Remuneration for the 2018 business year

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

	Compensation			Social insurance funds 3	Total compen- sation 2018 4	Total compen- sation 2017 4
	Cash compensation 1	Number of shares	Share-based compensation 2	Social insurance funds 3	Total compen- sation 2018 4	Total compen- sation 2017 4

Andreas Koopmann	270	300	236	22	528	655
Chairman Board of Directors
Chairman Nomination Committee
Hubert Achermann	150	150	118	11	279	343
Chairman Audit Committee
Gerold Bührer	123	150	118	10	251	314
Vice Chairman Board of Directors
Member Audit Committee
Roman Boutellier	90	150	118	8	216	286
Member Nomination Committee
Riet Cadonau	90	150	118	11	219	276
Member Compensation Committee
Roger Michaelis	123	150	118	13	254	317
Member Audit Committee
Eveline Saupper	110	150	118	12	240	304
Chairwoman Compensation Committee
Jasmin Staiblin	90	150	118	11	219	283
Member Compensation Committee
Zhiqiang Zhang	113	150	118	12	243	307
Member Nomination Committee
Total	1’159	1’500	1’180	110	2’449	3’085

(all in CHF 1’000, except column “Number of shares”)

1 The cash compensation includes reimbursements for international travel amounting to CHF 45’000.

2 The share-based compensation consists in the allocation of a fixed number of shares. The amount of the share-related compensation is calculated based on the full value of the shares at the year-end price of CHF 786.50 on 31 December 2018.

3 Social insurance funds represent employer contributions to social insurance funds.

4 The total compensation encompasses the cash compensation, the share-based compensation, and the contribution to social insurance funds.

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

Fixed salary in cash

Short-term incentive in cash 1

EPS dependent performance shares PS(EPS)

rTSR dependent performance shares PS(rTSR)

Share-based remune- ration 2

Social insu- rance funds 3

Pension funds 4

Total com- pen- sation 2018 5

Total compen- sation 2017

Executive Committee *

3’003

2’797

876

1’378

375

864

8’417

9’123

Of whom Yves Serra, CEO (highest individual compensation)

950

1’247

375

590

132

278

3’197

3’471

(all in CHF 1’000, except rows “EPS dependent performance shares” and “rTSR dependent performance shares”)

* The Executive 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).

1 The short-term incentive is based on the short-term incentive plan. The amount is determined by the fulfillment of personal performance objectives and by the financial results of the divisions and the Corporation. The short-term incentive for the 2018 financial year was approved by the Board of Directors on 21 February 2019. Payment will be made in March 2019.

2 The share-based remuneration is based on the long-term incentive plan: Each year, fixed numbers of performance shares (PS) are allocated. The amount of the PS-based compensation is calculated based on the grant value of the PS at the year-end price of CHF 786.50 on 31 December 2018. The number of PS vesting after the vesting period of three years depends on meeting the respective performance criteria.

3 The social insurance funds expenses represent employer contributions to social security.

4 The pension funds expenses represent employer contributions to pension funds.

5 The total compensation is comprised of the fixed salary, the short-term incentive, the share-based remuneration, and the social and pension contributions.

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:

Business objectives	Hurdle 1	Strategy targets 2016–2020	Result 2018
Organic sales growth (at constant currencies)	1%	3–5%	6.5%
EBIT margin	6%	8–9%	8.4%
ROIC	14%	18–22%	22.4%

1 Achievements below the hurdle result in zero payout for the respective business objective; for the objectives EBIT margin and ROIC, hurdle achievements result in 50% payout for the respective target

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.

Shareholding ownership guideline

The Board of Directors approved the implementation of a shareholding ownership guideline as per 1 January 2017, as follows:

–Members of the Board are required to hold 200% of the basis fee in GF shares.
–The CEO is required to hold 200% of the fixed base salary in GF shares.
–Members of the Executive Committee are required to hold 100% of the fixed base salary in GF shares.
–Newly appointed members shall build up the required ownership within five years of their appointment. In the event of a substantial rise or drop in the share price, the Board of Directors may, at its discretion, amend that time period accordingly.

To calculate whether the minimum holding requirement is met, all vested shares are considered regardless of whether they are blocked or not. However, unvested PS are excluded. The Compensation Committee reviews compliance with the share ownership guideline on an annual basis.

Shareholdings of the members of the Board of Directors and of the Executive Committee

The information on shareholdings of the members of the Board of Directors and of the Executive Committee is included in the notes 6 Compensation and shareholdings of GF Ltd.

Loans to members of governing bodies

Neither GF Ltd nor its Corporate Companies granted any guarantees, loans, advances, or credit facilities to members of the Board of Directors or the Executive Committee or related parties in the year under review. As of 31 December 2018, no loans were outstanding.