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Corporate Communications
Georg Fischer Ltd
Amsler-Laffon-Strasse 9
8201 Schaffhausen
Switzerland

kommunikation #at# georgfischer dot com

Corporate Governance

The Board of Directors and Executive Committee of Georg Fischer attach very great importance to good Corporate Governance in the interest of shareholders, customers, business partners and employees. The implementation and ongoing improvement of the generally accepted principles of Corporate Governance ensure the necessary transparency to enable investors to judge the quality of the Corporation. This Report provides information on structures and processes, areas of responsibility and decision-making procedures, control mechanisms as well as the rights and obligations of the various stakeholders.

Contents

The present publication fulfills all obligations of the relevant SIX Swiss Exchange directive on information relating to Corporate Governance in terms of content and order and is based on the Swiss Code of Best Practice for Corporate Governance of economiesuisse, the association of Swiss industry. The Compensation Report is presented in a separate chapter on pages 56 to 60. All data and information apply to the cutoff date of 31 December 2012, unless otherwise noted. Any changes occurring before the copy deadline on 14 February 2013 are listed at the end of this chapter. Any changes occurring after the copy deadline can be found on our website. Georg Fischer also publishes the Articles of Association of Georg Fischer Ltd, the internal Organization and Business Rules, its policies and much more information online at

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Corporate Communications
Georg Fischer Ltd
Amsler-Laffon-Strasse 9
8201 Schaffhausen
Switzerland

kommunikation #at# georgfischer dot com

Compensation Report

Contents

The information below follows the guidelines of the SIX Swiss Exchange on compensation policy and the remuneration paid to the Board of Directors and Executive Committee and takes into account the transparency regulations of the Swiss Code of Obligations Art. 663bbis and 663c CO.

The remuneration paid in accordance with the abovementioned provisions of the Code of Obligations is listed and commented on in the consolidated financial statements and in the statements of Georg Fischer Ltd.

Compensation policy

Introduction

The Human Resources Policy defines the principles of the Corporation’s compensation policy. It is designed to provide simple and clearly structured salary systems that ensure fair remuneration and that are transparent for the Corporation’s employees. Georg Fischer gears salary levels to salaries in the relevant market and reviews these levels at regular intervals. Individual compensation is determined by the specifications of the position, competencies, performance, and the Corporation’s business success. Wherever possible, Georg Fischer uses results- and performance-driven compensation systems that include a result-based variable component.

Criteria for comparison

These principles also apply to the compensation policy for the Board of Directors and the Executive Committee, which is adopted by the Board of Directors on a proposal of the Compensation Committee. The amount and the elements of the compensation for the Board of Directors and the Executive Committee are tailored to the sector and labor market and are reviewed regularly. For this purpose, the Compensation Committee uses publicly available information from comparable companies on sales, earnings, number of employees, markets, and sectors in the metal-working, electrical engineering and mechanical industry in Switzerland.

Board of Directors

The compensation for the Board of Directors consists of:

A) cash compensation
B) share-based compensation
C) other benefits

The criteria used to determine compensation are set out in regulations. These criteria, which retain their validity for several years, were last reviewed on behalf of the Compensation Committee in 2010 (see criteria for comparison under section compensation policy).

A) Each member of the Board receives a fixed cash compensation as part of his or her remuneration (see criteria for comparison under section compensation policy). Additional time for special tasks such as committee chairmanship, vice-chairmanship or membership, for extraordinary meetings or for travel to and from meetings which does not take place on the day of the meeting is also remunerated on a daily rate basis (see criteria for comparison under section compensation policy).

The cash compensation may be paid, wholly or in part, in Georg Fischer shares, at the member’s discretion. The taxable value of the shares is determined by the share price at the end of the reporting year.

B) Each member of the Board receives a fixed number of Georg Fischer shares as part of his or her remuneration. The amount of the share-related compensation is calculated on the basis of the shares’ full value at the price at the end of the reporting year.

C) The other benefits include employee contributions to social insurance funds and lump-sum remuneration for expenses which are assumed by Georg Fischer Ltd.

Executive Committee

The compensation elements for the Executive Committee are as follows:

A) a fixed base salary in cash
B) a performance-related bonus in cash
C) share-based remuneration (long-term incentive)
D) pension and social insurance funds

The criteria used to determine compensation are set out in regulations. These criteria, which retain their validity for several years, were last reviewed by the Compensation Committee in 2012 (see criteria for comparison under section compensation policy).

A) The fixed base salary is determined primarily by the manager’s task, responsibility, skills, managerial experience and labor market conditions (see criteria for comparison under section compensation policy).

B) The performance-related bonus depends on the fulfillment of the individual performance objectives and the Corporation’s business success.

As part of the management by objectives process, measurable individual targets are agreed upon at the beginning of the year between the Chairman of the Board of Directors and the Chief Executive Officer, and between the Chief Executive Officer and the individual members of the Executive Committee. Fulfillment of these targets is assessed at the end of the business year.

The business success of the Corporation as a whole and of the individual divisions is measured by four financial value drivers:

  • organic sales growth (excluding acquisitions and divestitures),
  • EBIT margin (EBIT in relation to sales),
  • Return on Invested Capital (ROIC),
  • asset turnover (sales in relation to average net operating assets).

The weighting is as follows: organic growth 30 %, the EBIT margin and the ROIC 25 % each as well as the asset turnover 20 %.

The objectives are set by the Board of Directors for the medium term and are weighted in accordance with the strategic priorities. A lower threshold and an upper ceiling are defined for each of the four value drivers. If the lower threshold for the criterion in question is not reached, that part of the bonus will not apply. Exceeding the ceiling, however, does not lead to a further increase in the bonus.

The amount of the bonus is derived from fulfillment of the targets. The maximum bonus for the members of the Executive Committee may not exceed 90 % of the base salary; for the Chief Executive Officer the maximum is 110 %. In the review year, the performance-related bonus of the Executive Committee members and the Chief Executive Officer varied between 40 % and 53 % of the fixed annual base salary.

The individual objectives and the Corporation’s business success are weighted as follows: For the Heads of the Divisions, the weighting is 30 % each for the individual targets, the business success of the division in question, and the business success of the Corporation. For the Head of the Corporate Staff Unit Finance & Controlling, the weighting is 30 % for the individual targets and 60 % for the Corporation’s business success. For the Chief Executive Officer, the individual goals have a weighting of 30 % and the Corporation’s business success 80 %. The fulfillment of the individual performance objectives and the business success results in a bonus in cash of approximately two third of the maximum bonus.

C) The share-based remuneration is a long-term incentive. A fixed number of shares, vested for at least five years, is distributed to each member of the Executive Committee and to the Chief Executive Officer. The purpose of this share allocation is to reward managers for the Corporation’s long-term success over a period of at least five years.

D) The pension fund and social insurance expenses include employer contributions to social insurance funds and to obligatory and non-mandatory pensions.

The expense regulations apply to members of the Executive Committee in the same way as they do to all other employees of the particular Georg Fischer Corporate Company. Furthermore, an additional regulation governing lump-sum remuneration for expenses incurred on behalf of the company applies to members of the Executive Committee and all management employees in Switzerland. Both sets of regulations have been approved by the relevant cantonal tax authorities. Members of the Executive Committee with a Swiss labor contract do not have the use of a company car.

Other remuneration

The members of the Board and the Executive Committee of Georg Fischer do not receive any further compensation for these functions. In particular, the following direct and indirect remuneration elements do not apply:

Termination benefits

Members of the Board or the Executive Committee have no contractual entitlement to severance payments.

Options

Options are not allocated to members of the Executive Committee or the Board of Directors.

Additional fees

No member of the Executive Committee or the Board of Directors or any person closely associated with them received any fees or other payments for additional services to Georg Fischer Ltd or its Corporate Companies in the 2012 business year.

Loans to members of governing bodies

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.

Decision-making authority and supervision

Board of Directors

Based on the compensation regulations, the annual compensation for each member of the Board of Directors depends on the time spent and the tasks assumed in the year under review. Compensation is made on a pro rata basis for members joining or leaving during the year they are in office. The compensation due to members of the Board of Directors, in accordance with the regulations, is proposed by the Chairman of the Board of Directors to the Compensation Committee, which takes a decision at its regular meeting in December.

Executive Committee

On the basis of the compensation regulations, the Board of Directors decides at its December meeting, based on a proposal by the Compensation Committee, on the amount of the fixed remuneration to be paid for the following year to the Chief Executive Officer and the entire Executive Committee. The fixed base salary paid to the individual members of the Executive Committee is set by the Compensation Committee based on a proposal by the Chief Executive Officer. At the February meeting of the Compensation Committee and the Board of Directors, a decision is taken, on the same basis, on whether the objectives have been reached and on the resulting performance-related bonus for the past business year.

Supervision

The Internal Auditing annually ensures compliance with the compensation rules for the Executive Committee and the Board of Directors on behalf of the Board of Directors.

Remuneration for the 2012 business year

Board of Directors

The members of the Board of Directors received cash compensation of CHF 854 thousand in the year under review (previous year: CHF 956 thousand). Of this amount, Board members voluntarily drew 524 Georg Fischer registered shares with a par value of CHF 10, equivalent to a market value of CHF 193 thousand in 2012. The previous year, this draw had been 1,596 Georg Fischer registered shares with a par value of CHF 10, equivalent to a market value of CHF 512 thousand. In addition, a total of 1,603 Georg Fischer registered shares with a market value of CHF 590 thousand were allocated as sharerelated compensation. The previous year, the allocation had been 1,600 Georg Fischer registered shares, equivalent to a market value of CHF 514 thousand. Together with other benefits, the total compensation paid to the Board of Directors in the year under review amounted to CHF 1,585 thousand (previous year: CHF 1,622 thousand). The detailed disclosure of compensation to the Board of Directors in accordance with the transparency provisions of the Code of Obligations is as follows:

Compensation paid to the members of the Board of Directors 2012

Executive Committee

The members of the Executive Committee received cash compensation and social security and pension payments amounting to CHF 4.8 million for the year under review (previous year: CHF 4.7 million). 1,750 Georg Fischer registered shares (par value of CHF 10) with a fair value of CHF 644 thousand, based on a share price of CHF 368.00 at yearend 2012, were allocated to members of the Executive Committee for the year under review (previous year: 1,750 Georg Fischer registered shares with a fair value CHF 562 thousand).

The detailed disclosure of compensation to the Executive Committee in accordance with the transparency provisions of the Code of Obligations is as follows:

Compensation paid to the members of the Executive Committee 2012

Compensation paid to the members of the Executive Committee 2012

Total compensation for the Executive Committee and the CEO in 2012 was slightly higher than in 2011. In order to bring the fixed portion of the compensation into line with the average for our industrial sector, the fixed salary for members of the Executive Committee and the CEO were adjusted accordingly in 2012. The bonus linked to the financial results of the Corporation and the divisions was lower than in 2011. While the number of Georg Fischer shares allocated was unchanged, the share-based compensation paid in 2012 was somewhat higher than in the previous year owing to the higher year-end share price.

In the 2012 business year, no severance payments were made to persons who left governing bodies in the year under review or earlier.

Total compensation paid to the Board of Directors and Executive Committee is contained in the Corporation’s total expenses. Further details on compensation can be found on pages 116 to 117 of the Annual Report.

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Corporate Communications
Georg Fischer Ltd
Amsler-Laffon-Strasse 9
8201 Schaffhausen
Switzerland

kommunikation #at# georgfischer dot com

Consolidated financial statements

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Corporate Communications
Georg Fischer Ltd
Amsler-Laffon-Strasse 9
8201 Schaffhausen
Switzerland

kommunikation #at# georgfischer dot com

Financial statements Georg Fischer Ltd

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Corporate Communications
Georg Fischer Ltd
Amsler-Laffon-Strasse 9
8201 Schaffhausen
Switzerland

kommunikation #at# georgfischer dot com