Remuneration

REMUNERATION

124 Vifor Pharma Ltd. Annual Report 2020 HIGHLIGHTS PEOPLE 126 Chairwoman’s overview 128 Philosophy and approach to remuneration 130 Governance 134 Board and Executive remuneration 139 Remuneration awarded in 2020 and 2019 146 Overview of executive remuneration in 2020 and 2019 147 Outlook: changes in remuneration model for 2021 148 Statutory auditor’s report PORTFOLIO RESPONSIBILITY GOVERNANCE REMUNERATION FINANCE

Vifor Pharma Ltd. Annual Report 2020 125 REMUNERATION CHAIRWOMAN’S OVERVIEW

The remuneration “programs of Vifor Pharma are designed to support our corporate strategy and to ensure a sustainable performance towards our future objectives.”

SUE MAHONY CHAIRWOMAN OF THE REMUNERATION COMMITTEE

126 Vifor Pharma Ltd. Annual Report 2020 HIGHLIGHTS “ We reward entrepreneurial Vifor Pharma’s remuneration philosophy aims to attract and retain highly talented and behaviour that ethical individuals who help us ensure the drives sustainable long-term competitiveness and success of our PEOPLE business, to meet the needs of patients, to performance and look after the interests of our stakeholders and the environment in order to deliver on the long-term value strategy and to sustain profitable growth. This report sets out the remuneration policies for creation.” the Board of Directors and Executive Commit- tee which are designed to help them achieve these goals.

A year of unprecedented challenges for Chief Medical Officer and Gregory Oakes as countries and companies around the world President North America. PORTFOLIO has underlined the importance of a strong and transparent remuneration framework. The Remuneration Committee considers Vifor Notwithstanding, as in previous years, Vifor Pharma appropriately positioned to enable it Pharma’s philosophy and approach to remu- to compete successfully with its peers and to neration has remained stable: we reward support its ambitious growth plans. Nonethe- entrepreneurial behavior that drives sustain- less, are we constantly scrutinizing our able performance and long-term value remuneration and promotion processes to creation. The negative effect of the sales foster equitable career flows for both women growth below the set targets in this challeng- and men when it comes to pay equity, leader-

ing year has been mitigated by an EBITDA ship development training and organizational RESPONSIBILITY exceeding the targets due to management’s culture. careful contingency planning and cost control. Our Chairman, the members of the Board of 2020 also saw major changes to the composi- Directors as well as the Executive Committee tion of the Board of Directors, with the former continue to demonstrate their personal Executive Chairman (now Honorary Chairman) commitment, alignment with the shareholders’ Etienne Jornod, passing on his tasks and interest and their confidence in Vifor Pharma responsibilities after over 40 years of remark- Group by being remunerated significantly in able service to Jacques Theurillat, as Chairman, blocked shares. On the following pages, GOVERNANCE and Stefan Schulze, as Chief Executive Officer. we explain how the different remuneration This change is also reflected in the remunera- programs for the Board of Directors, the tion structure and will lead to a reduction Chairman of the Board of Directors and the of the remuneration for the Board of Directors Executive Committee are designed to ensure and an increase of the remuneration of the sustainable success and to protect the Executive Committee. The full effect of which interests of our shareholders. will become visible as from 2021 onwards. Apart from the reduction of such shift, the Yours sincerely, remuneration of the Board of Directors remained unchanged. REMUNERATION

In the past year Vifor Pharma has been able to attract highly regarded talents in a competitive market. The Executive Committee was substantially strengthened in 2020 with the recruitment of Lee Heeson as President Sue Mahony International, Dr. Klaus Henning Jensen as Chairwoman of the Remuneration Committee FINANCE

Vifor Pharma Ltd. Annual Report 2020 127 REMUNERATION PHILOSOPHY AND APPROACH TO REMUNERATION

The company’s philosophy and approach to remuneration have remained stable in recent years.

To reflect their different roles on delivering by the Board, who recognizes that under the strategy, the Board of Directors (Board) certain circumstances, achieving economic and the Executive Committee are remuner success may require a longer period of time. ated through different programs. In order to strengthen the alignment of executives and shareholders, members of the Board members receive a fixed remuneration, Executive Committee receive part of their independent of operational performance, to remuneration in restricted shares and are underscore their focus on corporate strategy, subject to a minimum shareholding require- supervision, governance and sustainability. ment. Selected members of senior management involved in long-term company projects To strengthen the alignment with sharehold- may also be invited to participate in the ers’ interests, Board members, including the share-based Long-Term Incentive Program. non-executive Chairman of the Board, receive all or part of their remuneration in the form of restricted shares. Members of the Executive PAY-FOR-PERFORMANCE Committee are remunerated according to the ALIGNMENT principles below. In addition to their fixed salary, members of the Executive Committee receive variable ATTRACTION AND RETENTION remuneration to reflect the operational performance of the company as well as their We aim to attract and retain highly talented, individual contributions. entrepreneurial, effective individuals who comply with the highest ethical standards and who can help us promote the well-being of FAIRNESS patients, protect the interests of our shareholders and drive the long-term success of We strive to remunerate our employees fairly our company. in the highly competitive market environment.

STRATEGIC AND SHAREHOLDER CLAW-BACK PROVISIONS ALIGNMENT Correct and ethical behaviour is the foun Our remuneration principles are in line dation of our activities. Should any wilful with our vision and strategy, both in terms of misconduct or fraud lead to a restatement of driving performance and of delivering the accounts of Vifor Pharma, bonus and the returns expected by our shareholders. long-term incentives awarded or paid during Vifor Pharma’s remuneration system is part the past three years to members of the of a sustainable, long-term development Executive Committee directly involved in such policy to support the strategic goals defined activities may be withheld or be subject to reimbursement.

128 Vifor Pharma Ltd. Annual Report 2020 Vifor Pharma Ltd. Ltd. Pharma Vifor Annual Report 2020 Report Annual 129

FINANCE REMUNERATION GOVERNANCE RESPONSIBILITY PORTFOLIO PEOPLE HIGHLIGHTS REMUNERATION GOVERNANCE

SHAREHOLDERS’ ENGAGEMENT RESPONSIBILITIES OF THE DIFFERENT BODIES IN Our shareholders have been given a greater DETERMINING REMUNERATION voice on remuneration matters in recent years. The Articles of Association that outline the Vifor Pharma’s remuneration and reporting principles of remuneration are approved by comply with: the Annual General Meeting. In addition, shareholders annually elect the members of –– the Swiss Code of Obligations, the Remuneration Committee for the coming –– the Swiss Federal Ordinance against period of office and approve the maximum excessive compensation in publicly listed aggregate remuneration amounts each year corporations (VegüV), for the Board and the Executive Committee –– the standards on corporate governance of prospectively for the next business year. SIX Swiss Exchange and Furthermore, shareholders may express their –– the Swiss Code of Best Practice for Corpo- opinion on the remuneration report in a rate Governance of Swiss national federa- consultative vote at the Annual General tion, economiesuisse. Meeting. The remuneration report describes the remuneration principles and programs as The Board is responsible for designing the well as the governance framework related to remuneration policy and programs and for the remuneration of the Board and Executive determining individual remuneration for the Committee. The report also provides details members of the Board and the Executive on the remuneration awarded to the members Committee. Furthermore, the Board is of the Board and of the Executive Committee accountable for the preparation and overall in the reporting year. fair presentation of the remuneration report in accordance with Swiss law and the VegüV. The Remuneration Committee approves the PROVISIONS IN THE VIFOR individual remuneration of EC members PHARMA ARTICLES OF other than the CEO. For the remuneration of ASSOCIATION: SUMMARY the CEO and the Board, the Remuneration Committee acts in an advisory capacity while The responsibilities of the different deci- the Board retains the decision authority sion-making bodies in determining remunera- on matters relating to remuneration except tion and the guiding principles are defined for the maximum aggregate remuneration in the Vifor Pharma Articles of Association. amounts for the Board and for the Executive The Articles of Association form the basis for Committee, which are approved by sharehold- our remuneration strategy and policy for the ers at the Annual General Meeting. The Board and the Executive Committee. They are responsibilities of the different bodies also the basis for any recommendation or regarding remuneration matters are detailed proposal that the Remuneration Committee in the table on page 132. formulates. Key provisions of the Articles of Association on remuneration are summarized in the table below and can be found online at viforpharma.com/governance.

130 Vifor Pharma Ltd. Annual Report 2020 HIGHLIGHTS PEOPLE THE REMUNERATION COMMITTEE formulates appropriate recommendations. The Chairman of the Board is invited regularly The Remuneration Committee supports the to meetings in an advisory capacity. Board in defining the principles of the remuneration policy and in determining the The Chairwoman of the Remuneration Commit- remuneration awarded to members of the tee may also invite other Executives, such as the Board and the Executive Committee within CEO, as appropriate. Agenda items and matters the maximum aggregate amount of remunera- directly affecting the Chairman of the Board, the tion approved by shareholders at the Annual CEO or other Executives are deliberated in their General Meeting. The Remuneration Commit- absence. tee supports the Board in designing participa- PORTFOLIO tion and incentive programs and in all other The Remuneration Committee meets as often as tasks related to remuneration of the Board business requires, but at least quarterly accord- and the Executive Committee. The Board may ing to the annual remuneration planning cycle delegate further duties and powers to the described on page 133. In the 2020 business Remuneration Committee. The Chair of the year, the Committee held five meetings, each Remuneration Committee reports to the lasting between one and three hours. Board after each meeting on its activities and RESPONSIBILITY

PROVISIONS ON REMUNERATION IN THE VIFOR PHARMA ARTICLES OF ASSOCIATION: SUMMARY

Topic Article Summary

Remuneration 19 a The Remuneration Committee generally comprises three members who are elected Committee individually by the shareholders at the Annual General Meeting for a period of one

year. The Remuneration Committee supports the Board in establishing and reviewing GOVERNANCE the remuneration strategy, principles and programs, in preparing the proposals to the Annual General Meeting on remuneration matters and in determining the remuneration of the Board and of the members of the Executive Committee. “Say-on-pay” votes 19 b Shareholders approve the maximum possible amount of remuneration of the Board and par. 1 the Executive Committee for the following financial year. Remuneration 19 b Remuneration of the members of the Board consists of fixed remuneration only. principles par. 2 Remuneration of the members of the Executive Committee consists of fixed and variable elements. Variable remuneration may comprise short-term and long-term components. Remuneration may be paid in cash, shares or other benefits. Supplementary 19 b If the maximum approved remuneration amount is not sufficient to also cover the amount for new par. 6 remuneration of newly promoted/hired members of the Executive Committee, the REMUNERATION Executive Commit- maximum possible remuneration amount for such newly promoted/hired members tee members may exceed the average of existing members excluding the CEO by up to 25% as a supplementary amount to cover the remuneration of such new Executive Committee member(s). For a newly promoted/hired CEO the supplementary amount is 40% of the maximum possible remuneration amount of his or her predecessor. Credits and loans 19 b Credits and loans may not be granted to members of the Board and only up to 50% par. 8 of the annual base salary for members of the Executive Committee. FINANCE

Vifor Pharma Ltd. Annual Report 2020 131 REMUNERATION

USE OF BENCHMARKS AND Georg Fischer, Kühne + Nagel, Lindt, EXTERNAL ADVISORS Logitech OC Oerlikon, Sonova, Straumann and Temenos. The remuneration of the Board and the Executive Committee is benchmarked based The remuneration of the Swiss-based Execu- on public information, recognized market data tive Committee members is compared with providers, data published by non-profit the remuneration of Executive Committee organizations focused on socially responsible members in comparable European pharma- investment and active share ownership, and ceutical companies and Swiss listed compa- on our Remuneration Committee members’ nies, as well as with the remuneration of experience and expertise from similar compa- executives in Swiss subsidiaries of internation- nies. al pharmaceutical companies. The remuneration awarded to the Executive Committee The remuneration of the Board is bench- member based in the United States is com- marked from time to time (every two to four pared to the data of pharmaceutical compa- years) against a group of listed companies on nies in the San Francisco Bay Area (no specific the SIX Swiss Exchange of comparable size, peer group). A company is regarded as similar including market capitalization. The latest if it is comparable to Vifor Pharma in terms of analysis was conducted in 2020 based on the sector, structure and complexity, size (sales, following 14 companies: Adecco, Barry market capitalization and number of employ- Callebaut, Clariant, DKSH, Dufry, Geberit, ees), geographic presence and profitability.

RESPONSIBILITIES REGARDING REMUNERATION DECISIONS

Remuneration CEO Committee Board of Directors Shareholders

Remuneration policy and incentive plans Proposes Approves Maximum remuneration amount of EC Proposes Recommends Approves CEO remuneration Proposes Approves Individual remuneration of EC members other than the Proposes Approves Is informed CEO Informs Performance objectives and assessment of CEO Proposes Approves Performance objectives and assessment Proposes Approves Is informed of EC other than the CEO Informs Shareholding requirements of CEO and EC Proposes Approves Maximum remuneration amount of the Board Proposes Recommends Approves Individual remuneration of Board members Proposes Approves Remuneration report Proposes Approves Consultative vote

132 Vifor Pharma Ltd. Annual Report 2020 HIGHLIGHTS PEOPLE The composition of the benchmarking peer Biocare, Novartis, Novo Nordisk, Roche, groups is disclosed below. Shire, Smith & Nephew, Sonova, Syngenta, Tecan, Zoetis Peer group of Swiss listed companies –– Barry Callebaut, Clariant, EMS-Chemie, External consultants may provide analytical Galenica, Idorsia, Lindt, Lonza, Siegfried, support to the Remuneration Committee in Sika, Sonova, Straumann, Swiss Prime Site, the development of the remuneration strategy Tecan, Ypsomed and of the review of short-term and long-term incentive programs, cash and equity-based Peer group of European pharmaceutical remuneration and salary levels. companies PORTFOLIO –– Grifols, Hikma, Indivior, Ipsen, Lundbeck, In 2019, Mercer and Willis Towers Watson Orion, Recordati, Sonova, Swedish Orphan carried out a benchmark study on the remu- Biovitrum, UCB neration levels of the Executive Committee. Agnès Blust Consulting AG carried out the Peer group of Swiss subsidiaries of interna- benchmark of the Board remuneration and tional pharmaceutical companies was mandated on certain other executive –– Allergan, Beckman Coulter, Catalent remuneration matters in 2020. Those compa- Pharma Solutions, Clariant, CSL, John- nies hold no other mandates with Vifor son & Johnson (former Actelion), Leica Pharma Ltd.

Microsystems, Lonza, Nestlé, Nobel RESPONSIBILITY

ANNUAL REMUNERATION PLANNING CYCLE

Q1 Q2 Q3 Q4

Annual Shareholder Meeting × GOVERNANCE Remuneration policy and incentive plans × × Maximum aggregate remuneration amount for Board to be submitted × to shareholders’ vote Maximum aggregate remuneration amount for Executive Committee × to be submitted to shareholders’ vote Performance achievement of Executive Committee (mid-year assessment) × Performance achievement of Executive Committee (final assessment) × of the previous year Performance objectives for the Executive Committee for the following year × REMUNERATION Variable remuneration of Executive Committee (short-term bonus for × the previous business year and vesting level of the Long Term Incentive for the preceding three years) Remuneration Report on the previous business year to be submitted × to shareholders’ consultative vote FINANCE

Vifor Pharma Ltd. Annual Report 2020 133 REMUNERATION BOARD AND EXECUTIVE REMUNERATION

Remuneration of the Board of Remuneration for the former Directors Executive Chairman

The Board sets the remuneration for its The former Executive Chairman, Etienne members in order to attract and retain a mix Jornod, did not stand for re-election at the of Swiss and international high-calibre 2020 Annual General Meeting. His remunera- individuals with global experience. Board tion for the term until the 2020 Annual General members do not receive variable perfor- Meeting is included in this Remuneration mance-based remuneration or options, and Report. Since 2012, Etienne Jornod has been are not eligible to company paid pension remunerated almost exclusively in registered benefits, which underscores their focus on shares for his responsibilities and duties as corporate strategy, supervision and gover- Executive Chairman of the Board. The agree- nance. ment between the Board and Etienne Jornod was that, conditionally upon his reelection by Each Board member receives an annual fee for shareholders at the Annual General Meeting, the Board membership, as well as additional his annual share-based remuneration would fees for the functions as chair and/or member remain unchanged until 2020. His annual of a Board committee. The level of remunera- share-based remuneration was therefore held tion for each role is determined based on constant at CHF 3,670,000 and awarded at the the skill set, experience and time required for end of each business year in form of shares, the function as described below. which are blocked for five years. In addition, Etienne Jornod also received a cash remuner- Net amounts in CHF* ation of CHF 150,000 per annum to cover his pension and social security contributions and Board chair 900,000 of CHF 120,000 per annum to compensate for Board member 140,000 the allocation of the share-based remunera- Board vice-chair 50,000 tion in arrears introduced in 2016 and the Committee chair 30,000 introduction of a five year lock-up period on Committee member 10,000 newly allocated shares.

* The social security contributions are fully paid by the company (employer and employee contributions).

Remuneration is paid 50% in cash and 50% in shares, which are blocked for five years. Board members may elect to be remunerated fully in shares. The remuneration amount to be paid in shares (50% or 100% of the total remuneration) is divided by the average share price during the last month preceding the election less a 25% discount. Board members are subject to a minimum shareholding require- ment: They must build-up and hold the equivalent of at least their annual remuneration in shares within two years of their first election to the Board.

134 Vifor Pharma Ltd. Annual Report 2020 HIGHLIGHTS PEOPLE Remuneration for the years, such as specific long-term financial Executive Committee objectives or the integration of a new business (eg, Relypsa). The short-term bonus and the LTI are variable, performance-based income. In order to reward performance and promote This incentive system is designed to ensure the Executive Committee members’ loyalty that the participants’ actions, behaviour and and long-term engagement, the remuneration decisions support the fulfilment of the system comprises an annual base salary, company’s goals and its sustainable success. an annual short-term bonus, a long-term incentive and customary benefits. The ratio These incentive schemes constitute indepen- between fixed and variable remuneration may dent remuneration elements and are therefore PORTFOLIO vary depending on criteria such as position weighted and calculated individually. The level, scope and responsibility of the role (eg, ratio between the annual base salary and the impact on organisation, profit and loss, variable elements of remuneration is deter- budget and team, headcount). mined by the Remuneration Committee based on function level. The maximum payout level of both the short-term bonus and the LTI is ANNUAL BASE SALARY capped at 200% of target.

The annual base salary constitutes the fixed

pay that reflects the scope and responsibilities SHORT-TERM BONUS RESPONSIBILITY of the function, the required skills and the profile of the incumbent (qualifications and The purpose of the annual short-term bonus previous experience). The annual base salary is to reward the company’s financial perfor- is determined according to typical market mance and individual contributions during practice (external benchmarks) and the Vifor a given business year. The target bonus Pharma Group’s internal salary structure. is defined once a year at the beginning of a An annual base salary around the median of performance period and constitutes the the benchmark is considered competitive. The amount to be paid out to the extent that all annual base salary is reviewed annually in performance objectives have been fully GOVERNANCE line with market salary trends, the company’s achieved (100% payout). The target bonus ability to pay based on its financial perfor- amounts to 90% of the annual base salary for mance and the evolving experience of the the CEO and up to 60% of the annual base incumbent. salary for the other members of the Executive Committee.

VARIABLE REMUNERATION The annual short-term bonus is based on the (INCENTIVES) annual financial performance of the company, weighted at 75%, and on the individual Executive Committee members are eligible contributions of the Executive Committee REMUNERATION for an annual short-term bonus to reward member, weighted at 25%. The financial the company’s overall financial results and performance consists of Net Sales weighted individual contributions during a given 40% and EBITDA weighted 60%. Those business year. They may also be invited to performance metrics have been chosen as participate in an annual Long-Term Incentive they combine top-line growth with bottom- Program (LTI) that recognizes and rewards the line profitability and thus are well aligned achievement of company goals over several with the strategy of profitable growth. The FINANCE

Vifor Pharma Ltd. Annual Report 2020 135 REMUNERATION

individual performance objectives consist LONG-TERM INCENTIVE of either quantitative or qualitative goals (eg, PROGRAM (LTI) strategic, operational or project-based objectives including safety, compliance and The LTI recognizes and rewards Executive corporate responsibility). For each objective, Committee members for the achievement of the Remuneration Committee determines specific long-term objectives, such as long- a minimum level of performance (threshold) term financial targets or the successful below which the payout is zero, a target level integration of a major acquisition. The LTI is of performance for which the payout amounts designed to align management and company to 100% and a maximum level of performance interests over the medium and long terms to (cap) above which the payout is capped at ensure sustainable value for patients, custom- 200%. The evaluation of an Executive Commit- ers and shareholders. LTI participants also tee member’s individual performance is have the opportunity to benefit from the conducted at the end of the year and includes long-term appreciation of Vifor Pharma’s a qualitative assessment of whether they have overall value through the development of the carried out their duties in line with company share price, which strengthens their personal values and expected leadership behaviours. investment in the company and gives them a compelling reason to stay at Vifor Pharma. Specific performance targets are not pub- The LTI is a long-term equity plan whose lished as they are considered commercially value is influenced by the Group’s operating sensitive information. performance and the Vifor Pharma share price. The LTI is awarded in form of perfor- The short-term bonus is allocated annually mance share units (PSUs) that vest and are after the full-year results have been published. converted into Vifor Pharma Ltd. shares at the Executive Committee members receive 32% end of a three-year vesting period. The of their annual short-term bonus in Vifor Remuneration Committee defines the target Pharma shares, which are subject to a block- amount for an LTI award as a percentage of ing period of five years. Such shares are the annual base salary for each member allocated at the average share price for the of the Executive Committee at the beginning month of December of the year prior to of a three-year vesting period. The target payment of the annual short-term bonus, amount for Executive Committee members minus 25% discount. The remaining 68% of ranges from 40% to 60% of annual base salary the annual short-term bonus is paid out in (except for the President North America for cash. If the Board in exceptional cases awards whom the grant size amounts to 120%). For a discretionary bonus for extraordinary the CEO, the Board determines the LTI target performance, the bonus would usually be paid amount. It corresponds 80% of the annual out in cash only. base salary.

The number of PSUs granted at the beginning of a vesting period depends on the target amount and on the average Vifor Pharma Ltd. share price during the final month prior to allocation. The number of PSUs is subject to the achievement of a performance conditions during the vesting period. The Return on Investment Capital (ROIC) was chosen as performance indicator because it expresses

136 Vifor Pharma Ltd. Annual Report 2020 HIGHLIGHTS PEOPLE how well the company is generating cash align calculatory pay-out with increased relative to the capital it has invested in its statisticial longevity. It exceeds the legal business and is a simple and easily accessible requirements stipulated by the Swiss Federal metric for management on all levels. The Law on Occupational Pension Schemes (BVG) target level for the three-year vesting period and is in line with what other listed companies that is determined is generally substantially of similar size in Switzerland offer. The Presi- above the weighted average cost of capital. dent North America is covered by a comparable pension scheme in the United States. The PSUs granted under the LTI are subject to full or partial forfeiture in the event of termina- Independent of their remuneration, employees, tion of employment. In the cases of death or including Executive Committee members, are PORTFOLIO disability, a pro-rata vesting applies on the entitled to acquire up to 100 of Vifor Pharma Ltd. date of termination. In case of change of shares per year under the share acquisition control, eg, if the shares were to be delisted, plan. These shares, which may be acquired at outstanding PSUs may vest in full immediately. a 30% discount on the market price, are blocked for three years. Vifor Pharma maintains a long-term incentive plan pursuant to which Relypsa employees Other benefits may include an expense may be granted restricted share unit awards in allowance, a company car and reimbursement shares of Vifor Pharma Ltd. On 30 June 2020, for one-time expenses relating to relocation,

43,920 such restricted share units were tax and legal advice (eg, in order to move to RESPONSIBILITY granted. For the following years, further Switzerland) for the Executive Committee and grants of up to 100,000 restricted share units selected management members. The fair per year may be made. These restricted share value of these other benefits is part of the units vest in three annual tranches. Awards remuneration and disclosed in the table on may not be transferred, other than by will or page 142. Members of the Executive Commit- the laws of descent and distribution, and may tee do not receive additional benefits. be proportionately adjusted in the event of any change in the capitalization of Vifor Pharma Ltd. EMPLOYMENT CONTRACTS GOVERNANCE

Members of the Executive Committee are PENSIONS AND OTHER employed under contracts of unlimited EMPLOYEE BENEFITS duration and subject to a maximum notice period of 12 months during which also Vifor Pharma offers additional benefit plans non-compete obligations apply. No additional that are designed to protect and support compensation is awarded for the non-com- employees around the uncertainties of life. pete period. They are not entitled to severance, These benefits including retirement, disability termination or change-of-control payments, and death plans are country-specific and are except the special vesting provisions under REMUNERATION designed in accordance with local legal the LTI as described above. requirements and competitive market prac tices. Members of the Executive Committee based in Switzerland are covered by the pension scheme for all Vifor Pharma employees in Switzerland. The Vifor Pharma pension plan in Switzerland was adjusted in 2020 to FINANCE

Vifor Pharma Ltd. Annual Report 2020 137 REMUNERATION

MINIMUM SHAREHOLDING OPTIONS AND LOANS REQUIREMENTS Vifor Pharma does not issue any tradeable The members of the Executive Committee are options. The Vifor Pharma Articles of Associa- required to own at least 75% of their annual tion do not allow loans or credits to members base salary and annual target short-term of the Board; loans and credits to members bonus in Vifor Pharma Ltd. shares within five of the Executive Committee are permitted up years of their appointment to the Executive to 50% of an individual annual base salary. Committee.

HOW PSUS ARE CONVERTED INTO SHARES UNDER THE LTI PROGRAM

N I N G O I N F C G Y C E L B E

Target amount Number Vifor Pharma = of PSUs share price awarded

% of target Number achievement of PSUs × during three-year awarded period

Final number of = shares delivered

E N D O F C Y C L E

138 Vifor Pharma Ltd. Annual Report 2020 REMUNERATION AWARDED HIGHLIGHTS IN 2020 AND 2019 PEOPLE In accordance with the Articles of Association, Vifor Pharma shareholders vote prospectively, ie, one year in advance, on the maximum aggregate remuneration for members of the Board and of the Executive Committee for the next business year. In order to allow for a comparable basis with this prospective vote, remuneration paid or attributed

in 2020, and that of the previous year, is presented on the PORTFOLIO same basis perspective of cost to the company.

REMUNERATION OF THE BOARD COVID-19 crisis overlapping with the transi- OF DIRECTORS tion from an Executive Chairman supported by a COO to a non-executive Chairman Since the Annual General Meeting last year supported by a CEO.

the new Chairman has taken up his role as RESPONSIBILITY non-executive Chairman. The tasks of the The remuneration for Board and Committee former Executive Chairman have been divided memberships other than the role of the between the new Chairman and the newly Chairman remained unchanged from previous promoted CEO. Their increased role and years. The remuneration amount, which was responsibility is also reflected in their respec- delivered in shares was converted at the tive remuneration and described below for average share price for the month of Decem- the Board of Directors and for the Executive ber 2019, ie, CHF 176.30, minus a 25% dis- Committee respectively. count. For the new board member the average share price was determined for the GOVERNANCE The overall remuneration of the Board of month of April 2020, ie, CHF 141.66, minus Directors for 2020 amounted to a 25% discount. CHF 5,876,000. It remained on the same level as the previous year and remained unchanged for all Directors other than the Chairman. It is REMUNERATION OF THE within the maximum amount of CHF 6,500,000 EXECUTIVE COMMITTEE approved by the shareholders for the year 2020. The lower level of remuneration of the The remuneration system and programs for former Executive Chairman due to pro-rated the Executive Committee remained essentially payments was partially offset by the contrac- unchanged in 2020. Overall, the total aggre- REMUNERATION tual obligations due to him as an executive of gate remuneration of the Executive Commit- the Company. In addition, the overall remu- tee for 2020 was CHF 13,127,000. This neration for the Board of Directors includes amounted to 77.2% of the maximum aggre- a higher remuneration of the non-executive gate amount of CHF 17,000,000, approved by Chairman (including for his tenure in the the shareholders for the year 2020. This was Board before being elected Chairman) and for an increase of 18.8% compared to previous significantly increased workload during the year, mainly for the following reasons: FINANCE

Vifor Pharma Ltd. Annual Report 2020 139 REMUNERATION

–– The CEO, promoted from the former year: 72%), resulting in an overall bonus position as COO as of 14 May 2020, payout of between 41.9% and 44.4% of the received a higher annual base salary and maximum potential (previous year: 76.5% to an increase in short-term bonus and LTI 81.5%). grant value compared to the prior year to reflect his increased responsibilities of the –– Remuneration includes contractual obliga- new role and to align with market practice. tions to the former member of the Execu- tive Committee, Patrick Treanor. –– The remuneration of selected Executive Committee members was increased in order The variable portion (excluding social security) to adjust to market levels already applied of the total remuneration for the Executive for members who joined in 2020. These Committee who were in office at the end of individual increases in 2020 amounted to the year in 2020 was 49.5% (2019: 46.9%). For an average of 9% on annual base salary. the CEO it was 55.1% (2019: 59.6%). Additionally the target short-term bonus for the selected members was set to 60% at The allocation of Performance Share Units target and the LTI target amount was set to (PSUs) under the Long-Term Incentive Pro- between 40% and 60% of the annual base gram (LTI) was defined on the basis of the salary. average Vifor Pharma Ltd. share price during the month of May 2020 of CHF 148.94. The –– The financial performance achieved under performance achievement under the LTI the short-term bonus, which accounts for 2018–2020 that vested at the end of 2020 was 75% of the payout, reached 42.5% of the 108.4%, based on an average ROIC of 8.1% maximum potential (previous year: 81.9%). over the three years 2018, 2019 and 2020. For the individual portion of the bonus, which accounts for 25% of the payout, the average performance achievement was 42.5% of the maximum potential (previous

PERFORMANCE ACHIEVEMENT FOR THE STI IN 2020

Minimum Target Maximum 0% 100% 200% Financial Goals (75% weight)

Net Sales (40% weight)

EBITDA (60% weight)

Individual Goals (25% weight)

140 Vifor Pharma Ltd. Annual Report 2020 HIGHLIGHTS PEOPLE

OPTIONS, LOANS AND CREDITS FORMER MEMBERS OF THE BOARD OF DIRECTORS AND EXECUTIVE As of 31 December 2020, no member of the COMMITTEE Executive Committee or the Board of Direc- tors held tradable options or was granted any Vifor Pharma continued to pay contractually loan or credit from the company. There was no agreed remuneration in the reporting outstanding loan to any member of the Board period to the former Executive Chairman (as of Directors or the Executive Committee. disclosed) and to a former member of the Executive Committee Patrick Treanor, who resigned on 30 September 2020 as disclosed PORTFOLIO in the remuneration table for the Executive Committee on page 142. Otherwise, Vifor Pharma did not pay any remuneration to former members of the Board of Directors or the Executive Committee. RESPONSIBILITY GOVERNANCE REMUNERATION FINANCE

Vifor Pharma Ltd. Annual Report 2020 141 REMUNERATION

REMUNERATION OF EXECUTIVE COMMITTEE MEMBERS IN 20201

Of which In thousand CHF Total Stefan Schulze, CEO

Base salary 5,078 876 Bonus in cash 1,682 449 Bonus in shares 952 2 282 Long-Term Incentive Program 3,621 701 Social security costs 684 161 Contributions to pension funds 748 117 Other remuneration 362 15 Executive Committee member remuneration 13,127 3 2,601 Maximum Remuneration approved by the Annual Shareholder Meeting for 2020 17,000 Within approval limit Yes

1 All remuneration amounts are gross amounts (excluding pension fund and social security contributions). 2 Includes the 25% discount on the share price at alloction. 3 Remuneration for the eight members of the Executive Committee who were in office in 2020, including TCHF 1,341 remuneration to the former member of the Executive Committee, Patrick Treanor.

EXECUTIVE COMMITTEE MEMBERS SHAREHOLDINGS AND OUTSTANDING PERFORMANCE SHARE UNITS (PSU)

Number of registered shares Number of PSU Total number of held as at 31.12.2020 1 granted in 2020 PSUs outstanding 2

Stefan Schulze 12,200 4,707 26,073 Barbara Angehrn 747 2,179 6,070 Colin Bond 7,607 2,272 9,898 Lee Heeson 100 4,032 4,032 Klaus Jensen 100 3,679 3,679 Gregory Oakes — 3,009 3,009 Michael Puri 7,998 1,071 6,691 Dr. Christoph Springer 31,823 1,481 7,451

1 Registered shares held by related parties of members of the Executive Committee are also included in the totals disclosed above. 2 Upon vesting, each Performance Share Unit (PSU) will be converted to registered shares within a range of 0 and 2 depending on the target achievement.

142 Vifor Pharma Ltd. Annual Report 2020 HIGHLIGHTS PEOPLE

REMUNERATION OF THE VIFOR PHARMA BOARD OF DIRECTORS IN 20201

Registered shares Fee equivalent Other Held as at Allocated In thousand CHF Role(s) Fee in cash in shares remuneration 2 Total 31.12.2020 for 2020

Etienne Jornod, Executive Chairman (until Annual Shareholder Meeting 2020) 3 CG 63 1,529 1,733 4 3,325 n/a 12,427 Executive member of the Board of Directors 63 1,529 1,733 3,325 n/a 12,427

Jaques Theurillat, Chairman (as of PORTFOLIO Annual Shareholder Meeting 2020) CG 5 660 6 480 — 1,140 1,581 2,723 Gilbert Achermann (as of Annual Shareholder Meeting 2020) CA 57 80 17 154 — 534 Michel Burnier CS, R — 240 23 263 9,460 1,362 VC, A, G, Romeo Cerutti R — 293 33 326 7,967 1,664 Sue Mahony CR, CU 100 133 — 233 661 757 Kim Stratton A, S, U 85 113 26 224 562 643 Gianni Zampieri G, S 80 107 24 211 20,483 606 RESPONSIBILITY Non-executive members of the Board of Directors 982 1,446 7 123 2,551 40,714 8,289 8 Remuneration of the members of the Board of Directors 1,045 2,975 1,856 5,876 40,714 20,716 Maximum Remuneration approved by the Annual Shareholder Meeting for 2020 6,500

Within approval limit yes GOVERNANCE 1 All remuneration amounts are net amounts. The Company does not pay any pension contributions to members of the Board. 2 Other remuneration includes the employer’s and employee's contribution to social security. 3 Etienne Jornod received TCHF 500 for consultancy services rendered to various entities of Vifor Pharma group after May 15, 2020. 4 Includes contractual obligations and payments in line with employee regulations. 5 CA and S until AGM 2020 included in remuneration pro rata. 6 Includes TCHF 300 compensating extraordinary workload during the Covid-19 crisis overlapping with the transition period. 7 Includes the 25% discount on the share price at alloction. 8 Allocated in February 2021.

Registered shares held by related parties of members of the Board of Directors are included in the declaration of the number of shares they hold.

Committee; R: Membership in the Remuneration Committee; S: Membership in the Scientific Committee; U: US Committee; VC: Vice-Chairperson REMUNERATION FINANCE

Vifor Pharma Ltd. Annual Report 2020 143 REMUNERATION

REMUNERATION OF EXECUTIVE COMMITTEE MEMBERS IN 2019 1

Of which In thousand CHF Total Stefan Schulze, COO

Base salary 5,512 666 Bonus in cash 1,785 575 Bonus in shares 979 361 Long-Term Incentive Program 1,427 466 Social security costs 576 139 Contributions to pension funds 494 105 Other remuneration 277 41 Executive Committee member remuneration 11,050 2 2,353 Maximum Remuneration approved by the Annual Shareholder Meeting for 2019 14,800 Within approval limit Yes

1 All remuneration amounts are gross amounts (excluding pension fund and social security contributions). 2 Remuneration for the eight members of the Executive Committee who were in office in 2019, including TCHF 2,715 remuneration and contractual obligations to two former EC members David Bevan and Dario Eklund.

EXECUTIVE COMMITTEE MEMBERS SHAREHOLDINGS AND OUTSTANDING PERFORMANCE SHARE UNITS (PSU)

Number of registered shares Number of PSU Total number of held as at 31.12.2019 1 granted in 2019 PSUs outstanding 2

Stefan Schulze 6,664 3,699 23,803 Barbara Angehrn 85 1,332 3,891 Colin Bond 3,687 2,032 14,874 Michael Puri 2,898 1,246 11,811 Dr. Christoph Springer 24,133 1,332 12,535 Patrick Treanor — 1,235 2,303

144 Vifor Pharma Ltd. Annual Report 2020 HIGHLIGHTS PEOPLE

REMUNERATION OF THE VIFOR PHARMA BOARD OF DIRECTORS IN 20191

Registered shares Fee equivalent Other Held as at Allocated In thousand CHF Role(s) Fee in cash in shares remuneration 2 Total 31.12.2019 for 2019

Etienne Jornod, Executive Chairman CG 150 3,670 684 3 4,504 286,711 27,366 Executive member of the Board of Directors 150 3,670 684 4,504 286,711 27,366 Michel Burnier CS, R — 180 12 192 8,619 2,051 PORTFOLIO VC, A, G, Romeo Cerutti R — 220 18 238 5,460 2,507 Sue Mahony (as of Annual Share- holder Meeting 2019) CR, CU 67 67 11 145 — 661 Kim Stratton (as of Annual Share- holder Meeting 2019) A, S, U 57 57 9 123 — 562 Jaques Theurillat CA, S 90 90 15 195 555 1,026 Gianni Zampieri G, S — 160 13 173 49,539 4 1,823 Daniela Bosshardt (until Annual Shareholder Meeting 2019) CR, S 75 — 6 81 n/a n/a RESPONSIBILITY Sylvie Grégoire (until Annual Shareholder Meeting 2019) G, S 67 — 6 73 n/a n/a Fritz Hirsbrunner (until Annual Shareholder Meeting 2019) A, R 67 — 4 71 n/a n/a Non-executive members of the Board of Directors 423 774 94 5 1,291 64,173 8,630 6 Remuneration of the members of the Board of Directors 573 4,444 778 5,795 350,884 35,996 Maximum Remuneration approved

by the Annual Shareholder Meeting GOVERNANCE for 2019 6,500

Within approval limit yes

1 All remuneration amounts are net amounts. 2 Other remuneration includes the employer’s contribution to social security and pension fund. In addition, the employer pays the employee’s amount for the social security costs amounting to TCHF 223. 3 Includes TCHF 20.9 resulting from change in remuneration structure to maintain economic value despite change in payment structure and TCHF 238.3 for holidays not taken and TCHF 120 to compensate for the allocation of the share-based remuneration in arrears introduced in 2016 and the introduction of a 5-year lock-up period on newly allocated shares. 4 Includes the share-based portion of Dr. Zampieri’s PSUs that were awarded during his tenure as a member of the Coporate Executive Committee and that were subsequently converted into shares.

5 To the extent that board members chose to elect remuneration in equity this amount is increased by 25%. REMUNERATION 6 Allocated in February 2020.

Registered shares held by related parties of members of the Board of Directors are included in the declaration of the number of shares they hold.

A: Membership in the Audit and Risk Committee; CA: Chair of the Audit and Risk Committee; CG: Chair of the Governance Committee; CR: Chair of the Remuneration Committee; CS: Chair of the Scientific Committee; CU: Chair of US Committee; G: Membership in the Governance Committee; R: Membership in the Remuneration Committee; S: Membership in the Scientific Committee; U: US Committee; VC: Vice-Chairperson FINANCE

Vifor Pharma Ltd. Annual Report 2020 145 REMUNERATION OVERVIEW OF EXECUTIVE REMUNERATION IN 2020 AND 2019

EXECUTIVE COMMITTEE CEO/COO REMUNERATION REMUNERATION IN 2019 IN 2019 AND 2020 AND 2020 in thousand CHF in thousand CHF

2019 (eight members) 2020 (eight members) 2019 2020

17,000 4,400

14,800 22.8%

25% 13,127 41%

3,000

11,050 3,621 2,601 22% 1,427 2,353 701 466 2,764 2,634 Per cent of maximum potential not paid or 77.2% allocated 75% 1,347 731 1,794 936 Per cent of maximum 59% potential paid or 78% allocated 293 285 LTI 5,512 5,078 STI 876 666 Social insurance and other remuneration Annual base salary Potential Paid or Potential Paid or Potential Paid or Potential Paid or maximum allocated maximum allocated maximum allocated maximum1 allocated1 1 Pro rata calculation for COO and CEO position.

In line with the Articles of Association, the including in particular the short-term bonus maximum aggregate amount of remuneration and the LTI (blocked shares and PSUs are for members of the Board and of the Executive valued at the grant date). The chart above Committee will be submitted to shareholders shows a comparison between remuneration for approval prospectively for the business awarded and remuneration approved by year following the Annual Shareholder Meet- shareholders for the Executive Committee ing. This approval process sets an upper and the COO/CEO for the years 2019 and limit to the maximum possible remuneration 2020. amount and accounts for all variable elements

146 Vifor Pharma Ltd. Annual Report 2020 OUTLOOK: CHANGES IN HIGHLIGHTS REMUNERATION MODEL FOR 2021 PEOPLE

In 2020, the Remuneration Committee conducted its annual review of the compensation system of the Executive Committee. The committee concluded that the compensation structure itself is fit-for-purpose and well aligned with the shareholders' interests and with market practice. However, it also estab- lished that that the performance measurement under the long-term incentive needed some further consideration: ROIC has been used as PORTFOLIO single performance metrics in the long-term incentive plan for several years, which has its roots in the history of the plan. Considering the performance conditions of the short-term bonus, which include Net Sales and EBITDA and are well-aligned with the business strategy of profitable growth, the Remuneration Committee decided to introduce a relative performance component in the long-term

incentive in the form of relative Total Share- RESPONSIBILITY holder Return. The committee also decided to add at least one additional performance metric to the long-term incentive: This discussion is still ongoing and the performance concept is currently being finalized. Further details will be provided in the 2021 Remuneration Report. GOVERNANCE REMUNERATION FINANCE

Vifor Pharma Ltd. Annual Report 2020 147

REMUNERATION

Ernst & Young Ltd Phone +41 58 286 61 11 Schanzenstrasse 4a Fax +41 58 286 68 18 P. O . B ox www.ey.com/ch CH-3001 Berne

To the General Meeting of Berne, 24 February 2021 Vifor Pharma Ltd., St. Gallen

Report of the statutory auditor on the remuneration report

We have audited the remuneration report of Vifor Pharma Ltd. for the year ended 31 December 2020. The audit was limited to the information according to articles 14–16 of the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance) contained on pages 142 to 143 of the remuneration report.

Board of Directors’ responsibility The Board of Directors is responsible for the preparation and overall fair presentation of the

remuneration report in accordance with Swiss law and the Ordinance. The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages.

Auditor’s responsibility Our responsibility is to express an opinion on the remuneration report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the remuneration report complies with Swiss law and articles 14–16 of the Ordinance.

An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration report with regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the remuneration report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value components of remuneration, as well as assessing the overall presentation of the remuneration report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion In our opinion, the remuneration report for the year ended 31 December 2020 of Vifor Pharma Ltd. complies with Swiss law and articles 14–16 of the Ordinance.

Ernst & Young Ltd

Martin Mattes Pascal Solèr Licensed audit expert Licensed audit expert (Auditor in charge)

148 Vifor Pharma Ltd. Annual Report 2020 Ltd. Pharma Vifor

Annual Report 2020 Report Annual 149

FINANCE REMUNERATION GOVERNANCE RESPONSIBILITY PORTFOLIO PEOPLE HIGHLIGHTS