1.1 General

These annual financial statements were prepared in accordance with the provisions of the Swiss accounting law (Title 32 of the Swiss Code of Obligations). The main valuation principles applied that are not prescribed by law are described below.

Georg Fischer Ltd, Schaffhausen (Switzerland), reports its consolidated financial statements based on a recognized standard (Swiss GAAP FER) and, in accordance with the legal provisions, the company has decided not to provide notes on the audit fees, a cash flow statement or a report on the business situation.

1.2 Securities with market price

Securities held for the short term are valued at the market price on the balance sheet date. No equalization reserve has been created.

1.3 Loans to Corporate Companies and other financial assets

Loans granted to Corporate Companies and other financial investments in foreign currencies are valued at the market rate on the actual closing date. Unrealized currency losses are recognized, whereas unrealized gains are deferred (imparity principle). The valuation is at nominal values, taking into consideration any value adjustments required.

1.4 Investments

Investments are valued in line with the principle of individual valuation. In addition, further flat-rate value adjustments can be applied.

1.5 Dividend income

Dividend income is recognized when paid out.

1.6 Share-based compensation

More information about share-based compensation is available in the Compensation Report as well as in note 6.

1.7 Long-term interest-bearing liabilities

Interest-bearing liabilities are recognized at nominal value.

1.8 Treasury shares

Treasury shares are recognized at cost and deducted from shareholder’s equity. The gain or loss from the sale of treasury shares is recognized in shareholder’s equity as an increase or reduction in retained earnings.

2.1 Dividend income

The dividend income for the year under review was CHF 156 million (previous year: CHF 127 million).

2.2 Income from services provided to Corporate Companies

The income from Corporate Companies consisted primarily of licensing income for the use of the corporate brand +GF+ as well as income for services provided.

2.3 Financial income

The financial income comes from interest income on the loans granted to Corporate Companies.

2.4 Commission income from Corporate Companies

This position contains commission income from Corporate Companies for issued guarantees.

2.5 Value adjustment on investments

This position includes value adjustments of investments held by Georg Fischer Ltd. The principles for the valuation of investments are found in note 1.4.

2.6 Financial expenses

This position includes interest expense for a bond of CHF 200 million issued in the year under review as well as losses on foreign currencies. More information on the bond issue can be found in note 3.7.

2.7 Other operating expenses

The main expense items related to external consulting services, marketing expenses, fees for the Board of Directors, and IT costs.

2.8 Direct taxes

Income taxes in the period under review concerned not only the income taxes of Georg Fischer Ltd, but also the corporation taxes of Georg Fischer BV & Co KG, Singen (Germany), acting as the German fiscal unity parent of GF. Georg Fischer Ltd, as the associate of Georg Fischer BV & Co KG is liable for German corporation taxes.

3.1 Cash and cash equivalents and short-term investments with a quoted market price

This balance sheet item contains securities in the amount of CHF 3.1 million (previous year: CHF 3.6 million).

3.2 Other current receivables due from Corporate Companies

The balance sheet item includes short-term receivables and loans to Corporate Companies and items from cash pooling with Corporate Companies. These are reported as a gross amount under “Other current receivables due from Corporate Companies” and “Short-term interest-bearing liabilities due to Corporate Companies”.

3.3 Loans to Corporate Companies

The activities of Corporate Companies are, whenever possible and suitable, financed by loans from the Corporation instead of credit facilities from local banks.

3.4 Investments

Direct and indirect investments in Corporate Companies of Georg Fischer Ltd include the companies listed in note 4.2 in the consolidated financial statements.

3.5 Short-term interest-bearing liabilities due to Corporate Companies

This balance sheet item includes short-term liabilities and loans from Corporate Companies and items from cash pooling with Corporate Companies. These are reported as a gross amount under “Other current receivables due from Corporate Companies” and “Short-term interest-bearing liabilities due to Corporate Companies”.

3.6 Accrued expenses and deferred income

Accrued expenses and deferred income comprises variable compensation for employees and fees for the Board of Directors as well as other deferred items.

3.7 Long-term interest-bearing liabilities

On 20 April 2018, Georg Fischer Ltd issued a bond of CHF 200 million on the Swiss capital market. The bond has a duration of 10 years and carries a coupon of 1.05%.

3.8 Long-term provisions

This provision mainly concerns currency risks.

3.9 Share capital

As of 31 December 2018, the share capital amounted to 4’100’898 registered shares at a par value of CHF 1.

Conditional capital: As of 31 December 2018, the conditional capital amounted to CHF 0.6 million and can be created by exercising conversion or option rights granted in connection with debenture loans or similar bonds of Georg Fischer Ltd or its Corporate Companies that were issued on the capital markets.

Authorized capital: In accordance with the resolution of the Annual General Meeting of 18 April 2018, the Board of Directors is authorized to increase the share capital, until no later than 17 April 2020, by a maximum amount of CHF 0.6 million, by issuing a maximum of 600’000 fully paid-in registered shares with a nominal value of CHF 1 each. The increase may be made in partial amounts.

The maximum amount of the authorized or conditional capital is reduced by the amount that authorized or conditional capital is created through the issue of bonds or similar debt instruments or new shares.

3.10 Treasury shares

Georg Fischer Ltd held 7’586 own shares on the balance sheet date. The principles for the valuation of treasury shares are found in note 1.8.

Before 2017, treasury shares were held by a fully consolidated subsidiary of Georg Fischer Ltd and accordingly, a reserve for treasury shares was set up at Georg Fischer Ltd. As of 31 December 2017, this reserve was reversed to retained earnings.

4.1 Full-time equivalents

As of 31 December 2018, Georg Fischer Ltd employed 76 people including trainees.

4.2 Contingent liabilities

In addition, Georg Fischer Ltd bears joint liability with regard to the Swiss Federal Tax Administration for the amounts due of value-added tax of all the Swiss Corporate Companies.

4.3 Pension fund obligations

At year-end 2018, pension fund obligations amounted to CHF 4.2 million (previous year: CHF 2.2 million).

4.4 Significant shareholders

An overview can be found in the chapter Corporate Governance (GF share and GF shareholders).

4.5 Shareholdings of members of the Board of Directors, Executive Committee, or persons related to them

Information on the shareholdings of members of the Board of Directors, Executive Committee, or persons related to them is provided in note 4.2 in the consolidated financial statements.

Board of Directors

The members of the Board of Directors received cash compensation of CHF 1.159 million in the year under review. In addition, a total of 1’500 GF registered shares with a total market value of CHF 1.18 million were allocated as share-related compensation. In the previous year, and due to the cap of the total remuneration of the Board of Directors approved by the shareholders in 2016 for 2017, the allocation had been 1’390 GF registered shares only, equivalent to a total market value of CHF 1.79 million. Together with other benefits, the total compensation paid to the Board of Directors in 2018 amounted to CHF 2.449 million (previous year: CHF 3.085 million) compared to a total amount approved by the shareholders of CHF 3.750 million.

The detailed disclosure of compensation to the Board of Directors is as follows:

Compensation of the members of the Board of Directors 2018

The compensation paid to the Board of Directors for the year 2018 was below that of the previous year. The decrease is explained solely by the decreased value of the shares from CHF 1’288 in 2017 to CHF 786.50 in 2018. The compensation system for the Board of Directors remained unchanged.

In the year under review both Mr. Roger Michaelis and Mr. Zhiqiang Zhang received each CHF 22’500 for international travel time spent; these reimbursements are included in the cash compensation.

No further compensation was paid to members of the Board of Directors. No compensation was paid to parties closely related to members of the Board of Directors.

Executive Committee

The members of the Executive Committee received cash, share-related compensation, social security and pension contributions amounting to CHF 8.417 million for the year under review (previous year: CHF 9.123 million) compared to a total amount of CHF 10.298 million approved by the shareholders at the Annual Shareholders’ Meeting of 19 April 2017.

Under the long-term incentive plan, 1’752 performance shares with a total value at grant of CHF 1.378 million, based on a share price of CHF 786.50 at year-end 2018, were granted to members of the Executive Committee for the year under review (previous year: 1’750 performance shares with a total value of CHF 2.254 million).

The detailed disclosure of compensation to the Executive Committee in accordance with the Swiss “Ordinance against excessive pay in stock exchange listed companies” is as follows:

Compensation of the members of the Executive Committee 2018

Total compensation for the Chief Executive Officer and the other members of the Executive Committee in 2018 was lower than in 2017, mainly due to the lower share price. The change in compensation is explained by the following factors:

• –The Executive Committee compensation includes the compensation for Josef Edbauer (Executive Committee member until 31 August 2018) and includes the compensation for Carlos Vasto (Executive Committee member since 1 September 2018).
• –The share price decreased from CHF 1’288 in 2017 to CHF 786.50 in 2018.
• –The short-term incentive related to the financial results of the Corporation and the divisions and to the individual performance was higher than in 2017, based on the results achieved. Consequently, the overall short-term incentive percentage ranges from 56.3% to 83.1% of the base salary for the Executive Committee members and amounts to 131.3% of the base salary for the Chief Executive Officer.
• –The fixed salaries were slightly adjusted in order to keep competitive levels in line with the market practice of GF’s industrial sector.
• –The employer’s contributions to social security have increased due to the slightly increased fixed salaries and the higher short-term incentive payout. Please note that a significant portion of the social security payments of the employer to the Swiss social security system represents a solidarity payment as the individuals will never get any return or benefit due to these payments.

Achievement of the corporate business objectives

The achievement of the corporate business objectives for the year 2018 is as follows:

For a former Executive Committee member who continued his employment as non-Executive Committee member, a compensation amounting to CHF 471’655 was paid for the year 2018.

In the year under review, no further compensation was paid to former members of the Executive Committee. No compensation was paid to parties closely related to members of the Executive Committee.

Shareholdings of members of the Board of Directors, Executive Committee, or persons related to them

Related persons and companies are defined as family members and persons or companies over which a significant influence can be exercised. Transactions with related persons and companies must be settled on prevailing market terms.

Apart from the compensation paid to the Board of Directors and the Executive Committee and the regular contributions to the various pension fund institutions, no transactions with related persons or companies took place.

Shareholdings Board of Directors

Shareholdings Executive Committee

The registered shares transferred as part of share-based compensation to the Executive Committee are blocked for at least five years.

As of 31 December 2018, members of the Senior Management registered a total of 18’994 shares of Georg Fischer Ltd. A total of 43’504 Georg Fischer shares were held by the Board of Directors, the Executive Committee, and the Senior Management as of 31 December 2018, corresponding to 1.06% of issued shares.

Neither Georg Fischer Ltd nor its Corporate Companies granted any guarantees, loans, advances, or credit facilities to members of the Executive Committee or the Board of Directors or related parties.

Compensation has not involved the allocation of options to current or past members of the Executive Committee or Board of Directors. Neither they nor any related persons possess option rights allocated by GF. As of 31 December 2018, the members of the Executive Committee held no option rights for Georg Fischer registered shares.

In 2018, GF did not make any severance payments to members of the Board of Directors or Executive Committee who left the company in the period under review or earlier.