Fresenius Medical Care AG 6-K, filed Jul 17, 2020
Fresenius Medical Care AG (FMS)
About this 6-K
Fresenius Medical Care AG filed this 6-K on July 17, 2020.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
For the month of July 2020
FRESENIUS MEDICAL CARE AG & Co. KGaA
(Translation of registrant’s name into English)
Else-Kröner Strasse 1
61346 Bad Homburg
Germany
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o No x
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82
On July 14, 2020 the Company published in the German electronic-Bundesanzeiger (Federal Gazette) the agenda and invitation for its 2020 Annual General Meeting (“AGM”) of Shareholders to be held August 27, 2020. A convenience translation of the invitation and agenda for the 2020 AGM has been posted on the Company’s web site, www.freseniusmedicalcare.com/en/agm, and is being furnished as an exhibit to this Report on Form 6-K. The Company has also posted on its web site two other reports referred to in the AGM invitation — the report of the Company’s Supervisory Board and the report of the Company’s general partner pursuant to § 289a para. 1 and § 315a para. 1 of the German Commercial Code. The Company is also furnishing with this Form 6-K report copies of (i) the report of the Company’s Supervisory Board and the report of the Company’s General Partner (together, the “Reports”) referred to in the AGM invitation and (ii) certain additional information (the “Supplemental Information”) that the Company has agreed to make available to its ADR holders pursuant to the Pooling Agreement among the Company, Fresenius Medical Care Management AG, the Company’s general partner, Fresenius SE & Co. KGaA and the Company’s independent directors designated in the Pooling Agreement. The Supplemental Information for ADR holders has also been posted on the Company’s web site, www.freseniusmedicalcare.com/en/agm, and is also being furnished with this Report on Form 6-K.
On or about July 27, 2020 the Depositary for the American Depositary Receipts (“ADRs”) representing the Company’s ordinary shares will distribute to ADR holders (a) a notice informing ADR holders of the electronic availability of the AGM invitation and agenda, and the Reports and other materials referred to in the agenda, and (b) a voting instruction card for ADR holders. The notice to ADR holders will include a URL link to the location on the Company’s web site where the AGM materials have been posted. The notice will also inform ADR holders that copies of the AGM invitation and agenda, the Reports and the Supplemental Information will be provided to any holder of ADRs without charge upon request made to the Depositary. The Company will furnish the notice of availability of the AGM materials and the voting instruction card with a report on Form 6-K when they are distributed to ADR holders by the Depositary.
The Company’s Annual Report on Form 20-F and the Company’s 2019 Annual Report have each been posted on the Company’s web site.
EXHIBITS
The following exhibits are being furnished with this Report:
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Exhibit 99.1 |
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English convenience translation of Agenda and Invitation for the Annual General Meeting of Shareholders to be held August 27, 2020 published in the German electronic-Bundesanzeiger (Federal Gazette). |
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Exhibit 99.2 |
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Report of the Supervisory Board of Fresenius Medical Care AG & Co. KGaA for the Fiscal Year 2019 |
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Exhibit 99.3 |
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Explanatory report of the General Partner on data under § 289a para. 1, § 315a para. 1 Commercial Code |
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Exhibit 99.4 |
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Supplemental Information for ADR holders. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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DATE: July 17, 2020 |
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FRESENIUS MEDICAL CARE AG & Co. KGaA, | ||
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a partnership limited by shares, represented by: | ||
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FRESENIUS MEDICAL CARE MANAGEMENT AG, its | ||
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General Partner | ||
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By: |
/s/ RICE POWELL | |
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Name: |
Rice Powell |
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Title: |
Chief Executive Officer and |
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Chairman of the Management Board |
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of the General Partner |
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By: |
/s/ HELEN GIZA | |
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Name: |
Helen Giza |
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Title: |
Chief Financial Officer and |
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Member of the Management Board |
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of the General Partner |
Invitation to the Annual General Meeting
Fresenius Medical Care AG & Co. KGaA
Hof an der Saale
ISIN: DE0005785802 // Securities Identification No.: 578580
ISIN: DE000A254VN2 // Securities Identification No.: A254VN
ISIN: US3580291066 // CUSIP: 358029106
We hereby invite our shareholders to the
Annual General Meeting
to be held on Thursday, 27 August 2020, at 10:00 hours Central European Summer Time (CEST).
Against the background of the spread of the coronavirus SARS-CoV-2, the Annual General Meeting will be held as a virtual General Meeting without the physical presence of shareholders or their proxies.
I. AGENDA
1. Presentation of the annual financial statements and consolidated group financial statements each approved by the Supervisory Board, the management reports for Fresenius Medical Care AG & Co. KGaA and the consolidated group, the explanatory report by the General Partner on the information pursuant to sections 289a, 315a of the German Commercial Code (Handelsgesetzbuch — HGB) and the report by the Supervisory Board of Fresenius Medical Care AG & Co. KGaA for fiscal year 2019; resolution on the approval of the annual financial statements of Fresenius Medical Care AG & Co. KGaA for fiscal year 2019
The Supervisory Board approved the annual financial statements and the consolidated group financial statements drawn up by the General Partner according to section 171 German Stock Corporation Act (Aktiengesetz — AktG). According to section 286 (1) AktG, the
annual financial statements are to be submitted for approval by the General Meeting; otherwise, the aforementioned documents are to be made available to the General Meeting without requiring a further resolution in this regard.
The General Partner and the Supervisory Board propose that the annual financial statements of Fresenius Medical Care AG & Co. KGaA for fiscal year 2019 as presented, showing a profit of EUR 3,396,526,947.19, be approved.
2. Resolution on the allocation of distributable profit
The General Partner and the Supervisory Board propose to allocate the distributable profit shown in the annual financial statements in the amount of EUR 3,396,526,947.19 for fiscal year 2019 as follows:
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Payment of a dividend of EUR 1.20 for each of the |
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292,641,774 shares entitled to a dividend |
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351,170,128.80 |
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Profit carried forward to new account |
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3,045,356,818.39 |
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Distributable profit |
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3,396,526,947.19 |
The proposal on the allocation of distributable profit reflects the 11,795,102 treasury shares that are held by the Company at the time of the convening of the General Meeting and that are not entitled to a dividend pursuant to section 71b AktG. If the number of shares entitled to a dividend for fiscal year 2019 changes until the General Meeting, the General Meeting will be presented with a proposal that will be adjusted accordingly, with an unchanged dividend of EUR 1.20 for each share entitled to a dividend as well as accordingly amended amounts for the dividend sum and the profit carried forward to new account.
The dividend is due on 1 September 2020.
3. Resolution on the approval of the actions of the General Partner for fiscal year 2019
The General Partner and the Supervisory Board propose the approval of the actions of the General Partner of the Company for fiscal year 2019.
4. Resolution on the approval of the actions of the Supervisory Board for fiscal year 2019
The General Partner and the Supervisory Board propose the approval of the actions of the members of the Supervisory Board of the Company for fiscal year 2019.
5. Election of the auditor and consolidated group auditor for fiscal year 2020 as well as the auditor for the potential review of interim financial information
The Supervisory Board — based on the recommendation of its Audit and Corporate Governance Committee (Prüfungs- und Corporate-Governance-Ausschuss) — proposes the election of PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Frankfurt am Main,
· as auditor and consolidated group auditor for fiscal year 2020,
· as auditor for the potential review of interim financial information for fiscal year 2020 prepared after the Annual General Meeting 2020, and
· as auditor for the potential review of interim financial information for fiscal year 2021 prepared prior to the Annual General Meeting 2021.
The Audit and Corporate Governance Committee of the Supervisory Board has carried out a selection procedure in accordance with Article 16 of the EU Statutory Audit Regulation (Regulation (EU) No. 537/2014). On the basis of this selection procedure, the Audit and Corporate Governance Committee recommended that the Supervisory Board propose to the General Meeting either PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Frankfurt am Main, or Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Eschborn, for election. The Audit and Corporate Governance Committee indicated that it prefers PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Frankfurt am Main.
The Audit and Corporate Governance Committee stated that its recommendation is free from undue influence by a third party and that no clause restricting the choice in the meaning of Article 16 (6) of the EU Statutory Audit Regulation (Regulation (EU) No. 537/2014) has been imposed upon it.
6. Resolution on the approval of the compensation system for the members of the Management Board of the General Partner
The German Act Implementing the Second Shareholder Rights Directive (ARUG II) has supplemented the German Stock Corporation Act by, inter alia, the provision of section 120a AktG. Section 120a (1) AktG provides that the General Meeting of listed companies must resolve on the approval of the compensation system for the members of the Management Board, as presented by the Supervisory Board, in each case of a material change, but at least every four years. In accordance with the statutory transitional provisions, the first resolution on the compensation system must be adopted in the Annual General Meeting 2021 at the latest.
The compensation system for the members of the Management Board of the General Partner is intended to be amended with effect as from 1 January 2020 (Compensation System 2020+). Against this background and for the purpose of early shareholder participation, a resolution on the approval of the compensation system, as presented by the Supervisory Board, shall already be passed at the Annual General Meeting 2020.
The Compensation System 2020+ is part of this notice on the convening of the Annual General Meeting and is published and described in detail subsequent to the agenda in Section II.
The Supervisory Board proposes to approve the compensation system for the members of the Management Board of the General Partner (Compensation System 2020+) as submitted to the General Meeting and published in Section II.
7. Resolution on the remuneration of the members of the Supervisory Board and on the amendment of Article 13 and Article 13e (3) of the Articles of Association
The German Act Implementing the Second Shareholder Rights Directive (ARUG II) also led to an amendment of section 113 (3) AktG. Pursuant to Section 113 (3) sentences 1 and 2 AktG as amended by the ARUG II, the General Meeting of listed companies must resolve on the remuneration of Supervisory Board members at least every four years, with a resolution confirming the remuneration being permissible. A corresponding resolution on the remuneration of the Supervisory Board members must be passed at the Annual General Meeting 2021 at the latest. In order to ensure that a corresponding resolution is adopted by the General Meeting as early as possible and in parallel with the compensation system for the members of the Management Board of the General Partner, the resolution of the General Meeting on the remuneration of the members of the Supervisory Board shall already be passed at the Annual General Meeting 2020.
The remuneration of the members of the Supervisory Board shall be amended with effect as from 1 January 2021. Until that date, the existing remuneration regulation shall remain unchanged.
Article 13 of the Company’s Articles of Association so far provides that in addition to fixed remuneration components the members of the Supervisory Board receive a variable remuneration which is determined on the basis of the respective average growth rate of the earnings per share of the Company over a three-year period. In accordance with the corresponding suggestion of the revised German Corporate Governance Code (DCGK) in the version of 16 December 2019, the predominant practice of large listed companies in Germany and the recommendations of voting rights advisors, this variable remuneration component shall be abolished as from 1 January 2021 by a corresponding amendment of Article 13 of the Company’s Articles of Association and, in return, an increase in the fixed remuneration as well as an appropriate adjustment of the remuneration for serving on a committee shall be introduced. Serving in the Nomination Committee shall also be remunerated. Otherwise, the remuneration for the members of the Supervisory Board shall remain unchanged, and Article 13 of the Company’s Articles of Association shall only be revised editorially. Article 13e (3) of the Company’s Articles of Association is to be editorially adjusted to the amendment of Article 13 of the Articles of Association.
The remuneration of the members of the Supervisory Board and the proposed changes are published and described in detail subsequent to the agenda in Section III.
The General Partner and the Supervisory Board propose to resolve as follows:
a) The current remuneration of the members of the Supervisory Board as provided for in Article 13 of the Company’s Articles of Association and as described under Section III. is confirmed.
b) The remuneration of the members of the Supervisory Board effective as from 1 January 2021 and as described in Section III. is approved, and Article 13 and Article 13e (3) of the Company’s Articles of Association are revised as follows:
aa) Article 13 of the Company’s Articles of Association is revised as follows:
“Art. 13 Remuneration of Supervisory Board Members
(1) The members of the supervisory board shall be reimbursed for the expenses incurred in the exercise of their office, including any statutory value-added tax owed by them.
(2) Each member of the supervisory board shall receive a fixed fee of USD 160,000.00 per annum for each full fiscal year, payable in four equal installments at the end of each calendar quarter.
(3) The chairman of the supervisory board shall receive additional remuneration in the amount of USD 160,000.00 and his deputy additional remuneration in the amount of USD 80,000.00.
(4) As a member of a committee, a supervisory board member shall receive an additional amount of USD 40,000.00 per year. As chairman of a committee, a member of the committee shall in addition receive USD 40,000.00 per year and as deputy chairman an additional USD 20,000.00 respectively, payable in each case in four equal installments at the end of each calendar quarter. For membership in the Joint Committee (Articles 13a et seqq.) as well as in the capacity of the chairman and deputy chairman of this committee, no separate remuneration shall be granted. Article 13e (3) shall remain unaffected.
(5) In the event that the general meeting, taking into consideration the respective relevant annual results, resolves a higher remuneration by a three fourths majority of the votes cast, such higher remuneration shall be payable.
(6) If a fiscal year is not a complete calendar year, the remuneration relating to a full fiscal year shall be paid on a pro rata temporis basis.
(7) To the extent that a member of the supervisory board is at the same time a member of the supervisory board of the General Partner Fresenius Medical Care Management AG and receives remuneration for his services as a member of the supervisory board of Fresenius Medical Care Management AG, the remuneration according to Article 13 (2) will be reduced to half. The same shall apply in relation to additional remuneration of the chairman and his deputy according to Article 13 (3) if such person is, at the same time, the chairman or deputy chairman, respectively, of the supervisory board of Fresenius Medical Care Management AG. If the deputy chairman of the supervisory board of the Company is at the same time chairman of the supervisory board of Fresenius Medical Care Management AG, he shall not receive additional remuneration according to Article 13 (3) for his services as deputy chairman of the supervisory board of the Company.
(8) To the extent that a member of a committee is at the same time a member of a supervisory board committee of Fresenius Medical Care Management AG and receives remuneration for his services as a member of such supervisory board committee, this remuneration will be set off against the respective amount of remuneration received pursuant to Article 13 (4) if the committees in both companies have the same type of functions and competences; apart from that, no further set-off or adjustment shall take place.
(9) The Company shall pay the remuneration of the supervisory board members subject to statutory deductions.
(10) The Company shall provide the members of the supervisory board with an insurance protection regarding the fulfillment of their duties as such members of the supervisory board which is subject to an appropriate deductible.”
bb) Article 13e (3) sentence 2 of the Company’s Articles of Association is revised as follows:
“Article 13 (1), (9), and (10) of the Articles of Association shall be applied accordingly.”
Otherwise, Article 13e of the Company’s Articles of Association shall remain unchanged.
cc) The General Partner is instructed to apply for the registration of the resolved amendments to the Articles of Association in the commercial register no earlier than 1 January 2021.
8. Resolution on the cancellation of the existing authorized capitals, on the creation of new authorized capitals including the possibility of the exclusion of subscription rights as well as on corresponding amendments to Article 4 (3) and (4) of the Articles of Association of the Company
The General Partner was authorized pursuant to Article 4 (3) of the Articles of Association to increase the share capital of the Company with the approval of the Supervisory Board by up to EUR 35,000,000.00 by issuing new bearer ordinary shares for cash on one or more occasions (Authorized Capital 2015/I). The General Partner was further authorized pursuant to Article 4 (4) of the Articles of Association to increase the share capital of the Company with the approval of the Supervisory Board by up to EUR 25,000,000.00 by issuing new bearer ordinary shares for cash and/or contributions in kind on one or more occasions (Authorized Capital 2015/II). These authorizations have each expired on 18 May 2020. The authorizations have not been used. The creation of new authorized capitals is proposed hereinafter in order to continue to enable the Company to increase the share capital in a flexible manner and without further resolution of the General Meeting. The amounts of these new authorized capitals shall be identical to the existing authorized capitals.
The General Partner and the Supervisory Board propose to resolve as follows:
a) The Authorized Capital 2015/I in Article 4 (3) of the Articles of Associations shall be canceled by annulling Article 4 (3) of the Articles of Associations in its current form.
b) The General Partner shall be authorized until 26 August 2025 to increase the share capital of the Company with the approval of the Supervisory Board by up to a total of EUR 35,000,000.00 (in words: thirty-five million Euros) for cash by issuing new bearer ordinary shares on one or more occasions (Authorized Capital 2020/I). The number of shares must be increased in the same proportion as the share capital. In principle, the shareholders have subscription rights. The new shares can also be obtained by a credit institution or a company operating in accordance with section 53 (1) sentence 1 or section 53b (1) sentence 1 or (7) of the German Banking Act (Kreditwesengesetz — KWG) (financial institution) or a consortium of such credit institutions and/or financial institutions retained by the General Partner with the obligation to offer the shares to the Company’s shareholders for subscription.
However, the General Partner shall be authorized with the approval of the Supervisory Board to exclude the shareholders’ subscription rights in order to eliminate fractional amounts from the subscription right.
The General Partner may only exercise the aforementioned authorization to exclude subscription rights to the extent that the proportional amount of the total shares issued subject to an exclusion of subscription rights exceeds 10 % of the share capital neither at the time of this authorization coming into effect nor at the time of the exercise of this authorization. If, during the period of validity of the Authorized Capital 2020/I until its utilization, other authorizations on the issuance or on the sale of shares of the Company or the issuance of rights which authorize or bind to the subscription of shares of the Company are exercised and the subscription rights are excluded, such subscription rights will be taken into account with regard to the aforementioned limit.
The General Partner shall also be authorized with the approval of the Supervisory Board to determine the further details for the implementation of capital increases from the Authorized Capital 2020/I. Following a total or partial implementation of the increase of the share capital from the Authorized Capital 2020/I, the Supervisory Board shall be authorized to amend the wording of the corresponding provisions of the Articles with respect to the volume of such capital increase.
Article 4 (3) of the Articles is revised as follows:
“The General Partner is authorized until 26 August 2025 to increase the share capital of the Company with the approval of the Supervisory Board by up to a total of
EUR 35,000,000.00 (in words: thirty-five million Euros) for cash by issuing new bearer ordinary shares on one or more occasions (Authorized Capital 2020/I). The number of shares must be increased in the same proportion as the share capital. In principle, the shareholders have subscription rights. The new shares can also be obtained by a credit institution or a company operating in accordance with section 53 (1) sentence 1 or section 53b (1) sentence 1 or (7) KWG (financial institution) or a consortium of such credit institutions and/or financial institutions retained by the General Partner with the obligation to offer the shares to the Company’s shareholders for subscription.
However, the General Partner is authorized with the approval of the Supervisory Board to exclude the shareholders’ subscription rights in order to eliminate fractional amounts from the subscription right.
The General Partner may only exercise the aforementioned authorization to exclude subscription rights to the extent that the proportional amount of the total shares issued subject to an exclusion of subscription rights exceeds 10 % of the share capital neither at the time of this authorization coming into effect nor at the time of the exercise of this authorization. If, during the period of validity of the Authorized Capital 2020/I until its utilization, other authorizations on the issuance or on the sale of shares of the Company or the issuance of rights which authorize or bind to the subscription of shares of the Company are exercised and the subscription rights are excluded, such subscription rights will be taken into account with regard to the aforementioned limit.
The General Partner is also authorized with the approval of the Supervisory Board to determine the further details for the implementation of capital increases from the Authorized Capital 2020/I. Following a total or partial implementation of the increase of the share capital from the Authorized Capital 2020/I, the Supervisory Board is authorized to amend the wording of the corresponding provisions of the Articles with respect to the volume of such capital increase.”
c) The Authorized Capital 2015/II in Article 4 (4) of the Articles of Associations shall be canceled by annulling Article 4 (4) of the Articles of Associations in its current form.
d) The General Partner shall be authorized until 26 August 2025 to increase the share capital of the Company with the approval of the Supervisory Board by up to a total
of EUR 25,000,000.00 (in words: twenty-five million Euros) for cash and/or contributions in kind by issuing new bearer ordinary shares on one or more occasions (Authorized Capital 2020/II). The number of shares must be increased in the same proportion as the share capital. In principle, the shareholders have subscription rights. The new shares can also be obtained by a credit institution or a company operating in accordance with section 53 (1) sentence 1 or section 53b (1) sentence 1 or (7) KWG (financial institution) or a consortium of such credit institutions and/or financial institutions retained by the General Partner with the obligation to offer the shares to the Company’s shareholders for subscription.
However, the General Partner shall be authorized with the approval of the Supervisory Board to exclude the shareholders’ subscription rights in the following cases:
· in the case of one or more capital increases for contributions in kind for the purpose of acquiring companies, parts of companies, interests in companies or other assets, or
· in the case of one or more capital increases for cash if the issue price for the shares does not significantly fall below the stock exchange price of the shares already listed and the proportionate amount of the share capital of the Company attributable to the shares issued with exclusion of subscription rights exceeds 10 % of the share capital neither at the time of this authorization coming into effect nor at the time of the use of this authorization. To be set off against this limitation is the proportionate amount of share capital attributable to new shares or treasury shares previously acquired by the Company which are issued or sold during the period of validity of this authorization with exclusion of subscription rights in direct, analogous or corresponding application of section 186 (3) sentence 4 AktG and the proportionate amount of the share capital attributable to shares issued or to be issued to satisfy option or conversion rights or discharge option or conversion obligations from bonds, if the bonds are issued during the period of validity of this authorization with exclusion of subscription rights in analogous application of section 186 (3) sentence 4 AktG.
The General Partner may only exercise the aforementioned authorizations to exclude subscription rights to the extent that the proportional amount of the total shares issued subject to an exclusion of subscription rights exceeds 10 % of the share capital neither at the time of these authorizations coming into effect nor at the time of the exercise of these authorizations. If, during the period of validity of
the Authorized Capital 2020/II until its utilization, other authorizations on the issuance or on the sale of shares of the Company or the issuance of rights which authorize or bind to the subscription of shares of the Company are exercised and the subscription rights are excluded, such subscription rights will be taken into account with regard to the aforementioned limit.
The General Partner shall also be authorized with the approval of the Supervisory Board to determine the further details for the implementation of capital increases from the Authorized Capital 2020/II. Following a total or partial implementation of the increase of the share capital from the Authorized Capital 2020/II, the Supervisory Board shall be authorized to amend the wording of the corresponding provisions of the Articles with respect to the volume of such capital increase.
Article 4 (4) of the Articles is revised as follows:
“The General Partner is authorized until 26 August 2025 to increase the share capital of the Company with the approval of the Supervisory Board by up to a total of EUR 25,000,000.00 (in words: twenty-five million Euros) for cash and/or contributions in kind by issuing new bearer ordinary shares on one or more occasions (Authorized Capital 2020/II). The number of shares must be increased in the same proportion as the share capital. In principle, the shareholders have subscription rights. The new shares can also be obtained by a credit institution or a company operating in accordance with section 53 (1) sentence 1 or section 53b (1) sentence 1 or (7) KWG (financial institution) or a consortium of such credit institutions and/or financial institutions retained by the General Partner with the obligation to offer the shares to the Company’s shareholders for subscription.
However, the General Partner is authorized with the approval of the Supervisory Board to exclude the shareholders’ subscription rights in the following cases:
· in the case of one or more capital increases for contributions in kind for the purpose of acquiring companies, parts of companies, interests in companies or other assets, or
· in the case of one or more capital increases for cash if the issue price for the shares does not significantly fall below the stock exchange price of the shares already listed and the proportionate amount of the share capital of the Company attributable to the shares issued with exclusion of subscription rights exceeds
10 % of the share capital neither at the time of this authorization coming into effect nor at the time of the use of this authorization. To be set off against this limitation is the proportionate amount of share capital attributable to new shares or treasury shares previously acquired by the Company which are issued or sold during the period of validity of this authorization with exclusion of subscription rights in direct, analogous or corresponding application of section 186 (3) sentence 4 AktG and the proportionate amount of the share capital attributable to shares issued or to be issued to satisfy option or conversion rights or discharge option or conversion obligations from bonds, if the bonds are issued during the period of validity of this authorization with exclusion of subscription rights in analogous application of section 186 (3) sentence 4 AktG.
The General Partner may only exercise the aforementioned authorizations to exclude subscription rights to the extent that the proportional amount of the total shares issued subject to an exclusion of subscription rights exceeds 10 % of the share capital neither at the time of these authorizations coming into effect nor at the time of the exercise of these authorizations. If, during the period of validity of the Authorized Capital 2020/II until its utilization, other authorizations on the issuance or on the sale of shares of the Company or the issuance of rights which authorize or bind to the subscription of shares of the Company are exercised and the subscription rights are excluded, such subscription rights will be taken into account with regard to the aforementioned limit.
The General Partner is also authorized with the approval of the Supervisory Board to determine the further details for the implementation of capital increases from the Authorized Capital 2020/II. Following a total or partial implementation of the increase of the share capital from the Authorized Capital 2020/II, the Supervisory Board is authorized to amend the wording of the corresponding provisions of the Articles with respect to the volume of such capital increase.”
Pursuant to section 278 (3) AktG in connection with sections 203 (2) sentence 2, 186 (4) sentence 2 AktG, the General Partner has submitted a written report on the reasons for the exclusion of subscription rights in certain cases according to the paragraphs b) and d) above. The contents of this report are part of this notice on the convening of the Annual General Meeting and are published under Section IV. below. The report will also be available on the Company’s website under www.freseniusmedicalcare.com/en/agm/ from the time of the convening of the Annual General Meeting.
9. Resolution on the amendment of Article 15 (1) sentence 2 of the Company’s Articles of Association (Alignment with the German Stock Corporation Act as amended by the ARUG II)
Pursuant to Article 15 (1) sentence 1 of the Company’s Articles of Association, only those shareholders are entitled to attend the General Meeting and to exercise the voting right who have registered and provided evidence of their entitlement. Pursuant to Article 15 (1) sentence 2 of the Company’s Articles of Association, evidence of entitlement requires evidence of the shareholding by the depositary institution.
The provision of the German Stock Corporation Act on which Article 15 (1) sentence 2 of the Company’s Articles of Association is based was partially amended by the German Act Implementing the Second Shareholder Rights Directive (ARUG II) for General Meetings convened after 3 September 2020. In particular, section 123 (4) AktG refers to the newly introduced section 67c (3) AktG. As a consequence of this, pursuant to the new legal terminology, evidence of the shareholding must be provided by the so-called “ultimate intermediary” and no longer by the “depositary institution”.
Article 15 (1) sentence 2 of the Company’s Articles of Association shall be amended in order to continue to comply with the corresponding provision of the German Stock Corporation Act.
The General Partner and the Supervisory Board propose to resolve as follows:
a) Article 15 (1) sentence 2 of the Company’s Articles of Association shall be revised as follows:
“As evidence of entitlement, evidence of the shareholding by the ultimate intermediary is required.”
Otherwise, Article 15 (1) of the Company’s Articles of Association shall remain unchanged.
b) The General Partner is instructed to apply for the registration of the resolved amendment to the Articles of Association in the commercial register no earlier than 3 September 2020.
II. COMPENSATION SYSTEM FOR THE MEMBERS OF THE MANAGEMENT BOARD OF THE GENERAL PARTNER
1. Introduction
Creating a future worth living. For patients. Worldwide. Every day. This vision guides us in our efforts to give our patients around the world a better life by offering them high-quality products and outstanding health care services. Fresenius Medical Care aims to further leverage its expertise as the world’s leading provider of dialysis products and services and to apply this integrated approach as a basis for sustainable, profitable growth. Moreover, Fresenius Medical Care intends to expand its range of medical services in the area of Care Coordination, e.g. in providing pharmacy or vascular services. In an environment of growing patient numbers and changing health care systems, Fresenius Medical Care sees significant potential in providing value-based care — especially in the U.S. This approach focuses on providing holistic medical care and on receiving outcome-based reimbursements. All business activities are designed to enable Fresenius Medical Care to create long-term and sustainable value. As Fresenius Medical Care’s commitment to sustainability, Fresenius Medical Care AG & Co. KGaA (“Company”) launched a global sustainability program.
The compensation system presented herein (“Compensation System 2020+”) makes a significant contribution of promoting the business strategy and the long-term, sustainable development of Fresenius Medical Care. It provides effective incentives for the achievement of the aforementioned strategic goals as well as for the long-term value-creation of the Company, taking into account the interests of patients, shareholders, employees and other stakeholders.
The Company is a partnership limited by shares that itself does not have a management board but rather a general partner, i.e. Fresenius Medical Care Management AG (“General Partner”), which conducts the business of the Company. While the supervisory board of the Company is competent and responsible for the submission of the compensation system to the general meeting of the Company for approval, it is the supervisory board of the General Partner that determines the compensation and the compensation system of the management board of the General Partner (“Management Board”). Therefore, any reference to the “Supervisory Board” in the Compensation System 2020+ relates to the supervisory board of the General Partner.
In order to further incentivize the members of the Management Board to implement Fresenius Medical Care’s long-term strategy in the best possible way, the Supervisory Board
developed the Compensation System 2020+ that is based on the following guiding principles:
Guiding principles of the Compensation System 2020+
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Link to strategy |
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The Compensation System 2020+ for the Management Board members promotes the execution of Fresenius Medical Care‘s global strategy. |
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Alignment with shareholders’ interests |
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With the aim of achieving sustainable and profitable growth, the Com-pensation System 2020+ is aligned with shareholders’ interests. Feed-back from many investors has been considered in the design of the system. |
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Simplified structure |
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The Compensation System 2020+ is more comprehensible and less complex. |
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Long-term focus |
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The applied compensation components and the long-term oriented compensation structure promote long-term and sustainable value crea-tion. |
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Reward financial performance & sustainability |
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The applied performance targets reflect the Company’s strategy and ensure the Company’s strong commitment towards environmental, so-cial and governance aspects. |
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Collaboration across operating segments |
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Both regional and global performance targets are applied for the mem-bers of the Management Board. By measuring predominantly on a global basis, a close collaboration across the Company’s operating segments is promoted. |
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Good corporate governance |
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The Compensation System 2020+ is designed to comply with the rec-ommendations set forth in the German Corporate Governance Code in the version dated 16 December 2019. |
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Best market practice |
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The design of the Compensation System 2020+ is based on current best market practice. |
The Compensation System 2020+ sets out the framework under which the Management Board members can be granted compensation components by the Supervisory Board. It is designed to comply with the requirements set out in the German Stock Corporation Act, as amended by the German Act Implementing the Second Shareholder Rights Directive (ARUG II), as well as the recommendations regarding the compensation system of Management Board members set out in Chapter G of the German Corporate Governance Code in the version dated 16 December 2019.
The Compensation System 2020+ is envisaged to be reflected in the service agreements of the currently appointed Management Board members within a period of two (2) months
after the General Meeting of the Company (“General Meeting”) in 2020 and shall become retroactively effective as per 1 January 2020. It shall also be applied to new service agreements for Management Board members.
2. Overview of the Compensation System 2020+
The following illustration shows the compensation components and further design elements of the Compensation System 2020+, which are described in more detail below.
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Compensation System 2020+ |
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Fixed components |
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Variable components | ||
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Base salary |
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Short-Term Incentive |
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Long-Term Incentive |
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(Multiplier: 1.05 times base salary) |
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(Multiplier: 1.35 times base salary) |
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Financial performance targets |
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Financial performance targets | |
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Fringe benefits
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· 20% Revenue · 20% Operating Income · 40% Net Income |
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· 1/3 Revenue Growth · 1/3 Net Income Growth · 1/3 ROIC |
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Pension commitment |
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Non-financial performance target |
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· 20% sustainability |
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Target achievement cap for financial performance targets: 200% Overall proceeds cap incl. share price development: 400% | |
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Target achievement cap: 120% |
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Maximum compensation amount
Maximum compensation for each Management Board member depending on the function
Further design elements
Share ownership
Malus and clawback
Severance payment cap
2.1 Fixed Components
The fixed compensation components comprise a base salary, fringe benefits and a pension commitment.
2.2 Variable Components
The variable compensation components comprise a short-term performance-based compensation component (“Short-Term Incentive” or “STI”) and a long-term performance-based compensation component (“Long-Term Incentive” or “LTI”) that includes a mandatory share ownership element. The target Short-Term Incentive amount equals 105 %
(multiplier of 1.05) of the respective Management Board member’s relevant base salary. The grant amount under the Long-Term Incentive equals 135 % (multiplier of 1.35) of the respective Management Board member’s relevant base salary.
2.3 Financial Performance Targets and Sustainability Targets
Fresenius Medical Care aligns all processes in a global organization in a patient-oriented manner, develops innovative products and provides life sustaining treatments. Treating more patients allows to further improve the quality of treatments due to the global exchange of best in class standards. In focusing on our core competencies — operating outpatient facilities, standardizing medical procedures, developing innovative products and coordinating patients efficiently — Fresenius Medical Care can further capture opportunities that go along with a growing patient base. To ensure an appropriate balance between growth and profitability, the Compensation System 2020+ focuses on both dimensions and additionally takes into account environmental, social and governance aspects.
The performance targets, as determined by the Supervisory Board, include financial as well as non-financial performance targets and set targeted incentives for the Management Board members to act in accordance with the aforementioned corporate strategy and support the long-term development of Fresenius Medical Care in the best possible way.
The financial performance targets are derived from key performance indicators that are relevant to the Company and relate to revenue (“Revenue”), operating income (“Operating Income”), net income attributable to the shareholders of the Company (“Net Income”) and return on invested capital (“ROIC”). The non-financial performance target relates to the identified material sustainability areas as defined in the Company’s global sustainability program: patients, anti-bribery and anti-corruption, employees, data privacy and security, human rights, supply chain, environment as well as occupational health and safety.
These performance targets promote both the operating targets and strategic goals of Fresenius Medical Care and reward the success in implementing its global sustainability program by ensuring high quality care for patients, sustainable profitable growth and sustainability. The introduction of a non-financial sustainability target is driven by the Company’s commitment to a responsible and sustainable corporate culture and is designed to meet the increasing requirements of the Company’s shareholders and various other stakeholders.
2.4 Caps and Maximum Compensation
For the Short-Term Incentive, the target achievement and payout are capped at 120 % of the respective target Short-Term Incentive amount. For the Long-Term Incentive, the target achievement is capped at 200 % for each grant. In addition, the proceeds from each grant of the Long-Term Incentive are capped at 400 % of the grant amount for each grant, thus also capping the opportunity related to the share price development in the respective performance period.
The Compensation System 2020+ further provides for an overall maximum compensation amount for each Management Board member. These maximum compensation amounts limit the payouts and allocations of the total compensation granted to a Management Board member for a fiscal year, irrespective of the dates of the payouts and allocations. The maximum compensation amount for each Management Board member can be below the sum of the potentially achievable payouts and allocations from the individual compensation components granted for a fiscal year.
The maximum compensation amounts are defined based on the currency of the base salary as stated in the respective Management Board member’s service agreement and amount to EUR 12,000,000 or USD 13,433,640 for the Chairman of the Management Board (CEO),
EUR 9,500,000 or USD 10,634,965 for the CEO North America and EUR 7,000,000 or USD 7,836,290 for all other current Management Board functions.
In case new Management Board functions are established, the maximum compensation amounts for the Management Board members having such functions can range between EUR 5,000,000 and EUR 7,000,000 or between USD 5,597,350 and USD 7,836,290.
2.5 Share Ownership
Share ownership is part of the Compensation System 2020+ in order to further strengthen the alignment of the Management Board members with the interests of the Company’s shareholders. Such share ownership is provided via a mandatory investment in Company shares by the Management Board members as part of the Long-Term Incentive. The Supervisory Board can introduce additional share ownership requirements under the Compensation System 2020+ in the future.
2.6 No Discretionary Special Payments
Under the Compensation System 2020+, the Supervisory Board is not entitled to grant special payments for outstanding performance to the Management Board members on a discretionary basis (also known as “Ermessenstantieme”).
2.7 Malus and Clawback
Under the Compensation System 2020+, the Supervisory Board is entitled to withhold or reclaim variable compensation components in cases of conduct or behavior of a member of the Management Board not complying with its duties or internal Company guidelines, considering the characteristics of the individual case. Within this framework the Supervisory Board ensures that contractual provisions are in place determining detailed requirements applying to withholding or reclaiming variable compensation components and setting forth the consequences thereof, including the forfeiture, in full or in part, of all or some variable compensation components.
2.8 Compensation Offset
Any compensation granted to Management Board members for supervisory board mandates in entities of the Company’s group is offset against the Management Board member’s relevant base salary. Further, the Supervisory Board can resolve to deduct any compensation, in full or in part, granted to Management Board members for any activity in supervisory boards outside of the Company’s group from the respective Management Board member’s base salary.
2.9 Compensation Structure
The Compensation System 2020+ is focused on the long-term and sustainable corporate development of Fresenius Medical Care. Therefore, variable compensation components are mainly granted on a long-term basis. For this purpose, it is ensured in the Compensation System 2020+ that the grant amount under the Long-Term Incentive exceeds the target Short-Term Incentive amount for each fiscal year.
Under the Long-Term Incentive, performance is measured over a period of at least three years. The compensation under the Long-Term Incentive is accessible to Management Board members only after a period of at least four years; deviations may apply in case of death, full or partial reduction in earnings capacity and other pre-defined leaver events.
The compensation structure of the target total direct compensation for a full fiscal year (base salary as well as the target Short-Term Incentive amount and the grant amount under the Long-Term Incentive, “Target Total Direct Compensation”) are shown in the following illustration:
As shown in the illustration above, the Target Total Direct Compensation for each Management Board member consists of 29 % base salary, 31 % Short-Term Incentive and 40 % Long-Term Incentive. Thus, 71 % of the Target Total Direct Compensation comprises of performance-based variable compensation components. The 40 % share of the Long-Term Incentive (56 % of the variable components) reflects the long-term orientation of the compensation structure.
For the determination of the compensation structure of the total target compensation, fringe benefits and pension commitments are also considered.
Fringe benefits are granted based on the service agreements with the Management Board members and vary for each Management Board member. The amount of fringe benefits for each Management Board member can range between 1 % and 13 % of the respective Target Total Direct Compensation for each fiscal year. This range is derived from the individual fringe benefits granted to each Management Board member in its respective current service agreement as well as from historical data.
Pension commitments can be granted under a defined benefit or a defined contribution scheme to the Management Board members. The amount of the pension service cost can range between 0 % and 25 % of a Management Board member’s respective Target Total Direct Compensation for each fiscal year. The individual pension service cost amount strongly depends, inter alia, on the Management Board member’s relevant base salary and date of birth as well as on actuarial assumptions and is therefore more volatile than the range for fringe benefits. This range for the pension service cost is based on historical actuarial valuations as well as actuarial forecasts.
2.10 Compensation Levels
When applying the Compensation System 2020+, the Supervisory Board is responsible for determining the total compensation of each Management Board member. In doing so, the Supervisory Board takes the different functions and responsibilities within the Management Board as well as the economic situation of the Company into account. The Supervisory Board further takes into consideration that the total compensation should be appropriate also with respect to relevant market practice and benchmarks, using results of vertical and horizontal compensation reviews and external benchmark data. As a result, the total compensation may differ among the Management Board under adequate consideration of a Management Board member’s function and responsibility as well as of differences in international pay practices. The total compensation granted to a Management Board member also takes into account the best interest of the Company to retain Management Board members and to attract possible new talents for the Management Board. The Supervisory Board will in each case review the resulting compensation levels and structures prior to the beginning of each fiscal year.
3. Process of Determining, Reviewing and Implementing the Compensation System
The Supervisory Board is responsible for determining the compensation of each Management Board member as well as for determining, reviewing and implementing the compensation system for the entire Management Board. The Supervisory Board is supported in this regard by its Human Resources Committee, a committee which is composed of members of the Supervisory Board. The Human Resources Committee is also responsible for the tasks of a compensation committee and makes recommendations to the Supervisory Board. The recommendations of the Human Resources Committee as well as any other matter relating to the individual compensation of the Management Board members and the compensation system are discussed by the Supervisory Board and, as required, resolved upon. Under the Rules of Procedure for the Supervisory Board, the members of the Supervisory Board are under an obligation to disclose any conflicts of interest without undue delay. This duty also applies to the members of the Human Resources Committee. These regulations for the avoidance of conflicts of interests also apply to the process of determining, reviewing and implementing the compensation system for the Management Board members.
The Compensation System 2020+ was developed with the support of external compensation experts. The Supervisory Board may also in the future consult external compensation experts to support it in its determination of the compensation of Management Board members as well as with respect to the determination and review of the compensation system as a whole. Any such compensation expert is independent from the Company, the Management Board as well as the Company’s affiliates. From time to time, any such compensation expert will be replaced in order to ensure an independent compensation review.
In order to assess the appropriateness of the compensation system and the individual compensation of the Management Board members, the Supervisory Board conducts a horizontal review of compensation amounts and structures. The amounts of the Target Total Direct Compensation and the respective components, granted to each member of the Management Board are compared to compensation market data of companies of a comparable sector, country-coverage and size. Additionally, the base salary as well as the target amounts of the variable compensation components of the Management Board members are benchmarked against those of companies of relevant peer groups. These include DAX30 companies as well as U.S. companies with comparable sector and size.
The Supervisory Board also conducts a vertical review with respect to the compensation levels of the Company’s employees when determining the compensation system and the
compensation of the Management Board members. For this purpose, the ratios between the average compensation of the Management Board and that of the upper management of the Company’s group in Germany are determined. For the purpose of the determination of the Compensation System 2020+, the upper management of the Company’s group in Germany has been defined as all employees reporting to a Management Board member with a position of Vice President and above. In addition, the ratios between the average compensation of each member of the Management Board, the workforce of the Company’s group in Germany and the entire workforce of the Company’s group are determined and, to the extent practicable, compared to corresponding ratios of companies included in the DAX30. When conducting the vertical review, the Supervisory Board will also take into account the development of compensation levels over time.
Any new compensation system for the Management Board members as resolved and intended to be applied by the Supervisory Board is presented to the General Meeting for approval. The Supervisory Board will regularly review the applied compensation system and, if required and typically upon recommendation by the Human Resources Committee, resolve changes thereto. In case of significant changes and at least every four years, the compensation system is presented to the General Meeting for approval. Should the General Meeting not approve the presented compensation system, such compensation system will be reviewed and presented, at the latest, to the following Annual General Meeting.
4. Compensation Components in Detail
4.1 Fixed Compensation
The fixed compensation granted to the Management Board members under the Compensation System 2020+ comprises a base salary, fringe benefits and a pension commitment.
4.1.1 Base Salary
The base salary, which usually is agreed for a full year, is paid in accordance with local customs applicable to the respective member of the Management Board. For Management Board members located in the U.S., the base salary is typically paid in twenty-four (24) bi-weekly installments. For Management Board members located in Germany or Hong Kong, the base salary is typically paid in twelve (12) monthly installments.
4.1.2 Fringe Benefits
Fringe benefits are granted based on the service agreements with the Management Board members and can include e.g. the private use of company cars, special payments such as school fees, housing, rent and relocation payments, reimbursement of fees for the preparation of tax returns, reimbursement of charges, contributions to pension schemes (other
than the pension commitments set out herein), accident, life and health insurance or other insurances as well as tax equalization compensation due to varying tax rates applicable in Germany and, as the case may be, the country in which the Management Board member is personally taxable. Fringe benefits can be of one-time or recurring nature. A maximum amount for fringe benefits for each fiscal year and for each Management Board member is determined via the maximum compensation.
In order to attract qualified candidates for the Management Board, the Supervisory Board may complement the compensation of first-time Management Board members in an appropriate and market-compliant manner in the form of a sign-on bonus e.g. to compensate for forfeited compensation benefits from previous employment relationships. The Supervisory Board may also grant reimbursement of fees, charges and any other costs in connection with or related to any change in the regular place of work of Management Board members.
4.1.3 Pension Commitments
Management Board members who have been appointed to the Management Board prior to 1 January 2019 may be granted a contractual pension commitment in the form of a defined benefit scheme. Under this defined benefit scheme, pension commitments provide for pension and survivor benefits (Hinterbliebenenversorgung) as of the time of conclusively ending active work or in case of full or partial reduction in earning capacity (Erwerbsminderung). The amount of such benefits is calculated by reference to the amount of the Management Board member’s most recent base salary or, as the case may be, the five (5)-year average of the Management Board member’s most recent base salaries and will increase for each complete year of service by 1.5 percentage points up to a maximum of 45 %.
Management Board members that have been or will be appointed to the Management Board on or after 1 January 2019 may be granted a defined contribution pension commitment. Under such defined contribution pension commitment, the respective member of the Management Board receives a defined contribution by the General Partner which determines the future amount of the benefit. After reaching the retirement age under a defined contribution pension commitment, payments can be made as one-time payment, in equal installments or as annuity payments. Under a defined contribution pension commitment, survivor benefits (Hinterbliebenenversorgung) as well as benefits in case of full or partial reduction in earning capacity (Erwerbsminderung) may be provided for.
4.2 Short-Term Incentive
Under the Compensation System 2020+, 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 Company’s performance in the relevant fiscal year. The Short-Term Incentive is linked to the achievement of three financial and one non-financial performance target, balancing growth, profitability and sustainability aspects.
4.2.1 Target Amounts
The target Short-Term Incentive amount to be granted to each Management Board member, which is paid out at a target achievement level of 100 %, equals 105 % (multiplier of 1.05) of the Management Board member’s relevant base salary. 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 four performance targets: 20 % relate to Revenue, 20 % to Operating Income, 40 % to Net Income and 20 % to the achievement of specific and measurable sustainability criteria.
The financial performance targets reflect key operating figures of the Company and support the Company’s strategy of achieving sustainable and profitable growth. The non-financial performance target underlines the Company’s commitment to implement its global sustainability program.
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Performance |
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Rationale and link to strategy |
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Revenue |
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20% |
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The management of our regions is based on Revenue as a key performance indicator. The key to continue growing our Reve-nue is to attract new product customers, new patients and in-crease the number of treatments performed each year as well as delivering in our other healthcare businesses. |
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Operating Income |
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20% |
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Operating Income is the most appropriate measure for evaluating the profitability of the regions and therefore is also a key per-formance indicator. Operating Income reflects the profit contri-bution of the regions as well as the overall profitability of Frese-nius Medical Care. |
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Net Income |
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40% |
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On a group level, Net Income is a key performance indicator used for internal management. Net Income reflects the profita-bility of Fresenius Medical Care. |
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Sustainability |
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20% |
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The sustainability target (relating to different sustainability areas) reflects the Company’s commitment and strategy with respect to environmental, social and governance aspects. |
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The underlying financial figures of the financial performance targets are at constant currency and may be adjusted for certain effects to ensure comparability of the financial figures with respect to the operational performance, e.g. effects from certain acquisitions and divestments and changes in IFRS accounting standards.
In order to further enhance collaboration across the operating segments and at the same time incentivize the Management Board members with respect to their individual responsibilities, some performance targets are measured at the group level whereas others are measured at the regional level. For Management Board members who are responsible for a particular region, the Revenue and the Operating Income relate to that of the relevant region. For Management Board members with corporate group functions, the Revenue and the Operating Income relate to that of the group. The Net Income target always relates to that of the group. By measuring the performance targets on a regional as well as on a group level, both the financial performance of the individual regions and that of the group is reflected.
The achievement of the sustainability target is measured at the group level to ensure close collaboration across the Company’s operating segments in the field of sustainability. For this purpose, eight (8) material sustainability areas were defined: patients, anti-bribery and anti-corruption, employees, data privacy and security, human rights, supply chain, environment as well as occupational health and safety. The progress in each sustainability area is measured by the degree of implementation of pre-defined management concepts that include purpose, goals and objectives, responsibility and ownership, coverage, reporting and communication, results and progress as well as policy, guideline and training. At least for the years 2020 to 2022, the progress in the respective sustainability areas will be determined by an external auditor.
4.2.3 Performance Target Setting and Determination of Target Achievement
Prior to the beginning of the relevant fiscal year, the Supervisory Board defines the target values of the underlying financial figures for each financial performance target that lead to a target achievement of 0 % (lower threshold), 50 %, 100 % and 120 % (cap). In setting the target values the Supervisory Board considers the market and competitive environment, the budget and the strategic growth targets. To the extent this requires the consideration of financial figures that are unknown at that point in time, the Supervisory Board prior to the beginning of such fiscal year determines the methodology to be applied once such figures are available.
For the sustainability target the Supervisory Board has already in 2019, as part of the Company’s global sustainability program, defined the target values and the methodology on how to measure the respective target achievement for the fiscal years 2020, 2021 and 2022. The target achievement for each fiscal year is assessed by measuring the progress and success in all defined sustainability areas based on a tracking and calculation model that is audited by an external auditor.
For the target setting of the sustainability target for the fiscal years beyond 2022, the Supervisory Board will define the sustainability target, including the metrics as well as the methodology as to how the target values and target achievement will be determined, prior to the beginning of the fiscal year 2023.
After the one (1)-year performance period of the Short-Term Incentive has lapsed, the Supervisory Board determines whether and to what extent the performance targets have been achieved. The following applies for each performance target: If the lower target value is not exceeded, a target achievement of 0 % applies. If the upper target value is exceeded, a target achievement of 120 % (cap) applies. If the actual financial figures are
between the respective target values for a target achievement of 0 % and 50 %, 50 % and 100 % or 100 % and 120 %, the target achievement is determined by linear interpolation.
The degree of the overall target achievement is determined by the weighted arithmetic mean of the target achievement of each performance target. Multiplying the degree of the respective overall target achievement with the target Short-Term Incentive amounts results in the final Short-Term Incentive amount. Subject to the approval by the Supervisory Board, the final Short-Term Incentive amount is paid to the respective Management Board member in cash. Since the overall target achievement is capped at 120 %, the final Short-Term Incentive amount is also capped at 120 % of the respective target Short-Term Incentive amount. When determining the degree of the 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 commercial, tax or similar impacts are not related to the performance of the Management Board member. In the extraordinary case the Supervisory Board resolves to make use hereof, the rationale will be adequately explained and disclosed.
Detailed information on the applied target values and the performance target achievements will be disclosed ex-post in the compensation report for each fiscal year.
4.3 Long-Term Incentive
Under the Compensation System 2020+, the Management Board members are entitled to receive a Long-Term Incentive in the form of so-called “Performance Shares” with a performance period of at least three (3) years. Performance Shares are non-equity, cash-settled virtual compensation instruments. Any proceeds from Performance Shares are subject to the achievement of three equally weighted performance targets and further depend on the development of the stock exchange price of the shares of the Company. The proceeds from the Performance Shares are subject to a mandatory investment in shares of the Company with a holding period of at least one (1) year. For this purpose, shares of the Company are purchased for the account of the respective Management Board member. The proceeds from the Long-Term Incentive is therefore not accessible to the Management Board members prior to the lapse of a period of at least four (4) years.
4.3.1 Target Amounts
The grant amount under the Long-Term Incentive for each member of the Management Board is defined by the Supervisory Board by applying a multiplier to the relevant base salary, such grant amount equaling 135 % (multiplier of 1.35) of the relevant base salary. In case of appointments to the Management Board during a fiscal year, the amount to be granted to such member 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 amount is divided by the value per Performance Share determined in accordance with IFRS 2 and considering the average share price of the shares of the Company over a period of 30 (thirty) calendar days prior to each respective grant date. The number of Performance Shares to vest for each member of the Management Board depends on the achievement of pre-defined performance targets that are determined by the Supervisory Board prior to the beginning of the respective performance period.
4.3.2 Performance Targets
The Long-Term Incentive is measured based on the achievement of three equally weighted financial performance targets: Revenue growth (“Revenue Growth”), Net Income growth (“Net Income Growth”) and ROIC. In order to achieve long-term profitable growth, these performance targets have been chosen as they reflect the Company’s strategic priorities of increasing the business activities and at the same time ensuring a certain level of return of the Company’s investments.
The performance targets under the Long-Term Incentive form part of the Company’s key operating figures and support the execution of the Company’s long-term strategy.
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Rationale and link to strategy |
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Revenue Growth |
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1/3 |
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The key to continue growing our Revenue is to attract new product customers, new patients and increase the number of treatments performed each year as well as delivering in our other healthcare businesses. Revenue Growth also reflects the continuous importance of growth for the long-term success of the group. |
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Net Income Growth |
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1/3 |
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On a group level, percentage growth in Net Income is a key performance indicator used for internal management. Net Income Growth reflects the long-term profitability of the group. |
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ROIC |
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1/3 |
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ROIC is a profitability measure and expresses how efficiently capital under our control is allocated in the long-term or how well our capital with regard to a specific investment project is employed. |
Revenue Growth and Net Income Growth are at constant currency. The underlying financial figures of the financial performance targets may be adjusted for certain effects to ensure comparability of the financial figures with respect to the operational performance, e.g. effects from certain acquisitions and divestments and changes in IFRS accounting standards.
4.3.3 Performance Target Setting and Determination of Target Achievement
Prior to the beginning of the respective performance period of each grant, the Supervisory Board defines target values for each performance target that lead to a target achievement of 0 % (lower threshold), 100 % and 200 % (cap). In setting the target values the Supervisory Board considers the strategic growth targets and the market and competitive environment. To the extent this requires the consideration of financial figures that are unknown at that point in time, the Supervisory Board determines prior to the beginning of the fiscal year the methodology to be applied once such figures are available.
The following applies for each performance target: If the lower target value is not exceeded, a target achievement of 0 % applies. If the upper target value is exceeded, a target achievement of 200 % (cap) applies. If the actual financial figures are between the respective target values for a target achievement of 0 % and 100 % or 100 % and 200 %, the target achievement is determined by linear interpolation.
The achievement of each performance target is determined annually. Thereby, the three performance targets are weighted equally to determine the yearly target achievement. At the end of the performance period, the Supervisory Board determines the overall target achievement for each grant of the Long-Term Incentive by taking the average of the yearly target achievements of the respective performance period.
Based on the overall target achievement, the number of Performance Shares to vest is determined for each member of the Management Board. Such number of Performance Shares to vest may increase or decrease over the performance period. A total loss as well as (at most) doubling of the granted Performance Shares (200 % target achievement cap) is possible. After the final determination of the overall target achievement, the number of vested Performance Shares is multiplied with the last 30 (thirty) calendar days’ average price of the shares of the Company prior to each respective vesting date to calculate a corresponding cash amount as proceeds from the vested Performance Shares. The overall proceeds from a Performance Share are capped at 400 % of the respective grant amount.
When determining the degree of the overall 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 commercial, tax or similar impacts are not related to the performance of the Management Board member. In the extraordinary case the Supervisory Board resolves to make use hereof, the rationale will be adequately explained and disclosed.
Detailed information on the applied target values and the performance target achievements will be disclosed ex-post in the compensation report for each fiscal year.
4.4 Investment in Shares of the Company
The proceeds from the vested Performance Shares (after applicable payroll withholding taxes, contributions and other expenses) are not paid out to the respective Management Board member but transferred to a credit institution which is instructed by the General Partner to use such amount to purchase shares of the Company for the account of the respective Management Board member. The shares of the Company that are acquired as part of this process are subject to a mandatory holding period of at least one (1) year following the respective purchase date, and the member of the Management Board only has access to such shares upon lapse of the mandatory holding period.
The Supervisory Board can introduce additional share ownership requirements under the Compensation System 2020+ in the future.
5. Maximum Compensation
The maximum compensation amounts are defined based on the currency of the base salary as stated in the respective Management Board member’s service agreement and, as the case may be, amount to EUR 12,000,000 or USD 13,433,640 for the Chairman of the Management Board (CEO), EUR 9,500,000 or USD 10,634,965 for the CEO North America and EUR 7,000,000 or USD 7,836,290 for all other current Management Board functions.
In case new Management Board functions are established, the maximum compensation amounts for the Management Board members having such functions can range between EUR 5,000,000 and EUR 7,000,000 or between USD 5,597,350 and USD 7,836,290.
The maximum compensation amounts consider all compensation components granted to a Management Board member during a respective fiscal year, irrespective of the date the Management Board member is entitled to receive payouts and allocations from such compensation components.
The maximum compensation amount for each Management Board member can be below the sum of the potentially achievable payouts and allocations from the individual compensation components granted for a fiscal year.
In case the payouts and allocations to be received exceed the maximum compensation amount of a Management Board member, the proceeds of the Long-Term Incentive are reduced accordingly until the maximum compensation amount is not exceeded.
6. Commitments to Management Board members in the Event of Termination
The Supervisory Board may determine leaver rules for any compensation component with respect to the end of a Management Board member’s employment relationship with the General Partner or the end of the appointment of a Management Board member to the Management Board for any termination reason. This includes cases like retirement or full or partial reduction in earning capacity, death, ordinary termination of the service agreement or termination of the service agreement for good cause, revocation of the appointment for good cause, transfer of a service agreement to the major shareholder of the Company or to an affiliated company of the Company’s major shareholder, or the end of the General Partner exercising the function of the Company’s general partner. For any such instance the Supervisory Board may in advance determine the requirements applying to the payment or forfeiture of all or some compensation components, in full or in part, prematurely or deferred, to the member of the Management Board or, in case of death, to the
heirs of the respective member of the Management Board. In any event, payment of variable compensation components can only be made in accordance with the targets and comparison parameters as well as the due dates or holding periods stipulated in the respective plan terms as referenced in the service agreements or agreed to in the service agreements with the respective Management Board members.
The Supervisory Board concludes service agreements with Management Board members providing for a severance payment cap. Under such severance payment cap, payments in connection with an early termination of a Management Board appointment may not exceed the value of two (2) years’ compensation and may not compensate more than the remaining term of the relevant service agreement. For the calculation of the relevant annual compensation, only non-performance-based compensation components may be applied. If there is good cause for the termination of the service agreement, no severance payments are made.
The Supervisory Board may agree to a post-employment non-competition covenant (nachvertragliches Wettbewerbsverbot) for a period of up to two (2) years with Management Board members. If such post-employment non-competition covenant becomes applicable, the Management Board members may receive compensation amounting to up to half of their relevant base salary for each year of the respective application of the post-employment non-competition. Any payments under a post-employment non-competition covenant are to be offset against any severance payments.
The service agreements of the Management Board members shall not contain provisions that are triggered by a change of control.
7. Compensation System in Case of Special and Extraordinary circumstances
In special and extraordinary circumstances (such as a severe financial or economic crisis), the Supervisory Board has the right to temporarily deviate in accordance with section 87a (2) sentence 2 of the German Stock Corporation Act from the Compensation System 2020+ and amend the regulations concerning the compensation structure and the individual compensation components as well as the regulations governing the respective procedures if this is necessary in the interest of the Company’s long-term well-being. Unfavorable market developments are not considered special and extraordinary circumstances allowing for a deviation from the Compensation System 2020+.
III. REMUNERATION FOR THE MEMBERS OF THE SUPERVISORY BOARD
The Supervisory Board of Fresenius Medical Care AG & Co. KGaA (the “Supervisory Board”) advises and monitors the management by the General Partner and performs the tasks assigned to it by law and the Articles of Association. The Supervisory Board is involved in the strategy and planning and in all matters of fundamental importance to the Company. In view of these tasks which carry a high degree of responsibility, the members of the Supervisory Board shall receive an appropriate remuneration, which also takes into account the time required for the Supervisory Board office. In addition, Supervisory Board remuneration that is also appropriate with respect to the market environment ensures that the Company will continue to have qualified candidates for the Supervisory Board in the future. Thus, the appropriate remuneration of the Supervisory Board members contributes to the promotion of the business strategy and the long-term development of Fresenius Medical Care AG & Co. KGaA.
This standard is met by both the remuneration of Supervisory Board members as currently provided for in Article 13 of the Articles of Association of Fresenius Medical Care AG & Co. KGaA (the “Articles of Association”) as well as the further developed remuneration proposed for resolution to the Company’s Annual General Meeting 2020 under agenda item 7 by a respective amendment of Article 13 of the Articles of Association and which shall apply as from 1 January 2021.
Compared with the current regime, the main amendment of the remuneration for the Supervisory Board proposed under agenda item 7 is that under the new remuneration regime only fixed remuneration components shall be paid in future. The variable remuneration component currently provided for in Article 13 (4) of the Articles of Association shall be abolished. In 2011 a variable remuneration component for the members of the Supervisory Board was introduced. This was done with regard to the recommendation in the version of the German Corporate Governance Code (GCGC) applying at that time, according to which the Supervisory Board should receive performance-based remuneration in addition to fixed remuneration.
The revised version of the GCGC dated 16 December 2019 now suggests in G.18 sentence 1 that the remuneration of the Supervisory Board should consist of a fixed remuneration. Remunerating Supervisory Board members only on the basis of a fixed remuneration also meets the expectations of numerous investors and voting rights advisors. The Company believes that the conversion to an exclusively fixed remuneration of the Supervisory
Board is also suitable to take even greater account of the independent advisory and control capacity of the Supervisory Board.
1. Composition of the remuneration
The remuneration of the members of the Supervisory Board is based on Article 13 of the Articles of Association. Both in accordance with the current provisions of the Articles of Association and in accordance with the revised version of Article 13 of the Articles of Association as proposed to the Annual General Meeting 2020 under agenda item 7, the members of the Supervisory Board receive a fixed remuneration, fringe benefits (comprising reimbursements and insurance coverage) and, if they serve in committees of the Supervisory Board, remuneration for these committee activities. According to the current regime, the members of the Supervisory Board also receive variable performance-based remuneration; this shall be abolished with effect as from 1 January 2021.
a) Remuneration for the membership in the Supervisory Board
aa) Current regime
(1) Fixed remuneration
Currently, the members of the Supervisory Board receive on the one hand a fixed remuneration in the amount of USD 88,000.00 per annum for each full fiscal year, payable in four equal installments at the end of each calendar quarter. The Chairman of the Supervisory Board receives additional remuneration in the amount of USD 88,000.00 and his deputy additional remuneration in the amount of USD 44,000.00. If a fiscal year is not a full calendar year, the remuneration relating to a full fiscal year shall be paid on a pro rata temporis basis.
(2) Variable performance-based remuneration
Currently, each member of the Supervisory Board also receives a variable performance-based remuneration for each full fiscal year pursuant to Article 13 (4) of the Articles of Association, which is based upon the respective average growth of earnings per share of the Company (EPS) during the period of the last three (3) fiscal years prior to the payment date. The amount of this variable remuneration component is determined by the following formula:
|
3-year average EPS growth (as %) |
|
Amount of variable remuneration (in |
|
|
8.00-8.99 |
|
60,000.00 |
|
|
9.00-9.99 |
|
70,000.00 |
|
|
> 10.00 |
|
80,000.00 |
|
If the thresholds for the aforementioned three percentage margins are reached, the respective variable remuneration amounts are earned to their full extent, i.e. within these margins there is no pro rata remuneration (e.g. 8.00 % = USD 60,000.00; 8.99 % = USD 60,000.00).
In any case, the variable remuneration component pursuant to Article 13 (4) of the Articles of Association is capped at the maximum amount of USD 80,000.00 per annum. Reciprocally, the members of the Supervisory Board are only entitled to the variable remuneration component if the 3-year average EPS growth of at least 8.00 % is reached.
The variable remuneration component is in principle disbursed on a yearly basis, namely following approval (Feststellung) of the Company’s annual financial statements at the end of the calendar quarter in which the Company’s annual financial statements are approved. If a fiscal year is not a full calendar year, the remuneration relating to a full fiscal year shall be paid on a pro rata temporis basis.
bb) Regime as from 1 January 2021
With effect as from 1 January 2021, the remuneration of the Supervisory Board shall no longer include a variable remuneration component. As a compensation for this and in view of the remuneration provision introduced at the Annual General Meeting in 2016, which has remained unchanged since then, the fixed remuneration of the members of the Supervisory Board shall be increased in view of the considerable increase in the scope of monitoring and advisory tasks. Each member of the Supervisory Board shall receive USD 160,000.00 annually. The Chairman of the Supervisory Board shall receive an additional remuneration in the amount of USD 160,000.00 and the Deputy Chairman shall receive an additional remuneration in the amount of USD 80,000.00 per year. As per the current regime, the remuneration relating to a full fiscal year shall be paid on a pro rata temporis basis if a fiscal year is not a full calendar year.
b) Remuneration for serving on a committee of the Supervisory Board
aa) Current regime
The members of the Supervisory Board who serve on a committee of the Supervisory Board receive an additional amount of USD 44,000.00 per year. As Chairman of a committee, a member of the committee shall in addition receive USD 22,000.00 per year and as Deputy Chairman an additional USD 11,000.00 respectively, payable in each case in four equal installments at the end of each calendar quarter. For memberships in the Nomination Committee and in the Joint Committee pursuant to Articles 13a et seqq. of the Articles of Association as well as in the capacity of their respective Chairmen and Deputy Chairmen, no separate remuneration shall be granted. Article 13e (3), according to which the members of the Joint Committee receive an attendance fee of USD 3,500.00, remains unaffected. If a fiscal year is not a full calendar year, the remuneration relating to a full fiscal year shall be paid on a pro rata temporis basis.
bb) Regime as from 1 January 2021
In view of the proposed abolition of the variable remuneration component and of the considerable increase in the scope of monitoring and advisory tasks since the introduction of the current remuneration provision, the remuneration for serving on a committee of the Supervisory Board shall also be appropriately adjusted as from 1 January 2021. As a member of a committee, a member of the Supervisory Board shall receive an additional annual payment of USD 40,000.00. In addition, as Chairman or Vice Chairman of a committee, a committee member shall receive USD 40,000.00 or USD 20,000.00 annually. In view of the considerable amount of work and time required for the selection of suitable candidates, membership in the Nomination Committee (as well as activity as Chairman or Deputy Chairman) shall also be remunerated in the same way. The regulations for the Joint Committee pursuant to Articles 13a et seqq. of the Articles of Association described in lit. aa) shall remain unchanged also in the future. As per the current regime, the remuneration relating to a full fiscal year shall be paid on a pro rata temporis basis if a fiscal year is not a full calendar year.
c) Set-off of remuneration for simultaneous seats on the Supervisory Board of the General Partner or its committees
aa) Current regime
Article 13 (8) and (9) of the Articles of Association provides for a set-off of remuneration payments in the event of simultaneous seats on the supervisory board of the Company’s General Partner, Fresenius Medical Care Management AG, or its committees.
To the extent that a member of the Supervisory Board of the Company is at the same time a member of the supervisory board of Fresenius Medical Care Management AG and receives remuneration for his services as a member of the supervisory board of Fresenius Medical Care Management AG, the fixed remuneration, including the additional remuneration for the Chairman and the Deputy Chairman, if they are at the same time Chairman or Deputy Chairman in the supervisory board of Fresenius Medical Care Management AG, and the variable performance-based remuneration are each reduced to half. If the Deputy Chairman of the Supervisory Board is at the same time Chairman of the supervisory board of Fresenius Medical Care Management AG, he shall not receive additional remuneration for his services as Deputy Chairman of the Supervisory Board.
To the extent that a member of a committee of the Supervisory Board is at the same time a member of a supervisory board committee of Fresenius Medical Care Management AG and receives remuneration for his services as a member of such supervisory board committee, this remuneration will be set off against the respective amount of remuneration received for services in committees of the Supervisory Board, if the committees in both companies have the same functions and competences; apart from that, no further set-off or adjustment shall take place.
bb) Regime as from 1 January 2021
The remuneration proposed to the Annual General Meeting 2020 under agenda item 7 provides that the current regulations on the set-off of remuneration for simultaneous seats on the Supervisory Board of Fresenius Medical Care Management AG or its committees are essentially retained. In the future, however, set-off is to be effected even if the committees in both companies merely have the same type of functions and competences. The provision according to which the variable remuneration is also reduced to half in the event of dual positions will be abolished without replacement due to the abolition of the variable remuneration of the members of the Supervisory Board.
d) Fringe benefits (reimbursements and insurance coverage)
Furthermore, members of the Supervisory Board are currently reimbursed for the expenses incurred in the exercise of their office, including any statutory value-added tax owed by them. In addition, the Company shall provide the members of the Supervisory Board with an insurance coverage regarding the fulfillment of their duties as such members of the Supervisory Board which is subject to an appropriate deductible. These regulations shall continue to apply with minor editorial changes in the future.
e) Ratio of fixed and variable remuneration components
aa) Current regime
In the event of an entitlement to variable performance-based remuneration, the relative proportion of the fixed remuneration is between 59.5 % and 52.4 % and the proportion of variable performance-related remuneration is correspondingly between 40.5 % and 47.6 % of the compensation, depending on the relevant 3-year average growth in EPS (in %) as described in lit. a) aa) (2). These ratios may change in favor of the relative proportion of the fixed remuneration in case of a function as Chairman or Deputy Chairman of the Supervisory Board or a service in committees of the Supervisory Board of the Company in accordance with the descriptions in lit. a) aa) and lit. b) aa). If there is no entitlement to variable performance-related remuneration, the relative proportion of the fixed remuneration is 100 %.
bb) Regime as from 1 January 2021
Under the proposed regime applying from 1 January 2021, the relative proportion of the fixed remuneration will always be 100 %.
2. Procedure for determining, implementing and reviewing the remuneration of the Supervisory Board
No remuneration-related legal transactions within the meaning of section 87a (1) sentence 2 no. 8 AktG were concluded with the members of the Supervisory Board. Since the remuneration of the members of the Supervisory Board is based on the provisions of the Articles of Association resolved by the General Meeting, the remuneration and employment conditions of the employees were not taken into account when determining the remuneration of the members of the Supervisory Board.
A resolution on the remuneration of the members of the Supervisory Board of the Company is adopted by the General Meeting at least every four years, based on a proposal by the
General Partner and the Supervisory Board. To the extent that this resolution concerns the confirmation of the remuneration of the Supervisory Board, a majority of the votes cast is sufficient for the resolution. If the resolution is intended to amend the remuneration, this resolution requires a simultaneous amendment of the corresponding provisions of the Articles of Association; unless the Articles of Association of the Company stipulate a different capital majority, a majority of three quarters of the share capital represented at the General Meeting when adopting the resolution is required for this purpose.
Prior to the proposal to the General Meeting, the General Partner and the Supervisory Board generally on the basis of public information and information available to experts, in particular comparative studies, and, if necessary, with the help of external remuneration consultants review the remuneration of the members of the Supervisory Board. In the event that the General Meeting, taking into consideration the respective relevant annual results, resolves a higher remuneration by a three fourths majority of the votes cast, such higher remuneration shall be payable.
IV. WRITTEN REPORT OF THE GENERAL PARTNER ON AGENDA ITEM 8
Pursuant to section 278 (3) AktG in connection with sections 203 (2) sentence 2, 186 (4) sentence 2 AktG, the General Partner hereinafter reports on the reasons for which it shall be authorized in certain cases to exclude the shareholders’ subscription rights when making use of the authorized capitals proposed for resolution under agenda item 8:
The General Partner was authorized pursuant to Article 4 (3) and Article 4 (4) of the Articles of Association to increase the Company’s share capital with the approval of the Supervisory Board by up to EUR 35,000,000.00 by issuing new bearer ordinary shares for cash (Authorized Capital 2015/I) and up to EUR 25,000,000.00 by issuing new bearer ordinary shares for cash and/or contributions in kind (Authorized Capital 2015/II). These authorizations have each expired on 18 May 2020. The authorizations have not been used. To ensure that the Company will be able to satisfy future financial requirements arising in connection with the implementation of strategic decisions in a quick and adequately flexible manner and with the approval of the Supervisory Board, i.e. without a time-consuming new resolution in a General Meeting, new authorized capitals are proposed under agenda item 8. The amounts of these new authorized capitals shall be identical to the existing authorized capitals.
In total, new authorized capitals of up to EUR 60,000,000.00 shall be created. The Authorized Capital 2020/I shall authorize the General Partner until 26 August 2025 to increase the share capital of the Company with the approval of the Supervisory Board by up to a total of EUR 35,000,000.00 for cash by issuing new bearer ordinary shares on one or more occasions. The Authorized Capital 2020/II shall authorize the General Partner until 26 August 2025 to increase the share capital of the Company with the approval of the Supervisory Board by up to a total of EUR 25,000,000.00 for cash and/or contributions in kind by issuing new bearer ordinary shares on one or more occasions.
If the General Partner exercises the authorizations proposed for resolution under agenda item 8 b) and d) during their term, the shareholders have, in principle, subscription rights. In the following cases, however, the General Partner shall be authorized pursuant to these authorizations to exclude the subscription rights with the approval of the Supervisory Board:
A. Under the Authorized Capital 2020/I as proposed for resolution under agenda item 8 b), the General Partner shall be authorized to exclude with the approval of the Supervisory Board fractional amounts from the shareholders’ subscription rights. Fractional amounts can follow from the issuing volume and the determination of a practicable subscription ratio. The exclusion of subscription rights for fractional amounts under the Authorized Capital 2020/I enables the utilization of the proposed authorization in round amounts while maintaining an even subscription rights ratio. This facilitates the processing of the subscription rights. The exclusion therefore enhances practicability of the capital increase and facilitates the processing of the issuing of shares. Also, the value of fractional amounts per shareholder is usually small. In contrast, the effort necessary for the issuance of shares without excluding subscription rights for fractional amounts is significantly higher. The shares excluded from shareholders’ subscription rights as free fractional amounts will be utilized in the best possible way for the Company, either by disposal on the stock exchange or in another way. Since the exclusion of subscription rights under the authorization proposed for resolution under agenda item 8 b) is restricted to fractional amounts, a potential disadvantageous dilutive effect for shareholders resulting from an exclusion of subscription rights is small. The Management Board of the General Partner therefore considers the exclusion of subscription rights under the Authorized Capital 2020/I to the extent described necessary, appropriate, adequate and, weighting the interests of the Company against the interests of shareholders, materially justified.
The General Partner may only exercise the aforementioned authorizations to exclude subscription rights with regard to the Authorized Capital 2020/I to the extent that the proportional amount of the total shares issued under exclusion of subscription rights exceeds 10 % of the share capital neither at the time of this authorization coming into effect nor at the time of the exercise of this authorization. If, during the period of validity of the Authorized Capital 2020/I until its utilization, other authorizations on the issue or on the sale of shares of the Company or the issue of rights which authorize or bind to the subscription of shares of the Company are exercised and the subscription rights are excluded, such subscription rights will be taken into account with regard to the aforementioned 10 % limit.
B. With regard to the Authorized Capital 2020/II as proposed for resolution under agenda item 8 d), the General Partner shall on the one hand be authorized to exclude the shareholders’ subscription rights with the approval of the Supervisory Board in the case of capital increases for contributions in kind. This authorization to
exclude subscription rights shall allow for the acquisition of companies, parts of companies, interests in companies or other assets in return for granting the Company’s shares. To remain competitive especially in an international perspective, the Company must in the interest of its shareholders at any time be in a position to act quickly and flexibly on the international markets. In particular, this includes the option to acquire companies, parts of companies, interests in companies or other assets to improve the Company’s position. It can be of great interest to sellers of attractive targets to (also) be able to acquire shares of the acquiring company instead of cash. At the same time, the acquisition of such targets against the Company’s shares preserves the Company’s funds without affecting the Company’s debt/equity ratio. Therefore, the Company shall also be enabled to grant shares as consideration in kind since the aforementioned acquisition opportunities usually only exist for a short time and for this reason the necessary issuance of new shares cannot be resolved upon by a General Meeting that would need to be convened first to be able to conduct an ordinary capital increase. Corresponding to the existing Authorized Capital 2015/II, the proposed authorization to exclude subscription rights preserves the necessary flexibility for the Company to quickly and flexibly avail itself of opportunities to acquire companies, parts of companies, interests in companies and other assets. The exclusion of subscription rights leads to a relative reduction of the proportionate interest ratio as well as the proportionate voting ratio for existing shareholders. Should, however, subscription rights be granted, the acquisition of companies, parts of companies, interests in companies or other assets in return for shares would not be possible and the advantages for the Company and the shareholders as described above would therefore not be achievable. The financial interests of the Company’s shareholders in the case of capital increases against contributions in kind are, however, protected by the General Partner’s legal obligation to issue the new shares at an issue price that is adequate to the proportionate value of the contribution in kind.
On the other hand, the management shall in the case of capital increases for cash from the Authorized Capital 2020/II be authorized to exclude subscription rights pursuant to section 278 (3) AktG in connection with sections 203 (1) sentence 1, 203 (2), 186 (3) sentence 4 AktG if the new shares are issued at a price which does not fall significantly below the stock exchange price of shares of the Company already issued at the time of the final determination of the issue price and the proportionate amount attributable in total to the issued shares exceeds 10 % of the share capital existing on the first exercise of the authorization neither at the time of the coming into effect nor at the time of the first exercise of the authorization.
The possibility to exclude subscription rights in analogous application of section 186 (3) sentence 4 AktG enables the Company to use favorable stock exchange conditions effectively and close to the current stock exchange price at the relevant time and to achieve the highest issue price possible and a substantial strengthening of the equity funds by fixing the issue price close to the market. The authorization therefore allows the Company to cover any capital requirements even at short notice and to use the corresponding stock exchange price of the Company’s shares to strengthen its equity funds. By avoiding a time-consuming and expensive processing of subscription rights, the equity capital requirements can be covered within a very short time from short-term market opportunities and additional new shareholder groups can be acquired at home and abroad. The flexibility inherent in the exclusion of subscription rights is an important instrument for the Company to be able to use the opportunities offered in rapidly changing markets. The issue price for the new shares must be geared to the stock exchange price of the shares already listed and must not differ significantly from the respective current stock exchange price in each case and, in particular, must not fall significantly below it. This ensures that the compensation received for new shares is always adequate to the market, which is in the interest of both the Company and all its shareholders.
The utilization of the Authorized Capital 2020/II with the exclusion of subscription rights results in a reduction of the proportionate interest ratio as well as the proportionate voting ratio of existing shareholders. As far as the new shares are issued for cash, this dilution will — in conformity with the statutory rationale in section 186 (3) sentence 4 AktG — be adequately limited by the fact that the proportionate amount of share capital attributable to shares issued for cash with exclusion of subscription rights from the Authorized Capital 2020/II must not exceed 10 % of the share capital in total. Also to be set off against this limitation is the proportionate amount of share capital attributable to new shares or treasury shares previously acquired by the Company which are issued or sold during the period of validity of this authorization with exclusion of subscription rights in direct, analogous or corresponding application of section 186 (3) sentence 4 AktG and the proportionate amount of the share capital attributable to shares issued or to be issued to satisfy option or conversion rights or discharge option or conversion obligations from bonds, if the bonds are issued during the period of validity of this authorization with exclusion of subscription rights in analogous application of section 186 (3) sentence 4 AktG. This ensures that the upper limit of 10 % mentioned above will not be not exceeded and the financial and voting right interests of the shareholders will be
reasonably preserved when exercising thfe Authorized Capital 2020/II with the exclusion of subscription rights. In the case of the utilization of the Authorized Capital 2020/II with the exclusion of subscription rights according to section 186 (3) sentence 4 AktG, shareholders interested in fully maintaining their proportionate interest can always make use of the option to acquire shares of the Company via stock exchanges and therefore at market conditions.
The General Partner may only exercise the aforementioned authorizations to exclude subscription rights with regard to the Authorized Capital 2020/II to the extent that the proportional amount of the total shares issued under exclusion of subscription rights exceeds 10 % of the share capital neither at the time of these authorizations coming into effect nor at the time of the exercise of these authorizations. If, during the period of validity of the Authorized Capital 2020/II until its utilization, other authorizations on the issue or on the sale of shares of the Company or the issue of rights which authorize or bind to the subscription of shares of the Company are exercised and the subscription rights are excluded, such subscription rights will be taken into account with regard to the aforementioned 10 % limit.
Duly taking all circumstances stated herein into account, the Management Board of the General Partner considers the exclusion of subscription rights under the Authorized Capital 2020/II appropriate, necessary, adequate as well as materially justified weighting the interests of the Company and the interests of shareholders for the stated reasons and in consideration of the potential dilutive effect to the disadvantage of the shareholders.
Currently, there are no specific plans for the utilization of the Authorized Capital 2020/I and the Authorized Capital 2020/II. The Management Board of the General Partner will in each case carefully assess whether it should exercise the authorizations to use the authorized capitals and, where necessary, the authorizations to exclude subscription rights. It will only do so if it is in the well-understood interests of the Company and all its shareholders and is reasonable and adequate.
The Management Board of the General Partner will report on every utilization of the authorizations granted under agenda item 8 b) and d) at the respective following General Meeting.
Fresenius Medical Care AG & Co. KGaA
The General Partner
V. FURTHER INFORMATION REGARDING THE CONVENING OF THE ANNUAL GENERAL MEETING
Total number of shares and voting rights
At the time of the convening of the Annual General Meeting, the share capital of the Company is composed of 304,607,990 non-par value shares and consists solely of bearer shares, of which each share grants one vote. Therefore, the total number of voting rights at the time of the convening of the Annual General Meeting amounts to 304,607,990 voting rights. Treasury shares do not entitle the Company to any voting right.
Virtual General Meeting without the physical presence of the shareholders
In accordance with sections 1 (1), (2), (6) sentence 1, (8) sentence 1 of the German Act on Measures in Corporate, Cooperative, Association, Foundation and Housing Law to Combat the Effects of the COVID-19 Pandemic (“COVID-19 Act”), the General Partner has decided, with the consent of the Supervisory Board, that the General Meeting will be held as a virtual General Meeting without the physical presence of the shareholders or their proxies and that the shareholders will cast their votes in particular also by means of electronic communication.
The General Meeting will be held at the Company’s offices in Else-Kröner-Straße 1, 61352 Bad Homburg v.d. Höhe. In order to protect the health of the shareholders and the physically present members of the Supervisory Board and the Management Board of the General Partner, a physical participation of shareholders or their proxies is excluded.
Holding the General Meeting in the form of a virtual General Meeting under the COVID-19 Act results in modifications to the procedures of the General Meeting and to the shareholders’ rights. The entire General Meeting will be broadcast in audio and video on the internet for registered shareholders, shareholders will be able to exercise their voting rights via electronic communication and to issue a power of attorney, shareholders will be given the opportunity to ask questions via electronic communication, and shareholders who have exercised their voting rights will be able to object to resolutions of the General Meeting via electronic communication.
This year, we ask shareholders to pay particular attention to the following information on registering for the General Meeting, on exercising voting rights and on further shareholder rights.
Registering for the General Meeting and exercising shareholder rights
Only those shareholders who have registered with the Company in text form in the German or the English language by the end of 20 August 2020 (24:00 hours CEST), at the latest, at the following address
Fresenius Medical Care AG & Co. KGaA
c/o Computershare Operations Center
80249 Munich
Germany
Telefax: + 49 (0)89 30903-74675
E-Mail: anmeldestelle@computershare.de
and who have provided the Company with evidence of their entitlement to exercise shareholder rights in connection with the General Meeting are entitled to such rights. As evidence of such entitlement, shareholders must, by the end of 20 August 2020 (24:00 hours CEST) at the latest, provide evidence of their shareholding issued by their depositary institution in text form in the German or English language to the aforementioned address referring to the beginning of 6 August 2020 (00:00 hours CEST) (“Evidence Date”).
After receipt of the registration and evidence of shareholding, registered shareholders will receive access cards on which the number of votes and the necessary access data for the internet-based General Meeting and Voting System (Shareholder Portal) are printed.
In order to ensure that the access cards are received in time, we ask shareholders to ensure that they register and send evidence of their shareholding to the Company in good time.
Significance of the Evidence Date
As regards the exercise of shareholder rights in connection with the General Meeting, only those who have provided evidence of share ownership are considered shareholders in relation to the Company. The right of exercising shareholder rights and the extent of the
voting rights are solely determined by the shareholding on the Evidence Date. The Evidence Date is not accompanied by a lock on the sale of shares. Even a full or partial sale of the shareholding after the Evidence Date does not affect the voting right and the entitlement to exercise further shareholder rights in connection with the General Meeting. This also applies accordingly to the acquisition of shares after the Evidence Date. Persons who do not hold shares on the Evidence Date and become shareholders only thereafter are entitled to exercise shareholder rights for the shares held by them only to the extent that they are authorized by proxy or otherwise authorized to exercise rights. However, the Evidence Date has no significance for the entitlement to a dividend as this entitlement only depends on the shareholder status on the day of the resolution on the distribution of profits by the Annual General Meeting.
Internet-based General Meeting and Voting System (Shareholder Portal)
For the purpose of conducting the virtual General Meeting, the Company has set up an internet-based General Meeting and Voting System (Shareholder Portal) which enables shareholders and their proxies to exercise shareholder rights in connection with the General Meeting without physically attending the General Meeting.
The Shareholder Portal is available on the Company’s website at www.freseniusmedicalcare.com/en/agm/. Access to the Shareholder Portal requires the entry of access data which will be sent to shareholders or their proxies after proper registration.
Irrespective of the other possibilities for exercising shareholders’ rights in connection with the General Meeting described in detail below, shareholders or their proxies may use the Shareholder Portal to issue powers of attorney and instructions, cast their votes by postal vote, follow the broadcast of the General Meeting on 27 August 2020 and exercise further shareholders rights.
Voting by postal vote
Shareholders may cast their votes by postal vote. Postal votes can either be cast electronically via the Shareholder Portal or by using the proxy and instruction form sent to shareholders with their access card after registration and which will also be available on the Company’s website at www.freseniusmedicalcare.com/en/agm/.
Voting electronically by postal vote via the Shareholder Portal may be carried out until immediately prior to the beginning of the voting process in the General Meeting. Up to this point in time, it is also possible to revoke or amend votes cast via the Shareholder Portal.
Postal votes cast by means of the proxy and instruction form can be sent to the Company by post, fax or e-mail and, for organizational reasons, must be received by the Company at the following postal address, fax number or e-mail address at the latest by the end of 26 August 2020 (24:00 hours CEST):
Fresenius Medical Care AG & Co. KGaA
c/o Computershare Operations Center
80249 Munich
Germany
Telefax: + 49 (0)89 30903-74675
E-Mail: freseniusmedicalcare.hv@computershare.de
If a shareholder exercises his voting rights by postal vote in due time both electronically via the Shareholder Portal and by means of the proxy and instruction form, the electronic voting via the Shareholder Portal will be considered binding regardless of the time of receipt of the postal votes.
Procedure regarding the authorization of third parties
Shareholders may also have their rights in connection with the General Meeting exercised by a proxy, e.g. the depositary bank, an association of shareholders or another person of their choice. If the shareholder authorizes more than one person, the Company can reject one or more of such persons. The issue of the power of attorney, its amendment and revocation as well as the evidence of authorization to be presented to the Company require the text form; intermediaries, shareholders’ associations and voting rights advisors pursuant to section 134a AktG and persons equivalent to them pursuant to section 135 (8) AktG may provide for deviating provisions in case of their authorization.
To authorize third parties, shareholders can use the Shareholder Portal which is also available as an electronic channel for transmitting evidence of the appointment of a proxy to the Company. The granting of a power of attorney, its amendment, its revocation and the evidence of authorization of third parties can be made via the Shareholder Portal until the closure of the General Meeting on 27 August 2020.
To authorize third parties, shareholders can also use the proxy and instruction form which will be sent to shareholders with their access card after registration and which will also be available on the Company’s website at www.freseniusmedicalcare.com/en/agm/. If third parties are authorized by means of the proxy and instruction form, the fully completed form must have been received by the Company for organizational reasons by the end of 26 August 2020 (24:00 hours CEST), at the latest, at the following postal address, fax number or e-mail address:
Fresenius Medical Care AG & Co. KGaA
c/o Computershare Operations Center
80249 Munich
Germany
Telefax: + 49 (0)89 30903-74675
E-Mail: freseniusmedicalcare.hv@computershare.de
If a shareholder grants, amends or revokes authorizations to third parties in due time both electronically via the Shareholder Portal and by means of the proxy and instruction form, the last declaration made electronically via the Shareholder Portal will be considered binding regardless of the time of receipt of the declarations.
Even if a power of attorney is granted, registration and evidence of entitlement must be submitted in due time in accordance with the above provisions. This does not preclude the granting of a power of attorney after registration has been completed.
Even if a third party is granted a power of attorney, votes may be cast exclusively as described above by way of a postal vote or as described below by authorizing and instructing the proxies named by the Company.
Procedure regarding the authorization of proxies named by the Company acting on shareholders’ voting instructions
The Company offers that shareholders may issue powers of attorney to proxies named by the Company who are bound to shareholders’ voting instructions. Such persons are employees of the Company or of an affiliated company who vote on the respective items of the agenda on the basis of authorizations by shareholders and in accordance with the instructions issued by them. The proxies named by the Company are obligated to vote in
accordance with the instructions. They cannot exercise the voting rights at their own discretion. To the extent there is no express and unambiguous instruction, the proxies named by the Company will abstain from voting on the respective voting matter.
To issue powers of attorney and instructions to the proxies named by the Company, shareholders can use the Shareholder Portal which is also available as an electronic channel for transmitting evidence of authorization of the proxies named by the Company to the Company. The granting of powers of attorney and instructions, their amendment, their revocation and the evidence of authorization of the proxies named by the Company can be made electronically via the Shareholder Portal until immediately prior to the beginning of the voting process in the General Meeting.
To issue powers of attorney and instructions to the proxies named by the Company, shareholders can also use the proxy and instruction form which will be sent to shareholders with their access card after registration and which will also be available on the Company’s website at www.freseniusmedicalcare.com/en/agm/. If the proxy and instruction form is used, the fully completed form must have been received by the Company for organizational reasons by the end of 26 August 2020 (24:00 hours CEST), at the latest, at the following postal address, fax number or e-mail address:
Fresenius Medical Care AG & Co. KGaA
c/o Computershare Operations Center
80249 Munich
Germany
Telefax: + 49 (0)89 30903-74675
E-Mail: freseniusmedicalcare.hv@computershare.de
If a shareholder grants, amends or revokes powers of attorneys and instructions to the proxies named by the Company in due time both electronically via the Shareholder Portal and by means of the proxy and instruction form, the last declaration made electronically via the Shareholder Portal will be considered binding regardless of the time of receipt of the declarations.
Even if a power of attorney is granted, registration and evidence of entitlement must be submitted in due time in accordance with the above provisions. This does not preclude the granting of a power of attorney after registration has been completed.
Rights of shareholders pursuant to section 278 (3) AktG in connection with sections 122 (2), 126 (1), 127, 131 (1) AktG
Supplements to the agenda at the request of a minority according to section 278 (3) AktG in connection with section 122 (2) AktG
Shareholders whose total combined shares amount to the twentieth part of the registered share capital or the proportionate amount of the share capital of EUR 500,000 (that is equivalent to 500,000 non-par value shares), can request, according to section 278 (3) AktG in connection with section 122 (2) AktG, that items be placed on the agenda and notice thereof be given. For each new item, reasons or a draft resolution must be attached.
Supplemental requests must be received by the Company at least 30 days prior to the Meeting in writing; the day of receipt and the day of the General Meeting are not included in that calculation. Therefore, the last possible date for receipt is 27 July 2020 (24:00 hours CEST). Supplemental requests received after that date cannot be taken into account.
Applicants must provide evidence that they hold the minimum quantity of shares for at least ninety days prior to the day of the receipt of the supplemental request and that they hold the shares until the General Partner’s decision on the supplemental request (section 278 (3) AktG in connection with section 122 (2), (1) sentence 3 AktG).
We ask shareholders to submit any supplemental requests to the following address:
Fresenius Medical Care AG & Co. KGaA
Die persönlich haftende Gesellschafterin
Fresenius Medical Care Management AG
— Vorstand —
Else-Kröner-Straße 1
61352 Bad Homburg v.d. Höhe
Germany
Motions and proposals for election by shareholders according to section 278 (3) AktG in connection with sections 126 (1), 127 AktG
Prior to the General Meeting shareholders may send countermotions to the Company regarding proposals made by the General Partner and/or the Supervisory Board pertaining
to a specific item on the agenda. Shareholders may also submit proposals for the election of the auditors. Countermotions and proposals for election to be made accessible that have been received by the Company at the address mentioned below at least 14 days prior to the General Meeting, i.e. until 12 August 2020 (24:00 hours CEST) at the latest, will be made available on the Company’s website to the other shareholders, including the name of the shareholder and any reasons given, at www.freseniusmedicalcare.com/en/agm/. Reasons must be given for countermotions. For proposals for election, however, no reasons need to be given.
Any comments of the management will also be published under the internet address provided above.
Countermotions and proposals for election are to be sent only to
Fresenius Medical Care AG & Co. KGaA
— Investor Relations —
Else-Kröner-Straße 1
61352 Bad Homburg v.d. Höhe
Germany
Telefax: +49 (0)6172 609-2301
E-Mail: hauptversammlung@fmc-ag.com
Countermotions and reasons given do not need to be made accessible under the prerequisites of section 126 (2) sentence 1 AktG. Pursuant to section 126 (2) sentence 2 AktG, the reasons for a countermotion also do not need to be made accessible if they amount to more than 5,000 characters in total. Section 126 AktG applies analogously to the proposal of a shareholder for the election of the auditors pursuant to section 127 AktG.
Proposals for the election of the auditors pursuant to section 127 AktG will moreover only be made accessible if they contain the name, the profession exercised and the residential address of the proposed person or the name and registered office of the proposed legal entity.
The rights of shareholders to submit motions and proposals for elections on agenda items are excluded in accordance with the legal concept of the COVID-19 Act. Countermotions and proposals for election that have been received by the Company at the above address in due time and which are to be made accessible will nevertheless be considered as having been submitted at the General Meeting, provided that they were sent by shareholders who
have registered and provided evidence of their shareholding in due time in accordance with the above provisions.
Opportunity to ask questions by way of electronic communication
Pursuant to section 1 (2), (8) sentence 1 of the COVID-19 Act, shareholders are offered the opportunity to submit questions by way of electronic communication. The General Partner has stipulated that any questions must be submitted by electronic means at least two days prior to the Meeting at the latest. The General Partner will decide which questions to answer and how to answer them according to its dutiful, free discretion.
Shareholders who have registered for the General Meeting may submit their questions to the Company until 24 August 2020 (24:00 hours CEST) at the latest via the Shareholder Portal by using the input facility provided there for this purpose.
In the context of answering questions also the name of the shareholder or proxy submitting the question may be disclosed.
Further explanations on the rights of the shareholders under section 278 (3) AktG in connection with sections 122 (2), 126 (1), 127, 131 (1) AktG
Further explanations on the rights of the shareholders under section 278 (3) AktG in connection with sections 122 (2), 126 (1), 127, 131 (1) AktG are available on the Company’s website at www.freseniusmedicalcare.com/en/agm/.
Opportunity to object to resolutions of the General Meeting
Shareholders who have exercised their rights to vote are given the opportunity to object to resolutions of the General Meeting. If votes have been cast, corresponding declarations can be submitted via the Shareholder Portal as of the opening of the General Meeting and are possible until the Chairman of the Meeting closes the General Meeting.
Availability of documents
The following documents and the further information to be made available pursuant to section 278 (3) AktG in connection with section 124a AktG are available on the Company’s website at www.freseniusmedicalcare.com/en/agm/:
1) the annual financial statements and consolidated group financial statements approved by the Supervisory Board for fiscal year 2019;
2) the management reports for Fresenius Medical Care AG & Co. KGaA and the consolidated group for fiscal year 2019 including the non-financial declaration for the group;
3) the report by the Supervisory Board of Fresenius Medical Care AG & Co. KGaA for fiscal year 2019;
4) the report by the General Partner on the information pursuant to sections 289a, 315a HGB;
5) the General Partner’s proposal on the allocation of distributable profit;
6) the annual report for the Fresenius Medical Care group for fiscal year 2019 which contains the Report on Corporate Governance including the Remuneration Report as well as the Declaration on Corporate Governance for fiscal year 2019;
7) a description of the Compensation System 2020+ for the members of the Management Board of the General Partner;
8) a description of the current and, as proposed under agenda item 7, the future remuneration for the members of the Supervisory Board;
9) the written report of the General Partner regarding agenda item 8;
10) a marked version of the Company’s Articles of Association in which the amendments to the Articles of Association proposed under agenda items 7, 8 and 9 are identified.
Audio and video broadcast
The General Meeting will be broadcast in full in audio and video on 27 August 2020 from 10:00 hours CEST for registered shareholders via the Shareholder Portal. The broadcast of the introductory remarks by the Chairman of the Meeting and the speech by the chairman of the Management Board of the General Partner can be followed by the interested public on 27 August 2020 from 10:00 hours CEST on the Company’s website at www.freseniusmedicalcare.com/en/agm/ without requiring access to the Shareholder Portal and thus prior registration for the General Meeting.
Hof an der Saale, July 2020
Fresenius Medical Care AG & Co. KGaA
The General Partner
Fresenius Medical Care Management AG
The Management Board
Information for holders of American Depositary Receipts (ADR) regarding the Annual General Meeting
— ISIN: US3580291066 // CUSIP: 358029106 —
Holders of ADRs will generally submit their voting instructions to The Bank of New York Mellon Corporation, which, in its capacity as Depositary Bank, will try, as far as practically possible, to exercise the voting rights subject to German law and the provisions of the Articles of Association and according to the instructions provided by the holders of ADRs. However, the Depositary Bank and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. Guidelines as to the exercise of voting rights by means of “Proxy Voting” can be found in the materials of the General Meeting, which will be sent to the holders of ADRs. Voting instructions must be received by The Bank of New York Mellon Corporation by 17 August 2020 (prior to 17:00 hours New York Time) at the latest.
The custodian banks are advised of the separate publications in the German Wertpapier-Mitteilungen.
Hof an der Saale, July 2020
Fresenius Medical Care AG & Co. KGaA
The General Partner
Fresenius Medical Care Management AG
The Management Board
Privacy Notice
1. Controller, categories of processed data and purposes of data processing
Fresenius Medical Care AG & Co. KGaA, Else-Kröner-Straße 1, 61352 Bad Homburg v. d. Höhe, Germany (the “Company”), email: ir@fmc-ag.com, processes personal data (in particular name, first name, address, email address, number of shares, type of ownership of shares, number of the access card, and voting, and, as the case may be, name, first name and address of a proxy authorized by the respective shareholder) as controller in accordance with applicable data protection laws to enable shareholders to exercise their rights in the context of the virtual General Meeting. If shareholders or proxies contact the Company, the Company also processes the personal data necessary to respond to any requests (for example the contact data provided by the shareholder or proxies, such as email address or telephone number). If applicable, the Company also processes personal data relating to questions, countermotions, election proposals and requests of shareholders or proxies in the context of the virtual General Meeting.
If shareholders or proxies make use of the opportunity to submit questions in advance of the virtual General Meeting via the shareholder portal and these questions will be answered, this will — in general — be done by stating their names, which may be taken notice of in the virtual General Meeting. In the course of submission of questions, the shareholders or proxies have the opportunity to object that their names are stated.
2. Legal basis for data processing
The legal basis for the processing are Art. 6 (1) sentence 1 lit. c) as well as Art. 6 (1) sentence 1 lit. f) of the General Data Protection Regulation (“GDPR”).
3. Categories of recipients of personal data, data sources and retention period
The Company and, respectively, the service providers of the Company that are engaged in the context of the virtual General Meeting receive the personal data of the shareholders or proxies from the registration office, which receives the data either from the shareholders or proxies themselves or from the depositary banks of the shareholders. The service providers engaged by the Company receive only personal data from the Company that are required to provide the requested services, and process data only based on instructions by the Company. Additional personal data relating to questions, countermotions, election proposals and requests of shareholders or proxies may also be collected in the context of the virtual General Meeting. In addition, personal data will be made available to shareholders and proxies in with the context of the virtual General Meeting within the framework of statutory provisions. The personal data will be stored by the Company in accordance with
legal obligations and for the avoidance of potential liability risks and will be deleted afterwards.
4. Rights of data subjects and contact details of the data protection officer
In accordance with the statutory provisions, shareholders and proxies are at any time entitled as data subjects to exercise their rights of access, of rectification, of restriction, of objection and of erasure regarding the processing of their personal data and are also entitled to exercise their right to data portability in accordance with chapter III of the GDPR. Shareholders and proxies can assert these rights towards the Company free of charge via the contact details indicated above or directly vis-à-vis the data protection officer: Fresenius Medical Care AG & Co. KGaA, Mr. Giovanni Brugugnone, Else-Kröner-Straße 1, 61352 Bad Homburg v. d. Höhe, Germany, email: Datenschutzbeauftragter@fmc-ag.com. In addition, shareholders have the right to lodge a complaint with a supervisory authority pursuant to Art. 77 GDPR.
Further information regarding the processing of personal data of shareholders or proxies in the course of the use of the shareholder portal are available on the shareholder portal.
Convenience translation
Report by the Supervisory Board
of Fresenius Medical Care AG & Co. KGaA
for the Fiscal Year 2019
The past fiscal year was a successful year for Fresenius Medical Care, in which the company achieved stable growth and the operating business developed as planned. The company was able to achieve sustainable organic growth while meeting the targets it had set itself. The measures announced in the previous year to promote further sustainable, profitable growth were further implemented. So, the acquisition of NxStage Medical, Inc. was successfully completed, which supported the record growth in the number of home dialysis patients in North America. In the important growth market China, Fresenius Medical Care successfully launched a dialysis machine specially developed for emerging markets. The cost optimization initiatives being pursued throughout the company also developed as planned.
Significant events concerning the organization and composition of the management board of the General Partner, Fresenius Medical Care Management AG, (hereinafter the “Management Board”) or the Supervisory Board of Fresenius Medical Care AG & Co. KGaA (hereinafter the “Company”) were:
· Appointment of a new Chief Financial Officer to the Management Board
With effect as of the end of October 31, 2019, Mr. Michael Brosnan resigned as a member of the Management Board. He had been with the Company since 1998 and was Chief Financial Officer of the General Partner since 2010. The Supervisory Board would like to thank him for his many years of valuable work and for his important contribution to the success of Fresenius Medical Care.
His successor is Ms. Helen Giza, who was appointed as a new member of the Management Board responsible as Chief Financial Officer with effect as of November 1, 2019. Prior to that Ms. Giza has been Chief Integration and Divestiture Management Officer at Takeda Pharmaceuticals. Before her appointment to the management, she had served as Chief Financial Officer of Takeda’s U.S. business unit since 2008. Prior to that she held a number of key international finance and controlling positions, amongst others at TAP Pharmaceuticals and Abbott Laboratories. Ms. Giza is a U.K. Chartered Certified Accountant and holds a Master of Business Administration from the
Kellogg School of Management at Northwestern University in Evanston, Illinois, U.S.
· Expansion of the Management Board by a Global Chief Medical Officer
Mr. Frank Maddux, MD, has been appointed as a member of the Management Board in his function as Global Chief Medical Officer with effect as of January 1, 2020. He had previously been entrusted with the newly created position of Global Chief Medical Officer of the company and is to link clinical research and therapy even more closely. Mr. Maddux has more than 30 years of experience in the healthcare industry and is a recognized expert in the field of quality-oriented care of dialysis patients. He has been with Fresenius Medical Care since 2009. Before his appointment as Global Chief Medical Officer, he served as Executive Vice President for Clinical & Scientific Affairs and Chief Medical Officer for Fresenius Medical Care North America. In this function he was responsible for the delivery of high-quality, value-based care for the largest integrated renal care network in the U.S.
· Elections of two new members of the Supervisory Board
On May 16, 2019, the Annual General Meeting of the Company elected Dr. Dorothea Wenzel and Prof. Dr. Gregor Zünd as members of the Supervisory Board of the Company. Prof. Dr. Zünd had already been appointed by court as a member of the Supervisory Board before, in light of Dr. Gerd Krick’s resignation from the Company’s Supervisory Board.
The Supervisory Board also in the past fiscal year observed all duties imposed on it by law, the Articles of Association and the Rules of Procedure. In this context it also took into account the recommendations of the German Corporate Governance Code. The Supervisory Board supervised the General Partner, Fresenius Medical Care Management AG, within its responsibility and regularly advised the Management Board. The members of the Supervisory Board in their entirety are familiar with the sectors in which Fresenius Medical Care operates.
All relevant questions of the business policy, the company’s planning and the strategy were subject to the deliberations of the Supervisory Board. Reports of the Management Board on the progress of the business, the profitability and liquidity as well as on the situation and perspectives of the Company and the Group formed the basis for the work of the Supervisory Board. Further topics were the risk situation and risk management. Additional items on the agenda were discussions on acquisition and investment projects. The Supervisory Board and its competent committees comprehensively discussed these as well as also
all further significant business events. Furthermore, the Supervisory Board also in the past year reviewed the development of the acquisitions of the previous years. Key benchmarks for this review were, inter alia, the planning and projections at the time of each respective transaction. The Supervisory Board passed resolutions within its competencies according to law and the Articles of Association.
Meetings
In the past fiscal year, six meetings of the Supervisory Board, some of which lasted several days, as well as two telephone conferences, took place. The participation rate of the members in the meetings and telephone conferences of the Supervisory Board was 97.6 % and including the meetings and telephone conferences of the committees was 96.8 %. No Supervisory Board member attended only half or less than half of the meetings of the Supervisory Board and the committees he or she is a member of. The following table shows the participation of the members in the meetings and telephone conferences of the Supervisory Board and the committees in the past fiscal year:
|
|
|
Supervisory |
|
Audit and |
|
Nomination |
|
Joint |
|
Special |
|
|
Rolf A. Classon |
|
8/8 |
|
11/11 |
|
4/4 |
|
0/0 |
|
- |
|
|
William P. Johnston |
|
7/8 |
|
10/11 |
|
- |
|
0/0 |
|
- |
|
|
Dr. Dieter Schenk |
|
8/8 |
|
- |
|
4/4 |
|
- |
|
4/4 |
|
|
Dr. Dorothea Wenzel |
|
2/2 |
|
- |
|
- |
|
- |
|
- |
|
|
Pascale Witz |
|
8/8 |
|
9/10 |
|
- |
|
- |
|
4/4 |
|
|
Prof. Dr. Gregor Zünd |
|
8/8 |
|
- |
|
- |
|
- |
|
- |
|
The Supervisory Board was in regular contact with the Management Board and was always promptly and comprehensively informed by it. Between meetings,
the Management Board reported to the Supervisory Board in writing. During the meetings, the Management Board also informed the Supervisory Board verbally. In addition, the Supervisory Board also last year was in contact with members of the senior management level. The members of the Management Board were further available to the Supervisory Board for follow-up queries. The Chairman of the Supervisory Board maintained continuous contact with the Management Board outside the meetings, in particular with the Chairman of the Management Board. In case of important occasions or events, the Chairman of the Management Board promptly informed the Chairman of the Supervisory Board. In such cases, the Chairman of the Supervisory Board subsequently informed the other members of the Supervisory Board in the next meeting at the latest. During the entire fiscal year, the Chairman of the Supervisory Board also was in close contact with the other members of the Supervisory Board. In the year under review, the Chairman of the Supervisory Board was also available for communication with investors to the extent permitted by law and in close coordination with the Management Board.
Focus of the discussions in the Supervisory Board
One of the main focus areas of the Supervisory Board’s discussions in the past year were again strategic considerations. Measures discussed by the Supervisory Board related to both existing and potentially new business areas. Fresenius Medical Care wants to further grow in its core business with dialysis products and the treatment of dialysis patients. In the past year, Fresenius Medical Care therefore made targeted strategic complementary acquisitions, including a dialysis centre in the U.S. and a day clinic in Australia. In addition, Fresenius Medical Care made complementary investments for its core business with dialysis products and the treatment of dialysis patients, including the construction of a new laboratory in the U.S.
The business development, the competitive situation and the Management Board’s planning in the individual regions and functions were also at the centre of the Supervisory Board’s discussions. Another focus of the discussions and consultations were several extensive investment projects, inter alia, the expansion of supply chain capacities in North America as well as investments in the subsidiary Unicyte, a leading regenerative medicine company with translational programs (transferring the results of basic research into clinical applications) in the field of kidney disease and other diseases. In joint consultations with the
Management Board, the development of the production quantities and their expansion were discussed. In the past year, the Supervisory Board also informed itself about the quality assurance systems and about the results of the product quality testing in the production facilities.
In the past fiscal year, the Supervisory Board again discussed the development of cost reimbursement in the various health care systems, in particular in the U.S. A focus of the discussions was the Executive Order of the U.S. President to improve the price and quality transparency in the healthcare system of the U.S. With a view to the continued aim of increasing efficiency and the corresponding measures taken by the management already in previous years, the Supervisory Board also informed itself also in the last year about the success of the measures taken to improve the cost situation.
In the year under review a bond with a volume of US$500 million was successfully issued in June and bonds with an aggregate volume of €1.75 billion in November.
In addition, the Company launched a share buyback program with a volume of up to €1 billion in the year under review, under which it acquired treasury shares for a stock exchange price of approx. €600 million in total by the end of year 2019.
The Supervisory Board was regularly informed about the company’s compliance. Findings of the internal audit department were also taken into account. In particular, the Supervisory Board has informed itself intensively and on an ongoing basis about the negotiations successfully completed in March 2019 with the U.S. Department of Justice (DoJ) and the U.S. Securities and Exchange Commission (SEC) concerning violations of provisions of the US Foreign Corrupt Practices Act (“FCPA”) on which the company had voluntarily informed the two authorities already since the year 2012. The company has, in fulfilment of its obligations under the agreements concluded with the DoJ and the SEC, paid an amount of US$231.7 million in total to these two authorities. In addition, in coordination with the DoJ and the SEC, it has assigned an independent expert (“Monitor”) for a period of at least two years for monitoring the internal compliance, who reports directly to the two authorities. The Supervisory Board will continue to closely monitor this topic.
The Annual General Meeting of the Company on May 16, 2019 granted discharge to the General Partner and the Supervisory Board of the Company only
with a majority of 56.81% and 52.32% of the votes cast, respectively. Although it must be taken into account when assessing this voting result that Fresenius SE & Co. KGaA, which holds approximately 31 % of the voting rights in the Company, was excluded from participating in both resolutions, this voting result is not satisfactory from the point of view of the Supervisory Board. The Supervisory Board understands this as an indication from the shareholders to the Supervisory Board to further intensify the close supervision of the Management Board in the expansion of compliance measures to avoid comparable violations. To this end, the Supervisory Board will in particular continue to inform itself about the progress and findings of the Monitor’s investigations regarding the monitoring of internal compliance.
The Supervisory Board has formed committees from among its members that support the Supervisory Board as a whole in its supervisory and advisory functions. The respective chairmen have regularly reported to the Supervisory Board on the work of the committees. Details of the composition of the Supervisory Board’s committees can be found in the Declaration on Corporate Governance which can be found on pages 118 et seqq. of the annual report.
Audit and Corporate Governance Committee
The Audit and Corporate Governance Committee convened five times in the past fiscal year. In addition, six telephone conferences were held. All members of this committee are financial experts according to Sec. 100 para. 5 of the German Stock Corporation Act. Messrs. William P. Johnston (Chairman until the end of December 31, 2019) and Rolf A. Classon (Chairman since January 1, 2020) have specific knowledge and experience in applying accounting principles and internal control procedures. They are also familiar with auditing. As already reported in the previous year, the Supervisory Board resolved at its meeting on February 11, 2019 to appoint Ms. Pascale Witz as an additional member of this committee.
In the past year, the committee dealt with the annual and consolidated financial statements, the proposal for the allocation of profit and the report according to Form 20-F for the SEC. It also discussed the quarterly reports with the Management Board. Furthermore, it dealt with the selection and the independence of the auditor of the annual and consolidated financial statements. In doing so, it also considered any additional non-audit services provided. Also, the audit
engagement for the report according to Form 20-F, which comprises the consolidated financial statements according to the International Financial Reporting Standards (IFRS), was issued by the committee. The committee further negotiated the fee agreement with the auditor. Key audit matters of the past fiscal year were the impairment of goodwill of the cash-generating unit Latin America, the acquisition of NxStage Medical, Inc. and the first-time application of the new accounting standard “IFRS 16 — Leases”.
Representatives of the auditor participated in all meetings and telephone conferences of the committee and informed the members of the committee of their auditing activities. In addition, they provided information on any significant results of their audit and were available for additional information. In the absence of the members of the Management Board, they reported on the cooperation with them.
The Audit and Corporate Governance Committee dealt with the supervision of the accounting and its process, with the effectiveness of the internal control system, the risk management system, the internal audit system, the audit and compliance. With respect to the Company’s compliance, the committee accompanied, inter alia, the review triggered by the violations of provisions of the FCPA. The committee also dealt with the review of the internal control system. In particular, the cause and the measures to be taken in fiscal year 2020 to eliminate an identified material control weakness in the North America business segment was discussed. The material control weakness relates to the design and effectiveness of the internal controls for determining the transaction price and for limiting the variable compensation of the transaction price for certain revenue arrangements that are under legal clarification, and the timely adjustment of the variable compensation upon receipt of new information. The control weakness did not lead to any objections by the auditor to the correctness of the consolidated financial statements and the consolidated management report. Due to the significant control weakness, the auditor issued a qualified audit opinion in the report according to Form 20-F on February 20, 2020, regarding the internal accounting-related control system and the implementation of the relevant provisions of the Sarbanes-Oxley Act. In the course of its audit, the auditor audited the internal control and risk management system in relation to the financial reporting as well as the early risk recognition system. The audit showed that the General Partner has appropriately implemented the measures required under Sec. 91 para. 2 of the German Stock Corporation Act, in particular regarding the establishment of a monitoring system, and that the monitoring system is
suitable for the early identification of developments that may affect the Company’s ability to continue as a going concern. The Management Board periodically reported to the committee on larger individual risks. It also regularly informed the committee on the compliance situation as well as on the audit plans and results of the internal audit.
The committee again reviewed the business relations of the Fresenius Medical Care group companies to Fresenius SE & Co. KGaA and its affiliated companies. It was confirmed in each case that these relationships corresponded to those between unrelated third parties.
Certain transactions of the Company with related parties are subject to the approval of the Supervisory Board since the German Act Implementing the Second Shareholders’ Rights Directive came into force. The Supervisory Board has made use of the option to delegate the responsibility for the approval resolution to the Audit and Corporate Governance Committee.
The chairman of the Audit and Corporate Governance Committee has regularly reported to the Supervisory Board on the results of the discussions and resolutions in the committee.
Nomination Committee
The Nomination Committee prepares candidate proposals and proposes to the Supervisory Board of the Company suitable candidates for its election proposals to the General Meeting. In the past fiscal year, the Nomination Committee convened three times, including once by telephone conference, in particular to prepare the proposal for the election of Dr. Dorothea Wenzel as a member of the Supervisory Board by the 2019 Annual General Meeting. By resolution of December 4, 2019, the Supervisory Board elected Mr. Rolf A. Classon as Chairman of the Nomination Committee.
Joint Committee
The Company has a Joint Committee which is composed of two members of the supervisory board of the General Partner as well as two members of the Supervisory
Board of the Company. For certain matters, the Management Board requires the approval of the Joint Committee. In the past fiscal year, the Joint Committee did not convene since no meeting was required.
Special Joint Committee
In the year under review, the Supervisory Board of the Company and the Supervisory Board of the General Partner formed a special joint committee (Special Joint Committee).
The Special Joint Committee shall, within the scope of the responsibilities of the Supervisory Board, review any consequences of the findings of the Company’s agreements with the DoJ and the SEC in the year under review and make recommendations to the Supervisory Board. The Special Joint Committee has convened in three meetings and one telephone conference during the year under review. The Chairman of the Special Joint Committee regularly informs the Supervisory Board of the Company.
Corporate Governance
The Supervisory Board again reviewed the efficiency of its work and also dealt with the exchange of information with the Management Board as well as between the Supervisory Board and its committees. No objections arose in the course of such review.
In some cases, members of the Supervisory Board of the Company are also members of the Supervisory Board of the General Partner. This applies to Messrs. Rolf A. Classon, William P. Johnston and Dr. Dieter Schenk. In addition, Dr. Schenk is vice chairman of the supervisory board of Fresenius Management SE. Fresenius Management SE is the general partner of Fresenius SE & Co. KGaA. As of the end of the past fiscal year, Fresenius SE & Co. KGaA held approx. 31% of the shares in the Company. It is also the sole shareholder of Fresenius Medical Care Management AG.
In the year under review, no consulting or other service relationships between members of the Supervisory Board and the Company existed.
The Supervisory Board dealt with the provisions of the German Corporate Governance Code and their application in relation to the group of companies. The Supervisory Board considers, taking into account the shareholder structure, a number of at least four independent Supervisory Board members to be an adequate number of independent members and that the Supervisory Board and its committees do comprise an adequate number of independent members. Independent within the meaning of the recommendation no. 5.4.2 of the German Corporate Governance Code in the version dated February 7, 2017 are Mr. Rolf A. Classon, Mr. William P. Johnston, Dr. Dorothea Wenzel, Ms. Pascale Witz and Professor Dr. Gregor Zünd. In the assessment of the Supervisory Board Mr. Classon, Mr. Johnston, Dr. Wenzel, Ms. Witz and Professor Dr. Zünd are independent within the meaning of the recommendation C.7 of the German Corporate Governance Code in the version dated December 16, 2019.
The recommendation C.9 of the German Corporate Governance Code in the version dated December 16, 2019, according to which, in the event that the company has a controlling shareholder within the meaning of the German Corporate Governance Code, in the case of a Supervisory Board with six or fewer members at least one shareholder representative shall be independent of the controlling shareholder, does not apply to the Company because Fresenius SE & Co. KGaA is no controlling shareholder in this meaning given the lack of a sustainable majority at the Annual General Meeting. However, when presuming the applicability of this recommendation, Mr. Classon, Mr. Johnston, Dr. Wenzel, Ms. Witz and Prof. Dr. Zünd would be considered independent in this meaning.
There were no conflicts of interest of members of the Management Board or the Supervisory Board that would have been required to be disclosed to the Supervisory Board.
The profile of skills and expertise of the Supervisory Board is available on the Company’s website under www.freseniusmedicalcare.com/en in the section “About us” and there in the sub-section “Supervisory Board”. The Supervisory Board will strive to make its election proposals to the Annual General Meeting in accordance with the profile of skills and expertise. The status of implementation of the profile of skills and expertise is reported in the Corporate Governance Report.
The members of the Supervisory Board self-responsibly undertake educational and training measures required for their tasks, such as on changes in the legal
framework and on new, forward-looking technologies, and are thereby supported by the Company. For targeted training, internal information events are offered if required. New members of the Supervisory Board can meet the members of the Management Board and specialist managers for a discussion of fundamental and current topics and thereby gain an overview of the relevant topics of the company. In the year under review, a comprehensive introduction was given to the two new members of the Supervisory Board Dr. Dorothea Wenzel and Prof. Dr. Gregor Zünd by the Management Board and further employees of the Company at the group headquarters in Bad Homburg (“onboarding”).
Against the background that the German Corporate Governance Code in the version dated December 16, 2019 continues to retain the recommendation to set age limits for members of the management board and the supervisory board, the Supervisory Board also again addressed the question of whether and what age limits should be set for members of the Management Board and for members of the Supervisory Board. In view of the fact that the Supervisory Board has so far deviated in its practice in this respect from the corresponding recommendations of the German Corporate Governance Code, the Supervisory Board intends to examine this question in detail and with due care and, based on the current situation, assumes that the introduction and implementation of corresponding age limits is not expected before the year 2021.
The Supervisory Board also dealt with the compensation system for the members of the Management Board of the General Partner with a view to submitting it to the General Meeting. An outlook on the changes to the compensation system to be submitted to the Company’s Annual General Meeting 2020 for approval is provided in the compensation report, which can be found as an annex to the Corporate Governance Report on pages 131 et seqq. of the annual report.
Based on its discussions, the Supervisory Board resolved on the Declaration of Compliance in relation to the German Corporate Governance Code according to Sec. 161 of the German Stock Corporation Act. A Declaration of Compliance was published each in October 2019 and in December 2019. They are permanently available to the public on the Company’s website www.freseniusmedicalcare.com/en in the section “Investors” and there in the sub-section “Corporate Governance”.
The Corporate Governance Report of the General Partner and of the Supervisory Board together with the Declaration on Corporate Governance is available on
pages 118 et seqq. of the annual report. The Declaration on Corporate Governance was discussed by the Supervisory Board and approved in its meeting of March 10, 2020.
Annual and consolidated financial statements
The annual financial statements and the annual management report of Fresenius Medical Care AG & Co. KGaA were prepared in accordance with the regulations of the German Commercial Code (HGB). The consolidated financial statements and consolidated management report follow Sec. 315e of the German Commercial Code in accordance with IFRS as applicable in the European Union. Accountancy, the annual financial statements, the annual management report as well as the consolidated financial statements and the consolidated annual management report for 2019 were audited by KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin. Said company was elected as auditor by resolution of the Annual General Meeting of May 16, 2019 and mandated by the Supervisory Board. The auditor has provided each of the aforementioned documents with an unqualified certificate. The audit reports of the auditor were made available to the Audit and Corporate Governance Committee and the Supervisory Board. The Audit and Corporate Governance Committee reviewed the annual and consolidated financial statements as well as the management reports and included the audit reports of, and the discussions with, the auditor in its discussions. The Audit and Corporate Governance Committee reported to the Supervisory Board on this.
The Supervisory Board also reviewed the annual financial statements, the annual management report, the consolidated financial statements and the consolidated annual management report in each case for the past fiscal year. The documents were provided to it in good time. The Supervisory Board declared its agreement to the result of the audit of the annual financial statements and the consolidated financial statements by the auditor. The representatives of the auditor who signed the audit reports participated in the discussions of the Supervisory Board of the annual and consolidated financial statements. They reported to the Supervisory Board on the significant findings of their audit and were available for additional information. Also according to the final results of its own review, no objections are be raised by the Supervisory Board as regards the annual financial statements, the annual management report, the consolidated financial statements and the consolidated annual management.
In its meeting on February 19, 2020 the Supervisory Board discussed the draft of the report according to Form 20-F. The report according to Form 20-F was filed with the SEC on February 20, 2020.
The annual financial statements and annual management report of Fresenius Medical Care AG & Co. KGaA as well as the consolidated financial statements and the consolidated annual management report for the past fiscal year, as presented by the General Partner, were approved by the Supervisory Board at its meeting on March 10, 2020.
The Supervisory Board also approved the General Partner’s proposal for the application of profit which provides for a dividend of €1.20 for each share.
For the fiscal year 2019, the annual financial statements and the consolidated financial statements were audited by KPMG AG Wirtschaftsprüfungsgesellschaft for the last time until further notice. KPMG AG Wirtschaftsprüfungsgesellschaft was continuously the auditor of the annual financial statements of the Company since the initial public offering of the Company in the year 1996. The annual financial statements and the consolidated financial statements have been signed by Mr. Alexander Bock since the fiscal year 2017 and by Mr. Andreas Kast since the fiscal year 2016.
In the course of the so-called auditor rotation, the 2020 Annual General Meeting is to be proposed — as already reported in the previous year — to elect PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Frankfurt am Main, as auditor of the annual financial statements and consolidated financial statements for the fiscal year 2020. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Frankfurt am Main, was already elected by the 2019 Annual General Meeting as auditor for the potential review of interim financial information for fiscal year 2020 that is prepared prior to the 2020 Annual General Meeting.
Separate non-financial group report
The separate non-financial group report of Fresenius Medical Care AG & Co. KGaA was prepared in accordance with the regulations of the German Commercial Code (HGB) and will be published separately from the management report. Fresenius Medical Care reports selected non-financial information in reference to the international sustainability standard of the Global Reporting Initiative (GRI).
The Supervisory Board made use of the option to have the separate non-financial group report verified by an external auditor. The separate non-financial group report has been subject to a limited assurance engagement by KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, in accordance with the international standard on assurance engagements ISAE 3000. KPMG AG Wirtschaftsprüfungsgesellschaft issued a corresponding assurance statement.
The Supervisory Board reviewed the separate non-financial group report. The documents were provided to it in good time. The Supervisory Board declared its agreement with the result of the limited assurance engagement by the auditor. The representatives of the auditor who signed the note on the limited assurance engagement participated in the discussions of the Supervisory Board of the separate non-financial group report. They reported to the Supervisory Board on the significant findings of their limited assurance engagement and were available for additional information. Also according to the final results of its own review, no objections are be raised by the Supervisory Board as regards the separate non-financial group report.
Dependency report
The General Partner prepared a report on its relationships to Fresenius SE & Co. KGaA and the latter’s affiliates in accordance with Sec. 312 of the German Stock Corporation Act for the past fiscal year. The report contains the following final declaration:
“In conjunction with the legal transactions and measures set out in the report on relationships with affiliates, and on the basis of the circumstances of which we were aware at the time when the legal transactions were carried out or when the measures were taken or not carried out, FMC-AG & Co. KGaA has received adequate consideration for every legal transaction, and has not suffered any disadvantage as a result of the fact that measures have or have not been carried out.”
Both the Audit and Corporate Governance Committee and the Supervisory Board received the dependency report in good time and reviewed it. The auditor participated in the relevant meetings. It reported on the main results of its
audit and was available for additional information. On February 19, 2020, the auditor added the following certificate to the dependency report:
“Based on our audit and the conclusions reached, we confirm that 1. the disclosures made in the report are factually correct, 2. the consideration received or paid by the Company for each legal transaction disclosed in the report was not unreasonably high, 3. there are no other circumstances relating to the transactions and measures disclosed in the report which would lead to a conclusion different to the one reached by the personally liable shareholder (General Partner).”
The Audit and Corporate Governance Committee and the Supervisory Board concur with the assessment of the auditor. Following the final results of the review by the Supervisory Board, it does not raise any objections against the declaration of the General Partner at the bottom of the report on the relationships to affiliates.
Acknowledgements
Conclusively, the Supervisory Board thanks the members of the Management Board as well as all employees of the group for their commitment. Thank you very much for the successful work performed in a further challenging environment in the past fiscal year!
Bad Homburg v.d. Höhe, March 10, 2020
On behalf of the Supervisory Board
sgd. Dr. Dieter Schenk
Chairman
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Convenience Translation |
Explanatory report of the General Partner
on information according to Sec. 289a para. 1, Sec. 315a para. 1
of the German Commercial Code
The information contained in the management report to the group financial statements and the separate financial statements of Fresenius Medical Care AG & Co. KGaA for the fiscal year 2019 according to Sec. 289a para. 1, Sec. 315a para. 1 of the German Commercial Code (HGB) are explained as follows:
Share capital held by the Company’s shareholders (excluding treasury shares held by the Company) at December 31, 2019 totals approximately €298 M, divided into 298,329,247 non-par bearer shares, and a nominal value of €1 each. On the basis of the authorization granted by the Company’s Annual General Meeting on May 12, 2011 to conduct a share buy-back program, the Company repurchased 7,548,951 shares in 2013. The Company redeemed 6,549,000 of these repurchased shares on February 16, 2016. On the basis of the authorization granted by the Company’s Annual General Meeting on May 12, 2016 to conduct a share buy-back program, the Company repurchased further 660,000 shares between December 11, 2017, and December 21, 2017 (including) and further 431,000 shares between May 28, 2018 and June 8, 2018 (including). The company redeemed the 1,091,000 shares repurchased in 2017 and 2018 on December 12, 2018. In the period from March 12, 2019 to May 10, 2019 (including) the Company repurchased further 3,770,772 shares for an average weighted stock price of €71.55 on the basis of the authorization granted by the Company’s Annual General Meeting on May 12, 2016. The company redeemed the 3,770,772 shares repurchased in the period from March 12, 2019 to May 10, 2019 (including) on June 28, 2019. In the period from June 17, 2019 to December 31, 2019 (including) the Company repurchased further 5,107,678 shares for an average weighted stock price of 62.55 on the basis of the authorization granted by the Company’s Annual General Meeting on May 12, 2016. As of December 31, 2019, the Company therefore holds 6,107,629 treasury shares. Treasury shares held correspond to approximately €6.1 M or 2.01% of the Company’s share capital. Voting rights may not be exercised on treasury shares. The treasury shares were acquired in the course of share buyback programs on the stock exchange via the XETRA trading system and/or — for the share buyback program since June 17, 2019 - via selected multilateral trading facilities (MTF). Including treasury shares, the Company’s share capital therefore amounted to €304 M at December 31, 2019, divided into 304,436,876 shares. The acquired treasury shares will only be used to reduce the Company’s share capital (by cancellation of the relevant shares) or to service employee incentive plans.
The rights of the shareholders are governed by the German Stock Corporation Act (AktG) and the Company`s Articles of Association. This stipulates that each share shall be entitled to one vote at the Company’s Annual General Meeting.
The General Partner, Fresenius Medical Care Management AG, is responsible for managing and representing the Company. Similarly, it does not participate in the profit or loss or net assets of the Company. The General Partner’s management authority also encompasses exceptional management measures, which do not require approval by the shareholders. Vis-à-vis the General Partner, the Company is represented by its Supervisory Board.
The General Partner will cease to be General Partner of the Company if and when all shares in the General Partner entity are no longer held directly or indirectly by one party, which at the same time must hold, directly or indirectly by means of a controlled company as defined by sec. 17 para.1 AktG, more than 25% of the Company’s share capital. This does not apply if all the shares of the General Partner entity are held directly or indirectly by the Company. Additionally, the General Partner will cease to be the Company’s General Partner if the shares in the General Partner entity are acquired by another person
· who does not at the same time acquire shares of the Company in the amount of more than 25% of the Company’s capital or
· who has not, within three months after the effectiveness of such acquisition, submitted a voluntary or mandatory takeover offer to the Company’s shareholders according to the rules of the German Securities Acquisition and Takeover Act (WpÜG); the fair consideration offered to the shareholders must also reflect the consideration which the purchaser pays for the shares in the General Partner entity, if the amount for such consideration is above the amount of its equity capital.
The other grounds for withdrawal as provided by the law remain unaffected with respect to the General Partner.
As at December 31, 2019, Fresenius SE & Co. KGaA, Bad Homburg v. d. Höhe, Germany holds 94,380,382 shares of the Company, corresponding to 31.00% holding and hence in excess of 10% of the Company’s total share capital. After deduction of treasury shares held by the Company in accordance with sec. 16 para. 2 HGB sentence 2 AktG, Fresenius SE & Co. KGaA holds 31.64% of the Company’s voting rights.
The appointment and removal of members of the Management Board of the General Partner entity are governed by sec. 84 and sec. 85 AktG. Changes in the Articles of Association of the company must be made in accordance with sec. 278 para. 3 AktG, sec. 179 AktG in conjunction with sec. 133 AktG unless otherwise provided for in the Articles of Association. The Articles of Association entitle the Company’s Supervisory Board,
without resolution of the General Meeting, to make amendments to the Articles of Association which concern only its wording.
The General Partner is entitled, subject to approval by the Supervisory Board, to increase the Company’s share capital as follows in accordance with the resolutions passed by the shareholders at the General Meeting:
· authorization, in the period up to May 18, 2020 to increase, on one or more occasions, the Company’s share capital by up to a total of €35 M by issuing new bearer ordinary shares in return for cash contributions (Authorized Capital 2015/I).
· authorization, in the period up to May 18, 2020 to increase, on one or more occasions, the Company’s share capital by up to a total of €25 M by issuing new bearer ordinary shares in return for non-cash contributions (Authorized Capital 2015/II).
In both cases, the General Partner is entitled, with the approval of the Supervisory Board and in accordance with the resolutions passed at the General Meeting, to decide on the exclusion of shareholders’ pre-emption rights.
In addition to the above, the following conditional capital is in place:
· a conditional increase of up to €9.728 M. This conditional share capital increase will only be carried out to the extent that options were issued in accordance with the Stock Option Plan 2011 based on the shareholders’ resolutions taken on May 12, 2011 and May 12, 2016, the holders of such options exercise their rights and the Company does not issue any own (treasury) shares to settle the options; in the case of options issued to members of the Management Board of the General Partner entity, the Supervisory Board of that entity shall be responsible.
In accordance with the resolution taken at the Annual General Meeting on May 12, 2016, the general partner is authorized to acquire treasury shares until May 11, 2021 and up to a maximum of 10% of the share capital in place at the date of the resolution. At no stage shall the acquired shares together with other treasury shares held by the Company or attributable to it pursuant to sec. 71a ff. AktG exceed 10% of the Company’s share capital. The acquisition can be made via the stock exchange or by means of a public invitation to submit offers for sale. The authorization may not be used for the purposes of trading in its own shares. The general partner is authorized to use the shares of the Company acquired on the basis of this or an earlier authorization for all legally admissible purposes, in particular (i) to withdraw them from circulation without any requirement for a further resolution to be taken at the Annual General Meeting, (ii) to sell them to third parties in return for contributions in kind, (iii) rather than using conditional capital, to award them to employees of the Company and its affiliates (including to members of the executive managements of affiliates) and to use them to service rights or commitments to acquire
shares of the Company and (iv) to service bonds with option or conversion rights issued by the Company or by dependent companies as defined by sec. 17 AktG.
A change of control resulting from a takeover offer could, under certain circumstances, have an impact on several of the Company’s long-term financing arrangements, in which market standard change of control clauses are in place. These clauses give creditors the right to call for early repayment of outstanding amounts in the event of a change in control. In most of these financing agreements — in particular in case of the bonds which are placed in the capital markets — the right to terminate only exists, however, if the change of control involves the Company’s rating or the corresponding financing instrument being downgraded.
Hof an der Saale, March 2020
Fresenius Medical Care AG & Co. KGaA
represented by Fresenius Medical Care Management AG
as General Partner
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sgd. Rice Powell |
sgd. Helen Giza |
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Member of the Management Board |
Member of the Management Board |
SUPPLEMENTAL INFORMATION FOR HOLDERS OF AMERICAN DEPOSITARY SHARES TO ACCOMPANY THE INVITATION AND AGENDA FOR THE 2020 ANNUAL GENERAL MEETING
In this document (1) “FMC-AG & Co. KGaA”, the “Company”, “we” or “our” refer to Fresenius Medical Care AG & Co. KGaA, a German partnership limited by shares, (2) “Fresenius Medical Care AG” and “FMC-AG” refer to the Company as a German stock corporation before the transformation of our legal form into a partnership limited by shares; (3) “Fresenius SE” refers to Fresenius SE & Co. KGaA, a German partnership limited by shares resulting from the change of legal form of Fresenius SE (effective as of January 2011), a European company (Societas Europaea) previously called Fresenius AG, a German stock corporation. “Group” refers to the Company including its subsidiaries. Each of “Management AG”, “FMC Management AG” and the “General Partner” refers to Fresenius Medical Care Management AG, FMC-AG & Co. KGaA’s general partner and a wholly owned subsidiary of Fresenius SE. “Management Board” and “our Management Board” refer to the members of the management board of Management AG and, except as otherwise specified (see, e.g., “(iv) Compensation of the Management Board and the Supervisory Board”), “Supervisory Board” and “our Supervisory Board” refer to the supervisory board of FMC-AG & Co. KGaA. “THOUS” is used to denote the presentation of amounts in thousands and “M” is used to denote the presentation of amounts in millions. Share data are presented in actual amounts.
As a foreign private issuer under the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (“SEC”), we are not subject to the SEC’s proxy rules. However, under the stipulations of the Pooling Agreement among us, Fresenius SE, our General Partner and our independent directors, FMC-AG & Co. KGaA has agreed that in connection with any exercise of voting or consent rights by our shareholders, we will furnish to the SEC and make available for holders of our American Depositary Shares (“ADSs”) information which is generally comparable to that which would be provided by a U.S. corporation, except that we agreed to provide the following information as it would be provided by a foreign private issuer under the SEC’s rules:
· (i) Security Ownership of Certain Beneficial Owners of Fresenius Medical Care AG & Co. KGaA;
· (ii) Trading Markets for our Securities;
· (iii) Directors and Senior Management;
· (iv) Compensation of the Management Board and the Supervisory Board;
· (v) Options to Purchase Our Securities, and
· (vi) Material Transactions between FMC-AG & Co. KGaA and its subsidiaries and directors, officers and controlling persons of FMC-AG & Co. KGaA.
· The above information contained in this document, as well as the information in item (vii) “Principal Accountant Fees and Services,” has been derived principally from our Annual Report on Form 20-F for the year ended December 31, 2019 filed with the SEC (our “2019 20-F”).
Our 2019 20-F is available on the web site maintained by the SEC at www.sec.gov and on our web site at www.freseniusmedicalcare.com on the “News and Publications” page. The information in this document accompanies the information in the accompanying convenience translation of the Agenda and Invitation to the Annual General Meeting (“AGM”) to be held as a so-called virtual meeting without the presence of shareholders and their proxies on August 27, 2020 (the “2020 AGM Invitation”) and the other reports furnished with the 2020 AGM Invitation.
(i) Security Ownership of Certain Beneficial Owners of Fresenius Medical Care AG & Co. KGaA and Fresenius SE & Co. KGaA
Security ownership of certain beneficial owners of Fresenius Medical Care
Our outstanding share capital consists of shares issued only in bearer form. Accordingly, unless we receive information regarding acquisitions of our shares through a filing with the Securities and Exchange Commission or through the German statutory requirements referred to below, or except as described below with respect to our shares held in American Depositary Receipt (“ADR”) form, we face difficulties precisely determining who our shareholders are at any specified time or how many shares any particular shareholder owns.
Since we are a foreign private issuer under the rules of the Securities and Exchange Commission, our directors and officers are not required to report their ownership of our equity securities or their transactions in our equity securities pursuant to Section 16 of the Securities and Exchange Act of 1934. However, persons who become
“beneficial owners” of more than 5% of our shares are required to report their beneficial ownership pursuant to Section 13(d) of the Securities and Exchange Act of 1934.
In addition, under Article 19(1) of the Regulation (EU) No. 596/2014 of the European Parliament and of the Council of April 16, 2014 on market abuse (Market Abuse Regulation or “MAR”), persons discharging managerial responsibilities within an issuer of shares, as well as persons closely associated with them, are obliged to notify the issuer and the competent authority, i.e. for the Company as issuer, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht or “BaFin”), of every transaction conducted on their own account relating to the shares or debt instruments of the issuer or to derivatives or other financial instruments linked thereto no later than three business days after the date of the transaction. This notification obligation applies once the volume of all transactions of such person conducted within a calendar year exceeds a total amount of €5,000. As of January 1, 2020, the threshold is €20,000 per calendar year. Persons discharging managerial responsibilities, inter alia, include the members of management as well as supervisory boards.
In addition, holders of voting securities of a German company listed on the regulated market (Regulierter Markt) of a German stock exchange or a corresponding trading segment of a stock exchange within the European Union are, under Sections 33, 34 of the German Securities Trading Act (Wertpapierhandelsgesetz or “WpHG”), obligated to notify the company of held or attributed holdings whenever such holding reaches, exceeds or falls below certain thresholds, which have been set at 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% of a company’s outstanding voting rights. Such notification obligations will also apply pursuant to Section 38 of the WpHG to the direct or indirect holder of instruments granting an unconditional right to acquire voting rights when due or providing discretion as to the acquisition of shares or instruments that have a similar economic effect as well as pursuant to Section 39 of the WpHG to the aggregate of held or attributed voting rights and instruments (in each case excluding the 3% threshold). For threshold notifications furnished to us by third parties please see note 17 in the notes to the consolidated financial statements included in our 2019 20-F.
Based on notices the Company received pursuant to Section 33 et seq. of the WpHG through June 25, 2020 from the shareholders listed below, they held, as per the day of the notice, (directly or indirectly) three percent or more of its outstanding voting rights:
· According to a release pursuant to Section 40 para. 1 of the WpHG filed by BlackRock, Inc. on April 3, 2020, the various BlackRock entities named in the release pursuant to Section 40 para. 1 of the WpHG are the beneficial owners of a total of 9,503,066 shares, or 3.12% of our shares.
· According to a release pursuant to Section 40 para. 1 of the WpHG filed by Artisan Partners Asset Management Inc. on June 24, 2020, Artisan Partners Limited Partnership is the beneficial owner of a total of 9,188,224 shares, or 3.02% of our shares.
· We have been informed that as of May 11, 2020, Fresenius SE owned 32.2% of our shares.
All notifications made by shareholders in accordance with the WpHG are published on the Company’s website (www.freseniusmedicalcare.com) under “Investors — Shares — Shareholder Structure”.
As the sole shareholder of our General Partner, Fresenius SE is barred from voting its shares on certain matters. See Item 16G, “Corporate governance — Supervisory Board” in our 2019 20-F. Subject to any applicable statutory limitations, all of our outstanding shares have the same voting rights.
As of December 31, 2019, no member of our Supervisory Board, the supervisory board of our General Partner or the Management Board beneficially owned 1% or more of our outstanding shares, according to the most recent information available. See Item “(iv) Compensation of the Management Board and the Supervisory Board.” Additionally, stock option and other share-based plans are discussed in detail in note 20 of the notes to our consolidated financial statements included in our 2019 20-F. For information regarding outstanding options to purchase our ordinary shares, see “(v) Options to purchase our securities - Information on holdings under share-based plans.”
Bank of New York Mellon, our ADR depositary, informed us, that as of December 31, 2019, 16,906,846 ADRs were held of record by 2,711 U.S. holders. For more information regarding ADRs and ADSs see Item 10B, “Articles of Association — Description of American depositary receipts” in our 2019 20-F.
Security ownership of certain beneficial owners of Fresenius SE
Fresenius SE’s share capital consists solely of ordinary shares, issued only in bearer form. Accordingly, Fresenius SE has difficulties precisely determining who its shareholders are at any specified time or how many shares any particular shareholder owns. However, under the WpHG, holders of voting securities of a German company listed on the regulated market (Regulierter Markt) of a German stock exchange or a corresponding trading segment of a
stock exchange within the European Union are obligated to notify a company of certain levels of holdings, as described above.
The Else Kröner-Fresenius-Stiftung is the sole shareholder of Fresenius Management SE, the general partner of Fresenius SE, and has sole power to elect the supervisory board of Fresenius Management SE. In addition, based on the most recent information available, Else Kröner-Fresenius-Stiftung owns approximately 26.61% of the Fresenius SE ordinary shares. See item (vi), “Material Transactions between FMC-AG & Co. KGaA and its Subsidiaries and Directors, Officers and Controlling Persons of FMC-AG & Co. KGaA” below.
(ii) Trading Markets for our Securities
The principal trading market for our shares is the Frankfurt Stock Exchange (FWB® Frankfurter Wertpapierbörse). The ordinary shares of Fresenius Medical Care AG had been listed on the Frankfurt Stock Exchange since October 2, 1996. Trading in the ordinary shares of FMC-AG & Co. KGaA on the Frankfurt Stock Exchange commenced on February 13, 2006 under the symbol FME.
Our shares have been listed on the Regulated Market (Regulierter Markt) of the Frankfurt Stock Exchange and on the Prime Standard of the Regulated Market, which is a sub-segment of the Regulated Market with additional post-admission obligations. Admission to the Prime Standard requires the fulfillment of the following transparency criteria: publication of quarterly reports; preparation of financial statements in accordance with international accounting standards (International Financial Reporting Standards, “IFRS,” or U.S. Generally Accepted Accounting Principles; publication of a company calendar; convening of at least one analyst conference per year; and publication of ad-hoc messages (i.e., certain announcements of material developments and events) in English. Companies aiming to be listed in this segment have to apply for admission. Listing in the Prime Standard is a prerequisite for inclusion of shares in the selection indices of the Frankfurt Stock Exchange, such as the DAX®, the index of 30 major German stocks.
ADSs representing the ordinary shares of Fresenius Medical Care AG had been listed on the New York Stock Exchange (“NYSE”) since October 1, 1996. Trading in the ADSs representing the ordinary shares of FMC-AG & Co. KGaA on the NYSE, under the symbol FMS, commenced in February of 2006. Effective December 3, 2012, we effected a two-for-one split of our outstanding ADSs, which changed the ratio our ADSs to shares from one ADSs representing one share to two ADSs representing one share. The Depositary for the ADSs is Bank of New York Mellon (the “Depositary”). For more information regarding ADRs see Item 10B. “Articles of Association — Description of American depositary receipts” in our 2019 20-F.
Trading on the Frankfurt Stock Exchange
Deutsche Börse AG operates the Frankfurt Stock Exchange, which is the largest of the six German stock exchanges by value of shares traded. Our shares are traded on Xetra, the electronic trading system of the Deutsche Börse. The trading hours for Xetra are between 9:00 a.m. and 5:30 p.m. Central European Time (“CET”). Only brokers and banks that have been admitted to Xetra by the Frankfurt Stock Exchange have direct access to the system and may trade on it. Private investors can trade on Xetra through their banks and brokers.
Deutsche Börse AG publishes information for all traded securities on the Internet, http://www.deutsche-boerse.com.
Transactions on Xetra and the Frankfurt Stock Exchange settle on the second business day following the trade except for trades executed on Xetra International Markets, the European Blue Chip segment of Deutsche Börse AG, which settle on the third business day following a trade. The Frankfurt Stock Exchange can suspend a quotation if orderly trading is temporarily endangered or if a suspension is deemed to be necessary to protect the public.
The Hessian Stock Exchange Supervisory Authority (Hessische Börsenaufsicht) and the Trading Monitoring Unit of the Frankfurt Stock Exchange (HÜST Handelsüberwachungsstelle) both monitor trading on the Frankfurt Stock Exchange.
BaFin, an independent federal authority, is responsible for the general supervision of securities trading pursuant to MAR, WpHG and other applicable laws.
Dividends
We generally pay annual dividends on our shares in amounts that we determine on the basis of FMC-AG & Co. KGaA’s prior year’s retained earnings (Bilanzgewinn) as shown in the statutory unconsolidated financial statements that we prepare under German law on the basis of the accounting principles of the German Commercial Code (Handelsgesetzbuch or HGB). The payment of dividends is subject to approval by a resolution of the general
meeting of shareholders. Our goal is for the dividend development to be closely aligned with our growth in basic earnings per share, while maintaining dividend continuity.
The General Partner and our Supervisory Board propose dividends to the AGM and the AGM approves dividends. The dividends are paid in respect of the fiscal year preceding the respective AGM. Since all of our shares are in bearer form, we remit dividends to the depositary bank (Depotbank) on behalf of the shareholders.
The table below provides information regarding the annual dividend per share that we paid on our shares. These payments were made in the years shown in the table. They relate to the results of operations in the year preceding the payment.
|
|
|
2019 |
|
2018 |
|
2017 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Per share amount |
|
€ |
1.17 |
|
€ |
1.06 |
|
€ |
0.96 |
|
At our AGM on August 27, 2020, our General Partner and our Supervisory Board will propose to the shareholders a dividend of €1.20 per share for 2019, payable in 2020. The dividend is subject to approval by our shareholders at our AGM, as described in the 2020 AGM Invitation.
Holders of ADSs will be entitled to receive cash dividends on the shares represented by the respective ADSs. We will pay any cash dividends payable to such holders to the depositary in euros and, subject to certain exceptions, the depositary will convert the dividends into U.S. dollars and, after deduction of its fees and any taxes, distribute the dividends to ADS holders. See Item 10, “Additional information — Description of American depositary receipts — Share dividends and other distributions” in our 2019 20-F. Fluctuations in the exchange rate between the U.S. dollar and the euro will affect the amount of dividends that ADS holders receive. Dividends paid to holders and beneficial holders of the ADSs will be subject to deduction of German withholding tax. You can find a discussion of German withholding tax in “Item 10.E. Taxation” in our 2019 20-F.
(iii) Directors and Senior Management
General
As a partnership limited by shares, under the German Stock Corporation Act (Aktiengesetz or “AktG”), our corporate bodies are our General Partner, our Supervisory Board and our general meeting of shareholders. Our sole General Partner is Management AG, a wholly-owned subsidiary of Fresenius SE. Management AG is required to devote itself exclusively to the management of Fresenius Medical Care AG & Co. KGaA.
For a detailed discussion of the legal and management structure of Fresenius Medical Care AG & Co. KGaA, including the more limited powers and functions of the Supervisory Board compared to those of the General Partner, see Item 16G, “Corporate governance — The legal structure of FMC-AG & Co. KGaA” in our 2019 20-F.
Our General Partner has a supervisory board and a management board. These two boards are separate and no individual may simultaneously serve as a member on both boards. A person may, however, serve on both the supervisory board of our General Partner and on our Supervisory Board.
The General Partner’s Supervisory Board
The supervisory board of Management AG consists of six members who are elected by Fresenius SE (acting through its general partner, Fresenius Management SE), the sole shareholder of Management AG. Pursuant to a pooling agreement for the benefit of the public holders of our shares, at least one-third (but no fewer than two) of the members of the General Partner’s supervisory board are required to be independent directors as defined in the pooling agreement, i.e., persons with no substantial business or professional relationship with us, Fresenius SE, the General Partner, or any affiliate of any of them.
Unless resolved otherwise by Fresenius SE in the general meeting of shareholders of Management AG, the terms of each of the members of the supervisory board of Management AG will expire at the end of the general meeting of shareholders held during the fourth fiscal year following the year in which the Management AG supervisory board member was elected by Fresenius SE, but not counting the fiscal year in which such member’s term begins. Fresenius SE, as the sole shareholder of Management AG, is at any time entitled to re-appoint members of the Management AG supervisory board. The most recent election of members of the General Partner’s supervisory board took place in May 2016. Members of the General Partner’s supervisory board may be removed only by a court decision or by a resolution of Fresenius SE in its capacity as sole shareholder of the General Partner. Neither our shareholders nor our separate Supervisory Board has any influence on the appointment of the supervisory board of the General Partner.
The General Partner’s supervisory board ordinarily acts by simple majority vote and the Chairman has a tie-breaking vote in case of any deadlock. The principal function of the General Partner’s supervisory board is to appoint and to supervise the General Partner’s Management Board in its management of the Company and to approve mid-term
planning, dividend payments and other matters which are not in the ordinary course of business and are of fundamental importance to us. The General Partner’s supervisory board is also responsible for determining the compensation for the individual members of the Management Board as well as determining and reviewing the compensation system for the members of the Management Board.
The table below provides the names of the current members of the supervisory board of Management AG and their ages. Dr. Schenk, Mr. Classon and Mr. Johnston are also members of the Supervisory Board of FMC AG & Co. KGaA.
|
Name |
|
Age as of |
|
|
Mr. Stephan Sturm, Chairman(1) |
|
56 |
|
|
Dr. Dieter Schenk, Vice Chairman(1) (4) |
|
67 |
|
|
Dr. Gerd Krick(1) |
|
81 |
|
|
Mr. Rolf A. Classon(1) (2) (3) (4) |
|
74 |
|
|
Mr. William P. Johnston(1) (2) (3) (4) |
|
75 |
|
|
Ms. Rachel Empey |
|
43 |
|
(1) Members of the Human Resources Committee of the supervisory board of Management AG.
(2) Members of the Audit and Corporate Governance Committee of FMC-AG & Co. KGaA. See “Board Practices,” below.
(3) Independent director for purposes of our pooling agreement.
(4) Member of the Regulatory and Reimbursement Assessment Committee of the supervisory board of Management AG. See “Board Practices,” below.
MR. STEPHAN STURM has been Chairman of the Management Board of Fresenius Management SE since July 1, 2016, after serving for over 11 years as Fresenius Management SE’s Chief Financial Officer. Prior to joining Fresenius in 2005, he was a Managing Director of Credit Suisse First Boston (“CSFB”), from 2000 as Head of Investment Banking for Germany and Austria, and also served on CSFB’s European Management Committee. During his more than 13 years in investment banking, Stephan Sturm held various executive positions with BHF-Bank, Union Bank of Switzerland and CSFB in Frankfurt and London. Prior to entering investment banking in 1991, he was a management consultant at McKinsey & Co in Duesseldorf and Frankfurt. Mr. Stephan Sturm holds a degree in Business from Mannheim University. Additionally, Mr. Sturm is the Chairman of the supervisory board of Fresenius Kabi AG, Vice Chairman of the supervisory board of Vamed AG, Austria as well as a member of the supervisory board of Deutsche Lufthansa AG.
DR. DIETER SCHENK has been Vice Chairman of the supervisory board of Management AG since 2005 and is Vice Chairman of the supervisory board of Fresenius Management SE. Dr. Schenk was elected as the Chairman of our Supervisory Board in 2018; previously Dr. Schenk served as the Vice Chairman of our Supervisory Board. He is an attorney and tax advisor and was a partner in the law firm Noerr LLP (formerly Nörr Stiefenhofer Lutz) from 1986 until December 31, 2017. Additionally, he also serves as the Chairman of the supervisory board of Gabor Shoes AG, HWT invest AG (formerly Bank Schilling & Co. AG) and TOPTICA Photonics AG. Dr. Schenk is also Chairman of the Foundation Board of Else Kröner-Fresenius-Stiftung, the sole shareholder of Fresenius Management SE, which is the sole general partner of Fresenius SE & Co. KGaA.
MR. ROLF A. CLASSON has been a member of the supervisory board of Management AG since July 7, 2011 and a member of our Supervisory Board since May 12, 2011. Mr. Classon also has served on the Board of Directors of Catalent Inc. since August 2014 and as a member of the Board of Directors of Perrigo Company plc, since May 8, 2017. Mr. Classon was the Chairman of the Board of Directors for Hill-Rom Holdings, Inc. until March 6, 2018 as well as the Chairman of the Board of Directors for Tecan Group Ltd. until April 18, 2018.
MR. WILLIAM P. JOHNSTON has been a member of the supervisory board of Management AG since May 2006 and also serves on our Supervisory Board. Mr. Johnston was an Operating Executive of The Carlyle Group until February 29, 2019.
MS. RACHEL EMPEY became the Chief Financial Officer of Fresenius Management SE on August 1, 2017 and a member of the supervisory board of Management AG on September 1, 2017. Prior to August 1, 2017, she served as Chief Financial and Strategy Officer of Telefónica Deutschland Holding AG and as a member of the Telefónica Deutschland Management Board, starting in 2011. Previously, Ms. Empey held a number of key international finance and controlling positions in the Telefónica group. She started her career as an audit executive at Ernst & Young and business analyst at Lucent Technologies. Ms. Empey is a chartered accountant and holds an MA (Hons) in Mathematical Sciences from the University of Oxford. Additionally, Ms. Empey has been the Vice Chairman of the supervisory board of Fresenius Kabi AG since October 2017 and has served on the Board of Directors of Inchcape plc since May 2016.
DR. GERD KRICK has been a member of the supervisory board of Management AG since December 2005 and was Chairman of our Supervisory Board until May 17, 2018. He is the Chairman of the supervisory board of
Fresenius Management SE and of Fresenius SE & Co. KGaA. Dr. Gerd Krick is also Chairman of the supervisory board of Vamed AG, Austria.
The General Partner’s Management Board
Each member of the Management Board of Management AG is appointed by the supervisory board of Management AG for a maximum term of five years and is eligible for reappointment thereafter. Their terms of office expire in the years listed below.
The table below provides names, positions and terms of office of the current members of the Management Board of Management AG and their ages:
|
Name |
|
Age as of |
|
Position |
|
Year term |
|
|
|
|
|
|
|
|
|
Mr. Rice Powell |
|
64 |
|
Chief Executive Officer and Chairman of the Management Board |
|
2022 |
|
Ms. Helen Giza |
|
51 |
|
Chief Financial Officer |
|
2022 |
|
Mr. William Valle |
|
59 |
|
Chief Executive Officer for the North America Segment |
|
2025 |
|
Dr. Olaf Schermeier |
|
47 |
|
Chief Officer of Global Research & Development |
|
2021 |
|
Mr. Kent Wanzek |
|
60 |
|
Chief Executive Officer of Global Manufacturing, Quality & Supply |
|
2022 |
|
Mr. Harry de Wit |
|
57 |
|
Chief Executive Officer for the Asia-Pacific Segment |
|
2023 |
|
Dr. Katarzyna Mazur-Hofsäß |
|
56 |
|
Chief Executive Officer for the EMEA Segment |
|
2021 |
|
Franklin W. Maddux, MD |
|
62 |
|
Global Chief Medical Officer |
|
2022 |
MR. RICE POWELL has been with the Company since 1997. He became Chairman and Chief Executive Officer of the Management Board of Management AG effective January 1, 2013. Mr. Powell is also a member of the Management Board of Fresenius Management SE and of the Board of Administration of Vifor Fresenius Medical Care Renal Pharma, Ltd., Switzerland. Mr. Powell was the Chief Executive Officer and director of Fresenius Medical Care North America until December 31, 2012. Mr. Powell has more than 40 years of experience in the health care industry, which includes various positions with Baxter International Inc., Biogen Inc., and Ergo Sciences Inc.
MS. HELEN GIZA was appointed Chief Financial Officer of the Management Board of Management AG effective November 1, 2019. Prior to joining Fresenius Medical Care, Ms. Giza held a number of key international finance and controlling positions at Takeda Pharmaceuticals, TAP Pharmaceuticals and Abbott Laboratories.
MR. WILLIAM VALLE was appointed Chief Executive Officer for Fresenius Medical Care North America (“FMCNA”) effective January 2017 and a member of the Management Board of Management AG on February 17, 2017. Prior to that, Mr. William Valle was executive vice president responsible for the dialysis service business and vascular access business of FMCNA from 2014 to 2017. Mr. Valle joined FMCNA in 2009 and has approximately 30 years of experience in the dialysis industry, holding executive positions in sales, marketing and business development at several dialysis companies including Gambro Healthcare, Inc.
DR. OLAF SCHERMEIER was appointed Chief Executive Officer for Global Research and Development on March 1, 2013. Dr. Schermeier serves on the supervisory board of Xenios AG. Prior to joining FMC-AG & Co. KGaA, Dr. Schermeier served as President of Global Research and Development for Dräger Medical, Lübeck, Germany. Dr. Schermeier has many years of experience in various areas of the health care industry, among others at Charité clinic and at Biotronik, Germany.
MR. KENT WANZEK has been with the Company since 2003. Mr. Wanzek is a member of the Management Board of Management AG since January 1, 2010 with responsibility for Global Manufacturing, Quality & Supply and prior to joining the Management Board had been in charge of North American operations for the Renal Therapies Group at FMCNA since 2004. Mr. Wanzek held several senior executive positions with companies in the health care industry, including Philips Medical Systems, Perkin-Elmer, Inc. and Baxter Healthcare Corporation.
MR. HARRY DE WIT assumed the role of Chief Executive Officer for the Asia-Pacific Segment on April 1, 2016. Mr. de Wit has worked in the medical device industry for more than 25 years. Mr. de Wit holds a master’s degree in Medicine from the VU University of Amsterdam in the Netherlands and a Bachelor of Science in Physiotherapy from the School of Physiotherapy of Den Bosch in the Netherlands. Mr. de Wit has been a non-executive member of the Board of Directors of New Asia Investments Pte Ltd. since March 25, 2014.
DR. KATARZYNA MAZUR-HOFSÄß assumed the role of Chief Executive Officer for the EMEA Segment on September 1, 2018. Before joining the Company, she had been president for EMEA at the med-tech company Zimmer Biomet since 2013. She has 25 years of professional experience and held various positions in the medical and pharmaceutical industry from her positions, among others, at Abbott Laboratories and Roche.
FRANKLIN W. MADDUX, MD was appointed Global Chief Medical Officer in 2019 and appointed to the Management Board on January 1, 2020. He is an expert nephrologist, IT entrepreneur and healthcare executive with more than 30 years of experience in healthcare. He joined the Company in 2009 and was appointed Executive Vice President for Clinical & Scientific Affairs and Chief Medical Officer for Fresenius Medical Care North America in 2011, where he was responsible for the delivery of high-quality, value-based care for the largest integrated renal care network on the continent.
The business address of all members of our Management Board and Supervisory Board is Else-Kröner-Strasse 1, 61352 Bad Homburg, Germany.
The Supervisory Board of FMC-AG & Co. KGaA
Our Supervisory Board consists of six members who are elected by the shareholders of FMC-AG & Co. KGaA in a general meeting. Generally, the terms of office of the members of the Supervisory Board will expire at the end of the general meeting of shareholders of FMC-AG & Co. KGaA in which the shareholders discharge the Supervisory Board for the fourth fiscal year following the year in which they were elected, but not counting the fiscal year in which such member’s term begins. The next regular elections will take place in 2021. Before the expiration of their term, members of the Supervisory Board may be removed only by a court decision or by a resolution of the shareholders of FMC-AG & Co. KGaA with a majority of three quarters of the votes cast at such general meeting.
Fresenius SE, as the sole shareholder of Management AG, our General Partner, is barred from voting for election and/or removal of members of the Supervisory Board as well as from voting on discharge of the Supervisory Board, but it nevertheless has and will retain significant influence over the membership of the Supervisory Board in the foreseeable future. See Item 16G, “Corporate governance — The legal structure of FMC-AG & Co. KGaA” in our 2019 20-F.
The current Supervisory Board consists of six persons, three of whom — Messrs. Schenk (Chairman), Classon (Vice Chairman) and Johnston — are also members of the supervisory board of our General Partner. For information regarding those members of the supervisory board, see “The General Partner’s Supervisory Board,” above. The ages listed below are as of December 31, 2019.
MS. PASCALE WITZ, 53, has been a member of the Supervisory Board since May 12, 2016. Ms. Witz was the Executive Vice President of Global Diabetes and Cardiovascular of Sanofi S.A. as well as on Sanofi’s executive committee (equivalent to management board), prior to which she held other executive positions in Sanofi S.A. and with GE Healthcare and Becton Dickinson. Ms. Witz has served on the Board of Directors of Regulus Therapeutics Inc. since June 1, 2017, Horizon Therapeutics plc (formerly Horizon Pharma plc) since August 3, 2017 and Perkin Elmer Inc. since October 30, 2017. Additionally, Ms. Witz is president of PWH ADVISORS SASU, since November 2016, and the CEO of PWH ADVISORS LLC.
PROF. DR. GREGOR ZÜND, 60, was appointed as a new member of the Supervisory Board on October 29, 2018. Prof. Dr. Zünd has been Chief Executive Officer of the University Hospital of Zurich since 2016. As Director of Research and Education he has been a member of the hospital’s executive board since 2008. In parallel, he has been Managing Director of the Center for Clinical Research and Head of the Surgical Research department at University Hospital Zurich. Until 2001, Prof. Zünd was Senior Physician at the Clinic for Cardiovascular Surgery at University Hospital Zurich. He spent several years at Texas Medical Center, Houston, and at Harvard Medical School, Boston. Gregor Zünd is Professor ad personam at the University of Zurich.
DR. DOROTHEA WENZEL, 50, became a member of the Supervisory Board effective May 16, 2019 and is currently the Executive Vice President and Head of the Global Business Unit Surface Solutions at Merck KGaA. Dr. Wenzel has previously held a number of finance and business positions in the health care industry at Merck KGaA, AXA Krankenversicherung AG and Medvantis Holding AG. Dr. Wenzel was also a Member of the Staff of the Committee for the Sustainability of the Financing of the Social Security Systems of the Federal Ministry of Health (Germany). Dr. Wenzel holds a doctorate in Health Economics and a diploma in business & computer sciences from the Technical University of Darmstadt.
The principal function of the Supervisory Board is to oversee the management of the Company but, in this function, the supervisory board of a partnership limited by shares has less power and scope for influence than the supervisory board of a stock corporation. The Supervisory Board is not entitled to appoint the General Partner or its executive bodies, nor may it subject the General Partner’s management measures to its consent or issue rules of procedure for the General Partner. Only the supervisory board of Management AG, elected solely by Fresenius SE, has the authority to appoint or remove members of the General Partner’s Management Board. See Item 16G, “Corporate governance — The legal structure of FMC-AG & Co. KGaA” in our 2019 20-F. Among other matters, the Supervisory Board will, together with the General Partner, determine the agenda for the AGM and make recommendations with respect to the approval of the Company’s financial statements and dividend proposals. The Supervisory Board will
also propose nominees for election as members of the Supervisory Board. The Audit and Corporate Governance Committee also recommends to the Supervisory Board a candidate as the Company’s auditor to audit our German statutory financial statements to be proposed by the Supervisory Board to our shareholders for approval and, as required by the SEC and NYSE audit committee rules, retains the services of our independent auditors to audit or review our IFRS financial statements included in the periodic reports that we file with the SEC.
Governance Matters and Board Practices
ADSs representing our shares are listed on the NYSE. However, because we are a “foreign private issuer,” as defined in the rules of the SEC, we are exempt from substantially all of the governance rules set forth in Section 303A of the NYSE’s Listed Companies Rules, other than the obligation to maintain an audit committee in accordance with SEC Rule 10A-3 under the Exchange Act, the obligation to notify the NYSE if any of our executive officers becomes aware of any material non-compliance with any applicable provisions of Section 303A, the obligation to file annual and interim written affirmations, on forms mandated by the NYSE, relating to our compliance with applicable NYSE governance rules, and the obligation to disclose the significant ways in which the governance standards that we follow differ from those applicable to U.S. companies under the NYSE governance rules. Many of the governance reforms instituted by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including the requirements to provide shareholders with “say-on-pay” and “say-on-when” advisory votes related to the compensation of certain executive officers, are implemented through the SEC’s proxy rules. Because foreign private issuers are exempt from the proxy rules, these governance rules are not applicable to us. However, the compensation system for our Management Board is reviewed by an independent external compensation expert as amendments to the system are made, the most recent review having been conducted in 2019. See item (iv) below, “Compensation of the Management Board and the Supervisory Board.” Similarly, the more detailed disclosure requirements regarding management compensation applicable to U.S. domestic companies (including requirements for pay ratio disclosure and a proposal for disclosure of the relationship between executive compensation actually paid and a registrant’s financial performance issued in 2015 but currently on the SEC’s “long-term actions” agenda without a target date for adoption) are found in SEC Regulation S-K, whereas compensation disclosure requirements for foreign private issuers are set forth in Form 20-F. That form generally limits our compensation disclosure obligations to the information we disclose under German law. Pursuant to German law, we prepare a Compensation Report on the basis of the recommendations of the German Corporate Governance Code. See “(iv) Compensation of the Management Board and the Supervisory Board” below. In 2015 the SEC also issued its proposed compensation “clawback” rule which would direct U.S. stock exchanges to establish listing standards that would require listed issuers to develop, implement and disclose policies providing for the recovery, under certain circumstances, of incentive-based compensation based on financial information that is subsequently restated. The proposal received extensive comments from issuers and participants in the securities markets. It has not been withdrawn and in 2019, action on the proposed rule was moved from the SEC’s “long-term actions” agenda to its “current” agenda. Under the terms and conditions of our Fresenius Medical Care Long-Term Incentive Plan 2016 (“LTIP 2016”) and our Fresenius Medical Care Management AG Management Board Long-Term Incentive Plan 2019 (“MB LTIP 2019”) (see item (iv) below, “Compensation of the Management Board and the Supervisory Board”), and the employment contracts concluded or prolonged with individual members of the Management Board as from January 1, 2018, the Company is entitled to reclaim certain previously earned and paid compensation components. Such right to reclaim exists in case of relevant violations of internal guidelines or undutiful conduct. If the SEC’s proposed clawback rule is eventually adopted as proposed, requirements of that rule would apply to both U.S. domestic and foreign private issuers and would impose clawback requirements without fraud or other misconduct as a necessary prerequisite. Subject to the exceptions noted above, instead of applying their governance and disclosure requirements to foreign private issuers, the rules of both the SEC and the NYSE require that we disclose the significant ways in which our corporate practices differ from those applicable to U.S. domestic companies under NYSE listing standards.
As a German company FMC-AG & Co. KGaA follows German corporate governance practices. German corporate governance practices generally derive from the provisions of the AktG, capital market related laws, the German Codetermination Act (Mitbestimmungsgesetz or “MitBestG”) and the German Corporate Governance Code. Our Articles of Association also include provisions affecting our corporate governance. German standards differ from the corporate governance listing standards applicable to U.S. domestic companies which have been adopted by the NYSE. See Item 16.G “Corporate governance” in our 2019 20-F for information regarding our organizational structure, management arrangements and governance, including information regarding the legal structure of a KGaA, management by a general partner, certain provisions of our Articles of Association and the role of the Supervisory Board in monitoring the management of our company by our General Partner. Item 16.G. of our 2019 20-F includes a brief general summary of the principal differences between German and U.S. corporate governance practices, together with, as appropriate, a comparison to U.S. principles or practices.
For information relating to the terms of office of the Management Board and the supervisory board of the General Partner, Management AG, and of the Supervisory Board, and the periods in which the members of those bodies have served in office, see item (iii), “Directors and Senior Management,” above. For information regarding certain compensation payable to certain members of the General Partner’s Management Board after termination of employment, see item (iv), “Compensation of the Management Board and the Supervisory Board - Commitments to the members of the Management Board for the event of termination of their appointment” below. Determination of the compensation system and of the compensation to be granted to the members of the Management Board is made by the full supervisory board of Management AG. It is assisted in these matters, particularly evaluation and assessment of the compensation of the members of the General Partner’s management board, by the Human
Resources Committee of the General Partner’s supervisory board, the members of which are currently Stephan Sturm (Chairman) Dr. Gerd Krick (Vice Chairman), Rolf A. Classon, William P. Johnston, and Dr. Dieter Schenk.
The Audit and Corporate Governance Committee of the Supervisory Board currently consists of Rolf A. Classon (Chairman since January 1, 2020, Vice Chairman until December 31, 2019), William P. Johnston (Vice Chairman since January 1, 2020, Chairman until December 31, 2019), and Pascale Witz, all of whom are independent directors for purposes of SEC Rule 10A-3 and NYSE Rule 303A.06. The primary function of the Audit and Corporate Governance Committee is to assist FMC-AG & Co. KGaA’s Supervisory Board in fulfilling its oversight responsibilities, primarily through:
· overseeing FMC-AG & Co. KGaA’s accounting and financial reporting processes, the performance of the internal audit function and the effectiveness of the internal control systems;
· overseeing the independence and performance of FMC-AG & Co. KGaA’s outside auditors
· overseeing the effectiveness of our systems and processes utilized to comply with relevant legal and regulatory standards for global health care companies, including adherence to our Code of Ethics and Business Conduct;
· overseeing the effectiveness of our risk management system;
· overseeing our corporate governance performance according to the German Corporate Governance Code;
· providing an avenue of communication among the outside auditors, management and the Supervisory Board;
· overseeing our relationship with Fresenius SE & Co. KGaA and its affiliates and reviewing the report of our General Partner on relations with related parties and for reporting to the overall Supervisory Board thereon;
· recommending to the Supervisory Board a candidate as an independent auditor to audit our German statutory financial statements (to be proposed by the Supervisory Board for election by our shareholders at our AGM) and approval of their fees;
· retaining the services of our independent auditors to audit our consolidated financial statements and approval of their fees; and
· pre-approval of all audit and non-audit services performed by our independent auditors.
The Audit and Corporate Governance Committee has also been in charge of conducting the internal investigation described in Item 15B, “Management’s annual report on internal control over financial reporting” in our 2019 20-F.
In 2005, we established a joint committee (the “Joint Committee”) (Gemeinsamer Ausschuss) of FMC-AG & Co. KGaA consisting of four members, two of which are members of the supervisory board of the General Partner, Management AG, designated by the General Partner, and two of which are members of our Supervisory Board elected by the AGM. The two members from the supervisory board of the General Partner are Dr. Gerd Krick and Stephan Sturm. The two members from our Supervisory Board are Rolf A. Classon and William P. Johnston. The Joint Committee advises on and approves certain extraordinary management measures, including:
· transactions between us and Fresenius SE and its subsidiaries if considerable importance is attributed to them and the value exceeds 0.25% of our consolidated revenue, and
· acquisitions and sales of significant participations and parts of companies, the spin-off of significant parts of our business, initial public offerings of significant subsidiaries and similar matters. A matter is “significant” for purposes of this approval requirement if 40% of our consolidated revenues, our consolidated balance sheet total assets or consolidated profits, determined by reference to the arithmetic average of the said amounts shown in our audited consolidated accounts for the previous three fiscal years, are affected by the matter.
Furthermore, a nomination committee of the Supervisory Board prepares candidate proposals for the Supervisory Board and suggests suitable candidates to the Supervisory Board and for its election proposals to the General Meeting. The nomination committee of the Supervisory Board currently consists of Rolf A. Classon (Chairman since December 4, 2019) and Dr. Dieter Schenk (Vice Chairman).
The supervisory board of our General Partner, Management AG, is supported by a Regulatory and Reimbursement Assessment Committee, whose members are currently William P. Johnston (Chairman since January 1, 2020, Vice Chairman until December 31, 2019), Rolf A. Classon (Vice Chairman since January 1, 2020, Chairman until December 31, 2019), and Dr. Dieter Schenk. The primary function of this committee is to assist and to represent the supervisory board in fulfilling its responsibilities, primarily through assessing the Company’s affairs in the area of its regulatory obligations and reimbursement structures for dialysis services. In the United States, these reimbursement regulations are mandated by the Department of Health and Human Services and the Centers for Medicare and Medicaid Services (“CMS”) for dialysis services. Similar regulatory agencies exist country by country in the international regions to address the conditions for payment of dialysis treatments. Furthermore, the
supervisory board of Management AG has its own nomination committee, which consists of Stephan Sturm (Chairman), Dr. Gerd Krick and Dr. Dieter Schenk.
We are exempt from the NYSE rules requiring companies listed on that exchange to have a majority of independent directors on their boards and to maintain compensation committees and nominating committees consisting of independent directors. See Item 16G, “Corporate governance” in our 2019 20-F. As noted above, the full supervisory board of Management AG (which includes persons who would not be independent directors under the NYSE compensation committee rule) determines the compensation of the members of the Management Board.
(iv) Compensation of the Management Board and the Supervisory Board
Report of the Management Board of Management AG, our General Partner
The Compensation Report of FMC-AG & Co. KGaA summarizes the main elements of the system for the compensation of the members of the Management Board of Fresenius Medical Care Management AG, the General Partner of FMC-AG & Co. KGaA, and in this regard notably explains the amounts and structure of the compensation paid to the Management Board. Furthermore, the principles and the amount of the compensation of the Supervisory Board of the Company are described. The Compensation Report is part of the Management Report on the annual financial statements and on the annual consolidated group financial statements of FMC-AG & Co. KGaA as at December 31, 2019. The Compensation Report was prepared on the basis of the recommendations of the German Corporate Governance Code in the version dated February 7, 2017. Therefore, the terms “granting” or “granted” used in the following in connection with the components of performance-related remuneration are to be construed in the meaning of the recommendations of the German Corporate Governance Code in the version dated February 7, 2017. The Compensation Report also includes the disclosures as required pursuant to the applicable statutory regulations, notably in accordance with the German Commercial Code (HGB). The Compensation Report discusses performance metrics that are non-IFRS measures, including Free Cash Flow, Return on Invested Capital, and Revenue and Net Income in constant currency. For information regarding these measures, see Item 5, “ Operating and financial review and prospects - I. Performance Management System.”
Compensation of the Management Board
The Supervisory Board of Fresenius Medical Care Management AG is responsible for determining the compensation of the members of the Management Board. The Supervisory Board of Fresenius Medical Care Management AG is assisted in this task by the Human Resources Committee.
The underlying system of the Management Board compensation in the 2019 fiscal year was approved by the General Meeting of FMC-AG & Co. KGaA on May 12, 2016. The Management Board compensation is reviewed by an independent external compensation expert on a regular basis.
The objective of the compensation system is to enable the members of the Management Board to participate reasonably in the sustainable development of the Company’s business and to reward them based on their duties and performance as well as their success in managing the Company’s economic and financial position giving due regard to the peer environment.
The amount of the total compensation of the members of the Management Board is measured taking particular account of a horizontal comparison with the compensation of management board members of other DAX-listed companies and similar companies of comparable size and performance in a relevant peer environment.
Furthermore, the relation of the overall compensation of the members of the Management Board and that of the senior management as well as the staff overall, as determined by way of a vertical comparison, is taken into account.
The compensation of the Management Board is, as a whole, performance-based and geared to promoting sustainable corporate development. It consists of three components:
1. non-performance-based compensation (base salary and fringe benefits)
2. short-term performance-based compensation (one-year variable compensation)
3. components with long-term incentive effects (multi-year variable compensation comprised of share-based compensation with cash settlement and stock options, the latter granted in previous fiscal years).
Compensation components granted during the fiscal year:
I. Non-performance-based compensation
The members of the Management Board receive a base salary. In Germany or Hong Kong (applicable to Mr. Harry de Wit, who is resident in Hong Kong), as the case may be, the base salary is paid in twelve equal monthly instalments. To the extent the base salary is paid to members of the Management Board in the U.S., the payment is made in accordance with local customs in twenty-four equal instalments.
Moreover, the members of the Management Board receive fringe benefits. In the fiscal year these consisted mainly of payments for insurance premiums, the private use of company cars and special payments such as school fees, housing, rent and relocation supplements, reimbursement of fees for the preparation of tax returns, reimbursement of charges, payments in connection with the appointment to the Management Board, reimbursement of air travel expenses, anniversary payments, contributions to pension, accident, life and health insurance as well as tax burden compensation due to varying tax rates applicable in Germany and the U.S. (net compensation) and other benefits in kind and fringe benefits, also in case provisions have been set up therefore.
II. Performance-based compensation
Performance-based compensation is granted as a short-term cash component (one-year variable compensation) and as components with long-term incentive effects (comprising share-based compensation with cash settlement). The one-year variable compensation consists of an amount that is payable without deferral after the end of the fiscal year (hereinafter: “Bonus”) and an amount that is converted into virtual shares of the Company as an amount to be deferred (the so-called Share Based Award, together with the Bonus the “Total Bonus”). The share-based compensation with cash settlement consists of the Share Based Award as well as of Performance Shares, which have been granted in the context of the MB LTIP 2019.
Performance-based compensation components granted in the fiscal year:
Under the Fresenius Medical Care Long-Term Incentive Program 2011 (hereinafter: “LTIP 2011”), individual members of the Management Board may under certain conditions also exercise stock options previously granted or receive a share-based compensation with cash settlement from previously granted Phantom Stock. In addition, under certain conditions and for the first time in year 2020, individual members of the Management Board may receive a share-based compensation with cash settlement from Performance Shares that have been granted within the framework of the LTIP 2016.
One-year variable compensation and Share Based Award
The amount of the one-year variable compensation and of the Share Based Award depends on the achievement of the following individual and joint targets which are derived from the corporate strategy:
· adjusted net income growth attributable to the shareholders of FMC-AG & Co. KGaA at constant currency (“Adjusted Net Income Growth”)
· adjusted net cash provided by (used in) operating activities after capital expenditures, before acquisitions and investments (“Adjusted Free Cash Flow”), in percent of revenues
· adjusted operating margin (“Adjusted Operating Margin”)
In order to ensure comparability of the figures, they are adjusted for certain special effects (such as the implementation of IFRS 16 and effects from certain acquisitions and divestments).
The targets are weighted differently depending on the Management Board department or function. In the case of Messrs. Rice Powell and Michael Brosnan (member of the Management Board until October 31, 2019), and Ms. Helen Giza (member of the Management Board since November 1, 2019), (each of them being members of the Management Board with corporate group functions), as well as Dr. Olaf Schermeier (member of the Management Board responsible for Research and Development), the Adjusted Net Income Growth is weighted with 80%. In the case of Dr. Katarzyna Mazur-Hofsäß and Messrs. William Valle and Harry de Wit (each of them being members of the Management Board with regional responsibility) as well as Mr. Kent Wanzek (member of the Management Board responsible for Global Manufacturing, Quality and Supply), the Adjusted Net Income Growth is weighted with 60%. In the case of the members of the Management Board last named, the valuation of the respective Adjusted Operating Margin contributes another 20%. The target Adjusted Free Cash Flow in percent of revenues is uniformly measured with 20% for all members of the Management Board.
|
|
|
Adjusted Net Income |
|
Adjusted Free Cash Flow |
|
Adjusted Operating |
|
|
Corporate group function and/or Research and Development |
|
80 |
% |
20 |
% |
— |
|
|
|
|
|
|
|
|
|
|
|
Regional function and/or Global Manufacturing, Quality and Supply |
|
60 |
% |
20 |
% |
20 |
% |
The degree of the achievement of the specific targets (target achievement) is determined by comparing the actual values with the target values to be achieved. The Adjusted Net Income Growth is taken into account up to a growth rate of 2%. The targets regarding the respective Adjusted Free Cash Flow in percent of revenues fall within a range of rates between 0.51% and 10.69% and are evaluated within the Group or, as the case may be, in the relevant regions. For the benefit of members of the Management Board with regional responsibilities as well as for the benefit of the Management Board member responsible for Global Manufacturing, Quality and Supply, growth of the respective Adjusted Operating Margin is compensated within individual target corridors between 11.84% and 17.75%, reflecting the particularities of the respective regions and responsibilities:
|
|
|
0% target achievement |
|
100% target achievement |
|
120% target achievement |
|
|
Adjusted Net Income Growth |
|
-2.00% |
|
1.49% |
|
2.00% |
|
|
Adjusted Free Cash Flow in % of revenues |
|
Individual corridors between 0.51% and 10.69%, depending on the respective responsibilities |
| ||||
|
Adjusted Operating Margins |
|
Individual target corridors between 11.84% and 17.75%, depending on the respective responsibilities |
| ||||
The degree of overall target achievement of each member of the Management Board is determined by the weighted arithmetic mean of the target achievement of the aforementioned targets. Multiplying the degree of the respective overall target achievement by the respective base salary and another fixed multiplier results in the Total Bonus, of which a 75% share is paid out in cash to the members of the Management Board as Bonus after approval of the consolidated annual financial statements of FMC-AG & Co. KGaA by the Supervisory Board for the respective fiscal year. Since the degree of target achievement is limited to a maximum of 120%, the Management Board’s achievable one-year variable compensation has maximum limits (cap).
For the fiscal year and the previous year, the amount of cash compensation payments to members of the Management Board without components with long-term incentive effects consists of the following:
Amount of Cash Compensation
in € THOUS
|
|
|
|
|
|
|
|
|
|
|
Short-term |
|
Cash compensation |
| ||||
|
|
|
|
|
|
|
|
|
|
|
based |
|
(without long-term |
| ||||
|
|
|
Non-performance-based compensation |
|
compensation |
|
incentive components) |
| ||||||||||
|
|
|
Base salary |
|
Fringe benefits |
|
Bonus |
|
|
|
|
| ||||||
|
|
|
2019 |
|
2018(1) |
|
2019 |
|
2018(1) |
|
2019 |
|
2018(1) |
|
2019 |
|
2018(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members of the Management Board serving as of December 31, 2019 |
|
|
| ||||||||||||||
|
Rice Powell |
|
1,340 |
|
1,270 |
|
256 |
|
195 |
|
1,970 |
|
2,376 |
|
3,566 |
|
3,841 |
|
|
Helen Giza(2) |
|
108 |
|
— |
|
440 |
(3) |
— |
|
159 |
|
— |
|
707 |
|
— |
|
|
Dr. Katarzyna Mazur-Hofsäß(2) |
|
700 |
|
233 |
|
94 |
|
844 |
(4) |
1,131 |
|
370 |
|
1,925 |
|
1,447 |
|
|
Dr. Olaf Schermeier |
|
510 |
|
490 |
|
136 |
|
131 |
|
750 |
|
970 |
|
1,396 |
|
1,591 |
|
|
William Valle |
|
866 |
|
792 |
|
237 |
|
330 |
|
1,035 |
|
1,395 |
|
2,138 |
|
2,517 |
|
|
Kent Wanzek |
|
607 |
|
550 |
|
127 |
|
126 |
|
866 |
|
1,076 |
|
1,600 |
|
1,752 |
|
|
Harry de Wit |
|
520 |
|
480 |
|
337 |
|
315 |
|
841 |
|
950 |
|
1,698 |
|
1,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former member of the Management Board who resigned during the fiscal year 2019(5) |
|
|
| ||||||||||||||
|
Michael Brosnan |
|
633 |
|
720 |
|
211 |
|
56 |
|
1,117 |
|
1,300 |
|
1,961 |
|
2,076 |
|
|
Total: |
|
5,284 |
|
4,535 |
|
1,838 |
|
1,997 |
|
7,869 |
|
8,437 |
|
14,991 |
|
14,969 |
|
(1) Please note for purposes of comparison between the amounts indicated and those of the fiscal year that the compensation is subject to foreign exchange rate fluctuations depending on whether it is contractually denominated in euro (Mses. Helen Giza and Dr. Katarzyna Mazur-Hofsäß as well as Messrs. Dr. Olaf Schermeier and Harry de Wit) or U.S. dollar (Messrs. Rice Powell, William Valle, Kent Wanzek and Michael Brosnan).
(2) Please note for purposes of comparison of the amounts indicated for the fiscal year that Ms. Helen Giza has been appointed as member of the Management Board only with effect as of November 1, 2019 and Dr. Katarzyna Mazur-Hofsäß with effect as of September 1, 2018 and, therefore, they have received compensation payments to be set out herein only in each case as of such date.
(3) The fringe benefits of Ms. Helen Giza include a payment of €400 THOUS, which Ms. Helen Giza received in connection with her appointment to the Management Board. In the years 2020 and 2021, Ms. Helen Giza will receive further payments of €200 THOUS each year in connection with her appointment to the Management Board.
(4) The other benefits of Dr. Katarzyna Mazur-Hofsäß include a one-off special payment in the amount of € 800 THOUS by which Dr. Katarzyna Mazur-Hofsäß was compensated for forfeited compensation benefits from the previous employment relationship.
(5) Mr. Michael Brosnan resigned from the Management Board with effect as of the end of October 31, 2019. Therefore, the amounts for the base salary and the fringe benefits as set out herein for the fiscal year relate to the period until October 31, 2019.
The portion of the one-year variable compensation not paid out for the fiscal year in question, amounting to 25% of the Total Bonus, is converted into virtual shares not backed by equity and allocated to the members of the Management Board in the form of the so-called Share Based Award. The Share Based Award is attributed to the compensation components with long-term incentive effect and can be exercised at the earliest after lapse of a period of three years following the grant date. In special cases (e.g. occupational disability, entry into retirement, non-renewal of expired employment contracts by the Company), a shorter period may apply. The payment from the Share Based Award is made in cash and depends on the share price of FMC-AG & Co. KGaA upon exercise.
In accordance with the targets achieved in the fiscal year, the members of the Management Board who were members of the Management Board on December 31 of the fiscal year and the member of the Management Board who resigned during the fiscal year acquired entitlements to Share Based Awards valued at €2,623 THOUS (2018: €3,414 THOUS). Based on the already fixed value, the allocation of the specific number of virtual shares made by
the Supervisory Board of Fresenius Medical Care Management AG in principle takes place in March of the following year on the basis of the then current price conditions of the shares of FMC-AG & Co. KGaA. This number will also serve as multiplier for the share price on the respective exercise date and, thus, as the basis for the determination of the payment amount of the respective share-based compensation.
Functionality of the Total Bonus (Bonus and Share Based Award) in principle:
Personal Investment from the Bonus 2018 with Stock Holding Condition
To take adequate account of the business development in the year 2018, the members of the Management Board being in office at that time — in accordance with a respective agreement with the Supervisory Board — have acquired shares in FMC-AG & Co. KGaA on a stock exchange for a portion of their Bonus for year 2018 after payment in the fiscal year 2019. The shares acquired from this portion of their Bonus for year 2018 may only be sold by the respective member of the Management Board after a period of three years from the respective date of acquisition has expired.
The net amounts invested by the members of the Management Board being in office at that time in implementation of this personal investment partly exceed the agreed amounts and, taking into account the respective exchange rate applicable at the time of acquisition, are as follows:
Personal Investment in Fiscal Year 2019
|
|
|
Amount |
|
Currency |
|
|
Rice Powell |
|
619,571 |
|
US$ |
|
|
Michael Brosnan |
|
317,951 |
|
US$ |
|
|
Dr. Katarzyna Mazur-Hofsäß |
|
80,207 |
|
€ |
|
|
Dr. Olaf Schermeier |
|
244,664 |
|
€ |
|
|
William Valle |
|
308,633 |
|
US$ |
|
|
Kent Wanzek |
|
344,036 |
|
US$ |
|
|
Harry de Wit |
|
166,456 |
|
€ |
|
Performance Shares
In addition to the Share Based Award, the members of the Management Board were also granted so-called “Performance Shares” on the basis of the MB LTIP 2019, as further performance-based component with a long-term incentive effect. The MB LTIP 2019 was approved in the fiscal year 2019 by the Supervisory Board of Fresenius Medical Care Management AG upon recommendation of the Human Resources Committee and follows on the LTIP 2016, under which, as of the end of 2018, no further Performance Shares may be granted, and on the LTIP 2011, under which, as of the end of 2015, no further stock options or Phantom Stock may be granted.
Performance Shares are virtual compensation instruments not backed by equity. These may provide entitlement to a cash payment depending on the achievement of the performance targets described below and the development of FMC-AG & Co. KGaA’s share price. The MB LTIP 2019 stipulates that the members of the Management Board could be granted Performance Shares once or twice in the year 2019. For the members of the Management Board, the Supervisory Board determined, after due consideration and taking into account the individual responsibilities and performance of the respective members of the Management Board, the so-called grant value, as the initial amount for each grant to be made to members of the Management Board. This grant value was divided by the applicable fair value of a Performance Share at the grant date, taking into account the 30-day average stock exchange price of the share of FMC-AG & Co. KGaA prior to the grant, in order to determine the number of Performance Shares to be granted. This number may change over a period of three years depending on the degree to which the performance targets are achieved, both the total loss of all granted Performance Shares as well as a doubling (at most) of that number being possible. The number of Performance Shares after the three-year performance period, resulting from the respective target achievement, is considered as vested four years after the
date the respective allocation was made. The above-mentioned number of Performance Shares is then multiplied by the average price of the Company’s shares during the thirty-day period prior to the expiration of the four years’ vesting period. The resulting amount is paid out in cash to the members of the Management Board for their respective Performance Shares.
The degree of the total target achievement during the three-year performance period is determined based on the three following performance targets which are derived from the long-term corporate strategy:
· revenue growth at constant currency (“Revenue Growth”)
· growth of the net income attributable to the shareholders of FMC-AG & Co. KGaA at constant currency (“Net Income Growth”)
· ROIC
In order to ensure comparability of the figures of the growth-related performance targets, they are adjusted for the effects of the implementation of IFRS 16.
The target corridors and targets are as set out in the table below:
|
|
|
Growth/ROIC |
|
Target achievement |
|
Weight |
|
Performance target 1: |
|
< 0% |
|
0% |
|
1/3 |
|
|
7% |
|
100% |
| ||
|
|
> 16% |
|
200% |
| ||
|
Performance target 2: |
|
< 0% |
|
0% |
|
1/3 |
|
|
7% |
|
100% |
| ||
|
|
> 14% |
|
200% |
| ||
|
Performance target 3: |
|
0.2 percentage points |
|
0% |
|
1/3 |
|
|
target ROIC |
|
100% |
| ||
|
|
0.2 percentage points |
|
200% |
|
Under the MB LTIP 2019 the ROIC target for the year 2019 is set at 7.9%. For each Revenue Growth, any Net Income Growth and any ROIC level within the range of the values presented above, the degree of target achievement is linearly interpolated. If the target achievement in relation to the ROIC target in the third year of the performance period is higher than or equal to the target achievement in each of the two previous years, the ROIC target achievement for the third year applies to all years of the performance period.
Each of these three performance targets accounts for one-third in the calculation of the yearly target achievement, which is calculated for each year of the three-year performance period. The overall target achievement at the end of the three-year performance period is determined by the arithmetic value of these three average yearly target achievements. The achievement degree of each of the performance targets as well as the overall target achievement can lie in a corridor between 0% and 200% and in this respect has a maximum limit (target achievement cap).
The number of Performance Shares granted to the members of the Management Board is multiplied by the overall target achievement in percent in order to determine the final number of Performance Shares that forms the basis of the cash payments under the MB LTIP 2019 as described above.
Functionality of the MB LTIP 2019 in principle:
In the course of the fiscal year, a total of 114,999 Performance Shares (2018: 73,315 under the LTIP 2016) with a total value of €7,158 THOUS (2018: €5,783 THOUS under the LTIP 2016) were granted to the members of the Management Board under the MB LTIP 2019. The fair value of the Performance Shares issued in July of the fiscal
year amounted on the grant date to €62.10 (2018: €80.55 under the LTIP 2016) for grants in euro (applies to Dr. Katarzyna Mazur-Hofsäß and Messrs. Dr. Olaf Schermeier and Harry de Wit) and to $69.71 (2018: $94.11 under the LTIP 2016) for grants in U.S. dollars (applies to Messrs. Rice Powell, Michael Brosnan (member of the Management Board until October 31, 2019), William Valle and Kent Wanzek). Ms. Helen Giza (member of the Management Board since November 1, 2019) was granted Performance Shares in December of the fiscal year whose fair value on the grant date was €60.58 (2018: €69.05 for the grant of Performance Shares to Dr. Katarzyna Mazur-Hofsäß under the LTIP 2016). At the end of the fiscal year, the members of the Management Board being in office on December 31 of the fiscal year held a total of 314,313 Performance Shares under the MB LTIP 2019 and the LTIP 2016 (2018: 204,693 under the LTIP 2016).
For the fiscal year, the value of the share-based compensation with cash settlement granted to the members of the Management Board is shown, in each case compared to the previous year, individualized in the following table:
Long-Term Incentive Components
in € THOUS
|
|
|
Share-based |
| ||
|
|
|
compensation |
| ||
|
|
|
with cash settlement(1) |
| ||
|
|
|
2019 |
|
2018(2) |
|
|
|
|
|
|
|
|
|
Members of the Management Board serving as of December 31, 2019 |
|
|
|
|
|
|
Rice Powell |
|
2,232 |
|
2,391 |
|
|
Helen Giza(3) |
|
865 |
|
— |
|
|
Dr. Katarzyna Mazur-Hofsäß(3) |
|
1,180 |
|
858 |
|
|
Dr. Olaf Schermeier |
|
1,053 |
|
1,081 |
|
|
William Valle |
|
1,133 |
|
1,402 |
|
|
Kent Wanzek |
|
1,076 |
|
1,084 |
|
|
Harry de Wit |
|
1,083 |
|
1,074 |
|
|
|
|
|
|
|
|
|
Former member of the Management Board who resigned during the fiscal year 2019(4) |
|
|
|
|
|
|
Michael Brosnan |
|
1,160 |
|
1,307 |
|
|
Total: |
|
9,782 |
|
9,197 |
|
(1) This includes Performance Shares pursuant to the MB LTIP 2019 (for fiscal year 2019) and to the LTIP 2016 (for fiscal year 2018) as well as Share Based Awards granted to the members of the Management Board during the respective fiscal year. The share-based compensation amounts are based on the fair value on the grant date.
(2) Please note for purposes of comparison between the amounts indicated and those of the fiscal year that the compensation is subject to foreign exchange rate fluctuations depending on whether it is contractually denominated in euro (Mses. Helen Giza and Dr. Katarzyna Mazur-Hofsäß as well as Messrs. Dr. Olaf Schermeier and Harry de Wit) or U.S. dollar (Messrs. Rice Powell, William Valle, Kent Wanzek and Michael Brosnan).
(3) Please note for purposes of comparison of the amounts indicated for the fiscal year that Ms. Helen Giza has been appointed as member of the Management Board only with effect as of November 1, 2019 and Dr. Katarzyna Mazur-Hofsäß with effect as of September 1, 2018 and, therefore, they have received compensation payments to be set out herein only in each case as of such date.
(4) Mr. Michael Brosnan resigned from the Management Board with effect as of the end of October 31, 2019.
The Supervisory Board has agreed on a limitation option for the components with a long-term incentive effect in the event of extraordinary developments.
The components with long-term incentive effect entitle to a cash payment or can be exercised only after the expiration of the predefined waiting and/or vesting periods. Their value is distributed over the waiting periods and is proportionally accounted for as an expense in the respective fiscal year.
The expenses pertaining to components with long-term incentive effects for the fiscal year and for the previous year are set out in the following table:
Expenses for Long-Term Incentive Components
in € THOUS
|
|
|
|
|
|
|
Share-based |
|
|
|
|
| ||
|
|
|
|
|
|
|
compensation with |
|
Share-based |
| ||||
|
|
|
Stock Options |
|
cash settlement(1) |
|
compensation |
| ||||||
|
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members of the Management Board serving as of December 31, 2019 |
|
|
| ||||||||||
|
Rice Powell |
|
327 |
|
659 |
|
2,588 |
|
391 |
|
2,915 |
|
1,050 |
|
|
Helen Giza(2) |
|
— |
|
— |
|
10 |
|
— |
|
10 |
|
— |
|
|
Dr. Katarzyna Mazur-Hofsäß(2) |
|
— |
|
— |
|
224 |
|
9 |
|
224 |
|
9 |
|
|
Dr. Olaf Schermeier |
|
109 |
|
236 |
|
1,226 |
|
229 |
|
1,335 |
|
465 |
|
|
William Valle(3) |
|
— |
|
— |
|
731 |
|
114 |
|
731 |
|
114 |
|
|
Kent Wanzek |
|
153 |
|
295 |
|
1,272 |
|
128 |
|
1,425 |
|
423 |
|
|
Harry de Wit |
|
— |
|
— |
|
1,001 |
|
222 |
|
1,001 |
|
222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former member of the Management Board who resigned during the fiscal year 2019(4) |
|
|
| ||||||||||
|
Michael Brosnan |
|
164 |
|
330 |
|
3,552 |
|
245 |
|
3,716 |
|
575 |
|
|
Total: |
|
753 |
|
1,520 |
|
10,604 |
|
1,338 |
|
11,357 |
|
2,858 |
|
(1) This includes expenses for Performance Shares under the MB LTIP 2019 (for fiscal year 2019 only) and under the LTIP 2016, expenses for Phantom Stock under the LTIP 2011 and expenses for the Share Based Award.
(2) Please note for purposes of comparison of the amounts indicated for the fiscal year that Ms. Helen Giza has been appointed as member of the Management Board only with effect as of November 1, 2019 and Dr. Katarzyna Mazur-Hofsäß with effect as of September 1, 2018 and, therefore, they have received compensation payments to be set out herein only in each case as of such date.
(3) The amounts indicated for stock options do not include the expenses from stock options which have been granted to the member of the Management Board William Valle prior to his appointment to the Management Board.
(4) Mr. Michael Brosnan resigned from the Management Board with effect as of the end of October 31, 2019. The expenses for long-term incentive components result from the compensation components granted to Mr. Michael Brosnan under the LTIP 2011, the LTIP 2016, the MB LTIP 2019 and the Share Based Award which are payable or can be exercised, as the case may be, on the relevant regular vesting date in accordance with the respective plan conditions.
Focus on sustainable corporate development
The compensation of the Management Board is designed to promote sustainable corporate development. This is ensured, among other things, by the fact that the portion of the long-term compensation always exceeds the portion of short-term compensation. To the extent the portion of the performance-based components with long-term incentive effects (i.e. Performance Shares and Share Based Award) does not reach 50% of the sum of all variable compensation components for the respective fiscal year, it has been contractually provided that the one-year variable compensation is reduced accordingly and the Share Based Award is increased correspondingly.
In addition, previously earned and paid compensation components, in particular in case of relevant violations of internal guidelines or undutiful conduct, can be reclaimed (claw back) on the basis of the MB LTIP 2019 and the LTIP 2016 plan conditions and in accordance with the employment contracts concluded with individual members of the Management Board as from January 1, 2018.
Performance Shares under the LTIP 2016
Until the end of year 2018 grants of Performance Shares under the LTIP 2016 constituted a component of the compensation of the members of the Management Board. As of the end of year 2018 grants under the LTIP 2016 are no longer possible. However, individual members of the Management Board may exercise Performance Shares which have already been granted and receive (for the first time in year 2020) thereof a cash-settled share-based payment from Performance Shares under the LTIP 2016, taking into consideration blackout periods, the achievement of defined performance targets as well as, subject to deviating stipulations in the individual case, the continuation of the service and/or employment relationship. The members of the Management Board being in office on December 31 of the fiscal year held, by the end of the fiscal year, a total of 211,878 Performance Shares (2018: 204,693) under the LTIP 2016.
Stock options and Phantom Stock under the LTIP 2011
Until the end of the fiscal year 2015 grants under the LTIP 2011, which consisted of the Phantom Stock Plan 2011 and the Stock Option Plan 2011, constituted an essential component of the compensation system for the members of the Management Board. As of the end of the fiscal year 2015 grants under the LTIP 2011 are no longer possible. However, individual members of the Management Board may exercise Phantom Stock or stock options which have already been granted, taking into consideration blackout periods, the achievement of defined performance targets as well as, subject to deviating stipulations in the individual case, the continuation of the service and/or employment relationship.
The members of the Management Board being in office on December 31 of the fiscal year held, by the end of the fiscal year, a total of 23,336 Phantom Stock (2018: 54,711) pursuant to the Phantom Stock Plan 2011. Moreover, at the end of the fiscal year the members of the Management Board being in office on December 31 of the fiscal year held a total of 452,989 stock options (2018: 602,389) originating from the Stock Option Plan 2011. For details regarding the conditional capital used to secure the Stock Option Plan 2011, please see “Conditional Capital” in note 17 of the notes consolidated financial statements in our 2019 20-F.
The development and status of stock options in the fiscal year of the members of the Management Board serving at December 31 of the fiscal year are shown in more detail in the following table:
Development and Status of the Stock Options
|
|
|
|
|
Rice Powell |
|
Helen Giza |
|
Dr. Katarzyna |
|
Dr. Olaf |
|
William Valle |
|
Kent Wanzek |
|
Harry de Wit |
|
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding January 1, 2019 |
|
Number |
|
256,781 |
|
— |
|
— |
|
96,488 |
|
30,000 |
|
69,720 |
|
— |
|
452,989 |
|
|
|
Weighted average exercise price in € |
|
66.06 |
|
— |
|
— |
|
63.88 |
|
76.99 |
|
76.99 |
|
— |
|
68.00 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercised during the fiscal year |
|
Number |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
Weighted average exercise price in € |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
| |
|
|
Weighted average share price in € |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding December 31, 2019 |
|
Number |
|
256,781 |
|
— |
|
— |
|
96,488 |
|
30,000 |
|
69,720 |
|
— |
|
452,989 |
|
|
|
Weighted average exercise price in € |
|
66.06 |
|
— |
|
— |
|
63.88 |
|
76.99 |
|
76.99 |
|
— |
|
68.00 |
| |
|
|
Weighted average remaining contractual life in years |
|
2.97 |
|
— |
|
— |
|
2.99 |
|
3.57 |
|
3.57 |
|
— |
|
3.11 |
| |
|
|
Range of exercise prices in € |
|
49,76 - 76,99 |
|
— |
|
— |
|
49,76 - 76,99 |
|
76.99 |
|
76.99 |
|
— |
|
49,76 - 76,99 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable December 31, 2019 |
|
Number |
|
256,781 |
|
— |
|
— |
|
96,488 |
|
30,000 |
|
69,720 |
|
— |
|
452,989 |
|
|
|
Weighted average exercise price in € |
|
66.06 |
|
— |
|
— |
|
63.88 |
|
76.99 |
|
76.99 |
|
— |
|
68.00 |
|
III. Total Compensation
The amount of the total compensation of the Management Board for the fiscal year and for the previous year is shown in the following table:
Total Compensation
in € THOUS
|
|
|
|
|
|
|
|
|
|
|
Total compensation |
| ||
|
|
|
Cash compensation |
|
Components with |
|
(including long-term |
| ||||||
|
|
|
(without long-term |
|
long-term |
|
incentive |
| ||||||
|
|
|
incentive components) |
|
incentive effect |
|
components) |
| ||||||
|
|
|
2019 |
|
2018(1) |
|
2019 |
|
2018(1) |
|
2019 |
|
2018(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members of the Management Board serving as of December 31, 2019 |
|
|
| ||||||||||
|
Rice Powell |
|
3,566 |
|
3,841 |
|
2,232 |
|
2,391 |
|
5,798 |
|
6,232 |
|
|
Helen Giza(2) |
|
707 |
|
— |
|
865 |
|
— |
|
1,572 |
|
— |
|
|
Dr. Katarzyna Mazur-Hofsäß(2) |
|
1,925 |
|
1,447 |
|
1,180 |
|
858 |
|
3,105 |
|
2,305 |
|
|
Dr. Olaf Schermeier |
|
1,396 |
|
1,591 |
|
1,053 |
|
1,081 |
|
2,449 |
|
2,672 |
|
|
William Valle |
|
2,138 |
|
2,517 |
|
1,133 |
|
1,402 |
|
3,271 |
|
3,919 |
|
|
Kent Wanzek |
|
1,600 |
|
1,752 |
|
1,076 |
|
1,084 |
|
2,676 |
|
2,836 |
|
|
Harry de Wit |
|
1,698 |
|
1,745 |
|
1,083 |
|
1,074 |
|
2,781 |
|
2,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former member of the Management Board who resigned during the fiscal year 2019(3) |
|
|
| ||||||||||
|
Michael Brosnan |
|
1,961 |
|
2,076 |
|
1,160 |
|
1,307 |
|
3,121 |
|
3,383 |
|
|
Total: |
|
14,991 |
|
14,969 |
|
9,782 |
|
9,197 |
|
24,773 |
|
24,166 |
|
(1) Please note for purposes of comparison between the amounts indicated and those of the fiscal year that the compensation is subject to foreign exchange rate fluctuations depending on whether it is contractually denominated in euro (Mses. Helen Giza and Dr. Katarzyna Mazur-Hofsäß as well as Messrs. Dr. Olaf Schermeier and Harry de Wit) or U.S. dollar (Messrs. Rice Powell, William Valle, Kent Wanzek and Michael Brosnan).
(2) Please note for purposes of comparison of the amounts indicated for the fiscal year that Ms. Helen Giza has been appointed as member of the Management Board only with effect as of November 1, 2019 and Dr. Katarzyna Mazur-Hofsäß with effect as of September 1, 2018 and, therefore, they have received compensation payments to be set out herein only in each case as of such date.
(3) Mr. Michael Brosnan resigned from the Management Board with effect as of the end of October 31, 2019.
IV. Commitments to members of the Management Board for the event of termination of their appointment
The following pension commitments and other benefits are also part of the compensation system for the members of the Management Board: Individual contractual pension commitments for the members of the Management Board Messrs. Rice Powell, Michael Brosnan (member of the Management Board until October 31, 2019), Dr. Olaf Schermeier, Mr. Kent Wanzek and Mr. Harry de Wit have been granted by Fresenius Medical Care Management AG. In addition, pension commitments from the participation in employee pension schemes of other Fresenius Medical Care companies exist for individual members of the Management Board.
Each of the pension commitments by Fresenius Medical Care Management AG provides for a pension and survivor benefit (Hinterbliebenenversorgung) as of the time of conclusively ending active work, at age 65 at the earliest or upon occurrence of disability or incapacity to work (Berufs- oder Erwerbsunfähigkeit) or of reduction of earning capacity (Erwerbsminderung), calculated by reference to the amount of the recipient’s most recent base salary. In deviation from this, individual members of the Management Board (Messrs. Rice Powell and Kent Wanzek) have this entitlement already upon reaching the age of the 63 if they have been members of the Management Board of Fresenius Medical Care Management AG for at least ten years at the time of their final retirement from active employment (early retirement); in this case, the benefits are reduced by 0.5% per calendar month that the member leaves active employment before reaching the age of 65.
The retirement pension will be based on 30% of the last base salary or the 5-year average of the last base salaries and will increase for each complete year of service by 1.5 percentage points up to a maximum of 45%. Current pensions increase according to legal requirements (Sec. 16 of the German Act to improve company pension plans, “BetrAVG”). 30% of the gross amount of any post-retirement income from an activity of the Management Board member is offset against the pension. Any amounts to which the members of the Management Board or their surviving dependents, respectively, are entitled to from other company pension rights of the Management Board member, even from employment contracts with other companies, are also to be set off. If a Management Board member dies, the surviving spouse receives a pension amounting to 60% of the resulting pension claim at that time. Furthermore, the deceased Management Board member’s own legitimate children (leibliche eheliche Kinder) receive an orphan’s pension amounting to 20% of the resulting pension claim at that time, until the completion of their education or they reach 25 years of age, at the latest. All orphans’ pensions and the surviving spouse’s pension together reach a maximum of 90% of the Management Board member’s pension, however. If a Management Board member leaves the Management Board of Fresenius Medical Care Management AG before reaching the age of 65, the rights to the aforementioned benefits remain, however the pension to be paid is reduced — unless the Management Board member is leaving because of the occurrence of an event insured against (occupational disability, incapacity to work, pension payments to surviving dependents in case of death or, if applicable, early
retirement) — in proportion to the ratio of the actual years of service as a Management Board member to the potential years of service until reaching the age of 65.
Based on individual contractual commitments, the members of the Management Board Messrs. Rice Powell, Michael Brosnan (member of the Management Board until October 31, 2019), William Valle and Kent Wanzek additionally participated in the U.S.-based 401(k) savings plan in the fiscal year; in this regard, contributions in the amount of $8,400 (2018: $8,250) were earned in the fiscal year in each case and allocated in January 2020 to the members of the Management Board mentioned above. This plan generally allows employees in the U.S. to invest a limited portion of their gross salaries in retirement pension programs. The Company supports its employees at this with contributions of up to 50% of the yearly made payments.
Furthermore, the members of the Management Board Messrs. Rice Powell and Michael Brosnan (member of the Management Board until October 31, 2019) have acquired non-forfeitable benefits from participation in employee pension plans of Fresenius Medical Care North America, which provide payment of pensions as of the age of 65 and the payment of reduced benefits as of the age of 55. In March 2002, the rights to receive benefits from the pension plans were frozen at the level then applicable.
Based on an individual contractual commitment, the member of the Management Board Mr. Harry de Wit additionally participated in the Hong Kong-based “Mandatory Provident Fund Scheme” until December 31, 2018. In this regard, contributions in the amount of 0 HKD (2018: 18,000 HKD) were earned in the fiscal year. This scheme enables employees to contribute a limited portion of their gross salaries in programs for retirement planning.
Additions to pension provisions in the fiscal year for the members of the Management Board being in office on December 31 of the fiscal year amounted to €6,751 THOUS (2018: €5,071 THOUS). The pension commitments are shown in the following table:
Development and Status of Pension Commitments
in € THOUS
|
|
|
As of |
|
|
|
As of |
|
|
|
|
January 1, |
|
Increase |
|
December 31, |
|
|
|
|
|
|
|
|
|
|
|
Rice Powell |
|
12,940 |
|
3,309 |
|
16,249 |
|
|
Helen Giza |
|
— |
|
— |
|
— |
|
|
Dr. Katarzyna Mazur-Hofsäß |
|
— |
|
— |
|
— |
|
|
Dr. Olaf Schermeier |
|
974 |
|
549 |
|
1,523 |
|
|
William Valle |
|
— |
|
— |
|
— |
|
|
Kent Wanzek |
|
3,587 |
|
1,191 |
|
4,778 |
|
|
Harry de Wit |
|
— |
|
1,702 |
|
1,702 |
|
|
Total: |
|
17,501 |
|
6,751 |
|
24,252 |
|
A post-employment non-competition covenant was agreed upon with all members of the Management Board. If such covenant becomes applicable, the members of the Management Board for a period of up to two years receive compensation amounting to half of their respective annual base salary and an amount equivalent to half of 30% of their respective base salary for each year of respective application of the non-competition covenant. The employment contracts of the members of the Management Board contain no express provisions that are triggered by a change of control.
The new or extended employment contracts concluded with individual members of the Management Board effective from or after January 1, 2018 provide for a severance payment cap. Under this cap, payments in connection with the early termination of a Management Board activity in the event of dismissal for cause (Abberufung aus wichtigem Grund) may not exceed the value of two years’ compensation and may not compensate more than the remaining term of the contract. For the calculation of the relevant annual compensation, only the non-performance-based compensation components are applied. If there is good cause for the termination of the employment contract, no severance payments are made.
V. Miscellaneous
All members of the Management Board have received individual contractual commitments for the continuation of their compensation in cases of sickness for a maximum of twelve months, although after six months of sick leave, insurance benefits may be set off against such payments. If a Management Board member dies, the surviving dependents will be paid three more monthly instalments after the month of death, not to exceed, however, the amount due between the time of death and the scheduled expiration of the respective employment contract.
Mr. Michael Brosnan was a member of the Management Board until the end of October 31, 2019. In his termination agreement, it was agreed with respect to the compensation components he is contractually entitled to for the period from November 1, 2019 to December 31, 2020 that he will receive a base salary of $850 THOUS p.a. (pro rata for the period from November 1, 2019 to December 31, 2019). For the period from January 1, 2020 to December 31, 2020 Mr. Michael Brosnan has an entitlement to fringe benefits in the form of contributions to financial planning, insurance benefits, contributions to pension, accident, life and health insurances and housing, rent and relocation
supplements as well as tax burden compensation due to varying tax rates in Germany and the U.S. (net compensation) and a car allowance in the total amount of approximately $257 THOUS. For the period from November 1, 2019 to December 31, 2019 these fringe benefits amounted to $17 THOUS. Additionally, Mr. Michael Brosnan will participate in the U.S.-based 401(k) savings plan until December 31, 2020. For the period from January 1, 2020 to December 31, 2020, Mr. Michael Brosnan will also receive an amount equivalent to 30% of his base salary. The compensation components granted to Mr. Michael Brosnan under the LTIP 2016, the MB LTIP 2019 and in the form of Share Based Awards are payable or exercisable in accordance with the respective plan conditions. With the exception of the Share Based Award for 2019, Mr. Michael Brosnan will no longer be granted any further components with long-term incentive effects as from (and including) the year 2020. As of January 1, 2021, Mr. Michael Brosnan will receive an annual compensation for the agreed post-employment non-competition covenant in the amount of $553 THOUS p.a. for a period of two years. It was agreed with Mr. Michael Brosnan that he is entitled to receive a company pension on the basis of the individual contractual pension commitment of Fresenius Medical Care Management AG in the annual amount of $405 THOUS from January 1, 2021. The compensation for the agreed post-employment non-competition covenant is credited against the company pension.
Mr. Dominik Wehner was a member of the Management Board until the end of December 31, 2017. In his termination agreement, it was agreed with respect to the compensation components he is contractually entitled to for the period from January 1, 2018 to March 31, 2022 that he will annually receive a base salary of €425 THOUS and an amount of 30% of his base salary. In addition, Mr. Dominik Wehner is entitled to fringe benefits such as the private use of his company car, contributions to financial planning, insurance benefits and contributions to pension and health insurance in a total amount of approximately €30 THOUS p.a. The compensation components granted to Mr. Dominik Wehner under the LTIP 2011, the LTIP 2016 and in form of Share Based Awards are payable or can be exercised, as the case may be, upon the relevant regular vesting date in accordance with the respective plan conditions. Except for the Share Based Award for 2017, Mr. Dominik Wehner is no longer eligible to be granted any components with long-term incentive effects since the year 2018 (including). As of the completion of the age of 65, Mr. Dominik Wehner will receive a Company-funded retirement pension in accordance with the individual contractual pension commitment by Fresenius Medical Care Management AG, as described before.
Mr. Ronald Kuerbitz, who was a member of the Management Board until February 17, 2017, received an annual non-compete compensation from February 17, 2017 for a period of two years; this compensation amounted in the fiscal year to €90 THOUS (2018: €515 THOUS). It was also agreed with him that, after the end of his employment contract, he would act as an advisor to National Medical Care, Inc. from August 14, 2017 until the end of August 13, 2019. The consideration to be granted for such services (including reimbursement of expenses) amounts to €167 THOUS (2018: €212 THOUS) for the fiscal year. As of the completion of the age of 65, Mr. Ronald Kuerbitz will receive a Company-funded retirement pension of €130 THOUS per year.
Mr. Roberto Fusté, who was a member of the Management Board until March 31, 2016, received pension payments in the amount of approximately €274 THOUS (2018: €261 THOUS) in the fiscal year. On the occasion of the termination of his employment contract with effect as of December 31, 2016 as a member of the Management Board, it was agreed with Mr. Roberto Fusté that he would be subject to a post-employment non-compete obligation lasting until the end of December 31, 2018 and that he would act as an advisor to the Chairman of the Management Board. For this, he did neither receive a non-compete compensation (2018: €377 THOUS) nor an advisory fee (2018: €377 THOUS) in the fiscal year.
Prof. Emanuele Gatti, who was a member of the Management Board until March 31, 2014, received pension payments in the amount of €355 THOUS in the fiscal year (2018: €338 THOUS).
A consulting agreement was entered into with Dr. Rainer Runte, who was a member of the Management Board until March 31, 2014, effective March 1, 2017, the term of which in the meantime was extended until December 31, 2018. Under this consulting agreement, Dr. Rainer Runte provided consulting services on certain fields. The consideration (including the reimbursement of expenses) to be granted by Fresenius Medical Care Management AG for such services amounts to €0 THOUS for the fiscal year (2018: €226 THOUS).
Instead of a pension provision, a consulting agreement was entered into with Dr. Ben Lipps, the Chairman of the Management Board until December 31, 2012, for the period January 1, 2013 to December 31, 2021. Under this consulting agreement, Dr. Ben Lipps will provide consulting services on certain fields and within a specified time frame and will be subject to a non-compete covenant. The consideration to be granted by Fresenius Medical Care Management AG for such services (including reimbursement of expenses) amounts for the fiscal year to €568 THOUS (2018: €522 THOUS). In 2019, an amendment to the agreement was made which provides for a one-off payment of €1,129 THOUS for the remaining term of the agreement. This payment was also made in the fiscal year. All payments for services to be performed by him under the consulting agreement have thus been made.
In the fiscal year, no loans or advance payments for future compensation components were made to the members of the Management Board of Fresenius Medical Care Management AG.
The payments to U.S. members of the Management Board Messrs. Rice Powell, Michael Brosnan (member of the Management Board until October 31, 2019) and Kent Wanzek were paid in part in the U.S. (in U.S. dollar) and in part in Germany (in euro). For the part paid in Germany, the Company has agreed that due to varying tax rates in both countries, the increased tax burden to such members of the Management Board arising from German tax rates in comparison to U.S. tax rates will be balanced (net compensation). Pursuant to a modified net compensation agreement, these members of the Management Board will be treated as if they were taxed in their home country, the United States, only. Therefore, the gross amounts may be retroactively changed. Since the actual tax burden can only be calculated in connection with the preparation of the Management Board members’ tax returns,
subsequent adjustments may have to be made, which will then be retroactively covered in future compensation reports.
To the extent permitted by law, Fresenius Medical Care Management AG undertook to indemnify the members of the Management Board from claims against them arising out of their work for the Company and its affiliates, to the extent such claims exceed their liability under German law. To secure such obligations, a Directors & Officers liability insurance exists with a deductible that corresponds to the specifications according to the German Stock Corporation Act.
Former members of the Management Board did not receive any compensation in the fiscal year other than mentioned herein. As of December 31 of the fiscal year, pension obligations towards this group of persons exist in an amount of €37,373 THOUS (2018: €25,163 THOUS).
VI. Revision of the compensation system for the Management Board
The Supervisory Board attaches great importance to good corporate governance — also in the area of the compensation of the Management Board. This includes ensuring an effective system of incentives that is in line with the market. Therefore, the Supervisory Board also in 2019 intensively dealt with the system for the compensation of the General Partner’s Management Board and continuously and closely monitored the further development of the standards of good corporate governance and identified suitable measures to adjust the existing compensation regulations. On the basis of intensive discussions also with external stakeholders and the now established statutory changes resulting from the implementation of the Second Shareholders’ Rights Directive in the German Stock Corporation Act and the publication of a new version of the German Corporate Governance Code, the compensation system for the members of the Management Board of the General Partner shall now be comprehensively revised.
The Supervisory Board is convinced that the changes to the system for compensation will significantly contribute to creating further incentives to bring the long-term strategic business orientation, with due consideration of the amended regulatory framework, even more in line with the further evolved interests of the Company’s shareholders. This includes in particular the introduction of non-financial sustainable performance parameters for compensation, with which the Company’s commitment to its social and environmental responsibility is also reflected in the Management Board compensation. In addition, it is intended to adjust the basic systematics of the system for compensation, to reduce its complexity, and to orient it even more strongly on the long term. The compensation component that has so far been paid out as part of the one-year variable compensation, but irrespective of the target achievement, will in future be determined as part of the base salary. Further, the one-year variable compensation shall no longer partially be converted into a long-term performance-related compensation element (Share Based Award). Instead, a larger portion of the performance-related compensation than so far shall be granted in the long term under the future long-term incentive plan. Such plan is also intended to provide for mandatory share retention rules to promote share ownership. Overall, this results in a shift in compensation to a longer-term composition with comparable total compensation. The hypothetical possibility of paying a discretionary compensation component shall be expressly excluded. Furthermore, maximum payout limits (caps) shall be introduced for all performance-related compensation components granted in future.
The comprehensively revised compensation system for the members of the Management Board of the General Partner shall be submitted to the Annual General Meeting of the Company on August 27, 2020 for approval in accordance with the provisions of the Second Shareholders’ Rights Directive as implemented in the German Stock Corporation Act. Information regarding the revised compensation system is contained in the 2020 AGM Invitation under Agenda item 6 and Section II.
VII. Tables of the value of benefits granted and received
The German Corporate Governance Code in the version dated February 7, 2017 provides that the compensation report shall include information in tabular form for each member of the Management Board on the benefits granted and received as well as on the pension expenses for the fiscal year. The model tables provided in the appendix to the German Corporate Governance Code shall be used to present this information. The following tables include information on the value of benefits granted and received. They adhere to the structure and, to the greatest extent possible, the standards of the model tables of the German Corporate Governance Code:
|
Benefits granted to serving members of the Management Board as of December 31, 2019 |
|
in € THOUS |
|
|
|
Rice Powell |
|
Helen Giza |
| ||||||||||||
|
|
|
Chairman of the Management Board |
|
Chief Financial Officer |
| ||||||||||||
|
|
|
Member of the Management Board since |
|
Member of the Management Board since November |
| ||||||||||||
|
|
|
2019 |
|
2019 |
|
2019 |
|
2018(2) |
|
2019 |
|
2019 |
|
2019 |
|
2018(2) |
|
|
|
|
|
|
Minimum |
|
Maximum |
|
|
|
|
|
Minimum |
|
Maximum |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary |
|
1,340 |
|
1,340 |
|
1,340 |
|
1,270 |
|
108 |
|
108 |
|
108 |
|
— |
|
|
Fringe benefits |
|
256 |
|
256 |
|
256 |
|
195 |
|
440 |
|
440 |
|
440 |
|
— |
|
|
Total non-performance-based compensation |
|
1,596 |
|
1,596 |
|
1,596 |
|
1,465 |
|
548 |
|
548 |
|
548 |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-year variable compensation |
|
2,211 |
|
201 |
|
2,653 |
|
2,096 |
|
179 |
|
98 |
|
215 |
|
— |
|
|
Multi-year variable compensation / components with long-term incentive effects |
|
2,232 |
|
— |
|
n.a. |
|
2,390 |
|
865 |
|
— |
|
n.a. |
|
— |
|
|
thereof Share Based Award - New Incentive Bonus Plan 2010 3-year term / 3-year vesting period |
|
657 |
|
— |
|
n.a. |
|
977 |
|
53 |
|
— |
|
n.a. |
|
— |
|
|
thereof Performance Shares - LTIP 2016 4-year term / 4-year vesting period |
|
— |
|
— |
|
n.a. |
|
1,413 |
|
— |
|
— |
|
n.a. |
|
— |
|
|
thereof Performance Shares - MB LTIP 2019 4-year term / 4-year vesting period |
|
1,575 |
|
— |
|
n.a. |
|
— |
|
812 |
|
— |
|
n.a. |
|
— |
|
|
Total non-performance-based compensation and performance-based compensation |
|
6,039 |
|
1,797 |
|
n.a. |
|
5,951 |
|
1,592 |
|
646 |
|
n.a. |
|
— |
|
|
Pension expense |
|
828 |
|
828 |
|
828 |
|
674 |
|
— |
|
— |
|
— |
|
— |
|
|
Value of benefits granted |
|
6,867 |
|
2,625 |
|
n.a. |
|
6,625 |
|
1,592 |
|
646 |
|
n.a. |
|
— |
|
|
|
|
|
|
Dr. Olaf Schermeier |
| ||||||||||||
|
|
|
Dr. Katarzyna Mazur-Hofsäß |
|
Member of the Management Board for Research and |
| ||||||||||||
|
|
|
Member of the Management Board since September |
|
Member of the Management Board since March |
| ||||||||||||
|
|
|
2019 |
|
2019 |
|
2019 |
|
2018(2) |
|
2019 |
|
2019 |
|
2019 |
|
2018(2) |
|
|
|
|
|
|
Minimum |
|
Maximum |
|
|
|
|
|
Minimum |
|
Maximum |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary |
|
700 |
|
700 |
|
700 |
|
233 |
|
510 |
|
510 |
|
510 |
|
490 |
|
|
Fringe benefits |
|
94 |
|
94 |
|
94 |
|
844 |
|
136 |
|
136 |
|
136 |
|
131 |
|
|
Total non-performance-based compensation |
|
794 |
|
794 |
|
794 |
|
1,077 |
|
646 |
|
646 |
|
646 |
|
621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-year variable compensation |
|
1,155 |
|
105 |
|
1,386 |
|
386 |
|
842 |
|
77 |
|
1,010 |
|
809 |
|
|
Multi-year variable compensation / components with long-term incentive effects |
|
1,180 |
|
— |
|
n.a. |
|
857 |
|
1,053 |
|
— |
|
n.a. |
|
1,080 |
|
|
thereof Share Based Award - New Incentive Bonus Plan 2010 3-year term / 3-year vesting period |
|
377 |
|
— |
|
n.a. |
|
123 |
|
250 |
|
— |
|
n.a. |
|
323 |
|
|
thereof Performance Shares - LTIP 2016 4-year term / 4-year vesting period |
|
— |
|
— |
|
n.a. |
|
734 |
|
— |
|
— |
|
n.a. |
|
757 |
|
|
thereof Performance Shares - MB LTIP 2019 4-year term / 4-year vesting period |
|
803 |
|
— |
|
n.a. |
|
— |
|
803 |
|
— |
|
n.a. |
|
— |
|
|
Total non-performance-based compensation and performance-based compensation |
|
3,129 |
|
899 |
|
n.a. |
|
2,320 |
|
2,541 |
|
723 |
|
n.a. |
|
2,510 |
|
|
Pension expense |
|
— |
|
— |
|
— |
|
— |
|
179 |
|
179 |
|
179 |
|
189 |
|
|
Value of benefits granted |
|
3,129 |
|
899 |
|
n.a. |
|
2,320 |
|
2,720 |
|
902 |
|
n.a. |
|
2,699 |
|
(1) The indicated date refers to the appointment as a member of the Management Board of the General Partner.
(2) Please note for purposes of comparison between the amounts indicated and those of the fiscal year that the compensation is subject to foreign exchange rate fluctuations depending on whether it is contractually denominated in euro (Mses. Helen Giza and Dr. Katarzyna Mazur-Hofsäß as well as Messrs. Dr. Olaf Schermeier and Harry de Wit) or U.S. dollar (Messrs. Rice Powell, William Valle, Kent Wanzek and Michael Brosnan).
|
Benefits granted to serving members of the Management Board as of December 31, 2019 |
|
in € THOUS |
|
|
|
William Valle |
|
Kent Wanzek |
| ||||||||||||
|
|
|
Member of the Management Board for North |
|
Member of the Management Board for Global |
| ||||||||||||
|
|
|
Member of the Management Board since February |
|
Member of the Management Board since January 1, |
| ||||||||||||
|
|
|
2019 |
|
2019 |
|
2019 |
|
2018(1) |
|
2019 |
|
2019 |
|
2019 |
|
2018(1) |
|
|
|
|
|
|
Minimum |
|
Maximum |
|
|
|
|
|
Minimum |
|
Maximum |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary |
|
866 |
|
866 |
|
866 |
|
792 |
|
607 |
|
607 |
|
607 |
|
550 |
|
|
Fringe benefits |
|
237 |
|
237 |
|
237 |
|
330 |
|
127 |
|
127 |
|
127 |
|
126 |
|
|
Total non-performance-based compensation |
|
1,103 |
|
1,103 |
|
1,103 |
|
1,122 |
|
734 |
|
734 |
|
734 |
|
676 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-year variable compensation |
|
1,430 |
|
130 |
|
1,716 |
|
1,306 |
|
1,002 |
|
91 |
|
1,203 |
|
908 |
|
|
Multi-year variable compensation / components with long-term incentive effects |
|
1,133 |
|
— |
|
n.a. |
|
1,403 |
|
1,077 |
|
— |
|
n.a. |
|
1,084 |
|
|
thereof Share Based Award - New Incentive Bonus Plan 2010 3-year term / 3-year vesting period |
|
345 |
|
— |
|
n.a. |
|
696 |
|
289 |
|
— |
|
n.a. |
|
377 |
|
|
thereof Performance Shares - LTIP 2016 4-year term / 4-year vesting period |
|
— |
|
— |
|
n.a. |
|
707 |
|
— |
|
— |
|
n.a. |
|
707 |
|
|
thereof Performance Shares - MB LTIP 2019 4-year term / 4-year vesting period |
|
788 |
|
— |
|
n.a. |
|
— |
|
788 |
|
— |
|
n.a. |
|
— |
|
|
Total non-performance-based compensation and performance-based compensation |
|
3,666 |
|
1,233 |
|
n.a. |
|
3,831 |
|
2,813 |
|
825 |
|
n.a. |
|
2,668 |
|
|
Pension expense |
|
— |
|
— |
|
— |
|
— |
|
379 |
|
379 |
|
379 |
|
369 |
|
|
Value of benefits granted |
|
3,666 |
|
1,233 |
|
n.a. |
|
3,831 |
|
3,192 |
|
1,204 |
|
n.a. |
|
3,037 |
|
|
|
|
Harry de Wit |
|
|
| ||||||||||||
|
|
|
Member of the Management Board for Asia-Pacific |
|
|
| ||||||||||||
|
|
|
Member of the Management Board since April 1, |
|
|
| ||||||||||||
|
|
|
2019 |
|
2019 |
|
2019 |
|
2018(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum |
|
Maximum |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary |
|
520 |
|
520 |
|
520 |
|
480 |
|
|
|
|
|
|
|
|
|
|
Fringe benefits |
|
337 |
|
337 |
|
337 |
|
315 |
|
|
|
|
|
|
|
|
|
|
Total non-performance-based compensation |
|
857 |
|
857 |
|
857 |
|
795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-year variable compensation |
|
858 |
|
78 |
|
1,030 |
|
792 |
|
|
|
|
|
|
|
|
|
|
Multi-year variable compensation / components with long-term incentive effects |
|
1,083 |
|
— |
|
n.a. |
|
1,074 |
|
|
|
|
|
|
|
|
|
|
thereof Share Based Award - New Incentive Bonus Plan 2010 3-year term / 3-year vesting period |
|
280 |
|
— |
|
n.a. |
|
317 |
|
|
|
|
|
|
|
|
|
|
thereof Performance Shares - LTIP 2016 4-year term / 4-year vesting period |
|
— |
|
— |
|
n.a. |
|
757 |
|
|
|
|
|
|
|
|
|
|
thereof Performance Shares - MB LTIP 2019 4-year term / 4-year vesting period |
|
803 |
|
— |
|
n.a. |
|
— |
|
|
|
|
|
|
|
|
|
|
Total non-performance-based compensation and performance-based compensation |
|
2,798 |
|
935 |
|
n.a. |
|
2,661 |
|
|
|
|
|
|
|
|
|
|
Pension expense |
|
1,795 |
|
1,795 |
|
1,795 |
|
— |
|
|
|
|
|
|
|
|
|
|
Value of benefits granted |
|
4,593 |
|
2,730 |
|
n.a. |
|
2,661 |
|
|
|
|
|
|
|
|
|
(1) Please note for purposes of comparison between the amounts indicated and those of the fiscal year that the compensation is subject to foreign exchange rate fluctuations depending on whether it is contractually denominated in euro (Mses. Helen Giza and Dr. Katarzyna Mazur-Hofsäß as well as Messrs. Dr. Olaf Schermeier and Harry de Wit) or U.S. dollar (Messrs. Rice Powell, William Valle, Kent Wanzek and Michael Brosnan).
|
Benefits granted to a former member of the Management Board who retired in fiscal year 2019 |
|
in € THOUS |
|
|
|
Michael Brosnan |
|
|
| ||||||||||||
|
|
|
Chief Financial Officer |
|
|
| ||||||||||||
|
|
|
Member of the Management Board until October 31, |
|
|
| ||||||||||||
|
|
|
2019(1) |
|
2019(1) |
|
2019(1) |
|
2018(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum |
|
Maximum |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary |
|
633 |
|
633 |
|
633 |
|
720 |
|
|
|
|
|
|
|
|
|
|
Fringe benefits |
|
211 |
|
211 |
|
211 |
|
56 |
|
|
|
|
|
|
|
|
|
|
Total non-performance-based compensation |
|
844 |
|
844 |
|
844 |
|
776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-year variable compensation |
|
1,253 |
|
114 |
|
1,503 |
|
1,188 |
|
|
|
|
|
|
|
|
|
|
Multi-year variable compensation / components with long-term incentive effects |
|
1,160 |
|
— |
|
n.a. |
|
1,307 |
|
|
|
|
|
|
|
|
|
|
thereof Share Based Award - New Incentive Bonus Plan 2010 3-year term / 3-year vesting period |
|
372 |
|
— |
|
n.a. |
|
600 |
|
|
|
|
|
|
|
|
|
|
thereof Performance Shares - LTIP 2016 4-year term / 4-year vesting period |
|
— |
|
— |
|
n.a. |
|
707 |
|
|
|
|
|
|
|
|
|
|
thereof Performance Shares - MB LTIP 2019 4-year term / 4-year vesting period |
|
788 |
|
— |
|
n.a. |
|
— |
|
|
|
|
|
|
|
|
|
|
Total non-performance-based compensation and performance-based compensation |
|
3,257 |
|
958 |
|
n.a. |
|
3,271 |
|
|
|
|
|
|
|
|
|
|
Pension expense |
|
1,494 |
|
1,494 |
|
1,494 |
|
667 |
|
|
|
|
|
|
|
|
|
|
Value of benefits granted |
|
4,751 |
|
2,452 |
|
n.a. |
|
3,938 |
|
|
|
|
|
|
|
|
|
(1) The amounts for the base salary and the fringe benefits as set out herein for the fiscal year relate to the period until October 31, 2019.
(2) Please note for purposes of comparison between the amounts indicated and those of the fiscal year that the compensation is subject to foreign exchange rate fluctuations depending on whether it is contractually denominated in euro (Ms. Helen Giza, Dr. Katarzyna Mazur-Hofsäß as well as Messrs. Dr. Olaf Schermeier and Harry de Wit) or U.S. dollar (Messrs. Rice Powell, William Valle, Kent Wanzek and Michael Brosnan).
Allocations
in € THOUS
|
|
|
Serving members of the Management Board as of December 31, 2019 |
|
Former member of the |
| ||||||||||||||||||||||||||||
|
|
|
Rice Powell |
|
Helen Giza |
|
Dr. Katarzyna Mazur- |
|
Dr. Olaf Schermeier |
|
William Valle |
|
Kent Wanzek |
|
Harry de Wit |
|
Michael Brosnan |
| ||||||||||||||||
|
|
|
Member of the |
|
Member of the |
|
Member of the |
|
Member of the |
|
Member of the Management |
|
Member of the |
|
Member of the |
|
Member of the |
| ||||||||||||||||
|
|
|
2019 |
|
2018(2) |
|
2019 |
|
2018(2) |
|
2019 |
|
2018(2) |
|
2019 |
|
2018(2) |
|
2019 |
|
2018(2) |
|
2019 |
|
2018(2) |
|
2019 |
|
2018(2) |
|
2019(3) |
|
2018(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary |
|
1,340 |
|
1,270 |
|
108 |
|
— |
|
700 |
|
233 |
|
510 |
|
490 |
|
866 |
|
792 |
|
607 |
|
550 |
|
520 |
|
480 |
|
633 |
|
720 |
|
|
Fringe benefits |
|
256 |
|
195 |
|
440 |
|
— |
|
94 |
|
844 |
|
136 |
|
131 |
|
237 |
|
330 |
|
127 |
|
126 |
|
337 |
|
315 |
|
211 |
|
56 |
|
|
Total non-performance based compensation |
|
1,596 |
|
1,465 |
|
548 |
|
— |
|
794 |
|
1,077 |
|
646 |
|
621 |
|
1,103 |
|
1,122 |
|
734 |
|
676 |
|
857 |
|
795 |
|
844 |
|
776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-year variable compensation |
|
1,970 |
|
2,376 |
|
159 |
|
— |
|
1,131 |
|
370 |
|
750 |
|
970 |
|
1,035 |
|
1,395 |
|
866 |
|
1,076 |
|
841 |
|
950 |
|
1,117 |
|
1,300 |
|
|
Multi-year variable compensation / components with long-term incentive effects |
|
494 |
|
2,777 |
|
— |
|
— |
|
— |
|
— |
|
740 |
|
277 |
|
207 |
|
2,693 |
|
459 |
|
5,401 |
|
— |
|
— |
|
1,505 |
|
131 |
|
|
thereof Share Based Award - New Incentive Bonus Plan 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3-year term / 3-year vesting period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant 2014 |
|
— |
|
131 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
55 |
|
— |
|
— |
|
— |
|
104 |
|
— |
|
— |
|
— |
|
76 |
|
|
Grant 2015 |
|
150 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
53 |
|
— |
|
— |
|
— |
|
115 |
|
— |
|
— |
|
— |
|
82 |
|
— |
|
|
thereof LTIP 2011 - Stock Option Plan 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8-year term / 4-year vesting period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant 2011 |
|
— |
|
2,536 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
532 |
(4) |
— |
|
1,573 |
|
— |
|
— |
|
1,251 |
|
— |
|
|
Grant 2012 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
333 |
(4) |
— |
|
786 |
|
— |
|
— |
|
— |
|
— |
|
|
Grant 2013 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
466 |
(4) |
— |
|
786 |
|
— |
|
— |
|
— |
|
— |
|
|
Grant 2014 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
1,331 |
(4) |
— |
|
2,097 |
|
— |
|
— |
|
— |
|
— |
|
|
thereof LTIP 2011 - Phantom Stock Plan 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5-year term / 4-year vesting period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant 2013 |
|
— |
|
110 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
31 |
|
— |
|
55 |
|
— |
|
— |
|
— |
|
55 |
|
|
Grant 2014 |
|
344 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
222 |
|
207 |
|
— |
|
344 |
|
— |
|
— |
|
— |
|
172 |
|
— |
|
|
Grant 2015 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
687 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
Total non-performance-based and performance-based compensation |
|
4,060 |
|
6,618 |
|
707 |
|
— |
|
1,925 |
|
1,447 |
|
2,136 |
|
1,868 |
|
2,345 |
|
5,210 |
|
2,059 |
|
7,153 |
|
1,698 |
|
1,745 |
|
3,466 |
|
2,207 |
|
|
Pension expense |
|
828 |
|
674 |
|
— |
|
— |
|
— |
|
— |
|
179 |
|
189 |
|
— |
|
— |
|
379 |
|
369 |
|
1,795 |
|
— |
|
1,494 |
|
667 |
|
|
Allocation |
|
4,888 |
|
7,292 |
|
707 |
|
— |
|
1,925 |
|
1,447 |
|
2,315 |
|
2,057 |
|
2,345 |
|
5,210 |
|
2,438 |
|
7,522 |
|
3,493 |
|
1,745 |
|
4,960 |
|
2,874 |
|
(1) The indicated date refers to the appointment as a member of the Management Board of the General Partner.
(2) Please note for purposes of comparison between the amounts indicated and those of the fiscal year that the compensation is subject to foreign exchange rate fluctuations depending on whether it is contractually denominated in euro (Mses. Helen Giza and Dr. Katarzyna Mazur-Hofsäß as well as Messrs. Dr. Olaf Schermeier and Harry de Wit) or U.S. dollar (Messrs. Rice Powell, William Valle, Kent Wanzek and Michael Brosnan).
(3) The amounts for the base salary and the fringe benefits as set out herein for the fiscal year relate to the period until October 31, 2019.
(4) The indicated amounts are allocations from multi-year variable compensation which have been granted to the member of the Management Board William Valle prior to his appointment to the Management Board: LTIP 2011 - Phantom Stock Plan 2011 - Grant 2011 - fair value at grant €81 THOUS, LTIP 2011 - Phantom Stock Plan 2011 - Grant 2012 - fair value at grant €48 THOUS, LTIP 2011 - Phantom Stock Plan 2011 - Grant 2013 - fair value at grant €47 THOUS, LTIP 2011 - Phantom Stock Plan 2011 - Grant 2014 - fair value at grant €135 THOUS.
Compensation of the Supervisory Board
The compensation of the FMC-AG & Co. KGaA Supervisory Board is set out in section 13 of the Articles of Association of FMC-AG & Co. KGaA.
Each Supervisory Board member receives a base salary of $88 THOUS (2018: $88 THOUS) for each full fiscal year, payable in four equal instalments at the end of a calendar quarter. The Chairman of the Supervisory Board receives additional compensation of $88 THOUS (2018: $88 THOUS) and the Vice Chairman receives additional compensation of $44 THOUS (2018: $44 THOUS) per respective full fiscal year.
In addition, each member of the Supervisory Board receives as a variable performance-based compensation component (hereinafter also: “performance-based compensation”) an additional remuneration which is based upon the respective average growth of earnings per share of the Company (EPS) during the period of the last three fiscal years prior to the payment date (3-year average EPS growth). The amount of the performance-based compensation is $60 THOUS in case of achieving a 3-year average EPS growth corridor from 8.00% to 8.99%, $70 THOUS in the corridor from 9.00% to 9.99% and $80 THOUS in case of a 3-year average EPS growth of 10.00% or more. If the aforementioned targets are reached, the respective variable remuneration amounts of the performance-based compensation are earned to their full extent, i.e., within these margins there is no pro rata remuneration. In any case, this component is capped at the maximum amount of $80 THOUS per annum. Reciprocally, the members of the Supervisory Board are only entitled to the remuneration component if the 3-year average EPS growth of at least 8.00% is reached. Provided that the relevant targets have been achieved, the remuneration is, in principle, disbursed on a yearly basis following approval of the Company’s annual financial statements at the end of the calendar quarter in which the Company’s annual financial statements are approved. For the fiscal year 2019, the 3-year average EPS growth for the years 2017, 2018 and 2019 was relevant.
In application of the principles above, for the fiscal year no entitlement to a payment of performance-based compensation was achieved (2018: $641 THOUS for the entire Supervisory Board).
As a member of a committee, a Supervisory Board member of FMC-AG & Co. KGaA additionally annually receives $44 THOUS (2018: $44 THOUS). A member of a committee who serves as chairman or vice chairman of a committee additionally receives $22 THOUS and $11 THOUS a year, respectively (2018: $22 THOUS and $11 THOUS, respectively), payable in identical instalments at the end of a calendar quarter. For memberships in the Nomination Committee of the Supervisory Board and in the Joint Committee of the Company as well as in the capacity of their respective chairmen and vice chairmen, no separate remuneration shall be granted to the members of the Supervisory Board. In accordance with section 13e para. 3 of the Articles of Association of FMC-AG & Co. KGaA, the members of the Joint Committee are, however, entitled to receive an attendance fee in the amount of $3.5 THOUS.
Should a member of the FMC-AG & Co. KGaA Supervisory Board at the same time be a member of the Supervisory Board of the General Partner Fresenius Medical Care Management AG and receive compensation for his/her work on the Supervisory Board of Fresenius Medical Care Management AG, the compensation for the work as a FMC-AG & Co. KGaA Supervisory Board member shall be reduced by half. The same applies to the additional compensation for the Chairman of the FMC-AG & Co. KGaA Supervisory Board and the Vice Chairman, to the extent that they are at the same time chairman and vice chairman, respectively, of the Supervisory Board of Fresenius Medical Care Management AG. To the extent the vice chairman of the FMC-AG & Co. KGaA Supervisory Board is at the same time chairman of the Supervisory Board at Fresenius Medical Care Management AG, he shall receive no additional compensation for his work as vice chairman of the FMC-AG & Co. KGaA Supervisory Board.
The compensation of the members of the Supervisory Board of Fresenius Medical Care Management AG and the compensation of the members of its committees were charged to FMC-AG & Co. KGaA in accordance with section 7 para. 3 of the Articles of Association of FMC-AG & Co. KGaA.
The members of the Supervisory Board of FMC-AG & Co. KGaA are to be reimbursed for the expenses incurred in the exercise of their office, which also include the applicable VAT.
For the benefit of the members of the Supervisory Board of FMC-AG & Co. KGaA a Directors & Officers liability insurance exists with a deductible that corresponds to the specifications according to the German Stock Corporation Act.
The total compensation of the Supervisory Board of FMC-AG & Co. KGaA, including the amount charged by Fresenius Medical Care Management AG to FMC-AG & Co. KGaA, is stated in the following tables:
Compensation of the Supervisory Board
in € THOUS(1)
|
|
|
Base salary |
|
Base salary |
|
Compensation for |
|
Compensation for |
|
Total amount of non- |
| ||||||||||
|
|
|
for Supervisory Board at |
|
for Supervisory Board at |
|
committee services at |
|
committee services at |
|
performance-based |
| ||||||||||
|
|
|
FMC Management AG |
|
FMC-AG & Co. KGaA |
|
FMC Management AG |
|
FMC-AG & Co. KGaA |
|
compensation |
| ||||||||||
|
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Dieter Schenk(2) |
|
39 |
|
44 |
|
118 |
|
91 |
|
120 |
|
93 |
|
19 |
|
— |
|
296 |
|
228 |
|
|
Stephan Sturm(3) |
|
157 |
|
149 |
|
— |
|
— |
|
100 |
|
65 |
|
— |
|
— |
|
257 |
|
214 |
|
|
Rolf A. Classon (4) |
|
39 |
|
37 |
|
79 |
|
41 |
|
118 |
|
112 |
|
49 |
|
47 |
|
285 |
|
237 |
|
|
Rachel Empey(5) |
|
79 |
|
75 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
79 |
|
75 |
|
|
William P. Johnston |
|
39 |
|
37 |
|
39 |
|
37 |
|
108 |
|
102 |
|
59 |
|
56 |
|
245 |
|
232 |
|
|
Dr. Gerd Krick(6) |
|
79 |
|
60 |
|
— |
|
42 |
|
59 |
|
56 |
|
— |
|
14 |
|
138 |
|
172 |
|
|
Dr. Dorothea Wenzel(7) |
|
— |
|
— |
|
45 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
45 |
|
— |
|
|
Pascale Witz(8) |
|
— |
|
— |
|
79 |
|
75 |
|
— |
|
— |
|
60 |
|
— |
|
139 |
|
75 |
|
|
Prof. Dr. Gregor Zünd(9) |
|
— |
|
— |
|
79 |
|
13 |
|
— |
|
— |
|
— |
|
— |
|
79 |
|
13 |
|
|
Deborah Doyle McWhinney(10) |
|
— |
|
— |
|
— |
|
62 |
|
— |
|
— |
|
— |
|
31 |
|
— |
|
93 |
|
|
Total |
|
432 |
|
402 |
|
439 |
|
361 |
|
505 |
|
428 |
|
187 |
|
148 |
|
1,563 |
|
1,339 |
|
|
(1) Shown without VAT and withholding tax; translation of U.S. dollar amounts at respective average exchange rates for the respective calendar year. |
|
(2) Please note for purposes of comparison of the amounts indicated for the fiscal year that Dr. Dieter Schenk was appointed at the same time as vice chairman of the Supervisory Board of FMC-AG & Co. KGaA until May 17, 2018 and as chairman of the Supervisory Board of FMC-AG & Co. KGaA since May 17, 2018. |
|
(3) Chairman of the Supervisory Board of FMC Management AG, but not a member of the Supervisory Board of FMC-AG & Co. KGaA; compensation paid by FMC Management AG. |
|
(4) Please note for purposes of comparison of the amounts indicated for the fiscal year that Mr. Rolf A. Classon was appointed at the same time as vice chairman of the Supervisory Board of FMC-AG & Co. KGaA since November 30, 2018. |
|
(5) Member of the Supervisory Board of FMC Management AG, but not a member of the Supervisory Board of FMC-AG & Co. KGaA; compensation paid by FMC Management AG. |
|
(6) Please note for purposes of comparison of the amounts indicated for the fiscal year that Dr. Gerd Krick was appointed as a member of the Supervisory Board of FMC AG & Co. KGaA until May 17, 2018, and, therefore, received compensation payments to be set out herein until this date. Dr. Gerd Krick is a member of the Supervisory Board of FMC Management AG; compensation for this paid by FMC Management AG. |
|
(7) Member of the Supervisory Board of FMC-AG & Co. KGaA, but not a member of the Supervisory Board of FMC Management AG; compensation paid by FMC-AG & Co. KGaA. Please note for purposes of comparison of the amounts indicated for the fiscal year that Dr. Dorothea Wenzel was appointed as a member of the Supervisory Board of FMC-AG & Co. KGaA as of May 16, 2019, and, therefore, received compensation payments to be set out herein as of this date. |
|
(8) Member of the Supervisory Board of FMC-AG & Co. KGaA, but not a member of the Supervisory Board of FMC Management AG; compensation paid by FMC-AG & Co. KGaA. |
|
(9) Member of the Supervisory Board of FMC-AG & Co. KGaA, but not a member of the Supervisory Board of FMC Management AG; compensation paid by FMC-AG & Co. KGaA. Please note for purposes of comparison of the amounts indicated for the fiscal year that Prof. Dr. Gregor Zünd was appointed as a member of the Supervisory Board of FMC-AG & Co. KGaA as of October 29, 2018, and, therefore, received compensation payments to be set out herein as of this date. |
|
(10) Former member of the Supervisory Board of FMC-AG & Co. KGaA, but not a member of the Supervisory Board of FMC Management AG; compensation paid by FMC-AG & Co. KGaA. Please note for purposes of comparison of the amounts indicated for the fiscal year that Mrs. Deborah Doyle McWhinney resigned as a member of the Supervisory Board of FMC-AG & Co. KGaA effective November 1, 2018, and, therefore, received compensation payments to be set out herein until this date. |
Compensation of the Supervisory Board
in € THOUS(1)
|
|
|
Performance-based |
|
Performance-based |
|
|
|
|
|
|
|
|
| ||||
|
|
|
compensation in |
|
compensation in |
|
Performance-based |
|
|
|
|
| ||||||
|
|
|
FMC Management AG |
|
FMC-AG & Co. KGaA |
|
compensation |
|
Total compensation |
| ||||||||
|
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Dieter Schenk(2) |
|
— |
|
34 |
|
— |
|
34 |
|
— |
|
68 |
|
296 |
|
296 |
|
|
Stephan Sturm(3) |
|
— |
|
68 |
|
— |
|
— |
|
— |
|
68 |
|
257 |
|
282 |
|
|
Rolf A. Classon (4) |
|
— |
|
34 |
|
— |
|
34 |
|
— |
|
68 |
|
285 |
|
305 |
|
|
Rachel Empey(5) |
|
— |
|
68 |
|
— |
|
— |
|
— |
|
68 |
|
79 |
|
143 |
|
|
William P. Johnston |
|
— |
|
34 |
|
— |
|
34 |
|
— |
|
68 |
|
245 |
|
300 |
|
|
Dr. Gerd Krick(6) |
|
— |
|
42 |
|
— |
|
25 |
|
— |
|
67 |
|
138 |
|
239 |
|
|
Dr. Dorothea Wenzel(7) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
45 |
|
— |
|
|
Pascale Witz(8) |
|
— |
|
— |
|
— |
|
68 |
|
— |
|
68 |
|
139 |
|
143 |
|
|
Prof. Dr. Gregor Zünd(9) |
|
— |
|
— |
|
— |
|
12 |
|
— |
|
12 |
|
79 |
|
25 |
|
|
Deborah Doyle McWhinney(10) |
|
— |
|
— |
|
— |
|
57 |
|
— |
|
57 |
|
— |
|
150 |
|
|
Total |
|
— |
|
280 |
|
— |
|
264 |
|
— |
|
544 |
|
1,563 |
|
1,883 |
|
|
(1) Shown without VAT and withholding tax; translation of U.S. dollar amounts at respective average exchange rates for the respective calendar year. |
|
(2) Please note for purposes of comparison of the amounts indicated for the fiscal year that Dr. Dieter Schenk was appointed at the same time as vice chairman of the Supervisory Board of FMC-AG & Co. KGaA until May 17, 2018 and as chairman of the Supervisory Board of FMC-AG & Co. KGaA since May 17, 2018. |
|
(3) Chairman of the Supervisory Board of FMC Management AG, but not a member of the Supervisory Board of FMC-AG & Co. KGaA; compensation paid by FMC Management AG. |
|
(4) Please note for purposes of comparison of the amounts indicated for the fiscal year that Mr. Rolf A. Classon was appointed at the same time as vice chairman of the Supervisory Board of FMC-AG & Co. KGaA since November 30, 2018. |
|
(5) Member of the Supervisory Board of FMC Management AG, but not a member of the Supervisory Board of FMC-AG & Co. KGaA; compensation paid by FMC Management AG. |
|
(6) Please note for purposes of comparison of the amounts indicated for the fiscal year that Dr. Gerd Krick was appointed as a member of the Supervisory Board of FMC AG & Co. KGaA until May 17, 2018, and, therefore, received compensation payments to be set out herein until this date. Dr. Gerd Krick is a member of the Supervisory Board of FMC Management AG; compensation for this paid by FMC Management AG. |
|
(7) Member of the Supervisory Board of FMC-AG & Co. KGaA, but not a member of the Supervisory Board of FMC Management AG; compensation paid by FMC-AG & Co. KGaA. Please note for purposes of comparison of the amounts indicated for the fiscal year that Dr. Dorothea Wenzel was appointed as a member of the Supervisory Board of FMC-AG & Co. KGaA as of May 16, 2019, and, therefore, received compensation payments to be set out herein as of this date. |
|
(8) Member of the Supervisory Board of FMC-AG & Co. KGaA, but not a member of the Supervisory Board of FMC Management AG; compensation paid by FMC-AG & Co. KGaA. |
|
(9) Member of the Supervisory Board of FMC-AG & Co. KGaA, but not a member of the Supervisory Board of FMC Management AG; compensation paid by FMC-AG & Co. KGaA. Please note for purposes of comparison of the amounts indicated for the fiscal year that Prof. Dr. Gregor Zünd was appointed as a member of the Supervisory Board of FMC-AG & Co. KGaA as of October 29, 2018, and, therefore, received compensation payments to be set out herein as of this date. |
|
(10) Former member of the Supervisory Board of FMC-AG & Co. KGaA, but not a member of the Supervisory Board of FMC Management AG; compensation paid by FMC-AG & Co. KGaA. Please note for purposes of comparison of the amounts indicated for the fiscal year that Mrs. Deborah Doyle McWhinney resigned as a member of the Supervisory Board of FMC-AG & Co. KGaA effective November 1, 2018, and, therefore, received compensation payments to be set out herein until this date. |
(v) Options to Purchase our Securities
Fresenius Medical Care AG & Co. KGaA share-based plans
As of December 31, 2019, the Company has various share-based compensation plans, which may either be equity- or cash-settled.
Fresenius Medical Care AG & Co. KGaA long-term incentive plans during 2016—2019
As of May 11, 2016, the issuance of stock options and Phantom Stock under the LTIP 2011 is no longer possible. Furthermore, as of January 1, 2019, the issuance of Performance Shares under the LTIP 2016 is no longer possible. In order to continue to enable the members of the Management Board, the members of the management boards of affiliated companies and managerial staff members to adequately participate in the long-term, sustained success of the Company, successor programs effective January 1, 2019 were introduced. For members of the Management Board, the Supervisory Board of Management AG has approved and adopted the MB LTIP 2019. For the members of the management boards of affiliated companies and managerial staff members, the Management Board of Management AG has approved and adopted the Fresenius Medical Care AG & Co. KGaA Long-Term Incentive Plan 2019 (“LTIP 2019”). Additionally, the Management Board of Management AG has approved and adopted the Fresenius Medical Care AG & Co. KGaA NxStage Long-Term Incentive Plan (“NxStage LTIP”) for the management board and managerial staff members of NxStage in the course of the integration of NxStage into the Company.
The MB LTIP 2019, the LTIP 2019, the NxStage LTIP and the LTIP 2016 are variable compensation programs with long-term incentive effects. Similar to the LTIP 2016, which granted so-called “Performance Shares” annually or semiannually from 2016 to 2018, pursuant to the MB LTIP 2019 and the LTIP 2019, Performance Shares could be granted to plan participants in the MB LTIP 2019once or twice during 2019 f and may be granted throughout 2019 to 2021 for the LTIP 2019. Pursuant to the NxStage LTIP, plan participants were granted Performance Shares in February 2019. Performance Shares are non-equity, cash-settled virtual compensation instruments which may entitle plan participants to receive a cash payment depending on the achievement of pre-defined performance targets further defined below as well as the Company’s share price development.
For members of the Management Board, the Supervisory Board of Management AG will, in due exercise of its discretion and taking into account the individual responsibility and performance of each Management Board member, determine an initial value for each grant for any awards to Management Board members. For plan participants other than the members of the Management Board, such determination will be made by the Management Board. The initial grant value is determined in the currency in which the respective participant receives
his or her base salary at the time of the grant. In order to determine the number of Performance Shares each plan participant receives, the respective grant value will be divided by the value per Performance Share at the time of the grant, which is mainly determined based on the average price of the Company’s shares over a period of thirty calendar days prior to the respective grant date.
The number of granted Performance Shares may change over the performance period of three years, depending on the level of achievement of the following: (i) Revenue Growth, (ii) Net Income Growth and (iii) ROIC. For the LTIP 2019 exclusively, the level of achievement for Performance Shares granted in fiscal year 2019 may be subject to an increase if certain targets in relation to the second phase of the Company’s Global Efficiency Program are achieved (“GEP-II targets”).
Revenue, net income and ROIC are determined according to the Company’s consolidated reported and audited figures in Euro for the financial statements prepared in accordance with IFRS, applying the respective plan terms. Revenue Growth, Net Income Growth and the fulfillment of the GEP-II targets, for the purpose of the relevant plan, are determined at constant currency.
An annual target achievement level of 100% will be reached for the Revenue Growth performance target if Revenue Growth is 7% in each individual year of the three-year performance period; Revenue Growth of 0% will lead to a target achievement level of 0% and the maximum target achievement level of 200% will be reached in case of Revenue Growth of at least 16%. If Revenue Growth ranges between these values, the degree of target achievement will be linearly interpolated between these values.
An annual target achievement level of 100% for the Net Income Growth performance target will be reached if Net Income Growth is 7% in each individual year of the three-year performance period. In case of Net Income Growth of 0%, the target achievement level will also be 0%; the maximum target achievement of 200% will be reached in the case of Net Income Growth of at least 14%. Between these values, the degree of target achievement will be determined by means of linear interpolation.
With regard to ROIC, an annual target achievement level of 100% will be reached if the target ROIC as defined for the respective year is reached. For the MB LTIP 2019 and the LTIP 2019, the target ROIC is 7.9% for 2019 (LTIP 2016: 7.3% in 2016 and increased by 0.2 percentage points for each consecutive year until 2020; NxStage LTIP: 7.7% in 2018 and increased by 0.2 percentage points for each consecutive year until 2020). A target achievement level of 0% will be reached if the ROIC falls below the target ROIC for the respective year by 0.2 percentage points or more, whereas the maximum target achievement level of 200% will be reached if the target ROIC for the respective year is exceeded by 0.2 percentage points or more. The degree of target achievement will be determined by means of linear interpolation if the ROIC ranges between these values. In case the annual ROIC target achievement level in the third year of a performance period is equal or higher than the ROIC target achievement level in each of the two previous years of such performance period, the ROIC target achievement level of the third year is deemed to be achieved for all years of the respective performance period.
The achievement level for each of the three performance targets will be weighted annually at one-third to determine the yearly target achievement for each year of the three-year performance period. The level of overall target achievement over the three-year performance period will then be determined on the basis of the mean of these three average yearly target achievements. The overall target achievement can be in a range of 0% to 200%. For the LTIP 2019, the overall target achievement for Performance Shares granted in fiscal year 2019 shall be increased by 20 percentage points if the GEP-II targets achievement is 100%. In case of a GEP-II targets achievement between 0% and 100%, the respective increase of the overall target achievement will be calculated by means of linear interpolation. The overall target achievement increased by the GEP-II targets achievement shall not exceed 200%.
The number of Performance Shares granted to the plan participants at the beginning of the performance period will each be multiplied by the level of overall target achievement in order to determine the final number of Performance Shares.
For the MB LTIP 2019, the final number of Performance Shares is generally deemed earned four years after the day of a respective grant (the four-year vesting period). The number of such vested Performance Shares is then multiplied by the average Company share price over a period of thirty days prior to the lapse of this four-year vesting period. The respective resulting amount will then be paid to the plan participants as cash compensation.
For plan participants of the LTIP 2019, the final number of Performance Shares is generally deemed earned three years after the day of a respective grant (the three-year vesting period). The number of such vested Performance Shares is then multiplied by the average Company share price over a period of thirty days prior to the lapse of this three-year vesting period. The respective resulting amount, which is capped in total at an amount equaling 400% of the grant value received by the participant, will then be paid to the plan participants as cash compensation.
For plan participants of the NxStage LTIP, the final number of Performance Shares granted in February 2019 is generally deemed earned in December 2022 (the vesting period). The number of such vested Performance Shares is then multiplied by the average Company share price over a period of thirty days prior to the lapse of this vesting period. The respective resulting amount will then be paid to the plan participants as cash compensation.
For plan participants of the LTIP 2016, the final number of Performance Shares is generally deemed earned four years after the day of a respective grant (the four-year vesting period). The number of such vested Performance Shares is then multiplied by the average Company share price over a period of thirty days prior to the lapse of this four-year vesting period. The respective resulting amount will then be paid to the plan participants as cash compensation.
During 2019, the Company awarded 114,999 Performance Shares under the MB LTIP 2019 at a measurement date weighted average fair value of €60.70 each and a total fair value of €6,980 THOUS, which will be revalued if the fair value changes. The total fair value will be amortized over the four-year vesting period.
During 2019, the Company awarded 817,089 Performance Shares under the LTIP 2019 at a measurement date weighted average fair value of €62.16 each and a total fair value of €50,790 THOUS, which will be revalued if the fair value changes. The total fair value will be amortized over the three-year vesting period.
During 2019, the Company awarded 55,978 Performance Shares under the NxStage LTIP at a measurement date weighted average fair value of €62.17 each and a total fair value of €3,480 THOUS, which will be revalued if the fair value changes. The total fair value will be amortized over the vesting period.
During 2018, the Company awarded 632,804 Performance Shares under the LTIP 2016 including 73,315 Performance Shares to the members of the Management Board at a measurement date weighted average fair value of €51.99 each and a total fair value of €32,900 THOUS, which will be revalued if the fair value changes. The total fair value will be amortized over the four-year vesting period.
During 2017, the Company awarded 614,985 Performance Shares under the LTIP 2016 including 73,746 Performance Shares to the members of the Management Board at a measurement date weighted average fair value of €83.40 each and a total fair value of €51,290 THOUS, which will be revalued if the fair value changes. The total fair value will be amortized over the four-year vesting period.
Fresenius Medical Care AG & Co. KGaA long-term incentive program 2011
On May 12, 2011, the Stock Option Plan 2011 (“2011 SOP”) was established by resolution of the Company’s AGM. The 2011 SOP, together with the Phantom Stock Plan 2011, which was established by resolution of the General Partner’s Management and supervisory boards, forms the Company’s LTIP 2011. Under the LTIP 2011, participants were granted awards, which consisted of a combination of stock options and Phantom Stock. The final grant under the LTIP 2011 was made in December 2015. Awards under the LTIP 2011 were subject to a four-year vesting period. Vesting of the awards granted was subject to achievement of pre-defined performance targets. The 2011 SOP was established with a conditional capital increase up to €12,000 subject to the issue of up to twelve million non-par value bearer ordinary shares with a nominal value of €1.00 per share.
Stock options granted under the LTIP 2011 have an eight-year term and can be exercised for the first time after a four-year vesting period. The exercise price of stock options granted under the LTIP 2011 shall be the average stock exchange price on the Frankfurt Stock Exchange of the Company’s shares during the 30 calendar days immediately prior to each grant date. Stock options granted under the LTIP 2011 to U.S. participants are non-qualified stock options under the United States Internal Revenue Code of 1986, as amended. Stock options under the LTIP 2011 are not transferable by a participant or a participant’s heirs, and may not be transferred, pledged, assigned, or disposed of otherwise.
Phantom Stock awards under the LTIP 2011 entitle the holders to receive payment in euro from the Company upon exercise of the Phantom Stock. The payment per Phantom Stock in lieu of the issuance of such stock shall be based upon the share price on the Frankfurt Stock Exchange of one of the Company’s shares on the exercise date. Phantom Stock awards have a five-year term and can be exercised for the first time after a four-year vesting period. For participants who are U.S. taxpayers, the Phantom Stock is deemed to be exercised in any event in the month of March following the end of the vesting period.
New incentive bonus plan
In 2019, the members of the Management Board were eligible for performance-related compensation that depended upon achievement of pre-defined targets. The targets are measured based on the adjusted net income growth attributable to the shareholders of FMC-AG & Co. KGaA at constant currency (“Adjusted Net Income Growth”), adjusted net cash provided by (used in) operating activities after capital expenditures, before acquisitions and investments (“Adjusted Free Cash Flow”) in percent of revenues and adjusted operating margin (“Adjusted Operating Margin”), and are derived from the comparison of targeted and actually achieved current year figures. Targets are divided into Group level targets and those to be achieved in individual regions and areas of responsibility.
Performance-related bonuses for 2019 consist proportionately of a cash component and a share-based component which will be paid in cash. Upon meeting the annual targets, the cash component for the year 2019 will be paid in the following year, after the consolidated financial statements for 2019 have been approved. The share-based component is subject to a three-year vesting period, although a shorter period may apply in special cases (e.g. occupational disability, retirement and employment contracts which were not extended by the Company). The amount of cash for the payment relating to the share-based component shall be based on the share price of Fresenius Medical Care AG & Co. KGaA ordinary shares upon exercise. For each of the members of the
Management Board, the amount of the achievable pay component as well as of the allocation value of the cash-settled share-based compensation is capped.
Share-based compensation related to this plan for fiscal years ended 2019, 2018 and 2017 was €2,623 THOUS, €3,414 THOUS and €3,418 THOUS, respectively.
Information on holdings under share-based plans
At December 31, 2019, the members of the Management Board held 102,435 Performance Shares under the MB LTIP 2019. Former members of the Management Board held 12,564 Performance Shares under the MB LTIP 2019.
At December 31, 2019, the plan participants held 797,659 Performance Shares under the LTIP 2019.
At December 31, 2019, the plan participants held 45,007 Performance Shares under the NxStage LTIP.
At December 31, 2019, the members of the Management Board held 211,878 Performance Shares and plan participants other than the members of the Management Board held 1,747,142 Performance Shares under the LTIP 2016.
At December 31, 2019, the members of the Management Board held 23,336 Phantom Stock and plan participants other than the members of the Management Board held 311,650 Phantom Stock under the LTIP 2011.
At December 31, 2019, the members of the Management Board held 452,989 stock options and plan participants other than the members of the Management Board held 3,036,000 stock options under the 2011 SOP.
Additional information on share-based plans
The table below provides reconciliations for stock options outstanding at December 31, 2019, as compared to December 31, 2018.
Transactions
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Exercise |
|
|
Stock options for shares |
|
Options |
|
Price |
|
|
|
|
(in THOUS) |
|
in € |
|
|
Balance at December 31, 2018 |
|
3,896 |
|
68.85 |
|
|
Granted |
|
— |
|
— |
|
|
Exercised(1) |
|
329 |
|
51.72 |
|
|
Forfeited |
|
78 |
|
75.08 |
|
|
Balance at December 31, 2019 |
|
3,489 |
|
70.32 |
|
(1) The average share price at the date of exercise of the options was €67.62.
The following table provides a summary of fully vested options outstanding and exercisable at December 31, 2019:
Share Options
|
|
|
Outstanding |
|
Exercisable |
| ||||||
|
|
|
|
|
Weighted |
|
Weighted |
|
|
|
Weighted |
|
|
Range of |
|
|
|
average |
|
average |
|
|
|
average |
|
|
exercise |
|
Number |
|
remaining |
|
exercise |
|
Number |
|
exercise |
|
|
prices |
|
of |
|
contractual |
|
price |
|
of |
|
price |
|
|
in € |
|
options |
|
life |
|
in € |
|
options |
|
in € |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45.01 - 50.00 |
|
767,001 |
|
2.38 |
|
49.90 |
|
767,001 |
|
49.90 |
|
|
50.01 - 55.00 |
|
825 |
|
0.93 |
|
52.27 |
|
825 |
|
52.27 |
|
|
55.01 - 60.00 |
|
133,375 |
|
1.24 |
|
57.68 |
|
133,375 |
|
57.68 |
|
|
60.01 - 65.00 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
65.01 - 70.00 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
70.01 - 75.00 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
75.01 - 80.00 |
|
2,587,788 |
|
3.58 |
|
77.03 |
|
2,587,788 |
|
77.03 |
|
|
|
|
3,488,989 |
|
3.23 |
|
70.32 |
|
3,488,989 |
|
70.32 |
|
At December 31, 2019, there were no total unrecognized compensation costs related to non-vested options.
During the fiscal years ended December 31, 2019, 2018, and 2017, the Company received cash of €17,014 THOUS, €43,508 THOUS and €42,234 THOUS, respectively, from the exercise of stock options (see note 17). The intrinsic value of stock options exercised for the twelve-month periods ended December 31, 2019, 2018, and 2017 was €5,231 THOUS, €29,440 THOUS and €31,580 THOUS, respectively.
The compensation expense related to equity-settled stock option programs is determined based upon the fair value on the grant date and the number of stock options granted which will be recognized over the four-year vesting period. In connection with the 2011 SOP, the Company incurred compensation expense of €1,992 THOUS, €6,713 THOUS and €11,736 THOUS for the fiscal years ended December 31, 2019, 2018 and 2017, respectively.
The compensation expense related to cash-settled share-based payment transactions is determined based upon the fair value at the measurement date and the number of Phantom Stock or Performance Shares granted which will be recognized over the vesting period. In connection with cash-settled share-based payment transactions, the Company recognized compensation expense of:
· €656 THOUS, €0 and €0 related to Performance Shares under the MB LTIP 2019 for the fiscal years ended December 31, 2019, 2018 and 2017, respectively,
· €4,771 THOUS, €0 and €0 related to Performance Shares under the LTIP 2019 for the fiscal years ended December 31, 2019, 2018 and 2017, respectively,
· €572 THOUS, €0 and €0 related to Performance Shares under the NxStage LTIP for the fiscal years ended December 31, 2019, 2018 and 2017, respectively,
· €30,304 THOUS, €4,152 THOUS and €38,882 THOUS related to Performance Shares under the LTIP 2016 for the fiscal years ended December 31, 2019, 2018 and 2017, respectively, and
· €5,724 THOUS, -€8,799 THOUS and €21,576 THOUS related to Phantom Stock for the fiscal years ended December 31, 2019, 2018 and 2017, respectively.
Care Coordination stock incentive plans
In 2014, the Company established two subsidiary stock incentive plans for the acquisitions of Sound and National Cardiovascular Partners. The Company divested its controlling interest in Sound on June 28, 2018, see note 4 c) of the notes to the consolidated financial statements included in the 2019 20-F for information regarding the divestiture. For the year ended December 31, 2019, the Company did not record stock compensation expense associated with the Sound subsidiary stock incentive plan (2018: €87,157 THOUS and 2017: €35,250 THOUS). The remaining subsidiary stock incentive plan related to National Cardiovascular Partners is immaterial to the Company.
(vi) Material Transactions between FMC-AG & Co. KGaA and its Subsidiaries and Directors, Officers and Controlling Persons of FMC-AG & Co. KGaA
In connection with the formation of FMC-AG, and the combination of the dialysis businesses of Fresenius SE and W.R. Grace & Co. in 1996, which we refer to as the “Merger,” Fresenius SE and its affiliates and FMC-AG and its affiliates entered into several agreements for the purpose of giving effect to the Merger and defining our ongoing relationship. Fresenius SE and W.R. Grace & Co. negotiated these agreements. The information below
summarizes the material aspects of certain agreements we entered into in connection with the Merger and certain other, arrangements and transactions between FMC-AG & Co. KGaA and Fresenius SE, their respective affiliates and with certain of our equity method investees. For further information, see note 5 of the notes to the consolidated financial statements included in the 2019 20-F. The following descriptions are not complete and are qualified in their entirety by reference to those agreements, which have been filed with the Securities and Exchange Commission. We believe that the leases, the supply agreements and the service agreements summarized below are no less favorable to us and no more favorable to Fresenius SE than would have been obtained in arm’s-length bargaining between independent parties. The trademark and other intellectual property agreements summarized below were negotiated by Fresenius SE and W.R. Grace & Co., and, taken independently, are not necessarily indicative of market terms.
In the discussion below regarding our contractual and other relationships with Fresenius SE:
· the term “we (or us) and our affiliates” refers only to FMC-AG & Co. KGaA and its subsidiaries; and
· the term “Fresenius SE and its affiliates” refers only to Fresenius SE and affiliates of Fresenius SE other than FMC-AG & Co. KGaA and its subsidiaries.
Real property leases
The Company is a party to real estate lease agreements with Fresenius SE and certain of its affiliates (the “Fresenius SE Companies”), which mainly include leases for the Company’s corporate headquarters in Bad Homburg, Germany and production sites in Schweinfurt and St. Wendel, Germany. The majority of the leases expire at the end of 2026.
Below is a summary resulting from the above described lease agreements with related parties.
Lease agreements with related parties
in € THOUS
|
|
|
2019 |
|
2018 |
|
2017 |
|
December 31, 2019 |
| ||||||||||
|
|
|
Depreciation |
|
Interest |
|
Lease |
|
Lease |
|
Lease |
|
Lease |
|
Lease |
|
Right-of-use |
|
Lease |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresenius SE |
|
4,580 |
|
501 |
|
4,005 |
|
— |
|
8,745 |
|
— |
|
8,456 |
|
30,336 |
|
30,820 |
|
|
Fresenius SE affiliates |
|
12,589 |
|
1,396 |
|
452 |
|
— |
|
15,852 |
|
— |
|
13,676 |
|
91,879 |
|
92,126 |
|
|
Total |
|
17,169 |
|
1,897 |
|
4,457 |
|
— |
|
24,597 |
|
— |
|
22,132 |
|
122,215 |
|
122,946 |
|
(1) Short-term leases and expenses relating to variable lease payments are exempted from balance sheet recognition.
For information with respect to our principal properties, see “Item 4.D. Property, plant and equipment” in our 2019 20-F.
Trademarks
Fresenius SE continues to own the name “Fresenius” and several marks containing “Fresenius” (hereinafter referred to as “Fresenius Marks”). Fresenius SE and Fresenius Medical Care Deutschland GmbH, one of our German subsidiaries (hereinafter referred to as “D-GmbH”), have entered into agreements containing the following provisions. Fresenius SE has granted to D-GmbH, for our benefit and that of our affiliates, an exclusive, worldwide, royalty-free, perpetual license to use “Fresenius Medical Care” in our names, and to use the Fresenius marks, including some combination marks containing the Fresenius name that were used by the worldwide dialysis business of Fresenius SE, and the “Fresenius Marks” as a trademark in all aspects of the renal business. D-GmbH, for our benefit and that of our affiliates, has also been granted a worldwide, royalty-free, perpetual license to use the “Fresenius Marks” in the former National Medical Care non-renal business if it is used as part of a trademark containing the words “Fresenius Medical Care” together with one or more descriptive words, such as “Fresenius Medical Care Vascular Care” or “Fresenius Medical Care Physician Services”.
We and our affiliates have the right to use “Fresenius Marks” in other medical businesses only with the consent of Fresenius SE. Fresenius SE may not unreasonably withhold its consent. Fresenius SE will not use or license third parties to use the Fresenius Marks in the renal business worldwide and will not use the Fresenius Marks alone or in combination with any other words in the US and Canada, except in combination with one or more additional words such as “Pharma Home Care” as a service mark in connection with its home care business.
Other intellectual property
Some of the patents, patent applications, inventions, know-how and trade secrets that Fresenius Worldwide Dialysis (the name of the dialysis business conducted by Fresenius SE before the Merger) used prior to our formation were also used by other divisions of Fresenius SE. For Biofine®, the polyvinyl chloride-free packaging material, Fresenius SE has granted to D-GmbH, for our benefit and for the benefit of our affiliates, an exclusive
license for the renal business and a non-exclusive license for all other fields except other non-renal medical businesses. D-GmbH and Fresenius SE share equally any royalties from licenses of the Biofine® intellectual property by either D-GmbH or by Fresenius SE to third parties outside the renal business and the other non-renal medical businesses. In addition, Fresenius SE transferred to D-GmbH the other patents, patent applications, inventions, know-how and trade secrets that were used predominantly in Fresenius SE’s dialysis business. In certain cases, Fresenius Worldwide Dialysis and the other Fresenius SE divisions as a whole each paid a significant part of the development costs for patents, patent applications, inventions, know-how and trade secrets that were used by both prior to the Merger. Where D-GmbH acquired those jointly funded patents, patent applications, inventions, know-how and trade secrets, D-GmbH licensed them back to Fresenius SE exclusively in the other non-renal medical businesses and non-exclusively in all other fields. Where Fresenius SE retained the jointly funded patents, patent applications, inventions, know-how and trade secrets, Fresenius SE licensed them to D-GmbH exclusively in the renal business and non-exclusively in all other fields.
Services agreements and products
The Company is party to service agreements with the Fresenius SE Companies to receive services, including, but not limited to: administrative services, management information services, employee benefit administration, insurance, information technology services, tax services and treasury management services. The Company also provides central purchasing services to the Fresenius SE Companies. These related party agreements generally have a duration of 1 to 5 years and are renegotiated on an as needed basis when the agreement comes due. The Company provides administrative services to one of its equity method investees.
The Company sold products to the Fresenius SE Companies and made purchases from the Fresenius SE Companies and equity method investees. In addition, Fresenius Medical Care Holdings, Inc. (“FMCH”) purchases heparin supplied by Fresenius Kabi USA, Inc. (“Kabi USA”), through an independent group purchasing organization (“GPO”). Kabi USA is an indirect, wholly-owned subsidiary of Fresenius SE. The Company has no direct supply agreement with Kabi USA and does not submit purchase orders directly to Kabi USA. FMCH acquires heparin from Kabi USA, through the GPO contract, which was negotiated by the GPO at arm’s length on behalf of all members of the GPO.
In May 2019, the Company entered into a ten-year agreement with one of the Fresenius SE Companies for the manufacturing of infusion bags. In order to establish the new production line, the Company purchased machinery from one of the Fresenius SE Companies in the amount of €7,183 THOUS during the year ended December 31, 2019 and €4,497 THOUS during the year ended December 31, 2018.
In December 2010, the Company and Galenica Ltd. (now known as Vifor Pharma Ltd.) formed the renal pharmaceutical company Vifor Fresenius Medical Care Renal Pharma Ltd., an equity method investee of which the Company owns 45%. The Company has entered into exclusive supply agreements to purchase certain pharmaceuticals from Vifor Fresenius Medical Care Renal Pharma Ltd. Under the terms of certain unconditional purchase agreements, the Company is obligated to purchase approximately €752,837 THOUS of pharmaceuticals, of which €423,545 THOUS is committed at December 31, 2019 for 2020. The terms of these agreements run up to five years.
Under the CMS’ Comprehensive ESRD Care Model, the Company and participating physicians formed entities known as ESCOs as part of a payment and care delivery model that seeks to deliver better health outcomes for Medicare ESRD patients while lowering CMS’ costs. The Company has entered into participation/services agreements with these ESCOs, which are accounted for as equity method investees.
Below is a summary, including the Company’s receivables from and payables to the indicated parties resulting from the above described transactions with related parties.
Service agreements and products with related parties
in € THOUS
|
|
|
2019 |
|
2018 |
|
2017 |
|
December 31, 2019 |
|
December 31, 2018 |
| ||||||||||
|
|
|
Sales of |
|
Purchases |
|
Sales of |
|
Purchases |
|
Sales of |
|
Purchases |
|
Accounts |
|
Accounts |
|
Accounts |
|
Accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service agreements (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresenius SE |
|
153 |
|
29,114 |
|
445 |
|
24,456 |
|
381 |
|
21,704 |
|
35 |
|
360 |
|
378 |
|
4,019 |
|
|
Fresenius SE affiliates |
|
4,420 |
|
105,832 |
|
3,819 |
|
101,590 |
|
11,111 |
|
81,491 |
|
2,003 |
|
6,416 |
|
681 |
|
8,470 |
|
|
Equity method investees |
|
49,052 |
|
— |
|
58,362 |
|
— |
|
82,628 |
|
— |
|
68,300 |
|
— |
|
108,655 |
|
— |
|
|
Total |
|
53,625 |
|
134,946 |
|
62,626 |
|
126,046 |
|
94,120 |
|
103,195 |
|
70,338 |
|
6,776 |
|
109,714 |
|
12,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresenius SE |
|
3 |
|
— |
|
— |
|
— |
|
1 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
Fresenius SE affiliates |
|
44,771 |
|
37,279 |
|
33,564 |
|
39,181 |
|
30,529 |
|
40,467 |
|
16,803 |
|
3,405 |
|
8,750 |
|
3,658 |
|
|
Equity method investees |
|
— |
|
469,474 |
|
— |
|
399,667 |
|
— |
|
399,180 |
|
— |
|
36,262 |
|
— |
|
57,975 |
|
|
Total |
|
44,774 |
|
506,753 |
|
33,564 |
|
438,848 |
|
30,530 |
|
439,647 |
|
16,803 |
|
39,667 |
|
8,750 |
|
61,633 |
|
(1) In addition to the above shown accounts payable, accrued expenses for service agreements with related parties amounted to €8,352 and €9,376 at December 31, 2019 and 2018.
Financing
The Company receives short-term financing from and provides short-term financing to Fresenius SE. The Company also utilizes Fresenius SE’s cash management system for the settlement of certain intercompany receivables and payables with its subsidiaries and other related parties. As of December 31, 2019 and December 31, 2018, the Company had accounts receivable from Fresenius SE related to short-term financing in the amount of €71,078 THOUS and €80,228 THOUS, respectively. As of December 31, 2019 and December 31, 2018, the Company had accounts payable to Fresenius SE related to short-term financing in the amount of €38,050 THOUS and €32,454 THOUS, respectively. The interest rates for these cash management arrangements are set on a daily basis and are based on the then-prevailing overnight reference rate, with a floor of zero, for the respective currencies.
On August 19, 2009, the Company borrowed €1,500 THOUS from the General Partner on an unsecured basis at 1.335%. The loan repayment has been extended periodically and is currently due on August 21, 2020 with an interest rate of 0.930%. On November 28, 2013, the Company borrowed an additional €1,500 THOUS with an interest rate of 1.875% from the General Partner. The loan repayment has been extended periodically and is currently due on November 23, 2020 with an interest rate of 0.930%.
At December 31, 2018, a subsidiary of Fresenius SE held unsecured bonds issued by the Company in the amount of €6,000 THOUS. One bond was issued in 2012 with a coupon of 5.25% and interest paid semiannually until maturity in 2019. At December 31, 2019, the subsidiary of Fresenius SE held another unsecured bond issued by the Company in the amount of €1,000 THOUS. This bond was issued in 2011 with a coupon of 5.25% and interest payable semiannually until maturity in 2021. For further information on these bonds, see note 14 of the notes to the consolidated financial statements in our 2019 20-F.
At December 31, 2019 and December 31, 2018, the Company borrowed from Fresenius SE in the amount of €18,865 THOUS at an interest rate of 0.930% and €185,900 THOUS at an interest rate of 0.825%, respectively. For further information on this loan agreement, see note 13 of the notes to the consolidated financial statements in our 2019 20-F.
Other interests
The Chairman of the Company’s Supervisory Board, Dr. Dieter Schenk, is also Vice Chairman of the supervisory board of the general partner of Fresenius SE as well as the Vice Chairman of the supervisory board of the Company’s General Partner. He is also Chairman of the Advisory Board of the Else Kröner-Fresenius-Stiftung, a charitable foundation that is the sole shareholder of the general partner of Fresenius SE. He was also a partner in a law firm which provided services to the Company and certain of its subsidiaries until December 31, 2017. While Dr. Dieter Schenk was a partner in the law firm, the Company incurred expenses in the amount of €2,337 THOUS for services during 2017. The Chairman of the supervisory board of Fresenius SE and of the general partner of Fresenius SE, Dr. Gerd Krick, is also a member of the supervisory board of the Company’s General Partner. Three of the six members of the Company’s Supervisory Board, including the Chairman Dr. Dieter Schenk and the Vice Chairman Rolf A. Classon, are also members of the supervisory board of the Company’s General Partner.
The Chairman of the supervisory board of the Company’s General Partner, Stephan Sturm, is also the Chairman of the management board of the general partner of Fresenius SE. Rachel Empey is a member of the supervisory board of the Company’s General Partner as well as a member of the management board of the general partner of Fresenius SE. Additionally, the Chairman and Chief Executive Officer of the Management Board of the Company’s General Partner, Rice Powell, is a member of the Management Board of the general partner of Fresenius SE.
General Partner reimbursement
Due to the Company’s legal form of a German partnership limited by shares, the General Partner holds a key management position within the Company. In addition, as key management personnel, members of the Management Board and the Supervisory Board, as well as their close relatives, are considered related parties.
The Company’s Articles of Association provide that the General Partner shall be reimbursed for any and all expenses in connection with management of the Company’s business, including remuneration of the members of the General Partner’s supervisory board and the members of the Management Board. The aggregate amount reimbursed to the General Partner was €23,905 THOUS, €14,612 THOUS and €25,995 THOUS, respectively, for its management services during 2019, 2018 and 2017 and included an annual fee of €120 THOUS as compensation for assuming liability as general partner. The annual fee is set at 4% of the amount of the General Partner’s share capital (€3,000 THOUS as of December 31, 2019). As of December 31, 2019 and December 31, 2018, the Company had accounts receivable from the General Partner in the amount of €977 THOUS and €176 THOUS, respectively. As of December 31, 2019 and December 31, 2018, the Company had accounts payable to the General Partner in the amount of €34,170 THOUS and €47,205 THOUS, respectively.
(vii) Principal Accountant Fees and Services
During the AGM held on May 16, 2019, our shareholders approved the appointment of KPMG to serve as our independent auditors for the 2019 fiscal year and for the potential review of the first half year financial report and other interim financial information for fiscal year 2019. Furthermore, during the AGM held on May 16, 2019, our shareholders approved the appointment of PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft,
Frankfurt am Main, to serve as our independent auditors for the potential review of interim financial information for fiscal year 2020 that is prepared prior to the AGM in 2020.
In 2019, 2018 and 2017, fees for the auditor KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, and its affiliates were expensed as follows:
Fees
in € THOUS
|
|
|
Consolidated thereof |
|
Consolidated thereof |
|
Consolidated thereof |
| ||||||
|
|
|
2019 |
|
2018 |
|
2017 |
| ||||||
|
Audit fees |
|
10,113 |
|
1,665 |
|
7,845 |
|
1,322 |
|
8,629 |
|
1,232 |
|
|
Audit-related fees |
|
615 |
|
525 |
|
320 |
|
316 |
|
59 |
|
18 |
|
|
Tax fees |
|
318 |
|
— |
|
1,069 |
|
115 |
|
830 |
|
169 |
|
|
Other fees |
|
41 |
|
— |
|
251 |
|
234 |
|
716 |
|
110 |
|
Audit fees are the aggregate fees billed by KPMG for the audit of the Company’s consolidated financial statements and the statutory financial statements of FMC-AG & Co. KGaA and certain of its subsidiaries, reviews of interim financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements. Fees related to the audit of internal control over financial reporting are included in audit fees. Audit-related fees are fees charged by KPMG for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under audit fees. This category comprises fees billed for comfort letters, consultation on accounting issues, agreed-upon procedure engagements and other attestation services subject to regulatory requirements. Tax fees are fees for professional services rendered by KPMG for tax compliance, tax advice on implications for actual or contemplated transactions, tax consulting associated with international transfer prices, and expatriate employee tax services, as well as support services related to tax audits. Other fees include amounts related to services in regard to the harmonization of the IT-landscape as well as amounts related to supply chain consulting fees.
Fees billed by KPMG for non-audit services in Germany include fees for the services described above within the audit-related fees, tax fees and other fees.
Audit Committee’s pre-approval policies and procedures
As a German company, we prepare statutory financial statements under German law on the basis of the accounting principles of the German Commercial Code (Handelsgesetzbuch or HGB) and consolidated financial statements in accordance with IFRS. Our Supervisory Board engages our independent auditors to audit these financial statements, in consultation with our Audit and Corporate Governance Committee and subject to election by our shareholders at our AGM in accordance with German law.
Our financial statements are also included in registration statements and reports that we file with the SEC. Our Audit and Corporate Governance Committee engages our independent auditors to audit these financial statements in accordance with Rule 10A-3 under the Exchange Act and Rule 303A.06 of the NYSE Governance Rules. See also the description in “Item (iii). Directors and Senior Management” above.
Fresenius Medical Care AG’s audit committee also adopted a policy requiring management to obtain the committee’s approval before engaging our independent auditors to provide any permitted non-audit services to us or our subsidiaries. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the Audit and Corporate Governance Committee pre-approves a catalog of specific non-audit services that may be performed by our auditors and provides for additional approval requirements based on fee amount.
The General Partner’s Chief Financial Officer reviews all individual management requests to engage our auditors as a service provider in accordance with this catalog and, if the requested services are permitted pursuant to the catalog, approves the request accordingly. Services that are not included in the catalog or are included but exceed applicable fee levels are passed on either to the chairman of the Audit and Corporate Governance Committee or to the full committee, for approval on a case by case basis. In addition, the Audit and Corporate Governance Committee is informed about all approvals on a quarterly basis. Neither the chairman of our Audit and Corporate Governance Committee nor the full committee is permitted to approve any engagement of our auditors if the services to be performed either fall into a category of services that are not permitted by applicable law or would be inconsistent with maintaining the auditors’ independence.
During 2019, the total fees paid to the Audit and Corporate Governance Committee members for service on the committee were $0.160 M (€0.143 M).