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Carasso Motors Ltd. ("the Company")

The Updated Compensation Policy was discussed and approved unanimously by the Company's Board of Directors on May 26, 2026, after the Board of Directors examined all the considerations, matters, and parameters above and considered the Compensation Committee's recommendation.

2.3

The Updated Compensation Policy is attached as Appendix A to this immediate report. The Compensation Policy includes few changes relative to the Previous Compensation Policy, the main ones being - the indication of the updated gross (monthly) bases salary of the Company's CEO as of April 30, 2026 (relative to the said salary which was correct as of September 30, 2022, and which was specified in the Previous Compensation Policy), updating the gross (monthly) bases salary as of the officers (relative to the caps in the Previous Compensation Policy) including updating that these caps shall be linked to changes in the Consumer Price Index compared to the April 2026 index (which was published on May 15, 2026), updating the maximum grant for meeting targets for the Company's CEO, updating the cost of employment cap for the CEO (which shall be linked to the rise of the index published on May 15, 2026), updating the ratio between the officers' employment terms and the rest of the employees, as well as additional technical changes. For convenience, see the Compensation Policy attached as Appendix B to this report in which all the changes that the Company seeks to make to the Company's Previous Compensation Policy have been marked.

A spart of the Company's Board of Directors' discussions as specified above, the members of the Board of Directors examined, inter alia, the degree of suitability of the terms of office and employment of all officers holding office in the Company to the Compensation Policy, and reached the conclusion that the second one would be related from the principles of the Company's Compensation Policy, except as detailed below:

The existing terms of office and employment of Mr. Itzik Weitz, the Company's CEO (hereinafter: "Weitz">), which have been ineffects since 2005 and as updated in the agreements signed in May 2011 prior to the first issuance of the Company's shares on the Tel Aviv Stock Exchange (hereinafter - "TASE">) ⁴ sup>, include a variable compensation component derived from the Company's annual pre-tax profit, based on its consolidated financial statements, and in accordance with the tiers as detailed in the employment agreements signed between Weitz and the Company ⁵ sup>4

The company first offered securities to the public in May 2011. 5

In accordance with the said employment agreement, the Company's CEO is entitled to an annual cumulative grant based on the Company's pre-tax profit according to its consolidated financial statements for that year, as follows: a grant in the amount of 1.5% of the Company's profit up to 90 2

(hereinafter: "Weitz's variable compensation">). It should be noted that Weitz's variable compensation is not limited by a cap and lacks an operational target as determined in the component weights of the compensation model as stated in section 2 of the Compensation Policy.

Notwithstanding the above, the members of the Compensation Committee and the Company's Board of Directors believe that such deviations should be examined considering, among other things, Weitz's great contribution to the Company over the years from his arrival at the Company until the present day. Weitz is an excellent manager of the first rank in the economy, who led the Company to many successes, including the initial public offering of the Company's shares for trading on the TASE in 2011 and subsequent by turning it into a leading automotive group in Israel, in the area, through the importation of new vehicle brands including Cherry and XPeng, heavy mechanical equipment, the acquisition of Metro Motor, holding one of the leading leasing companies in Israel, expanding the Company's business activity, diversifying the Company's financing sources through the issuance of BONDS series and equity issuance on the TASE, as well as building additional growth engines, including expanding the financing activity and insurance agency and promoting the Company's activity in selling vehicle outside Israel. It should also be noted that Weitz managed the Company skillfully in a way that strengthened its activity while the Company successfully navigated through crises stemming from the security situation in Israel and geo-political changes and their implications on the automotive industry, the Israel economy, and vehicle importers in particular. In light of the foregoing, the members of the Compensation Committee and the Company's Board of Directors believe that the said inconsistencies of Weitz's employment agreement with the Compensation Policy are reasonable, and that Weitz's total existing compensation components are reasonable and fair and reflect his contribution to the Company. $< / p> < /$ div $>2.5$ . $< /$ div $>$ Asparto f the Company's Board of Directors' discussions, as detailed above, the Board of Directors decided that the Compensation Policy shall not apply with respective senior officers in corporations under its control, who are not officers serving in the Company. $< /$ div $> < /$ div $>2.6$ . $< /$ div $>$ As of this date, the entry into force of the Updated Compensation Policy is contingent upon its approval by the General Meeting summoned according to this immediate report (or alternatively, should the said General Meeting approval not be received, upon its approval by the Compensation Committee and the Company's Board of Directors, in accordance with the irauthority to do sounder the provisions of Section 267A(c) of the Companies Law). $< /$ div $> < /$ div $>$ The Approval Required for the Entry into Force of the Updated Compensation Policy $< /$ h2 $> < /$ div $> < /$ div

The entry into force of the Updated Compensation Policy is contingent upon receiving the approval of the General Meeting of the Company's shareholders, summoned pursuant to this immediate report, by a majority as detailed in Section 7 below. $< / p > < / \text{div} > 4$ . $< / \text{div} > \text{Names of the Directors who Participated in the Decisions of the Compensation Committee and the Board of Directors} < / h2 > $< / \text{div} > 4$ . 1. $< / \text{div} > \text{The decision of the Company's Compensation Committee dated March 26, 2024, in which the Updated Compensation Policy was approved, was participated in by Msrs. Varda Truax (External Director), Lior Hans (External Director), and Moshe Litvak (Independent Director). There were no opponents among the members of the Compensation Committee to the approval of the Updated Compensation Policy. $< / \text{div} > < / \text{div} >$

million NIS; a grant in the amount of $2\%$ of the profits above 90 million NIS up to 130 million NIS; a grant in the amount of $2.5\%$ of the profit, above 130 million up to 170 million NIS; a grant in the amount of $3\%$ of the profits above 170 million NIS. All amounts are linked to the index known on December 31, 2010, compared to the index at the end of the year for which the compensation is paid. $< / p > 3 < / \text{div} > < / \text{footier} > < / \text{main} > 4.2 < / \text{div} > \text{The decision of the Company's Board of Directors dated May 26, 2026, in which the Updated Compensation Policy was approved, was participated in by Msrs. Yoel Carasso, Tzipora Mizrahi, Ariel Carasso, Yoram BenHaim, Sara Carasso Bouton, Orly Hoshen, Yoni Goldstein Carasso, Nili Benjamin, Moshe Carasso, Moshe Litvak (Independent Director), Lior Hans (External Director), and Varda Truax (External Director). There were no opponents among the members of the Board of Directors to the approval of the Updated Compensation Policy. $< / \text{div} > < / \text{section} > 5. < / \text{div} >$ Identity of the controlling shareholders in the Company and the rights granting them control of the Company, including their holdings of voting rights and issued and paid-up capital of the Company and voting agreements relating to such voting rights to which they are a party $< / \text{h2} >$

As of the date of this report, Msrs. Tzipora Mizrahi, Ariel Carasso, Yoel Carasso, Moshe Carasso, Yoni Goldstein Carasso, Orly Hoshen, and Sara Carasso Bouton, are the controlling shareholders in the Company $< \text{sup} > 6 < / \text{sup} >$ (hereinafter: $< \text{spanclass} < \text{font - bold} >$ "the controlling shareholders in the Company" $< / \text{span} >$ ) by virtue of the Shareholders Agreement dated July 30, 2024, among these shareholders (hereinafter: $< \text{spanclass} < \text{font - bold} >$ "the Shareholders Agreement" $< / \text{span} >$ ), which replaced the previous Shareholders Agreement from 2011. $< \text{sup} > 7 < / \text{sup} > < / \text{p}>$

It should be noted that in accordance with the Shareholders Agreement, the controlling shareholder since the Company act in concert regarding their voting in the Company's General Meeting. $< / \mathrm{p}> < /$ div $> < /$ section $>6$ . $< /$ div $>$ The Record Date for Participation in the Meeting $< / h2>$

In accordance with Section 182(c) of the Companies Law and in accordance with Regulation 3 of the Companies Regulations (Written Voting and Position Statements), 2005, any person who will be a shareholder of the Company on Monday, June 8, 2026 (hereinafter: "the Record Date" ), will be entitled to participate in the Meeting and vote therein in person or by proxy, pursuant to a letter of appointment, or a copy thereof to the satisfaction of the Board of Directors or a person authorized by it, which shall be deposited at the Company's offices in the state of the United States, and the other members of the Company, with respect to an unregistered holder of the Company's shares ⁸ sup>, by means of a voting paper that will be transmitted to the Company in the electronic voting system (pursuant to Subsection B of Chapter G2 of the Securities Law) (hereinafter: "the Electronic Voting System" ) upto 6 hours before the time of the Meeting convening ⁹ sup> or by means of a voting paper in the form at attached to this immediate report (hereinafter: "the Voting Paper" ) which shall be submitted to the Company upto 4 hours before the time of the Meeting convening, subject to proof of ownership of shares in accordance with the Companies Regulations (Proof of Ownership of a Share for the Purpose of Voting at a General Meeting), 2000. $< / \mathrm{p}> < /$ div $> < /$ section $>7$ . $< /$ div $>$ The Required Majority $< / h2> < /$ div $> < /$ section $>7.1 < /$ div $>$ Therequired Majority for the approval of the Updated Compensation Policy, as detailed in Section 2 above, is as stated in Section 267A(b) of the Companies Law, according to which a majority of the votes of the shareholders present participating in the vote (whether directly or indirectly via proxy or voting paper or via voting in the Electronic Voting System) is required, provided that one of the following is met: (1) The majority votes in the Meeting shall include a majority of all votes of shareholders who are not controlling shareholders in the Company or persons having a personal interest in the approval of the Compensation Policy, participating in the vote; in the count of total votes of shareholders $< /$ div $> < /$ section $> < /$ div $>6 < /$ span>

Holding the Company's shares directly and through private companies under their full ownership and control. $< / \mathrm{p}> < /$ div $>7 < /$ span>

For further details regarding the new Shareholders Agreement see Section 6.8 of the Company's Board of Directors Reports of June 30, 2024, as published by the Company on August 21, 2024 (Reference No.: 2024-01-085773). $< / \mathrm{p}> < /$ div $>8 < /$ span>

As defined under Section 177(1) of the Companies Law. $< / \mathrm{p}> < /$ div $>9 < /$ span>

The closing date of the Electronic Voting System as determined by the Securities Authority. $< / \mathrm{p}> < /$ div $> < /$ div $>4 < /$ div $> < /$ footer $> < /$ main>

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said shares shall not be taken into account in the count of abstaining votes; the provisions of section 276 of the Companies Law shall apply to anyone who has a personal interest, with the necessary changes; (2) the total opposing votes among the shareholders mentioned in subparagraph (1) above did not exceed a rate of two percent (2%) of the total voting rights in the company.

7.2. It should be emphasized that in accordance with the provisions of section 276 of the Companies Law, a shareholder participating in the vote to approve the updated compensation policy, as specified in section 2 above, shall notify the company before the vote in the meeting or, if the vote is via a voting paper – on the voting paper, whether they are among the controlling shareholders of the company and/or if they have a personal interest, as the case may be, in the approval of the item on the agenda as stated or not; if a shareholder did not so notify, they shall not vote and their vote shall not be counted.

Quorum

No discussion shall be opened at the general meeting unless a quorum is present within half an hour from the time set for its opening. A quorum for holding the meeting shall be formed when at least two (2) shareholders holding together at least one quarter (1/4) of the voting rights in the company (hereinafter: the "Quorum") are present, themselves or by proxies. If after half an hour from the time set for the meeting a quorum is not found, the meeting shall be adjourned to Tuesday, July 7, 2026, at the same time and place (hereinafter: the "Adjourned Meeting"). If at the adjourned meeting a quorum is not found after half an hour from the time set for the adjourned meeting, the adjourned meeting shall be held with any number of participants.

Inclusion of Additional Items on the Agenda of the Meeting

A shareholder, one or more, who holds at least one percent of the voting rights in the company, may request the company's board of directors to include a topic on the meeting's agenda, provided that the topic is suitable to be discussed in the meeting, in accordance with the determination of the company's board of directors (hereinafter: the "Additional Topic"). A request by a shareholder to include the additional topic on the meeting's agenda shall be delivered to the company up to (7) seven days after the meeting invitation according to this report. If such a request is submitted, the additional topics may be added to the meeting's agenda and their details will appear on the distribution site of the Israel Securities Authority: www.magna.isa.gov.il (hereinafter: the "Distribution Site"). It will be clarified that the publication of the updated agenda (including the additional topics), if updated, does not change the record date (as defined above).

Voting in Writing

A shareholder may vote in the meeting using a voting paper as detailed below.

a. The website addresses where the version of the voting paper and position statements as defined in sections 87 and 88 of the Companies Law can be found are as follows: the Distribution Site as defined in section 9 above, and the website of the Tel Aviv Stock Exchange Ltd: www.tase.co.il (hereinafter: the "TASE Website");

b. Voting in writing shall be done on the second part of the voting paper, as published on the Distribution Site;

c. A shareholder may contact the company directly and receive from it the version of the voting paper and position statements;

d. A TASE member shall send, free of charge, by e-mail, a link to the version of the voting paper and position statements, on the Distribution Site, to every shareholder who is not registered in the shareholder register and whose shares are registered with that TASE member, if the shareholder notified that they are interested in it, provided that the notice was given regarding a specific securities account and at a time prior to the record date;

e. A shareholder whose shares are registered with a TASE member is entitled to receive ownership confirmation from the TASE member through which they hold their shares, at the branch of the TASE member or by mail to their address for shipping fees only, if requested. A request in this matter shall be given in advance for a specific securities account;

f. The deadline for delivering the voting papers to the company through the electronic voting system is 6 (six) hours before the meeting time, while the deadline for delivering the voting papers by manual delivery to the company is up to 4 hours before the meeting time;

g. The deadline for delivering position statements to the company is up to 10 (ten) days before the meeting date;

h. The company may deliver to the Israel Securities Authority and the stock exchange a position statement that will include the response of the Board of Directors as stated in section 88(c) of the Companies Law up to 5 (five) days before the meeting date;

i. The company shall send free of charge, to the shareholders registered in the shareholder register, a voting paper on the day of publication of the notice of the general meeting.

Review of Documents

The shareholders of the company will be able to review, upon their request, any document regarding the item on the agenda at the company's offices, at the Re'em Park Logistics Center, Bnei Ayish, during accepted working hours, by prior coordination with Mr. Nir Farber, the Legal Counsel and Company Secretary at phone: 08-8631111 and also on the Distribution Site as defined in section 9 above.

Sincerely,

Carasso Motors Ltd.

Signed by:

Dror Shila, CFO

Adv. Nir Farber, Legal Counsel and Company Secretary

Appendix A - The Updated Compensation Policy

Officers' Compensation Policy

in Carasso Motors Ltd.

May 2026

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1. Introduction

1.1 The purpose of this document is to describe and detail the Company's policy regarding the compensation of the officers of Carasso Motors Ltd. (hereinafter: the "Company"), its components and the manner of its determination, among others, in accordance with the Companies Law (Amendment No. 20), 5773-2012 (hereinafter: "Amendment 20", "Compensation Policy", as the case may be).

1.2 The compensation policy is a tool for the Company through which it can, if necessary, incentivize and reward the officers. The compensation components to which the officers will be entitled will only be those that have been individually approved for them by the authorized organs of the Company and subject to the provisions of any law¹.

2. Validity of the Compensation Policy

2.1 The compensation policy will enter into force as of the date of its approval by the General Meeting (or its re-approval, as the case may be) with effect from the date of expiration of the previous compensation policy and for a duration of 3 years in accordance with the provisions of the Companies Law, 5759-1999 and its regulations as updated from time to time (hereinafter: the "Companies Law"), i.e., until January 12, 2029. Changes to the compensation policy will be brought for approval in accordance with the law applicable at that time. The Company has the right to change the compensation policy at any time, in accordance with the provisions of the law.

2.2 The compensation committee will examine the compensation policy, the need to update it, and the manner of its implementation from time to time, and will recommend to the Company's Board of Directors its update if necessary.

2.3 As of the date of approval of this compensation policy document, there are compensation mechanisms in the Company for officers in the Company, to which the Company is committed by virtue of signed employment agreements. Nothing in the compensation policy shall derogate from the provisions of the employment agreements and terms of office of officers in the Company, which were approved prior to the approval of the compensation policy in the Company and before the entry into force of Amendment 20. However, the renewal or updating of such existing agreements and terms will be carried out taking into account the compensation policy.

Furthermore, the Company will strive, within the framework of entering into new employment agreements and/or management agreements/renewal of existing agreements, to implement and apply the principles of the compensation policy included below, subject to the Company's ability to deviate from this compensation policy, as required and subject to the provisions of the law.

2.4 If and to the extent that after the date of approval of the compensation policy in accordance with the provisions of the Companies Law, leniencies are determined in the law, regulations, or orders issued thereunder regarding mandatory requirements or threshold conditions that must be included in the compensation policy as of the date of its approval, the said leniencies will be seen as included in the compensation policy despite any other provision stipulated therein, all subject to the approval of the compensation committee and the Board of Directors.

¹ It is clarified that the adoption of the compensation policy by the Company does not grant any right to the officers therein.

3. Authorized Organs for Approving Compensation Terms in the Company

3.1 Approval of employment terms and changes to the compensation plans of officers within the framework of the policy will be discussed and approved by the authorized organs of the company in accordance with the provisions of any law and taking into account the compensation policy. In this regard, it will be noted, that a non-material change in the terms of office and employment of a VP, within the limits established in the compensation policy, shall be approved by the CEO of the company only, provided that his terms of office and employment are consistent with the compensation policy.

3.2 The company's board of directors is responsible for the compensation policy and its implementation and for all actions required for this purpose, including the authority to interpret the provisions of the compensation policy in any case of doubt regarding the manner of its implementation.

4. Guiding Principles When Constructing the Compensation Policy

4.1 The compensation policy attempts as much as possible to reflect the creation of appropriate and balanced incentives for officers of the company, taking into account, among other things, the company's objectives, the officer's role, and the risk management policy in the company. The compensation policy defines a compensation structure, the purpose of which is to incentivize officers to act to achieve goals that will promote the company's objectives, its work plan both in the immediate term and in a long-term view, including the proper ratio between variable and fixed components of the total compensation package, and this, among other things, in order not to encourage the relevant officer to take risks that are not in accordance with the company's policy in this regard while emphasizing balancing the need to retain senior officers in the company.

4.2 Recruiting and retaining high-quality, outstanding managers who constitute the solid foundation for managing the company, among other things, in light of the company's manpower structure, their status and their senior role as officers, the continued development of the company and its success over time.

4.3 In determining variable components in the terms of office and employment of officers in the compensation policy, the officer's contribution to achieving the company's goals and maximizing its profits is expressed, among other things, in a long-term view and in accordance with the officer's role.

4.4 The compensation policy reflects consideration of the company's size, character, and the complexity of its operations.

4.5 The policy will apply to all officers in the company as defined in the Companies Law.

5. Compensation Policy

5.1 General

As a rule, compensation plans for officers are adapted to their role and areas of responsibility in the company and to achievable goals, which are set for them as part of performing their role for the purpose of promoting company objectives, its work plan and its policy in a long-term view.

5.2 Objectives of the Compensation Policy:

A. Promoting the company's objectives, its work plans and its policy, in a long-term view;

B. Creating appropriate incentives for officers, taking into account, among other things, the company's objectives, the role of the officer and the company's risk management policy;

C. Recruiting and retaining high-quality, outstanding managers who constitute the solid foundation for managing the company, its continued development and success over time.

5.3 Considerations when determining terms of office and employment for officers:

A. Taking into account the education, skills, expertise, professional experience and achievements of the candidate for office or the serving officer;

B. Taking into account the nature of the role, areas of responsibility, period of employment and previous agreements with the officer (as long as it is not a new officer);

C. The size of the company, the activity relevant to the officer's role and the nature of its operations;

D. Recommendation of the officer's superior;

E. The officer's contribution to achieving company goals and maximizing its profits, all in a long-term view and in accordance with the officer's role (regarding variable compensation components);

F. The ratio to the level of earnings² of the company's employees and its managers – upon approval of compensation for an officer, data shall be presented regarding: (1) The compensation of officers at a similar level in the company (as far as relevant); (2) The salary of the previous officer in the same role (as far as relevant); (3) The average salary and median salary of company employees and contractor employees employed at the company and the ratio between each of these and the compensation proposed to be approved for the officer – in this context, the impact of the gap between the terms of office of the officers and the salary terms of the rest of the employees in the company on work relations in the company will be examined;

G. Comparison to the level of earnings of officers in similar roles in similar companies. Similar companies in this regard will be companies that are similar to the company in terms of the nature and industry of activity and relevant financial data such as market value, total balance sheet, revenues and/or all of these parameters in accordance with the nature, size of the company and its type of activity. In addition, the company will strive for the number of companies in its comparison group not to be less than 7 companies;

H. The company's financial condition.

Below are detailed guidelines of the compensation policy in the company as approved by the compensation committee and the Board of Directors, regarding all components of the compensation plans.

² Employer's cost.

5.4 Definitions

For convenience, below are definitions of key terms appearing in this compensation plan:

"The Company" Carasso Motors Ltd.

"Compensation Policy" Policy regarding the terms of office and employment of officers in the Company, as the meaning of the term in Section 267A(A) of the Companies Law, 5759 - 1999.

"The Index" Consumer Price Index.

"Fixed Salary Cost" Base salary including fixed grants, as relevant, social benefits, and study fund.

"Monthly Consideration" Fixed salary cost, per month.

"Employment Cost" Total cost of employment of an employee to the Company (i.e., including variable grant and equity compensation).

"Gross Base Salary" Salary without fringe benefits and social benefits.

5.5 Fixed Salary Components

Fixed salary - intended to reward the officer for the time he invests in performing his role in the Company on an ongoing basis. Fixed salary reflects both the officer's skills and professional experience and his role definition and role level in the Company, including the authority and responsibility deriving from them.

A. Base Salary:

The Company may update the salary of the Company's CEO up to a real ceiling of $15\%$ in three years and the salary of officers subordinate to the CEO up to a real ceiling of $30\%$ in three years (the calculation base for salary updates will be the gross base salary, correct as of the approval of the compensation policy, without fringe benefits and social benefits).
Officers expected to work in the Company – their salary will be determined in accordance with the considerations for determining the terms of office and employment of officers listed above.
The salary may be linked to the Index partially or fully. Linking the salary will be done, if at all, individually according to the Company's discretion and in accordance with the officer's employment agreement.
Due to the officers holding a senior management position, officers will not be entitled to compensation for overtime work or for work during the weekly rest time.
Below is a breakdown of the gross base salary ceiling (monthly) of the officers, based on 100% position:

Officer Name and Position	Gross Base Salary Ceiling per Month
CEO	Up to 220 thousand NIS

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Activity Manager	Up to 175 thousand NIS
VPs and other officers reporting to the CEO	Up to 115 thousand NIS

B. Periodic salary review - In order to enable the retention of officers in their positions over time, the Compensation Committee will discuss, from time to time, the level of the fixed salary of the officers in the company (all or part of them, as applicable) compared to the relevant market for similar positions and compared to the business situation of the company and in accordance with the considerations mentioned above, it will recommend to the Board of Directors whether to approve a salary update, and if so, the amount of the update.

Notwithstanding the foregoing, an increase in the fixed salary of an officer reporting to the CEO, at a rate of up to 10% only of the employment cost in annual terms, shall not be considered a material change in the terms of tenure and employment of the officer, provided that the above does not deviate from the compensation policy as a result of the said change.

C. Ancillary conditions:

Within the framework of the terms of tenure and employment of the officers, ancillary conditions and social provisions are included in accordance with the law and company practice.
Fixed cash bonus - The officer may be entitled to a fixed cash bonus that is not performance-contingent, such as a fixed annual bonus, 13th salary or any other fixed compensation as stated, in accordance with their employment agreement⁵.
Ancillary conditions include, among others, vacation, convalescence, contributions to remuneration and severance, and contribution to a study fund.
The company is entitled to provide the officer, for the purpose of fulfilling their role, a car, mobile phone, laptop, etc., as determined by the company's management. The company is entitled to determine that it will bear all expenses associated with these ancillary conditions. The company is entitled to determine in the engagement with the officer that it will bear some or all of the officer's expenses incurred for the purpose of fulfilling their role, including telephone, internet, accommodation (in Israel and abroad), per diem, hospitality, travel expenses in Israel and abroad, newspapers, academic studies, professional literature, membership fees in a professional organization, etc.
The officers may receive a discount on the purchase and sale of vehicles, receiving garage services, insurance and financing, in accordance with the company's work procedures.
Officers providing services to the company within the framework of a service agreement with a company under their control, payment will be made against an invoice and will include the fixed salary and all ancillary conditions and benefits (except for reimbursement of expenses).
Changes in ancillary conditions will be examined as part of the total fixed component in reference to the ratios defined by the company between variable and fixed components in the compensation package.
The ancillary conditions will be examined by the Compensation Committee and the Board of Directors as part of a periodic review of the total volume of expenses and will be updated as necessary.

⁵ For the avoidance of doubt, it is clarified that a fixed cash bonus is an integral part of the fixed salary component, as applicable.

5.6 Variable Compensation - Target-based Bonus (hereinafter in this subsection: the "Bonus" or the "Variable Compensation" as applicable)

A. General:

The variable component will reflect the officer's contribution to achieving the company's goals and maximizing its profits, in the short term and with a long-term view, according to measurable criteria.
The variable component will be determined in alignment with the company's performance and the officer's personal performance against the goals defined for them within the framework of fulfilling their role according to their areas of responsibility.
The company's compensation policy is that significant weight is given to meeting targets, derived from the company's annual and multi-annual work plan and/or the company's strategic plan. The company's targets express the company's success as a whole in realizing its plans, the contribution of the officers to the company's success, and the company's desire to reward officers for meeting these targets.
The targets will include measurable targets reflecting the company's goals and strategy in the short and long term in order to create an identity of interests between the company, the shareholders and the officers, in promoting the company's goals and strategy as stated. The bonus based on measurable criteria as stated will be derived and calculated on the basis of the measurable targets but will not exceed the bonus cap, as detailed below.
The company's Board of Directors, upon the recommendation of the Compensation Committee, shall have the authority to reduce up to $20\%$ of the bonus amount, taking into account the reasonableness of the bonus received from meeting targets compared to the officer's contribution to achieving them and the company's business and financial situation. Furthermore, the Board of Directors shall have the authority to cancel the bonus payment to a certain officer in cases of breach of fiduciary duty, breach of the engagement agreement, and/or improper management.

B. Applicability

The company's CEO and officers reporting to the CEO may be entitled to variable compensation.

C. Cumulative Threshold Conditions for Granting Variable Compensation:

Profit test - The company will present in the consolidated annual financial report of the company, for the relevant compensation year, profit for the period (for this purpose, profit means net profit) and this is in accordance with the audited financial reports of the company for that year.
Solvency test - During the relevant calendar year, the company fully met the repayment terms of principal, interest and linkage differentials in respect of BONDS it issued, to the extent it issued, and loans provided to it by banking corporations and institutional bodies, which were in circulation in that year.

Failure to meet one or more of the above threshold conditions means that the officers will not be entitled to a bonus in the relevant calendar year.

D. Components of Variable Compensation

The level of the variable component will be determined in a model that can include two components:

Measurable targets - financial and operational;
Discretionary component - the compensation component, which is not based on evaluation according to measurable criteria.

E. Component Weights in the Compensation Model of the Total Variable Compensation (as the term is defined in section 5.6 above) (hereinafter: the "Compensation Model")

Name and Position of Officer	Financial Targets	Operational Targets	Discretion	Total
CEO	0%-80%	0%-40%	Not to exceed 20% or 3 monthly remunerations per year, according to the higher	100%
Activity Manager	0%-40%	0%-60%	Up to 100%	100%
VPs and other officers reporting to the CEO	0%-80%	0%-40%	Up to 100%	100%

F. Financial targets - Financial targets will be defined for officers from time to time in accordance with their areas of responsibility and their ability to influence the meeting of these targets. These targets, as defined each year, may include, among others, the following targets: profit before tax (consolidated or solo, as applicable), return on equity, equity, gross profit, selling expenses, financing expenses, operating profit and net profit (according to financial statements, audited or reviewed). The target mix, their weight and minimum target achievement rate entitling to variable compensation, will be determined from time to time by the company, subject to any law.

G. Operational targets - Operational targets will be defined for officers each year in accordance with their areas of responsibility and their ability to influence the meeting of these targets. These targets, as defined each year, may include, among others, the following targets: number of vehicles sold (brands according to the matter), market share (brands according to the matter) and operating expense change rate in reports (selling, general and administrative). The target mix, their weight and minimum target achievement rate entitling to variable compensation, will be determined from time to time by the company, subject to any law.

H. A change of up to $20\%$ in the relative weight of each quantitative index and/or a change of up to $20\%$ in a certain measurable target and/or in a parameter for determining a bonus in the parameter scale with a forward-looking view only, will not be considered a material change in the terms of tenure and employment of the officer.

I. The bonus for officers for measurable targets (financial and operational) is calculated as follows: The bonus for officers will be based on meeting targets in accordance with the compensation model weights table. For each target included in the compensation model, a range of target achievement will be defined. The compensation to which the company's officers will be entitled will be calculated as detailed below:

Company CEO

The maximum bonus for meeting targets (hereinafter: the "Target Bonus") for the company's CEO stands at 18 monthly remunerations.

Target Achievement Rate	Compensation in terms of target bonus / bonus caps
From 0% to 80% (exclusive)	-
From 80% to 90% (exclusive)	20%
From 90% to 100% (exclusive)	50%
From 100% to 125%	Linear compensation up to 18 monthly remunerations

The company will publish within regulation 21 of chapter D of the Periodic report the main measurable targets for which bonuses were actually paid to the CEO (unless based on the same target less than 3 monthly remunerations were paid and subject to the provisions of the law).

Officers reporting to the CEO

Below are the target bonuses for officers reporting to the CEO divided as follows:

Activity Manager: 15 monthly remunerations;

VPs: 12 monthly remunerations;

Other officers reporting to the CEO: 6 monthly remunerations.

Target Achievement Rate	Compensation in terms of target bonus/bonus caps
From 0 to 80% (exclusive)	-
From 80% to 90% (exclusive)	20%
From 90% to 100% (exclusive)	40%
100%	50%
From 100% to 133%	Linear compensation up to the target bonus

J. Discretionary component – As detailed above, the variable compensation of officers reporting to the CEO may be granted based on qualitative criteria that are not measurable, i.e., at discretion alone, including CEO evaluation, taking into account the officer's contribution to the company. With reference to the company's CEO, the variable compensation according to discretion as stated shall not exceed a total of 20% or 3 monthly remunerations per year, according to the higher.

K. Annual bonus caps for officers

In terms of monthly remunerations (as of December of the calendar year for which the compensation is granted), the annual bonus caps for officers are as follows:

CEO: 18 monthly remunerations.
Activity Manager: 15 monthly remunerations.
VPs: 12 monthly remunerations.
Other officers reporting to the CEO: 6 monthly remunerations.
Not including special bonus as detailed below.

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L. Additional Topics:

Special Bonus: The company's long-term strategy is multi-year growth and expansion of activities. This strategy is reflected in the compensation mechanism by providing a special bonus in the case of extraordinary events and/or performance, subject to the approval of the Compensation Committee and the Company's Board of Directors (as applicable), for reasons that will be recorded. In the event of such an event, as defined in the Company's annual budget, officers defined by the Board of Directors may be entitled to a special bonus, which will not exceed 25% of the annual employment cost for the officer. It should be noted that a special bonus is not related to the annual bonus and is not subject to the above ceilings.
Offsetting amounts in case of loss: In the event that in a certain year the Company has a consolidated annual loss, such loss will be offset from the subsequent consolidated annual profit for the purpose of calculating the bonus for the profit target in the subsequent year.
Timing of bonus payment: The bonus will be paid to the officers for each calendar year of the employment period no later than the payment date of the first salary after the date of approval of the Company's annual financial reports. The payment for the said compensation may be made on a quarterly or annual basis, according to the bonus terms that will be set for the officers.
Partial bonus and qualification period: An officer will be entitled, as far as they are entitled, to a bonus only on the condition that they were employed by the Company for at least half a year in the calendar work year for which the compensation is granted. If the officer finishes their role before the end of the relevant year, the bonus for the year of termination of their tenure will be calculated proportionally to the tenure period in that year.
Unless explicitly stated otherwise in a personal employment agreement, any payment paid to the officer as variable compensation according to this compensation policy, as far as it is paid, is not and will not be considered part of the officer's regular salary for any purpose and will not constitute a basis for calculation or eligibility or accrual of any ancillary right, including, and without derogating from the generality of the foregoing, will not serve as a component included in the payment of vacation, severance pay, contributions to provident funds, and the like.
After the payment of a bonus to the officers, no net loss will be recorded. If it turns out that the calculation of the compensation for all officers (hereinafter: "Total Calculated Bonuses") brings the Company to record a loss, the Company will be able to distribute a bonus amount up to the zeroing of the net profit (hereinafter: "Total Actual Bonuses"). The distribution of bonuses will be done such that each officer will receive their share of the Total Actual Bonuses according to the proportion of the calculated bonus for them out of the Total Calculated Bonuses.
Taxation: To the extent there is any tax liability or other mandatory payment (National Insurance, State Health Insurance, etc.) for and/or due to the plan, it will be borne by the officer according to law (as far as it applies to the officer according to law).

Variable Compensation - Equity Component (hereinafter: "Equity Compensation")

Equity compensation constitutes an appropriate mechanism for the retention and incentivizing of officers while creating an alignment of interests between the officers and the shareholders and maintaining a proper balance between short-term and long-term considerations, among other things by determining a full vesting period and providing share-based payment that is not in cash flow at the time of its grant. Thanks to the long term of equity compensation plans, they support the Company's ability to retain its senior managers in their positions for a long period.

B. The Company shall be entitled to use a variety of additional equity instruments such as restricted shares (at a rate of up to 25% of the value ceiling of the equity compensation or up to three monthly salaries), performance-based restricted stock units, phantom options, etc.

C. When determining an equity compensation plan, the annual value ceiling of the non-cash-settled equity variable components at the time of their grant is up to 18 monthly salaries for the Company's CEO and up to 12 monthly salaries for officers reporting to the CEO (as of the date of allocation). The annual ceiling is calculated as if the equity expense is spread linearly during the vesting period.

D. The Compensation Committee and the Board of Directors will determine which of the officers will be included in the specific plan, as far as it is approved.

E. The minimum holding or vesting period of variable equity components in tenure and employment conditions is 4 years, and not less than 12 months for the first tranche.

F. To the extent that share-based compensation is granted within the framework of equity compensation, the exercise price of this equity compensation shall not be less than the average price of the Company's share on the Tel Aviv Stock Exchange Ltd. during up to 30 trading days preceding the date of grant.

G. The lifespan of the share-based payment to be granted under an equity compensation plan shall not exceed 8 years from the date of its grant.

H. The Company shall be entitled to determine full acceleration of equity compensation for an officer in the event of death, disability, medical reasons, and change of control as a result of which trading in the Company's shares will be terminated. To the extent that the Company is requested to determine acceleration as a result of a change of control in the Company in the event of termination of employment, acceleration of the next tranche that has not yet vested will be possible.

CEO Employment Cost Ceiling

5.8

Notwithstanding anything stated in the compensation plan, the employment cost for the Company's CEO per year shall not exceed a total of NIS 13 million plus linkage to the index increase compared to the index of April 2026. To the extent that the actual compensation exceeds the employment cost ceiling, the variable compensation will be reduced from the employment cost first, followed by the equity compensation, as required.

Retirement Terms

5.9

A. The Company's officers are entitled to a prior notice ranging between 90 to 180 days and to severance pay in accordance with their employment agreements. Officers do not have retirement bonuses in their employment agreements.

B. The Company shall have the option to provide a retirement/adjustment bonus to a retiring officer, in accordance with the conditions detailed below, beyond the compensation for the prior notice period.

C. Generally, the retirement/adjustment bonus will not be granted to an officer with a seniority of less than two years in the Company and will not exceed 6 monthly salaries (as of the retirement date).

D. A retirement bonus will be conditioned upon the fulfillment of the non-compete conditions in the officer's employment agreements.

E. The Company's Board of Directors will decide on the granting of a retirement bonus considering the recommendation of the Compensation Committee, while referring to the following parameters: period and terms of tenure and employment, Company performance during said period and the officer's contribution to achieving the Company's goals and maximizing its profits, and circumstances of retirement (without harming the Company).

Ratio between variable components in their entirety and fixed components in the compensation package 7

A. CEO: The variable compensation component shall not exceed 80% of the total compensation package.

B. VPs and other officers reporting to the CEO: The variable compensation component shall not exceed 70% of the total compensation package.

Clawback of variable compensation in case of error

5.11

If it turns out that an annual bonus or part of it paid to an officer was calculated based on data that later turned out to be erroneous, within a period of 3 years from the payment date of the relevant bonus, the officer shall return to the Company, or the Company shall pay to the officer, as the case may be, the difference between the amount of the bonus they received and the one they were entitled to due to the said correction (while factoring in differences, as far as they exist, in payments and tax liabilities applicable to the officer and/or paid by them). An officer shall not be required to return amounts and the Company shall not pay an officer any payment, as stated in this section above, in a case where the bonus the officer was entitled to after the correction of the financial reports is lower or higher (as applicable) by up to 10% of the bonus actually paid to the officer for that same year. Furthermore, such clawback shall not apply in the event of an update or correction of the financial reports as a result of a change in accounting standards or reporting rules.

The return of the amounts by the Company, as far as relevant, will be performed on the date of payment of the first salary after the publication of corrected financial reports, while the return of the amounts by the officer will be performed by way of offsetting from the annual bonus in the subsequent year, as far as relevant, with the balance, if any, being settled within the framework of the monthly salary spread over 12 payments.

7 A deviation from the stated ratio of 5-7% will not be considered a deviation/exception from the compensation policy.

The ratio between the officer's employment terms and the employment terms of the company's employees

5.12

The Compensation Committee and the Company's Board of Directors, when approving/determining terms of office and employment for officers, will examine the ratio between the terms of office and employment of the officers in the Company and the employment terms of the rest of the Company's employees (including contractor employees) and specifically the ratio to the average and median salary of such employees and will express their opinion on the influence of these ratios on labor relations in the Company, the reasonableness of the officers' salaries in the Company in light of the type of company, its size, and its employee base mix.

As of the date of approval of the compensation policy in the Company, the ratio between the cost of the salary of the CEO and the VPs in it to the average salary cost of the rest of the employees in the Company is 56.2 and 6.1 respectively, and the ratio between the cost of the salary of the CEO and the VPs in it to the median salary cost of such employees is 67.5 and 7.4 respectively.

The matter was discussed in the Compensation Committee and the Board of Directors, and in the estimation of the Compensation Committee and the Company's Board of Directors, these ratios have no influence on the labor relations in the Company.

Directors' Compensation

5.13

Directors in the Company will be entitled to compensation that will not exceed the maximum compensation according to the Companies Regulations (Rules regarding Compensation and Expenses of an External Director), 2000 (hereinafter: "the Compensation Regulations").

Insurance, Indemnity, and Exemption

5.14

A. An officer in the Company (including the directors) may be entitled, in addition to the compensation package as stated in this compensation policy, and subject to the approval of the authorized organs in the Company, to officer liability insurance as is customary in the Company (including Run-Off type insurance), all subject to the provisions of any law and the Company's articles of association. The coverage ceiling will be within liability limits of up to 80 million US dollars⁹. The Company shall be entitled, with the approval of the Compensation Committee only, to enter into an agreement with an insurance company (provided that the agreement is on market terms, in the ordinary course of business, and it is not likely to materially affect the Company's profitability, assets, or liabilities) in liability insurance policies for all directors and officers in the Company, as they will be from time to time, including directors and/or officers who may be considered controlling shareholders in the Company, under the terms as stated above.

B. The directors and officers may be entitled to letters of indemnity, subject to the provisions of the law, in an amount of up to 25% of the Company's equity, in accordance with the provisions of the Company's articles of association.

C. The directors and officers may be entitled to letters of exemption in accordance with the Companies Law and the provisions of the Company's articles of association, provided that the exemption granted as stated will not apply to a decision or transaction in which a controlling shareholder or any officer in the Company (even an officer other than the one for whom the letter of exemption is granted) has a personal interest.

8 Based on the employment cost for April 2026, including an estimate of payments paid on an annual basis.

9 Currently, the coverage ceiling stands at 40 million US dollars per claim and in total per insurance period.

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Appendix B - Compensation Policy marked relative to the previous compensation policy

Officer Compensation Policy at Carasso Motors Ltd.

May 2026

1. Introduction

1.1 The purpose of this document is to describe and detail the Company's policy regarding the compensation of the officers of Carasso Motors Ltd. (hereinafter: the "Company"), its components and the manner of its determination, among other things, in accordance with the Companies Law (Amendment No. 20), 2012 (hereinafter: "Amendment 20", "Compensation Policy", as applicable).

1.2 The Compensation Policy is a tool for the Company through which it can, if necessary, incentivize and reward the officers. The compensation components to which the officers will be entitled shall only be those that were individually approved for them by the authorized organs of the Company and subject to the provisions of any law¹.

2. Validity of the Compensation Policy

2.1 The Compensation Policy shall enter into effect as of the date of its approval by the General Meeting (or its re-approval, as applicable) effective from the date of the conclusion of the previous compensation policy and for a period of 3 years in accordance with the provisions of the Companies Law, 1999 and its regulations as updated from time to time (hereinafter: the "Companies Law"), namely until January 12, 2029. Changes to the Compensation Policy will be brought for approval in accordance with the law applicable at that time. The Company reserves the right to change the Compensation Policy at any time, in accordance with the provisions of the law.

2.2 The Compensation Committee will examine the Compensation Policy, the need to update it, and the manner of its implementation from time to time, and will recommend its update to the Company's Board of Directors as necessary.

2.3 As of the date of approval of this Compensation Policy document, there are compensation mechanisms for officers in the Company to which the Company is committed by virtue of signed employment agreements. Nothing in the Compensation Policy shall derogate from the provisions of the employment agreements and terms of service of officers in the Company which were approved prior to the approval of the Compensation Policy in the Company and prior to the entry into force of Amendment 20. Nevertheless, the renewal or updates of existing agreements and terms as stated shall be performed taking the Compensation Policy into consideration. Furthermore, the Company shall strive, within the framework of entering into new employment and/or management agreements or renewing existing agreements, to embed and implement the Compensation Policy principles included below, subject to the Company's ability to deviate from this Compensation Policy as required and subject to the provisions of the law.

2.4

If and to the extent that after the date of approval of the Compensation Policy in accordance with the Companies Law, relaxations are determined in the law, regulations or orders issued thereunder regarding the mandatory requirements or threshold conditions that must be included in a compensation policy as of the date of its approval, the said relaxations shall be deemed included in the Compensation Policy notwithstanding any other provision stated therein, all subject to the approval of the Compensation Committee and the Board of Directors.

1 It is clarified that the adoption of the Compensation Policy by the Company does not grant any right to its officers.

3. Authorized Organs for Approval of Compensation Terms in the Company

3.1 Approval of employment terms and changes in the compensation plans of the officers within the framework of the policy will be discussed and approved by the Company's authorized organs in accordance with the provisions of any law and taking the Compensation Policy into account. In this regard, it will be noted that a non-material change in the terms of service and employment of an Executive VP, within the limits set in the Compensation Policy, will be approved by the CEO of the Company only, provided that his/her terms of service and employment comply with the Compensation Policy.

3.2 The Company's Board of Directors is entrusted with the Compensation Policy and its implementation and all actions required for this purpose, including the authority to interpret the provisions of the Compensation Policy in any case of doubt regarding the manner of its implementation.

4. Guiding Principles in Formulating the Compensation Policy

4.1 The Compensation Policy attempts, as much as possible, to reflect the creation of appropriate and balanced incentives for the Company's officers, considering, among other things, the Company's goals, the officer's role and the Company's risk management policy. The Compensation Policy defines a compensation structure, the purpose of which is to incentivize the officers to act to achieve goals that will promote the Company's objectives, its work plan both in the immediate and long-term view, including the appropriate ratio between variable and fixed components of the total compensation package, and this, among other things, in order not to encourage the relevant officer to take risks that are not in accordance with the Company's policy in this regard while emphasizing the balance of the need to retain senior officers in the Company.

4.2 Recruitment and retention of high-quality, outstanding managers who form the solid foundation for the Company's management, among other things, in light of the Company's personnel structure, the senior status and role of the officers, the continued development of the Company and its success over time.

4.3

In determining variable components in the terms of service and employment of officers in the Compensation Policy, the officer's contribution to achieving the Company's goals and maximizing its profits is expressed, among other things, in a long-term perspective and according to the officer's role.

4.4 The Compensation Policy reflects a reference to the size of the Company, its nature and the complexity of its activities.

4.5 The policy will apply to all officers of the Company as defined in the Companies Law.

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5. Compensation Policy

5.1. General

As a rule, compensation plans for officers are adapted to their role and areas of responsibility in the company and to achievable goals set for them within the performance of their duties for the purpose of promoting the company's goals, its work plan, and its policy from a long-term perspective.

5.2. Goals of the Compensation Policy:

a. Promoting the company's goals, its work plans, and its policy, from a long-term perspective;

b. Creating proper incentives for officers, considering, among other things, the company's goals, the officer's role, and the company's risk management policy;

c. Recruiting and retaining high-quality outstanding managers who constitute the solid basis for managing the company, its continued development, and its success over time.

5.3. Considerations when determining terms of office and employment for officers:

a. Consideration of the education, skills, expertise, professional experience, and achievements of the candidate for office or the incumbent officer;

b. Consideration of the nature of the role, areas of responsibility, period of employment, and previous agreements with the officer (to the extent it is not a new officer);

c. Company size, the relevant activity for the officer's role, and the nature of its activity;

d. The recommendation of the officer's supervisor;

e. The officer's contribution to achieving the company's goals and maximizing its profits, all from a long-term perspective and in accordance with the officer's role (regarding variable compensation components);

f. The ratio to the level of earnings² of the company's employees and its managers – when approving compensation for an officer, data will be presented regarding: (1) the compensation of officers at a similar level in the company (to the extent relevant); (2) the salary of the previous officer in the same role (to the extent relevant); (3) the average salary and median salary of the company's employees and the contractor employees employed by the company and the ratio between each of these and the compensation proposed for approval for the officer – in this context, the impact of the gap between the terms of office of the officers and the salary conditions of the rest of the employees in the company on labor relations in the company will be examined;

g. Comparison to the earnings level of officers in similar positions in similar companies. Similar companies for this purpose will be companies similar to the company in terms of the nature and industry of activity and relevant financial data such as market value, total balance sheet, revenues, and/or the set of these parameters according to the nature, company size, and type of its activity. In addition, the company shall strive for the number of companies in its comparison group to be no fewer than 7 companies;

h. The financial position of the company.

Following are the guidelines of the company's compensation policy as approved by the Compensation Committee and the Board of Directors, regarding the components of the compensation plans.

2 Employer cost.

5.4.Definitions

For convenience, below are definitions of key terms appearing in this compensation plan:

"The Company" Carasso Motors Ltd

"Compensation Policy" A policy regarding terms of office and employment of officers in the company, as defined in Section 267A(a) of the Companies Law, 1999.

"The Index" The Consumer Price Index.

"Cost of Fixed Salary" Base salary including fixed grants, as relevant, social provisions, and study fund.

"Monthly Compensation" The cost of fixed salary, per month.

"Employment Cost" Total employment cost of an employee to the company (i.e., including variable grant and equity compensation).

"Gross Base Salary" Salary without ancillaries and social conditions.

5.5. Fixed Salary Components

Fixed Salary - intended to reward the officer for the time invested in performing the role in the company on an ongoing basis. Fixed salary reflects both the officer's skills and professional experience and the definition of the role and its level in the company, including the authorities and responsibilities arising therefrom.

a. Base Salary:

The company may update the salary of the company's CEO up to a ceiling of $15\%$ real over three years and the salary of the officers reporting to the CEO up to a ceiling of $30\%$ real over three years (the calculation basis for salary updates will be the gross base salary, correct to the approval of the compensation policy, without ancillaries and social provisions) $^3$ .
Officers intended to work in the company - their salary will be determined according to the considerations for determining terms of office and employment of officers listed above.
The salary may be linked to the index partially or fully. Salary linkage will be done, if at all, individually at the company's discretion and in accordance with the officer's employment agreement.
Due to the officers being senior management position holders, officers will not be entitled to compensation for overtime work or during weekly rest time.
Below is a breakdown of the gross base salary ceiling (monthly) for officers, based on a $100\%$ position:

Name and Role of Officer	Monthly Gross Base Salary Ceiling
CEO	Up to 220 thousand NIS

3 For illustration purposes only, the gross base salary (monthly) of the company's CEO as of April 30, 2024 is NIS 146,020.
4 The ceilings mentioned above will be adjusted proportionally to the actual scope of position of the relevant officer and will be linked to the April 2026 index.

Activity Manager	Up to 175 thousand NIS
VPs and other officers reporting to the CEO	Up to 115 thousand NIS

b. Periodic Salary Review - in order to allow for the retention of officers in their roles over time, the Compensation Committee will discuss, from time to time, the level of fixed salary of the company's officers (all or some, as relevant) compared to the market relevant to holders of similar roles and compared to the company's business situation and in accordance with the considerations listed above, and will recommend to the Board of Directors whether to approve a salary update, and if so, the amount of the update.

Notwithstanding the above, an increase in the fixed salary of an officer reporting to the CEO, at a rate of only up to $10\%$ of the employment cost in annual terms, will not be considered a material change in terms of office and employment of the officer provided that the above do not deviate from the compensation policy as a result of said change.

c. Ancillary Conditions:

As part of the terms of office and employment of officers, ancillary conditions and social provisions are included in accordance with the law and company practice.
Fixed monetary grant - an officer may be entitled to a fixed monetary grant not contingent on performance, such as a fixed annual grant, 13th salary, or any other such fixed compensation, in accordance with the employment agreement5.
Ancillary conditions include, among others, vacation, convalescence, provisions for benefits and severance, and provisions for a study fund.
The company is entitled to provide the officer, for the performance of the role, with a car, mobile phone, laptop, etc., as determined by company management. The company may determine that it will bear all costs associated with these ancillary conditions. The company may determine in the engagement with the officer that it will bear part or all of the officer's expenses incurred for the purpose of fulfilling the role, including telephone, internet, lodging (in Israel and abroad), per diem, hosting, travel expenses in Israel and abroad, newspapers, academic studies, professional literature, membership fees in a professional organization, etc.
Officers may receive a discount on the purchase and sale of vehicles, garage services, insurance, and financing, in accordance with the company's work procedures.
For officers providing services to the company under a service agreement with a company under their control, payment will be made against an invoice and will include the fixed salary and all ancillary conditions and benefits (except for reimbursement of expenses).
Changes in ancillary conditions will be examined as part of the total fixed component in relation to the ratios defined by the company between variable and fixed components in the compensation package.
Ancillary conditions will be examined by the Compensation Committee and the Board of Directors as part of a periodic review of total expenses and will be updated if necessary.

Variable Compensation - target-based bonus (hereinafter in this subsection: the "Bonus" or "Variable Compensation" as relevant)

5.6

a. General:

The variable component will reflect the officer's contribution to achieving the company's goals and maximizing its profits, in the short term and from a long-term perspective, according to measurable criteria.
The variable component will be determined in alignment with the company's performance and the officer's individual performance against the goals set for them within the scope of their role according to their areas of responsibility.
The company's compensation policy is that significant weight is given to meeting targets derived from the company's annual and multi-year work plan and/or the company's strategic plan. The company's goals express the success of the company as a whole in realizing its plans, the contribution of the officers to the company's success, and the company's desire to reward officers for meeting these goals.
The targets will include measurable targets reflecting the company's goals and strategy in the short and long term in order to create an identity of interests between the company, the shareholders, and the officers in promoting the company's goals and strategy as stated. The Bonus based on measurable criteria as stated will be derived and calculated based on the measurable targets but will not exceed the Bonus ceiling, as detailed below.
The company's Board of Directors, upon the recommendation of the Compensation Committee, shall have the authority to reduce up to $20\%$ of the Bonus amount, taking into account the assessment of the reasonableness of the Bonus received from meeting targets versus the officer's contribution to achieving them and the company's business and financial situation. Furthermore, the Board shall have the authority to cancel the Bonus payment to a specific officer in cases of breach of fiduciary duties, breach of the engagement agreement, and/or improper management.

b. Applicability

The company's CEO and officers reporting to the CEO may be entitled to Variable Compensation.

c. Cumulative threshold conditions for awarding variable compensation:

Profit Test - The company will present in its annual consolidated financial report for the relevant compensation year a profit for the period (profit for this purpose means net profit) in accordance with the company's audited financial statements for that year.
Solvency Test - During the relevant calendar year, the company fully met the repayment terms of principal, interest, and linkage differentials for BONDS it issued, to the extent it issued, and loans provided to it by banking corporations and institutional bodies, which were in circulation in that year.

Failure to meet one or more of the above threshold conditions means that the officers will not be entitled to a Bonus in the relevant calendar year.

d. Components of Variable Compensation

The level of the variable component will be determined in a model that may include two components:

Measurable Targets - financial and operational;
Discretionary Component - a compensation component not based on assessment by measurable criteria.

e. Component weights in the compensation model out of total variable compensation (as the term is defined in this Section 5.6 above) (hereinafter: the "Compensation Model")

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Officer Name and Position	Financial Targets	Operational Targets	Discretion	Total
CEO	0%-80%	0%-40%	Will not exceed 20% or 3 monthly compensations per year, whichever is higher	100%
Operations Manager	0%-40%	0%-60%	Up to 100%	100%
VPs and other officers reporting to the CEO	0%-80%	0%-40%	Up to 100%	100%

F. Financial Targets - Financial targets will be defined for officers periodically according to their areas of responsibility and their ability to influence the achievement of these targets. These targets, as defined annually, may include, among others, the following targets: profit before tax (consolidated or solo, as applicable), return on equity, equity, gross profit, selling expenses, financing expenses, operating profit, and net profit (according to financial statements, audited or reviewed). The mix of targets, their weight, and the minimum achievement rate entitling variable compensation will be determined periodically by the Company, subject to any law.

G. Operational Targets - Operational targets will be defined for officers periodically according to their areas of responsibility and their ability to influence the achievement of these targets. These targets, as defined annually, may include, among others, the following targets: number of vehicles sold (brands as applicable), market share (brands as applicable), and operating expense change rate in the reports (selling, general, and administrative). The mix of targets, their weight, and the minimum achievement rate entitling variable compensation will be determined periodically by the Company, subject to any law.

H. A change of up to 20% in the relative weight of each quantitative index and/or a change of up to 20% in a specific measurable target and/or in a parameter for determining a bonus in the parameter scale on a forward-looking basis only, will not be considered a material change in the terms of tenure and employment of the officer.

I. The bonus for officers regarding measurable targets (financial and operational) is calculated as follows:

The bonus for the officers will be based on meeting targets according to the compensation model weighting table. For each target included in the compensation model, a range of target achievement will be defined. The compensation to which the company's officers will be entitled will be calculated as follows:

Company CEO

The maximum bonus for meeting targets (hereinafter: "Target Bonus") for the company CEO stands at 18 monthly compensations.

Target Achievement Rate	Compensation in terms of Target Bonus / Bonus Caps
From 0% to 80% (excluding)	-
From 80% to 90% (excluding)	20%
From 90% to 100% (excluding)	50%
From 100% to 125%	Linear compensation up to 18 monthly compensations

The company will publish, within the framework of Regulation 21 of Chapter D of the Periodic report, the main measurable targets for which actual bonuses were paid to the CEO (unless less than 3 monthly compensations were paid based on that same target and subject to legal provisions).

- Officers reporting to the CEO

The following are the target bonuses of officers reporting to the CEO, divided as follows:

Operations Manager: 15 monthly compensations;

VPs: 12 monthly compensations;

Other officers reporting to the CEO: 6 monthly compensations.

Target Achievement Rate	Compensation in terms of Target Bonus / Bonus Cap
From 0% to 80% (excluding)	-
From 80% to 90% (excluding)	20%
From 90% to 100% (excluding)	40%
100%	50%
From 100% to 133%	Linear compensation up to the target bonus

J. Discretionary Component - As detailed above, the variable compensation of officers reporting to the CEO may be granted based on qualitative criteria that are not measurable, i.e., at sole discretion, including the CEO's assessment, taking into account the officer's contribution to the Company. Regarding the Company CEO, the discretionary variable compensation as stated shall not exceed a total of $20\%$ or 3 monthly compensations per year, whichever is higher.

K. Annual Bonus Caps for officers

In terms of monthly compensations (as of December of the calendar year for which the compensation is granted), the annual bonus caps for officers are as follows:

CEO: 18 monthly compensations.
Operations Manager: 15 monthly compensations.
VPs: 12 monthly compensations.
Other officers reporting to the CEO: 6 monthly compensations.

L. Additional Topics:

Special Bonus:

The Company's long-term strategy is multi-year growth and expansion of operations. This strategy is reflected in the compensation mechanism by providing a special bonus in the event of extraordinary events and/or performance, subject to the approval of the Compensation Committee and the Company's Board of Directors (as applicable), for reasons to be recorded. In the event of such an event, as defined in the Company's annual budget, officers defined by the Board may be eligible for a special bonus, not exceeding 25% of the annual employment cost for the officer. It should be noted that a special bonus is not related to the annual bonus and is not subject to the aforementioned caps.

Offsetting Amounts in Case of a Loss:

If in a certain year the Company has a consolidated annual loss, such loss will be offset against the subsequent consolidated annual profit for the purpose of calculating the bonus for the profit target in the subsequent year.

Timing of Bonus Payment:

The bonus will be paid to the officers for each calendar year of the employment period no later than the date of payment of the first salary following the date of approval of the Company's annual financial statements. The payment for said compensation may be made on a quarterly or annual basis, according to the bonus terms set for the officers.

Partial Bonus and Qualification Period:

An officer will be eligible, to the extent they are eligible, for a bonus only on the condition that they were employed by the Company for at least half a year in the calendar work year for which the compensation is granted. Should the officer end their role before the end of the relevant year, the bonus for the year of termination will be calculated proportionally to the period of tenure in that year.

Unless explicitly stated otherwise in a personal employment agreement, any payment made to an officer as variable compensation according to this compensation policy, to the extent paid, is not and will not be considered part of the officer's regular salary for any purpose and will not constitute a basis for calculation or entitlement or accumulation of any ancillary right, including, and without derogating from the generality of the foregoing, it shall not serve as a component included in the payment of vacation, severance pay, provisions to provident funds, etc.

After payment of a bonus to officers, no net loss will be recorded. If it becomes clear that the compensation calculation for all officers (hereinafter: the "Calculated Bonus Pool") leads the Company to record a loss, the Company may distribute a bonus amount up to the zeroing of the net profit (hereinafter: the "Actual Bonus Pool"). The distribution of bonuses will be done such that each officer receives their share of the actual bonus amount according to the proportion of the calculated bonuses for them from the calculated bonus pool.

Taxation:

To the extent there is any tax liability or other mandatory payment (National Insurance, State Health Tax, etc.) for and/or due to the plan, it shall be borne by the officer according to law (to the extent it applies to the officer by law).

5.7 Variable Compensation - Equity Component (hereinafter: "Equity Compensation")

Equity compensation constitutes an appropriate mechanism for retaining and incentivizing officers while creating alignment of interests between the officers and the shareholders and maintaining a proper balance between short-term and long-term considerations, among other things, by setting a full vesting period and providing share-based payment that is not in-the-money at the time of grant. Thanks to the long-term nature of equity compensation plans, they support the Company's ability to retain its senior managers in their positions for a long period.

B. The Company shall be entitled to use a variety of additional equity instruments such as restricted shares (at a rate of up to 25% of the value cap of the equity compensation or up to three monthly compensations), performance-based restricted share units, phantom options, etc.

C. When determining an equity compensation plan, the annual value cap of the equity-based variable components that are not settled in cash, at the time of grant, is up to 18 monthly compensations for the Company CEO and up to 12 monthly compensations for officers reporting to the CEO (as of the allocation date). The annual cap is calculated as if the equity expense is spread linearly over the vesting period.

D. The Compensation Committee and the Board of Directors will determine which of the officers will be included in the specific plan, to the extent approved.

E. The minimum holding or vesting period for equity-based variable components in the terms of tenure and employment is 4 years, and no less than 12 months for the first installment.

F. Insofar as share-based compensation is granted within the framework of equity compensation, the exercise price of this equity compensation shall not be less than the average price of the Company's share on the Tel Aviv Stock Exchange Ltd. during the up to 30 trading days preceding the grant date.

G. The life of the share-based payment granted within an equity compensation plan shall not exceed 8 years from the grant date.

H. The Company shall be entitled to determine full acceleration of equity compensation for an officer in case of death, disability, medical reasons, and a change of control as a result of which trading in the Company's shares will cease. To the extent the Company requests to determine acceleration as a result of a change of control in the Company in case of termination of employment, acceleration of the next installment that has not yet vested will be possible.

5.8 Employment Cost Cap for CEO

Notwithstanding anything stated in the compensation plan, the annual employment cost for the Company CEO shall not exceed a total of 13 million NIS plus linkage to the increase in the index compared to the index of April 2026. To the extent that the actual compensation exceeds the employment cost cap, first the variable compensation and then the equity compensation shall be reduced from the employment cost, as required.

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Retirement Terms

5.9.

A. The officers in the company are entitled to advance notice ranging from 90 to 180 days and to severance pay in accordance with their employment agreements. Officers do not have retirement grants in their employment agreements.

B. The company shall have the option to provide a retirement/adjustment grant to a retiring officer, in accordance with the conditions detailed below, beyond the compensation for the advance notice period.

C. As a rule, the retirement/adjustment grant will not be granted to an officer with seniority of less than two years in the company and will not exceed 6 monthly compensations (as of the date of retirement).

D. A retirement grant will be given upon fulfillment of the non-compete conditions in the officer's employment agreements.

E. The company's board of directors will decide on granting a retirement grant, taking into account the recommendation of the compensation committee while referring to the following parameters: the period and terms of office and employment, the company's performance during the said period, and the officer's contribution to achieving the company's goals and maximizing its profits and the circumstances of retirement (without harming the company).

Ratio between variable components in their entirety and fixed components in the compensation package

5.10.

A. CEO: The variable compensation component shall not exceed 80% of the total compensation package.

B. VPs and other officers subordinate to the CEO: The variable compensation component shall not exceed 70% of the total compensation package.

Restitution of variable compensation in case of error

5.11.

If it turns out that an annual grant or part thereof paid to an officer was calculated based on data that subsequently turned out to be erroneous, within a period of 3 years from the payment date of the relevant grant, the officer shall return to the company, or the company shall pay to the officer, as the case may be, the difference between the amount of the grant received and that which they were entitled to due to the said correction (taking into account differences, if any, in tax payments and liabilities applicable to the officer and/or paid by them). An officer shall not be obligated to return amounts, and the company shall not pay any payment to an officer, as stated in this section above, in the event that the grant to which the officer was entitled after the correction of the financial statements is lower or higher (as the case may be) by up to 10% of the grant actually paid to the officer for that same year. Furthermore, such restitution shall not apply in the case of an update or correction of the financial statements as a result of a change in accounting standards or reporting rules. The restitution of amounts by the company, if relevant, will be carried out at the time of the first salary payment after the publication of corrected financial statements, whereas the restitution of amounts by the officer will be carried out by way of offset from the annual grant in the following year, if relevant, while the balance, if any, will be settled within the monthly salary spread over 12 payments.

The ratio between the officer's employment terms and the employment 5.12 terms of the company's employees

The compensation committee and the company's board of directors, when approving/determining terms of office and employment for officers, will examine the ratio between the terms of office and employment of the officers in the company and the employment terms of the rest of the company's employees (including contractor employees) and in particular the ratio to the average and median salary of such employees and will express their opinion on the impact of these ratios on labor relations in the company, the reasonableness of the salary of the company's officers in light of the type of company, its size, and the mix of its workforce.

As of the date of approval of the compensation policy in the company, the ratio between the salary cost of the CEO and the VPs to the average salary cost of the rest of the employees in the company is 56.2 and 6.1 respectively, and the ratio between the salary cost of the CEO and the VPs to the median salary cost of such employees is 67.5 and 7.4 respectively⁸.

The matter was discussed in the compensation committee and the board of directors, and in the estimation of the company's compensation committee and board of directors, these ratios have no impact on labor relations in the company.

Director Remuneration

Directors in the company will be entitled to remuneration not exceeding the maximum remuneration according to the Companies Regulations (Rules regarding Remuneration and Expenses of an External Director), 5760-2000 (hereinafter: "the Remuneration Regulations").

Insurance, Indemnity, and Exemption

5.14

A. An officer in the company (including directors) may be entitled, in addition to the compensation package as stated in this compensation policy, and subject to the approval of the authorized organs in the company, to officer liability insurance as practiced in the company (including Run-Off insurance), all subject to the provisions of any law and the company's Articles of Association. The ceiling for coverage will be up to a liability limit of 80 million US dollars⁹. The company shall be entitled, with the approval of the compensation committee only, to enter into an agreement with an insurance company (provided that the engagement is on market terms, in the ordinary course of business, and is not likely to materially affect the company's profitability, assets, or liabilities) for liability insurance policies for all directors and officers in the company, as they may be from time to time, including directors and/or officers who may be considered controlling shareholders of the company, under terms as stated above.

B. The directors and officers may be entitled to letters of indemnity, subject to the provisions of the law, in an amount of up to 25% of the company's equity, in accordance with what is stipulated in the company's Articles of Association.

C. The directors and officers may be entitled to letters of exemption in accordance with the Companies Law and the provisions of the company's Articles of Association, provided that the exemption granted as stated shall not apply to a decision or transaction in which a controlling shareholder or any officer in the company (including an officer other than the one for whom the letter of exemption is granted) has a personal interest.

⁸ Based on the salary cost for April 2026, including an estimate of payments made on an annual basis.

⁹ Currently, the ceiling for coverage stands at 40 million US dollars in total per insurance period.

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Carasso Motors Ltd. — Proxy Solicitation & Information Statement 2026

6719_rns_2026-05-31_98d58a4d-a5fd-4fe3-90a9-522133b47e4f.pdf

Officers' Compensation Policy

1. Introduction

2. Validity of the Compensation Policy

3. Authorized Organs for Approving Compensation Terms in the Company

4. Guiding Principles When Constructing the Compensation Policy

5. Compensation Policy

5.1 General

5.2 Objectives of the Compensation Policy:

5.3 Considerations when determining terms of office and employment for officers:

5.4 Definitions

5.5 Fixed Salary Components

A. Base Salary:

5.6 Variable Compensation - Target-based Bonus (hereinafter in this subsection: the "Bonus" or the "Variable Compensation" as applicable)

A. General:

B. Applicability

C. Cumulative Threshold Conditions for Granting Variable Compensation:

D. Components of Variable Compensation

E. Component Weights in the Compensation Model of the Total Variable Compensation (as the term is defined in section 5.6 above) (hereinafter: the "Compensation Model")

Company CEO

Officers reporting to the CEO

K. Annual bonus caps for officers

L. Additional Topics:

CEO Employment Cost Ceiling

Retirement Terms

Clawback of variable compensation in case of error

The ratio between the officer's employment terms and the employment terms of the company's employees

Directors' Compensation

Insurance, Indemnity, and Exemption

Officer Compensation Policy at Carasso Motors Ltd.

1. Introduction

2. Validity of the Compensation Policy

3. Authorized Organs for Approval of Compensation Terms in the Company

4. Guiding Principles in Formulating the Compensation Policy

5. Compensation Policy

5.1. General

5.2. Goals of the Compensation Policy:

5.3. Considerations when determining terms of office and employment for officers:

5.4.Definitions

5.5. Fixed Salary Components

a. Base Salary:

c. Ancillary Conditions:

Variable Compensation - target-based bonus (hereinafter in this subsection: the "Bonus" or "Variable Compensation" as relevant)

a. General:

b. Applicability

c. Cumulative threshold conditions for awarding variable compensation:

d. Components of Variable Compensation

e. Component weights in the compensation model out of total variable compensation (as the term is defined in this Section 5.6 above) (hereinafter: the "Compensation Model")

- Officers reporting to the CEO

K. Annual Bonus Caps for officers

5.8 Employment Cost Cap for CEO

Retirement Terms

Ratio between variable components in their entirety and fixed components in the compensation package

Restitution of variable compensation in case of error

Director Remuneration

Insurance, Indemnity, and Exemption

More from Carasso Motors Ltd.

Carasso Motors Ltd. Proxy Solicitation & Information Statement 2026