Dear Shareholders,

In the name of the Board of Directors and the Nomination and Compensation Committee, I am pleased to introduce the 2016 Compensation Report.

2016 has been a very strong year for Sika, with a 4.7% revenue growth in Swiss francs (5.5% in local currencies) and 21.8% profitability increase. All regions posted very good results, and the company continued its accelerated development in the emerging markets with the opening of nine new factories and four national subsidiaries, as well as with the market launches of new products. In terms of relative performance, Sika outperformed its peers both in terms of sales growth and profitability improvement. The Compensation Report explains how these results impacted the variable incentive payments made to the members of Group Management under the different compensation plans.

In the reporting year, the Nomination and Compensation Committee reviewed the compensation programs and decided to implement a few changes related to the share-based compensation of Group Management, such as the introduction of a shareholding ownership guideline and the removal of the restriction period on the vested shares under the long-term incentive plan. Those changes are described more in detail in this report. Furthermore, the Committee performed its regular activities throughout the year such as the succession planning for the positions on the Board of Directors and Group Management, 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 Group Management, the preparation of the Compensation Report and of the say-on-pay vote at the Annual General Meeting.

At the 2016 Annual General Meeting, a binding vote on the aggregate maximum compensation amounts for the Board of Directors and for Group Management was conducted, as well as a consultative vote on the Compensation Report, so that shareholders could express their opinion on our compensation policies and principles. The shareholders approved the compensation amount for Group Management with a result of 99.05%, however, the compensation amount for the Board of Directors (binding vote) and the compensation report (consultative vote) were rejected mainly because of the majority voting rights of the main shareholder. However, considering the special circumstances of the intended sale of the company to Saint-Gobain by the main shareholder, we do not interpret the negative votes as a generic disagreement of our shareholders with our compensation system and/or compensation amounts.

Looking ahead, we will continue to assess and review our compensation programs to ensure that they are still fulfilling their purpose in the evolving context in which the company operates and are aligned to the interests of our shareholders. We will also continue to maintain an open dialog with our shareholders and their representatives. We would like to thank you here for sharing your perspectives on executive compensation with us and trust that you will find this report informative.


FRITS VAN DIJK Chairman of the Nomination and Compensation Committee


Chairman of the Nomination and Compensation Committee