Sabaf

Annual Report • Apr 6, 2023

1

INTRODUCTION TO THE ANNUAL REPORT AND CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION

2022

SABAF S.p.A. Via dei Carpini, 1 – 25035 OSPITALETTO (BS) ITALY Share capital €11,533,450 fully paid in www.sabafgroup.com

Sabaf Group/Introduction to the 2022 Annual Report and Consolidated Disclosure of Non-Financial Information

TABLE OF CONTENTS

INTRODUCTION TO THE ANNUAL REPORT	4
Summary of key performance indicators (KPI)	5
Products and markets	8
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION	15
Methodological note	16
Letter from the Chief Executive Officer to stakeholders	18
Business model, strategic approach and sustainable creation of value	21
Strategic approach and creation of value	21
Sustainable value creation	21
Values, vision and mission	21
Business model	25
Materiality analysis	33
Corporate Governance, Risk Management and Compliance	36
Corporate Governance	36
Risk Management	49
Compliance	51
Sabaf and employees	55
Risks	55
Personnel management policy	56
The people of the Sabaf Group	57
Recruitment policy	60
Personnel training	63
Internal Communication	64
Diversity and equal opportunities	65
Remuneration, incentive and enhancement systems	67
Occupational health and safety and working environment	71
Industrial relations	75
Business climate analysis	76
Disputes	77
Sabaf and environment	78
Risks	78
Health and safety, environmental and energy policy	78
Process and product innovation and environmental sustainability	79
Environmental impact	82
Disputes	87

Sabaf, the management of product quality and customer relations	88
Risks	88
Quality management policy	88
Sabaf and supply chain management	91
Risks	91
Supply chain management policy	91
Sabaf, Public Administration and Community	93
Sabaf and shareholders	99
Sabaf and lenders	102
Sabaf and competitors	103
EU taxonomy	105
GRI Content Index	106
External assurance	111

INTRODUCTION TO THE ANNUAL REPORT

The publication of the Annual Report of the Sabaf Group, now in its eighteenth edition, confirms the Group's commitment, undertaken since 2005, to an integrated reporting of its economic, social, and environmental performance.

Sabaf, one of the first international-level companies to embrace the trend of integrated reporting, intends to continue along this path, aware that integrated, complete and transparent reporting can benefit both the companies themselves, through a better understanding of the structure of the strategy and greater internal cohesion, and the community of investors, which can thus more clearly understand the connection between strategy, governance and company performance.

The Annual Report provides an overview of the Group's business model and the process of creating corporate value. The business model and the main results achieved (summary of key performance indicators) are in fact presented from the standpoint of the capital employed (financial; social and relational; human; intellectual, infrastructural, and natural) to create value over time, thereby generating results for the business, with positive impacts on the community and on stakeholders as a whole. "Non-financial indicators" include the results achieved in managing and enhancing intangible capital, the main driver that allows monitoring the ability of the company's strategy to create value in a perspective of medium/long-term sustainability.

On 30 December 2016, Legislative Decree no. 254 came into force, which, in implementation of Directive 2014/95/EU on non-financial and diversity information, requires relevant public interest entities to disclose non-financial and diversity information starting from the 2017 financial statements. As a relevant public-interest entity, Sabaf prepared for the sixth year the Consolidated Disclosure of Non-Financial Information presenting the main policies practiced by the company, the management models, the risks, the activities carried out by the Group during 2022, and the related performance indicators as pertains to the topics expressly referred to by Italian Legislative Decree no. 254/2016 (environmental, social, personnel-related, respect for human rights, fight against corruption) and to the extent needed to ensure understanding of the business activity, its trend, its results, and the impacts it produces.

Summary of key performance indicators (KPIs)

Economic capital		2022	2021	2020
Sales revenues	€/000	253,053	263,259	184,906
EBITDA	€/000	40,092	54,140	37,097
EBIT	€/000	21,887	37,508	20,093
Pre-tax profit	€/000	12,209	29,680	14,509
Net Profit	€/000	15,249	23,903	13,961
Working capital	€/000	79,380	68,631	52,229
Invested capital	€/000	240,528	190,043	174,129
Shareholders' equity	€/000	156,162	122,436	117,807
Net financial debt	€/000	84,366	67,607	56,322
ROCE
(return on capital employed)	%	9.1	19.7	11.5
Dividends paid out	€/000	6,690	6,172	3,924
Human capital		2022	2021	2020
Total employees	no.	1,238	1,278	1,168
men	%	59.5	60.9	62.0
women	%	40.5	39.1	38.0
Average age of personnel
(sum of employees age/	years	40.3	39.5	39.3
total employees at 31/12)
Level of education
(number of graduates/	%	65.1	64.4	61.6
total employees at 31/12)
Leaving turnover
(employees no longer in office/total employees at	%	22.7	17.7	10.8
31/12)
men	%	25.6	21.9	11.5
women	%	18.4	11.2	9.7
Hours of training per employee	h	23.1	17.4	10.8
(hours of training/total employees at 31/12)
Hours of training per collaborator (hours of training/total collaborators at 31/12)	h	25.9	20.4	13.9
Investments in training of collaborators/turnover	%	0.39	0.27	0.26
Hours of strike for internal causes	h	0	39	0
Injury rate
(number of injuries x 1,000,000/total hours worked)		8.16	15.59	16.10
Injury lost day rate1
(days of absence x 1,000/total hours worked)		0.13	0.26	0.11
Summary indicator of injuries
(injury rate x injury lost day rate x 100)		106	405	177
Jobs created (lost)	no.	(40)	110	133

¹The 2021 injury lost day rate and the summary indicator of injuries have been restated due to the continued absence of an injury in 2022.

Relational capital		2022	2021	2020
Value of goods and services outsourced	€/000	13,564	18,227	10,670
Average turnover by customer (total turnover/number of customers)	€/000	615	629	465
Percentage of top 10 customers	%	51	47	50
Percentage of top 20 customers	%	69	67	70
Turnover from certified suppliers (turnover from certified suppliers/purchases)	%	75	72	65
Number of analysts who follow the security continuously	no.	3	2	1
Productive capital		2022	2021	2020
Fixed assets	€/000	170,750	130,093	131,543
Total net investments	€/000	20,856	23,752	17,296
IT Budget	%	0.6	0.6	0.8
(investments + current expenditure)/turnover
Real investment/turnover	%	7.6	8.7	9.0
Quantities sold of Light alloy valves on Total valves and thermostats	%	91.1	89.3	91.3
Quantities sold of high energy efficiency
Burners on total Burners	%	31.9	26.5	23.3
Environmental capital		2022	2021	2020
Materials used
steel	t	20,587	26,801	26,046
aluminium alloys	t	7,917	11,326	9,188
brass	t	639	1,227	638
Electricity consumption
from renewable sources	MWh	3,520	4,853	158
from non-renewable sources	MWh	32,658	39,276	35,220
Natural gas consumption	m3x1,000	4,090	5,474	4,478
Energy intensity (kWh/turnover)	kWh/€	0.308	0.378	0.436
Water consumption2	m3	115,982	102,447	78,357
Waste by type3
similar to urban	t	209	356	291
hazardous	t	1,619	2,238	2,256
non-hazardous	t	7,833	9,385	8,132
Total waste/Generated economic value (kg in €/000)	kg in €/000	36	45	56
CO2 emissions	tCO2eq	23,150	29,134	24,378
(scope 1+scope 2 market-based)
Intensity of CO2 emissions (scope 1 and 2 market-based emissions/turnover)	tCO2eq/ millions of Euro	91	111	132

² The indicator does not include data relating to C.G.D. s.r.l.

Depending on data availability, the amount of collected rainwater is also included from the 2021 reporting year.

³ The indicator does not include data relating to the Polish branch of C.M.I. s.r.l.

Intellectual capital		2022	2021	2020
Capitalised investments in research and development	€/000	2,506	1,770	465
Hours dedicated to the development of new products/hours worked	%	3.1	3.1	3.3
Hours dedicated to process engineering/hours worked (hours dedicated to orders for the construction of new machines for new products or to increase production capacity/total hours worked)	%	2.3	1.7	2.6
Investments in intangible assets/turnover	%	1.2	0.8	0.6
Value of waste/turnover (production waste/turnover)	%	0.47	0.48	0.48
Impact of quality costs/turnover (charges and returns from customers/turnover)	%	0.07	0.05	0.13
Number of samples for customers	no.	3,232	5,571	5,034

Products and markets

Historically, the Sabaf Group is one of the world's leading manufacturers of components for household gas cooking appliances, with a market share of about 40% in Europe and over 10% worldwide.

In recent years, through a policy of organic investments and through acquisitions, the Group expanded its product range and is now active in the following segments of the household appliance market:

• gas parts;
• hinges;
• electronic components.

In 2022, the Group announced its entry into the induction cooking components market. Sabaf thus is present in all cooking technologies: gas, traditional electric and induction.

The entry into the induction cooking industry was made possible by an important investment plan that the Group made by setting up a dedicated project team in Italy. Leveraging a total team of more than 50 electronic engineers, Sabaf developed its own project know-how internally by filing proprietary patents, software and hardware, and aspires to create innovative products that better meet customers' needs and new consumer trends.

The first prototypes were presented in the second half of 2022, while production will start no later than the first half of 2023.

The distribution, planned on a global scale, will primarily leverage existing partnerships with leading manufacturers of household appliances. Sabaf aims to capture at least a 5% share of the European non-captive market by 2025, and to gradually expand this share in the following years.

The reference market of the Sabaf Group is represented by manufacturers of household appliances. The range also includes products for the professional sector.

The 2021-2023 Business Plan

On 23 March 2021, the Board of Directors approved the 2021-2023 Business Plan. The aim was to accelerate growth, both organic and through acquisitions, which was positively launched with the carrying-out of the 2018-2020 Plan.

The Business Plan set a revenue target of €300 million in 2023, gross profitability (EBITDA%) of at least 19%, and an improvement in return on invested capital (ROI) of at least one percentage point from 11.5% in 2020.

Over the three-year period, total investments of €130 million (including those for M&A) were planned.

Organic development

The Group has set an average annual growth target for sales of more than 10%. Organic growth will be supported by strengthening technical and commercial relations with some of the major global players.

Research and development activities will increasingly focus on the study of ad hoc solutions to meet the specific needs of individual markets and the design of customised products.

Therefore, the industrial footprint to 2023 envisaged 13 production plants, of which 5 in Italy and 8 abroad with new sites in India, Turkey and Mexico.

Development through acquisitions

The Group is also determinedly pursuing new growth opportunities through acquisitions and/or joint ventures, which will be aimed at further extending the product range and fully exploiting the Group's production potential.

Sustainability

With the Plan, the Group promotes the improvement of the quality of the environment and the community in which it operates so that the basic needs of all are met in an environmentally sustainable way. To this end, specific objectives are defined in the Plan, such as the reduction of emissions, safety at work and the growth of its own people through training.

The product range

Gas parts	Hinges	Electronic components	Induction (starting in 2023)
Valves: they regulate the flow of gas to the covered (of the oven or grill) or uncovered burners. Burners: by mixing the gas with air and burning the gases used, they produce one or more flame rings.	They allow movement and balancing when opening and closing the oven door, washing machine door or dishwasher door.	Electronic control boards, timers and display and power units for ovens, refrigerators, freezers, hoods and other products.	Complete kits including all components for hob operation.
Accessories: include spark plugs, microswitches, injectors and other components to complete the range.

Sales by division

(€/000)

The industrial footprint

* including agency workers and trainees

Countries and customers⁴

(no.)	2022	2021	2020
Countries	56	56	64
Customers	411	418	399

In line with the followed commercial policies, most of the active commercial relations are characterised by relations consolidated over the long term. There are 43 customers with annual sales of more than €1 million (48 in 2021). The distribution by class of turnover is as follows:

(no.)	2022	2021	2020
> €5,000,000	14	15	10
from €1,000,001 to €5,000,000	29	33	22
from €500,001 to €1,000,000	19	18	24
from €100,001 to €500,000	74	81	64
< €100,000	275	271	279
Total customers	411	418	399

⁴ Data processed considering customers with sales above €1,000.

Sabaf's international development: challenges and opportunities

2022	2021	2020	2019	2018
34.5%	35.3%	37.7%	37.6%	34.5%
87,282	92,935	69,618	58,684	51,961

Turkey

Turkey is the main production hub of household appliances for the European market. In this context, the opening of a production plant in 2012 and the acquisition of Okida Elektronik (September 2018) were key elements in support of the growth strategy. In 2021, Sabaf opened a new plant in Turkey to increase production capacity for electronic components. Production of hinges for dishwashers for customers with production sites in Turkey was also started in 2022.

Sabaf estimates that about 75% of sales in Turkey are exported by our customers; however, the Turkish domestic market is of increasing importance although subject to the fluctuations that can characterise emerging economies, such as currency crises and high inflation.

⁵ Sales by geographical area (€/000) and percentage incidence on Group sales.

North America

Sabaf Group sales and market share in North America have been growing steadily in recent years, also thanks to the development of co-designed products with major customers.

In 2021, the Group acquired a plot of land in San Luis de Potosi (Mexico), where work is in progress on the construction of a plant for the production of burners and hinges, which will be started in the first half of 2023.

The direct presence in North America will reduce time and logistics costs and strengthen partnerships with manufacturers of household appliances in that market.

South America

Sabaf has a well-established presence in Brazil (one plant has been operational since 2001).

The Sabaf Group believes that the development potential of this area is extremely interesting, considering the significant size of the market and the demographic growth trends.

The product range for the local market was recently expanded, with the production of special burners in Brazil, also to meet the specific nature of demand.

Other markets of great interest to the Group are those in the Andean area.

2022		2021		2020		2019		2018
	11.3%		15.0%		14.9%		15.0%		16.9%
	28,503		39,589		27,639		23,451		25,461

Africa and Middle East

Sabaf has a long-standing presence and reputation in the Middle East and Africa.

The Group considers the Middle East and Africa among the most promising markets in the medium term, also in view of demographic trends and the growing rate of urbanisation.

Asia and Oceania

The Indian market offers huge potential that has yet to be tapped. In 2022, after developing significant business relationships with manufacturers of highend cooking appliances, Sabaf is the first Western manufacturer to invest directly in gas cooking components: production of valves and thermostats started in Hosur (Tamil Nadu) in 2022.

China, with its production of more than 30 million hobs per year, is the most important market in the world. The Group aims to establish partnerships with major Chinese customers.

2022	2021	2020	2019	2018
4.6%	5.7%	4.4%	5.9%	5.0%
11,525	15,123	8,103	9,198	7,590

CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION

(prepared pursuant to Article 4 of Legislative Decree 254/2016)

Methodological note

Preparation criteria

The Consolidated Disclosure of Non-Financial Information of the Sabaf Group (hereinafter also referred to as the " isclosure" , prepared in accordance ith Art. 4 of Legislati e ecree 254 20 6 as amended hereinafter also referred to as the " ecree" , contains information policies practiced, risks and related management methods, management models and performance indicators) on environmental, social, personnel, human rights and anti-corruption issues, to the extent necessary to ensure understanding of the activities carried out by the Group, its performance, results and impact. Each section also describes the main risks, generated or suffered, related to the above issues and deriving from the Group's activities.

The Sabaf Group identified the GRI Sustainability Reporting Standards (hereinafter also referred to as "GRI Standards") published by the Global Reporting Initiative (GRI) as the "reference standard" for fulfilling the obligations of Legislative Decree 254/2016, as the most widely recognised and internationally disseminated Guidelines. As from 2022, Sabaf has been applying the GRI Standards published in 2021, which updated the drafting process, general disclosures and the process for identifying and evaluating material topics: GRI 1 Foundation; GRI 2: General Disclosures and GRI 3 Material topics. This Disclosure is prepared under the "in accordance" reporting option and, like the Financial Information, covers the period from 1 January 2022 to 31 December 2022. The process of defining the contents and determining the material topics, also in relation to the areas envisaged by the Decree, was based on the principles envisaged by GRI Standards (accuracy, balance, clarity, comparability, completeness, sustainability context, timeliness, and verifiability). To help readers find the information in the document, the GRI Content Index is at the bottom of the Disclosure.

This Disclosure, prepared annually, was approved by the Board of Directors on 21 March 2023 and, in accordance with one of the options envisaged by Art. 5 of Legislative Decree 254/2016, it constitutes a separate report from the Report on operations. Moreover, this Disclosure is subject to limited review according to ISAE 3000 Revised by the independent auditors EY S.p.A., appointed to audit the Group's accounts", ith the exception of the contents of the paragraph "EU Taxonomy". It is then specified that the quantitative indicators, which do not refer to any general or topic-specific disclosure of the GRI Standards, reported in accordance with the pages indicated in the GRI Content Index, are not subject to a limited review by EY S.p.A.

The Disclosure of Non-Financial Information was published on the website www.sabafgroup.com on 7 April 2023. For further information on this Disclosure, please contact info@sabaf.it.

Reporting boundary

The reporting boundary of qualitative and quantitative data and information contained in the Disclosure of Non-Financial Information of the Sabaf Group refers to the performance of the Sabaf Group (hereinafter also referred to as "Group" or "Sabaf") for the year ended 31 December 2022 and includes all companies consolidated on a line-by-line basis, except for:

• Sabaf India, a newly established company that began operations in 2022;
• Sabaf Mexico, a company not yet operational in 2022;
• P.G.A. s.r.l. and P.G.A.2.0 s.r.l., companies acquired on 3 October 2022.

Reporting process

In 2019, the Board of Directors of Sabaf S.p.A. approved a procedure for the reporting process of non-financial information. The procedure defines the phases, activities, timing, roles and responsibilities for the management of the reporting process and for the definition, collection and validation of data and other contents of the Disclosure.

The procedure, which has been applied for the preparation of this Disclosure, envisages the involvement of the parent company's management ("group data owners") and the representatives of all subsidiaries ("subsidiary data owners"), who are responsible for the relevant areas and the related data and information covered by the Group's non-financial reporting.

In particular, the data and information included in this Disclosure derive from the company information system used for the management and accounting of the Group and from a nonfinancial reporting system (data collection package) specifically implemented to meet the requirements of Legislative Decree 254/2016 and GRI Standards. In order to ensure the reliability of the information contained in the Disclosure, directly measurable quantities have been included, limiting the use of estimates as much as possible. Calculations are based on the best information available or on sample surveys. The estimated quantities are clearly indicated as such. The economic and financial data and information are derived from the Consolidated Financial Statements at 31 December 2022.

Impacts of the Russia-Ukraine conflict

The outbreak of the Russia-Ukraine conflict led to severe tensions on the supply and prices of gas and the main raw materials used by the Group (steel and aluminium). The Sabaf Group has not changed its approach to sustainability or revised its ESG goals as a result of the conflict. The impacts on the sector and its economic and financial performance are explained in the Annual Financial Report.

Letter from the Chief Executive Officer to stakeholders

Dear Stakeholders,

The year just ended was characterised by a two-speed trend: in the first half of the year, the intense and abnormal growth that followed the pandemic continued, while the market settled down in the second half of the year. Demand in the household appliance market traditionally fluctuated with growth rates of between 1%-3%. Since autumn 2020, with the end of the health emergency, a period of intense growth had begun, triggered by the change in lifestyle (stay-at-home) brought about by the pandemic. This growth in demand, at an annual rate of 15%, led to a sharp increase in production and stocks. Sabaf was ready to seize the opportunity, as evidenced by the 2021 results (a record for the Group).

The very positive trend continued throughout the first half of 2022, while in the second half of the year demand started to decline and corporate customers sharply reduced their inventories, coinciding with a significant increase in energy and commodity prices (the result of the combination of the geopolitical crisis, energy market instability and critical global supply chains). The Group's 2022 results, which were satisfactory in terms of revenue and margins (but lower than the exceptional 2021 results) inevitably reflect these factors.

On the other hand, the circumstances have certainly not called into question the strategic development guidelines set out in the 2018 Business Plan (expanding and diversifying the range of products, including through acquisitions; developing synergies between the Group's components; strengthening and internationalising the industrial footprint) in order to increase growth potential, ensure long-term competitiveness, and provide stability in the generation of economic and social value for shareholders and stakeholders.

As is well known, the implementation of the business plan, updated in 2021, aims to position Sabaf as an all-round player in smart appliances, after having historically been a company focused on gas cooking components. The aim of the new positioning is to supply the various markets with the cooking technologies most in demand. Europe and the United States, where incomes are higher, are geared towards the growth of electric cooking, while emerging markets with higher population growth are confirming the growth and development of gas cooking.

In 2022, continuing with the process that had already led to the integration of the offer with electronic components (displays and timers for programming ovens, electronic hobs and fridges; hood control boards), two measures were taken to increase the range of electronic components.

In May, Sabaf announced its entry into electromagnetic induction cooking components, a market estimated to be worth around €600 million in 2022 and that has been growing steadily at a rate of more than 10% for several years. The move is of strategic importance as it has enabled Sabaf to become a global manufacturer present in all surface cooking technologies: gas (a segment in which it now holds around 40% of the world market), traditional electric (radiant) and induction.

In October, the Group acquired 100% of P.G.A. s.r.l., based in Fabriano (AN), a company with over 25 years' experience in the design and assembly of electronic control boards for household appliances, thus strengthening its presence in the smart appliances and IoT sectors for household appliances.

The Group's efforts to increase diversification are well illustrated by two figures: in 2022, gas cooking components accounted for 60% of total revenues, compared to 95% in 2018.

The entry into induction cooking components was made possible by a major investment plan. The research and development work involved a team of over fifty electronic engineers who also drew on the expertise of Okida, the Group's Turkish company specialised in electronic components. Production is scheduled to start in the second half of 2023 at the Ospitaletto, Fabriano and Istanbul plants. The marketing, on a global scale, will leverage existing relationships with manufacturers of household appliances. Several contracts have already been signed with major industry players.

The Group's strategy also includes the geographical expansion of production capacity to better serve customers by being closer to their plants and to reduce logistics and transport costs. The resulting increase in competitiveness is certainly a valid response to the consolidation taking place in the household appliance industry.

In June 2022, a new unit for the production of gas cooking components (valves and burners) became operational in India. A new burner production plant in San Luis Potosi, central Mexico, will be operational in 2023 to serve the North American market. An integrated production line of hinges for dishwashers was started in Turkey to supply major Turkish manufacturers. With these investments, our Group will be able to count on the production capacity of 14 plants: 6 in Italy and 8 abroad. Ospitaletto is, and will remain, the heart of the Group, home to its know-how and professional expertise.

In 2022, the Group continued to invest prospectively in research and development in order to achieve its goal of strong innovation in its product range. To date, the four divisions have their own R&D centres: electronic induction, hinges and gas.

The development of new projects can count on the contribution of more than 90 electronic and mechanical engineers working in the various Group companies. In addition to the abovementioned induction cooking business, Sabaf aims to increase the excellence and competitiveness of its products, such as high-efficiency burners with lower CO² and carbon monoxide emissions, hydrogen-powered burners (the company is participating in the British Hy4Heat project for the use of domestic hydrogen in the kitchen), IoT projects in electronics (electric hobs and hoods) and new hinges with increased functionality.

The development lines are implemented in accordance with the environmental, social and governance (ESG) principles that the Group has integrated into its strategy and organisation. Sabaf has based its business on the principles of sustainability for many years, ahead of the market in adopting the necessary policies. There are many ongoing measures that have brought Sabaf up to the highest international standards, including energy efficiency, the reduction of emissions through the installation of photovoltaic systems (one is already in operation and another is at an advanced stage of planning), the purchase of energy from renewable sources, the continuous training of employees and various support measures for the local community and health prevention.

In 2022, the Group fully achieved the sustainability targets set out in the Business Plan and integrated into the LTI plan relating to safety, training and the reduction of CO² emissions into the atmosphere.

Once again in 2022, for the fourth year in a row, Sabaf was among the winners of the Best Managed Companies Award, given by Deloitte Private to the best Italian companies, testifying to the company's ability to perform brilliantly regardless of market conditions and to the professionalism and commitment of the Group's 1,300 employees. The Best Managed Companies were selected by an independent jury, made up of experts from the Italian institutional and academic world, which considers parameters such as: strategy; expertise and innovation; corporate culture and

commitment; governance e performance measure; sustainability; supply chain; internationalisation.

Finally, a reference to the current year. In the first quarter, demand normalised, energy prices fell sharply (although they remained higher than at the start of the war between Russia and Ukraine) and commodity prices gradually trended down from the peaks of previous months.

The destocking that characterised the second half of last year is now over; sales in the first half of 2023, while not reaching the records of early 2022, are expected to be higher in the second half of 2022. These trends, combined with the favourable reception of the induction market, the start of operations of the new production plants in India and Mexico and the integration of P.G.A. into the Electronics Division, point to a year of gradual and substantial recovery.

As proof of the validity of our Business Plan and in order to strengthen our assets, I can confirm that the acquired companies have already fully repaid the value of the investments made for their acquisition, thanks to the liquidity generated by their own activities, ahead of expectations. This underlines the effectiveness of our solid Business Plan, which is focused on development and creating value for shareholders, and which continues to be implemented as planned, including growth and diversification through acquisitions.

Pietro Iotti

Business model, strategic approach and sustainable creation of value

Strategic approach and creation of value

Sustainable value creation

For the Sabaf Group, respect for business ethics and socially responsible behaviour are the fundamental elements of its business model. Accordingly, the Group developed a strategy and a governance model that can guarantee sustainable success over time.

The Sabaf Group is aware that sustainable success depends on the degree of harmony and the sharing of values with its stakeholders: compliance with common values increases mutual trust, encourages the development of common knowledge, and therefore contributes to the containment of transaction costs and control costs; in essence, it benefits the Group and all its stakeholders.

Values, vision and mission

Sabaf takes the Person as its original value and therefore as the fundamental criterion of every choice: this results in an entrepreneurial vision that ensures dignity and freedom to the Person within shared rules of behaviour. The centricity of the Person represents a universal value, i.e. a hyper-standard applicable without differences in time and space. In compliance with this universal value, the Sabaf Group operates by promoting cultural diversity through the criterion of equity in space and time. Such a moral commitment implies an a priori renunciation of all choices that do not respect the physical, cultural and moral integrity of the Person, even if such decisions can be efficient, economically convenient and legally acceptable. Respecting the value of the Person means that, first of all, the dimension of the category of Being in relation to Doing and Having is the overriding consideration, and therefore implies the protection and enhancement of the "essential" manifestations expressing the fullness of the Person.

The Charter of Values of Sabaf

The Sabaf Charter of Values, approved by the Board of Directors, is available on the website www.sabafgroup.com under the section "Sustaina ility - Sustainability at Sabaf.

The Charter of Values is the governance tool through which the Sabaf Group clearly explains the Company's alues, standards of eha iour and commitments in relations ith its stakeholders – employees, shareholders, customers, suppliers, lenders, the Public Administration, the community and the environment.

The spirit of the Charter is to reconcile the principles of economic management with ethics based on the centricity of Man, as an essential condition for the sustainable success of business in the long term. Sustainable success, intended as the ability to combine at the same time:

• economic sustainability, i.e. operate in such a way that company choices increase the value of the company not only in the short term but above all are able to guarantee business continuity in the long term through the application of an advanced model of corporate governance;
• social sustainability, i.e. promote ethical behaviour in business and reconcile the legitimate expectations of the various stakeholders in accordance with common shared values;

▪ environmental sustainability, i.e. produce by minimising the direct and indirect environmental impacts of its production activities to preserve the natural environment for the benefit of future generations in compliance with current laws on the subject.

The Charter aims to give a vision of ethics, focusing mainly on positive and just actions to be taken and not only on incorrect behaviour to be avoided. This vision is the basis for a positive use of freedom by decision-makers, where ethical references guide decisions in a manner consistent with the Group's culture of social responsibility. The Sabaf Group aims to develop a process based on people being given a sense of responsibility within shared rules of behaviour with which to voluntarily comply.

According to this approach, it is still imperative to comply absolutely with the law and regulations in force in Italy and in the other countries where the Group operates, as well as with all the internal regulations of the Group and the values declared in the Charter.

The Charter of Values also represents a reference document as part of the Organisation, Management and Control Model pursuant to Legislative Decree 231/2001 and, as such, sets out a series of general rules of behaviour Group employees are required to comply with.

Any stakeholder of the Sabaf Group can report cases of alleged non-compliance with the Charter by sending a written, non-anonymous description to the Sabaf S.p.A. Internal Audit Department.

The Internal Audit Department takes appropriate measures to protect the reporting parties from any type of retaliation, discrimination, penalisation or any consequence resulting therefrom, ensuring them confidentiality on their identity, without prejudice to law obligations and the protection of the rights of the Company or of persons accused wrongly and/or in bad faith.

The Internal Audit Department considers all reports of violations received or non-compliance with the Charter identified in the course of its activities and informs:

• the supervisory body of the company in question, if the violation is relevant to the subjects covered by Legislative Decree no. 231/2001;
• the Board of Directors, if the violation is particularly serious or involves top management or directors of the Company.

No reports of violations or non-compliance were received during 2022.

With a view to initiating the appropriate procedure against the person responsible for the violation, in accordance with the existing disciplinary system, the Internal Audit Department reports to the person's line manager and to the Human Resources Department any violations of the Charter discovered in the course of its activities or reported by other corporate functions (after verifying their validity).

Although the Group has no specific training plans, the values, principles of conduct and commitments set out in the Charter of Values are communicated to employees and integrated into the corporate culture.

Table summarising the Policies of the Sabaf Group with reference to the contents of Legislative Decree 254/2016 as amended

	Topic envisaged by Legislative Decree 254/2016	Reference policies
	Environment
▪ ▪ ▪ ▪ ▪ ▪	Basic principles Raise staff awareness and train the personnel to promote environmental awareness Minimise direct and indirect environmental impacts Adopt a precautionary approach to environmental impacts Encourage the development and diffusion of environmentally friendly technologies and products Define environmental objectives and improvement programmes Search for the right balance between economic objectives and environmental sustainability	▪ Charter of Values ▪ Manual of the Integrated Management System of Health and Safety, Environment and Energy in compliance with ISO 14001, ISO 50001 and ISO 45001 standards
	Human rights
▪ ▪ ▪ ▪	Basic principles Adopt socially responsible behaviour Promote respect for the fundamental human rights of workers in all countries where the Group operates Avoid all forms of discrimination and favouritism in respect of employment and occupation Enhance and respect diversity	▪ Charter of Values
	Personnel
▪ ▪ ▪ ▪ ▪	Basic principles Encourage continuous learning, professional growth and knowledge sharing Provide clear and transparent information on the tasks to be carried out and the position held Encourage teamwork and the dissemination of creativity in order to allow the full expression of individual skills Adopt criteria of merit and competence in employment relationships Encourage the involvement and satisfaction of all the personnel	▪ Charter of Values
	Personnel/Health and safety
▪ ▪ ▪ ▪ ▪	Basic principles Reach working standards that guarantee health and maximum safety, also through the modernisation and continuous improvement of workplaces Minimise any form of exposure to risks at work Disseminate the culture of risk prevention through systematic and effective training Promote the protection not only of oneself, but also of colleagues and third parties Encourage the diffusion of products with security systems	▪ Charter of Values ▪ Manual of the Integrated Management System of Health and Safety, Environment and Energy in compliance with ISO 14001, ISO 50001 and ISO 45001 standards
	Anti-corruption
▪ ▪	Basic principles Raise awareness among all those who work for Sabaf so that they behave correctly and transparently in the performance of their activities Comply with local anti-corruption regulations	▪ Group Anti-corruption Policy ▪ Organisation, management and control Model pursuant to Legislative Decree 231/2001
	Social/Supply chain
▪ ▪	Basic principles Ensure absolute impartiality in the choice of suppliers Establish long-term relationships based on fairness in negotiations, integrity and contractual fairness	▪ Charter of Values

The Charter of Values and the Anti-corruption Policy are applied and disseminated in all Group companies.

Sabaf S.p.A. has an integrated Health and Safety, Environment and Energy management system certified to ISO 45001, ISO 14001 and ISO 50001.

Faringosi Hinges s.r.l., C.G.D. s.r.l. and C.M.I. s.r.l. since 2022 have a Health and Safety management system certified and compliant with ISO 45001 standard.

Sabaf Turkey has an ISO 14001 certified Environmental Management System since 2022.

In any case, the ISO 14001, ISO 45001 and ISO 50001 standards are sources of reference and inspiration for the entire Group.

The Organisation, Management and Control Model pursuant to Legislative Decree 231/2001 is adopted by Sabaf S.p.A. and Faringosi Hinges s.r.l. and, limited to the part concerning Occupational Health and Safety, by C.G.D. s.r.l. and C.M.I. s.r.l.

Vision

Combine business decisions and results with ethical values by going beyond family capitalism and opting for a managerial rationale oriented not only towards the creation of value but also towards the respect of values.

Mission

Consolidate the technological and market leadership in the design, production and distribution of the entire range of components for household appliances through constant attention to innovation, safety and the enhancement of internal expertise.

Associate the growth of company services with social and environmental sustainability, promoting an open dialogue with the legitimate expectations of stakeholders.

Business model

Strategic pillars of Sabaf's Business Model

In line with its shared values and mission, Sabaf believes that there is a successful industrial and cultural model to be consolidated both through organic growth and growth through acquisitions. The Group believes that its business model - oriented towards long-term sustainability and characterised by a high level of verticalisation of production and production facilities close to the main markets - is adequate to face future challenges and new scenarios.

The distinctive features of the Sabaf model are set below.

Innovation

Innovation represents one of the essential elements of Sabaf's industrial model and one of its main strategic levers. Thanks to continuous innovation, the Group has managed to achieve excellent results, identifying technological and production solutions that are among the most advanced and effective currently available and establishing a virtuous circle of continuous improvement of processes and products, until acquiring technological competence with characteristics that are difficult to match for competitors. The know-how acquired over the years in the development and internal production of machinery, tools and moulds, which is integrated synergistically with the know-how in the development and production of our products, represents the main critical success factor of the Group. With the acquisition of Okida and the more recent acquisition of P.G.A., Sabaf has also acquired a strong electronic know-how that, together with the traditional and strong mechanical skills, further expanded the business spaces for the Group.

The investments in innovation allowed the Group to become a world leader in a highly specialised sector. The production sites in Italy and abroad are designed to guarantee products according to the highest levels of technology available today and represent a cutting-edge model both for environmental protection and safety of the employees.

Eco-efficiency

Sabaf's product innovation strategy gives priority to the search for improved environmental performance. Attention to environmental issues is reflected both in innovative production processes that have a lower energy impact in the manufacture of products, and for what concerns gas parts, in the design of eco-efficient products during their daily use. Innovation efforts in this area are directed towards the development of burners that reduce fuel consumption (natural gas or gpl) and emissions (carbon dioxide and carbon monoxide, in particular) in users. In line with its energy transition policy, the Group has also embarked on a major investment plan to enter the electromagnetic induction cooking sector. Sabaf is also involved in experimental projects and feasibility studies for the use of hydrogen as an alternative fuel to natural gas for domestic and professional cooking appliances.

Safety

Safety has always been one of the essential elements of Sabaf's business project. Safety for Sabaf is not just a matter of complying with existing standards but a management philosophy oriented towards the continuous improvement of its performance, in order to guarantee the end user an increasingly safe product. In addition to investing in research and development of new products, the Group has chosen to play an active role in disseminating a safety culture: Sabaf has long been promoting the introduction of regulations worldwide - in the various institutional venues - that make it compulsory to adopt products with thermoelectric safety devices. Sabaf also promoted the ban on the use of zamak (zinc and aluminium alloy) for the production of gas valves for cooking, in consideration of the intrinsic danger. To date, the use of zamak is still permitted in Brazil, Mexico

and other South American countries, limiting business opportunities in the valves segment for Sabaf.

Success on international markets and partnerships with multinational groups

Sabaf pursues its growth through its success in international markets by trying to replicate its industrial model in emerging countries with due consideration of local culture.

In line with its reference values and mission, the Group operates in emerging Countries in full respect of human rights and the environment and in compliance with the United Nations Code of Conduct for Transnational Corporations. This choice is driven by the awareness that only by operating in a socially responsible way it is possible to ensure long-term development of industrial experience in emerging markets.

The Group also intends to further strengthen its collaboration with customers and its position as main supplier of a complete range of products in the cooking components market, also thanks to its ability to adapt production processes to specific customer needs and provide an increasingly wide range of products.

In relations with large household appliance groups, the reliability of partners along the supply chain is more than ever an essential requirement. The presence of production facilities in all strategic geographical areas, the ability to react immediately to sudden changes in macroeconomic scenarios - such as those brought about by the pandemic and Russia's invasion of Ukraine - and financial solidity put the Sabaf Group in a favourable position compared to smaller, less structured competitors.

Widening the range of components and development through acquisitions

The continuous expansion of the range aims to increase customer loyalty through the widest satisfaction of market requirements. The possibility of offering a complete range of components is an additional distinguishing feature for Sabaf compared to its competitors. In order to sustain a dynamic growth path, the Group is extending its product range to other components for household appliances. This expansion is pursued both through internal research and through growth through acquisitions. Examples include the acquisition of A.R.C. s.r.l. in 2016, which operates in the professional cooking sector, the C.M.I. Group in 2019, which produces hinges for ovens and dishwashers, Okida in 2018 and P.G.A. in 2022, which designs and manufactures electronic components for household appliances. Another strategically important project is the entry into the induction cooking components sector, for which Sabaf has set up a dedicated development team and will also draw on the expertise of Okida and P.G.A.

Enhancement of intangible assets and of its intellectual capital

Sabaf carefully monitors and increases the value of its intangible assets: the high technical and professional competence of the people who work there, the image synonymous with quality and reliability, the reputation of a company attentive to social and environmental issues and the requirements of its stakeholders. The promotion of the idea of work and relations with stakeholders as a passion for a project based on common values in which everyone can recognise themselves symmetrically represents not only a moral commitment, but the real guarantee of enhancement of intangible assets. In this perspective, the sharing of values represents the link between the promotion of a corporate culture oriented towards social responsibility and the enhancement of its intellectual capital.

Business model

Generated and distributed economic value

The analysis of the determination and distribution of economic value among stakeholders, prepared in accordance with the indications of the GRI is shown below.

The table was prepared distinguishing between three levels of economic value. The generated one, the distributed one and the one retained by the Group. The economic value represents the overall wealth created by Sabaf, which is then distributed among the various stakeholders: suppliers (operating costs), employees, lenders, shareholders, public administration and community (external perks).

€ ( /000)	2022	2021	Change
Economic value generated by the Group	268,082	267,918	164
Revenue	253,053	263,259	(10,206)
Other income	10,182	8,649	1,533
Financial income	1,917	750	1,167
Value adjustments	3,432	2,525	907
Bad debt provision	(1)	(103)	102
Exchange rate differences	(515)	(7,399)	6,884
Income/expenses from the sale of property, plant and	251	237	14
equipment and intangible assets
Value adjustments to property, plant and equipment and	(189)	0	(189)
intangible assets
Profits/losses from equity investments	(48)	0	(48)
Economic value distributed by the Group	241,281	232,521	8,760
Remuneration of suppliers	176,493	166,164	10,329
Remuneration of employees	49,926	53,964	(4,038)
Remuneration of lenders	11,032	1,179	9,853
Remuneration of shareholders	6,758	6,172	586
Remuneration of the Public Administration6	(3,040)	4,997	(8,037)
External perks	112	45	67
Economic value retained by the Group	26,801	35,397	(8,596)
Depreciations	18,267	16,869	1,398
Provisions	49	29	20
Use of provisions	(6)	(12)	6
Reserves	8,491	18,511	(10,020)

⁶ Includes deferred taxes.

Governance of Social Responsibility and Stakeholder Engagement

Social responsibility in business processes

To transform the values and principles of sustainable development into intervention choices and management activities, Sabaf applies a structured methodology, the key factors of which are as follows:

• sharing values, mission and sustainability strategy;
• training and communication;
• an internal control system capable of monitoring risks (including social, environmental and reputational risks) and verifying the implementation of commitments to stakeholders;
• key performance indicators (KPIs), which can monitor economic, social and environmental performance;
• a clear and complete reporting system, able to effectively inform the different categories of stakeholders;
• a stakeholder engagement system, to compare with the expectations of all stakeholders and to receive useful feedback for continuous improvement.

The precautionary approach

The awareness of the social and environmental aspects that accompany the Group's activities, together with the consideration of the importance of a cooperative approach with stakeholders and the Group's good reputation, has led Sabaf to adopt a precautionary approach in managing the economic, social and environmental variables that it has to manage on a daily basis. To this end, the Group analysed specifically the main risks of the different operating dimensions.

Detailed information on the internal control system and on the risk management system is pro ided in the next paragraph "Corporate Go ernance, Risk Management and Compliance".

Stakeholder engagement

Sabaf is committed to constantly strengthening the social value of its business activities through careful management of relations with stakeholders. The Group intends to establish an open and transparent dialogue, encouraging opportunities for discussion in order to identify lawful expectations, increase trust in the Group, manage risks and identify new opportunities.

The identification of stakeholders is an essential starting point for defining social and environmental reporting processes. The "stakeholder map" provides a summary representation of Sabaf's main stakeholders, identified on the basis of their business characteristics, the characteristic aspects of the market and the intensity of their relations with the latter. The Annual Report is the preferred communication tool for presenting the significant economic, social and environmental performance achieved during the year.

The initiatives for involving each stakeholder that are carried out periodically are described below (generally every two or three years). The relevant issues arising from these activities are reported in the following paragraphs.

Stakeholder	Regular stakeholder engagement initiatives
	▪ Employee satisfaction survey and climate analysis
Employees	▪ Meetings with employees
	▪ Meetings with trade unions
Customers	▪ Customer Satisfaction Survey
Suppliers	▪ Regular meetings
	▪ Dialogue with current and potential investors
Shareholders	▪ Comparison with proxy advisors
	▪ Dialogue with financial analysts
Community and	▪ Dialogue with universities
Public Administration
Lenders	▪ Regular dialogue
Competitors	-

Sabaf complies with the Code of Conduct of APPLiA Europe

Sabaf complies with the code of conduct of APPLiA Europe, an association of manufacturers of household appliances representing companies in the household appliances industry.

The Code of Conduct confirms the commitment of the European household appliance industry to ethical and fair behaviour. The Code aims to promote fair and sustainable standards in working conditions and environmental protection to support fair competition in global markets.

The producers complying with the Code commit themselves voluntarily to implement decent working conditions, which include compliance with common standards regarding minimum age, working hours, hygiene and safety conditions, respect for freedom of association and collective bargaining, as well as respect for environmental standards. The signatory companies also undertake to raise awareness among their suppliers of the principles of the Code of Conduct and encourage them to pursue them. They also require that the same principles be proposed to the whole supply chain through the latter.

The Annual Report of Sabaf is also the tool through which the Group reports year by year on the practical implementation of the principles of the Code and the progress achieved, as specifically required of the companies complying with it.

Sabaf complies with the Global Compact

In 2004, Sabaf complied formally with the Global Compact, the United Nations initiative for companies that commit to upholding and promoting the ten universally accepted principles of human rights, labour rights, environmental protection and anti-corruption. With the publication of the 2022 Annual Report, we renew our commitment to making the Global Compact and its principles an integral part of our strategy, culture and day-to-day operations, and we also commit to explicitly declare our commitment to all employees, partners, customers and the general public.

The Disclosure of Non-Financial Information sets out in detail the actions taken by the Sabaf Group in support of the ten principles.

The 10 principles of the Global Compact

Human rights

Principle I Businesses should support and respect the protection of internationally proclaimed human rights; and Principle II

make sure that they are not - even if indirectly - complicit in human rights abuses.

Labour

Principle III

Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining

Principle IV

The elimination of all forms of forced and compulsory labour.

Principle V

The effective abolition of child labour.

Principle VI

The elimination of discrimination in respect of employment and occupation

Environment

Principle VII Businesses should support a precautionary approach to environmental challenges and Principle VIII undertake initiatives to promote greater environmental responsibility; and Principle IX encourage the development and diffusion of environmentally friendly technologies.

Fight against corruption

Principle X Businesses should work against corruption in all its forms, including extortion and bribery.

Materiality analysis

The GRI Standards require that the contents of the Disclosure of Non-Financial Information be defined on the basis of a materiality analysis. In compliance with the requests of GRI Standards, Sabaf has started since 2014 a process of identifying the material topics to be reported, i.e. those topics that represent the most significant impact of an organisation on the economy, the environment and people.

The last materiality analysis was conducted at the end of 2020, when the Group, taking into account the pervasive impacts of the pandemic, deemed it appropriate to update the analysis, integrate the material topics and resubmit them to management for assessment. The stakeholders involved were asked to express an evaluation (on a scale from 0 to 5) on the material topics identified and inherent to their responsibilities, both from an internal perspective and from the perspective of the stakeholders concerned. On 20 December 2022, the Board re-approved the materiality analysis, without changing its assessments.

It is noted that in defining material topics, the following topics are considered preconditions for operating and are therefore considered very important for both Sabaf and its stakeholders:

• creation and distribution of sustainable value over time (GRI 201: Economic Performance; scope of the Decree: transversal);
• transparent and effective governance system to support business (GRI 2-9: Governance structure and composition; scope of the Decree: transversal);
• constant attention to compliance with the law in the performance of its activities⁷ (GRI 205: Anti-Corruption and GRI 2-27: Compliance with laws and regulations; scope of the Decree: fight against corruption);
• an approach of fairness and transparency towards the public administration (GRI 207: Tax; scope of the Decree: transversal).

⁷ This includes the fight against corruption, which is an essential aspect of managing the Group's business and therefore included in the preconditions. It is discussed in this document in the section "Corporate Governance, Risk Management and Compliance".

Material topics 8

Scope Legislative Decree 254/16	Material topic	Importance of the topic for Sabaf	Link to GRI Standards
	Use of raw materials and materials	Use of materials for production, considering the maintenance of quality standards and assessing their environmental and social impact.	GRI 301: Materials 2016
Environment	Emissions into the atmosphere, waste and management of environmental impacts	Definition of monitoring and reduction activities of emissions of polluting substances into the atmosphere and of waste generated by the production processes of Sabaf. Impacts to be considered include smart working for part of the workforce, which has led to a reduction in travel by employees.	GRI 302: Energy 2016 GRI 305: Emissions 2016 GRI 306: Waste 2020
Human rights	Protection of Human and Workers' Rights	Protection of human rights as provided for in the "Universal Declaration of Human Rights" and the principles laid down in the conventions of the International Labour Organisation. One of the main objectives is to ensure working conditions with health and safety standards adapted to the health emergency period and, consequently, to safeguard business continuity.	GRI 406: Non-discrimination 2016 GRI 414: Supplier Social Assessment 2016
	Remuneration and incentive policy	Definition of fixed and variable components of remuneration for employees. Incentive system based on the achievement of pre-established targets in order to pursue company targets. Establishment of a welfare bonus system to recognise activities carried out during the health emergency.	GRI 202: Market Presence 2016 GRI 404: Training and education 2016
Personnel-related	Development of resources and skills	Boost the Group's expansion, through organic growth, maintaining the excellence of its economic results and preserving its financial solidity. Increase skills through training activities with the aim of guaranteeing the continuous professional growth of employees.	GRI 401: Employment 2016 GRI 404: Training and education 2016
	Health and safety of personnel and contractors	Management, in compliance with occupational health and safety regulations, of topics related to occupational health and safety: training, prevention, monitoring, improvement objectives, also with reference to the measures implemented against the spread of the Coronavirus during health emergencies in the workplace and the protection of frail persons in extraordinary working conditions.	GRI 403: Occupational Health and Safety 2018
	Diversity and equal opportunities	Commitment to ensuring equal opportunities for women and protected categories.	GRI 405: Diversity and equal opportunity 2016

⁸Only the topics considered relevant by the organisation and subject matter of reporting are listed.

Scope Legislative Decree 254/16	Material topic	Importance of the topic for Sabaf	Link to GRI Standards
Social	Management of relations with suppliers, supplier assessment and contractual conditions	Sabaf's commitment to defining a relation with the supply chain based on the principles of fairness in negotiations, integrity and contractual fairness. These include supporting the supply chain by joining industry initiatives and observing contract payment terms in times of possible difficulty. Sharing corporate values with suppliers. Sabaf defines minimum criteria for the creation of a lasting relationship with suppliers, based on the principles of social responsibility.	GRI 414: Supplier Social Assessment 2016
	Industrial relations	The relationship between Sabaf and trade union representatives, based on the principles of transparency, mutual fairness and willingness to negotiate agreements aimed at ensuring healthy and safe working conditions.	GRI 402: Labor/Management relations 2016
Transversal	Compliance with the competitive system	Compliance with regulations and behaviour that ensure Sabaf conducts its business in a balanced and regular competitive environment.	GRI 206: Anti-competitive behaviour 2016
	Customer satisfaction and customer support	Ability to respond effectively to customer expectations, at all stages of the relationship (from design to after-sales service).	GRI 416: Customer Health and Safety 2016
	Research and innovation of products and processes also with reference to safety and environmental performance	Identification of new technological and production solutions (also with a special attention to safety and environmental performance) that allow the Group to strengthen its leadership in the industrial sector to which it belongs.	GRI 416: Customer Health and Safety 2016
	Partnership with multinational groups	Sabaf's opening to strategic collaborations with the main players in the sector.	(*)
	Production quality and eco-efficiency	Search for better product or process performance and solutions in terms of environmental impact. Designing new eco-efficient products. Revision of business processes with the introduction of smart working, which can promote a lower environmental impact while maintaining standards of effectiveness and efficiency.	Please refer to topics 2 and 12

(*) With regard to these topics (not directly related to a Material Topic envisaged by the GRI Standards Guidelines), Sabaf indicates in the document the adopted management approach.

Corporate Governance, Risk Management and Compliance

Corporate Governance

Overview

Since its listing on the stock exchange in 1998, the corporate governance model of Sabaf has been based on a strict separation between the shareholding structure and management of the Company and of the Group.

Sabaf is committed to maintaining a system of governance aligned with the recommendations and best practice. The Company has welcomed the new Corporate Governance Code, fully agrees with its innovations and has taken action on its own model to fully implement the Code.

The purpose of this section of the file is to highlight the choices made by Sabaf and the peculiarities of its governance system. Where possible, a comparison with other listed companies is also provided, using the information collected by Assonime in its document "Report on Corporate Governance in Italy: the implementation of the Italian Corporate Governance Code (2021)", published in February 2023 and concerning the Corporate Governance reports for the 2021 financial year of 213 listed Italian companies. The benchmark used below takes into account, where available, a panel of "non-financial" companies only.

An analysis of the characteristics and functioning of the Board of Directors is also provided in comparison with the top 100 Italian listed companies (industrial and financial) and with the main European and non-European countries, based on data published by Spencer Stuart in the analysis "Boards around the world".

Sabaf Group companies are active in the following business segments.

Gas parts

• Sabaf S.p.A., valves and burners
• Sabaf do Brasil, burners
• Sabaf Turkey, valves and burners
• Sabaf China, burners
• A.R.C. s.r.l., professional burners
• Sabaf India, valves and burners
• Sabaf Mexico, burners (start of production scheduled for 2023)

Electronic components

• Okida, electronic control boards, timers, display and power units for ovens, hoods, vacuum cleaners, refrigerators and freezers
• P.G.A. Group, electronic control boards for household appliances: hoods, refrigeration, air quality control and water supply, IoT

Hinges for household appliances

• Faringosi Hinges s.r.l.
• C.M.I. Group
• Sabaf Turkey

Induction components (start of production in 2023)

• Sabaf S.p.A.
• Okida
• P.G.A. Group

The Governance Structure

Sabaf adopted a traditional model of management and control, characterised by the presence of:

• ▪ har h d r ' t g (ordinary and extraordinary) called to pass resolutions pursuant to the la s in force and the Company's Articles of Association;
• Board of Statutory Auditors, in charge of supervising: (i) compliance with the law and Articles of Incorporation and adherence to principles of proper management in the performance of corporate activities; (ii) the adequacy of the Company's organisational structure, internal control and risk management system and administrative/accounting system; (iii) the procedures for effective implementation of the corporate governance rules envisaged in the Corporate Governance Code; (iv) risk management; (v) the regulatory audit of the accounts and the independence of the auditing firm;
• Board of Directors, in charge of company administration and management of Company operations.

This model is supplemented, in accordance with the provisions of the Corporate Governance Code the Company complied with, by:

a) the Committees set up by the Board of Directors within its members, each one with proposal and advisory functions on specific matters and without decision-making powers, such as:

• Control, Risk and Sustainability Committee, that also takes on the functions of the Related Party Committee;
• Remuneration and Nomination Committee that takes on the functions envisaged by the Remuneration Committee and integrates them with those relating to the appointment and composition of the control bodies indicated by the Code;

b) the Internal Audit department in charge of checking the operation and adequacy of the internal control and risk management system.

Finally, the Group's administration and control model is completed by the presence of the Supervisory Body, set up following the adoption of the organisation, management and control model pursuant to Legislative Decree 231/2001, adopted by Sabaf since 2006.

The Governance Structure

Policy on the composition of corporate bodies

On 26 March 2018, Sabaf S.p.A. adopted a Policy on the composition of the Corporate Bodies. The Policy was updated by the Board of Directors on 11 February 2021, in view of the renewal of corporate offices and to implement the provisions of the new Corporate Governance Code.

The Policy sets out the Company's guidelines on the characteristics considered functional to ensuring an optimal composition of the corporate bodies (Board of Directors and Board of Statutory Auditors), with the aim of guiding the names put forward when renewing the Corporate Bodies, so that the benefits that can derive from a balanced composition of the Board and Board of Statutory Auditors inspired by criteria of diversity are taken into consideration. The Policy sets out the characteristics and factors considered necessary for the BoD to be able to carry out its assigned tasks more efficiently, take decisions thanks to the contribution of a number of qualified points of view and examine the issues under discussion from different perspectives, also within the framework of the internal board committees established from time to time.

The Policy sets out the following characteristics for the composition of each of the two bodies:

• Independence
• Training and professional experience
• Gender
• Age and seniority in office
• Numbers

The Policy on the composition of the Corporate Bodies is published on the Group's website and described in the Report on corporate governance and ownership structure.

Board of Directors

The Board of Directors currently in office, appointed by the Shareholders' Meeting on 6 May 2021 for the period 2021-2023, is composed of 9 members9, including:

• 2 executive directors;
• 3 non-executive directors;
• 4 non-executive and independent directors.

⁹ The Curriculum Vitaeof each Member is available on the Group's website.

55% of the members of the Board in office are between 50 and 60 years old; the average age is higher than the average of the Assonime sample (61 vs 57 years old).

In 2022, the Board of Sabaf met on 10 occasions (slightly below the Assonime average), with an average attendance rate of 88%. In general, the attendance of the Sabaf directors at the Board meetings in the last three years is slightly below than that of the Assonime panel.

The meetings were attended by the Board of Statutory Auditors and - regularly - the managers of Sabaf, who were invited to attend and report on specific issues on the agenda.

The comparison was made using data published by Spencer Stuart in the analysis "Board Governance: 2021 International Comparison Chart"10.

Self-assessment of directors

The Board of Directors of the Company, in order to periodically assess the effectiveness of its activities and the contribution made by its individual members, opts, with respect to possible approaches to assessment, for the self-assessment of individual Directors through the distribution, compilation, collection and processing of questionnaires and the subsequent discussion in the Board of Directors of the results obtained, in order to identify any elements for improvement. The Operating Guidelines of Sabaf S.p.A.'s Corporate Governance Manual regulate this process, under which the board's contribution to defining the company's strategy is also assessed.

Consistent with the provisions of the Corporate Governance Code and the Corporate Governance Manual, which envisage that the self-assessment of the Board of Directors is to be carried out at least every three years, the Company's Board of Directors carried out its last self-assessment in 2021 and planned to carry out the next process close to the end of its term of office (approval of the 2023 financial statements).

For further information, please refer to the Report on Corporate Governance and Ownership Structure available on the Group's website under Investors - Corporate Governance.

¹⁰ https://www.spencerstuart.com/research-and-insight/international-comparison-chart#foreign

Board of Statutory Auditors

The Board of Statutory Auditors, appointed by the Shareholders' Meeting on 6 May 2021 for the period 2021 to 2023, is composed of 3 members ¹¹ with an average age of 61 years (higher than the Assonime average of 56.8 years).

The Chairman of the Board of Statutory Auditors is the expression of the minority list.

The Board of Statutory Auditors of Sabaf met on average 9 times in the last three years (10 meetings in 2022), a number of times lower than the average number of meetings of the Assonime sample (13.1 meetings in the threeyear period).

The attendance of members at meetings was 100% in the period 2020 to 2022, higher than that of other listed companies of the research.

In general, the commitment of the Board of Statutory Auditors of Sabaf is achieved not only by carrying out checks and attending the periodic meetings required by law, but also by involving all members in the meetings of the Board of Directors, of the Control, Risk and Sustainability Committee and of the Remuneration and Nomination Committee, in the half-yearly collective meetings with the Control Bodies and individual meetings with the independent auditors.

¹¹ The Curriculum Vitaeof each statutory auditor is available on the Group's website.

Control, Risk and Sustainability Committee

The Control, Risk and Sustainability Committee currently in office, set up within the Board, consists of 3 members.

In line with the choice made by about 67% of the Assonime panel (referring only to CRC), the CRSC of Sabaf is made up exclusively of independent directors.

The Committee was also assigned the functions pertaining to the Related-Party Committee.

Office	Members
Chairman	Nicla Picchi
Member	Daniela Toscani
Member	Carlo Scarpa

The Committee met on average 5.7 times in the last three years (5 meetings in 2022), a number of times lower than the average number of meetings of the Assonime sample (9.0 meetings on average).

In 2022, the Committee, among other things:

• evaluated, together with the Financial Reporting Officer and the auditors, the correct application of the accounting standards;
• analysed the results of the risk assessment conducted at the end of 2022 and the consequent 2023 Audit Plan Proposal;
• analysed the results of the Internal Audit operations carried out during the year;
• made considerations on sustainability issues (sustainability objectives defined in the 2021- 2023 Business Plan, new European standards for sustainability, participation in CDP's Climate Change and Water programmes, other possible projects to be analysed in the medium term).

Remuneration and Nomination Committee

The Remuneration and Nomination Committee, set up within the Board, comprises three nonexecutive members, the majority of them independent (in line with the choice made by 40% of the Assonime panel), with the knowledge and experience in accounting, finance and remuneration policies that is deemed adequate by the Board of Directors.

Office	Members
Chairman	Daniela Toscani
Member	Stefania Triva
Member	Alessandro Potestà

In the last three years, the Committee met slightly fewer times than the Assonime average (5 vs 5.7). In particular, during the last financial year, the Committee met three times.

In 2022, the Committee, among other things:

• analysed final results of the managerial incentive plan (MBO) for the financial year 2021 and prepared the managerial incentive plan for the year 2022, approved by the Board of Directors on 21 March 2023;
• analysed the summary of the long-term incenti e plan or also "LT " for directors and employees of the Company and its subsidiaries through the free allocation of shares ("Stock Grant Plan"), approved by the Board of Directors on 13 May 2021; for further details, refer to the 2022 Report on Remuneration, available on the Company's website at: www.sabafgroup.com, under the section "Investors - Corporate Governance",
• expressed its opinion on the appointment and composition of the Board of Directors of the newly acquired company P.G.A. s.r.l. and its subsidiary PGA2.0 s.r.l.

Governance of sustainability

Sabaf has always believed that social and environmental topics are an integral part of the Group's strategy and, as such, are the responsibility of the Board of Directors.

With reference to the governance of these topics, at the meeting of the Board of Directors on 6 May 2021, it was confirmed that the criteria for implementing Corporate Social Responsibility ("CSR") are the responsibility of the Board itself. At the same meeting, the Board of Directors set up a Board committee, called the Control, Risk and Sustainability Committee, which, with reference to sustainability issues, has the task of:

▪ supporting the Board of Directors in the analysis of issues relevant to the Company and the Group, promoting a policy that integrates sustainability into business processes in order to ensure the creation of sustainable value over time for shareholders and all other stakeholders;

• promoting the dissemination of the culture of sustainability among all stakeholders;
• assessing the environmental, economic and social impacts of business activities;
• expressing opinions on the annual and multi-year sustainability targets to be achieved;
• expressing opinions on the initiatives and programmes promoted by the Company and the Group in terms of corporate social responsibility;

▪ assessing the suitability of periodic information to correctly represent the company's business model, strategies, the impact of its activities and the performance achieved;

▪ examining the contents of periodic non-financial information.

All Sabaf employees, as part of their responsibilities and competences, are required to implement the Group's sustainability strategy every day in the performance of their activities.

Induction programme

In 2022, the Company continued with the induction programme so as to offer the opportunity to members of the Board of Directors and the Board of Statutory Auditors to improve their knowledge of sustainable development.

During the meetings of the Board of Directors on 10 March and 22 September 2022, the Company invited some external consultants to explain to the members of the Board of Directors and the Board of Statutory Auditors the increasing relevance of sustainability topics.

The induction sessions were held during regularly minuted meetings.

Internal Audit and Supervisory Body

Internal Audit

On 25 June 2019, the Board of Directors, upon the proposal of the Director in charge of the Internal Control and Risk Management System, as well as after hearing the Board of Statutory Auditors, entrusted the Group Internal Audit Department for the period from 1 July 2019 to 31 December 2021 to PricewaterhouseCoopers Advisory S.p.A. (PwC) identifying Giuseppe Garzillo, partner of the company, as the Head of the department. On 16 December 2021, the Board of Directors, subject to the favourable opinion of the Control and Risk Committee and after hearing the Board of Statutory Auditors, renewed the appointment of PwC for the three-year period 2022 to 2024 and confirmed Garzillo as Head of Internal Audit.

The Head of Internal Audit reports hierarchically to the Board of Directors, which approves the Work Plan.

Supervisory Body

The Supervisory Body, appointed on 6 May 2021 by the Board of Directors for the three-year period 2021 to 2024, comprises Nicla Picchi, independent director and Vice Chairman of the Company, and Giuseppe Garzillo, Head of Internal Audit.

During 2022, the Supervisory Body of Sabaf met 5 times, asking the Company's management to attend the meetings in order to carry out in-depth analysis on specific aspects.

Conflicts of interest

The Board of Directors adopted a Guideline setting out the procedures for the approval and implementation of transactions carried out by the Company and its subsidiaries in which a director has an interest, in order to:

• regulate the operating procedures suitable for facilitating the identification and appropriate management of situations in which a director has an interest, potential or otherwise, on its own behalf or on behalf of third parties, which is not only conflicting but also competing with the Company's interest;
• ensure that these transactions are carried out in a transparent manner and in compliance with the criteria of correctness in form and in substance.

In the presence of a director's interest:

• if the transaction is subject to the approval of the Board of Directors, the Director with such an interest must immediately and fully inform the Board prior to the commencement of the Board's discussion, specifying the nature, terms, origin and extent of the underlying interest (even if potential or on behalf of third parties) and must leave the Board meeting at the time of the discussion and any subsequent resolution;
• if the transaction falls within the powers of the Chief Executive Officer who has an interest in the transaction, the latter shall refrain from carrying it out and submit it to the Sabaf Board for approval.

In both cases, the resolution of the Board of Directors must contain an adequate justification of the reasons and the benefits of the transaction for the Company.

If the existence of the director's interest, potential or otherwise, constitutes a Related Party transaction, the provisions of the Procedure regulating related-party transactions, published on the website www.sabafgroup.com, apply.

Information flows

The administration and control model of Sabaf operates through a network of periodic and systematic information flows between the various corporate bodies.

Each body, according to the timing and methods defined by the Articles of Association, the Governance Model and other internal documents, reports to the functionally superior body on the activities carried out in the reference period and those planned for the following period, any observations noted and suggested actions.

Risk Management

In the course of its business, Sabaf defines its strategic and operational objectives and identifies, assesses and manages risks that could prevent the achievement of these objectives.

In recent years, Sabaf has gradually moved closer to the concepts of risk assessment and risk management, developing a structured process of periodic identification, assessment and management of risks, defined and formalised in a Guideline of the Corporate Governance Manual.

The risk management process includes all the material topics identified by the Group as part of the materiality analysis carried out in accordance with the provisions of the GRI Standards.

The Guidelines define the roles and responsibilities of the risk assessment and risk management processes, indicating the subjects to be involved, the frequency of the process and the assessment scales.

The most recent risk assessment activity, coordinated by the Internal Audit department and aimed at updating the risk assessment, was carried out in October and November 2022.

The identification of risks was carried out according to a structured approach that involved the following steps:

• conducting specific interviews with the front lines and the Chief Executive Officer risk owner/process owner;
• sharing of risk assessment documents drawn up after meetings with risk owner/process owner;
• identification of the universe of risks considered relevant for the Group;
• identification of top risks;
• prior examination of the risk assessment by the Control and Risk Committee;
• approval of the Board of Directors.

All risks were investigated in terms of initial impact and probability, inherent risk and, taking into account existing mitigation measures, residual risk. The result of this analysis was represented within specific "heat maps" representing the risks in terms of "residual risk" and "current level of control".

	Severity rate
Severity drivers	Lower (1)	Moderate (2)	Significant (3)	Very significant (4)
Economic (EBITDA)	< €0.5 million	between €1.5 and €2 million	between €2 and €5 million	> €5 million
HSE	Limited or negligible temporary impact on health and safety and/or the environment (minor environmental damage)	Moderate impacts/damage on health and safety and/or the environment (recoverable environmental damage)	Serious impacts/damage on health and safety and/or the environment (critical environmental damage)	Very serious impacts/damage on health and safety and/or the environment (catastrophic pollution)
Reputational	Insignificant or small impacts on the level of trust of stakeholders	Moderate impacts on the level of trust of stakeholders but requiring targeted action by the company	Significant impacts on the level of trust of stakeholders requiring action by the company	Trust of key stakeholders significantly compromised with need for immediate action
Operational	No impact on business processes and/or customer relations	Low impacts on: i) efficiency/continuity of one or more non-critical business processes and/or ii) relations with customers other than "key accounts"	Significant impacts on: i) efficiency/continuity of one or more key business processes and/or ii) relations with key customers (key account)	Critical impacts on: i) efficiency/continuity of business and/or ii) relations with key customers (key account)

	Frequency rate
Frequency drivers	Rare (1)	Unlikely (2)	Possible (3)	Likely (4)
Probability of occurrence in the following three years	< 5%	from 5% to 25%	from 25% to 50%	> 50%
Frequency of occurrence	Event never occurred in the past and considered unlikely	Event occurred in the past and considered not very likely	Event occurred in the past and considered likely	Event occurred (several times) in the past/recently

	Level of control
Level of control	Optimal	Adequate (with possible room for improvement)	To be strengthened	Lacking/Non-existent
Description	In line with best practices and best in class	There are policies, procedures and/or operating instructions. However, there is still room for improvement.	Processes are not structured and are based on the skills of the individuals involved	Lack of controls, policies, procedures and organisational structures to manage and address risks/opportunities
% of reduction of inherent risk	75-90%	50-75%	30-50%	0-30%

The risks relating to the topics referred to in Legislative Decree 254/2016 are set out in this Disclosure, under the different chapters. For further details on risk factors, please also refer to the Report on Operations.

Compliance

Integrated Compliance

Internal control system

The risk management activity carried out by Sabaf also takes into account compliance requirements in order to achieve the company's objectives.

The internal control system is based on the following elements:

• organisation of the internal control and risk management system;
• procedures and mechanisms for the concrete implementation of the control principles;
• continuous verification and monitoring processes carried out at various levels of the organisation, both within the company processes and through independent structures.

In particular, Sabaf prepares an integrated and risk-based Audit Plan, broken down according to specific control objectives (operational risks, compliance risks with Law 262/2005, Legislative Decree 231/2001, GDPS, security of company information systems, etc.).

The execution of the interventions is assigned, in outsourcing, to a single structure, the Internal Audit, in turn responsible for reporting the results of the activities carried out to the competent control bodies.

All this translates into an integrated compliance culture and tools.

Integrated compliance and the Corporate Governance Manual

Following compliance with the Corporate Governance Code for listed companies and in order to internalise the good governance practices sponsored in this document in its processes, Sabaf adopted a ¹² Corporate Governance Manual that regulates principles, rules and operating procedures.

This Manual, adopted by Board resolution of 19 December 2006, has been updated several times over the years in order to reflect new laws and regulations in Corporate Governance, as well as best practices adopted by the Company over time.

The Manual includes some operating guidelines, also approved by the Board of Directors, prepared for the purpose of the correct carrying-out of the activities pertaining to Sabaf's management and control bodies.

Operating guidelines

¹² The latest version of the document in accordance with the provisions of the Corporate Governance Code, approved by the Board of Directors on 16 December 2021, is available on the Company website, at www.sabafgroup.com under the Investors - Corporate Governance section.

Integrated compliance and Legislative Decree 231/2001

In 2006, Sabaf S.p.A. adopted the Organisation, Management and Control Model, as suggested by Legislative Decree 231/200113, aimed at preventing the commission of specific types of offences by employees and/or employees in the interest or for the benefit of the Company.

In the following years, the Company, under the supervision of the Supervisory Body, promptly responded to the need to adapt the Model and the control structure to the regulatory changes that had occurred from time to time.

The Company entrusts the Supervisory Body with the task of assessing the adequacy of the Model itself, i.e. its real capacity to prevent offences as well as to supervise the operation and correct observance of the adopted protocols.

In 2008, the subsidiary Faringosi Hinges s.r.l. also adopted Model 231 and appointed the SB, ensuring, in line with the parent company, its proper updating and effective operation.

In 2019 and in 2021, C.G.D. and C.M.I. respectively adopted their own Model 231, limited to the management of issues related to occupational health and safety.

Activities carried out in 2022

In 2022, the Body:

• verified the effectiveness of the Model, both through checks carried out by Internal Audit and through conversations with personnel involved in sensitive activities;
• carried out the updating and collection of flows in AFC (Administration, Finance and Control);
• held periodic consultation meetings with Company management in order to analyse certain issues relating to the management of personnel and related information flows, the environment and occupational health and safety matters in the workplace, as well as issues subject to audits during the year.

¹³ The latest version of the document, approved by the Board of Directors on 13 May 2021, is available on the Company website, at www.sabafgroup.com under the Investors - Corporate Governance section.

Integrated compliance and Anti-corruption

The Sabaf Group, aware of the negative effects of corrupt practices in business management, is committed to preventing and combating the occurrence of offences in the carrying-out of its activities.

There were no cases of corruption for the three-year period from 2020 to 2022.

Integrated Compliance and Law 262/2005

Sabaf considers the Internal Control and Risk Management System for financial information an integral part of its risk management system.

In this regard, Sabaf has integrated the activities relating to the management of the internal control system on financial reporting into its Audit and Compliance process since 2008.

The Group defined its own Accounting Control Model, approved for the first time by the Board of Directors on 12 February 2008, subsequently revised and updated.

Elements characterising the accounting control model

Compliance with laws and regulations

There were no significant cases of non-compliance with laws and regulations in 2022.

Sabaf and employees

Risks

The management of relations with the employees of the Sabaf Group cannot disregard the identification, assessment and management of potential risks. The relevant risk categories in this area are set out below.

Strategic risks, which could affect the achievement of the Group's development objectives, such as the lack of adequate skills, the loss of key resources or the difficulty of replacing them.

Legal and compliance risks, related to contractual liabilities, compliance with the regulations applicable to the Group and the commitments set out in the Charter of Values, such as the correct application of labour contracts in force in the various countries in which the Group operates, health and safety regulations, compliance with the criteria of fairness and impartiality in the management of human resources.

Operational risks, which may lead to malfunctions in the carrying-out of current activities, such as high turnover or conflicting industrial relations.

The Sabaf Group implements structured policies and defines centrally coordinated guidelines in the following areas:

• selection and recruitment of personnel;
• training;
• health and safety;
• internal communication;
• remuneration and incentive systems;
• company welfare;
• industrial relations.

To this end, the group's organisational structure includes the positions of Global Group HR Director and Group HSE Manager.

The combination of these systems and policies enables the Group to have an adequate control of the risks related to the management of relations with employees.

The following paragraphs outline, for each of these topics, the characteristics of the "Sabaf model" and the performance achieved.

Personnel management policy

The commitment of the Sabaf Group to social responsibility and the protection of workers' health and safety are strategic elements for Sabaf and the compliance with labour standards that guarantee respect for human rights, health and maximum safety is an essential paradigm.

The Group is committed to pursuing the following objectives, which are also set out in the Charter of Values:

• promote respect for the fundamental human rights of workers in all countries where the Group operates, as identified in the principles established in the Global Compact and in the Code of Conduct of APPLiA Europe (European association of household appliances), relating to child labour, forced and compulsory labour, occupational health and safety, freedom of association and right to collective bargaining, discrimination, disciplinary procedures, working hours and remuneration criteria;
• carry out their activities by creating a group of motivated people who can operate in a work environment that encourages and rewards fairness and respect for others;
• produce profits without ever losing sight of the respect for the rights of its workers;
• identify and analyse potential hazards and risks in business processes, in order to make workplaces safer and more comfortable;
• avoid any form of discrimination and favouritism during the recruitment phase of personnel, whose selection must be made on the basis of the applicants' profiles meeting the company's requirements;
• value and respect diversity, avoiding any form of discrimination in career advancement on the grounds of gender, sexual orientation, age, nationality, state of health, political opinions, race and religious beliefs at all stages of the employment relationship;
• adopt criteria of merit and competence in employment relationships, based also on the achievement of collective and personal objectives;
• avoid all forms of harassment of workers;
• enhance the contribution of human capital in decision-making processes, encouraging continuous learning, professional growth and knowledge sharing;
• provide clear and transparent information on the tasks to be carried out and the position held, the performance of the Group and market developments;
• establish a responsible and constructive dialogue with trade unions, fostering a climate of mutual trust in compliance with the principles of fairness and transparency, respecting their roles.

During 2022, no episodes of discrimination were observed, no transactions/activities with a high risk of recourse to child labour and forced or compulsory labour or with a high risk of violation of the right of workers to exercise their freedom of association and collective bargaining were identified.

The people of the Sabaf Group

The Sabaf Group had 1,238 employees at 31 December 2022 compared to 1,278 at the end of 2021. The decrease in the number of employees compared to the previous year was 40 (+3.13%).

Breakdown of employees by gender and		31/12/2022			31/12/2021		31/12/2020
by geographical area (no.)	M	W	Tot.	M	W	Tot.	M	W	Tot.
Sabaf S.p.A. (Ospitaletto, Brescia - Italy)	298	163	461	309	164	473	312	168	480
Faringosi Hinges s.r.l. (Bareggio, Milan - Italy)	20	23	43	22	23	45	23	23	46
A.R.C. s.r.l. (Campodarsego, Padua - Italy)	14	5	19	16	5	21	15	5	20
C.M.I. s.r.l. (Valsamoggia, Bologna – Italy)	30	56	86	31	53	84	31	51	82
C.G.D. s.r.l. (Valsamoggia, Bologna – Italy)	40	3	43	41	3	44	35	3	38
Total Italy	402	250	652	419	248	667	416	250	666
C.M.I. s.r.l. - Polish branch (Myszków, Poland)	17	30	47	19	26	45	19	25	44
Total Poland	17	30	47	19	26	45	19	25	44
Sabaf do Brasil (Jundiaí, São Paulo - Brazil)	60	15	75	94	18	112	74	13	87
Total Brazil	60	15	75	94	18	112	74	13	87
Sabaf Turkey (Manisa - Turkey)	150	104	254	144	94	238	129	69	198
Okida (Esenyurt/Istanbul – Turkey)	103	99	202	97	112	209	80	85	165
Total Turkey	253	203	456	241	206	447	209	154	363
Sabaf China (Kunshan, Jiangsu Province – China)	5	3	8	5	2	7	6	2	8
Total China	5	3	8	5	2	7	6	2	8
Group total	737	501	1,238	778	500	1,278	724	444	1,168

As regards the types of contract adopted, at 31 December 2022, there are 1,232 employees with permanent contracts equal to 99.5% of the total (99.2% at the end of 2021) and 6 employees with a fixed-term contract, equal to 0.5% of the total (0.8% at the end of 2021).

Group

		31/12/2022			31/12/2021			31/12/2020
(no.)	M	W	Tot.	M	W	Tot.	M	W	Tot.
Permanent	733	499	1,232	770	498	1,268	711	432	1,143
Fixed term	4	2	6	8	2	10	13	12	25
Non
guaranteed	0	0	0	0	0	0	0	0	0
hours
Group total	737	501	1,238	778	500	1,278	724	444	1,168

		31/12/2022			31/12/2021			31/12/2020
(no.)	M	W	Tot.	M	W	Tot.	M	W	Tot.
Permanent	399	249	648	412	246	658	406	248	654
Fixed term Non	3	1	4	7	2	9	10	2	12
guaranteed hours	0	0	0	0	0	0	0	0	0
Total	402	250	652	419	248	667	416	250	666

Italy (Sabaf S.p.A., Faringosi, A.R.C., C.M.I., C.G.D.)

Poland (C.M.I. – Polish branch)

		31/12/2022			31/12/2021			31/12/2020
(no.)	M	W	Tot.	M	W	Tot.	M	W	Tot.
Permanent	17	30	47	19	26	45	19	25	44
Fixed term	0	0	0	0	0	0	0	0	0
Non
guaranteed hours	0	0	0	0	0	0	0	0	0
Total	17	30	47	19	26	45	19	25	44

Brazil (Sabaf do Brasil)

		31/12/2022			31/12/2021			31/12/2020
(no.)	M	W	Tot.	M	W	Tot.	M	W	Tot.
Permanent	60	15	75	94	18	112	74	13	87
Fixed term	0	0	0	0	0	0	0	0	0
Non
guaranteed	0	0	0	0	0	0	0	0	0
hours
Total	60	15	75	94	18	112	74	13	87

Turkey (Sabaf Turkey and Okida)

		31/12/2022			31/12/2021			31/12/2020
(no.)	M	W	Tot.	M	W	Tot.	M	W	Tot.
Permanent	253	203	456	241	206	447	208	144	352
Fixed term Non	0	0	0	0	0	0	1	10	11
guaranteed hours	0	0	0	0	0	0	0	0	0
Total	253	203	456	241	206	447	209	154	363

China (Sabaf China)

		31/12/2022			31/12/2021			31/12/2020
(no.)	M	W	Tot.	M	W	Tot.	M	W	Tot.
Permanent	4	2	6	4	2	6	4	2	6
Fixed term Non	1	1	2	1	0	1	2	0	2
guaranteed hours	0	0	0	0	0	0	0	0	0
Total	5	3	8	5	2	7	6	2	8

Non-employee personnel (agency workers and trainees)

(no.)	31/12/2022	31/12/2021	31/12/2020
Agency workers	115	198	155
Trainees	3	11	8

In 2022, the Group also employed 772 people who carried out contract work at the premises of the Group.

Breakdown of personnel by age

(%)	31/12/2022	31/12/2021	31/12/2020
< 30 years old	19.2	20.6	18.9
31 – 40 years old	34.7	35.4	34.5
41 – 50 years old	29.9	27.8	31.6
over 50 years old	16.2	16.2	15.0
Total	100.0	100.0	100.0

The low average age of Group employees (40.3 years old) confirms the strategy of hiring young workers, giving priority to training and internal growth rather than acquiring skills from outside. The age of the youngest employees in the Group is 19 years old for Italy, 23 years old for Poland, 20 years old for Turkey, 17 years old for Brazil and 33 years old for China.

Breakdown of the personnel by length of service

(%)	31/12/2022	31/12/2021	31/12/2020
< 5 years	46.9	48.4	44.5
6 – 10 years	10.4	9.9	9.0
11 – 20 years	25.9	27.9	31.9
over 20 years	16.8	13.8	14.6
Total	100.0	100.0	100.0

Sabaf is aware of the fundamental importance of having a stable and qualified workforce that is a key factor in maintaining its competitive advantage.

Recruitment policy

In order to attract the best resources, the recruitment policy aims to ensure equal opportunities for all candidates, avoiding any kind of discrimination. The selection procedure requires, inter alia:

• the selection process to be carried out in at least two stages with two different representatives;
• that at least two applicants be assessed for each position.

The assessment of the applicants is based on their skills, training, previous experience, expectations and potential, tailoring them to the specific needs of the company.

Breakdown by qualification

(%)	31/12/2022	31/12/2021	31/12/2020
Degree	16.7	16.0	15.4
High school leaving diploma	48.4	48.4	46.2
Middle school leaving certificate	32.2	33.1	36.5
Elementary school leaving certificate	2.7	2.5	1.9
Total	100.0	100.0	100.0

Change in personnel in the three-year period by age and gender

Hires (H) and turnover (T)

(no.)		2022		2021			2020
		H	T	H	T	H	T
	< 30 years old	35	29	37	19	52	19
	31-40 years old	40	36	57	21	37	7
Women	41-50 years old	16	19	13	13	20	10
	> 50 years old	1	8	5	3	0	7
Total women		92	92	112	56	109	43
	< 30 years old	83	78	131	88	72	27
	31-40 years old	47	73	66	54	50	32
Men	41-50 years old	14	23	21	16	21	8
	> 50 years old	5	15	6	12	7	16
Total men		149	189	224	170	150	83
Total		241	281	336	226	259	126

Rates of employee hire (H) and turnover (T) by geographical area, age group and gender

Group

(%)		2022			2021		2020
		H	T	H	T	H	T
	< 30 years old	6.99	5.79	7.40	3.80	11.71	4.28
	31-40 years old	7.98	7.19	11.40	4.20	8.33	1.58
Women	41-50 years old	3.19	3.79	2.60	2.60	4.50	2.25
	> 50 years old	0.20	1.60	1.00	0.60	0.00	1.58
Total women		18.36	18.37	22.40	11.20	24.54	9.69
	< 30 years old	11.26	10.58	16.84	11.31	9.94	3.73
	31-40 years old	6.38	9.91	8.48	6.94	6.91	4.42
Men	41-50 years old	1.90	3.12	2.70	2.06	2.90	1.10
	> 50 years old	0.68	2.04	0.77	1.54	0.97	2.21
Total men		20.22	25.65	28.79	21.85	20.72	11.46
Total		19.47	22.70	26.29	17.68	22.17	10.79

Italy (Sabaf S.p.A., Faringosi, A.R.C., C.M.I., C.G.D.)

(%)		2022		2021		2020
		H	T	H	T	H	T
	< 30 years old	1.60	0.80	1.21	0.00	0.00	0.40
	31-40 years old	1.60	1.20	2.02	1.21	1.60	0.00
Women	41-50 years old	1.20	0.00	0.40	2.42	1.20	0.80
	> 50 years old	0.00	1.60	0.40	1.21	0.00	2.40
Total women		4.40	3.60	4.03	4.84	2.80	3.60
	< 30 years old	2.49	2.49	3.34	0.95	0.48	0.00
	31-40 years old	2.24	3.23	2.15	1.91	0.96	1.68
Men	41-50 years old	1.00	1.49	1.19	1.43	0.96	0.48
	> 50 years old	0.75	3.48	0.48	2.15	0.96	3.13
Total men		6.48	10.69	7.16	6.44	3.36	5.29
Total		5.67	7.98	6.00	5.85	3.15	4.65

Poland (C.M.I. – Polish branch)

(%)		2022		2021		2020
		H	T	H	T	H	T
	< 30 years old	3.33	0.00	0.00	0.00	0.00	4.00
	31-40 years old	6.67	3.33	3.85	3.85	0.00	0.00
Women	41-50 years old	10.00	3.33	3.85	3.85	0.00	8.00
	> 50 years old	3.33	3.33	3.85	0.00	0.00	4.00
Total women		23.33	9.99	11.55	7.70	0.00	16.00
	< 30 years old	0.00	11.76	10.53	10.53	10.53	5.26
	31-40 years old	5.88	5.88	0.00	5.26	0.00	0.00
Men	41-50 years old	0.00	0.00	5.26	0.00	0.00	0.00
	> 50 years old	0.00	0.00	0.00	0.00	0.00	0.00
Total men		5.88	17.64	15.79	15.79	10.53	5.26
Total		17.02	12.77	13.33	11.11	4.55	11.36

Brazil (Sabaf do Brasil)

(%)		2022		2021		2020
		H	T	H	T	H	T
	< 30 years old	6.67	6.67	5.56	0.00	0.00	0.00
	31-40 years old	0.00	20.00	27.78	11.11	15.38	15.38
Women	41-50 years old	0.00	6.67	0.00	0.00	7.69	7.69
	> 50 years old	0.00	0.00	5.56	0.00	0.00	0.00
Total women		6.67	33.34	38.90	11.11	23.07	23.07
	< 30 years old	6.67	31.67	38.30	26.60	14.86	17.57
	31-40 years old	0.00	26.67	15.96	10.64	14.86	8.11
Men	41-50 years old	3.33	6.67	6.38	2.13	2.70	2.70
	> 50 years old	1.67	1.67	1.06	1.06	2.70	0.00
Total men		11.67	66.68	61.70	40.43	35.12	28.38
Total		10.67	60.00	58.04	35.71	33.33	27.59

Turkey (Sabaf Turkey and Okida)

(%)		2022		2021		2020
		H	T	H	T	H	T
	< 30 years old	14.29	12.81	16.02	9.22	33.77	11.04
	31-40 years old	16.26	14.29	22.33	7.28	20.13	3.25
Women	41-50 years old	4.93	8.37	5.34	2.91	10.39	3.25
	> 50 years old	0.00	1.48	0.97	0.00	0.00	0.00
Total women		35.48	36.95	44.66	19.41	64.29	17.54
	< 30 years old	27.27	18.58	32.78	23.65	27.27	6.22
	31-40 years old	14.23	16.60	17.43	14.11	16.75	9.09
Men	41-50 years old	3.16	5.14	3.73	3.32	7.18	1.91
	> 50 years old	0.40	0.00	1.24	0.83	0.48	1.44
Total men		45.06	40.32	55.18	41.91	51.68	18.66
Total		40.79	38.82	50.34	31.54	57.02	18.18

China (Sabaf China)

(%)		2022		2021		2020
		H	T	H	T	H	T
	< 30 years old	0.00	0.00	0.00	0.00	0.00	0.00
Wome	31-40 years old	33.33	0.00	0.00	0.00	0.00	0.00
n	41-50 years old	0.00	0.00	0.00	0.00	0.00	0.00
	> 50 years old	0.00	0.00	0.00	0.00	0.00	0.00
Total women		33.33	0.00	0.00	0.00	0.00	0.00
	< 30 years old	0.00	0.00	0.00	0.00	0.00	0.00
Men	31-40 years old	20.00	20.00	0.00	20.00	0.00	0.00
	41-50 years old	0.00	0.00	0.00	0.00	0.00	0.00
	> 50 years old	0.00	0.00	0.00	0.00	0.00	0.00
Total men		20.00	20.00	0.00	20.00	0.00	0.00
Total		25.00	12.50	0.00	14.29	0.00	0.00

Personnel training

Within the Sabaf Group, the professional growth of employees is supported by continuous training.

The Group Human Resources Department, having consulted the relevant heads and gathered the training requirements, prepares an annual training plan on the basis of which the specific courses to be carried out are planned.

	2022		2021			2020
(hours)	M	W	Tot.	M	W	Tot.	M	W	Tot.
Training for new employees, apprentices, training contracts	3,947	735	4,682	2,112	463	2,575	1,615	546	2,161
Technical training and information systems	2,109	583	2,692	3,671	1,040	4,711	2,393	823	3,216
Quality, safety, environment, energy and social responsibility	7,930	4,794	12,724	6,519	2,486	9,005	3,963	1,095	5,058
Administration and organisation	724	288	1,012	752	412	1,164	434	106	540
Foreign languages	1,746	931	2,677	1,447	959	2,406	470	268	738
Other (e.g. lean philosophy/production/office)	2,872	1,975	4,847	1,529	889	2,418	675	267	942
Total hours of training received	19,328	9,306	28,634	16,030	6,249	22,279	9,550	3,105	12,655
Hours of training provided by internal trainers14	7,628	789	8,417	1,677	273	1,950	4,306	946	5,252
Total	26,956	10,095	37,051	17,707	6,522	24,229	13,856	4,051	17,907

In 2022, 28,634 hours of training were provided to employees (22,279 in 2021). In addition to this, 6,375 hours of training were received by agency workers (7,859 in 2021).

		2022			2021			2020
(hours)	M	W	Tot.	M	W	Tot.	M	W	Tot.
Blue Collars	22.7	15.6	19.6	18.2	7.6	13.8	11.6	4.4	8.7
White collars and Middle Managers	36.7	31.0	34.8	29.2	34.8	31.0	16.9	18.2	17.3
Managers	14.3	4.1	12.9	11.6	11.1	11.6	24.7	4.0	22.6
Total employees	26.2	18.6	23.1	20.6	12.5	17.4	13.2	7.0	10.8
Agency workers	61.9	38.6	55.4	44.4	32.5	39.7

Average hours of training per capita received by category

Total personnel 29.8 19.8 25.9 23.8 15.2 20.4

The difference in training hours provided by gender is related to the tasks carried out.

In 2022, the total cost incurred for training activities of Group personnel was approximately €800,000 (approximately €540,000 in 2021). In addition, there are training costs for agency workers, which in 2022 were around €190,000 (around €178,000 in 2021).

¹⁴ Including training given to agency workers.

Internal Communication

With the aim of developing a dialogue and continuous involvement between the company and its employees, Sabaf organises meetings and sharing sessions in which the results of projects to improve quality, efficiency and productivity are presented.

The HR representatives provide assistance to all Group employees on matters relating to the employment relationship.

The focus on internal communication uses, among other things, advanced tools that can reach all employees, such as a dedicated portal and electronic bulletin boards.

Systematic meetings in the various departments promote communication and involvement of personnel.

Diversity and equal opportunities

Sabaf is constantly committed to ensuring equal opportunities for women employees, who at the end of 2022 represent 40.5% of the workforce (39.1% in 2021).

Percentage distribution of employment by gender

	31/12/2022		31/12/2021		31/12/2020
	no.	%	no.	%	no.	%
Men	737	59.5	778	60.9	724	62.0
Women	501	40.5	500	39.1	444	38.0
Total	1,238	100.0	1,278	100.0	1,168	100.0

Percentage distribution of employment by contract, gender and geographical area

The Group, in accordance with the organisational and production requirements, cares to the family requirements of its employees. To date, most of the demands for reduced working time made by workers have been met.

Group
		31/12/2022		31/12/2021			31/12/2020
		no.	%	no.	%	no.	%
	M	733	59.2	776	60.7	722	61.8
Full-time	W	444	35.9	446	34.9	387	33.1
	Tot.	1,177	95.1	1,222	95.6	1,109	94.9
	M	4	0.3	2	0.2	2	0.2
Part-time	W	57	4.6	54	4.2	57	4.9
	Tot.	61	4.9	56	4.4	59	5.1
Total		1,238	100.0	1,278	100.0	1,168	100.0

Italy (Sabaf S.p.A., Faringosi, A.R.C., C.M.I., C.G.D.)

(no.)		31/12/2022	31/12/2021	31/12/2020
Full-time	M	398	417	414
	W	193	194	193
	Tot.	591	611	607
	M	4	2	2
Part-time	W	57	54	57
	Tot.	61	56	59
Total		652	667	666

Poland (C.M.I. - Polish branch)

(no.)		31/12/2022	31/12/2021	31/12/2020
Full-time	M	17	19	19
	W	30	26	25
	Tot.	47	45	44
Part-time	M	0	0	0
	W	0	0	0
	Tot.	0	0	0
Total		47	45	44

Brazil (Sabaf do Brasil)

(no.)		31/12/2022	31/12/2021	31/12/2020
Full-time	M	60	94	74
	W	15	18	13
	Tot.	75	112	87
Part-time	M	0	0	0
	W	0	0	0
	Tot.	0	0	0
Total		75	112	87

Turkey (Sabaf Turkey and Okida)

(no.)		31/12/2022	31/12/2021	31/12/2020
	M	253	241	209
Full-time	W	203	206	154
	Tot.	456	447	363
	M	0	0	0
Part-time	W	0	0	0
	Tot.	0	0	0
Total		456	447	363

China (Sabaf China)

(no.)		31/12/2022	31/12/2021	31/12/2020
	M	5	5	6
Full-time	W	3	2	2
	Tot.	8	7	8
	M	0	0	0
Part-time	W	0	0	0
	Tot.	0	0	0
Total		8	7	8

Percentage distribution of employment by category, age and gender

		31/12/2022		31/12/2021			31/12/2020
(%)		M	W	Tot.	M	W	Tot.	M	W	Tot.
Managers	< 30 years old	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
	from 30 to 50 years old	0.4	0.1	0.5	0.4	0.0	0.4	0.7	0.0	0.7
	over 50 years old	1.1	0.2	1.3	1.0	0.2	1.2	0.8	0.2	1.0
	Total	1.5	0.3	1.8	1.4	0.2	1.6	1.5	0.2	1.7
White	< 30 years old	3.0	1.6	4.6	2.4	1.2	3.7	2.1	1.3	3.4
collars and	from 30 to 50 years old	10.1	5.9	16.0	9.5	4.8	14.3	10.1	4.9	15.0
Middle	over 50 years old	2.3	1.0	3.3	2.4	1.0	3.3	2.3	0.9	3.2
Managers	Total	15.4	8.5	23.9	14.3	7.0	21.3	14.5	7.1	21.6
	< 30 years old	8.0	4.0	12.0	11.1	5.4	16.5	9.8	4.5	14.3
	from 30 to 50 years old	27.6	23.0	50.6	27.0	22.0	49.0	29.4	22.3	51.6
Blue Collars	over 50 years old	7.0	4.7	11.7	7.1	4.5	11.6	6.8	3.9	10.7
	Total	42.6	31.7	74.3	45.2	31.9	77.1	46.0	30.7	76.7
Total	< 30 years old	11.0	5.6	16.6	13.5	6.6	20.2	11.9	5.8	17.7
	from 30 to 50 years old	38.1	29.0	67.1	36.9	26.8	63.7	40.2	27.2	67.4
	over 50 years old	10.4	5.9	16.3	10.5	5.7	16.1	9.9	5.0	14.9
	Total	59.5	40.5	100.0	60.9	39.1	100	62.0	38.0	100.0

The managers of all Group offices come from a geographical area close to the registered offices in which they operate, with the exception of the general manager at the premises of Sabaf China, who has been living in China for many years.

Remuneration, incentive and enhancement systems

All Group companies apply local national contracts, supplemented with any best deals. It is estimated that more than 60% of the Group's employees were covered by collective agreements in 2021 and 2022.¹⁵

The employees of Sabaf S.p.A. are classified according to the provisions of the National Collective Labour Contract for the metal and engineering industry, supplemented by second-level negotiations, which include:

• contractual minimum;
• company welfare from National Collective Labour Agreement;
• productivity or personal bonuses per level;
• production bonus per level;
• fixed performance bonus (part of which includes part of the previous variable bonus) for all levels;
• variable performance bonus that is the same for all levels.

As from 2019, Sabaf S.p.A. and Faringosi Hinges have launched a new corporate welfare platform (Edenred), which has been very well received by employees. The platform has also been extended to C.M.I. and C.G.D. as from 2020.

The Group believes that a fundamental element of the valuation system is represented by the training opportunities provided.

Remuneration of directors and executives with strategic responsibilities

The Remuneration Policy for directors and executives with strategic responsibilities, approved by the Shareholders' Meeting of 6 May 202 , is a aila le on the e site www.sabafgroup.com. The Remuneration Policy envisages the structuring of the remuneration of executive directors and executives with strategic responsibilities in such a way that it is significantly made up of variable remuneration, including financial instruments: (i) whose payment is conditional on the achievement of common objectives (in particular, Group EBITDA and EBIT) and individual objectives, not only of an economic-financial nature, but also of a technical-productive and/or socio-environmental nature; (ii) subject, in part, to adequate retention and deferral mechanisms. The objectives to which the disbursement of significant portions of variable remuneration is conditioned are structured in such a way as to prevent them from being achieved through shortterm management choices that would potentially undermine the sustainability and/or the Company's ability to generate profit in the long term. In this context, the policy aims to encourage the achievement of the strategic objectives set out in the business plans in force and to create longterm value for stakeholders, also in line with the principles of corporate social responsibility.

The Report on Remuneration describes each of the items that make up the remuneration, showing their consistency with the Policy, and details of the remuneration paid.

Long-term incentive (LTI)

A long-term incentive plan (stock grant plan) was introduced in 2018, which envisages the free allocation of shares to parties (directors and employees) who hold or will hold key positions for Sabaf S.p.A. and its subsidiaries.

In 2021, the shareholders' meeting approved a new long-term incentive plan, linked to the economic-financial and sustainability objectives set out in the 2021-2023 Business Plan. The socioenvironmental sustainability objectives were defined with reference to the issues that the materiality analysis has highlighted as being of greatest relevance to Sabaf and its stakeholders:

¹⁵ For Italy, the percentage is 100%.

Material topic	KPI	Impact on the LTI Plan
Emissions into the atmosphere	CO2emissions scope 1 + scope 2 market-based/Revenue	15%
Development of resources and skills	Hours of training per capita (by collaborator)	5%
Health and safety of personnel	Summary indicator of injuries (injury rate x injury severity index x 100)	5%

KPI	Unit of measure ment	2020 final balance	2021 objective	2021 final balance	2022 objective	2022 final balance	2023 objective
CO2 emissions	tCO2eq/ millions of Euro	132	126	111	120	91	114
Hours of training	h	13.9	11.0	20.4	13	25.9	15
Summary indicator of injuries	-	177	140	327	120	106	100

The 2022 Report on Remuneration, available on the Company's website www.sabafgroup.com, under the section "Investors - Corporate Governance", sets out further details of the LTI Plan.

Management By Objectives (MBO)

A Group-wide incentive system linked to collective and individual objectives (MBOs) is in place, involving managers and other employees with managerial responsibilities. In 2022, this incentive system involved 73 employees of the Group (64 men and 9 women). The operating mechanisms of the LTI system are described in the Report on Remuneration.

Quality of Production Flow (QPF) Bonus

With the aim of rewarding the contribution of personnel to the achievement of company objectives, as from 2016 Sabaf S.p.A. introduced an incentive system related to quality objectives (reduction of waste and rework), production efficiency and precision in carrying out projects.

In 2022, improvement targets in these areas were set for 115 people involved in relevant business processes.

(no.)	White Collars	Blue Collars	Total
Men	41	63	104
Women	5	6	11
Total	46	69	115

In addition to being a tool for steering towards challenging objectives (601 objectives were assigned, achieved or exceeded in 63% of cases), the QPF award stimulated teamwork and favoured the sharing of short- and medium-long term development plans at all company levels.

Variable Performance Bonus (VPB)

The supplementary company contract of Sabaf S.p.A. envisages a variable performance bonus for all employees, also based on quality and productivity indicators, which also in 2022 could be enjoyed in the form of company welfare. In consideration of the results achieved, the VPB is 90.94% above target in 2022.

C.M.I. has a VPB agreement in place for the three-year period 2020 to 2022, with the possibility of converting all or part of the bonus achieved into company welfare. The VPB is 25% above target in 2022.

In 2021, at Faringosi Hinges, a VPB agreement was established for the first time, shared with trade union representatives and valid for the three-year period 2021 to 2023, with the possibility of converting all or part of the bonus achieved into company welfare. The VPB is 85% above target in 2022.

Personnel Participation Bonus (PPB)

In 2018, Sabaf S.p.A. introduced a Personnel Participation Bonus (PPB) for all its employees who, through effective participation, help to achieve the company's objectives. This bonus was paid also in 2022 in the form of company welfare.

Extraordinary Bonus

In order to provide concrete support to address the needs related to the rising cost of living, Sabaf decided to grant an extraordinary bonus of €300 to all non-managerial employees of the Group's Italian companies, to be paid in December 2022 in the form of company welfare. With this initiative, Sabaf wants to show its support for all those who, through their work and commitment, contribute every day to achieving the company's results.

The forms of social security in force for all Group employees are those envisaged by the regulations in force in the various Countries in which the Group operates.

Ratio of maximum annual total remuneration to median annual total remuneration¹⁶

	2022	2021
Ratio of maximum remuneration to median remuneration	45	34
Ratio of maximum remuneration increase to median remuneration increase	7	-

Ratio between the standard salary of a new recruit by gender recognised by Group companies and the minimum salary provided for in the contracts

Minimum increase	2022			2021	2020
(%)	M	W	M	W	M	W
Sabaf S.p.A.	29%	29%	29%	29%	29%	29%
Faringosi Hinges s.r.l.	3%	3%	3%	3%	3%	3%
A.R.C. s.r.l.	0%	0%	0%	0%	0%	0%
C.M.I. s.r.l.	2%	2%	2%	2%	2%	2%
C.G.D. s.r.l.	0%	0%	0%	0%	0%	0%
C.M.I. Polish branch	9%	9%	2%	2%	4%	4%
Sabaf Turkey	14%	14%	15%	15%	14%	14%
Okida	0%	0%	0%	0%	0%	0%
Sabaf do Brasil	9%	9%	14%	14%	13%	13%
Sabaf China17	75%	75%	19%	19%	34%	34%

The Group has procedures in place to systematically check the regular contribution of suppliers and contractors and the correct hiring of their employees.

Ratio of average salary of female personnel to average salary of male personnel¹⁸

(%)	2022	2021	2020
White-collars, middle	80%	82%	78%
managers and managers
Blue Collars	89%	87%	79%

¹⁶ The remuneration used as a reference is that of the Chief Executive Officer and includes the gross fixed component and the gross variable short-term and long-term components (including the value of shares granted during the year and related to the 2018-2020 LTI plan). No employees among those reported in Disclosure 2-7 were excluded and no full-time equivalent rates of pay were used for part-time employees. It should also be noted that the figure for the ratio of maximum salary increase to median salary increase is not available for the year 2021 as it is based on data excluded from the reporting period.

¹⁷ As part of the calculation of the data relating to the ratio between the standard salary of a newly hired employee by gender recognised by the Group companies and the minimum salary provided for in the contracts, more detailed data is available than was considered for the calculation carried out last year and reported in 2021 DNI. The data available during 2022 made it possible to refine the calculation both for the current reporting year (2022) and, consistently, for the previous years (2020 and 2021), in order to give as reliable a representation as possible; therefore, this DNI reports the most accurate data for both 2022 and 2020 and 2021.

¹⁸ Calculated on basic salary.

Occupational health and safety and working environment

Risks

The Health & Safety risks to which Sabaf and contractors' personnel are exposed are related to the processes at the various sites where the business is carried out. In general, the main risks to workers' health and safety are:

• risks with high associated damage (falls from a height, work in confined spaces);
• the risks resulting from the presence of aluminium casting departments (burn, exposure to high temperatures);
• typical risks in metalworking companies, such as cuts and bruises.

The Group is also exposed to the compliance risk, resulting from any failure to adopt measures to bring its procedures and operations into line with current health and safety regulations.

Risk management

The Sabaf Group formally defines the responsibilities, criteria and operating procedures for identifying and planning prevention measures to eliminate and/or mitigate risks, as part of a system that allows the level of safety and hygiene to be optimised and constantly improved through preventive actions.

As from 2019, the function of Group HSE Manager was established with the aim of coordinating the management of Health, Safety and Environment of all companies based on a common policy.

The occupational health and safety management systems of Group companies are structured according to a risk-based approach.

Prevention and reduction of risk levels are based on the following factors.

• Effective training: all training courses are planned and managed by internal personnel and/or external trainers, with a propensity to teach and with strong experience in the reference sector (first aid, fire-fighting, work at height, etc.). Job-specific training courses have been designed with a focus on the simulation of real cases and actual experiences, in order to make training meetings more effective. The approach to training aims to overcome the compulsory approach to encourage the active participation of all employees.
• Cutting-edge plants: continuous investment in increasingly modern and technologically advanced machinery reduced the levels of risk related to ergonomics and manual handling of loads and improved the systems to protect against physical risks.
• Organisation: the strong involvement and constant training of department heads and their awareness of obligations and responsibilities led to a clear improvement in all aspects of Health and Safety.

With reference to the Covid pandemic, in order to mitigate the risks of contagion, all Group companies promptly adopted preventive measures and strict protocols, which are currently in force and constantly adapted based on best practice.

In the Group companies based in Italy (Sabaf S.p.A., Faringosi Hinges s.r.l., A.R.C. s.r.l., C.M.I. s.r.l., C.G.D. s.r.l.), the risk assessment is carried out by the Employer through the collaboration of the Occupational Health and Safety Officer and the Company Physician, with the participation of all responsible parties (managers and representatives). The involvement of workers is envisaged, both through periodic meetings with safety representatives through the obligation to report possible

additional risks. Equivalent systems, applied in accordance with applicable laws, are in place at the foreign offices.

In Sabaf S.p.A., in Faringosi Hinges s.r.l., in C.M.I. s.r.l. and C.G.D. s.r.l., the health and safety management system has been certified according to ISO 45001 since 2017, 2021, 2022 and 2020, respectively.

The management systems of the other Group companies are not certified. Moreover, the coordination at central level directs all companies towards a shared approach and methodology. For example, the support management system used at Sabaf S.p.A. has been gradually extended to certain subsidiaries (Faringosi Hinges, A.R.C., Sabaf do Brasil, Sabaf Turkey). The Group started the management and coordination of the related safety management systems for the recently acquired companies (Okida and the C.M.I. Group) as well.

Employees

Number and duration of injuries	2022	2021	2020
Hours worked	2,205,632	2,308,816	1,801,120
Near misses/Medical treatments without lost days	40	47	103
Recordable injuries19 (absence < 6 months) - excluding fatalities	18	35	29
of which injuries while travelling to/from work 20	0	0	0
High-consequence injuries (absence > 6 months) - excluding fatalities	0	1	0
of which injuries while travelling to/from work	0	0	0
Fatalities as a result of injuries	0	0	0
of which injuries while travelling to/from work	0	0	0
Days lost due to injury21	283	610	194
Total injuries - including fatalities	18	36	29
of which injuries while travelling to/from work	0	0	0
Injury rate (number of injuries x 1,000,000/hours worked)
Recordable injury rate	8.16	15.16	16.10
High-consequence injury rate	0.00	0.43	0.00
Fatality rate as a result of injuries	0.00	0.00	0.00
Total injury rate	8.16	15.59	16.10
Injury lost day rate (days of absence x 1,000/hours worked)
Rate based on recordable and high-consequence injuries	0.13	0.26	0.11

In 2022, the injury rate and the lost day rate improved significantly and there were no accidents resulting in more than six months' absence. The most common injuries are bruises and superficial cuts or burns.

¹⁹ Recordable injury includes any occupational injury, including fatal injury, that occurs to a person during or as a result of work, resulting in absence from work for less than 6 months, alternative activities or medical treatment.

²⁰ Only if transport has been organised by the organisation and the transfers have taken place within working hours.

²¹ Days lost in 2021 and 2021 injury lost day rate have been restated due to the continued absence of an injury in 2022.

External workers

Number and duration of injuries	2022	2021	2020
Hours worked	329,864	460,135	201,761
Recordable injuries22 (absence < 6 months) - excluding fatalities	5	7	0
of which injuries while travelling to/from work 23	0	0	0
High-consequence injuries (absence > 6 months) - excluding fatalities	0	0	1
of which injuries while travelling to/from work	0	0	0
Fatalities as a result of injuries	0	0	0
of which injuries while travelling to/from work	0	0	0
Days lost due to injury	42	76	198
Total injuries - including fatalities	5	7	1
of which injuries while travelling to/from work	0	0	0
Injury rate (number of injuries x 1,000,000/hours worked)
Recordable injury rate	15.16	15.21	0.00
High-consequence injury rate	0.00	0.00	4.96
Fatality rate as a result of injuries	0.00	0.00	0.00
Total injury rate	15.16	15.21	4.96
Injury lost day rate (days of absence x 1,000/hours worked)
Rate based on recordable and high-consequence injuries	0.13	0.17	0.98

No cases of occupational disease were reported at Group level in 2022.

In compliance with the laws in force, Group companies prepared and implemented health supervisory plans for employees, with health inspections aimed at the specific risks of the work activities carried out.

²² Recordable injury includes any occupational injury, including fatal injury, that occurs to a person during or as a result of work, resulting in absence from work for less than 6 months, alternative activities or medical treatment.

²³ Only if transport has been organised by the organisation and the transfers have taken place within working hours.

Sabaf, a health-promoting workplace

Since 2016, Sabaf S.p.A. has joined the WHP (Workplace Health Promotion) programme, committing itself to implementing good practices in the field of workplace health promotion. The company is committed not only to implementing all measures to prevent accidents and occupational diseases but also to offering its workers opportunities to improve their health, reducing general risk factors and in particular those most involved in the genesis of chronic diseases.

Workplace health promotion is the result of the combined efforts of employers, workers and the company. The following factors contribute to this promotion:

• improving work organisation and the working environment;
• encouraging personnel to participate in healthy activities;
• promoting healthy choices;
• encouraging personal growth.

The central idea is simple: Sabaf aims to build, through a participatory process, a context that encourages the adoption of positive behaviour and choices for health.

The WHP Programme envisages the development of activities (good practices) in 6 thematic areas: food, fight against smoking, fitness training, safe and sustainable mobility, fight against addictions, wellbeing/reconciling life and work.

Health and Well-being Prevention Campaign

Sabaf is on the side of women in the fight against breast cancer, a silent disease that led to 55,700 new breast cancer diagnoses in Italy in 2022.²⁴ Early diagnosis can actually save lives. For this reason, Sabaf promoted a company welfare project in collaboration with the ESA association, which has been promoting breast cancer prevention activities for years by raising awareness among women of the value of mammography screening as a tool for possible early diagnosis and therefore treatment of the disease.

In November 2022, Sabaf organised an information session with medical specialists for its employees and then offered a completely free breast check-up to all women in the company between the ages of 25 and 49.

A similar project was implemented in October 2022 in Turkey at the premises of Okida.

Use of dangerous substances

Only materials that fully comply with the requirements of Directive 2011/65/EU (RoHS Directive) which tends to limit the use of hazardous substances such as lead, mercury, cadmium and hexavalent chromium are used for production.

²⁴Data source: www.epicentro.iss.it/tumori/aggiornamenti

Industrial relations

Sabaf complies with the labour laws of the various countries and the conventions of International Labour Organisation (ILO) on Workers' Rights (freedom of association and collective bargaining, consultation, right to strike, etc.), systematically promoting dialogue between the parties and seeking an adequate level of agreement and sharing of company strategies by the personnel.

In case of organisational changes, with regard to the minimum notice period, the Group complies with the provisions of the law and the reference contracts of the various countries.

In March 2022, the second level company agreement of Sabaf S.p.A. was renewed, valid until 31 December 2024.

The key points of this agreement are set below:

• the sharing between the company and trade unions and Unitary Union Representative Body of priorities on which to channel resources and energy in the coming years (producing quality, creating and maintaining efficiency, becoming more flexible);
• sharing objectives also through the responsible involvement of personnel;
• maintaining fair and transparent industrial relations while respecting individual roles;
• the establishment of working groups with the aim of improving the involvement of personnel at all levels;
• the continuation of the payment of a variable part of remuneration, the payment of which is related to measurable and verifiable quality and efficiency indicators; data on which dissemination and transparency will be maintained;
• the possibility of converting all or part of the variable performance bonus (VPB) into welfare;
• attention to the individual and family well-being of personnel through targeted policies (working hours, leave, etc.);
• a renewed commitment to ever more efficient solutions and targeted training programmes to maintain the already optimal level of health and safety for all employees.

In the Group companies, at 31 December 2022, 153 employees, or 12.4% of the total, were members of trade unions (in 2021, 150 employees, or 11.7% of the total, were members).

Hours of participation in trade union activities during 2022 amounted to 0.17% of the hours worked (0.24% in 2021).

Participation in trade union activities	2022	2021	2020	Benchmark25
Meeting
Number of hours	862	1,537	209
Percentage over hours worked	0.04	0.07	0.01
Number of hours per capita	0.7	1.2	0.2	0.8
Leave for trade union duties
Number of hours	1,921	1,766	1,009
Percentage over hours worked	0.09	0.08	0.06
Number of hours per capita	1.6	1.4	0.9
Strike
Number of hours	1,016	2,196	1,017
Percentage over hours worked	0.05	0.10	0.06
Number of hours per capita	0.8	1.7	0.9	1.3
Total
Number of hours	3,798	5,499	2,235
Percentage over hours worked	0.17	0.24	0.12
Number of hours per capita	3.1	4.3	1.9

All strikes called in 2022 are related to public issues and never to specific company issues.

In 2022, the Italian companies made use of the temporary unemployment fund for a total of 34,769 hours.

Business climate analysis

The Group conducts a business climate analysis every three years.

Between July and October 2021, a climate analysis called "Conoscere e Ascoltare" (Knowing and Listening) was carried out in Sabaf S.p.A., C.M.I. (in Italy and Poland), C.G.D. and Faringosi Hinges.

The attendance was very high (601 total participants) and allowed people to express their perceptions of the key elements of their working life in our Group in a frank and direct manner.

The summary of the results reveals an undoubtedly positive and encouraging picture.

Among the elements of working life on which more than 70% of people expressed a positive perception are safety issues, the sense of belonging and pride in their company, and the canteen.

Note also that the possession of expertise deemed appropriate to one's job and the relationship with one's colleagues are the real treasures of living in the company, which contribute concretely to the foundation of the business climate in the Sabaf Group.

The results also give us an indication of the elements that people perceive as needing improvement, including the chapter on Training, Evaluation and Incentives and that on Information and Communication.

²⁵ FEDERMECCANICA, L'industria metalmeccanica in cifre June 202 – Ore pro–capite di assenza dal lavoro (2019), http://www.federmeccanica.it

Sabaf Turkey and Okida are a GREAT PLACE TO WORK®

In January 2023, Sabaf Turkey and Okida were awarded the Great Place to Work ® certification, proving that the Turkish companies of the Sabaf Group are excellent workplaces, attentive to people's well-being and able to attract talent, increase employee motivation and improve employer branding.

The Great Place to Work® model puts people at the centre of every process, because a "great place to work" is "an environment where employees believe in the people they work for, take pride in what they do, and feel good about their colleagues.

The GPTW® model measures the working climate on the basis of 5 aspects

• CREDIBILITY Two-way Communication, Competence, Integrity
• RESPECT Professional Development, Involvement, Care
• EQUITY Fairness of treatment, Impartiality, Justice
• ORGANISATION Individual work, Work group, Corporate image
• COHESION Confidence, Hospitality, Collaboration

Disputes

At 31 December 2022, a number of minor disputes with some former employees were outstanding.

Sabaf and environment

Risks

Environmental issues are managed through a risk-based approach, in line with the UNI EN ISO 14001:2015 standard. The relevant risk categories are set out below.

Risks of external context(environmental sustainability), concerning climate change and the objectives of protecting the environment and the territory, through the reduction of environmental impacts and the containment of the use of natural and energy resources. These impacts are considered from the product design stage, through the different stages of its implementation and from a perspective that considers the whole life cycle of the product. With regard to physical risks related to climate change, such as the increase in global temperatures, sea level and the increase in extreme weather events, the Group has not identified any significant risks to date. On the other hand, transitional risks, such as the increase in energy costs, changes in consumer choices or those related to the introduction of new technologies, which the Group manages at a strategic level, are of significant impact and probability.

Strategic risks, including collaboration with strategic service providers with potential environmental risk (waste collection and disposal, cleaning services, maintenances).

Legal and compliance risks, related to compliance with law requirements (authorisations and compliance obligations) and requests of local institutions, also with regard to reporting obligations.

The following paragraph describes how these risks are managed.

Health and safety, environmental and energy policy

Programme and objectives

The Group is committed to the following objectives:

• the prevention of pollution and rationalisation of the use of energy through the continuous improvement of its processes and products;
• the efficiency in the use of natural and energy resources during production, with a special reference to water and energy consumption;
• the reduction of the quantity of waste produced and the improvement of its quality in terms of hazardousness and recoverability.

Sabaf S.p.A. adopted and maintains an Integrated Management System of Health and Safety, Environment and Energy (EHS&En) that, by integrating with the other Management Systems operating within the company, is an effective means of pursuing a constant reduction in risks, environmental impacts and energy consumption through the following instruments:

• the prior assessment of EHS&En aspects in all company processes, with particular focus on design, production processes and purchases;
• maintaining full compliance with current law requirements, proactively using them as elements of continuous process monitoring;
• a training and information system involving all employees and collaborators.

Since 2003, the Environmental Management System of the Ospitaletto production site (which covers approximately 50% of the Group's total production) has been certified in compliance with ISO 14001. The Sabaf Turkey production site was ISO 14001 certified in 2022.

In 2015, the Energy Management System implemented at the premises of Ospitaletto was certified in compliance with the ISO 50001 standard.

In 2008, Sabaf S.p.A. obtained the Integrated Environmental Authorisation (IPPC) from the Lombardy Region pursuant to Legislative Decree 59 of 18 February 2005.

Sabaf's HSE function coordinates the management of environmental issues for all the Group's production sites.

Process and product innovation and environmental sustainability

Cooking technologies and environmental sustainability

There is a widespread perception that the environmental impact of induction cooking (the most efficient form of electric cooking) is lower than that of gas cooking. Actually, the measurement of environmental impact cannot be separated from the consideration of the electricity production mix (fossil fuels, renewables, nuclear). An authoritative study shows that, given the electricity production mix in Italy, the total CO² emissions over the life cycle of an induction hob are 1,590 kg, more than 50% higher than the total emissions of a gas hob (1,50 kg).²⁶

In the medium to long term, energy transition policies aimed at reducing fossil fuel production and promoting renewable energies will change the energy mix: it is estimated that an induction hob and a gas hob will be equivalent in terms of emissions when green energy production will be around 70%.²⁷

In line with its plans for ecological transition, the Sabaf Group announced major investments to enter the induction cooking components sector, a market estimated at around €500 million and which has been growing steadily at a rate of over 10% for several years. Sabaf thus is present in all cooking technologies: gas, traditional electric and induction.

²⁶ https://www.sciencedirect.com/science/article/abs/pii/S0959652618308011

Journal of Cleaner production - «Comparative life cycle assessment of cooking appliances in Italian kitchens», 2018

Claudio Favi ^a , Michele Germani b, Daniele Landi b, Marco Mengarelli ^c , Marta Rossi ^b

^a Università degli Studi di Parma ^b Università Politecnica delle Marche ^c Energy Research Institute, Nanyang Technological University

²⁷ Internal estimate from publicly available data.

A possible revolution - Hydrogen burners: the Hy4Heat project

The SABAF Group is one of the strategic suppliers of the UK government's Hy4Heat feasibility project. The Hy4Heat project aims to determine whether it is technically possible, safe and costeffective to replace natural gas (methane) with 100% hydrogen in residential and commercial buildings and gas appliances. The Hy4Heat project is funded by BEIS (the UK Government's Department for Business, Energy and Industrial Strategy) and involves ten separate working groups.

The Sabaf Group, through its subsidiary A.R.C., participates in the Working Group 4, which deals with domestic cooking and heating appliances. A.R.C. developed and produced the burners that are now included in the world's first ranges of 100% hydrogen-powered cookers and hobs.

These were installed on Glen Dimpex cooking appliances at HyHome, two purpose-built houses featuring hydrogen-powered appliances in a "real life" scenario in Low Thornley, near Gateshead, in the North of England.

In the next phase, cooking appliances with hydrogen burners will be included for the Community Trial involving 300 homes, organised by Scottish Gas Networks (SGN) in Fife and starting in 2022. In addition to the Community Trial, the UK government intends to commission a Village Trial with around 2,500 homes in 2025 and a Town Trial (10,000 homes) in the last part of the decade, before potentially converting the entire UK gas network to hydrogen in the future.

A.R.C. also participates in the Working Group 5B (Development of Commercial Hydrogen Appliances, which includes commercial restaurant equipment) and has developed commercial hob burners for Falcon Foodservice Equipment Ltd.

High efficiency burners

For many years, the Sabaf Group has been at the forefront in offering gas burners that are characterised by yields higher than standard burners.

In the range of standard single ring flame sizes, since the beginning of 2000 Sabaf has introduced four series of burners (Series III, AE, AEO and HE) to the market, all of which guarantee high energy efficiency, with an efficiency of up to 68%.

The DCC series of special burners was introduced in the range of special burners: they are characterised by an energy efficiency of over 60%, the highest available on the market today for multiple flame ring burners. Moreover, DCC burners with a brass flame-spreader ring and efficiency of more than 68% were produced specifically for the Chinese market, the top of what is currently available on that market.

High efficiency burners represent more than 30% of the total burners produced.

Light alloy valves

The production of aluminium alloy valves has several advantages compared to the production of brass valves: elimination of the hot moulding phase of brass, lower lead content in the product, lower weight and consequent reduction in consumption for packaging and transport. Light alloy valves currently account for more than 90% of the valves produced by the Sabaf Group.

Metal washing

In the production process of valves and burners, it is essential to wash metals in several stages. Since 2013, Sabaf S.p.A. has been using a washing system based on a modified alcohol, a solvent that is redistillable (and therefore recyclable) due to its properties. The environmental impact and operating costs of this solvent have been substantially eliminated, as well as the emissions and production of special waste.

This efficient and sustainable technology has also been used at the Sabaf do Brasil production site (since 2016 ) and at the Sabaf Turkey production site (since 2018).

Environmental impact

CDP

Aware of the value of complete and transparent disclosure, in 2022, Sabaf joined for the third consecutive year the Climate Change and Water programmes of CDP, an international nonprofit organisation that provides businesses, local authorities and governments with a system to measure, track, manage and share information on the environment globally.

In particular, companies are required to participate in an annual survey on the impact of their activities on the environment, the management of their environmental risks and the results achieved.

The aim is to make environmental performance central to business and investment decisions by leveraging information transparency.

In its third year of participation, Sabaf received a C rating in the Climate Change section on a scale ranging from A to F.

Materials used and recyclability of products

Sabaf products can be easily recycled because they are made almost entirely of brass, aluminium alloys, copper and steel.

(t)	2022 consumption	2021 consumption	2020 consumption
Raw materials
Steel	20,587	26,801	26,046
Aluminium alloys	7,917	11,326	9,188
Brass	639	1,227	638
Enamel	301	289	246
Cast iron	168	144	96
Stainless steel	50	139	103
Tin solder	8	-	-
Zamak	6	12	10
Copper	6	7	8
Bronze	1	1	0
Packaging materials
Wood	813	935	683
Cardboard	744	1,019	706
Plastic	282	281	220

38% of steel, 68% of aluminium alloys and 85% of brass used in 2022 are produced by scrap recycling; the remaining 67% of steel and 32% of aluminium alloys are produced from ore. The use of recycled steel is constantly increasing.

The Group estimates that at least 37% of the cardboard and 91% of the plastic used for packaging comes from recycling. Cardboard and wood are renewable materials.

The decreases in raw material and packaging consumption in 2022 reflect the Group's lower production levels compared to the previous year.

Sabaf products fully comply with the requirements of Directive 2011/65/EU (RoHS Directive) which tends to limit the use of hazardous substances such as lead in the production of electrical and electronic equipment.

Moreover, Sabaf products fully comply with the requirements of Directive 2000/53/EC (End of Life Vehicles), i.e. the heavy metal content (lead, mercury, cadmium, hexavalent chromium) is below the limits imposed by the Directive and/or any exemptions.

With regard to the REACH Regulation (Regulation no. 1907/2006 of 18/12/2006), Sabaf is a downstream user of substances and preparations. The products supplied by Sabaf are classified as

articles that do not give rise to the intentional emission of substances during normal use, therefore there is no registration of the substances contained in them. Sabaf involved the suppliers to ensure that they fully comply with REACH Regulation and to obtain confirmation that they meet their obligations to pre-register and register the substances or preparations they use. The data collected was used to complete the SCIP (Substances of Concern In Products) database as per the provisions of the ECHA agency.

Energy sources²⁸

	2022	2021	2020
	consumption	consumption	consumption
MWh	3,520	4,853	158
MWh	32,658	39,276	35,220
m3x1,000	4,090	5,474	4,478
lx1,000	86	79	57
lx1,000	15	12	17
lx1,000	0.10	0.10	0
GJ	280,571	358,285	290,125

The main sources used are:

• electricity, for all the equipment with electric power supply present, whether functional or not to the production process, which covers about 46% of the total energy requirement;
• natural gas, related to the operation of both production plants (foundry furnaces, washing burners, enamel kilns) and service plants (heating), which covers about 52% of total energy requirements.

Electricity from renewable sources is produced by a photovoltaic plant operating at the C.M.I. plant (63 MWh in 2022; 151 MWh in 2021) or comes from the purchase of I-REC certificates (3,457 MWh in 2022; 4,702 MWh in 2021). The lower consumption of renewable energy is related to the lower level of activity in Brazil, where 100% of electricity is generated from renewable sources.

Sabaf S.p.A., Sabaf do Brasil and Sabaf Turkey use natural gas as an energy source for the casting of aluminium and for the firing of enamelled lids. The production of other Group companies does not use methane as an energy source.

Energy intensity

€) (kWh on turnover in	2022	2021	2020
Energy intensity	0.308	0.378	0.436

The trend in energy consumption is closely related to production levels; in relation to sales revenues, there was a decrease in consumption, which was also made possible by constant interventions aimed at improving the energy efficiency of plants.

²⁸ Updated factors published in 2020, 2021 and 2022, respectively, by the Department for Environment, Food and Rural Affairs (DEFRA) were used to calculate consumption.

Water

(m3)	2022	2021	2020
from waterworks	71,982	69,109	50,682
of which freshwater	71,982	69,109	50,682
of which other water	0	0	0
from well	43,536	30,630	27,675
of which freshwater	43,536	30,630	27,675
of which other water	0	0	0
rainwater	464	2,708	-
of which freshwater	0	0	-
of which other water	464	2,708	-
Total29	115,982	102,447	78,357

All the water used in the production processes by Group companies is destined for disposal or internal recycling for reuse in company processes: as a consequence, there is no industrial waste water.

The water used in the die-casting and enamelling processes at the plant of Ospitaletto, at the end of the production processes, is treated in chemical/physical concentration plants that make it possible to significantly reduce the quantities of water required and waste produced. Since 2019, a concentration plant has also been in operation at the Brazilian production site.

At the Ospitaletto plant, there is a plant for the collection of rainwater intended for use in industrial activities. In 2022, 464 m³ were collected (2,708 m³ in 2021).

²⁹ The indicator does not include data relating to C.G.D. s.r.l. Depending on data availability, the amount of collected rainwater is also included from the 2021 reporting year.

Waste

Trimmings and waste from the production process are identified and collected separately for recycling or disposal. The risers deriving from aluminium die-casting are intended for direct reuse. The waste, broken down by type and method of disposal, is summarised below30.

	2022 (t)	Incidence (%)	2021 (t)	Incidence (%)	2020 (t)	Incidence (%)
Similar to urban	209	2.2	356	3.0	291	2.7
Total hazardous	1,618	16.7	2,238	18.7	2,256	21.1
reuse -	73	0.7	185	1.5	142	1.3
recycling -	46	0.5	67	0.6	5	0.1
incineration -	1,222	12.6	1,421	11.9	1,135	10.6
temporary storage -	268	2.8	147	1.2	111	1.0
other 31 -	9	0.1	418	3.5	863	8.1
Total non-hazardous	7,833	81.1	9,385	78.3	8,132	76.2
reuse -	3,659	37.9	4,725	39.4	3,882	36.3
recycling -	2,478	25.6	2,427	20.3	2,068	19.4
recovery -	99	1.0	68	0.6	70	0.7
incineration -	392	4.1	856	7.0	690	6.5
temporary storage -	1,151	11.9	1,266	10.6	1,334	12.5
other -	54	0.6	43	0.4	88	0.8
Total waste	9,660	100.0	11,979	100.0	10,679	100.0

The breakdown of waste according to composition is given below:

		2022 (t)	Incidence (%)	2021 (t)	Incidence (%)	2020 (t)	Incidence (%)
Metals		6,974	72.2	8,042	67.1	6,935	64.9
Liquid waste		1,551	16.1	2,611	21.8	2,606	24.4
Sludge and powdery waste		437	4.5	433	3.6	353	3.3
	Plastic	71	0.7	68	0.6	58	0.6
Packaging waste	Cardboard and paper	123	1.3	152	1.3	128	1.2
	Wood	212	2.2	297	2.5	269	2.5
Other		292	3.0	376	3.1	330	3.1
Total waste		9,660	100.0	11,979	100.0	10,679	100.0

	2022	2021	2020
Economic value generated by the Group € ) ( /000	268,082	267,918	190,001
Total hazardous waste/Generated economic value € (kg in /000)	6	8	12
Total waste/Generated economic value € (kg in /000)	36	45	56

The decrease in the volume of waste generated in 2022 is related to lower production levels. The incidence of waste on the economic value generated by the Group decreased significantly. The Group continues its efforts to reduce the production of special hazardous waste, also by purchasing raw materials and substances that are already not hazardous originally. All Group companies have separate waste collection.

³⁰ Data does not include the Polish branch of C.M.I. s.r.l.

³¹ Includes landfill disposal.

No significant spills occurred in 2022.

Emissions into the atmosphere

A large part of atmospheric emissions of the Sabaf Group derives from activities defined as "negligible pollution".

▪ Three production processes are carried out at Sabaf S.p.A:

• the production of the components that make up the burners (nozzle holder sumps and flame spreaders) involves the casting and subsequent die-casting of the aluminium alloy, sandblasting of the pieces, a series of mechanical processes with removal of material, washing of some components, assembly and testing. This production process results in the emission of negligible amounts of oily mists, as well as dust and carbon dioxide;

• the production of burner covers, where steel is used as raw material, which is submitted to blanking and minting. The semi-finished covers are then used for washing, sandblasting, application and firing of enamel, a process that generates the emission of dust;

• the production of valves and thermostats, in which mainly aluminium alloy, brass bars and moulded bodies and, to a much lesser extent, steel bars are used as raw materials. The production cycle is divided into the following phases: mechanical machining with removal of material, washing of semi-finished products and components obtained in this way, finishing of the coupling surface of bodies and masks with a diamond tool, assembly and final inspection of the finished product. This process generates negligible oily mists.

• The entire burner production process is carried out at Sabaf do Brasil and Sabaf Turkey. An analysis of the internal process shows that there are no significant emissions.

• In Faringosi Hinges s.r.l. and in the companies of the C.M.I. Group, steel is used as the main raw material for the production of hinges, and is subjected to a series of mechanical processing and assembly that do not involve any significant emissions.
• In A.R.C. s.r.l., professional burners are produced through mechanical processing and assembly, no significant emissions are recorded.
• Sabaf China carries out mechanical processing and burner assembly operations. Emissions are completely negligible.
• Electronic components (boards, timers, etc.) are assembled in Okida, the production activity generates negligible emissions.

The efficiency level of the filtration systems is ensured through their regular maintenance and the regular monitoring of all emissions. Monitoring in 2022 showed that all emissions complied with the limits imposed by the law.

CO2 emissions 32		2022	2021	2020
Scope 1 (direct emissions)	tCO2eq	8,546	11,493	9,409
from refrigerant gases	tCO2eq	49	231	162
from fuel consumption	tCO2	8,497	11,262	9,247
Scope 2 (indirect emissions) – location-based	tCO2	11,822	14,150	11,998
Scope 2 (indirect emissions) – market-based	tCO2	14,604	17,641	14,969
Total emissions scope 1+2 (location-based)	tCO2eq	20,368	25,643	21,407
Total emissions scope 1+2 (market-based)	tCO2eq	23,150	29,134	24,378

Intensity of CO2 emissions

(tCO2eq on turnover in millions of Euro)	2022	2021	2020
Intensity of emissions
(scope 1 and scope 2 market-based)	91	111	132

During 2022, the Group started a project to measure scope 3 emissions.

The use of naturalgas to power melting furnaces results in the emission of NO^X and SO^X into the atmosphere; however, these emissions are not significant. Sabaf does not currently contain any substances that damage the atmospheric ozone layer, with the exception of the refrigerant used in some air conditioners, which is managed in compliance with the reference standards.

Disputes

Over the three-year period from 2020 to 2022, the Group did not suffer any sanctions related to environmental compliance and no dispute is pending at 31 December 2022.

³² The factors used for calculating emissions are:

^▪ year 2020: Scope 1 fuels and F-GAS: Defra 2020 where available, otherwise Ispra 2016 - Scope 2 Location-based: Terna 2018 - Scope 2 market-based: AIB 2019, where available, otherwise Terna 2018;

^▪ year 2021: Scope 1 fuels and F-GAS: Defra 2021 where available, otherwise Ispra 2016 - Scope 2 Location-based: Terna 2019 - Scope 2 market-based: AIB 2020, where available, otherwise Terna 2019;

^▪ year 2022: Scope 1 fuels and F-GAS: Defra 2022 where available, otherwise Ispra 2016 - Scope 2 Location-based: Terna 2019 - Scope 2 market-based: AIB 2021, where available, otherwise Terna 2019.

The increase in refrigerant gas emissions in 2021 was due to the recharging and maintenance of air conditioning systems.

Sabaf, the management of product quality and customer relations

Risks

The new UNI EN ISO 9001:2015 standard with which Sabaf complies, introduces the concept of a "risk-based approach", which is fundamental for planning the Quality Management System. The relevant risk categories in this area are set out below.

Strategic risks, including intellectual property protection (there is a risk that some Group products, even if under patent protection, may be copied by competitors) and collaboration with critical suppliers.

Legal and compliance risks, relating to non-compliance with product regulations: Sabaf operates in international markets that adopt different laws and regulations. The product must therefore comply with the mandatory and voluntary requirements and the organisation must be able to show this consistency to the certification bodies responsible for control.

Business continuity risks: risk of non-delivery to customers due to stoppages for reasons of force majeure (unavailability of raw materials or components, critical logistics and transport issues, production stoppages or delays, total or partial lockdowns). This risk has become increasingly likely and impactful over the past two years, requiring immediate responses from the organisation to avoid or minimise the consequences.

Quality management policy

The Quality Management System has the aim of enabling the achievement of the following objectives:

• increasing customer satisfaction by understanding and meeting their present and future requirements;
• continuous improvement of processes and products, also aimed at protecting the environment and the safety of employees;
• involvement of partners and suppliers in the continuous improvement process, favouring the "comakership" logic;
• valuation of human resources;
• improvement of business performance and of the quality management system based on risk ased thinking";
• meet the mandatory requirements applicable to the products (laws and regulations).

In order to contribute consistently to the pursuit of these objectives, the Sabaf Group undertakes a series of commitments explicitly stated in the Charter of Values:

• to act with transparency, correctness and contractual fairness;
• to communicate product information in a clear and transparent manner;
• to adopt a professional and helpful behaviour towards customers;
• not to give gifts to customers that exceed normal courtesy practices and that may tend to influence their objective assessment of the product;
• to guarantee high quality standards of the offered products;
• to ensure constant attention in technological research in order to offer innovative products;
• to collaborate with customer companies to ensure that the end user is fully confident in using the products;
• to promote social responsibility actions throughout the production chain;

• to listen to customers' requirements through constant monitoring of customer satisfaction and complaints, if any;
• to inform customers of potential risks related to the use of products, as well as the related environmental impact.

Group companies that have obtained quality certification according to the ISO 9001 standard

Company	Year of first certification
Sabaf S.p.A.	1993
Faringosi Hinges s.r.l.	2001
C.G.D. s.r.l.	2002
C.M.I. s.r.l.	2003
Okida	2005
Sabaf do Brasil	2008
Sabaf Turkey	2015
C.M.I. s.r.l. - Polish branch	2022

During 2022, the Quality Management System was constantly monitored and maintained to ensure the correct implementation and compliance with the requirements of the ISO 9001 standard.

As part of the internal audit plan for 2022, a total of 26 functional areas of offices and production departments were checked at the Ospitaletto plant, 14 at Sabaf do Brasil and 13 at Sabaf Turkey. The results of these checks did not reveal any critical aspects of the system, which therefore fully complies with the regulations.

With regard to third-party inspections of the Quality Management System, annual inspections were carried out in 2022 at all certified plants, with the exception of the plant in Brazil, for which the next inspection is scheduled for 2023. The activities were successfully concluded, confirming the adequacy of the System and the maintenance of the ISO 9001 certification.

During the year 2022, Sabaf S.p.A.'s ISO 9001 certificate was extended to the plant in India.

Customer Health and Safety

Sabaf protects the health of consumers by checking that the materials that make up its products comply with the international directives in force (REACH and RoHS directives and completion of the SCIP database).

To ensure the safe operation of valves, thermostats and burners, Sabaf carries out leak tests on 100% of its production.

Valves and thermostats are also certified by third parties that guarantee compliance with the operating and safety requirements required to be marketed on the world market.

Hinges and electronic components do not pose a significant risk to consumer safety.

During the reporting period, there were no instances of non-compliance with regulations regarding the health and safety impacts of products.

Customer satisfaction

The customer satisfaction survey, carried out every two years, is part of the stakeholder engagement activities that Sabaf undertakes in order to constantly improve the quality of the services offered and to respond to customer expectations.

The last investigation was made in 2021.

Customer complaint handling

Sabaf systematically handles all complaints from customers. A specific process is in place and envisages:

• analysis of the alleged defect to assess its validity;
• identification of the causes of the defect;
• corrective actions necessary to prevent or limit the recurrence of the problem;
• customer feedback through 8D reports (quality management tool that enables a crossfunctional team to determine the causes of problems and provide effective solutions).

Disputes

With the exception of actions to recover non-performing loans, there is no dispute with customers at 31 December 2022.

Sabaf and supply chain management

Risks

The supply chain presents different types of risks, which must be assessed and monitored in order to limit the possibility of damage to the companies of the Group.

Risks of external context. Considering that a significant (although not predominant) portion of purchases takes place on international markets, the Group monitors and manages the risk of instability in supplier Countries.

Strategic risks related to a socially responsible approach along the supply chain (quality of supply, respect for human rights and protection of workers, respect for the environment, energy consumption). The definition of the criticality level, especially environmental and social, derives from a risk assessment that takes into account the type of process, product or service provided and the geographical location of the supplier.

Operational risks, manly related to:

• the continuity of supply, threatened by the shortage of many raw materials and critical components (e.g. microchips) and the global crisis in logistics; this aspect, which was particularly important in the period immediately after the outbreak of the pandemic and throughout 2021, gradually faded in the second half of 2022;
• the change in the prices of raw materials, electricity and gas, which in 2022 experienced sudden and large increases in several waves, also as a consequence of the Russia-Ukraine conflict.

Supply chain management policy

All Group companies comply with the principles of conduct defined in the Charter of Values in managing relations with suppliers.

The Group is gradually implementing a purchasing management policy valid for all Group companies. Relations with suppliers of all Group companies are managed on the basis of uniform procedures.

With regard to the management by suppliers of quality, environment and social responsibility, if the law in force already requires Sabaf to meet the minimum requirements, the risk is considered to be lower, otherwise periodic audits are carried out on the management of these aspects. In 2022, class A and B suppliers were analysed to cover 95% of the expenditure33. This analysis revealed 38 cases of suppliers considered potentially critical, following which 35 audits were carried out from which no critical non-conformities were found but only observations. In connection with noncritical non-compliances, the suppliers were asked to take appropriate action.

Relations with suppliers and contractual conditions

The Group's strategic suppliers are represented by:

• suppliers of raw materials, such as steel alloys and non-ferrous metals (mainly aluminium and brass); these tend to be large groups with an international presence;
• suppliers of electronic components;

³³ The valuation is made for suppliers with an average annual turnover to Sabaf of more than €5,000 over the previous three years. Residual suppliers are considered not significant.

• suppliers of other components that are assembled into products manufactured by the Group;
• suppliers of machinery and equipment, with whom the Group has strong long-term relationships;
• various types of service providers.

Relations with suppliers are based on long-term collaboration and on fairness in negotiations, integrity and contractual fairness and the sharing of growth strategies.

To encourage the sharing with suppliers of the values that underpin its business model, Sabaf has distributed the Charter of Values in a widespread manner.

Sabaf guarantees absolute impartiality in the choice of suppliers and undertakes to strictly comply with the agreed payment terms. Very short payment terms are agreed for artisan and less structured suppliers (mainly 30 days).

Sabaf requires its suppliers to be able to renew themselves technologically, so that the best quality/price ratios can always be proposed, and favours suppliers who have obtained or are obtaining Quality and Environmental System certifications.

In 2022, the turnover of suppliers of the Sabaf Group with a Certified Quality System was equal to 75% of the total (72% in 2021).

Purchase analysis

As shown in the table below, the Sabaf Group aims to encourage development in the area in which it operates and, therefore, in selecting suppliers, favours local companies34.

	Total 2022 purchases (€/000)	% domestic purchases	Total 2021 purchases (€/000)	% domestic purchases
Sabaf S.p.A.	93,826	79%	115,185	78%
Faringosi Hinges	12,208	99%	14,382	99%
A.R.C. s.r.l.	3,644	85%	4,186	85%
C.M.I. Group	35,783	98%	34,051	98%
Sabaf Turkey	21,084	67%	18,115	66%
Okida	16,113	69%	14,644	65%
Sabaf do Brasil	7,432	95%	21,550	95%
Sabaf China	2,718	100%	1,495	100%

Disputes

At 31 December 2022, there were no outstanding disputes with suppliers.

³⁴The data in the table does not take account of intercompany supplies. Values converted into euro at the annual average exchange rate.

Sabaf, Public Administration and Community

Relations with the Public Administration

Sabaf has always had an open dialogue with the authorities in every local community in which it is present, in order to promote shared and sustainable industrial development, with positive repercussions for local communities.

Approach to tax

The Group, in line with the principles defined in the Charter of Values, acts according to the values of honesty, moral integrity, transparency and fairness also in the management of its tax activity. The Group also believes that the contribution from taxes paid is an important channel through which it can participate in the economic and social development of the countries in which it operates. For this reason, the Group pays attention to the compliance with tax regulations and therefore acts responsibly in the jurisdictions in which it is present.

Therefore, acting responsibly in terms of tax is for the Group a behaviour also oriented towards the protection of the company's assets and the creation of value in the medium-long term.

The Administration and Finance Department is responsible for managing tax issues. The Group has not defined a formalised tax strategy at Group level; individual companies operate in accordance with local tax regulations.

To date, the Group has no formalised tax governance. Responsibility for compliance lies with the Administration and Finance functions of each subsidiary, while the Administration and Finance Department of the parent company performs a supervisory, guidance and coordination function with regard to intra-group relations.

Tax risks are analysed and managed in accordance with the company's overall Enterprise Risk Management model.

To date, the Group has not received any requests from its stakeholders regarding tax issues. Should they arrive, they will be dealt with by the corporate functions in charge of compliance on this matter.

Relations with tax authorities are based on the principles of fairness and full compliance with the different regulations applicable in the Countries where the Group operates. Note that the Group does not engage in tax advocacy.

Reporting by Country³⁵

Taxes – 2022 Country-by-Country Reporting
€ ( /000)	Italy	Brazil	Turkey	China	U.S.A.	India	Mexico	Poland36	consolidation Total before	Consolidation adjustments	consolidated statements financial Total
Number of employees	652	75	456	8	-	-	-	47	1,238	-	1,238
Property, plant and equipment other than cash and cash equivalents	297,497	20,656	89,047	3,641	-	5,826	6,154	3,088	425,909	(171,595)	254,314
Sales to third parties	166,872	12,522	60,101	1,491	-	526	-	11,541	253,053	-	253,053
Intra-group revenues to other jurisdictions	25,669	-	3,270	1,398	285	-	-	980	31,602	(31,602)	-
Pre-tax profit	9,735	349	2,894	(762)	(26)	(366)	(194)	516	12,146	63	12,209
Income taxes paid	4,707	104	2,845	-	-	-	-	77	7,733	-	7,733
Income taxes for the year	1,280	-	723	-	-	-	-	77	2,080	-	2,080
Differences between the theoretical tax burden and the tax burden booked in the financial statements (B)	1,056	119	(143)	(183)	(6)	(88)	(47)	47	755	-	755
Theoretical income tax (C) = (A)+(B)	2,336	119	580	(183)	(6)	(88)	(47)	124	2,835	-	2,835
Permanent tax differences (D)	215	7	-	-	-	-	-	-	222	-	222
Other changes (E)	(1,645)	-	(5,170)	183	6	88	47	(31)	(6,522)	-	(6,522)
Income taxes booked in the accounts, excluding IRAP and withholding taxes (current) (F) = (C)+(D)+(E)	906	126	(4,590)	-	-	-	-	93	(3,465)	(55)	(3,520)
IRAP (current) (G)	480	-	-	-	-	-	-	-	480	-	480
Total (H) = (F) + (G)	1,386	126	(4,590)	-	-	-	-	93	(2,985)	(55)	(3,040)

³⁵ The names and main activities carried out by Group companies are listed in the paragraph "Corporate Governance, Risk Management and Compliance" of this document.

³⁶ CMI Polska z.o.o. was merged into C.M.I. Cerniere Meccaniche Industriali s.r.l. on 31 December 2021.

€ ( /000)	Italy	Brazil	Turkey	China	U.S.A.	India	Mexico	Poland37	consolidation Total before	Consolidation adjustments	consolidated statements financial Total
Number of employees	667	112	447	7	-	-	-	45	1,278	-	1,278
Property, plant and equipment other than cash and cash equivalents	196,850	19,866	40,328	2,983	-	1,850	2,803	4,432	269,112	(31,989)	237,123
Sales to third parties	178,071	16,632	56,138	1,817	-	-	-	10,601	263,259	-	263,259
Intra-group revenues to other jurisdictions	26,873	-	3,191	212	254	-	-	768	31,298	(31,298)	-
Pre-tax profit	22,438	2,080	6,392	(446)	40	(57)	(134)	746	31,059	(1,379)	29,680
Income taxes paid	1,907	694	2,550	-	-	-	-	145	5,296	-	5,296
Income taxes for the year	4,943	710	1,819	-	-	-	-	145	7,617	-	7,617
Differences between the theoretical tax burden and the tax burden booked in the financial statements (B)	441	(3)	(221)	-	-	-	-	(11)	206	-	206
Theoretical income tax (C) = (A)+(B)	5,384	707	1,598	(105)	-	-	-	134	7,718	-	7,718
Permanent tax differences (D)	198	(13)	-	-	-	-	-	-	185	-	185
Other changes (E)	(2,158)	-	(2,107)	105	-	-	-	11	(4,149)	-	(4,149)
Income taxes booked in the accounts, excluding IRAP and withholding taxes (current) (F) = (C)+(D)+(E)	3,424	694	(509)	-	-	-	-	145	3,754	32	3,786
IRAP (current) (G)	1,211	-	-	-	-	-	-	-	1,211	-	1,211
Total (H) = (F) + (G)	4,635	694	(509)	-	-	-	-	145	4,965	32	4,997

Taxes – 2021 Country-by-Country Reporting

³⁷ CMI Polska z.o.o. was merged into C.M.I. Cerniere Meccaniche Industriali s.r.l. on 31 December 2021.

(€/000) Italy Brazil Turkey China U.S.A. India Poland Total before consolidation Consolidation adjustments Total consolidated financial statementsNumber of employees ^{666 87 363 8} - - ⁴⁴ 1,168 - 1,168 Property, plant and equipment other than cash and cash equivalents 167,729 13,345 39,057 1,808 - 1,585 3,636 227,160 (29,066) 198,094 Sales to third parties 123,156 12,347 38,881 1,092 - - 9,430 184,906 - 184,906 Intra-group revenues to other jurisdictions 20,794 2 1,927 123 263 - 535 23,645 (23,645) - Pre-tax profit 8,693 2,307 4,516 (625) 78 (48) 719 15,640 (1,131) 14,509 Income taxes paid 240 790 1,969 - - - - 2,999 - 2,999 Income taxes for the year 1,770 ^{791 951} - - - ¹²⁹ 3,641 - 3,641 Differences between the theoretical tax burden and the tax burden booked in the financial statements (B) 560 (6) 43 - - - - 597 - 597 Theoretical income tax (C) = (A)+(B) 2,330 785 994 (150) - - 129 4,088 - 4,088 Permanent tax differences (D) ^{233 6} (265) - - - - (26) - (26) Other changes (E) (1,332) - 222 150 - - - (960) - (960) Income taxes booked in the accounts, excluding IRAP and withholding taxes (current) (F) = (C)+(D)+(E) 1,231 791 951 - - - 129 3,102 (276) 2,826 IRAP (current) (G) 539 - - - - - - 539 - 539 Total (H) = (F) + (G) 1,770 791 951 - - - 129 3,641 (276) 3,365

Taxes – 2020 Country-by-Country Reporting

Relations with industrial associations

Sabaf S.p.A. is one of the founders of APPLiA Italia, the association that develops and coordinates in Italy the study activities promoted at European level by APPLiA – Home Appliance Europe with the related scientific, legal and institutional implications in the household appliances sector. Sabaf S.p.A. has been a member of Confindustria Brescia since 2014.

Relations with universities and the student world

Sabaf S.p.A. organises company visits with groups of students and bears witness of best practices on sustainability at important conferences.

Futura Expo

Sabaf took part in the first edition of Futura Expo, the event promoted by the Brescia Chamber of Commerce that brought together Brescia's leading companies and institutions with the aim of developing a culture of sustainability and sharing best practices. From 2 to 4 October 2022, the event attracted 110 exhibitors and 22,000 visitors.

FUTURA EXPO was the occasion for the launch of the PATTO PER LA SOSTENBIILITÀ BRESCIA 2050 (BRESCIA 2050 SUSTAINABILITY PACT), in which Sabaf and the other participants undertake to:

• 1. Quantifying one's greenhouse gas and pollutant emissions.
• 1. Defining appropriate measures and long-term strategies for decarbonisation and zero emissions, waste and consumption of natural resources.
• 1. Implementing the actions and measures of the previous point, bringing about tangible changes and innovations in the company's activities, such as improvements in efficiency, the use of renewable energy sources, sustainable logistics and mobility, the reduction of waste and consumption of resources, and any useful action to eliminate CO² emissions and pollutants.
• 1. Neutralising any remaining emissions by 2050 through additional, quantifiable, credible, permanent and socially responsible compensation.

Charitable initiatives and perks

The values that the Sabaf Group embraces are those of peace and brotherhood between people. For this reason, at the beginning of March 2022, just a few days after the outbreak of the conflict between Russia and Ukraine, Sabaf launched a collection of products (medicines, medical products, food and other necessities) to help and support the Ukrainian people. The initiative was very well received by employees and collaborators. Sabaf contributed to the purchase and shipment of medicines.

In 2022, Sabaf joined the project to co-finance for six years the Chair of Associate Professor of Anaesthesiology in the new School of Specialisation in Medicine and Palliative Care at the University of Brescia (contribution of €50,000 per year). Sabaf is thus supporting an important postgraduate training programme in the city of Brescia, which is of great value to the entire community.

The Group's ongoing humanitarian initiatives include:

▪ support for the ANT Foundation, which provides free specialist medical home-care to cancer patients and cancer prevention activities;

▪ support for Associazione Volontari per il Servizio Internazionale (AVSI), a nongovernmental, non-profit organisation engaged in international development aid projects; the donations are intended to support twenty children living in different Countries of the world at a long distance.

Since 2019, Sabaf S.p.A. has been associated with Fondazione Spedali Civili di Brescia.

Disputes

At the beginning of 2023, a tax dispute in Sabaf Turkey was resolved. There was no charge to the Group as a result of the unfavourable outcome.

There are no other disputes with Public Bodies or other representatives of the community.

Sabaf and shareholders

The composition of the share capital

The share capital of Sabaf S.p.A., fully subscribed and paid-up, is €11,533,450, consisting of 11,533,450 ordinary shares having the par value of €1.00 each. At the date of approval of this document (21 March 2023), a total of 4,302,028 shares had acquired voting rights (two votes for each share).

	No. of shares making up the share capital	Number of voting rights
Total	11.533.450	15,835,478
of which:
ordinary shares IT0001042610	7,231,422	7,231,422
ordinary shares with increased vote IT0005253338	4,302,028	8,604,056

The shareholders entered in the shareholders' register at 22 February 2023 were 1,899, of whom:

• 1,614 own up to 1,000 shares;
• 198 own 1,001 to 5,000 shares;
• 28 own 5,001 to 10,000 shares;
• 59 own over 10,000 shares.

29.36% of the share capital is held by shareholders resident abroad.

Relevant shareholders
Shareholder	Number of shares	% of share capital	Voting rights	% held
CINZIA SALERI S.a.p.A.	2,365,644	20.51%	3,049,644	19.26%
QUAESTIO CAPITAL MANAGEMENT SGR SPA	2,306,690	20.00%	4,613,380	29.13%
FINTEL S.r.l.	898,722	7.79%	1,748,722	11.04%
PALOMA RHEEM INVESTMENTS, INC.	570,345	4.95%	1,031,683	6.52%

There are no other shareholders other than those highlighted above with a shareholding of more than 5%.

Investor relations and financial analysts

Since its listing on the Stock Exchange (1998), the Company has attached strategic importance to financial communication, which is based on the principles of fairness, transparency and continuity, in the belief that this approach allows investors to correctly evaluate the Company.

In this perspective, Sabaf guarantees maximum willingness to engage in dialogue with financial analysts, institutional investors and proxy advisors. On 10 February 2022, the Company adopted the Policy for the Management of Dialogue with Shareholders, which regulates the opportunities for communication and attendance with all the Investors that require contact with the Board of Directors on the following matters:

• corporate governance system;
• remuneration policies;
• internal control and risk management system;
• strategic and industrial plans of the Company;
• strategic guidelines and policies on environmental and social sustainability.

The Policy entrusts the management of the dialogue with investors to the Chairman, the Chief Executive Officer and the CFO, also severally

In 2022, the Company participated in the Star Conference in March and Sustainability Week in September. The Company met with institutional investors as part of other roadshows organised in Milan, Vienna and Paris.

Remuneration of shareholders and share performance

In 2022, the Sabaf share recorded the highest official price on 6 June (€26.619) and lowest on 30 September (€16.185). The average volume traded was 9,849 shares per day, equal to an average value of €223,623 (€461,570 in 2021).

2022 performance of Sabaf shares (price and volumes traded)

Sabaf vs. FTSE Italia STAR index

The dividend policy aims to guarantee a valid remuneration of shareholders also through the annual dividend of €0.60 per share in 2022.

ESG investment

ESG (Environment, Social, Governance) criteria are increasingly important parameters for the screening and selection of investments by investors. Also through the preparation of this Disclosure, Sabaf strives to ensure maximum transparency on its sustainability strategy, social and environmental performance and level of alignment with best practices in terms of governance.

Disputes

There is no dispute with shareholders.

Sabaf and lenders

At 31 December 2022, the net financial debt was €84.4 million, compared with €67.6 million at 31 December 2021; the ratio of net financial debt to EBITDA is 2.10 (1.25 at 31 December 2021).

Relations with credit institutions

Relations with banks have always been based on maximum transparency. Relations with institutions that are able to support the Group in all its financial needs and to propose solutions in a timely manner to meet specific needs are privileged.

Other lenders

In December 2021, Sabaf S.p.A. issued a €30 million bond fully subscribed by PRICOA with a maturity of 10 years and an average life of 8 years. This issue enabled Sabaf to diversify its sources of financing, improve financial flexibility and significantly lengthen the average duration of its debt.

Disputes

There is no dispute with the lenders.

Sabaf and competitors

Trends in the cooking appliance manufacturer sector

The household appliance industry shows the following trends.

• Concentration, with a small number of large players present on a global scale. This trend is less evident for cooking appliances than for other household appliances: in the cooking sector, in fact, design and aesthetics on the one hand and the lower intensity of investments on the other allow the success of even small and highly innovative producers.
• Internationalisation of production, increasingly relocated to countries with low labour costs.
• Outsourcing the design and production of components to highly specialised suppliers who, like Sabaf, are active in the main world markets and are able to provide a range of products that meets the specific requirements of different markets.

Main Italian and international competitors

In Europe, Sabaf estimates that it has a market share of about 40% in the sector of gas parts. The world market share is over 10%. The Sabaf Group is also a world leader in hinges for oven doors and dishwashers.

The main competitors of the Sabaf on the international market are Copreci, E.G.O. and Robertshaw.

Copreci is a cooperative located in Spain in the Basque Country, part of Mondragon Cooperative Corporation and represents Sabaf's main competitor in terms of valves and thermostats.

E.G.O. is a major manufacturer of electronic components for household appliances based in Germany. In 2013, it acquired Defendi Italy (now E.G.O. Italia), a company mainly active in the production of burners in Italy and Brazil.

Robertshaw is the leading producer of gas parts for the North American market.

	Valves and thermostats	Burners	Hinges	Electronic components
SABAF GROUP	x	x	x	x
Copreci (Spain)	x			x
E.G.O. (Germany, Italy)	x	x		x
Robertshaw (USA)	x	x
Somipress (Italy)		x
Nuova Star (Italy)			x

Main Italian and international competitors

2020 and 2021 economic data of the main Italian competitors 38
-------------------------------------------------------------------	--

	2021			2020
€ ( /000)	Sales	Ebit	Net result	Sales	Ebit	Net result
SABAF GROUP	263,259	37,508	23,903	184,906	20,093	13,961
E.G.O. Italia	49,814	944	1,246	42,257	3,872	4,932
Somigroup Group	31,375	1,633	1,554	29,361	1,199	804
Nuova Star	59,844	2,751	2,628	40,924	657	395

Sabaf firmly believes that competition between companies promotes both an effective economy and sustainable growth. In making business decisions, Sabaf also takes into account the risk of behaviour that is detrimental to free competition. Currently, the Group has not adopted a formalised policy aimed at preventing anti-competitive behaviour. According to the information available, there is no evidence of anti-competitive behaviour or infringement of antitrust regulations.

Disputes

At 31 December 2022:

• there is a dispute pending against a competitor following an alleged violation of one of our patents;
• there is a dispute brought by a competitor due to an alleged violation of a patent.

³⁸ Sabaf processing from the financial statements of the various companies. Latest available data.

EU taxonomy

The Regulation (EU) 2020/852 (known as "Taxonomy") is part of the European Union's initiatives in favour of sustainable finance and aims to provide investors and the market with a common language of sustainability metrics. The Taxonomy focuses on the identification of economic activities considered to be eco-sustainable, defined as those economic activities that contribute substantially to the achievement of at least one of the intended environmental objectives39, provided that they do not cause significant damage to any of the other environmental objectives and are carried out in compliance with minimum safeguards. In June 2021, the European Commission formally adopted the Technical Delegated Acts defining the list of economic sectors and activities currently included in the Taxonomy and the related technical screening criteria to check whether they contribute substantially to achieving the environmental objectives of climate change mitigation and adaptation; further delegated acts are expected to be published during 2023 with regard to the remaining four environmental objectives.

The Sabaf Group immediately began analysing the regulations in order to understand their potential impact on the reporting process within the scope of its Disclosure of Non-Financial Information. This analysis showed that the Sabaf Group's revenues originate almost exclusively from the sale of components for household appliances, and these components are not included in the economic activities currently envisaged by the Taxonomy. Therefore, there are no "eligible" revenues, capital expenditures and operating expenses with respect to its core business. In this regard, note that, as confirmed by the Platform on Sustainable Finance, a body established pursuant to Article 20 of Regulation (EU) 2020/852 with advisory and support functions in favour of the European Commission on Taxonomy, the failure to identify revenues from "eligible" economic activities is not a measure of a company's environmental performance40.

Note that the Group identified certain minor projects "eligible" for the Taxonomy as part of its activities, which refer in particular to the production of electricity using photovoltaic solar technology; however, in the light of the margins of the amounts involved, it was not considered appropriate to report on a timely basis in this context.

The Sabaf Group will continue to monitor the evolution of the Taxonomy regulations in that the publication of further delegated acts relating to the remaining four environmental objectives (sustainable use and protection of water and marine resources, transition to a circular economy, prevention and reduction of pollution, and protection and restoration of biodiversity and ecosystems) could allow the Group's commitment in other areas of environmental sustainability to be reported and enhanced, such as recycling of raw and packaging materials and waste management.

³⁹ Art. 9 identifies the following environmental objectives: climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, prevention and reduction of pollution, and protection and restoration of ecosystems and biodiversity.

⁴⁰ In the document called Platform considerations on voluntary information as part of Taxonomy-eligibility reporting enclosed with the European Commission's FAQs published in December 2021 it is stated that "Eligibility is not an indicator of environmental performance; it is an indicator that an activity is in scope for testing and has the potential to be Taxonomy-aligned".

GRI Content Index

Statement of use	Sabaf S.p.A. has reported in accordance with the GRI Standards for the period from 1 January 2022 to 31 December 2022.
GRI 1 used	GRI 1: Foundation 2021
Applicable GRI Sector Standard(s)	Not currently available

GRI STANDARD	DISCLOSURE	PAGE/NOTE
General disclosures
GRI 2: General Disclosures 2021		SABAF S.p.A. Via dei Carpini, 1 – 25035 Ospitaletto ( BS) - Italy
	2-1 Organizational details	SABAF S.p.A. is a company listed on the Milan Stock Exchange
		The countries in which the Sabaf Group operates and which are relevant to the topics discussed in this Disclosure are: Italy, Poland, Brazil, Turkey and China.
	2-2 Entities included in the organization's sustaina ility reporting	16
	2-3 Reporting period, frequency and contact point	16
	2-4 Restatements of information	Not applicable
	2-5 External assurance	111-113
	2-6 Activities, value chain and other business relationships	8-14, 91-92
	2-7 Employees	57-59, 65-66
	2-8 Workers who are not employees	59
	2-9 Governance structure and composition	36-48
	2-10 Nomination and selection of the highest governance body	39
	2-11 Chair of the highest governance body	40

2-12 Role of the highest governance body in overseeing the management of impacts	46
2-13 Delegation of responsibility for managing impacts	46
2-14 Role of the highest governance body in sustainability reporting	16, 46
2-15 Conflicts of interest	47-48
2-16 Communication of critical concerns	22
2-17 Collective knowledge of the highest governance body	46
2-18 Evaluation of the performance of the highest governance body	42, 67-68
2-19 Remuneration policies	67-68
2-20 Process to determine remuneration	67-68
2-21 Annual total compensation ratio	70
2-22 Statement on sustainable development strategy	18-20
2-23 Policy commitments	21-32
2-24 Embedding policy commitments	21-24, 29, 46
2-25 Processes to remediate negative impacts	22, 29
2-26 Mechanisms for seeking advice and raising concerns	22
2-27 Compliance with laws and regulations	54, 87
2-28 Membership associations	31, 32, 97
2-29 Approach to stakeholder engagement	29-30

Material topics
GRI 3: Material Topics 2021	3-1 Process to determine material topics	33-35
	3-2 List of material topics	33-35
Economic performance
GRI 3: Material Topics 2021	3-3 Management of material topics	28-29, 33-35, 49-50
GRI 201: Economic performance 2016	201-1 Direct economic value generated and distributed	28
Market presence
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 55-56, 67-70
GRI 202: Market Presence 2016	202-1 Ratios of standard entry level wage by gender compared to local minimum wage	70
Anti-corruption
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 54
GRI 205: Anti-corruption 2016	205-3 Confirmed incidents of corruption and actions taken	54
Anti-competitive behaviour
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 104-105
GRI 206: Anti-competitive behaviour 2016	206-1 Legal actions for anti competitive behaviour, anti-trust, and monopoly practices	104
Tax
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 93
GRI 207: Tax 2019	207-1 Approach to tax	93
	207-2 Tax governance, control and risk management	93
	207-3 Stakeholder engagement and management of concerns related to tax	93
	207-4 Country-by-Country Reporting	94-96
Materials
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 78-79, 82-83
GRI 301: Materials 2016	301-1 Materials used by weight or volume	82
Energy
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 78-79, 83
GRI 302: Energy 2016	302-1 Energy consumption within the organisation	83

	302-3 Energy intensity	83
Emissions
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 78-81, 86-87
GRI 305: Emissions 2016	305-1 Direct (Scope 1) GHG emissions	87
	305-2 Energy indirect (Scope 2) GHG emissions	87
	305-4 GHG emissions intensity	87
Waste
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 78-79, 85-86
GRI 306: Waste 2020	306-1 Waste generation and significant waste-related impacts	85-86
	306-2 Management of significant waste-related impacts	85-86
	306-3 Waste generated	85
Employment
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 55-56, 60-62
GRI 401: Employment 2016	401-1 New employee hires and employee turnover	60-62
Industrial relations
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 55-56, 75-76
402: Labor/Management relations 2016	402-1 Minimum notice periods regarding operational changes	75
Health and safety
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 71-74
GRI 403: Occupational Health and Safety 2018	403-1 Occupational health and safety management system	71-74
	403-2 Hazard identification, risk assessment, and incident investigation	71-74
	403-3 Occupational health services	71-74
	403-4 Worker participation, consultation, and communication on occupational health and safety	71-74
	403-5 Worker training on occupational health and safety	71-74
	403-6 Promotion of worker health	71-74

	403-7 Prevention and mitigation of occupational health and safety impacts directly linked by business relationships	71-74
	403-9 Work-related injuries	72-73
Training and education
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 55-56, 63
GRI 404: Training and education 2016	404-1 Average hours of training per year per employee	63
Diversity and equal opportunities
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 39, 49-50, 55-56
GRI 405: Diversity and Equal Opportunity 2016	405-1 Diversity of governance bodies and employees	40-45, 65-66
Non-discrimination
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 55-56
GRI 406: Non discrimination 2016	406-1 Incidents of discrimination and corrective actions taken	56
Supplier social assessment
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 91-92
GRI 414: Supplier social assessment 2016	414-2 Negative social impacts in the supply chain and actions taken	91
Customer Health and Safety
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 88-90
GRI 416: Customer Health and Safety 2016	416-1 Assessment of the health and safety impacts of product and service categories	89
Customer satisfaction and customer support
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 33-35, 49-50, 88-90
GRI 416: Customer Health and Safety 2016	416-2 Incidents of non-compliance concerning the health and safety impacts of products and services	89
Topics not covered by specific standards
Partnership with multinational groups
GRI 3: Material Topics 2021	3-3 Management of material topics	29, 26, 33-35, 49-50

External assurance

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