5   Compensation, shareholdings and loans

5.1     Content and method of determining compensation and shareholding programmes

The members of the Board of Directors receive a fixed honorarium, which is determined annually and paid in cash. The remuneration takes account of the claims made on the individual members and their responsibilities and is not tied to company targets.

In addition to their fixed basic annual salary (including fringe benefits and contributions to pension funds/executive pension plan), members of Group Management also receive variable remuneration (target bonus) based on the company´s annual result (performance bonus) and the attainment of individual targets (function bonus). Over and above this, members of Group Management also receive variable remuneration geared to the long-term success of the company in the form of share allocations.

The amount of the fixed basic annual salary is dependent on the individuals´ tasks and responsibilities, on their experience and on their performance track record. It is determined on joining the company or on being appointed to Group Management and is reviewed annually. The total fixed remuneration paid to members of Group Management for the 2011 financial year amounted to CHF 1.57 million and contributions to pension funds (executive pension plan) came to CHF 0.21 million.

The amount of the target bonus consisting of the performance and function bonuses is set by the Board of Directors annually.

The performance bonus is based on the budgeted net operating profit (net profit excl. revaluation effect). If the budget is achieved, the performance bonus will be paid out in cash the following year once the annual financial statements have been approved by the Board of Directors. If the net operating profit falls short of the budget by ten or more percent, no performance bonus will be paid out. If the net operating profit is ten or more percent above budget, 150% of the agreed performance bonus will be paid out. The performance bonus for a net operating profit which is less than ten percent above or below budget will be calculated on a linear basis.

Total performance bonuses paid out to members of Group Management for the 2011 financial year amounted to CHF 1.36 million.

The function bonus is dependent on the performance of the member of Group Management in his area of responsibility and functions and hence on individual target attainment. The function bonus can amount to a maximum of 40% of the target bonus. If the individual targets are not achieved, no bonus will be paid out.

Total function-related bonuses paid out to members of Group Management for the 2011 financial year amounted to CHF 0.38 million.

In addition to the variable target bonus, the Board of Directors may, at its discretion and without giving rise to any recurrent entitlement, award individual members of Group Management an additional variable remuneration component in the form of shares which is geared to the company´s long-term success. The stock exchange value of the registered shares allocated must not exceed ten percent of the individual´s fixed basic salary relevant to the year in question. Bonus recipients will be able to access half of the shares allocated immediately and the remainder in two years´ time provided their position is not under notice of termination.

The performance of the share price does not count as a factor for setting the remuneration paid to Group Management. In 2011, Group Management members were allocated registered shares with a value of CHF 0.1 million from the company´s treasury shares.

Of the total compensation of CHF 3.62 million paid to members of Group Management for the financial year, fixed remuneration (basic annual salary) accounted for 43%, while the variable component of pay (performance bonus, function bonus and shares) accounted for 57%. The variable component amounted to between 52% and 61% of the total remuneration of the four members of Group Management.

Persons leaving the Board of Directors or Group Management will not be entitled to any contractually assured benefits or advantages.

Once a year, the Nomination and Compensation Committee submits a proposal to the full Board of Directors regarding the amount of the remuneration for the individual members of the Board of Directors and Group Management and at the same time provides information on the process used to determine the compensation and the course of the compensation process. While the full Board of Directors takes the final decision on the remuneration, all Board members have a say in the matter.

The meeting of the Nomination and Compensation Committee at which the proposals to the Board of Directors as a whole are prepared is attended by the Chief Executive Officer except where his performance is being assessed and his remuneration determined.