from this, the Management Board member responsible for the business segment Fresenius Vamed is entitled to an increase of 1.2 percentage points for each full year of service as a Management Board member, up to a maximum of 40 %. Management Board members that have been or will be appointed to the Management Board as of 1 January 2020, are granted a pension commitment within the framework of a defined contribution plan. This is promised at the beginning of the service contract with a waiting period of the first three (3) years regarding the granting of benefits. Under such defined contribution plan, the respective Board Management member receives an annual contribution amounting to 40 % of the base salary, which determines the future capital amount. After reaching the retirement age under the defined contribution plan, payments can be made either in ten (10) annual installments or optionally as a one-off payment. An annuity respectively pension payment is not provided. The defined contribution plan may provide for survivors' benefits (Hinterbliebenenversorgung) and benefits after the occurrence of a full or partial reduction in earning capacity ( Erwerbsminderung). 4.2 Short-Term Incentive Under the Compensation System 2021+, the Management Board members are entitled to receive a Short-Term Incentive, which may result in a cash payment. The Short-Term Incentive rewards the Management Board members for the success of the Company in the relevant fiscal year. The Short-Term Incentive is linked to the achievement of financial and non-financial performance targets, balancing growth, profitability and sustainability aspects. 4.2.1 Target Amounts The target amount to be granted to each Management Board member for the Short-Term Incentive (i.e. the amount paid out if the target is reached to 100 %) is determined by individual contract as a percentage of the respective base salary of a Management Board member. In case of appointments to the Management Board during a fiscal year, the amount to be granted to such member can be pro-rated. / 4.2.2 Performance Targets The Short-Term Incentive is measured based on the achievement of three (3) performance targets: 65 % relate to group or business segment Net Income (before special items), 20 % to group or business segment Sales and 15 % to the achievement of sustainability criteria ("ESG-targets"). For Management Board members with business segment responsibilities, half of the Net Income and half of Sales are based on the corresponding financial figures of the group and the respective business segment. For Management Board members with group responsibility, the two financial indicators of Net Income and Sales are measured exclusively at group level. The ESG-targets are measured equally at group level for all Management Board members. The extent to which each ESG-target is met is determined within each of the four (4) business segments and weighted at 25 % each. The overall ESG-target achievement is for the time being identical for all Management Board members. The financial performance targets reflect the key performance indicators of the Company and support the Company's strategy of achieving sustainable and profitable growth. The non-financial performance targets underline the Company's commitment to implement its global sustainability strategy. / The financial figures underlying the financial performance targets can be adjusted for certain effects, in particular effects from significant acquisitions, divestments, restructuring measures and changes in accounting principles. In addition, the Supervisory Board can also adjust for one-time material special items for which the Management Board is not responsible, which have not been budgeted for and which are therefore not included in the calculation of the target values. In order to further enhance cooperation across the business segments and at the same time incentivize the Management Board members with respect to their individual responsibilities, some performance targets are measured at group level, others at business segment level. For Management Board members who are responsible for a business segment, half of the Net Income and half of Sales are based on the corresponding key financial figures of the group and the respective business segment. For Management Board members with group responsibilities, Net Income and Sales refer to the corresponding key financial figures of the group. By measuring the financial performance targets at group as well as on a business segment level, the financial success of both the individual business segments and the group is reflected. The achievement of sustainability targets is measured at group level to ensure close cooperation across the Company's business segments in the field of sustainability. The non-financial performance targets relate to ESG focus topics such as quality, employees, innovation, compliance and environment. Performance targets are defined annually and apply to each focus topic. 4.2.3 Performance Target Setting and Determination of Target Achievement At the beginning of the relevant fiscal year, the Supervisory Board defines, based on budget, the concrete values for the underlying financial indicators, which lead to a target achievement of 0 % (lower threshold), 100 % (target value) and 150 % (cap). When setting the target values the Supervisory Board considers the market and competitive environment, the budget as well as strategic growth targets. To the extent this requires the consideration of financial figures that are unknown at this point in time, the Supervisory Board, at the beginning of such fiscal year, determines the methodology to be applied once such figures are available. For the ESG-targets the Supervisory Board has already defined three (3) targets for the fiscal years 2021 and 2022, through which each of the five (5) focus topics will be qualitatively measured. In this way, a total of 15 aspects are qualitatively assessed for compliance or non-compliance with the ESG-targets. If all ESG targets in the four (4) business segments are met, the overall ESG-target achievement is 100 % (cap). In order to determine the sustainability targets for the fiscal years after 2022, the Supervisory Board determines quantitative sustainability targets before the beginning of the 2023 fiscal year, including the metrics and the methodology for determining the target values and target achievement which can amount to a maximum of 150 % from that date. The ESG-targets and their achievement are reported transparently in the compensation report for the respective fiscal year. After the one-year performance period for the Short-Term Incentive has ended, the Supervisory Board determines whether and to what extent the targets have been achieved. The following applies to the financial targets: The target is deemed to be 0 % if the lower threshold is not reached. If the cap is exceeded, the target is deemed to have been reached by 150 %. If the achieved financial indicators are between the respective values for target achievement of 0 % and 100 % or 100 % and 150 %, the target achievement is determined by linear interpolation. / The degree of the overall target achievement is determined by the weighted arithmetic mean of the respective achievement of each financial and non-financial target. Multiplying the degree of respective overall target achievement with the target amounts of the Short-Term Incentive results in the final Short-Term Incentive amount. Subject to approval by the Supervisory Board, the final Short-Term Incentive amount will be paid out to the respective Management Board member in cash. Since the overall target achievement is capped at a maximum of 142.5 % (fiscal years 2021 and 2022) and of 150 % (from fiscal year 2023 onwards), the payout amount of the Short-Term Incentive for the fiscal years 2021 and 2022 is also capped to 142.5 % of the respective target amount and to 150 % from fiscal year 2023 onwards. When determining the degree of target achievement, the Supervisory Board - in accordance with the corresponding recommendation of the German Corporate Governance Code in the version dated 16 December 2019 - may take into consideration that certain extraordinary economic, tax or similar impacts are not related to the performance of the Management Board member. In the extraordinary case that the Supervisory Board resolves to make use of this possibility, the rationale will be adequately explained and disclosed. Detailed information on the applied target values, adjustments and the respective targets achievements will be disclosed ex-post in the compensation report for the respective fiscal year. 4.3 Long-Term Incentive Under the Compensation System 2021+, the Management Board members are entitled to receive Long-Term Incentives in the form of so-called "Performance Shares" with a measurement period of four (4) years. Performance Shares are virtual cash-settled payment instruments not backed by equity and are non-certificated. A payout depends on the achievement of two (2) equally weighted performance targets and on the development of the share price of the Company. / 4.3.1 Grant Values The grant value of the Long-Term Incentive for each Management Board member is defined by the Supervisory Board and corresponds to a percentage of the base salary, as stipulated in the individual contract. In case of appointments to the Management Board during a fiscal year, the grant value for these Management Board members can be pro-rated. In order to determine the number of Performance Shares to be granted to the respective Management Board member, the respective grant value is divided by the value per Performance Shares in accordance with IFRS 2 and considering the average share price of the Company over a period of sixty (60) stock exchange trading days prior to the respective grant date. The final number of Performance Shares depends on the achievement of pre-defined targets, which are set by
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