Adidas : Compensation Report for the 2023 financial year

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Compensation Report for the 2023 financial year

For adidas, clear, transparent, and comprehensible reporting on the compensation of the Executive Board and Supervisory Board is an essential element of good corporate governance. This Compensation Report was prepared in accordance with § 162 of the German Stock Corporation Act (AktG) and outlines in accordance with statutory requirements the amount and structure of the compensation granted and due to Executive Board members and Supervisory Board members in and for the 2023 financial year.

Compensation of the Executive Board members

Compensation system and current developments

The compensation system applicable for the Executive Board in the year under review was adopted by the shareholders at the Annual General Meeting on May 12, 2021, in accordance with § 120a section 4 AktG. The Executive Board compensation system is clear, easy to understand, and uses transparent performance criteria. It meets all requirements of the German Stock Corporation Act and is designed in line with the recommendations of the German Corporate Governance Code. The current compensation system is permanently available on the Company's website. ►WWW.ADIDAS-GROUP.COM/S/COMPENSATION

Short- and long-term variable Executive Board compensation in the 2023 financial year

Since the development of the compensation system applicable in the 2023 financial year, which reflects the long-term strategic and financial targets determined in 2021, the economic and political environment in which we act has changed considerably. Macroeconomic challenges and geopolitical tensions had a negative impact particularly in the 2022 financial year on our business, our consumers, and our business partners. In addition to the challenging market backdrop, adidas faced company-specific challenges such as the slower recovery in Greater China and the termination of the Yeezy partnership in the 2022 financial year. As a result, the Company's top- and bottom-line results came in significantly below the initial expectations in the 2022 financial year. Therefore, 2023 was a year of transition for adidas in which we began to re-adjust the strategic focus and concentrate on generating incremental sales growth and stabilizing the absolute operating profit. Correspondingly, the 2023 annual guidance reflected, in particular, currency-neutral net sales growth and operating profit.

In order to reflect these developments and to ensure an adequate incentive effect of the long-term Executive Board compensation, the Supervisory Board resolved corresponding adjustments in the short- and long- term variable Executive Board compensation at the start of the 2023 financial year. In doing so, the Supervisory Board complied with the provisions for a temporary deviation from the compensation system.

For details, ► SEE SECTION 'EXECUTIVE BOARD COMPENSATION 2023'

Operating business development in the 2023 financial year

The appointment of Bjørn Gulden as new CEO effective January 1 paved the way for a successful restart of the company. The overall business environment continued to be characterized by geopolitical tensions, macroeconomic challenges, and elevated inventory levels. Against this backdrop, the Company performed significantly better than initially expected as it put the focus back on its core: people, product, consumers, retail partners, and athletes. This started to pay off as brand momentum began to re-accelerate driven by the Terrace trend in Lifestyle and game-changing innovation in Performance. The Company improved the relationship to its retailers and invested into broadening its portfolio of sports partners. In addition, adidas successfully reduced high inventory levels by limiting the sell-in to the wholesale channel and clearing excess stock. This was essential to be able to return to a healthier business mix going forward. In addition, adidas was able to conduct two drops of the remaining Yeezy products. As a result, the write-off and

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destruction of the products could be avoided, and the Company made significant donations from the proceeds.

Consequently, despite the challenging market environment, adidas was able to upgrade its full year guidance twice in the course of 2023 and ultimately posted top- and bottom-line results significantly above the increasing expectations. This positive development is reflected correspondingly in the target achievement of the variable performance-related compensation for the 2023 financial year.

For details on the 2023 financial year target achievement and compensation payout ► SEE SECTION 'EXECUTIVE

BOARD COMPENSATION 2023'

Compensation system for the Executive Board as of the 2024 financial year

As part of the changed strategic direction and based on the feedback from the continuous dialog with our investors and further stakeholders on our compensation system, the Supervisory Board also dealt with the structure of the compensation system for the Executive Board and subjected it to a thorough review. On this basis, the Supervisory Board resolved a new compensation system for the Executive Board effective from the 2024 financial year.

The new compensation system for the Executive Board will be presented for approval to the Annual General Meeting on May 16, 2024. For an overview of the main changes ► SEE SECTION 'OUTLOOK 2024'.

Compensation Report

The aim of this Compensation Report is to ensure consistent reporting and to disclose clearly and transparently the correlation between the compensation paid for a particular financial year and the achievement of targets set for that financial year, regardless of when the payment is made, in accordance with our 'Pay-for-Performance' approach. Against this background, the achievement of the targets set for the 2023 financial year for the variable performance-related compensation based on the current compensation system is reported in a detailed and transparent manner. Accordingly, the compensation for the members of the Executive Board is clearly disclosed in compensation tables in conformity with market standards.

The Compensation Report for the 2022 financial year was prepared in accordance with § 162 AktG and was audited by the auditor to examine whether the disclosures stipulated in § 162 sections 1 and 2 AktG were made. The Compensation Report on the compensation granted and due to the individual members of the Executive Board and Supervisory Board of adidas AG in the 2022 financial year was approved by the Annual General Meeting on May 11, 2023, with a majority of 67.90% (in the 2021 financial year: 91.79%) in accordance with § 120a section 4 AktG. In the Company's view, the strongly declined approval rate is particularly due to the severance payment made to Kasper Rorsted in connection with the termination of his Executive Board mandate. In line with market practice in Germany and the legal requirements, this severance payment considered both the remaining term of his contract until July 31, 2026, as well as the requirements of the German Corporate Governance Code and the underlying compensation system of adidas AG. As regards the structure and transparency of the compensation system for the 2022 financial year, we generally received positive feedback.

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Compensation system

Principles of the compensation system

The compensation system for Executive Board members is geared toward creating an incentive for successful, sustainable, and long-term corporate management and development, observing an appropriate balance of fixed non-performance-related components and variable performance-related components. The variable performance-related compensation is measured based on the achievement of ambitious, pre- agreed targets; subsequent changes to performance targets or comparison parameters are not permitted. By applying a consistent 'Pay-for-Performance' approach, the compensation system aims at appropriately remunerating exceptional performance, while diminishing the variable performance-related compensation when targets are not met. Moreover, the incentive to achieve the long-term targets that determine the multi- year variable performance-related compensation component is higher than the incentive to achieve the targets that determine the one-year variable performance-related compensation component.

The implementation of the strategic direction is supported by selected appropriate performance targets for the variable performance-related compensation which are directly derived from the strategic orientation and the annual guidance. The variable performance-related compensation is therefore directly linked to the externally communicated operating, financial and strategic short- and long-term targets. In this way, the compensation system for the Executive Board members is immediately geared toward providing an incentive for successful, sustainable, and long-term corporate management and development and is in line with the interests of shareholders, employees, consumers, and other stakeholders. In order to achieve a continuous, sustainable increase in company value, the long-term variable compensation also depends on the development of the share price (capital market performance of adidas AG), thus aligning the interests of the shareholders and the Executive Board.

For the targets of the performance-related variable Executive Board compensation for the 2023 financial

year ► SEE SECTION 'EXECUTIVE BOARD COMPENSATION 2023'

Another important aspect is the high level of consistency between the Executive Board compensation system and the compensation system of the senior management. This ensures that all decision-makers pursue the same targets in order to secure the sustainable long-term success of the Company. When designing the compensation system, the Supervisory Board has particularly taken into account the following guidelines:

• Promoting the implementation of the long-term strategic orientation, including sustainability targets
• Strong Pay-for-Performance approach and long-term orientation
• Strong focus on the interests of the shareholders and other stakeholders
• Intuitive, clearly comprehensible compensation system and transparent disclosure of performance criteria
• High level of consistency with the compensation system of the senior management
• Conformity with applicable regulatory requirements (Stock Corporation Act and German Corporate Governance Code)
• Further development of the market-standard elements of a compensation system for the Executive Board

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Procedure for the determination, review, and implementation of the compensation system

In accordance with § 87a section 1 AktG, the Supervisory Board resolves upon a compensation system for the Executive Board members. Based on the compensation system, the Supervisory Board determines the specific overall target compensation for the individual Executive Board members. In doing so, the Supervisory Board takes into account the size and global orientation, the economic situation, the success, and the outlook of the Company. Compared with competitors, the compensation should be attractive, offering incentives to attract qualified members to the Executive Board and retain them on a long-term basis within the Company. In addition, when determining the compensation, the complexity and significance of the tasks of the respective Executive Board member, their experience (especially for new appointments) and their contribution to the Company's success are taken into consideration. The Supervisory Board regularly reviews the appropriateness of the Executive Board compensation. For this purpose, it uses a horizontal as well as a vertical comparison.

Horizontal (external) comparison

When determining the compensation of the Executive Board, the Supervisory Board takes into account current market compensation levels, especially among the DAX companies as well as comparable other German companies. In addition, the adidas Executive Board compensation is compared with the compensation of selected national and international companies within the sporting goods and textile industry. When selecting these companies, the Supervisory Board also takes into consideration the comparability of the market position and company size. The Supervisory Board conducts regular horizontal comparisons to ascertain the appropriateness and competitiveness of the Executive Board compensation in relation to the economic situation of the Company. In addition to the DAX companies, the following national and international companies in particular were used for comparison in the last appropriateness test carried out in the 2023 financial year: Nike, Under Armour, VF, Hugo Boss, Puma, Lululemon, Skechers, Anta Sports, H&M, and Inditex.

Vertical (internal) comparison

The Supervisory Board also takes into account the Company's internal compensation structure and levels when determining the Executive Board compensation. Every year, the Executive Board compensation is compared to that of senior management and employees overall in Germany (employees covered by collective agreements as well as employees not covered by collective agreements), also with regard to their development over time.

The Supervisory Board considers the compensation of the Executive Board members to be appropriate, also in light of the horizontal and vertical comparisons that were conducted.

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Compensation components: Overview and structure

The Executive Board compensation system contains the following components outlined in the following overview:

Compensation system for the Executive Board members

1 Target direct compensation consisting of fixed compensation, the annual Performance Bonus as well as the share-based LTIP Bonus (in case of 100% target achievement).

2 Target value for the CEO amounts to 300%, for the ordinary Executive Board members to 200% of the annual fixed compensation taking into account a build-up phase of four years.

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For the targets of the performance-related variable Executive Board compensation for the 2023 financial

year ► SEE SECTION 'EXECUTIVE BOARD COMPENSATION 2023'

The compensation of the Executive Board members is made up of non-performance-related (fixed) and performance-related (variable) compensation components and consists of a fixed compensation, an annual cash bonus ('Performance Bonus'), a long-termshare-based bonus (Long-Term Incentive Plan - 'LTIP Bonus') as well as other benefits and pension benefits.

In case of 100% target achievement, the target direct compensation (total annual compensation without other benefits and pension benefits) is composed of

• 30% fixed Compensation,
• 25% Performance Bonus and
• 45% LTIP Bonus.

Total annual compensation and maximum compensation

The notional maximum total annual compensation of an individual Executive Board member can be derived from the fixed compensation, the capped variable performance-related compensation components, the other benefits, and the pension benefits. The percentage of the fixed compensation components (fixed compensation, other benefits,1 and pension benefits) amounts to approximately 41% of the annual total target compensation. Based on 100% target achievement, the percentage of the Performance Bonus amounts to approximately 21% and the percentage of the LTIP Bonus amounts to approximately 38% of the target total annual compensation.

In addition, the Supervisory Board has determined an absolute amount (in euros) for the annual maximum compensation in accordance with § 87a section 2 no. 1 AktG. The annual maximum compensation amounts to € 11,500,000 for the Chief Executive Officer and € 5,150,000 for each of the ordinary Executive Board members per financial year. The maximum compensation includes all fixed and variable compensation components.

Composition of target direct compensation and annual total target compensation

1 The amounts of other benefits may vary in the individual financial years. In general, a target amount of up to 3% of the target direct compensation is considered. The actual amount may be higher or lower.

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Fixed non-performance-related components

The fixed non-performance-related compensation consists of the fixed compensation, other benefits, and pension benefits.

Fixed compensation

The fixed compensation consists of an annual fixed salary, which is based on the responsibilities and the experience of the individual Executive Board member as well as on market conditions. It ensures an adequate income for the Executive Board members and thus avoids the assumption of inadequate risks for the Company. In principle, the fixed compensation is paid in twelve equal monthly installments and generally remains unchanged during the term of the service contract. The fixed compensation constitutes 30% of the target direct compensation of the respective Executive Board member.

Other benefits

The regularly granted other benefits for the Executive Board members serve to offset the costs and economical disadvantages directly connected with the Executive Board mandate or which promote the Executive Board mandate. They include payment for, or providing the monetary value of, non-cash benefits such as premiums or contributions to insurance schemes in line with market practice, the provision of a company car or the payment of a car allowance, reimbursement of costs for a regular health check, reimbursement of work-related moving costs, necessary security installations and services and the costs for a tax consultant selected by adidas.

Pension benefits

Pension benefits serve to provide contributions for adequate private retirement pensions. Executive Board members appointed after January 1, 2021, are not granted benefits under the company pension scheme. Instead, they receive a so-called pension allowance in the form of an adequate lump sum amount which is directly paid out to the Executive Board members annually. The pension allowance equals a maximum amount of 50% of the individual fixed compensation.

The members belonging to the Executive Board before January 1, 2023, have defined contribution pension plans. Each year as part of the pension commitments, the virtual pension account of each Executive Board member is credited with an amount which equals a percentage related to the Executive Board member's annual fixed compensation (50% for the members belonging to the Executive Board who were appointed before January 1, 2023). The pension assets on the virtual pension account at the beginning of the respective calendar year yield a fixed interest rate of 3% p.a., however for no longer than until the pension benefits first become due (pension payment). Entitlements to the pension benefits become vested immediately. Entitlements to pension benefits comprise pensions to be received upon reaching the age of 65, or, on application, early retirement pensions to be received upon reaching the age of 62 or disability and survivors' benefits.

Variable performance-related components

The variable performance-related compensation is designed to provide the right incentives for the Executive Board to act in the interest of the Company's strategic direction, the shareholders, and other stakeholders, as well as to ensure a successful, sustainable, and long-term corporate management and development. The level of the variable performance-related compensation is primarily determined by the economic development of adidas and takes into account the performance of the Executive Board members. In this respect, the Supervisory Board follows a consistent 'Pay for Performance' approach. When selecting the performance criteria, the Supervisory Board ensures that they are transparent, clearly measurable, and directly promote the implementation of the strategic direction, also in terms of sustainability. The variable performance-related compensation is therefore directly linked to the externally communicated operating, financial and strategic short- and long-term targets. This brings the compensation of the Executive Board members directly in line with the interests of shareholders, employees, consumers, and other stakeholders.

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The variable performance-related compensation consists of the Performance Bonus and the share-based LTIP Bonus.

Performance Bonus

As the annual variable performance-related component, the Performance Bonus serves as compensation for the Executive Board's performance in the past financial year in line with the short-term development of the Company. It incentivizes operational success accompanied by profitable growth within the established strategic framework. At the beginning of the financial year, the Supervisory Board establishes the respective weighted performance criteria. In case of 100% target achievement, the target amount of the Performance Bonus corresponds to 25% of the target direct compensation of the respective Executive Board member.

Criteria, weighting, and cap

The amount of the Performance Bonus is determined based on the achievement of, generally, four weighted criteria. Two of these criteria are the same financial performance criteria for all Executive Board members and are overall weighted at 60% ('common criteria'). The performance criteria are directly related to the annual guidance externally communicated. The other two criteria are defined individually for the respective Executive Board member and are overall weighted at 40% ('individual criteria'). These individual criteria allow for a further differentiation depending on the specific operating and strategic priorities of each individual Executive Board function. For the two individual targets, financial as well as non-financial performance criteria may be applied.

Examples of possible individual criteria deriving thereof are:

Sales growth in business segments /

sales channels

Business development

Product development and innovation

Gaining market share

Success of strategic projects

Attracting new members

Brand heat

Cost management

Efficiency increase

Cash-flow generation

Consumer satisfaction

Employee satisfaction

Diversity, Equity, and Inclusion

Digitalization

Sustainability

Succession planning

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In line with the strategic direction on sustainable growth and profitability, the Supervisory Board generally established the following financial performance criteria for the two common criteria at the start of 2021:

• Currency-neutralnet sales growth (weighting: 30%)
• Increase in the operating margin (weighting: 30%)

Due to the circumstances outlined above under 'Short- andlong-termvariable Executive Board compensation in the 2023 financial year', the financial performance criteria and their weightings were adjusted at the start of the 2023 financial year. The individual criteria for the respective Executive Board areas were also determined anew and aligned for all Executive Board members. For details ► SEE SECTION

'EXECUTIVE BOARD COMPENSATION 2023'

The overall degree of target achievement (sum of all weighted degrees of target achievement) for the Performance Bonus is capped at a maximum of 150% of the individual Performance Bonus target amount. All criteria are designed in such a way that individual target achievement may also be zero. If the overall degree of target achievement lies at or below 50%, the Executive Board member is not entitled to the Performance Bonus. Therefore, the Performance Bonus may be omitted entirely if targets are clearly not met.

Determination of target achievement and bonus amount

At the end of the financial year, the actual target achievement of each Executive Board member, which is based on a comparison of the predefined target values with the values achieved in the year under review, is assessed by the Supervisory Board ('target/actual comparison'). If the actual target achievement lies between the predefined threshold values, the degree of target achievement is determined based on a sliding scale. Taking into account the predefined weightings, the Supervisory Board determines the factor by which the Performance Bonus target amount is multiplied by adding up these degrees of target achievement ('overall degree of target achievement'). The result is the individual amount of the Performance Bonus to be paid ('Performance Bonus Amount'). The payout of the Performance Bonus Amount is due following approval of the consolidated financial statements of the past financial year.

Determination of target achievement and bonus amount within the framework of the Performance Bonus

1 Comparison of target values determined at the beginning of the financial year with values achieved in the financial year.

2 The individual target amount in case of 100% target achievement is determined in accordance with the applicable compensation structure for each Executive Board member. The overall degree of target achievement is the sum of all weighted degrees of target achievement.

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Long-Term Incentive Plan 2021/2025 ('LTIP 2021/2025')

The LTIP 2021/2025 aims to link the long-termperformance-related variable compensation of the Executive Board to the Company's performance and thus to the interests of the shareholders. Therefore, the LTIP 2021/2025 is share-based. It consists of five annual tranches (2021 to 2025), each with a term of five years. Each of the five annual LTIP tranches consists of a performance year and a subsequent lock-up period of four years.

LTIP 2021/2025: annual LTIP tranches

1 Performance year: determination of LTIP target amount in case of 100% target achievement.

2 Determination of the degrees of target achievement, LTIP Payout Amount payable following approval of the consolidated financial statements for the past performance year and investment in adidas AG shares. Start of lock-up period.

1. Lock-upperiod.
2. Lock-upperiod.
3. End of lock-up period effective December 31.

In case of 100% target achievement, the LTIP target amount for the respective LTIP tranche corresponds to 45% of the target direct compensation of the respective Executive Board member. The amount of the LTIP Bonus is determined based on the achievement of two uniform criteria for all Executive Board members, which are directly linked to the long-term strategic direction of adidas.

Criteria, weighting, and cap

As part of the compensation system applicable from 2021, the Supervisory Board had introduced the LTIP 2021/2025 for the long-term variable compensation. In view of the strategic targets applicable at the time, the following financial and ESG-related performance criteria were determined for each of the five performance years (2021 to 2025) of the LTIP 2021/2025:

• Financial criterion: Increase in net income from continuing operations compared to the previous
  year (weighting: 80%)
• ESG criterion: Share of sustainable articles offered (weighting: 20%)

For the performance criteria, the Supervisory Board pre-determined targets for each performance year which were derived from the externally published long-term growth targets for the Company's bottom-line performance and from the sustainability target for the share of sustainable articles offered. Moreover, in case the targets for increase in net income from continuing operations set by the Supervisory Board were not achieved in one of the performance years from 2022 through 2025, a catch-up mechanism was introduced to ensure that the Executive Board had an incentive in each performance year to achieve the long-term net income target 2025.

Due to the circumstances described above under 'Short- andlong-termvariable Executive Board compensation in the 2023 financial year' - in particular the Company's top- and bottom-line results which

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