Adjustments to to system of compensation of the Management Board

From 2010 on, the currently applicable system of compensation for the members of the Management Board will be adjusted to the new requirements of the German Act on the Appropriateness of Executive Board Compensation (VorstAG), which took effect on August 5, 2009, as follows:

In line with the existing compensation system, each member of the Management Board will receive an annual fixed basic compensation to be paid out in twelve equal monthly installments. The amount of the fixed basic compensation is assessed differently for the respective members of the Management Board to reflect the special individual areas of tasks and responsibilities as well as performance contribution.

In addition, the members of the Management Board receive a performance-related bonus whose amount in each case is dependent on certain target parameters oriented on the consolidated result of the Fresenius Group and / or of the relevant corporate segments being achieved. In the case of the members of the Management Board with functional responsibility for the entire Group – such members being Dr. Schneider, Mr. Sturm and Dr. Götz –, the amount of the variable bonus is based in its entirety on the respective consolidated net annual profit of Fresenius SE (after deduction of minority interests). For Mr. Baule and Dr. De Meo, half of the amount of the variable bonus in each case depends on the development of the consolidated net annual profit as well as the development of the net annual profit of the corporate segment (in each case after deduction of minority interests) for which the respective member of the Management Board is responsible. The variable bonus of Dr. Wastler in each case is oriented on the consolidated net annual profit of Fresenius SE (after deduction of minority interests) as well as on the consolidated annual result before tax and extraordinary income / expenditures of the VAMED group. As in the past, Dr. Lipps will continue to receive his compensation only from Fresenius Medical Care.

Besides the variable bonus, which as a rule is to be paid out annually in cash and which is limited in its amount, the members of the Management Board receive a further variable compensation component in the form of stock options as a performance-related component of long-term incentive compensation. Stock options are allotted on the basis of the Stock Option Plan 2008 of Fresenius SE. The number of stock options to be allotted is defined in each case by the Supervisory Board at its discretion, with all members of the Management Board, except for the Chairman of the Management Board who receives double the number of stock options, receiving the same number of stock options.

To ensure that the overall system of compensation of the members of the Management Board is oriented towards long-term and sustained corporate development, the new compensation system provides that the share of long-term variable compensation components is at least equal in its amount to half of the total variable compensation components granted to the respective member of the Management Board. As a means of ensuring this minimum ratio in favor of the compensation components oriented towards the long term, it is expressly provided that the Supervisory Board may determine that the variable bonus to be paid as a rule annually is converted (pro rata) into a variable compensation component based on a multi-year assessment in order to also take account of any negative developments within the assessment period. This is done in such a way that the maturity of the bonus earned on a variable basis is postponed at the discretion of the Supervisory Board, either on a pro rata basis or in its entirety, by two years. At the same time it is ensured that any payment is made to the member of the Management Board after expiry of such multi-year period only if (i) no subsequent adjustment of the decisive (i. e. adjusted by extraordinary effects) consolidated net annual profit of Fresenius SE (after deduction of minorities) beyond an amount equal to a tolerance range of 10 % is made, and (ii) the amount of consolidated net annual profit (adjusted for extraordinary effects) of Fresenius SE in the two relevant subsequent years is not substantially less than the consolidated net annual profits (adjusted by extraordinary effects, after deduction of minority interests) of the respective preceding fiscal years. In the event of the aforementioned conditions for payment being missed only to a minor and / or partial extent, the Supervisory Board may resolve on a correspondingly pro rata payment of the converted portion of the variable bonus. No interest is payable on the converted bonus claim from the time when it first arises until the time of its effective payment. In this way the variable bonus can be converted pro rata or in its entirety into a genuine variable compensation component on a multiyear assessment basis which also participates in any negative developments during the relevant assessment period.

In line with the aim and purpose of the provisions of the German Act on the Appropriateness of Executive Board Compensation (VorstAG), the new system of compensation for the Management Board moreover provides for a contractually stipulated cap or possibility of capping the amount of the annual compensation to be claimed by the member of the Management Board overall, i. e. including all variable compensation components. This makes it possible to adequately take account in particular of those extraordinary developments which are not in any relevant proportion to the performance of the Management Board.

Under the new compensation system, the amount of the basic compensation of the members of the Management Board was and will be assessed giving particular regard to the relevant comparison values of other DAX companies and similar companies of comparable size and performance from the relevant industrial sector. By this, a predominantly conservative position in relation to relevant comparative companies was deliberately chosen on average. In addition to this horizontal comparative view, due regard was also given to the vertical (company-internal) comparative view in assessing the compensation components for the members of the Management Board.

The existing system of compensation for the members of the Management Board applicable up to now, given its long-term compensation components as well as the ratios that were decisive for the achievement of targets for the short-term variable compensation components, was already oriented towards sustained corporate development. However, the new system of compensation for the members of the Management Board, thanks to the aforementioned provisions, will be oriented to an even greater extent towards the interests of sustained corporate development within the meaning of the provisions of the German Act on the Appropriateness of Executive Board Compensation (VorstAG).

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