The remuneration report summarises the key principles that determine the remuneration of the Board of Directors and Group Management and also explains the structure and extent of compensation.

HOCHDORF places great importance on recruiting, committing, motivating, and fostering well-qualified employees at all levels. This is particularly important when it comes to staffing those positions that have a significant bearing on the management of the company. Remuneration is designed in such a way as to create incentives that benefit the long-term development of the company. Performance evaluations are conducted on a qualitative basis through annual employee review meetings, at which personal targets and performance are assessed in general terms, as well as according to quantitative criteria, which are derived from the current financial results.

Pursuant to the Ordinance Against Excessive Compensation (ERCO), the Annual General Meeting decides on the remuneration of the Board of Directors and Group Management. The Articles of Association contain a summary of the remuneration principles. Article 19, Remuneration of the Board of Directors, provides that the Annual General Meeting decides on total remuneration for the current year until the next ordinary Annual General Meeting. Pursuant to Article 23, Remuneration of Group Management, the Annual General Meeting approves fixed and variable remuneration for the current year.

Each year, the Annual General Meeting separately votes on the proposed resolutions of the Board of Directors concerning the maximum total amounts of remuneration to be paid to the Board of Directors for the period until the next ordinary General Meeting and the remuneration to be paid to Group Management for the current year. The Annual General Meeting votes on the remuneration report on an advisory basis.

The remuneration paid to the Board of Directors consists of a fixed remuneration and a fixed expenses allotment, which are not linked to any profit components. The social contributions to be remitted in relation to remuneration are covered by the company and then offset accordingly.

The amount of the emoluments paid to the Board of Directors is set based on a discretionary decision. In so doing, the Board of Directors relies on published studies on director remuneration, publicly available information on fees paid by listed companies in the same industry, as well as comparisons with remuneration paid for other director mandates.

The remuneration includes a base amount for all members of the Board of Directors, a supplementary payment for work as Chairman or Vice Chairman, as well as flat-rate remuneration for work on committees and for expenses.

The additional fees were most recently modified at the meeting of the Board of Directors on 14 December 2016.

The figures show the amounts actually paid out in the reporting period. The members of the Board of Directors are not covered by the pension fund. 20% of the fee, excluding expenses, is paid in the form of HOCHDORF Holding Ltd. shares, which are subject to a three-year holding period. They are allocated at the volume-weighted average price of all transactions on the SIX on the day before allocation day. If a person departs from the Board of Directors, the shares are freely available immediately.

AC = Audit Committee; PCC = Personnel and Compensation Committee MSC = Market and Strategy Committee

The Annual General Meeting on 4 May 2018 approved a total amount of CHF 700,000 for the current term of office until the 2019 AGM. This total amount will not be exceeded. The following remuneration is envisioned for the term of office starting with the 2019 Annual General Meeting, with social contributions being factored in at the flat rate of 15%. 20% of the remuneration will be paid out in the form of stock options with a vesting period of three years. If a person departs from the Board of Directors, the shares are freely available immediately.

The total amount for 2019 to be put to a vote comes to CHF 700,000, as rounded.

Compensation paid to Group Management is composed of a fixed basic salary and variable, performance-related remuneration, with variable remuneration for each position being based on the consolidated EBIT of the Group after minority interests or – for the Managing Directors of the three business divisions – on the EBIT of the respective business area after minority interests. Variable remuneration includes an upper limit for all members of Group Management. It totals a maximum of twice the amount of the basic salary not including expenses. Hence, the total of the basic remuneration and the variable remuneration may not exceed 3 times the basic salary not including expenses. Total compensation also includes retirement benefits, service benefits, and benefits in kind. The Board of Directors defines the details in the compensation regulations. There are no share or option plans or similar shareholding programmes at HOCHDORF. 30% of the variable remuneration is paid in the form of HOCHDORF Holding Ltd shares, which are subject to a three-year holding period. They are allocated at the volume-weighted average price of all transactions on the SIX on the day before allocation. If a person departs from the Group Management, the shares are freely available immediately.

The Board of Directors sets the amount of the emoluments paid to Group Management. In so doing, it relies on the recommendation and proposed resolution of the Personnel and Remuneration Committee. The Board of Directors defines the range of total compensation and the strategic targets. As is the case with other members of Group Management, the CEO’s compensation is composed of a fixed basic salary and variable, performance-related remuneration. For the CEO, variable remuneration amounts to 2.0% of the consolidated EBIT for HOCHDORF after minority interests, whereby this must amount to at least CHF 3.5 million. The employment agreement was concluded for an indefinite period of time, with a notice period of six months.

For all other members of Group Management, the general achievement of personal targets, as well as company results, forms the basis for the decision on compensation. Variable remuneration is individual-specific. Depending on the business division and the position, it amounts to between 0.04% and 0.5% of the consolidated EBIT for HOCHDORF after minority interests, whereby this must amount to at least CHF 3.5 million, or between 0.60% and 3.5% of the EBIT generated by the individual’s business division after minority stakes. The employments agreement are concluded for an indefinite period of time, with a notice period of six months.

The amounts are calculated according to the accrual principle in accordance with the provisions of the ERCO.

1. Monthly salary, 13th monthly salary payment, flat-rate amount for entertainment expenses.
2. Private shares for company vehicles, vehicle payments, company loyalty gifts.

The Annual General Meeting on 4 May 2018 approved a total amount of CHF 4,500,000 for the 2018 reporting year. This total amount will not be exceeded.

In 2018, the Group Management changed as follows:

Based on contractual agreements and the calculation of variable remuneration using the budgeted results for 2019, the total amount for 2019 to be put to a vote is composed of the following:

1. Monthly salary, 13th monthly salary payment, flat-rate amount for entertainment expenses.
2. Private apportionments for company vehicles, vehicle payments, company loyalty gifts.

In order to be able to cover the possibility that the budget may be exceeded in 2019, a reserve of 10% was factored in, which amounts to about CHF 250,000 in additional variable remuneration. The total amount for 2019 to be put to a vote comes to CHF 3,200,000, as rounded.

Pursuant to Article 23 of the Articles of Association, the company or companies controlled by it are authorised to pay each member who joins Group Management or is promoted within Group Management after the time at which the total amount of fixed remuneration is approved by the Annual General Meeting an additional amount if the remuneration previously approved is insufficient for his or her remuneration. For each remuneration period, the additional amount may not exceed 30% of the most recently approved maximum amount of fixed remuneration for Group Management.

The employment agreements for the members of Group Management do not include any change-of-control clauses. There are no systems in place for severance payments, and none were set up during the reporting period. The notice period for members of Group Management is six months. They remain entitled to salaries and bonuses during this notice period.

The personnel changes made in the reporting period are listed in advance. The remuneration owed to former members of Group Management in the reporting period has been accrued accordingly. There were no changes to the Board of Directors in 2018.

As at 31 December, the individual members of the Board of Directors and Group Management (including related persons) held the following number of shares in the company:

AC = Audit Committee; PCC = Personnel and Compensation Committee, MSC = Market and Strategy Committee

No additional fees or remuneration were paid to the Board of Directors or to Group Management, including related parties, in the reporting period.

Loans are fundamentally never granted to members of the Board of Directors, the CEO, Group Management, or employees of HOCHDORF. During the reporting period, no collateral (loan guarantees, other guarantees, etc.) was granted. Neither HOCHDORF Holding Ltd nor other Group companies have waived a claim in respect of a member of the Board of Directors or Group Management.

As was the case in the previous year, no loans or collateral were granted to related persons during the reporting period. No loans or collateral existed as at the end of the reporting period.