Gefran

Remuneration Information • Mar 30, 2021

Report on Remuneration Policy and Remuneration Paid

Pursuant to article 123-ter of the Consolidated Financial Act and article 84-quater of the Consob Issuers' Regulation

www.gefran.com

Approved by the Board of Directors on 11 March 2021

Foreword

This Report on Remuneration Policy and Remuneration Paid (the "Report") is divided into two sections:

• Section I: Remuneration Policy for 2021 (the "2021 Policy") and

• Section II: Remuneration Paid in 2020 Report (the "2020 Statement").

This Report is prepared in accordance with art. 123-ter of the Consolidated Financial Act (as amended by Legislative Decree no. 49 of 2019 implementing in Italian legislation the Shareholders' Rights Directive II - EU Directive 828/2017) and art. 84-quater of the Consob Issuers Regulation (as amended by Consob Resolution no. 21623 of 10 December 2020). It also takes into account the provisions of the January 2020 edition of the Corporate Governance Code, to which Gefran S.p.A. ("Gefran" or "the Company") adhered with a resolution passed by the Board of Directors on 16 December 2020.

Moreover, the Report has been adopted pursuant to article 13, paragraph 3, letter b) of Consob Regulation 17221/2010 and article 13 of the Regulation governing transactions with related parties, approved by the Company's Board of Directors on 03 August 2017.

In the interests of its shareholders, the Company considers it appropriate to briefly summarise the regulatory measures taken since 2019 that have affected the content and manner of approval of the Report, although many of the new features were already in force at the time of the shareholders' meeting held on 28 April 2020, particularly the circumstances in which shareholders are called to express a binding vote on Section I of the Report.

Legislative Decree no. 49 of 2019 (the "Decree"), implementing the Shareholders' Directive II, amended the Consolidated Financial Act, among other things, in the provisions applicable to the Remuneration Report. Despite this, the Decree maintained Consob's power to identify the information to be included in the first section of remuneration policy and to indicate which information is to be included in the second section, within the deadline of 180 days from the date of the entry into force of the Decree, and therefore by 7 December 2019. On 31 October 2019 Consob began a process of consultation for amendment of the Issuers' Regulation aimed at implementing the regulations contained in the Shareholders' Rights Directive II regarding shareholders' rights, amending the Consolidated Financial Act with the Decree. The advisory process ended with Consob resolution no. 21623 of 10 December 2020 (the "Consob Resolution") .

While waiting for Consob to make its decision, the following provisions had already been implemented during the last meeting of Gefran shareholders:

• extension of the application of remuneration policy to control bodies, as required under art. - 123-ter, paragraph 3, letter A of the Consolidated Financial Act;

• definition, in remuneration policy, of the "exceptional circumstances" permitting exceptions to the most recent remuneration policy approved by shareholders, of the procedural conditions under which the exception may be applied, and specification of the elements of the policy to which exceptions may be permitted; the exceptional circumstances refer to situations in which an exception is necessary in order to "pursue long-term interests and sustainability as a whole or ensure the ability to remain on the market" (art. 123-ter, paragraph 3-bis of the Consolidated Financial Act);

• a binding vote on remuneration policy under art. 123-ter, paragraph 3-ter of the Consolidated Financial Act;

• a non-binding vote on the section regarding considerations paid, as required by art. 123-ter, paragraph 6 of the Consolidated Financial Act;

• verification, by the party entrusted with legal auditing, of the preparation of the second section of the report required under art. 123-ter, paragraph 8-bis of the Consolidated Financial Act.

The Consob Resolution intervened by making amendments:

• ➢ to article 84-quater of the Consob Issuers' Regulation
• ➢ to section I of Scheme 7-bis of Annex 3A to the Issuers Regulations
• ➢ to section II of Scheme 7-bis of Annex 3A to the Issuers Regulations

This 2021 Policy is consistent with the content of the 2020 Policy approved by the Shareholders' Meeting of 28 April 2020. To the benefit of the shareholders, the attention of the shareholders is drawn to Section I, point 2. C containing details on the remuneration of directors with special duties, detailing the matters approved by the Board of Directors on 28 April 2020 in implementation of the 2020 Policy approved by the Shareholders' Meeting held on the same date.

SECTION I

2021 Policy

1. General principles

1. A - Introduction

Remuneration Policy defines the whole series of principles and guidelines used to determine the remuneration of directors, directors with special duties, general directors, and executives with strategic responsibilities.

This policy governs the remuneration system for the Gefran Group employees, both in the Parent Company Gefran S.p.A. and its Italian and foreign subsidiaries.

In view of the recommendations of the January 2020 edition of the Code of Conduct promoted by the Corporate Governance Committee, this policy was prepared to concretely determine the remuneration or compensation system, with the goal of aligning the interests of management with those of shareholders, pursuing the goal of achieving sustainable success in Gefran in the medium to long term.

The remuneration system is one of the essential tools for attracting, motivating and retaining competent staff who can contribute to the Group's performance, while upholding Gefran's strategy, purpose, promise and guidelines, in view of the fact that company size and the size of the remuneration package are closely linked.

With this in mind, the remuneration policy implemented takes into account the Company's best practices, internal equilibrium and sustainability, rather than those of other companies or external benchmarks, which are nevertheless assessed and taken into consideration.

The guidelines are adopted by Gefran when new managers join the Company and when career advancement paths are prepared and implemented for existing staff in the Group.

It should be noted that in the year 2020 Gefran adopted its Strategic Sustainability Plan¹ , which sets out the guidelines for achieving the Group's sustainable success. As detailed below, the targets of the Strategic Sustainability Plan contribute to the variable remuneration of the Chief Executive Officer and executives with Strategic Responsibilities.

1. B - The process of determining and implementing the Policy and the parties involved

The Appointments and Remuneration Committee (hereinafter the "Committee") leads the process of drawing up the Remuneration Policy, in light of the experience it has acquired in implementing the Policy in previous years.

The document is then examined and approved by the Board of Directors.

The Committee:

¹Gefran's Strategic Sustainability Plan can be downloaded at the following link

• periodically assesses the adequacy, overall consistency and actual application of the policy for the remuneration of directors and managers with strategic responsibilities, based on the information provided by the managers responsible and by the Chief People & Organization Officer; it submits proposals in relation thereto to the Board of Directors;

• submits proposals or expresses opinions to the Board of Directors on the remuneration of executive directors and other directors with special duties, and sets performance objectives associated with the variable component of this remuneration; it also monitors the application of the decisions adopted by the Board, checking in particular that performance objectives are actually achieved.

In preparing the Remuneration Policy, the Committee takes into account business strategies, the market environment and the Group's consequent performance, in order to better align its remuneration systems with Gefran's actual requirements.

In accordance with policy guidelines, the remuneration of executive directors and directors with special duties are concretely determined by the Board of Directors, whereas the remuneration of executives with strategic responsibilities are determined by the People & Organization Department, in agreement with the CEO and Chairman of Gefran S.p.A..

The Remuneration Policy is implemented by the People & Organization Department, which supervises the administration of remuneration, and reports regularly to the Remuneration Committee.

In order to assess the appropriateness, consistency and application of the Policy, People & Organization provides all members of the Committee with documentation containing all the information necessary for such an assessment, including concrete information on remuneration and compensation schemes, cooperation agreements and systems for providing incentives to executive directors and directors with particular responsibilities.

At the end of the financial year, People & Organization, assisted by the Committee, ascertains to what extent targets have been met, based on final figures supplied by Management Control.

1. C. - Appointments and Remuneration Committee

On 28 April 2020, the Board of Directors of the Company resolved, also in compliance with the provisions of the Borsa Italiana Code of Conduct in effect at the time, the 2018 edition, to establish an Appointments and Remuneration Committee composed of three non-executive and independent directors (one of which is its Chairman), who will remain in office until the approval of the financial statements as of 31 December 2022. At the time of its appointment, the Board believed that the Committee's members included persons with sufficient know-how and experience in the areas of interest to the Committee.

The Remuneration Committee does not have the same members as the Committee for Transactions with Related Parties.

The Directors on the Committee are:

- Daniele Piccolo Chairman and Independent Director

• Monica Vecchiati Independent Director

• Cristina Mollis Independent Director

The Committee has advisory, proposal-making and supervisory functions to ensure that remuneration policies are defined and applied within the Group. The purpose of these policies is, on the one hand, to attract, motivate and retain staff with the professional skills required to successfully pursue the Group's objectives, and, on the other, to align the interests of management and shareholders.

The Committee submits proposals or expresses opinions to the Board of Directors on the remuneration of executive directors and other directors with special duties, and sets performance objectives associated with the variable component of their remuneration; it also monitors the application of the decisions adopted by the Board, checking in particular that the performance objectives are actually achieved.

Fees for directors with special duties must be calculated after consultation with the Board of Statutory Auditors, pursuant to article 2389 of the Civil Code.

The Committee also formulates proposals regarding the division among the members of the Board of the overall remuneration package approved by the Shareholders' Meeting.

In addition, it formulates proposals on any incentive plans for the aforementioned parties.

It periodically assesses the adequacy, overall consistency and actual application of the policy for the remuneration of directors and managers with strategic responsibilities, based on the information provided by the appointed managers; it submits proposals in relation thereto to the Board of Directors;

The Committee also consults with the Board of Directors, whenever requested to do so, on remuneration and other related matters.

The functions performed by the Committee in the quality of Appointments Committee are described in the appropriate section of the Report on Corporate Governance.

The Committee has access to all company information and may also use external consultants, when this is considered useful for comparing the market standards of remuneration systems, after ascertaining that their independence of judgement is not compromised in any way.

The Committee meets whenever the chairman of the Committee considers it necessary or when requested at least by one member, and in any event, with the frequency required to perform its duties.

The meetings are duly minuted. The Committee operates on the basis of its own regulations.

Meetings may also be attended by other directors and representatives of the Company, especially the Chief People & Organization Officer, when deemed appropriate or on the Committee's invitation.

The Chairman of the Board of Statutory Auditors (Marco Gregorini) attends Committee meetings, and the standing auditors are also entitled to attend.

No director may attend Committee meetings in which proposals concerning their own remuneration are being proposed to the Board of Directors. This is in order to avoid conflicts of interest.

The available and necessary documentation and information are sent to all members of the Appointments and Remuneration Committee sufficiently in advance of the meeting to enable them to express an opinion.

During 2020 the Appointments and Remuneration Committee held five meetings with an average duration of one hour each, attended regularly by all members and at least one representative of the Board of Statutory Auditors. On the chairman's invitation, the Chief People & Organisation Officer also attended to provide details of the incentive scheme adopted by the Company.

As of the date of this Report, the Appointments and Remuneration Committee has met twice in the year 2021 so far.

2. Remuneration established by the Shareholders' Meeting on 28 April 2020 and the newly appointed Board of Directors on 28 April 2020

2 A - Directors' remuneration

Remuneration policy requires Directors to be paid:

(i) a fixed annual sum determined by the Shareholders' meeting, in accordance with article 2389, paragraph one of the Civil Code, shared out by the Shareholders' meeting or the Board of Directors;

(ii) a possible additional fee for participation in committees within the Board of Directors;

(iii) a possible additional fee for executive positions of various kinds held and resolved on by the Board of Directors, in response to a proposal made by the Committee, under article 2389, paragraph 3 of the Civil Code.

With regard to the 2021 Policy, the following is proposed in continuity with the provisions of the Shareholders' Meeting of 28 April 2020, as well as the meeting of the newly appointed Board of Directors on 28 April 2020, in compliance with the so-called 2020 Policy contained in the "Report on Remuneration Policy and Remuneration paid," approved by a binding vote by the 28 April 2020 shareholders' meeting, taking into account the remuneration and working conditions of its employees.

2 B - Remuneration of directors without special duties pursuant to the resolution of the 28 April 2020 shareholders' meeting

The 28 April 2020 shareholders' meeting established a total gross annual fee of € 300.000,00. The breakdown of this sum was then approved by the newly appointed Board of Directors on proposal of the Appointments and Remuneration Committee, as listed below:

• ➢ € 270,000.00 divided equally among the directors, that is, a gross amount of € 30,000 a year for each director;
• ➢ € 29,000.00 for the committees;
• ➢ €1,000.00 for the Lead Independent Director.

In line with international best practice, directors without special duties are not entitled to a variable component of their fees (bonus).

To better illustrate the amount of € 29,000.00 available to the Committees, it should be noted that each of the members of the committees (in addition to the Appointments and Remuneration Committee, there is also the Control and Risks Committee and a Sustainability Committee) is paid a token of € 500,00 for each committee meeting attended, up to a maximum limit of € 29,000.00. This criterion enables non-executive directors to be remunerated according to their actual commitment.

2. C Remuneration of directors with special duties pursuant to the resolution passed by the Board of Directors on 28 April 2020

On 28 April 2020 the Board of Directors appointed the following directors with special duties:

• ➢ 1 Honorary Chairman
• ➢ 1 Chairman
• ➢ 2 Vice-Chairmen
• ➢ 1 Chief Executive Officer

The Board of Directors, having consulted the Committee and obtained the mandatory opinion of the Board of Statutory Auditors pursuant to art. 2389 of the Italian Civil Code, has allocated the following remuneration:

• the Honorary Chairman will be paid a fixed all-inclusive sum of € 210,000.00 every year for his of her functions, in addition to the fee of € 30,000.00 paid to each director;

• the Chairman of the Board of Directors will be paid a fixed all-inclusive sum of € 210,000.00 every year for his or her functions, in addition to the fee of € 30,000.00 paid to each director;

• each Vice-Chairman will be paid a fixed all-inclusive sum of € 135,000.00 every year for their functions, in addition to the fee of € 30,000.00 paid to each director.

The Honorary Chairman, Chairman and Vice-Chairmen will not receive MBO and LTI plans because they are directly and indirectly shareholders in Gefran S.p.A. and therefore benefit from any dividends that the Company may pay and the value of its share.

The Chief Executive Officer, who also holds the position of executive director as General Manager of the Company: the sum of €60,000.00 (fixed per financial year, all-inclusive) in addition to the fee of € 30,000.00 received by each director. In addition to this, an MBO of €30,000.00 and, in the event of over-achievement of one of the three targets, up to €37,000.00, as per the 11 March 2021 Board of Directors' resolution. This possibility is consistent with the Company's MBO policy described below. This is without prejudice to the fact that the fixed part of the remuneration (fee + gross annual pay) cannot exceed €335,000.00.

For the purposes of the 2021 Policy, the MBO targets of the Chief Executive Officer were approved by the Board of Directors, subject to the favourable opinion of the Appointments and Remuneration Committee, as follows:

• Profitability of the Gefran Group measured in terms of the value of EBIT (over-achievement of this target is possible);
• Projection of Group growth by external lines;
• Advacement of the Strategic Sustainability Plan.

For the sake of completeness, shareholders are reminded that, with regard to the figure of the Chief Executive Officer, the 2020 policy provided for a different structure of remuneration depending on whether

or not the person holding the position was a Company employee, and the remuneration package was therefore drafted differently.

The Chief Executive Officer is also a director of the Company and, as such, receives a further MBO as well as a three-year LTI.

***

In line with international best practice, an insurance policy of the type known as D&O (Directors & Officers) Liability contracted by Gefran S.p.A. to cover risk to corporate bodies, General managers, Executives with strategic responsibilities, Senior Managers, Executives and all figures playing a role in the protection of health and safety under Legislative Decree 81 of 2008 as a result of claims filed against them by the Company or a third party with the aim of having them sentenced to pay compensation for damages in relation to the performance of their functions. This stipulation also constitutes an act of specific interest to the company, as this policy is an instrument for the protection and safeguarding of claims for compensation made by parties damaged by the behaviour of persons representing the company.

5. Remuneration of the Board of Statutory Auditors

As of the date of this Report, the Board of Statutory Auditors is composed of: Chairman: Marco Gregorini Standing auditors: Roberta Dell'Apa, Luisa Anselmi Deputy Auditor: Guido Ballerio

For the sake of completeness, it should be noted that on 27 May 2020, the Board of Directors received the resignation, for personal reasons and with immediate effect, of Statutory Auditor Primo Ceppellini. In accordance with the law and the Articles of Association, the office is taken over by Luisa Anselmi, appointed Deputy Auditor by the Shareholders' Meeting of 24 April 2018.

Since the Ordinary Shareholders' Meeting convened on 27 April 2021 will be called upon to resolve on renewal of the Board of Statutory Auditors and, pursuant to art. 2402 of the Italian Civil Code, the Board of Statutory Auditors' remuneration for the entire duration of the appointment, the document entitled "Self-Assessment Report of the Board of Statutory Auditors" summarises² the work performed by the Board while in office, of use to Shareholders for assessing the adequacy of the remuneration of the members of the Board of Statutory Auditors.

In light of the assessments contained therein, and in view of the size and structure of the organisation, an annual fee of €30,000.00 is proposed for the Chairman, and €20,000.00 for each Standing Auditor, in addition to reimbursement of expenses incurred to carry out the appointment.

The remuneration of the Statutory Auditors is commensurate with the work required, the relevance of the position held, and the Company's size and sector.

² This document is attached to the Report on Governance and Ownership Structure

The fees accrued in 2020 are shown in Table I attached to the 2020 Statement in this Report. As in the case of the Directors, there is also a D&O (Directors & Officers) Liability insurance policy covering Statutory Auditors.

6. Remuneration of executive officers and other executives with strategic responsibilities.

As of the date of this Report, executives with strategic responsibilities are: Marcello Perini (Chief Executive Officer and General Manager), Patrizia Belotti (Chief People & Organization Officer), Fausta Coffano (Chief Financial Officer), Christian Pampallona (General Manager Drive & Motion Control Business Unit) and Marco Svara (Chief Technology Officer).

The remuneration policy for executive officers or executives with strategic responsibilities is intended to attract and retain professionals with the skills required to successfully pursue the Group's objectives, as well as motivating them and giving them an incentive to remain with the Company. In addition, it aims to align the interests of management with those of shareholders, also through a twin focus on short-term results and long-term results, thereby increasing the Group's value in a sustainable manner.

The remuneration package, which includes a balanced mix of fixed and variable, monetary and nonmonetary, direct and deferred elements, is divided into a number of different components:

• 1) Fixed Remuneration
• 2) Variable Remuneration: comprises a short-term component (annual MBO system) and a longterm component (LTI)
• 3) Benefits
• 4) Welfare (in the event of short-term over-achievement of the variable portion of pay)
• 5) Non-competition agreement for the position of General Manager.

It should be noted that the Company applies, in principle, this same scheme not only to strategic executives, but also to senior managers in the Parent Company and foreign subsidiaries, who are regularly included in the Management-by-Objectives (MbO) Plan drawn up by People & Organisation every year. The underlying principle is to develop a pay-for-performance system that links remuneration to real results, both collective and individual.

Gross annual fee (GAF) is the fixed component of remuneration. It is associated with the level of expertise, specialisation and management skills, and the accountability of the position held within the organisation. The principle adopted by the Company for determining that this amount is both appropriate and functional is based first and foremost on compliance with the Group's current policy and balances, taking into account the benchmarks on the job market.

GAF is adequate remuneration for the services provided, and is commensurate with the assigned tasks and responsibilities, as well as sufficient to remunerate the services provided in the event that the variable component is not provided.

It is standard practice to support managers' professional growth, in terms of both responsibilities and remuneration, in light of a positive performance.

The MbO (Management by Objectives) bonus is a variable component based on the achievement of annual objectives set in the first quarter of the year in question. It aims to recognise the results achieved by establishing a direct correlation between remuneration and short-term results, encouraging achievement of the annual targets identified in the Company's budget and in line with the business plan for the reference year.

The MBO system is structured in such a way as to make the link between economic recognition and the degree of achievement of annual objectives transparent.

The MBO system is structured and implemented in accordance with the guidelines issued by the People & Organization Department, in cooperation with the CEO and the Chairman.

The criteria and indicators used by the MBO system are established for each employee by each manager with strategic responsibilities and by each department head, in cooperation with the People & Organization Department.

Since 2021, the MBO System has identified a target in the area of sustainability, for both the Chief Executive Officer and the executives responsible for implementing projects included in the Sustainability Plan. The Long Term Incentive Plan, in addition to the inclusion of economic and financial objectives linked to the Industrial Plan and aligned with shareholders' interests, provides for introduction of additional indicators representing the creation of sustainable value in the medium to long term (ESG objectives).

The MBO system adopts a common, organic approach intended to represent the unity of the Group and the interdependence of the activities of the various functions. It is also intended to bring the interests of management further into line with those of the employees involved in the process, and those of shareholders. Performance is measured in relation to the actual results achieved at the Group, Business, Organisational Unit and individual levels.

Entitlement to the variable annual component is subject to the financial access condition (the on/off condition).

The incentive rewards the achievement of quantitative and qualitative objectives in relation to the beneficiary's role. The main economic/financial performance objective relates to Group EBIT, which is common for all management positions, with a weight within the overall framework of objectives that varies according to the manager's role. This may be accompanied by other financial indicators such as NWC (Net Working Capital) or Net Financial Position (NFP); business indicators, such as revenues, gross margin, cost control, or by objectives linked to the specific performance of various functions.

Individual objectives may be performance- or management-based, and are always defined objectively, in a way that ensures they are measurable over time and are interpreted in an unequivocal manner. They may be linked to management targets (processes/projects), or managerial/organisational development targets (competences).

Definition of the set of indicators to be assigned takes into account the balance guaranteeing sustainability; for example, sales are balanced by margin or EBITDA, efficacy is balanced by efficiency, and investments are balanced by EBIT.

In the case of interdepartmental projects or targets for innovation or change management, targets are shared by multiple people or by all, or through the customer/supplier approach.

Each MbO bonus is structured in such a way as to have a maximum limit on the variable payment, depending on the extent to which the Group's results are affected, and the ability of individual to influence the objective. Pay-out may range from 50% to a maximum of 150% of the target value.

As a rule, the maximum variable component of the remuneration cannot exceed the gross annual fee (GAF).

The variable component is normally paid upon approval of the draft financial statements and the consolidated financial statements, in the first quarter of the year following that in which they were accrued, to beneficiaries still employed at the Company at the time of payment, and not those who have left.

Since the Internal Audit Manager operates independently of the Company, there is no incentive plan in his favour.

Although Remuneration Policy does not provide for the payment of discretionary bonuses, the Board of Directors may, on the Appointments and Remuneration Committee's proposal, assign bonuses linked to specific operations and/or tasks of particular strategic importance for the Company and/or the Group, and in light of excellent performance according to merit-based criteria.

MBO FOR THE YEAR 2021

The guidelines behind the MBO system for the year 2021, approved by the Appointments and Remuneration Committee in its 1 October 2020 meeting, support the goals of growth, also through development of new geographical markets, new applications and new customers, of business profitability, of focusing on the organisation's sustainability and quality of service, and of rethinking processes to give them a leaner form. The system is confirmed as the primary method and tool for orientation of management and focusing on the Group's strategic goals. The incentive scheme based on short-term results (MbO) has been supplemented with a medium- to long-term scheme (LTI).

The MBO scheme thus comprises a minimum of three and a maximum of five components overall, each of which is an addendum.

There is a condition enabling the system (on/off), represented by a financial meta-target in relation to profitability with a quantitative parameter guaranteeing the sustainability of the system.

This condition, which is differentiated on the basis of the beneficiary's belonging to different Group Companies, is EBIT.

The methodology aims to direct and guide the organization towards the relevant business objectives by measuring the effectiveness and efficiency with which they are achieved.

These objectives are grouped into five clusters:

• (i) economic-financial;
• (ii) business development/marketing;
• (iii) product and innovation;
• (iv) sustainability, also in the economic and process areas;
• (v) service.

Reference indicators and KPIs (Key Performance Indicators) are defined for each cluster on the basis of what is known as the "smart" principle (specific, measurable, achievable, relevant, time-related) .

For quantitative objectives, minimum and maximum limits of percentage importance have been defined. These recognise results exceeding 95% of the target with a bonus of 50%, and reward over-performance, with the meeting of the target at 120-150% possibly corresponding to 120-150% of the related bonus.

A portion of the over-achievement in certain homogeneous categories of beneficiaries may be provided as corporate welfare, permitting access to a basket of services as permitted by legislation.

Safeguarding of EBIT will be a common goal, with the following rules: no bonus under 95% of the target

EBIT between 90% and 99.99% = 50% to 99.99% of the bonus, with linear growth EBIT between 100% = 100% of the bonus

EBIT between 100% and 120% = 100% to 150% of the bonus, with linear growth

All objectives are inspired by a systematic logic taking into account the balance required to guarantee the sustainability of the business. For example, turnover is balanced by EBITDA; investment by EBIT.

For each objective, if it is of a quantitative nature the source of verification is associated, while for qualitative ones such as the implementation of projects, there are criteria by which the objective is assessed in terms of the occurrence.

As for top management's individual targets, the plan allows for the possibility of assigning targets shared by one or more company departments, typically linked with cross-cutting projects involving innovation, organisational development, or improvement of productivity or efficiency, the achievement of which is the result of each manager's contribution.

Following a risk assessment conducted at the end of 2020 with the aim of mapping the principal strategic and operative risks to which the Gefran Group is exposed, objectives were also assigned for mitigation of the top risks emerging from the assessment.

Lastly, there are claw-back clauses for a number of specific targets.

The Long-Term Incentive (LTI) is a variable medium-/long-term component, set in order to focus management on the plans, projects and results within a period of more than one year, and on sustainable business growth by developing forward-looking vision, as well as retaining key resources.

The activating condition of the LTI system is represented by the continuation of the work relationship at the end of the three years. There may also be an enabling condition represented by Group EBITDA.

An LTI was agreed on with strategic executives in Italy and with the principal General Managers of foreign branches.

The scheme involves one or two strategic objectives, which may be economic/financial objectives linked with the overall results achieved by the company at the end of the three-year period, on the basis of which the beneficiary has the power to make decisions and act, or they may concern implementation of strategic plans aimed at generating value for stakeholders and shareholders. Measurement and payment takes place only at the end of the three-year period.

The bonus amount and its composition vary depending on the mutual interests of the Company and the managers during the period. Factors taken into consideration are: position held in the organisation and management experience; the manager's ability to influence the Group's long-term growth; annual results achieved to date and all remuneration received; the beneficiary's growth potential and loyalty-building requirements.

Details of the LTI of the General Manager are provided, taking into account the fact that the same person also holds the position of Chief Executive Officer. LTI is paid within the month following the approval of the Company's financial statements for the year to which the LTI refers (2022), on the condition that the recipient remains in office and has not resigned or been notified of termination employment or revocation of office.

The General Manager and Chief Executive Officer will not be entitled to the variable component of pay if he or she resigns the post in advance.

The benefits awarded to management are intended to ensure that overall remuneration is as competitive as possible, and is in line with the best practices adopted on the job market. They complete the monetary remuneration package. They consist of:

• ✓ insurance for reimbursement of medical costs
• ✓ company car for business/private use
• ✓ life and accident insurance
• ✓ D&O insurance

Results Bonus ("RB") This orientation toward achievement of results is also apparent in the definition of the Results Bonus (RB) offered to management, clerical staff and workers: in accordance with the Stability Law, the RB is based on indicators linked with profitability, productivity, efficiency, innovation and quality specific to the BU, defined every year in line with the budget. Note that on 26 November 2019 a company contract was signed for the 2020-2022 three-year period with the company's Unitary Trade Union

Representative (RSU), FIM-CISL and FIOM-CGIL. In addition to emphasising the central importance of the principles of inclusion and diversity, seen as assets of value for promoting innovation, change and growth in the company, there are also significant new developments for the Results Bonus. In addition to the indicators specified above, a new parameter has been introduced linked with separation of wastes for recycling, in harmony with the company's sustainability and environment strategies.

Under the new agreement, an extra annual bonus is available, directly proportionate to the growth of revenues beyond the budget, representing a strategic indicator for the company's growth. Performancerelated pay may be entirely or partially converted into goods and services under the company's welfare plan. Those who convert performance-related pay will see the their individual amount increased by 5%, if 80% of the bonus is converted, or 10%, if all of it is converted.

7. Indemnity for resignation, dismissal or termination of employment

The Gefran Group may enter into agreements with directors or managers with strategic responsibilities that regulate ex-ante the financial aspects of early termination of employment, upon the initiative of the Company or the individual (the "parachute indemnity").

Subject to legal and/or contractual obligations, any agreements on termination of employment with the Group are based on specific benchmarks, and fall within the limits set by the laws and practices of the country in which the agreement is entered into. If employment is terminated with the Group for reasons other than just cause, the usual approach is to seek an agreement to "terminate" the employment in a consensual manner.

This maximum amount includes any indemnities that may be paid in the event of termination of the office of director, even with powers, and those provided for in the employment relationship, if the same person holds both positions.

In the event that an amount is paid as a settlement, this is established in accordance with the guidelines set out in the Code of Corporate Governance, 2020 edition, and in particular with reference to the criteria set out in the Executives' national collective contract of employment.

8. Non-competition agreements

As of 31 December 2020 non-competition agreements had been signed with a number of members of management, particularly those playing roles of particular technical and commercial importance.

9. Exceptional circumstances permitting temporary exceptions to remuneration policy

In accordance with art. 123-ter, paragraph 3-bis of the Consolidated Financial Act, in the presence of exceptional circumstances the company may make temporary exceptions to remuneration policy, provided the policy specifies the procedural conditions under which such exceptions may be made and specifies the elements of the policy to which exceptions may be made.

Gefran believes that, in order to pursue its long-term interests and achieve sustainability for the Company as a whole, and to ensure its ability to remain on the market, changes to its Policy may be made in exceptional circumstances, such as, by way of example:

• (i) the need to replace the Chief Executive Officer or a manager with strategic responsibilities due to unexpected events, having to negotiate a remuneration package quickly, in cases in which the limitations imposed by the approved policy may limit the Company's ability to attract a highly professional manager;
• (ii) significant changes in the scope of the company's business while the Policy remains in effect, as in the case of sale of a company or company branch on whose performance the on performancebased objectives of the applicable policy were based, or acquisition of a significant business not included in the policy;
• (iii) the need to address exogenous and intrageneous exceptional situations, such as the impact of the Covid-19 pandemic on the Group.

These changes may relate to:

• in the case of the Chief Executive Officer:
  • i. whether the CEO also acts as General Manager or serves only as Chief Executive Officer;
  • ii. appointment of a person other than the Chief Executive Officer to serve as General Manager
  • iii. remuneration of the Chief Executive Officer, including both fee and salary as a Company employee
  • iv. the variable part of remuneration

This is without prejudice to the fact that the fixed part of the remuneration (fee + gross annual pay) may not exceed € 335,000.00.

• in the case of the Chairman:
  • i. in the event that the Chairman is given powers to act as Chief Executive Officer due to absence of this figure for any reason, an additional fee may be established, which, in addition to the current fee, may not exceed the amount of € 500.000,00.
• in teh case of General Managers and Managers with Strategic Responsibilities:
  • i. the Company may introduce new figures deemed useful for the development of the Gefran Group

Changes of this type must be introduced by resolution of the Board of Directors, with the approval of the Appointments and Remuneration Committee.

10. Other information

In preparing its 2021 Policy, the Company did not avail itself of the assistance of consulting companies and/or external experts, and did not use the specific remuneration policies of other companies as a reference, although the company did make use of statistical and qualitative surveys available on the market.

Gefran does not have any equity incentive plans in place, nor any other plans based on financial instruments;

***

It is the Committee's view that the Policy described above is in line with the approach followed in 2020 as regards the remuneration of directors and executives with strategic responsibilities.

***

In view of the above, by voting in favour of Section I - 2021 Policy, the above is confirmed.

SECTION II - Remuneration Paid in 2020 Report

This Report provides detailed information on remuneration for the current year and the related methodology with the aim of raising stakeholders' awareness of the Company's remuneration policy, practices and results, emphasising their consistency with the Company's business strategy and performance and with responsible remuneration and sound risk management, in accordance with remuneration policy.

1. Directors' Remuneration

The members of the Board of Directors are divided into:

• (i) Directors with special duties, who may also be granted specific powers;
• (ii) Directors without special duties.

At 31 December 2020:

• Directors with special duties: Ennio Franceschetti (Honorary Chairman), Maria Chiara Franceschetti (Chairman), Andrea Franceschetti (Vice Chairman), Giovanna Franceschetti (Vice Chairman) and Marcello Perini (Chief Executive Officer) ;
• Directors with no special duties: Daniele Piccolo, Monica Vecchiati, Cristina Mollis and Giorgio Metta.

For more information, see the Report on Corporate Governance and Ownership Structure.

Remuneration of directors without special duties

At the Gefran Shareholders' Meeting held on 28 April 2020 to appoint the Board of Directors, the shareholders approved an overall remuneration package for the directors pursuant to article 2389, paragraph 1, of the Civil Code, and assigned the Board of Directors the task of sharing it out.

The Shareholders' Meeting approved an overall gross annual remuneration package of € 300,000.00, divided as follows by the Board of Directors, on the Appointments and Remuneration Committee's proposal:

• ➢ € 270,000.00 divided equally among the directors, that is a gross amount of € 30,000 a year for each director;
• ➢ € 29,000.00 for the committees;
• ➢ €1,000.00 for the Lead Independent Director.

Remuneration of directors with special duties

The following directors with special duties were paid additional fees for these duties as of 31.12.2020:

• the Honorary Chairman, Ennio Franceschetti, who is paid the fixed all-inclusive sum of € 210,000.00 every year for his functions, in addition to the fee of € 30,000.00 paid to each director;

• the Chairman of the Board of Directors, Maria Chiara Franceschetti, is paid the fixed all-inclusive sum of € 210,000.00 every year for her functions, in addition to the fee of € 30,000.00 paid to each director;

• the Vice Chairman, Andrea Franceschetti, who is paid the fixed all-inclusive sum of € 135,000.00 every year for his functions, in addition to the fee of € 30,000.00 paid to each director;

• the Vice Chairman, Giovanna Franceschetti, is paid the fixed all-inclusive sum of € 135,000.00 every year for her functions, in addition to the fee of € 30,000.00 paid to each director;

The Chairman, Honorary Chairman and Vice Chairmen do not have MBO and LTI plans.

• Chief Executive Officer Marcello Perini, who, in addition to the fee of € 30,000.00 paid to each director, is paid a sum of € 60,000 for his functions and an MBO of a maximum of €30,000.00. It should be noted that the Chief Executive Officer is also a company employee.

Remuneration for executive officers and other executives with strategic responsibilities

These persons' remuneration is reported in the attached table, and conforms to 2020 policy.

In the year 2020, the fixed component accounted for an average of 75% of remuneration. This percentage is affected by the fact that in the year 2020, cost containment policies were implemented, against which accrued MBOs were paid in an amount equal to 50% of their potential value. In addition, one of the previously identified managers with strategic responsibilities began working with Gefran S.p.A. only on 1 September 2020, and did not accrue any variable bonus for the year 2020.

TABLE 1: Remuneration paid to directors and auditors, chief executive officers and other executives with strategic responsibilities - 2020

						Variable non-equity remuneration						Severan ce
First name and surname	Office	Period of office	Expiry of office	Fixed remunerati on	Remuneration for sitting on committees	Bonus and other incentives (1)	Profit sharing	Non monetary benefits (2)	Other remunera tion	Total	Fair value of equity remune ration	indemnit y for end of office or terminat ion of employ ment
Ennio Franceschetti	Honorary Chairman	Entire period	Approval of the financial statements as at 31/12/2022
Remuneration at the reporting entity			€ 240,000 (3)	€ -	€ -	€ -	€ 4,403	€ -	€ 244,403	€ -	€ -
Remuneration from subsidiaries and affiliates
Total				€ 240,000	€ -	€ -	€ -	€ 4,403	€ -	€ 244,403	€ -	€ -

Maria Chiara Franceschetti	Chairman	Entire period	Approval of the financial statements as at 31/12/2022
Remuneration at the reporting entity			€ 240,000 (4)	€ -	€	€ -	€ 12,300.20	€ -	€ 252,300.20	€ -	€ -
Remuneration from subsidiaries and affiliates			€ 3,000						€ 3,000
Total			€ 243,000	€ -	€	€ -	€ 11,042	€ -	€ 255,300.20	€ -	€ -

(1) These include, in addition to a company car, FASI and ASSIDIM medical insurance, accident insurance and life insurance

(2) Variable incentives of a monetary nature pertaining to the year 2020, already calculated on the basis of effective results and paid in the first quarter of 2021, are listed here. With regard to LTI, since it is maturing on a multi-year basis, only the portion accrued in the year in question or, in the event of liquidation, the portion accrued in 2020 and actually settled in the first quarter 2021 is reported.

(3) Including € 210,000 for the office of Honorary Chairman

(4) (4) Including € 210,000 for the office of Chairman

Andrea Franceschetti	Executive Director	Entire period	Approval of the financial statements as at 31/12/2022
Remuneration at the reporting entity			€ 165,000 (5)	€ -	€	€ -	€ 9,937.80	€ -	€ 174,937.80	€ -	€ -
Remuneration from subsidiaries and affiliates			€ 6,000						€ 6,000
Total			€ 171,000	€ -	€	€ -	€ 9,937.80	€ -	€ 180,937.80	€ -	€ -

Giovanna Franceschetti	Executive Director	Entire period	Approval of the financial statements as at 31/12/2022
Remuneration at the reporting entity			€ 165,000 (5)	€ 2,000	€	€ -	€ 11,711.80	€ -	€ 178,711.80	€ -	€ -
	Remuneration from subsidiaries and affiliates			€ 6,000						€ 6,000
Total			€ 171,000	€ 2,000	€	€ -	€ 11,711.80	€ -	€ 184,711.80	€ -	€ -

(5) Including € 135,000 for the office of Vice Chairman

Perini Marcello	Chief Executive Officer/General Manager	Director: Entire Period CEO/GM: Starting from 28/04/2020	Approval of the financial statements as at 31/12/2022
Remuneration at the reporting entity			€ 287,078 (6)	€ 2,000	€ 105,000		€ 9,424	€ -	€ 403,502	€ -	€ -
Remuneration from subsidiaries and affiliates			€ 3,000						€ 3,000
Total			€ 290,078	€ 2,000	€ 105,000	€ -	€ 9,424	€ -	€ 406,502	€ -	€ -

Romano Gallus	Director	Until 28 April 2020	Approval of the financial statements as at 31/12/2019
Remuneration at the reporting entity			€ 8,413	€ 1,000	€	€ -	€	€ -	€ 9,413	€ -	€ -
Remuneration from subsidiaries and affiliates
Total			€ 8,413	€ 1,000	€	€ -	€	€ -	€ 9,413	€ -	€ -

Daniele Piccolo	Director	Entire period	Approval of the financial statements as at 31/12/2022
Remuneration at the reporting entity			€ 25,000	€ 5,500	€	€ -	€	€ -	€ 30,500	€ -	€ -
Remuneration from subsidiaries and affiliates
Total			€ 25,000	€ 5,500	€	€ -	€	€ -	€ 30,500	€ -	€ -

(6) Including € 40,000 for the position of Chief Executive Officer beginning on 28 April 2020

Monica Vecchiati	Director	Entire period	Approval of the financial statements as at 31/12/2022
Remuneration at the reporting entity				€ 28,333.33	€ 5,500	€	€ -	€	€ 7,500	€ 41,333.33	€ -	€ -
	Remuneration from subsidiaries and affiliates						€ 8,000	€ 8,000
Total			€ 28,333.33	€ -	€	€ -	€	€ 15,500	€ 49,333.33	€ -	€ -

Mario Mazzoleni	Director	Until 28 April 2020	Approval of the financial statements as at 31/12/2019
Remuneration at the reporting entity			€ 8,413	€ 1,500	€	€ -	€	€ -	€ 9,913	€ -	€ -
Remuneration from subsidiaries and affiliates
Total			€ 8,413	€ 1,500	€	€ -	€	€ -	€ 9,913	€ -	€ -

Giorgio Metta	Director	Since 28 April 2020	Approval of the financial statements as at 31/12/2022
Remuneration at the reporting entity			€ 20,000	€ 1,500	€	€ -	€	€ -	€ 21,500	€ -	€ -
Remuneration from subsidiaries and affiliates
Total			€ 20,000	€ 1,500	€	€ -	€	€ -	€ 21,500	€ -	€ -

Cristina Mollis	Director	Entire period	Approval of the financial statements as at 31/12/2022
Remuneration at the reporting entity				€ 20,000	€ 3,000	€	€ -	€	€ -	€ 23,000	€ -	€ -
Remuneration from subsidiaries and affiliates
Total			€ 20,000	€ 3,000	€	€ -	€	€ -	€ 23,000	€ -	€ -

	Executives with strategic responsibilities	Year 2020	/
Remuneration at the reporting entity			€ 435,000	€ -	€ 122,500	€ -	€ 30,794	€	- € 588,294	€ -	€ -
Remuneration from subsidiaries and affiliates			€ 13,710	-	-	-	-		€ 13,710	-	-
Total			€ 448,710	€ -	€ 122,500	€ -	€ 30,794	€	- € 602,004	€ -	€ -

Marco Gregorini	Chairman of the Board of Statutory Auditors	Entire period	Approval of the financial statements as at 31/12/2020
Remuneration at the reporting entity			€ 30,000	€ -	€ -	€ -	€ -	€ -	€ 30,000	€ -	€ -
Remuneration from subsidiaries and affiliates									€ -
Total			€ 30,000	€ -	€ -	€ -	€ -	€ -	€ 30,000	€ -	€ -

Primo Ceppellini	Standing Auditor	Until 27 May 2020	Approval of the financial statements as at 31/12/2020
Remuneration at the reporting entity				€ 8,333.33	€ -	€ -	€ -	€ -	€ -	€ 8,333.33	€ -	€
Remuneration from subsidiaries and affiliates									€ -
Total			€ 8,333.33	€ -	€ -	€ -	€ -	€ -	€ 8,333.33	€ -	€

Roberta dell'Apa	Standing Auditor	Entire period	Approval of the financial statements as at 31/12/2020
Remuneration at the reporting entity			€ 20,000	€ -	€ -	€ -	€ -	€ -	€ 20,000	€ -	€
Remuneration from subsidiaries and affiliates									€ -
Total			€ 20,000	€ -	€ -	€ -	€ -	€ -	€ 20,000	€ -	€

Luisa Anselmi	Standing Auditor	Since 27 May 2020	Approval of the financial statements as at 31/12/2020
Remuneration at the reporting entity			€ 11,666.67	€ -	€ -	€ -	€ -	€ -	€ 11,666.67	€ -	€
Remuneration from subsidiaries and affiliates									€ -
Total			€ 11,666.67	€ -	€ -	€ -	€ -	€ -	€ 11,666.67	€ -	€

TABLE 3B: Monetary incentive schemes for directors, chief executive officers and other executives with strategic responsibilities - 2020

The table below shows the monetary incentive schemes in favour of the members of the Board of Directors and other executives with strategic responsibilities in the Company.

NAME AND SURNAME	Scheme		Bonus for the year (1)		Bonus from previous years (2)	Other bonuses
Perini Marcello	Chief Executive Officer	A	Payable/Paid	Deferred	Reference period	No longer payable	Payable/Paid	Still deferred
(I) Remuneration at the reporting entity	Scheme A	€ 90,000
	(II) Remuneration from subsidiaries and affiliates
	Executives with strategic responsibilities	A	Payable/Paid	Deferred	Reference period	No longer payable	Payable/Paid	Still deferred
(I) Remuneration at the reporting entity	Scheme A	€ 122,500

¹ Payments pertaining to the year 2020 which will be paid in 2021 are listed here. With regard to LTI, since it is maturing on multi-year basis, only the portion accrued in the year 2020 or, in the event of liquidation, the portion accrued in 2020 and actually settled in the first quarter 2021 is reported..

² Portions of variable multi-year payment (LTI) which will be paid in the first quarter of 2021 and pertain to years previous to 2020 are shown here

SCHEDULE 7-TER Information about the shareholdings of members of the Board of Directors and the Board of Statutory Auditors, executive officers and other executives with strategic responsibilities.

TABLE 1: Shareholdings held by directors, auditors and executive officers

Ennio Franceschetti personally holds 502,158 Gefran S.p.A. shares and indirectly owns the remaining 8,164,080 shares through ownership of 54% of the share capital of Fingefran S.r.l.

Name and surname	Office	Subsidiary	no. of shares at 31/12/2019	no. of shares purchased	no. of shares sold	no. of shares at 31/12/2020
Ennio Franceschetti	(Honorary Chairman)	GEFRAN S.P.A.	8,666,238	-	-	8,666,238
Maria Chiara Franceschetti	(Chairman)	GEFRAN S.P.A.	79.256*	1,139	-	80.395*
Giovanna Franceschetti	(Vice chairman)	GEFRAN S.P.A.	54,332**	-	-	54,332**
Andrea Franceschetti	(Vice chairman)	GEFRAN S.P.A.	48,016	-	-	48,016

* of which 10,000 held by spouse

*** of which 1,500 held by spouse

TABLE 2: Shareholdings of other executives with strategic responsibilities

Number executives strategic responsibilities	of with	Subsidiary	no. of shares at 31/12/2019	no. of shares purchased	no. of shares sold	no. of shares at 31/12/2020
		GEFRAN
5		S.P.A.	1,000	-	-	1,000

Provaglio d'Iseo, 11 March 2021

For the Board of Directors The Chairwoman Maria Chiara Franceschetti