ARYZTA : AGM 2024 Compensation Report 2023

COMPENSATION REPORT

GOVERNANCE

Annual Report and Accounts 2023

COMPENSATION REPORT

Letter from the Chair of the Remuneration Committee

Dear Shareholders,

On behalf of the Board of Directors (the 'Board') and the Remuneration Committee, I am pleased to introduce ARYZTA's Compensation Report for the financial period 2023 ('FY 2023'). The business environment in the 2023 reporting period was challenging due to persistent inflationary trends across all input costs, including labour, supply chain disruptions and an increasing interest rate environment. ARYZTA successfully managed these challenges. Overall, ARYZTA achieved strong results in the 2023 financial period, bringing the delivery of the existing mid-term targets within reach on all key metrics. To underline the enhanced clarity evident in our prior year report, we are providing significant detail on Directors and Executive pay in this, extended, 17-month Financial Year to ensure you, as shareholders, are provided with continued transparency on all compensation matters.

During FY 2023, the Remuneration Committee keenly absorbed last year's feedback in our compensation practices and we continue the pathway to increased transparency and strategic alignment of our incentive plans. Notably, and in the context of our extended Financial Year, we have made no changes to our in-flight Short Term & Long Term Incentive Plans ('STIP' & 'LTIP)'. We have, however, strived to provide additional clarity over the treatment of these programmes given the 17-month period. With the Board approving a separate budget for the 5-month Stub period for the STIP, we outline the specific impact on compensation via separate tables.

In this year's report we advance our disclosure from last year on the specificity and transparency of individual qualitative targets in the STIP for Executive Management which include measures related to ESG for the COO. In fact, we will drive an increased focus on ESG in individual measures for all Executive Management members going forward. For our LTIP, we included enhanced disclosure regarding the vesting by metric for the LTIP 2020 award as well as a table detailing the vesting curve for our FY 2023 award.

It is important to note that despite the overlong Financial Year, the shareholder approved budget for Executive Management has not been exceeded. In the context of Board of Directors pay, the amount that exceeds the approved maximum amount at the last AGM due to the overlong Financial Year will be put to a shareholder vote at the upcoming AGM and will not be paid before shareholders' approval.

ARYZTA AG Annual Report 2023

64

GOVERNANCE

Annual Report and Accounts 2023

COMPENSATION REPORT (continued)

At the upcoming AGM, we will ask you to approve, as last year, prospectively in a binding vote the maximum compensation of the Board of Directors for the period until the next 2024 AGM, and the maximum aggregate compensation for the newly constituted ExCo for FY 2025. Furthermore, you will have the opportunity to register your opinion on this Compensation Report in a consultative vote.

Looking ahead, we will continue refining our compensation framework in order to ensure alignment with the company strategy, market practice and evolving developments such as the aforementioned inclusion of ESG targets.

On behalf of ARYZTA and the Remuneration Committee, I would like to thank you for your support and valuable feedback.

Chair of the Remuneration Committee

Hélène Weber-Dubi

1 March 2024

ARYZTA AG Annual Report 2023

65

GOVERNANCE

COMPENSATION REPORT

(continued)

Introduction to Compensation

ARYZTA's Compensation Report for the FY 2023 has been prepared in accordance with the relevant sections of the Swiss Code of Obligations (Swiss CO), particularly Article 734 et seqq., applicable to Swiss listed companies, the Directive on Information related to Corporate Governance of SIX Swiss Exchange, as well as the Swiss Code of Best Practice.

Compensation Governance

The compensation governance at ARYZTA is mainly comprised of three key bodies: The Remuneration Committee which advises the Board in compensation-related matters; the Board which ultimately decides on compensation-related matters; and the shareholders of ARYZTA at the AGM who approve the maximum aggregate amount of remuneration of the Board for the period until the next AGM and the Executive Management for the subsequent financial year. The Organisational Regulations, the Terms of Reference of the Remuneration Committee and the Articles of Association of ARYZTA describe and define the roles and responsibilities of these three bodies. The Articles of Association contain the following relevant provisions on compensation:

• Compensation principles for the compensation of the Board and the Executive Management, including incentive and participation plans (Art. 21 and 22)
• Approval of compensation by the AGM (Art. 23)
• Supplementary amounts available for members newly joining the Executive Management after the relevant approval of compensation by the AGM (Art. 23 lit.e)
• Retirement benefits and pensions (Art. 24)
• Duration and termination of employment contracts (Art. 26)

The Articles of Association can be found on our website: https://www.aryzta.com/corporate-governance/regulations/

ARYZTA AG Annual Report 2023

66

GOVERNANCE

COMPENSATION REPORT

(continued)

The general division of duties, responsibilities, and powers between the three key bodies of compensation governance (Remuneration Committee, Board and AGM) is shown in the table below.

CEO

Remuneration

Committee

Board

AGM

Compensation strategy and guidelines		P	A
Compensation principles (Articles of Association)		P	A	A
			(subject to AGM	(binding vote, in
			approval)	case of changes)
Key terms of compensation plans for Board and Executive Management		P	A
Total compensation for the Board		P	A	A
			(subject to AGM	(binding vote)
			approval)
Total compensation for the Executive Management		P	A	A
			(subject to AGM	(binding vote)
			approval)
Individual total compensation for the CEO		P	A
Individual total compensation for other members of	P	R	A
the Executive Management
Employment and termination agreements for the CEO		P	A
Employment and termination agreements for other members of	P	R	A
the Executive Management
Compensation Report		P	A	A
				(consultative vote)
A: Approve, P: Propose, R: Review

Role of the Shareholders regarding the AGM

The AGM approves the maximum aggregate amount of compensation of the Board for the period from one AGM until the next AGM and the maximum aggregate amount of compensation for the Executive Management for the subsequent financial period (Art. 23 lit. a of the Articles of Association). Shareholders will be asked at the forthcoming AGM, to be held on 24 April 2024, to approve the maximum aggregate amount of compensation of:

• The Board for the period until the next AGM (i.e. the period from 24 April 2024 until the 2024 AGM in April 2025, specific date tbc); and, as a result of the overlong FY 2023, an additional amount covering the additional 5 months in the last period); and
• The Executive Management for the following financial period (i.e. the financial period com- mencing 1 January 2025 and ending 31 December 2025).

In addition, as in prior periods, the Board will submit this Compensation Report to a separate consultative vote for the shareholders at the forthcoming AGM in line with Art. 735 para. 3 no. 4 of the Swiss Code of Obligations ('CO').

ARYZTA AG Annual Report 2023

67

GOVERNANCE

COMPENSATION REPORT

(continued)

At the 2022 AGM, the Board submitted three separate compensation-related resolutions, which were all approved by shareholders.

1. The maximum aggregate amount of compensation for the members of the Board for the period from the 2022 AGM until the 2023 AGM (binding vote): CHF 1,300,000.

2. The maximum aggregate amount of compensation for the Executive Management for the FY 2024 (binding vote): CHF 8,750,000.

3. The compensation report for FY 2022.

The Board is cognizant of the minority vote against the resolution related to Executive Management compensation, and in particular the feedback received related to disclosure of retrospective STIP measures and targets. We continue to be committed to transparency on all compensation matters and provide more detail on the measures for our STIP pay outs than in prior years in the relevant section of this report. For example, we now include enhanced disclosure on our LTIP; namely a column detailing vesting by KPI for the LTIP 2020 award (see page 85), as well as a table detailing the vesting curve for our LTIP 2023 award (see page 83). Additionally, as it relates to our STIP we outline specifically the qualitative individual performance measures for Executive Management. In the context of disclosure of STIP measures, it should be noted that the table outlining STIP achievement (see page 80) is set transparently in the context of our reported numbers for Organic Growth and EBITDA %.

In addition and without further approval by shareholders, ARYZTA is authorised to use, as needed, supplementary amounts of 40% of the approved maximum aggregate amount (in full and not pro rata) of the compensation for the Executive Management for the relevant financial periods for new members joining the Executive Management after the AGM has approved the relevant maximum aggregate amount (Art. 23 lit. e of the Articles of Association).

For the avoidance of doubt, this supplementary amount was not used during the course of FY 2023 and may not be used to support base salary increases for existing members of the Executive Management.

Role of the Remuneration Committee

The Remuneration Committee has the duties of supervision and governance of ARYZTA's compensation framework and philosophy as well as the purpose to assist the Board in fulfilling its responsibilities regarding the compensation of the members of the Board and the Executive Management of ARYZTA.

The Remuneration Committee comprises a minimum of three independent non-executive members of the Board who are elected annually and individually by the AGM pursuant to Swiss law for a one-year period until the next AGM. The Remuneration Committee Chair is appointed by the Board (Art. 20a of the Articles of Association).

ARYZTA AG Annual Report 2023

68

GOVERNANCE

COMPENSATION REPORT

(continued)

Post the AGM 2022, the Remuneration Committee consisted of three members: Hélène Weber- Dubi, Heiner Kamps and Gordon Hardie, with Hélène Weber-Dubi appointed by the Board as Remuneration Committee Chair, Mr Gordon Hardie resigned from the Board of Directors and the Remuneration Committee in November 2023. Please refer to the Corporate Governance Report section for further details on Remuneration Committee composition, duties, and election (page 49 of the Annual Report).

For details about gender representation in the Board of Directors, and all activities of the Board members in comparable roles at other companies with a business purpose, please refer to page 87 of this Compensation Report and also to the Corporate Governance Report (pages 54-56 of the Annual Report).

As in prior periods, in FY 2023 the Remuneration Committee acted within the limits of the relevant shareholder approvals, being responsible for (Art. 20 lit b. of the Articles of Association):

• Considering and determining all elements of the compensation of the members of the Board and the CEO.
• Approving the compensation of other members of the Executive Management, upon the recommendation of the CEO.
• Reviewing and recommending to the Board on an annual basis a proposal regarding the total compensation amount of the Board and the Executive Management for approval at the AGM.
• Preparing and recommending to the Board the Compensation Report for approval at the AGM in a non-binding vote.

The Remuneration Committee reviews the level and structure of the compensation for the Executive Management on an annual basis to ensure that executives are remunerated in line with the level of their authority and responsibility within the Group and so as to ensure ARYZTA's capacity to recruit and retain a high calibre of professional managers.

After each Remuneration Committee meeting, the Remuneration Committee Chair reports to the Board at the following Board meeting, ensuring that the Board members are kept informed in a timely and appropriate manner of all material matters within the Remuneration Committee's area of responsibility. In addition, all Remuneration Committee papers (e.g. agenda, minutes, pres- entations, etc.) are available to all members of the Board. When the Remuneration Committee considers it appropriate to do so, it may directly ask members of the Executive Management or members of the Human Resources department to attend meetings as a guest. The Remuneration Committee regularly holds private sessions (i.e. without the presence of members of the Executive Management, members of the Human Resource department or third parties). Executives and the Chair of the Board do not participate during the sections of the meetings where their own performance and/or compensation are discussed. The Remuneration Committee is authorised to obtain

ARYZTA AG Annual Report 2023

69

GOVERNANCE

COMPENSATION REPORT

(continued)

appropriate external advice and to invite those persons to attend the meetings of the Remuneration Committee. In such cases, and where applicable, the Board has availed of the services of HCM International to provide such advice. The Remuneration Committee Chair convenes meetings of the Remuneration Committee as often as the business affairs of ARYZTA require. During FY 2023, the Remuneration Committee held eight meetings with an average duration of two hours each. The agenda items covered by the Remuneration Committee during the eight meetings of FY 2023 are described in the table below.

		Aug	Sep	Jan	Mar	May	June	Sep	Dec
	Agenda item	2022	2022	2023	2023	2023	2023	2023	2023
General Framework	Committee Terms of Reference	•
Annual Work Plan	•
	Management Compensation Packages			•					•
	Maximum aggregate compensation amount FY 2024								•
	STIP
Executive	- Review of STIP FY 2023 Stub design						•
Management	- Review of STIP FY 2024 design								•
	- Performance achievement FY 2022						•
	- Target setting for STIP FY 2023 Stub						•
	- Target setting for STIP FY 2024								•
	LTIP
	- Design LTIP grant FY 2023	•	•	•
Compensation	- Target setting LTIP FY 2023		•	•
	- Review of LTIP Regulations		•	•
	Benchmarking								•
	Maximum aggregate compensation amount
Board compensation	from 2022 AGM until the 2024 AGM (no AGM in 2023
	due to the overlong Financial Year)
Reporting &	- Compensation Report FY 2022	•
- Review FY 2022				•	•
Communication
- Compensation Report FY 2023					•	•	•	•

ARYZTA AG Annual Report 2023

70

GOVERNANCE

COMPENSATION REPORT

(continued)

Compensation Principles

ARYZTA's compensation framework and principles are designed to attract and retain top talent, to underpin the implementation and support of the Group's strategic plans and to provide a balance between motivating and challenging the members of the Executive Management to deliver ARYZTA's near-term business priorities together with achieving sustainable, long-term success (Art. 21lit. a of the Articles of Association). Furthermore, ARYZTA's compensation framework aims to be aligned with shareholders' interest and driving the creation of shareholder value. The Remuneration Committee gives careful and detailed consideration to the Board and Executive Management compensation. As one reference point, the Remuneration Committee regards market data on compensation to assess its competitiveness in the market environment.

Compensation objectives and principles

Retain &

Incentivise

The company aims to retain and incentivise top talent to support delivery of the strategic plan

Motivate &

Challenge

A balance between a motivating and challenging environment

is established to achieve near-term

business objectives and drive

long-term success

Align with

shareholders

Compensation outcomes shall be

aligned with shareholder

interests to reward management for creating shareholder value

Provide Equal

Opportunity

Equal opportunities are provided in recruitment, selection, promotion, employee development, succession plan- ning, training and compensation

ARYZTA AG Annual Report 2023

71

GOVERNANCE

COMPENSATION REPORT

(continued)

Fiscal Year End Change

On 6 March 2023 ARYZTA announced that it is changing its fiscal year from July ending to December ending to align with calendar year reporting. It was noted at the time that as part of this process the company would issue audited IFRS financial statements for the 12-month period 31 July 2022 to 29 July 2023 (non-statutory financial statements) and its 2023 annual report and accounts (including compensation report) for the 17-month period from 31 July 2022 to 31 December 2023. All ARYZTA AG directors would remain in office until the next AGM (i.e. the forthcoming AGM on 24 April 2024).

The subsequent effect of this change to the reporting on compensation and benefits for Directors and Executive Management will be detailed in this report in the subsequent relevant sections. For clarity, the guiding principles of our reporting in this Report are as follows:

• All compensation and benefit amounts paid to Directors and Executive Management for the entirety of the 17-month period from 31 July 2022 until 31 December 2023 are reported in the subsequent tables
• No changes were made to in-flight incentive programmes, neither STIP nor LTIP. This means that for outstanding awards, no targets or performance metrics were amended. The outstand- ing LTIP awards 2022 and 2023 are expected to vest as per the regular vesting schedule
• As a consequence of making no changes to incentive programmes, the FY 2023 STIP for the period ending 29 July 2023 was measured at the conclusion of the period using the afore- mentioned audited IFRS financial statements for the 12-month period and payments made to Executive Management in October 2023
• The additional 5-month,so-called Stub period, was subject to a Board approved budget and related STIP, which was measured and paid post the closing of our 17-month financial year on 31 December 2023; no changes were made to in-flight LTIP programmes, however
• Please note that despite the extended financial year and the addition of two new members to our Executive Management, we have remained below the proposed maximum aggregate amount of CHF 10,000,000 approved by shareholders at our AGM 2021

ARYZTA AG Annual Report 2023

72