

40

210

250

55

305

Total fixed rate debt

299

140

508

947

205

1,152

Balance as at 31 December

299

140

508

947

208

1,155

On 28 May 2003, the Group entered into a private placement for a total amount of USD 220 million. The private placement was made by
Givaudan United States, Inc. It was redeemable at various times beginning on May 2008 through May 2015 with annual interest rates
ranging from 3.65% to 5.00%. There were various covenants contained in the transaction covering conditions on net worth, indebtedness
and disposition of assets of Givaudan United States, Inc. Givaudan United States, Inc was in full compliance with these covenants. In May
2015, Givaudan reimbursed the final USD 50 million (CHF 47 million) instalment of this private placement.
On 16 April 2004, the Group entered into a private placement for a total amount of USD 200 million. The private placement wasmade by Givaudan United States, Inc. It matured at various times in instalments beginning May 2009 through April 2016 with annualinterest rates ranging from 4.16% to 5.49%. There were various covenants contained in the transaction covering conditions on net worth,indebtedness and disposition of assets of Givaudan United States, Inc. Givaudan United States, Inc has been in full compliance with thecovenants set. In April 2014, Givaudan United States, Inc. reimbursed USD 75 million (CHF 66 million) of this placement, the remaining
amount of USD 55 million (equivalent to CHF 53 million) has been fully paid in April 2016.
On 15 June 2011, the Group issued a 2.5% seven year public bond with a nominal value of CHF 300 million. The bond was issued by
Givaudan SA.
On 7 December 2011, the Group issued a dual tranche public bond transaction of CHF 150 million each, totalling CHF 300 million,
respectively of 1.250% for five years and of 2.125% for ten years. The bond was issued by Givaudan SA. The first tranche was redeemed in
December 2016.
In November 2012, Givaudan United States, Inc entered into three private placements for a total amount of USD 250 million(CHF 254 million) respectively USD 40 million redeemable in February 2020 with an annual interest rate of 2.74%, USD 150 million
redeemable in February 2023 with an annual interest rate of 3.30% and USD 60 million redeemable in February 2025 with anannual interest rate of 3.45%. The proceeds of these transactions have been received on 6 February 2013. There are various

Givaudan – 2016 Annual Report166 Financial report

Notes to the consolidated financial statementscovenants contained in these transactions covering conditions on net worth, indebtedness and EBITDA ratio to net interest
expense of Givaudan United States, Inc. The company is and has been in full compliance with the covenants set.
On 19 March 2014, the Group issued a 1.00% six and a half year public bond with a nominal value of CHF 100 million and a 1.75% ten year
public bond with a nominal value of CHF 150 million. These bonds were issued by Givaudan SA.
In March 2015, the Group issued a tranche of CHF 200 million of the multilateral facility (maturity July 2018), of which CHF 75 million
was reimbursed in April 2015, CHF 50 million in June 2015 and CHF 75 million in July 2015. This multilateral facility was issued by
Givaudan SA.
In December 2016, the Group issued a 0.00% six year public bond with a nominal value of CHF 100 million and a 0.625%
fifteen year public bond with a nominal value of CHF 200 million. These bonds were issued by Givaudan SA. The proceeds of
CHF 300 million were used to repay the 1.250% five year public bond with a nominal value of CHF 150 million which was redeemed in
December 2016 and to repay the short-term borrowings withdrawn during the year.
The carrying amounts of the Group’s debt are denominated in the following currencies:in millions of Swiss francs

2016

2015

Swiss Franc

997

847

US Dollar

259

305

Other currencies
Total debt as at 31 December

2

3

1,258

1,155

The weighted average effective interest rates at the statement of financial position date were as follows:

Private placements

2016

2015

3.3%

3.7%

Straight bond

1.6%

1.9%

Weighted average effective interest rates on gross debt

1.9%

2.4%

Givaudan – 2016 Annual ReportFinancial report

167

Notes to the consolidated financial statements

24. Provisions
2016
in millions of Swiss francs

Restructuring

Claims andlitigation

Environmental

Others

Total

Balance as at 1 January

3

11

23

26

63

Additional provisions

2

3

5

4

14

Unused amounts reversed

–

(3)

(1)

–

(4)

Utilised during the year

(2)

(3)

(1)

(2)

(8)

Currency translation effects

–

–

–

–

–

Balance as at 31 December

3

8

26

28

65

Current liabilities

2

2

2

6

Non-current liabilities

1

8

24

26

59

Balance as at 31 December

3

8

26

28

65

Restructuring

Claims andlitigation

Environmental

Others

Total

Balance as at 1 January

6

8

11

23

48

Additional provisions

1

6

15

10

32

Unused amounts reversed

(1)

–

–

(1)

(2)

2015
in millions of Swiss francs

Utilised during the year

(3)

(3)

(4)

(4)

(14)

Currency translation effects

–

–

1

(2)

(1)

Balance as at 31 December

3

11

23

26

63

Current liabilities

2

4

4

2

12

Non-current liabilities

1

7

19

24

51

Balance as at 31 December

3

11

23

26

63

Significant judgment is required in determining the various provisions. A range of possible outcomes is determined to make reliable
estimates of the obligation that is sufficient for the recognition of a provision. Differences between the final obligations and theamounts that were initially recognised impact the income statement in the period in which such determination is made.

Restructuring provisions
Restructuring provisions arise from reorganisations of the Group’s operations and management structure.
Claims and litigation
These provisions are made in respect of legal claims brought against the Group and potential litigations. Related estimated legal
fees are also included in these provisions.
Environmental
Givaudan’s affiliate, Givaudan Fragrances Corporation, is one of more than 100 companies identified by the US Environmental
Protection Agency (“EPA”) as “Potentially Responsible Parties” (“PRP”) for alleged contamination of the Passaic River. The EPA
released a Focused Feasibility Study (“FFS”) covering only the lower 8 miles of the River in 2014. In March 2016, the EPA issued its
Record of Decision (“ROD”) to confirm the remediation solution related to the FFS. The chosen solution entails a bank-to-bankdredge of the River, and the installation of an engineered cap, with an estimated cost of CHF 1.4 billion. One PRP has agreed to
conduct the detailed remediation design, which is expected to take up to four years to complete. The Cooperating Parties Group(“CPG”), of which Givaudan had been a member, issued a draft Remedial Investigation/Feasibility Study (“RI/FS”) in April 2014,
which proposed a Sustainable Remedy for the entire lower 17 miles of the River. The CPG is still responding to EPA comments on
the RI/FS, which remains in draft form today. At this time, there are many uncertainties associated with the final remediation planand the Company’s share of the costs, if any. However, in accordance with accounting guidance, the Group has recorded a reserve
which it believes can reasonably be expected to cover the Company’s obligation, if any, given the information currently available.
The other material components of the environmental provisions consist of costs to sufficiently clean and refurbish contaminatedsites and to treat where necessary.

Givaudan – 2016 Annual Report

168

Financial report

Notes to the consolidated financial statements

Other provisions
These consist largely of provisions related to long-term deferred compensation plan and to restoring expenses related toleased facilities.

25. Own Equity Instruments

Details of own equity instruments are as follows:

As at 31 December 2016

Settlement

Registered shares

Categoryin equivalentsharesFair value
in millions of Swiss
francsMaturity

Strike price(CHF)

31,13758

1 Mar 2017

915.0

2,732

3

EquityPurchased calls

Net cash

Derivative

Purchased calls

Gross shares

Equity2017 1,690.0 - 1,930.9

31,750

3

Written puts

Gross shares Financial liability

2017 1,690.0 - 1,930.4

31,7502

Maturity

Strike price(CHF)

in equivalentsharesFair value
in millions of Swiss
francs39,706722016 - 2017915.0 - 975.0

6,392

6

As at 31 December 2015

Settlement

Category

Purchased calls

Net cash

Derivative

Purchased calls

Gross shares

Equity2016 1,200.0 - 1,756.7

39,000

20

Written puts

Gross shares Financial liability

2016 1,108.0 - 1,756.7

39,000–Registered shares

Equity26. Equity
Share capital
As at 31 December 2016, the share capital amounts to CHF 92,335,860, divided into 9,233,586 fully paid-up registered shares, with anominal value of CHF 10.00 each. Every share gives the right to one vote.
The Board of Directors has at its disposal conditional capital of a maximum aggregate amount of CHF 7,481,980 that may be
issued through a maximum of 748,198 registered shares, of which a maximum of CHF 1,618,200 can be used for executive shareoption plans.
At the Annual General Meeting held on 17 March 2016 the distribution of an ordinary dividend of CHF 54.00 per share(2015: CHF 50.00 per share) was approved. The dividend payment has been primarily made out of statutory capital reserves from
capital contributions - additional paid-in capital which Givaudan showed in total equity as at the end of 2015, with the remainder
paid out of available retained earnings.

Givaudan – 2016 Annual ReportFinancial report

169

Notes to the consolidated financial statements

Movements in own equity instruments are as follows:
Price in Swiss francs
2016

NumberBalance as at 1 January

39,706

Purchases at cost
Sales and transfers

Total inmillions of
Swiss francs

High

AverageLow

38,2501,931.0

1,327.8

1,200.051(46,819)

1,402.7

1,402.7

1,402.7(66)

79(Gains) losses, net recognised in equity–

Movement on registered shares, net(15)

Movement on derivatives on own shares, net

42

Income taxes
Balance as 31 December

331,137

109

High

Average

Low

Total inmillions of
Swiss francs

32,0001,789.2

1,575.8

1,191.6

50(40,166)

1,233.0

1,233.0

1,233.0(49)

Price in Swiss francs
2015

NumberBalance as at 1 January

47,872

Purchases at cost
Sales and transfers

78(Gains) losses, net recognised in equity

9

Movement on registered shares, net

10

Movement on derivatives on own shares, net(6)

Income taxes
Balance as 31 December(3)39,70679

27. Commitments

At 31 December, the Group had operating lease commitments mainly related to buildings. Future minimum payments under
non-cancellable operating leases are as follows:
2016

2015

Within one year35

22

Within two to five years

87

55

Thereafter

53

45

Total minimum payments

175

122

in millions of Swiss francs

The 2016 charge in the consolidated income statement for all operating leases was CHF 38 million (2015: CHF 35 million).
The Group has capital commitments for the purchase or construction of property, plant and equipment totalling CHF 43 million(2015: CHF 17 million).

28. Contingent Liabilities
From time to time and in varying degrees, Group operations and earnings continue to be affected by political, legislative, fiscal andregulatory developments, including those relating to environmental protection, in the countries in which it operates.
The activities in which the Group is engaged are also subject to physical risks of various kinds. The nature and frequency of thesedevelopments and events, not all of which are covered by insurance, as well as their effect on the future operations and earnings are
not predictable.
Givaudan Group companies are involved in various legal and regulatory proceedings of a nature considered typical of its business,
including contractual disputes and employment litigation.

Givaudan – 2016 Annual Report

170

Financial report

Notes to the consolidated financial statements

One of the Group’s US affiliates, Givaudan Flavors Corporation was named as a defendant in several lawsuits brought against it andother flavour and raw chemical supply companies. The plaintiffs alleged that they sustained pulmonary injuries due to diacetylcontaining butter flavours manufactured by one or more of the flavour and raw chemical supply company defendants. The majorityof the cases filed against Givaudan Flavors Corporation have been settled. The Group has already recovered or will recover amounts
it is entitled to under the terms of its insurance policies.

29. Related Parties

Transactions between Givaudan SA and its subsidiaries, which are related parties of Givaudan SA, have been eliminated on
consolidation and are not disclosed in this note.

Compensation of key management personnel
The compensation of the Board of Directors and the Executive Committee during the year was as follows:
2016

2015

Salaries and other short-term benefits

13

10

Post-employment benefits

22

Share-based payments

1211

Total compensation

27

23

in millions of Swiss francs

No other related party transactions have taken place during 2016 (2015: nil) between the Group and the key management personnel.

Reconciliation table to the Swiss code of obligations
IFRS

Adjustments a

Swiss CO (Art. 663bbis)

2016

2015

2016

2015

2016

Salaries and other short-term benefits

13

10

(6)

(2)

7

8

Post-employment benefits

2

2

–

–

2

2

Share-based payments

12

11

2

–

14

11

Total compensation

27

23

(4)

(2)

23

21

in millions of Swiss francs

2015a)	IFRS information is adjusted mainly to the recognition of the share-based payments, IFRS 2 versus economic value at grant date. IFRS information also includes security costs.

There are no other significant related party transactions including in the jointly controlled entities.

Givaudan – 2016 Annual ReportFinancial report

Notes to the consolidated financial statements

171

30. Board of Directors and Executive Committee Compensation
Compensation of members of the Board of Directors
Compensation of Board members consists of Director fees, Committee fees and restricted share units (RSUs). Fees are paid
at the end of each year in office completed. RSUs give participants the right to receive Givaudan shares (or a cash equivalent incountries where securities laws prevent the offering of Givaudan securities) at the end of a three-year vesting period.
With the exception of the Chairman and outgoing Board members, each Board member receives an additional amount of
CHF 10,000 to cover out-of-pocket expenses. This amount is paid for the coming year in office. The equity awards are also granted
for the same period. The compensation paid out to the Board members for the reporting period is shown in the table below:

2016
in Swiss francs

Dr Jürg
WitmerChairman g

André
Hoffmann Victor Balli
f,g

e,g

Prof.
Dr-Ing.
WernerBaue r g

LilianBiner gMichaelCarlos g

IngridDeltenre g

CalvinPeter
Grieder g Kappeler f,g

ThomasRufer gTotal
2016 aDirector fees b

400,000

25,00075,000100,000

100,000

100,000

100,000

100,000

25,000Committee fees b

40,00010,00018,75065,00050,00040,00050,00050,0006,250

100,000 1,125,000
55,000Total fixed (cash)

440,000

35,00093,750165,000

150,000

140,000

150,000

150,000

31,250155,000 1,510,000

Number of RSUs
granted c

340

–

85

85

85

85

85

85

–

Value at grant d581,196–

145,299

145,299

145,299

145,299

145,299

145,299–

145,299 1,598,289

Total compensation 1,021,196

35,000239,049

310,299295,299285,299295,299295,299

31,250300,299 3,108,289

385,000

85935a)	Represents total compensation for the Board of Director paid in respect of the reporting year, reported in accordance with the accrual principle.
b)	Represents Director and Committee fees paid in respect of the reporting year, reported in accordance with the accrual principle.
c)	R SUs vest on 15 April 2019.
d)	Economic value at grant according to IFRS methodology, with no discount applied for the vesting period.
e)	Elected at the Annual General Meeting in March 2016.
f)	Retired at the Annual General Meeting in March 2016.
g)	T he function of each member of the Board of Directors are indicated on pages 80-84 in the Corporate Governance section of the 2016 Annual Report.

Estimated social security charges based on 2016 compensation amounted to CHF 221,000 (2015: CHF 232,000).
In addition to the above, payments to Board members for out-of-pocket expenses amounted to CHF 70,000 (2015: 80,000).
Prof.
Dr-Ing.
WernerBauer gLilianBiner gMichaelCarlos e,gIngridDeltenre e,gCalvinGrieder gPeterKappeler g

ThomasRufer

100,000

100,000

100,000

75,00075,000100,000

100,000

100,000

40,00025,00031,25018,75018,75025,00025,00055,0006,250

140,000

125,000

131,250

93,75093,750125,000

125,000

155,000

31,250 1,460,000

2015
in Swiss francs

Dr Jürg
AndréWitmer g
Chairman Hoffmann g

Director fees b

400,000

Committee fees b

40,000Total fixed (cash)

440,000

Nabil
Sakkabf,g

Total
2015 a25,000 1,175,000
285,000

Number of RSUs
granted c

364

91

91

91

91

91

91

91

91

Value at grant d580,908

145,227

145,227

145,227

145,227

145,227

145,227

145,227

145,227– 1,742,724

Total compensation 1,020,908

285,227

270,227

276,477

238,977

238,977

270,227

270,227

300,227

31,250 3,202,724

–

1,092

a)	Represents total compensation for the Board of Director paid in respect of the reporting year, reported in accordance with the accrual principle.
b)	Represents Director and Committee fees paid in respect of the reporting year, reported in accordance with the accrual principle.
c)	R SUs vest on 31 March 2018.
d)	Economic value at grant according to IFRS methodology, with no discount applied for the vesting period.
e)	Elected at the Annual General Meeting in March 2015.
f)	Retired at the Annual General Meeting in March 2015.
g)	T he function of each member of the Board of Directors are indicated on pages 74-78 in the Corporate Governance section of the 2015 Annual Report.

Givaudan – 2016 Annual Report

172

Financial report

Notes to the consolidated financial statements

Other compensation, fees and loans to members or former members of the Board
No additional compensation or fees were paid to any member of the Board.
No Board member or related parties had any loan outstanding as at 31 December 2016 and 2015.
Special compensation of members of the Board who left the company during the reporting period
No such compensation was incurred during the reporting period.
Compensation of members of the Executive Committee
The compensation of the Executive Committee during the year was as follows:in Swiss francs

Gilles Andrier
CEO 2016

Gilles Andrier
CEO 2015

Base salary

Executive
Committee
members(excludingCEO) a 2016

Executive
Committee
members(excludingCEO) b 2015

Total
2016

Total
2015

1,035,599

1,027,689

3,819,306

2,662,741

4,854,905

3,690,430

Pension benefits c442,705

459,199

1,558,506

1,119,563

2,001,211

1,578,762

Other benefits d

111,061

100,616

792,134

591,992

903,195

692,608

Total fixed compensation

1,589,365

1,587,504

6,169,946

4,374,296

7,759,311

5,961,800

Annual incentive e944,804

854,544

2,342,717

1,538,172

3,287,521

2,392,716

1,686

1,446

5,441

4,396

7,127

5,842

2,882,048

2,307,671

9,300,845

7,015,576 12,182,893

9,323,247

Number of performance shares granted f
Value at grant g
Total variable compensation

3,826,852

3,162,215 11,643,562

Total compensation

5,416,217

4,749,719 17,813,508 12,928,044 23,229,725 17,677,763

Employer social security h438,000

382,000

1,427,000

8,553,748 15,470,414 11,715,963

1,064,000

1,865,000

1,446,000a)	Represents full year compensation of eight Executive Committee members and partial year compensation of the new Executive Committee member in 2016. Adrien Gonckel
retired from his role as Chief Information Officer on 1 August 2016. Part of his total compensation for 2016 relates to the period from the time he ceased to be an EC member
until 31 December 2016.
b)	Represents full year compensation of five Executive Committee members and partial year compensation of the three new Executive Committee members in 2015.
c)	Company contributions to broad-based pension and retirement savings plans and annualised expenses accrued for supplementary executive retirement benefit.
d)	Represents annual value of health and welfare plans, international assignment benefits and other benefits in kind.
e)	Annual incentive accrued in reporting period based on 2016 performance.
f)	2016 Performance shares vest on 15 April 2019, 2015 Performance shares vest on 31 March 2018.
g)	Value at grant calculated according to IFRS methodology and based on 100% achievement of performance targets.
h)	2016 estimated social security charges based on 2016 compensation; 2015 estimated social security charges based on 2015 compensation.

Other compensation, fees and loans to members or former members of the Executive Committee
No other compensation or fees were accrued for or paid to any member or former member of the Executive Committee during thereporting period. No member or former member of the Executive Committee or related parties had any loan outstanding as at
31 December 2016 and 2015.
Special compensation of Executive Committee members who left the company during the reporting period
Adrien Gonckel retired from his role as Chief Information Officer on 1 August 2016. He did not receive any special compensation asa result of his retirement. All compensation is included in the compensation table above.
Ownership of shares and unvested share rights
Details on the Givaudan share based payment plans are described in Note 9.
As per 31 December 2016, the Chairman and other Board members including persons closely connected to them held
5,546 Givaudan shares in total. For further details, please refer to the following table on the next page showing:­  The shares held individually by each Board member as per 31 December 2016.
–­– The unvested RSUs that were granted in 2014-2016 and were still owned by members of the Board as per 31 December 2016.

Givaudan – 2016 Annual ReportFinancial report

Notes to the consolidated financial statements

173

2016
in numbers

SharesUnvested
RSUs

Dr Jürg Witmer, Chairman

1,500

1,180

970

295

Victor Balli

85

Prof. Dr-Ing. Werner Bauer
Lilian Biner

377

295

Michael Carlos a

2,083

176

Ingrid Deltenre

26

176

Calvin Grieder

295

Thomas Rufer

590

295

Total 2016

5,546

2,797

Total 2015

93,901

3,526a) 	Mr Carlos also held 1,750 unvested performance shares as per 31 December 2016 granted to him during his tenure as an Executive Committee member.

The company is not aware of any other ownership of shares, share options/option rights, RSUs or performance shares as at
31 December 2016 by persons closely connected to members of the Board.
The Chief Executive Officer and other members of the Executive Committee, including persons closely connected to them, held
4,460 Givaudan shares. For further details, please refer to the table below showing:­– The shares held individually by each member of the Executive Committee as per 31 December 2016.
– The unvested performance shares that were granted in 2014-2016 and were still owned by members of the Executive Committee
as per 31 December 2016.
Unvested
performance
shares2016
in numbers

SharesGilles Andrier, CEO

2,400

5,032

Matthias Waehren

300

3,293

Mauricio Graber

550

2,929

Maurizio Volpi

486

1,710

Joe Fabbri

100

2,287

56

1,312

Simon Halle-Smith
Willem Mutsaerts

943

Anne Tayac

104

529

Chris Thoen

464

1,243

Total 2016

4,460

19,278

Total 2015

3,575

21,845

No member of the Executive Committee held any share options or option rights as at 31 December 2016(31 December 2015: no member of the Executive Committee held any share options or option rights).
Two people closely connected to members of the Executive Committee owned Givaudan securities as at 31 December 2016: one
person owned 859 shares, one person owned 264 unvested performance shares.
The company is not aware of any other ownership of shares, share options/option rights, RSUs or performance shares as at
31 December 2016 by persons closely connected to members of the Executive Committee.

Givaudan – 2016 Annual Report174 Financial report

Notes to the consolidated financial statements

31. List of Principal Group Companies

The following are the principal companies fully owned by the Group. Share capital is shown in thousands of currency units:

Switzerland

Argentina
Australia
Austria
BermudaBrazilCanadaChile
China
Colombia
Czech Republic
Egypt
FranceGermany
Hungary
India
Indonesia
Italy
Japan
Korea
Malaysia
MexicoNetherlands
New ZealandNigeria
Peru
PolandRussiaSingapore
South Africa
Spain
SwedenThailandTurkeyUnited Kingdom
United Arab Emirates
United States of America
Venezuela

Givaudan – 2016 Annual Report

Givaudan SA
Givaudan Suisse SA
Givaudan Finance SA
Givaudan International SA
Induchem Holding AG
Induchem AG
Fondation Givaudan
Givaudan Argentina SA
Givaudan Argentina Servicios SA
Givaudan Australia Pty Ltd
Givaudan Austria GmbHFF Holdings (Bermuda) Ltd
Givaudan International Ltd
FF Insurance Ltd
Givaudan do Brasil Ltda
Givaudan Canada Co
Givaudan Chile Ltda
Givaudan Fragrances (Shanghai) Ltd
Givaudan Flavors (Shanghai) Ltd
Givaudan Specialty Products (Shanghai) Ltd
Givaudan Hong Kong Ltd
Givaudan Flavors (Nantong) Ltd
Givaudan Colombia SA
Givaudan CR, s.r.o.
Givaudan Egypt SAE
Givaudan Egypt Fragrances LLC
Givaudan France SAS
Soliance SA
Libragen SA
Givaudan Deutschland GmbH
Givaudan Hungary Kft
Givaudan Finance Services Kft
Givaudan (India) Private Ltd
P.T. Givaudan Indonesia
Givaudan Italia SpA
Givaudan Japan K.K.
Givaudan Korea Ltd
Givaudan Malaysia Sdn.Bhd
Givaudan de Mexico SA de CV
Givaudan Nederland B.V.
Givaudan Treasury International B.V.
Givaudan NZ Ltd
Givaudan (Nigeria) Ltd
Givaudan Peru SAC
Givaudan Polska Sp. Z.o.o.
Givaudan Rus LLC
Givaudan Singapore Pte Ltd
Givaudan South Africa (Pty) Ltd
Givaudan Iberica, SA
Givaudan North Europe AB
Givaudan (Thailand) Ltd
Givaudan Aroma Ve Esans Sanayi Ve Ticaret Limited Sirketi
Givaudan UK Ltd
Givaudan Holdings UK Ltd
Givaudan Middle East & Africa FZEGivaudan United States, Inc.
Givaudan Flavors Corporation
Givaudan Fragrances Corporation
Givaudan Flavors and Fragrances, Inc.
Givaudan Venezuela SA

CHF
CHF
CHF
CHF
CHF
CHF
ARS
ARS
AUD
EUR
USD
USD
CHF
BRL
CAD
CLP
USD
USD
USD
HKD
USD
COP
CZK
USD
EGP
EUR
EUR
EUR
EUR
EUR
EUR
INR
IDR
EUR
JPY
KRW
MYR
MXN
EUR
EUR
NZD
NGN
PEN
PLN
RUB
SGD
ZAR
EUR
SEK
THB
TRY
GBP
GBP
AED
USD
USD
USD
USD
VEF

92,3364,000
100,000
100
500
500
9,000
5,000
35,81240
12
12
170
133,512
12,901
5,000
7,750
10,783
12,0007,374
28,5006,965,925
200
11,360
50
4,696
1,203
345
4,100
15
12
87,3302,608,000
520
1,000,000
550,020200
53,611402
18
71
10,00025
50
9,000
24,000360,0028,020
120
100,000
34
70
317,348
1,000
0.05
0.1
0.1
0.1
4.5

Financial report

Notes to the consolidated financial statements

175

32. Disclosure of the Process of Risk Assessment

Risk management in Givaudan is an integral part of the business. It is a structured and continuous process of identifying, assessing
and deciding on responses to risks. The reporting of the opportunities and threats that these risks create and how they might
hinder the business in achieving its objectives is also part of managing risks.
Risk management is the responsibility of the Board of Directors, which empowers the Executive Committee to manage the overall
company risk management process. The Group actively promotes the continuous monitoring and management of risks at theoperational management level.
The Givaudan Enterprise Risk Management Charter describes the principles, framework and process of the Givaudan Enterprise
Risk Management, which ensure that material risks are identified, managed and reported. It defines the associated roles andresponsibilities which are reflected in the delegated authorities. Enterprise Risk Management encompasses both the Fragranceand Flavour businesses, as well as Givaudan Group functions. It includes all types of risks in terms of their nature, their source or
their consequences.
The process aims to be comprehensive, organised and documented in order to improve compliance with corporate governanceregulations, guidelines and good practices; better understand the risk profile of the business; and provide additional risk-based
management information for decision making.
The objectives of the Risk Management process are to continuously ensure and improve compliance with good corporate
governance guidelines and practices as well as laws and regulations, where applicable; facilitate disclosure to key stakeholders ofpotential risks and the company’s philosophy for dealing with them. At the same time, the process creates the awareness of all key
executives of the magnitude of risks; provides risk-based management information for effective decision-making; and safeguard
the values of the company and its assets, and protect the interests of shareholders.
Givaudan’s management, at all levels, is accountable for ensuring the appropriateness, timeliness and adequacy of the risk analysis.
Mitigation decisions are taken at individual and combined levels. This management is also responsible for implementing, tracking
and reporting the risk mitigation directives of the Executive Committee, including periodic reporting to the Board.
The assessment is performed in collaboration between the Executive Committee, divisional and functional management teams
and the Corporate Compliance Officer.
The Board of Directors’ Audit Committee also promotes the effective communication between the Board, Givaudan’s Executive
Committee, other senior corporate functions and Corporate Internal Audit in order to foster openness and accountability.
Givaudan has carried out its annual review of internal controls over accounting and financial reporting. A risk assessment isperformed throughout the Internal Control System for those identified risks which may arise from the accounting and financial
reporting. Then, relevant financial reporting controls are defined for each risk.

33. Subsequent Event

On 17 January 2017, as part of its 2020 strategy to strengthen capabilities in natural flavour solutions to its customers, Givaudan
announced that it has acquired Activ International.
Activ International employs globally 170 employees. The business would have represented approximately CHF 40 million ofincremental sales to Givaudan’s results in 2016 on a proforma basis.

Givaudan – 2016 Annual Report

176

Financial report

Statutory auditor’s report on the consolidated financial statements

Deloitte SA
Rue du Pré-de-la-Bichette 1
1202 Geneva
Switzerland
Phone: +41 (0)58 279 8000
Fax: +41 (0)58 279 8800
www.deloitte.ch

Statutory Auditor’s Report
To the General Meeting of GIVAUDAN SA, Vernier
Report on the Audit of the Consolidated Financial Statements
OpinionWe have audited the consolidated financial statements of Givaudan SA and its subsidiaries (the Group), which comprise the consolidated income
statement, consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes inequity, consolidated statement of cash flows for the year ended 31 December 2016, and notes to the consolidated financial statements, including asummary of significant accounting policies.
In our opinion the accompanying consolidated financial statements, presented on pages 116 to 175, give a true and fair view of the consolidated
financial position of the Group as at 31 December 2016, and its consolidated financial performance and its consolidated cash flows for the year thenended in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.

Basis for Opinion
We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Auditing Standards. Our
responsibilities under those provisions and standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the requirementsof the Swiss audit profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Overview of Key Audit Matters

Taxation

Pension accounting

Acquisition of Spicetec Flavors and Seasonings

Revenue recognition

Givaudan – 2016 Annual ReportFinancial report

Statutory auditor’s report on the consolidated financial statements

177

Our Audit Approach Summary
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial
statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole,and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key Audit Matters
Taxation
The Group operates in a large number of different jurisdictions and istherefore subject to many tax regimes with differing rules andregulations. As described in the Summary of Significant Accounting
Policies in Note 2 and in Note 3 on Critical Accounting Estimates andJudgments, significant judgment is required in determining provision
for income taxes, both current and deferred, as well as the assessmentof provisions for uncertain tax positions including estimates of interest
and penalties where appropriate.
The effective tax rate of the Group increased from 10% in 2015 to 18%
in 2016. The rate in 2015 was considerably lower following changes in
Swiss Accounting Law and as a result of internal restructuring.
The Consolidated Statement of Financial Position includes current tax
assets of CHF 26 million, current tax liabilities of CHF 46 million,
together with deferred tax assets of CHF 259 million and deferred
tax liabilities of CHF 93 million. The tax expense recognised in
the Consolidated Income Statement of CHF 140 million represents
18% of Group income before taxes. Details of all current anddeferred tax balances are disclosed in Note 16 to the consolidated
financial statements.
Due to their significance to the financial statements as a whole,combined with the judgment and estimation required to determine
their values, the evaluation of current and deferred tax balances is
considered to be a key audit matter.

How the scope of our audit responded
to the Key Audit Matters
We evaluated the design and implementation of controls in respect ofprovisions for current tax and the recognition and recoverability ofdeferred tax assets.
We discussed with management the adequate implementation ofGroup policies and controls regarding current and deferred tax, as wellas the reporting of uncertain tax positions.
We examined the procedures in place for the current and deferred
tax calculations for completeness and valuation and audited
the related tax computations and estimates in the light of ourknowledge of the tax circumstances. Our work was conductedwith our tax specialists.
We performed an assessment of the material components impacting
the Group’s tax expense, balances and exposures. We reviewed andchallenged the information reported by components with the supportof our own local tax specialists, where appropriate.
Utilising our own central tax specialists, we verified the consolidation
and analysis of tax balances at Group level.
We considered management’s assessment of the validity andadequacy of provisions for uncertain tax positions, evaluating the basisof assessment and reviewing relevant correspondence and legal advice
where available including any information regarding similar cases withthe relevant tax authorities.
In respect of deferred tax assets and liabilities, we assessed theappropriateness of management’s assumptions and estimates,
including the likelihood of generating sufficient future taxable income
to support deferred tax assets for tax losses carried forward as
disclosed in Note 16 of CHF 32 million.
We validated the appropriateness and completeness of the related
disclosures in Note 16 of the consolidated financial statements.
Based on the procedures performed above, we obtained sufficient
audit evidence to corroborate management’s estimates regarding
current and deferred tax balances and provisions for uncertain
tax positions.

Givaudan – 2016 Annual Report

178

Financial report

Statutory auditor’s report on the consolidated financial statements

Key Audit Matters
Pension accounting
As described in the Summary of Significant Accounting Policies inNote 2 and in Note 3 on Critical Accounting Estimates and Judgments,
significant judgment is required in determining the calculation of thepresent value of defined benefit obligations requiring financial anddemographic assumptions.
The Group operates a number of defined benefit and defined
contribution plans throughout the world. As disclosed in Note 8 tothe consolidated financial statements, total plan assets amount to
CHF 1’539 million, total post-employment funded obligations to
CHF 2’164 million and total post-employement unfunded obligations
to CHF 91 million.
During 2016, the defined benefit plans held in the United States ofAmerica and United Kingdom have been frozen, which resulted in
one-off non-cash gains of CHF 55 million in the United States ofAmerica and CHF 7 million in the United Kingdom.
The defined benefit obligations recognised in the Consolidated
Statement of Financial Position represent the present value of
defined benefit obligations calculated annually by independentactuaries. These actuarial valuations are sensitive to key assumptions
such as discount rates. Changes in a number of the key assumptions
can have a material impact on the position as disclosed in the Note 8
to the consolidated financial statements.
In addition, any pension plan amendment, such as a settlement or acurtailment, requires careful consideration of the accounting
treatment to ensure compliance with IAS 19 Employee Benefits.
We focused on this area because of the complexity of accounting
treatment of each plan amendment, the level of judgment required todetermine the valuation of both pension assets and pension
obligations and the significance of the balances to the consolidated
financial statements as a whole.

Givaudan – 2016 Annual Report

How the scope of our audit responded
to the Key Audit Matters
We evaluated the design and implementation of controls in respect ofpension accounting.
We discussed with management the adequate implementation ofGroup policies and controls regarding the asset valuation and thepension obligation valuation.
With support from our own pension specialists, we have discussedwith Group’s actuary and challenged key assumptions underpinning
the valuation of the pension plans at the end of 2016.
Specifically we challenged the discount rate, inflation and mortality
assumptions applied in the calculation and benchmarked theassumptions applied against comparable third party data andassessed the appropriateness of the assumptions in the context
of the Group’s own position. We found them to be within an
acceptable range.
We tested the data used in the valuation of the pension plans,such as employee data and we obtained confirmations to verify thecompleteness and accuracy of the pension plan assets.
We validated the appropriateness and completeness of the related
disclosures in Note 8 of the consolidated financial statements.
Based on procedures performed above, we validated the compliance of
the accounting treatment of pension plans, including pension planamendments, with IAS 19 Employee Benefits.

Financial report

Key Audit Matters

Statutory auditor’s report on the consolidated financial statements

179

How the scope of our audit responded
to the Key Audit Matters

Acquisition of Spicetec Flavors & Seasonings
As described in the Note 6 to the consolidated financial statements,
the Group completed the acquisition of assets and liabilities of Spicetec
Flavors & Seasonings on 25 July 2016 for a total purchase price of CHF
331 million. The Group acquired working capital valued at CHF 43
million, fixed assets valued at CHF 30 million, intangibles valued at CHF
112 million and other liabilities valued at CHF 4 million. The acquisition
resulted in the recognition of a goodwill of CHF 150 million.
This transaction is considered as a business combination as definedby IFRS 3 Business Combinations which requires to perform a purchaseprice allocation exercise to fair value the assets and liabilities of theacquired business. This requires exercise of judgments over theaccounting and disclosure for the transactions.
The accounting for the acquisition of assets and liabilities of Spicetec
Flavors & Seasonings requires a number of complex accounting
judgments sensitive to key assumptions such as the weighted average
cost of capital, growth rate and other assumptions used in the businessplan, internal rate of return, attrition rate.
In addition, the amortisation period retained for intangibles acquiredalso requires judgment and constitutes a significant estimate that willaffect current and future financial periods.
We focused on this area because of the complexity of acquisition
accounting and the level of judgments related to the identification of
intangible assets and the purchase price allocation to the assets
and liabilities acquired.

We challenged management on the identification and valuation of
tangible and intangible assets.
We reviewed and assessed the work performed by management’s
valuation expert including valuation methodology for each category ofasset and liability, along with the key judgments made in determining
the fair values.
We determined that the methods used by the management’s
valuation expert were appropriate and in compliance with IFRS 3
Business Combinations.
We considered and challenged the reasonableness of the assumptions,finding them to be within an acceptable range. The fair values
appeared reasonable based on the judgments made. In particular, we
challenged sales forecasts with historical data and market trends,
we benchmarked assumptions used in determining the discount rate
and the attrition rate.
We also challenged the duration estimated by management
for amortisation of the intangibles acquired, comparing withhistorical data.
We validated the appropriateness and completeness of the related
disclosures in Note 6 of the consolidated financial statements.
Based on the procedures performed above, we concurred with the
management assessment of the provisional purchase price allocation.

Revenue recognition
As described in the Summary of Significant Accounting Policies in note
2 to the consolidated financial statements, the Group recognises
revenues from sales of goods measured at the fair value of theconsideration received in the ordinary course of the Group’s activities.
Sales of goods are reduced for discounts, rebates and sales taxes. The
Group recognises revenue when the amount can be reliably estimated,
it is probable that future economic benefits will flow to the entity andwhen significant risks and rewards of ownership of the goods aretransferred to the buyer.
At 31 December 2016, the Group Consolidated Income Statement
included Sales of CHF 4’663 million.
Some terms of sales arrangements within each of Group’s companies,
including the timing of transfer of risk and rewards, the nature of
discount and rebates arrangements, delivery specifications including
incoterms, generate complexity and judgment in determining sales
revenues and revenue cut-off.
The risk is, therefore, that revenue is not recognised in the correct
period or that revenue and associated profit is misstated.

We performed walkthroughs to understand the adequacy and thedesign of the revenue cycle for all significant components.
We tested controls in the revenue and trade account receivables cycles
over the accuracy and timing of revenue accounted in the consolidated
financial statements.
We reviewed the revenue recognition policy applied by thegroup to ensure its compliance with IFRS requirements. Morespecifically we reviewed how the incoterms were consideredwithin the revenue recognition process. Our work included
consideration of the accounting for and presentation of the rebatesand discount arrangements.
In addition to substantive analytical reviews performed both atGroup and local level to understand how the revenue has trended over
the year, we performed a detailed testing on transactions around theyear-end, ensuring revenues were recognised in the correct
accounting period. We also tested journal entries recognised torevenue focusing on unusual or irregular transactions.
We validated the appropriateness and completeness of the related
disclosures in Note 2 of the consolidated financial statements.
Based on the procedures performed above, we obtained sufficient
audit evidence to corroborate management assumptions in relation
to revenue.

Givaudan – 2016 Annual Report180 Financial report

Statutory auditor’s report on the consolidated financial statements

Materiality
We define materiality as the magnitude of misstatement in the consolidated financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work
and in evaluating the results of our work.
Based on our professional judgment we determined materiality for the Group as a whole to be CHF 50 million, based on a calculation of 7%
of Group income before taxes, adjusted for non-recurring transactions. We selected Group income before taxes as the basis for determining ourmateriality because, in our view, this measure represents the performance of the Group and is one of the indicators against which Givaudan iscommonly assessed.
The materiality applied by the component auditors ranged from CHF 18 million to CHF 36 million depending on the scale of the component’s
operations, the component’s contribution to Group sales, Group income before taxes, Group total assets and our assessment of risks specific toeach location.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of CHF 1 million as well as differences
below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure mattersthat we identified when assessing the overall presentation of the consolidated financial statements.

Scoping
We designed our audit by obtaining an understanding of the Group and its environment, including Group-wide controls, determining materiality andassessing the risks of material misstatement in the consolidated financial statements.
Based on our understanding of Givaudan’s operations, we have defined 10 countries that are in scope for the group audit and for which weare performing full audit procedures. These countries are spread across all regions, reflecting Givaudan’s operations. We obtain assurance
over these countries through a combination of audit procedures performed locally, within the Givaudan shared service centres and centrally atthe Head office.
In aggregate, these components represented scope coverage of:
Sales

Operating income

Total assets

81%

92%

85%

In scope

19%

Out of scope

8%

15%

All other wholly owned and joint venture businesses were subject to analytical review procedures for the purpose of the Group audit. Annual
statutory audits are conducted by Deloitte at the majority of the Group’s affiliates, although these are predominantly completed subsequent toour audit report on the consolidated financial statements.
At the parent entity level we tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no
significant risks of material misstatement of the aggregated financial information of the remaining components not subject to a full scope audit.

Givaudan – 2016 Annual ReportFinancial report

Statutory auditor’s report on the consolidated financial statements

181

Other Information in the Annual Report
The Board of Directors is responsible for the other information in the annual report. The other information comprises all information included in
the annual report, but does not include the consolidated financial statements, the stand-alone financial statements of the Company and our
auditor’s reports thereon.
Our opinion on the consolidated financial statements does not cover the other information in the annual report and we do not express any form ofassurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information in the annual report and,in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtainedin the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibility of the Board of Directors for the Consolidated Financial Statements
The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair viewin accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors
either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect amaterial misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the website of EXPERTsuisse: http://expertsuisse.
ch/en/audit-report-for-public-companies. This description forms part of our auditor’s report.

Report on Other Legal and Regulatory Requirements
In accordance with article 728a paragraph 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that an internal control system exists,
which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.

Deloitte SA

Karine Szegedi PingoudJoëlle Herbette

Licensed Audit Expert
Auditor in Charge

Licensed Audit Expert

Geneva, 27 January 2017

Givaudan – 2016 Annual Report

182

Financial report

Statutory financial statements of Givaudan SA

Statutory financial statements of Givaudan SA(Group Holding Company)
Income Statement

For the year ended 31 Decemberin millions of Swiss francs

Income from investments in Group companies

Note

2016

2015

3

224

166

916

878

Royalties from Group companies
Other operating income

1–

Total Operating income

1,141

1,044

Research and development expenses to Group companies

(278)

(256)

Other operating expenses

(44)

(34)

Amortisation and impairment of intangible assets

(98)

(125)

Share of (loss) profit of jointly controlled entities

5

Total Operating expenses

(1)

(2)

(421)

(417)

Operating income

720

627

Financial expenses

(204)

(129)

Financial income
Non-operating expenses
Extraordinary, non-recurring expenses
Income before taxes
Income taxes
Net (loss) profit for the year

Givaudan SA – 2016 Annual Report

85

123

(105)

(221)

11

(1,240)
496

(840)

4

–

500

(840)

Financial report

Statutory financial statements of Givaudan SA

183

Statement of Financial Positionin millions of Swiss francs

Cash and cash equivalents

Note

4

31 December
2016

31 December
2015

112

6

140

178

Other current assets

7

23

Accrued income and prepaid expenses

10

Accounts receivable from Group companies

Current assets

269

207

Loans to Group companies

159

150

Other long-term assets

–

4

2,583

2,572

Investments in Group companies

3

Jointly controlled entities

5

Other financial assets
Intangible assets
Non-current assets
Total assets
Short-term debt

35

27

10

10

257

283

3,044

3,046

3,313

3,253

4

240

Accounts payable to Group companies

82

78

Other current liabilities

18

44

Deferred income and accrued expenses
Current liabilities
Long-term debt

6

Other non-current liabilities
Non-current liabilities
Total liabilities

1

1

101

363

998

697

62

61

1,060

758

1,161

1,121

Share capital

8

92

92

Statutory retained earnings

8

18

18

Statutory capital reserves from capital contributions - additional paid-in capital

8

3

402

Voluntary retained earnings

8

1,542

2,042

8, 9

(45)

(60)

Own shares
Available retained earnings- Balance brought forward from previous year

42

478

- Net (loss) profit for the year

500

(840)

Equity

2,152

2,132

Total liabilities and equity

3,313

3,253

Givaudan SA – 2016 Annual Report

184

Financial report

Notes to the statutory financial statements

Notes to the statutory financial statements
1. General Information
1.1. Structure and description of the activity
Givaudan SA is a holding company based in Vernier, near Geneva, whose main goal is to manage its investments in subsidiaries.
More specifically Givaudan SA invests in companies whose aim is to manufacture and commercialise natural and synthetic
aromatic or fragrance raw materials as well as other related products. In addition, Givaudan SA invests in research anddevelopment and supplies services for the use of these products. Givaudan SA develops, registers and makes use of all trademarks,
patents, licenses, manufacturing processes and formulas.

1.2. Employees
The average number of employees during the year was less than ten (2015: less than ten).

2. Summary of accounting principles adopted

The financial statements at 31 December 2016 are prepared in accordance with Swiss law.
The company is classified as a large entity as it meets the criteria to present group accounts under the definition of art. 961d al. 1 of
the Swiss Code of Obligations. As Givaudan prepares and reports comprehensive consolidated financial statements including acash flow, accompanying notes and a management report, Givaudan SA is exempt from preparing this information.
Valuation Methods and Translation of Foreign Currencies
Investments in, and loans to, Group companies are stated at cost less appropriate write-downs. Marketable securities are shownat the lower of cost and market value. Derivatives are recorded at fair value.
The currency in which Givaudan SA operates is Swiss francs (CHF) and the accounts are presented in Swiss francs. In thestatement of financial position, foreign currency assets and liabilities are remeasured at year-end exchange rates with the
exception of investments in Group companies which are valued at historical exchange rates. In the income statement, expenses
and income in foreign currencies are converted in Swiss francs using the daily exchange rate of the transaction date. Foreign
currency gains and losses are recognised in the income statement as they occur with the exception of unrealised gains which
are deferred.

Givaudan SA – 2016 Annual ReportFinancial report

Notes to the statutory financial statements 185

3. List of Direct Subsidiaries

List of the direct subsidiaries of the company, which are wholly-owned unless otherwise indicated (percentage of voting rights):
Switzerland

Argentina
Australia
Austria
BermudaBrazilCanada
Chile

China

Colombia
Czech Republic
Egypt
FranceGermany
Guatemala
Hungary
India
Indonesia
Italy
Japan
Korea
Malaysia
MexicoNetherlands
Nigeria
Peru
PolandRussiaSingapore
South Africa
Spain
SwedenThailandTurkeyUnited Kingdom
United Arab Emirates
United States of America
Venezuela

Givaudan Suisse SA
Givaudan Finance SA
Prodiga AG
Givaudan International SA
Induchem Holding AG
Givaudan Argentina SA
Givaudan Argentina Servicios SA
Givaudan Australia Pty Ltd
Givaudan Austria GmbH
Givaudan Capital Transactions Ltd
Givaudan do Brasil Ltda
Givaudan Canada Co
Givaudan Chile Ltda
Givaudan Fragrances (Shanghai) Ltd
Givaudan Flavors (Shanghai) Ltd
Givaudan Specialty Products (Shanghai) Ltd
Givaudan Hong Kong Ltd
Givaudan Flavors (Nantong) Ltd
Givaudan Management Consulting (Shanghai) Ltd
Givaudan Fragrances (Changzhou) Ltd
Givaudan Colombia SA
Givaudan CR, s.r.o.
Givaudan Egypt SAE
Givaudan Egypt Fragrances LLC
Givaudan France SAS
Soliance SA
Givaudan Deutschland GmbH
Givaudan Guatemala SA
Givaudan Hungary Kft
Givaudan Finance Services Kft
Givaudan (India) Private Ltd
P.T. Givaudan Indonesia
P.T. Givaudan Flavours and Fragrances Indonesia
Givaudan Italia SpA
Givaudan Japan K.K.
Givaudan Korea Ltd
Givaudan Malaysia Sdn.Bhd
Givaudan de Mexico SA de CV
Grupo Givaudan SA de CV
Givaudan Nederland B.V.
Givaudan Treasury International B.V.
Givaudan (Nigeria) Ltd
Givaudan Peru SAC
Givaudan Polska Sp. Z.o.o.
Givaudan Rus LLC
Givaudan Singapore Pte Ltd
Givaudan South Africa (Pty) Ltd
Givaudan Iberica, SA
Givaudan North Europe AB
Givaudan (Thailand) Ltd
Givaudan Aroma Ve Esans Sanayi Ve Ticaret Limited Sirketi
Givaudan Holdings UK Ltd
Givaudan Middle East & Africa FZEGivaudan United States, Inc.
Givaudan Venezuela SA

Givaudan SA – 2016 Annual Report

186

Financial report

Notes to the statutory financial statements

In 2016 Givaudan SA increased its investments in Givaudan Flavors (Nantong) Ltd and Givaudan Egypt SAE and incorporated
Givaudan Middle East & Africa FZE, Givaudan Guatemala and Givaudan Fragrances (Changzhou) Ltd.

4. Cash and cash equivalents

As at 31 December 2016, cash and cash equivalents include an amount of CHF 111 million related to the cash pooling agreementswith a Group company.
As at 31 December 2015, an amount of CHF 90 million related to the cash pooling agreements with a Group company was included
in short-term debt under current liabilities.

5. Jointly Controlled Entities
Name of joint ventures

Principal activity

Country of incorporation

Ownership interest

Production of fragrance ingredients

China

49%

Innovative natural ingredients

USA

49%

Natural Extracts International Ltd

Natural ingredient derivatives production

Mauritius

49%

Vanilla International Ltd

Natural ingredient collection and extract

Mauritius

49%

Jiangsu Xinrui Aromatics Ltd
BGN Tech LLC

6. Debt

On 15 June 2011, Givaudan SA issued a 2.5% seven year public bond with a nominal value of CHF 300 million.
On 7 December 2011, Givaudan SA issued a dual tranche public bond transaction of CHF 150 million each, totalling
CHF 300 million, respectively of 1.250% for five years and of 2.125% for ten years. The first tranche was redeemed in
December 2016.
On 19 March 2014, Givaudan SA issued a 1.00% six and a half year public bond with a nominal value of CHF 100 million anda 1.75% ten year public bond with a nominal value of CHF 150 million.
In March 2015, Givaudan SA issued a tranche of CHF 200 million of the multilateral facility (maturity July 2018), of which
CHF 75 million was reimbursed in April 2015, CHF 50 million in June 2015 and CHF 75 million in July 2015.
On 7 December 2016, Givaudan SA issued a 0.00% six year public bond with a nominal value of CHF 100 million and a 0.625%
fifteen year public bond with a nominal value of CHF 200 million. The proceeds of CHF 300 million were used to repay the 1.250% five
year public bond with a nominal value of CHF 150 million which was redeemed in December 2016 and to repay the short-termborrowings withdrawn during the year.

7. Indirect Taxes

The company is part of a Group for VAT purposes with two other affiliates of the Group in Switzerland. The company is jointly andseverally liable towards the tax authorities for current and future VAT payables of the VAT Group to which it belongs.

Givaudan SA – 2016 Annual ReportFinancial report

Notes to the statutory financial statements 187

8. Equity

As at 31 December 2016, the share capital amounts to CHF 92,335,860, divided into 9,233,586 fully paid-up registered shares,
with a nominal value of CHF 10.00 each. Every share gives the right to one vote.
The Board of Directors has at its disposal conditional capital of a maximum aggregate amount of CHF 7,481,980 that may be
issued through a maximum of 748,198 registered shares, of which a maximum of CHF 1,618,200 can be used for executive shareoption plans.
At the Annual General Meeting held on 17 March 2016 the distribution of an ordinary dividend of CHF 54.00 per share(2015: ordinary dividend of CHF 50.00 per share) was approved. The dividend payment has been primarily made out of statutory
capital reserves from capital contributions - additional paid-in capital which Givaudan showed in total equity as at end of 2015,
with the remainder paid out of available retained earnings.
The movements in equity are as follows:2016
in millions of Swiss francs

Balance as at 1 January

Share
CapitalStatutoryretainedearnings

Additional
paid-in
capitalVoluntary
retainedearnings

92

18

402

2,042

Available
retainedearnings Own shares

(362)

Total

(60)

2,132

15

15

Registered shares
Issuance of shares
Movement of shares
Appropriation of available earnings
Transfer to voluntary retained earnings(500)

Distribution to the shareholders paid relating to 2015

(399)

(96)

Net (loss) profit for the year
Balance as at 31 December

2015
in millions of Swiss francs

Balance as at 1 January

500
(495)

500
92

18

3

1,542

Share
CapitalStatutoryretainedearnings

Additional
paid-in
capitalVoluntary
retainedearnings

92

18

863

1,642

542

500
(45)

Available
retainedearnings Own shares

878

2,152

Total

(57)

3,436

(3)

(3)

Registered shares
Issuance of shares
Movement of shares
Appropriation of available earnings
Transfer to voluntary retained earnings

400

Distribution to the shareholders paid relating to 2014

(461)

Net (loss) profit for the year
Balance as at 31 December

(400)

(461)
(840)
92

18

402

2,042

(362)

(840)
(60)

2,132

Statutory capital reserves from capital contributions - additional paid-in capital are presented separately in equity. Any payments
made out of these reserves are not subject to Swiss withholding tax, nor subject to income tax on individual shareholders who areresident in Switzerland.

Givaudan SA – 2016 Annual Report

188

Financial report

Notes to the statutory financial statements

9. Own Shares

The movements in own shares are as follows:
Price in Swiss francs
2016

NumberBalance as at 1 January

39,706

Purchases at cost

Total inmillions of
Swiss francs

High

AverageLow

38,2501,931.0

1,320.2

1,200.050

Sales and transfers at cost

(46,819)

1,396.0

1,396.0

1,396.0(65)

Balance as at 31 December

31,1372015

Number

60

45

High

Average

Low

Total inmillions of
Swiss francs

Price in Swiss francs

Balance as at 1 January

47,872

Purchases at cost

32,0001,789.2

1,575.8

1,191.6

50

57

Sales and transfers at cost

(40,166)

1,179.6

1,179.6

1,179.6(47)

Balance as at 31 December

39,70660

As at 31 December 2015 and 2016, there were no other companies controlled by Givaudan SA that held Givaudan SA shares.
As at 31 December 2016, William H. Gates III (13.86%), BlackRock Inc. (5.08%), MFS Investment Management (3.00%), Nortrust
Nominees Ltd (nominee; 15.49%), Chase Nominees Ltd (nominee; 6.47%) and Messieurs Pictet & Cie (nominee; 4.17%) were the only
shareholders holding more than 3% of total voting rights.

10. Board of Directors and Executive Committee Compensation

Information required by Swiss law, as per art. 663b bis CO, on the Board of Directors and Executive Committee compensation aredisclosed in the Givaudan consolidated financial statements, Note 30.

11. Exceptional Events

As a result of an internal restructuring, a subsidiary of Givaudan SA was liquidated during 2015 which generated a loss of
CHF 1,240 million. This item had no effect on the consolidated financial statements of the Group, aside the tax impact.
Net losses can be carried forward over seven years.

12. Subsequent Event

On 17 January 2017, as part of its 2020 strategy to strengthen capabilities in natural flavour solutions to its customers, Givaudan
announced that it has acquired Activ International.
Activ International employs globally 170 employees. The business would have represented approximately CHF 40 million ofincremental sales to Givaudan’s results in 2016 on a proforma basis.

Givaudan SA – 2016 Annual ReportFinancial report

Notes to the statutory financial statements 189

Appropriation of available earnings anddistribution from the statutory capital reserves
from contributions – additional paid-in capitalof Givaudan SA
Proposal of the Board of Directors to the General Meeting of Shareholders

Available earnings
in Swiss francs

Net (loss) profit for the year
Balance brought forward from previous year
Total available earnings

2016

2015

500,446,384(839,571,189)

41,648,082

477,535,823

542,094,466(362,035,366)

Transfer (from) to voluntary retained earnings(500,000,000)
96,952,653

2015 distribution proposal of CHF 10.50 gross per share a2016 distribution proposal of CHF 56.00 gross per share

517,080,816

Total appropriation of available earnings

517,080,816(403,047,347)

25,013,650

41,648,082

Distribution not paid on Treasury shares held by the Group
Amount to be carried forward

636,101

Statutory capital reserves from capital contributions - additional paid-in capital
2016

2015

Balance brought forward from previous year

3,322,955

402,348,672

Total additional paid-in capital

3,322,955

402,348,672

in Swiss francs

2015 distribution proposal of CHF 43.50 gross per share a

401,660,991

Total appropriation of additional paid-in capital

401,660,991

Distribution not paid on Treasury shares held by the Group
Amount to be carried forward

2,635,274
3,322,955

3,322,955a)	T he distribution proposal has been distributed firstly from the statutory capital reserves from capital contributions - additional paid-in capital and the remaining amountfrom available earnings. All distributions of reserves are subject to the requirements of the Swiss law.

Givaudan SA – 2016 Annual Report190 Financial report

Statutory auditor’s report on the financial statements

Deloitte SA
Rue du Pré-de-la-Bichette 1
1202 Geneva
Switzerland
Phone: +41 (0)58 279 8000
Fax: +41 (0)58 279 8800
www.deloitte.ch

Statutory Auditor’s Report
To the General Meeting of GIVAUDAN SA, Vernier
Report on the Audit of the Financial Statements
OpinionWe have audited the financial statements of Givaudan SA, which comprise the income statement, the statement of financial position for the year
ended 31 December 2016, and notes, including a summary of significant accounting policies.
In our opinion the accompanying financial statements as at 31 December 2016, presented on pages 182 to 189, comply with Swiss law and thecompany’s articles of incorporation.

Basis for Opinion
We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those provisions and standards arefurther described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the entity inaccordance with the provisions of Swiss law and the requirements of the Swiss audit profession and we have fulfilled our other ethicalresponsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight Authority
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of thecurrent period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.

Givaudan SA – 2016 Annual ReportFinancial report

Key Audit Matter
Valuation of Investments in Group companies
As described in the Note 3 to the financial statements, the Company
holds investments in Givaudan Group companies with a carrying valueof CHF 2’583 million as of 31 December 2016, representing
78% of total assets. The valuation of these assets is dependent on
the ability of these companies to generate positive cash flows in
the future.
In accordance with Article 960 CO, each investment held is valued
individually and reviewed annually for impairment indicators.
Each investment showing impairment indicators must be tested for
impairment and an impairment would need to be recorded if therecoverable value is lower than the carrying value.
The Swiss Federal Tax Administration issued on 17 December 2009
circular 27, chapter 2.5. This circular provides guidance in relation to
the valuation methods and factors that must be considered inmonitoring the value of investments.
The impairment test performed by Givaudan management is subject
to judgment around key assumptions, in particular in relation to thevaluation method used, interpretation of the impairment model
results and ability of the Group companies to generate positive cash
flows in the future.
Accordingly, for the purposes of our audit, we identified the valuationof these investments as representing a key audit matter.

Statutory auditor’s report on the financial statements

191

How the scope of our audit responded
to the Key Audit Matter
We discussed with management the adequate implementation of
accounting policies and controls regarding the valuation of
investments in Group companies.
We tested the design and implementation of controls around thevaluation of investments to determine whether appropriate controls
are in place.
We challenged the assessment of impairment indicators by
the Company.
We tested the valuations by critically assessing the methodology
applied and the reasonableness of the underlying assumptions andjudgments. We assessed the impairment testing models andcalculations by:– checking the mechanical accuracy of the impairment models and theextraction of inputs from source documents;– challenging the significant inputs and assumptions used in
impairment for investments in Givaudan Group companies, suchas the ability of the Group companies to generate positive cash
flows in the future.
We validated the appropriateness and completeness of the related
disclosures in Note 3 of the financial statements.
Based on our procedures performed above, we obtained sufficient
audit evidence to address the risk over management’s estimatesand consider management’s key assumptions to be within areasonable range.

Givaudan SA – 2016 Annual Report192 Financial report

Statutory auditor’s report on the financial statements

Responsibility of the Board of Directors for the Financial Statements
The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of Swiss law and thecompany’s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation offinancial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the entity’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either
intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is nota guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the website of EXPERTsuisse: http://expertsuisse.
ch/en/audit-report-for-public-companies. This description forms part of our auditor’s report.

Report on Other Legal and Regulatory Requirements
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which
has been designed for the preparation of financial statements according to the instructions of the Board of Directors.
We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of incorporation.
We recommend that the financial statements submitted to you be approved.

Deloitte SA

Karine Szegedi PingoudJoëlle Herbette

Licensed Audit Expert
Auditor in Charge

Licensed Audit Expert

Geneva, 27 January 2017

Givaudan SA – 2016 Annual Report

193

Givaudan SA – Annual Report 2016

194

Appendix

In this section:

196 Givaudan registered offices
199 Givaudan sites worldwide
204 Overview of annual publications

Givaudan – 2016 Annual ReportGivaudan SA – 2016 Annual Report196 Appendix

Givaudan registered offices

Givaudan registered offices
Country

Legal Entity name

Address

Algeria

Givaudan International SA (Suisse)
Bureau de Liaison Algérie

Tour A - 4eme Etage, Business Centre Dar El Madina, Micro Zoned’activité Hydra Lot No. 20, 16035 Algers

Givaudan Argentina SA

Nicolàs Rodriguez Peña 1568, 5 ° B, 1021, C.A.B.A.
Rodriguez Peña 1568, piso 5, oficina B, Ciudad Autónoma de
Buenos Aires

Argentina

Givaudan Argentina Servicios SA

Australia

Givaudan Australia Pty Ltd

12-14 Britton Street, Smithfield, Sydney NSW 2164

Austria

Givaudan Austria GmbH

Twin Tower Vienna, Wienerbergstrasse 11, 1109 Vienna

Givaudan International Ltd

Hamilton

FF Holdings (Bermuda) Ltd

Hamilton

FF Insurance Ltd

Hamilton

BrazilGivaudan do Brasil Ltda

Avenida Engenheiro Billings 2185, Jaguaré, São PauloSP - 05321-010

CanadaGivaudan Canada Co.

2400 Matheson Blvd. East, Mississauga, Ontario L4W 5G9

Chile

Givaudan Chile Ltda

Avda Del Valle 869, oficina 203, Ciudad Empresarial, Comuna deHuechuraba, Santiago de Chile

Givaudan Flavors (Shanghai) Ltd Beijing Branch

15F Tower 2, Kun Sha Center, No. 16 Xin Yuan Li Road,
Chao Yang District, Beijing 100027

Givaudan Fragrances (Shanghai) Ltd Beijing Branch

15F Tower 2, Kun Sha Center, No. 16 Xin Yuan Li Road,
Chao Yang District, Beijing 100027

Givaudan Flavors (Shanghai) Ltd

668 Jing Ye Road, Jin Qiao Export Area, Pu Dong New Area,
Shanghai 201201

Givaudan Fragrances (Shanghai) Ltd

298 Li Shi Zhen Road, pilote Free Trade Zone, Shanghai 201303

Givaudan Flavors (Shanghai) Ltd Guangzhou Branch

15F The Centrepoint, No 374-2 Beijing Road, Yue Xiu District,
Guangzhou 510030

Givaudan Fragrances (Shanghai) Ltd Guangzhou Branch

15F The Centrepoint, No 374-2 Beijing Road, Yue Xiu District,
Guangzhou 510030

Givaudan Flavors (Shanghai) Ltd Chengdu Branch

Room 2001, 2 Fu Nian Plaza, Ji Tai Road, Gao Xin District, Chengdu
610041, Sichuan Province

Givaudan Flavors (Nantong) Ltd

No. 7 Jiang Hai Road, Nantong Economnic and Technology
Development Area, Nantong, Jiangsu Province 226017

Givaudan Flavors (Shanghai) Ltd Zhengzhou Branch

Room A1301, Bldg 2, No. 80 Jin Shui Road (East), New Green City,
Zhengzhou, He Nan Province

Givaudan Fragrances (Changzhou) Ltd

Room 232, nbr 238 Chunjiang Zhongyang, Huayuan, Xinbei
District, Changzhou 213034, Jiangsu Province

Givaudan Specialty Products(Shanghai) Ltd

222, Jiangtian East Road, Songjiang District, 201600 Shanghai

Givaudan Management Consulting (Shanghai) Ltd

3rd floor, no. 5 building, 298 Lishizhen Road, Zhangjiang
High-Tech Park, Pudong New Area, 201203 Shanghai

Givaudan Hong Kong Ltd

6th Floor Alexandra House, 18 Chater Road, Central

Givaudan Colombia SAS

Carrera 98 No. 25 G - 40, 151196 Bogotá D.C.

BermudaChina

Colombia

Czech Republic Givaudan CR, s.r.o.
Egypt

Klimentská 10, Praha 110 00

Givaudan Egypt SAE

Piece 37, Industriel Zone 3, 6th of October City

Givaudan Egypt Fragrances LLC

46 El Thawra st., 3rd floor, Appt 304, Heliopolis

Givaudan – 2016 Annual ReportAppendix Givaudan registered offices

197

Country

Legal Entity name

Address

Finland

Givaudan International SA, Branch in Finland

Niemenkatu 73, 15140 Lahti

Givaudan France SAS

55 Rue de la Voie des Bans, CS500024, 95102 Argenteuil Cedex

Soliance SA

Route de Bazancourt, 51110 Pomacle

Induchem France SAS

72 Rue du Faubourg Saint Honoré, 75008 Paris

Libragen SAS

3 Rue des Satellites, 31000 Toulouse

Germany

Givaudan Deutschland GmbH

Giselherstrasse 11, 44319 Dortmund

GuatemalaGivaudan Guatemala SA

Boulevar Los Proceres 18, Calle 24-69 Zona 10, Empresarial Zona Pradera,
Torre 1, Oficiana 1201-01010

Givaudan Hungary Kft

Királyhegyesi út 3, 6900 Makó

Givaudan Finance Services Kft

Teréz körút 55-57, Eiffel Offices, Building C, 1062 Budapest

India

Givaudan (India) Pvt Ltd

Plot No. 26, 2nd Cross Jigani Industrial Area, Anekal Taluk, Jigani,
Bangalore, Karnataka 560 105

Indonesia

PT. Givaudan Indonesia

Jl. Raya Jakarta-Bogor Km 35, Cimanggis Depok, 16951
West Java

Iran

Givaudan International SA, Iran Branch

P.O. Box 15175/534 - No.202 - 204, Gol Bld., Gol Alley, After Park Saei, ValiAsr, Tehran

Italy

Givaudan Italia SpA

Via Borgogne 5, 20121 Milano

Ivory Coast

Givaudan International SA (Bureau dereprésentation en Côte d’Ivoire)

Centre D’affaire Regus - Plateau Imm. BSIC, 5th fl., 7 Avenue Nogues, 01BP
5754 Abijan

Japan

Givaudan Japan K.K.

6-6 Osaki 3-chome, Shinagawa-ku, Tokyo 141-0032

Malaysia

Givaudan Malaysia Sdn Bhd

Level 8, Symphony House, Block D13, Pusat Dagangan Dana 2, Jalan PJU
1A/46, 47301 Petaling Jaya Selangor

Givaudan de México SA de CV

Av. Eje Norte-Sur No. 11 Civac, 62578 Jiutepec Morelos

Grupo Givaudan S.A. de C.V.

Av. Eje Norte-Sur No. 11 Civac, 62578 Jiutepec Morelos

Givaudan Singapore Pte Ltd (Myanmar Branch)

46A - 2C Excellent Condo, Pantra Street, Dagon Township, Yangon

Givaudan Nederland BV

Huizerstraatweg 28, 1411 GP Naarden

Givaudan Treasury International BV

Huizerstraatweg 28, 1411 GP Naarden

New ZealandGivaudan NZ Ltd

Level 1 The Lane, Botany Town Center, Te Irirangi Drive, Botany 2010

Nigeria

Givaudan (Nigeria) Limited

Plot 2 and 4, Block D, Amuwo Odofin Industrial scheme, Apapa/Oshodi
Expressway, Lagos

Pakistan

Givaudan International SA Pakistan

25 th Floor. The Ocean Tower, Block - 9. Clifton,
Karachi - 75600

Peru

Givaudan Peru SAC

Av. Victor Andrés Belaúnde 147, Centro Empresarial Real,
Torre Real 1 Piso 11, San Isidro 27 Lima

Philippines

Givaudan Singapore Pte Ltd,Regional Operating Headquarter

37/F Robinsons Equitable Tower, ADB Avenue corner Poveda Street,
Ortigas Center, Pasig City 1605

PolandGivaudan Polska Sp. z o.o.

ul. Puławska 182, IO-1 Building, 02-670 Warszawa

FranceHungary

MexicoMyanmar
Netherlands

Givaudan – 2016 Annual Report198 Appendix Givaudan registered offices

Country

Legal Entity name

Address

RussianFederation

Givaudan Rus LLC

Riverside Towers Business Centre, Floor 7-8,
Kosmodamianskaya Naberezhnaya 52/1, 115054 Moscow

Singapore

Givaudan Singapore Pte Ltd

1 Woodland Avenue 8, Singapore 738972

South
AfricaGivaudan South Africa (Pty) Ltd

9-11 Brunei Road, Tulisa Park, Johannesburg 2197

South Korea

Givaudan Korea Ltd

11-12/F Trus Tower Building, 60 Mabang-Ro, Seocho.Ku

Spain

Givaudan Ibérica, SA

Pla d’en Batllé s/n, 8470 Sant Celoni, Barcelona

SwedenGivaudan North Europe AB

Glimmervägen 6, 224 78 Lund

Givaudan SA

Chemin de la Parfumerie 5, 1214 Vernier

Givaudan Finance SA

Chemin de la Parfumerie 5, 1214 Vernier

Givaudan Suisse SA

Chemin de la Parfumerie 5, 1214 Vernier

Givaudan International SA

Chemin de la Parfumerie 5, 1214 Vernier

Induchem Holding AG

Industriestrasse 8A, 8604 Volketswil

Switzerland

Induchem AG

Industriestrasse 8A, 8604 Volketswil

Taiwan,Republic of
China

Givaudan Singapore Pte Ltd,
Taiwan Branch

7/F No 303, Hsin Yi Road, Sec 4, Taipei City Taiwan 106

ThailandGivaudan (Thailand) Ltd

719 KPN Tower, 16 & 25 Floor, Rama 9 Road, Bangkapi
Huaykwang, Bangkok 10310

TurkeyGivaudan Aroma ve Esans Sanayi ve Ticaret Ltd. Sirketi

Akat mahallesi, Bilge sokak, Park Maya Sitesi Barclay 19 No 1
daire 6/7 Besiktas, Istanbul

Givaudan International SA(Representative Office)Concord Tower Floor 21, Offices 2109 - 2114,
P.O. Box No. 33170, Media City, Dubai

Givaudan Gulf Trading LLC

Concord Tower, Media City, Floor 21, Iffuces 2105-2114 Dubai

Givaudan Middle East & Africa

Free Zone Establishment, Jafza View 19, First floor, office nbr
129, Jebel Ali Free Zone, Dubai

UnitedKingdom

Givaudan UK Ltd

Kennington Road, Ashford, Kent TN24 0LT

Givaudan Holdings UK Ltd

Kennington Road, Ashford, Kent TN24 0LT

UkraineGivaudan International SA,
Representative OfficePimonenko Str. 13 6B/18, 04050 Kiev

Givaudan Flavors Corporation

1199 Edison Drive, Cincinnati, OH 45216

Givaudan Fragrances Corporation

1199 Edison Drive, Cincinnati, OH 45216

Givaudan Flavors and Fragrances Inc.

1199 Edison Drive, Cincinnati, OH 45216

Givaudan United States Inc.

15 East North Street, Dover, Delaware 19901

Venezuela

Givaudan Venezuela SA

Calle Veracruz con calle Cali Torre, ABA Piso 8, Ofic 8A,
Las Mercedes, Caracas CP 1060

VietnamGivaudan Singapore Pte Ltd,
Vietnam Representative Office

Giay Viet Plaza 5th Fl., 180-182 Ly Chinh Thang Street,
District 3, Ho Chi Minh City

UAE

UnitedStates ofAmerica

Givaudan – 2016 Annual ReportAppendix Givaudan sites worldwide

199

San Lorenzo 4759, Esquina Ave Mitre, Munro, Prov. Buenos Aires
Givaudan Argentina SA
B 1605 EIO
Argentina

Australia

Austria

BrazilGivaudan Argentina SA¢

Tronador 4890, 8° piso, Buenos Aires C 1430 DNN CABA

Givaudan Argentina Servicios SA¢

12-14 Britton Street, Smithfield, Sydney NSW 2164

Givaudan Australia Pty Ltd

Unit 36, 5 Inglewood Place, Baulkham Hills, Sydney NSW 2153

Givaudan Australia Pty Ltd

Suite West 11A Ground fl., 215 Bell Street, Preston VIC 3072

¢

¢

¢

¢

¢



¢

¢

¢

¢

¢

¢

¢
¢

Ruta 9 Panamericana Km 36.5, Partido Malvinas Argentinas,
Buenos Aires B1667KOV2016 SR
Scope 1¢

Production

Legal Entity nameCreation/
Application

Algeria

Tour A - 4eme Etage, Business Centre Dar El Madina, Micro Zone Givaudan International SA (Suisse)d’activité Hydra Lot No. 20, 16035 Algers
Bureau de Liaison Algérie

Sales/Rep
officeAddress

Flavours

Country

Fragrances

Givaudan sites worldwide

¢
¢

¢

¢

¢

¢

Givaudan Australia Pty Ltd¢¢

Twin Tower Vienna, Wienerbergstrasse 11, 1109 Vienna

Givaudan Austria GmbH

¢

¢

¢

Avenida Engenheiro Billings 2185, Jaguaré, São PauloSP - 05321-010

Givaudan do Brasil Ltda

¢

¢

¢

¢

Avenida Engenheiro Billings 1653 & 1729, Jaguaré, São Paulo SP
Givaudan do Brasil Ltda
- 05321-010

¢

¢

¢

Canada2400 Matheson Blvd. East, Mississauga, Ontario L4W 5G9

Givaudan Canada Co.

¢

¢

Chile

Avda Del Valle 869, oficina 202, Ciudad Empresarial, Comuna deGivaudan Chile Ltda
Huechuraba, Santiago de Chile

¢

¢

¢

15F, Tower 2, Kun Sha Center, No. 16 Xin Yuan Li Road,
Chao Yang District, 100027 Beijing

Givaudan Flavors (Shanghai) Ltd
Beijing Branch

¢

¢



15F, Tower 2, Kun Sha Center, No. 16 Xin Yuan Li Road,
Chao Yang District, 100027 Beijing

Givaudan Fragrances (Shanghai)
Ltd Beijing Branch

668 Jing Ye Road, Jin Qiao Export Area, Pu Dong New Area,
201201 Shanghai

Givaudan Flavors (Shanghai) Ltd

298 Li Shi Zhen Road, Zhangjiang High-Tech Park, Pudong
New Area, 201203 Shanghai

Givaudan Fragrances (Shanghai)LtdNo. 7 Jianghai Road, Nantong Economic and Technological
Development Area, 226017 Nantong, Jiangsu Province

Givaudan Flavours (Nantong) Ltd¢

Unit 5, 15F Shuion Center, No 374-2 Beijing Road, Yue Xiu District, Givaudan Flavors (Shanghai) Ltd
510030 Guangzhou
Guangzhou Branch

¢

China

Unit 6-7, 15F Shuion Center, No 374-2 Beijing Road, Yue Xiu
District, 510030 Guangzhou

Givaudan Fragrances (Shanghai)
Ltd Guangzhou Branch222, Jiang Tian East Road, Songjiang Development Zone, 201600 Givaudan Specialty Products
Shanghai(Shanghai) Ltd
Room 2001, 20F Funian Plaza-2, No. 666 Jitai Road, Gaoxin
District, 610041 Chengdu, Sichuan Province

¢

¢
¢

¢

¢
¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢
¢

¢

Givaudan Flavors (Shanghai) Ltd
Chengdu Branch¢¢

Room A1301, Bldg 2, No. 80 Jin Shui Road (East), New Green City, Givaudan Flavors (Shanghai) Ltd
Zhengzhou, He Nan Province
Zhengzhou Branch

¢

¢

¢

¢

Unit 1001, 10 F Miramar Tower, 132 Nathan Road,
Tsim Sha Tsui

Givaudan Hong Kong Ltd

¢





1.	Locations taken into account in the 2016 Sustainability Report for the environment, health and safety performance indicators.

  Application onlyp  Flavour ingredients   r  Creation only

Givaudan – Annual Report 2016

Givaudan – 2016 Annual ReportCreation/
Application

¢

¢

¢

Givaudan CR, s.r.o.

¢¢

Piece 37, Industriel Zone 3, 6th of October City

Givaudan Egypt SAE¢¢

46 El Thawra st., 3rd floor, Appt 304, Heliopolis

Givaudan Egypt Fragrances LLC

Niemenkatu 73, 15140 Lahti

Givaudan International SA, Branch
in Finland

46, avenue Kléber, 75116 Paris

Givaudan France SAS

¢

¢

¢

55 Rue de la Voie des Bans, BP 500024,
95102 Argenteuil Cedex

Givaudan France SAS

¢

¢

¢

¢

19-23 Rue de la Voie des Bans, BP 500024,
95102 Argenteuil Cedex

Givaudan France SAS

¢

¢

¢

Route de Bazancourt, 51110 Pomacle

Soliance SA¢

Anse du Pors Gelin, 22560 Pleumeur Bodou

Soliance SA¢

72 Rue du Faubourg Saint Honoré, 75008 Paris

Induchem France SAS¢

3 Rue des Satellites, 31400 Toulouse

Libragen SAS¢

Giselherstrasse 11, 44319 Dortmund

Givaudan Deutschland GmbH

Lehmweg 17, 20251 Hamburg

Givaudan Deutschland GmbH

Address

Legal Entity nameColombia

Carrera 98 No. 25 G - 40, 151196 Bogotá D.C.

Givaudan Colombia SAS

Czech
Republic

Klimentská 10, Praha 110 00

Egypt
FinlandFranceGermany¢¢

2016 SR
Scope 1

Sales/ Rep
office¢Country

Production

Flavours

Appendix Givaudan sites worldwide

Fragrances

200

¢

¢

¢
¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

Guatemala

Boulevar Los Proceres 18, Calle 24-69 Zona 10, Empresarial Zona
Givaudan Guatemala SA
Pradera, Torre 1, Oficiana 1201-01010

Hungary

Királyhegyesi út 3, 6900 Makó

Givaudan Hungary Kft

Teréz körút 55-57, Eiffel Offices, Building C, 1062 Budapest

Givaudan Finance Services Kft

Plot No. 30, Survey No. 168, Dabhel Industrial Estate,
Daman 396210

Givaudan (India) Pvt Ltd

¢

¢

¢

Survey No. 57/3 (2) & 3, Village Dunetha, Daman 396 210

Givaudan (India) Pvt Ltd

¢

¢

¢

¢

¢

¢

¢

India

Indonesia

¢

¢

¢

¢

¢

¢

¢

Plot No. 26, 2nd Cross Jigani Industrial Area, Anekal Taluk, Jigani,
Givaudan (India) Pvt Ltd
Bangalore, Karnataka 560 105¢

13th Floor Prestige Meridian 1, 29 MG Road, Bangalore, 560001 Givaudan (India) Pvt Ltd

¢

¢

¢

401 Akruti Centre Point, 4th Floor, MIDC Central Road,
MIDC, Andheri (East), Mumbai 400093

Givaudan (India) Pvt Ltd

¢

¢

¢

406-410, 4th Floor, JMD Pacific Square, Sector 15, Part II,
Gurgaon 122001, Haryana

Givaudan (India) Pvt Ltd

¢

¢

¢

Jl. Raya Jakarta-Bogor Km 35, Cimanggis Depok, 16951
West Java

PT. Givaudan Indonesia¢¢

1.	Locations taken into account in the 2016 Sustainability Report for the environment, health and safety performance indicators.

  Application onlyp  Flavour ingredients   r  Creation only

Givaudan – 2016 Annual Report¢Flavours

Sales/Rep
officeCreation/
Application

Indonesia

Menara Anugrah 7th - 9th Floor, Kantor Taman E3.3,
Jl. Mega Kuningan Lot 8.6 - 8.7, Kawasan Mega Kuningan, 12950 PT. Givaudan Indonesia
Jakarta

¢

¢

¢

¢

Iran

P.O. Box 15175/534 - No.202 - 204, Gol Bld., Gol Alley, After Park Givaudan International SA, Iran
Saei, Vali Asr, Tehran
Branch

¢

¢

¢

Italy

Via XI Febbraio 99, 20090 Vimodrone (MI)Givaudan Italia SpA

¢

¢

¢

Ivory Coast

Centre D’affaire Regus - Plateau Imm. BSIC, 5th fl., 7 Avenue
Nogues, 01BP 5754 Abijan

Givaudan International SA (Bureaude représentation en Côte d’Ivoire)

¢

¢

¢

3014-1 Shinohara-cho, Yokohama-shi, Kanagawa 222-0026

Givaudan Japan K.K.

¢

3056 Kuno, Fukuroi-shi, Shizuoka 437-0061

Givaudan Japan K.K.

3-6-6 Tokiwa New Building, Osaki, Sinagawa-Ku, Tokyo
141-0032

Givaudan Japan K.K.

Japan

Legal Entity name11/F Trust Tower Bldg, 60 Mabang-ro, Seocho-Gu,
Seoul 06775
Korea(Republic of) 12/F Trust Tower Bldg, 60 Mabang-ro, Seocho-Gu,
Seoul 06775
Malaysia

MexicoMyanmar
Netherlands

Givaudan Korea Ltd¢

Givaudan Korea Ltd

¢

¢



¢

¢



¢

¢



A-901 Menara 1, Kelana Brem Towers, Jalan SS 7/15 (Jalan
Stadium), 47301 Petaling Jaya Selangor Darul Ehsan

Givaudan Malaysia Sdn Bhd¢

Camino a Quintanares Km. 1.5, Pedro Escobedo,
76700 Queretaro

Givaudan de México SA de CV¢

Av. Eje Norte-Sur No. 11 Civac, 62578 Jiutepec Morelos

Givaudan de México SA de CV¢¢

Av. Paseo de la Reforma #2620, piso 12 Edificio Reforma Plus, Col.
Givaudan de México SA de CV
Lomas Altas, 11950 Mexico, D.F¢¢

Av. Paseo de la Reforma #2620, piso 9 Edificio Reforma Plus, Col.
Givaudan de México SA de CV
Lomas Altas, 11950 Mexico, D.F¢

46A - 2C Excellent Condo, Pantra Street, Dagon Township,
YangonGivaudan Singapore Pte Ltd(Myanmar Branch)¢

Huizerstraatweg 28, 1411 GP Naarden
Nijverheidsweg 60, 3771 ME Barneveld

¢

¢

¢

¢

¢



Givaudan Nederland BV

¢

¢

¢

Givaudan Nederland BV¢

New Zealand

Level 1, The Lane, Botany Town Center, Te Irirangi Drive, Botany
Givaudan NZ Ltd
2010

Nigeria

Plot 2 and 4, Block D, Amuwo Odofin Industrial scheme, Apapa/
Givaudan (Nigeria) Limited
Oshodi Expressway, Lagos

Pakistan

25 th Floor. Ocean Tower, Block - 9. Clifton,
Karachi - 75600

Givaudan International SA Pakistan

Peru

Av. Victor Andrés Belaúnde 147, Centro Empresarial Real,
Torre Real 1 Piso 11, San Isidro 27 Lima

Givaudan Peru SAC

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

¢



¢
¢

2016 SR
Scope 1

Address

201

Production

Country

Fragrances

Appendix Givaudan sites worldwide

¢

¢

¢

¢



¢

¢



¢

¢



1.	Locations taken into account in the 2016 Sustainability Report for the environment, health and safety performance indicators.

  Application onlyp  Flavour ingredients   r  Creation only

Givaudan – 2016 Annual ReportFlavours

Sales/Rep
officeCreation/
Application

Production2016 SR
Scope 1

Appendix Givaudan sites worldwide

Fragrances

202

¢

¢

¢



Givaudan Polska Sp. z o.o.

¢¢Riverside Towers Business Centre, Floor 7-8,
Kosmodamianskaya Naberezhnaya 52/1, 115054 Moscow

Givaudan Rus LLC

¢

¢

¢

Delovoy dom B-5, floor 9, Botanicheskiy pereulok 5,
129090 Moscow

Givaudan Rus LLC

¢

¢

¢

1 Woodlands Avenue 8, Singapore 738972

Givaudan Singapore Pte Ltd

¢

¢

¢

¢

¢

1 Pioneer Turn, Singapore 627576

Givaudan Singapore Pte Ltd

¢

¢

¢

¢

¢

19 Chin Bee Road, Singapore 619833

Givaudan Singapore Pte Ltd

¢

¢

¢

9-11 Brunel Road, Tulisa Park, Johannesburg 2197

Givaudan South Africa (Pty) Ltd

¢

¢

¢

¢

¢

¢

¢

Country

Address

Legal Entity namePhilippines

37/F Robinsons Equitable Tower, ADB Avenue corner Poveda
Street, Ortigas Center, Pasig City 1605

Givaudan Singapore Pte Ltd,Regional Operating Headquarter

Polandul. Puławska 182, IO-1 Building, 02-670 Warszawa

RussianFederation

SingaporeSouth
AfricaSpain

Sweden

¢

¢

¢

¢



¢

r

51A Galaxy Avenue, Linbro Business Park,Frankenwald, Sandton
Givaudan South Africa (Pty) Ltd
2065¢

Pla d’en Batllé s/n, 8470 Sant Celoni, Barcelona

Givaudan Ibérica, SA¢

Edificio Géminis, Bloque B 1° 2a, Parque de Negocios Mas
Blau, 8820 El Prat de Llobregat, Barcelona

Givaudan Ibérica, SA¢

Hedvig Möllers gata 17, 22355 Lund

Givaudan North Europe AB¢Überlandstrasse 138, 8600 Dübendorf

Givaudan Schweiz AG¢Überlandstrasse 138, 8600 Dübendorf

Givaudan International AG¢

8310 Kemptthal

Givaudan Schweiz AG¢Givaudan International AG¢r

Switzerland 8310 Kemptthal

¢

¢
¢

¢

¢

Chemin de la Parfumerie 5, 1214 Vernier

Givaudan Suisse SA¢

Chemin de la Parfumerie 5, 1214 Vernier

Givaudan International SA¢

Industriestrasse 8A, 8604 Volketswil

Induchem AG¢

Taiwan, PR
China

7/F, No 303, Hsin Yi Road, Sec 4, Taipei City, Taiwan 106

Givaudan Singapore Pte Ltd,
Taiwan Branch

¢

¢

¢



Thailand719 KPN Tower, 16 & 25 Floor, Rama 9 Road, Bangkapi
Huaykwang, Bangkok 10310

Givaudan (Thailand) Ltd

¢

¢

¢



Ebulula Cad. Lale Sok., Park Maya Sitesi Barclay 19A Daire 6-7,
Akatlar, Besiktas / Istanbul 34335

Givaudan Aroma ve Esans Sanayi ve¢
Ticaret Ltd. Sirketi

Büyükdere Cad. Telpa Plaza., No 195 K.3, Levent,
Istanbul 34394

Givaudan Aroma ve Esans Sanayi ve
Ticaret Ltd. Sirketi

Turkey1.	Locations taken into account in the 2016 Sustainability Report for the environment, health and safety performance indicators.

  Application onlyp  Flavour ingredients   r  Creation only

Givaudan – 2016 Annual Report

¢
¢

¢
¢

¢

¢

¢

¢
¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

2016 SR
Scope 1Creation/
Application

¢

¢

¢

¢

¢

Address

Legal Entity nameConcord Tower Floor 21, Offices 2109 - 2114,
P.O. Box No. 33170, Media City, Dubai

Givaudan International SA(Representative Office)Concord Tower, Floor 36, Offices 3606 - 3610,
P.O. Box No. 33170, Media City, Dubai

Givaudan International SA(Representative Office)

Magna House, 76-80 Church Street, Staines, Middx.
TW18 4XR

Givaudan UK Ltd

Chippenham Drive, Kingston, Milton Keynes MK10 OAEGivaudan UK Ltd

Kennington Road, Ashford, Kent TN24 0LT

Givaudan UK Ltd

Pimonenko Str. 13 6B/18, 04050 Kiev

Givaudan International SA,
Representative Office¢880 West Thorndale Avenue, Itasca, IL 60143

Givaudan Flavors Corporation¢

580 Tollgate Road, Suite A, Elgin, IL 60123

Givaudan Flavors Corporation

¢

¢

¢

1199 Edison Drive 1-2, Cincinnati, OH 45216

Givaudan Flavors Corporation

¢

¢

¢

245 Merry Lane, East Hanover, NJ 07936

Givaudan Flavors Corporation

¢

¢

¢

9500 Sam Neace Drive, Florence, KY 41042

Givaudan Flavors Corporation¢

4705 U.S. Highway 92 East, Lakeland, FL 33801-3255

Givaudan Flavors Corporation¢

100 East 69th Street, Cincinnati, OH 45216

Givaudan Flavors Corporation¢

International Trade Center, 300 Waterloo Valley Road,
Mount Olive, NJ 07828

Givaudan Fragrances Corporation¢

40 West 57th St. 11th floor, New York, NY 10019

Givaudan Fragrances Corporation

¢

¢

¢

717 Ridgedale Avenue, East Hanover, NJ 07936

Givaudan Fragrances Corporation

¢

¢

¢

535 Fifth AVenue, Floor 23, New-York, NJ 10017

Induchem USA, Inc.

¢

¢

¢

195 Alexandra Way, Carol Stream, IL 60188

Givaudan Flavors Corporation(SpiceTech)

¢

¢

¢

6 Santa Fe Way, Cranbury, NJ 08512

Givaudan Flavors Corporation(SpiceTech)

¢

¢

¢

Venezuela

Calle Veracruz con calle Cali Torre, ABA Piso 8, Ofic 8A,
Las Mercedes, Caracas CP 1060

Givaudan Venezuela SA

¢

¢

¢



VietnamGiay Viet Plaza 5th Fl., 180-182 Ly Chinh Thang Street,
District 3, Ho Chi Minh City

Givaudan Singapore Pte Ltd,
Vietnam Representative Office

¢

¢

¢



UAE

UnitedKingdomUkraineUnitedStates ofAmerica

¢

¢

¢

203

Production

Sales/Rep
officeFlavours

Country

Fragrances

Appendix Givaudan sites worldwide

¢
¢

¢

¢

¢

¢

¢

¢

¢

¢
¢

¢

¢

¢

¢

¢

¢

¢

¢

¢

1.	Locations taken into account in the 2016 Sustainability Report for the environment, health and safety performance indicators.

  Application onlyp  Flavour ingredients   r  Creation only

Givaudan – 2016 Annual Report

204

Appendix

Overview of annual publications

Overview of annual publications
Online 2016 Annual Report

Available in English– From 31 January 2017– w ww.givaudan.com – investors –online annual report2016 Annual Report
Available in English– PDF from 31 January 2017
– Print from 23 March 2017
– www.givaudan.com – media – publications

2016 Highlights
Available in English, French and German– PDF and print from 23 March 2017
– www.givaudan.com – media – publications

2016 Sustainability Report
Available in English– PDF from 23 March 2017– w ww.givaudan.com – sustainability –publications

ContentOnline overview of our financial and businessperformance, Governance and Compensation, as
well as our business and culture, stories and afull download centre.

Content
The full Annual Report: Strategic overview,
Performance review, Governance andCompensation, and the Financial Report.

Content
Business and financial highlights in addition
to the Chairman and CEO reviews
and the highlights of the Governance andCompensation reports.

Content
Management and performance information on
our environmental, social and economic impacts.

To order publications:www.givaudan.com - media - corporate publications

Givaudan Foundation
2016 Annual Report

Available in English
PDF from 23 March 2017www.givaudan-foundation.org
The Givaudan Foundation is a non-profit
organisation created in 2013 as a result ofGivaudan’s desire to reinforce its commitment
towards the communities in which it operates.
The foundation’s purpose is to initiate and support
projects as well as to grant donations in theareas defined by its vision and mission. One of theGivaudan – 2016 Annual Reportcauses supported by the foundation is tosafeguard the future of communities and theirfragile environment. There is a specific focus on
three areas in which Givaudan as a company isalready engaged and where its expertise andexperience can be leveraged to make a difference:
communities at source, blindness and nutrition.
The Givaudan Foundation works closely with andrelies on resources provided by Givaudan to
conduct and monitor its projects. The Foundation
also operates with local partners to ensure theefficient deployment of projects and theirrelevance to those who are intended to benefit
from them.

Givaudan SA
Chemin de la Parfumerie 51214 Vernier, Switzerland

General information
T + 41 22 780 91 11
F + 41 22 780 91 50

Media and investor relations
T + 41 22 780 90 53
F + 41 22 780 90 90

Share registry

SAG SEGA Aktienregister AG
Postfach
4601 Olten, Switzerland
T + 41 62 205 36 95
F + 41 62 205 39 66

Share information

Symbol: GIVN
Security number: 1064593
ISIN: CH0010645932

Concept, design and realisation: PETRANIX Corporate and Financial Communications AG,
www.PETRANIX.com
Printing: Neidhart + Schön AG, www.nsgroup.ch
The Givaudan 2016 Annual Report is published in English.
All trademarks mentioned enjoy legal protection.
Printed in Switzerland.
This Annual and Financial Report may contain forward-looking information.
Such information is subject to a variety of significant uncertainties, including
scientific, business, economic and financial factors. Therefore actual results
may differ significantly from those presented in such forward looking statements.
Investors must not rely on this information for investment decisions.
© Givaudan SA, 2017www.givaudan.com
Givaudan – 2016 Annual Report