2. Foreword by the Chairman of the Nomination & Compensation Committee

Dear shareholders,

On behalf of the Nomination and Compensation Committee (NCC), I am pleased to present the 2018 Remuneration Report.

In 2018, the market environment was characterised by increased volatility and a declining growth momentum in certain markets. The solid sales growth and high profitability mean we can look back on a good financial year. The increased year-on-year operating results were above all attributable to higher sales volumes, price increases, positive effects of the closure of two plants in France in the previous year as well as to continuous efficiency improvements, while higher raw material prices as well as tariff-related increases in personnel expenses had a negative impact. The Remuneration Report summarises how these results impacted the variable remuneration made to the members of the Group Executive Board under the different remuneration components.

During the reporting year, the NCC performed a thorough review of the compensation programmes applicable to the Group Executive Board in order to ensure their alignment with the business strategy and with the long-term interests of our shareholders. As a result of this analysis, the NCC concluded that the main characteristics of the compensation system are fit for purpose. Nevertheless, the long-term incentive plan needs simplification and harmonisation. Therefore, the following changes will be implemented in the business year 2019:

• All options granted under the long-term incentive plan and under the management share purchase plan will be subject to a three-year cliff vesting and a maturity of nine years.
• Clawback and malus provisions will be introduced in the long-term incentive.

Otherwise, the NCC performed its regular activities throughout the year such as the performance goal setting at the beginning of the year and the performance assessment at year end, the determination of the compensation of the members of the Board of Directors and of the Group Executive Board, as well as the preparation of the Remuneration Report and of the say-on-pay vote for the General Meeting. You will find further information on our activities and on Geberit's compensation system and governance on the following pages.

At the 2019 General Meeting, we will request your approval of the total remuneration amount to be awarded to the Board of Directors for the period until the following General Meeting, and the maximum aggregate remuneration awarded to the Executive Board for the 2020 business year. Additionally, you will have the opportunity to express your opinion on this Remuneration Report in a consultative vote. You will see in the report that the remuneration awarded to the Board of Directors for the compensation period ending with the 2019 General Meeting and the remuneration awarded to the Group Executive Board in 2018 are within the limits approved at the 2018 General Meeting and 2017 General Meeting respectively.

Looking ahead, we will continue to assess and review our compensation programmes to ensure that they are still fulfilling their purpose in the evolving context in which the company operates. We will pursue an open and regular dialogue with our shareholders as we continue to enhance the compensation system. We are confident that this report includes all relevant information and that our remuneration system rewards performance in a balanced and sustainable manner and aligns well with shareholders’ interests.

Yours sincerely,

Hartmut Reuter
Chairman of the Nomination & Compensation Committee