REPORT ON CORPORATE GOVERNANCE AND OWNERSHIP STRUCTURE pursuant to art. 123-bis of the Consolidated Financial Act (traditional administration and control model)

Report approval date: 16 March 2021 Year to which the Report refers: 2020

www.irce.it

Glossary

1 Issuer profile
2 Information on the Ownership Structure (pursuant to art. 123-bis, paragraph 1 of the Consolidated Financial Act)
3 Compliance (pursuant to art. 123-bis, paragraph 2, letter a) of the Consolidated Financial Act)
4 Board of Directors
5 Processing of corporate information
6 Committees within the Board (pursuant to art. 123-bis, paragraph 2, letter d) of the Consolidated Financial Act)
7 Nomination Committee
8 Remuneration Committee
9 Remuneration of directors
10 Control and Risks Committee
11 Internal control and risk management system
12 Director interests and related-party transactions
13 Appointment of Statutory Auditors
14 Composition and functioning of the Board of Statutory Auditors (pursuant to art. 123-bis, paragraph 2, letters d) and d-bis) of the Consolidated Financial Act)
15 Relations with shareholders
16 Shareholders' Meetings (pursuant to art. 123-bis, paragraph 2, letter c) of the Consolidated Financial Act)
17 Further corporate governance procedures (pursuant to art. 123-bis, paragraph 2, letter a) of the Consolidated Financial Act)
18 Changes since the end of the reporting period
19 Considerations on the letter of the Chair of the Corporate Governance Committee dated 19 December 2019

TABLES

TABLE 1: INFORMATION ON THE OWNERSHIP STRUCTURE

TABLE 2: COMPOSITION OF THE BOARD OF DIRECTORS AND THE COMMITTEES

TABLE 3: COMPOSITION OF THE BOARD OF STATUTORY AUDITORS

GLOSSARY

Code/Corporate Governance Code: the Corporate Governance Code of listed companies as last amended in January 2020 by the Corporate Governance Committee and promoted by Borsa Italiana S.p.A., ABI, Ania, Assogestioni, Assonime and Confindustria.

Civil Code : the Italian Civil Code.

Board: the Board of Directors of the Issuer.

Issuer: the issuer of securities to which the Report refers.

Year: year to which the Report refers.

Consob Issuers' Regulations: Regulations issued by Consob with resolution no. 11971 of 1999 (as subsequently amended) concerning issuers.

Consob Markets Regulations: Regulations issued by Consob with resolution no. 20249 of 2017 (as subsequently amended) concerning markets.

Consob Regulations on related-party transactions: Regulations issued by Consob with Resolution No. 17221 of 12 March 2010 (as subsequently amended) concerning transactions with related parties.

Report: the report on corporate governance and corporate structure which companies are obliged to draft in compliance with art. 123-bis of the Consolidated Financial Act.

Consolidated Financial Act: Legislative Decree no.58 of 24 February 1998.

1. Issuer profile

GOVERNANCE

The company's governance structure is based on the traditional model and consists of the Shareholders' Meeting, the Board of Directors and the Board of Statutory Auditors.

MISSION

The IRCE Group is an important industrial player of European significance, which manufactures and trades the following products:

Winding wires for electrical machines. This type of product is used in a wide range of applications such as engines and electric generators, transformers, inductors and relays, and its use has grown over the years mainly due to the constant expansion of automation. The production of wires accounts for around 80% of the group's total turnover.
Insulated electrical cables. This product is used in the production of residential and industrial electrical systems and for the supply and connection of electrical equipment. The production of insulated electrical cables accounts for around 20% of the group's total turnover.

CORPORATE RESPONSIBILITY

With Board of Directors' resolution of 28 March 2008, the company established its Code of Ethics (last updated on 12 September 2019) which states all the rights, duties and responsibilities of company bodies with respect to all stakeholders involved in achieving the business purpose (customers, debtors, suppliers, employees and/or external staff, shareholders, supervisory bodies, institutions). These conduct guidelines shall thus be taken into consideration in daily work and in compliance with the laws and regulations in force in all the Countries in which the company operates. The code establishes reference standards and rules of conduct aimed at strengthening company decision-making processes and guiding the conduct of all those working for the company.

SME STATUS

The company falls within the definition of SME pursuant to art. 1, letter w-quater.1) of the Consolidated Financial Act, and pursuant to art. 2-ter) of Consob Issuers' Regulations. This is due to the fact that for three consecutive years the company has not exceeded either of the limits as per the aforesaid art. 1, letter w-quater.1) of the Consolidated Financial Act.

The company notified Consob of its SME status.

The capitalisation and turnover shown in the SME list published by Consob on its website (art. 2-ter, paragraph 2 of Consob Issuers' Regulations) are as follows:

TAX CODE		COMPANY NAME		END OF REPORTING PERIOD, IF DIFFERENT FROM 31/12		REPORTING PERIOD
82001030384		IRCE S.P.A.			2018

		2020 AVERAGE		2019 AVERAGE		2018 AVERAGE
		CAPITALISATION		CAPITALISATION		CAPITALISATION
	€	43.835.767	€	54.001.147	€	69.356.616

		2020 TURNOVER		2019 TURNOVER		2018 TURNOVER
	€	183.962.770	€	203.709.082	€	233.722.749

		2020 TURNOVER		2019 TURNOVER		2018 TURNOVER
		COMPONENTS		COMPONENTS		COMPONENTS
REVENUES	G	183.350.407	€	203.020.950	€	233.059.112
OTHER REVENUES AND	€	612.363	€	688.132	€	663.637

2. Information on the Ownership Structure as at 15 March 2021 (pursuant to art. 123-bis, paragraph 1 of the Consolidated Financial Act)

a) Structure of share capital (pursuant to art. 123-bis, paragraph 1, letter a) of the Consolidated Financial Act)

The share capital consists of ordinary shares, ownership of which entails full observance of the Articles of Association and of the Shareholders' Meeting's resolutions; subscribed and paid-up share capital amounts to € 14,626,560 divided into 28,128,000 ordinary shares. The shares are fully subscribed and paid up and bear no rights, privileges or restrictions as far as dividend distribution and capital repayment are concerned.

The share categories which make up the share capital (and the existence of any other financial instruments that grant rights to subscribe to new shares) are shown in Table 1 of the Annex.

There are no share-based incentive plans (stock options, stock grants, etc.) which could result in an increase of the share capital, with consideration or otherwise.

b) Restrictions regarding the transfer of shares (pursuant to art. 123-bis, paragraph 1, letter b) of the Consolidated Financial Act)

There are no restrictions regarding the transfer of shares.

c) Significant equity investments (pursuant to art. 123-bis, paragraph 1, letter c) of the Consolidated Financial Act)

Significant equity investments, whether direct or indirect (for example through stock pyramids or crossownership), as emerging from communications provided pursuant to art. 120 of the Consolidated Financial Act and concerning shares with voting rights exceeding 3% of share capital, are shown in Table 1 of the Annex.

d) Shares granting special rights (pursuant to art. 123-bis, paragraph 1, letter d) of the Consolidated Financial Act)

No shares granting special control rights have been issued.

None of the special powers under Law 474/94 apply, nor are there any provisions in the Articles of Association for shares with multiple voting rights or increased voting rights.

e) Employee stock ownership: mechanism for exercising voting rights (pursuant to art. 123-bis, paragraph 1, letter e) of the Consolidated Financial Act)

There is no employee stock ownership plan.

f) Restrictions on voting rights (pursuant to art. 123-bis, paragraph 1, letter f) of the Consolidated Financial Act)

There are no restrictions on voting rights.

g) Agreements among shareholders (pursuant to art. 123-bis, paragraph 1, letter g) of the Consolidated Financial Act)

The company is not aware of any agreements among shareholders pursuant to art. 122 of the Consolidated Financial Act.

h) Change of control clauses (pursuant to art. 123-bis, paragraph 1, letter h) of the Consolidated Financial Act) and statutory provisions on takeover bids (as per art. 104, paragraph 1-ter and art. 104-bis, paragraph 1)

Neither the company nor its subsidiaries have entered into significant agreements that shall be effective, modified or terminated in the event of changes of control of the company signing such agreements.

The Articles of Association of IRCE S.p.A. do not depart from the provisions on the "passivity rule" laid down by art. 104, paragraphs 1 and 2 of the Consolidated Financial Act, nor do they envisage the application of the "neutrality rule" provided for by art. 104-bis, paragraphs 2 and 3 of the Consolidated Financial Act.

i) Delegated powers to increase share capital and authorisations to purchase treasury shares (pursuant to art. 123-bis, paragraph 1, letter m) of the Consolidated Financial Act)

No powers have been delegated to the Board in order to increase share capital in compliance with art. 2443 of the Italian Civil Code or to issue financial instruments with characteristics of equity.

l) Management and coordination activities (pursuant to art. 2497 et seq. of the Italian Civil Code)

The majority shareholder Aequafin S.p.A. does not perform management and coordination activities in relation to IRCE S.p.A. in compliance with art. 2497 et seq. of the Italian Civil Code.

The following should be noted:

the information required by art. 123-bis, paragraph 1, letter i) of the Consolidated Financial Act ("agreements between the company and directors, on indemnities in the event of unfair dismissals or resignations or if the employment relationship ceases following a takeover bid") is not included in the Report on remuneration published in compliance with art. 123-ter of the Consolidated Financial Act since indemnities of this kind are not envisaged;

the information required by art. 123-bis, paragraph 1, letter l) of the Consolidated Financial Act ("provisions applicable to the nomination and replacement of directors … and to the amendment of the Articles of Association, if different from legislative and regulatory ones applicable as a supplementary measure") are illustrated in the section of the Report dedicated to the Board of Directors (Section 4.1).

3. Compliance (pursuant to art. 123-bis, paragraph 2, letter a) of the Consolidated Financial Act)

IRCE S.p.A. has adopted an internal organisational structure and a standard system of corporate governance, which complies, in substance, with the Corporate Governance Code for listed companies approved in 2006 by the Corporate Governance Committee and promoted by Borsa Italiana S.p.A. (last update in July 2020).

The Corporate Governance Code is accessible to the public on the website of the Corporate Governance Committee:

http://www.borsaitaliana.it/comitato-corporate-governance/codice/codice.en.htm

The company and its subsidiaries are not subject to non-Italian legal provisions that influence their Corporate Governance structure.

4. Board of Directors

4.1 Appointment and replacement (pursuant to art. 123-bis, paragraph 1, letter l) of the Consolidated Financial Act)

In compliance with the Articles of Association, the company is managed by a Board of Directors composed of a minimum of three and a maximum of twelve members elected on the basis of lists of candidates presented by the shareholders that hold, in total, an interest not lower than that established by the Consob Issuers' Regulations, and who have the obligation of proving ownership of the number of shares necessary to submit the lists within the deadline of two days prior to the shareholders' meeting first call.

In compliance with the Consob Issuers' Regulations, the interest necessary for presenting the list will be indicated in the notice of each Shareholders' Meeting convened to resolve on the appointment of directors. Each shareholder, as well as the shareholders belonging to the same group (as defined pursuant to the relevant legal provisions and regulations) or subscribing to a shareholder agreement regarding company shares, shall not present or vote for, directly, through third parties, or via trust companies, more than one list.

The lists submitted shall comply with the criteria of art. 147-ter, paragraph 1-ter of the Consolidated Financial Act, so as to ensure that the composition of the board ensures gender balance.

At least one of the members of the Board of Directors is chosen from among a minority list, as prescribed by art. 147-ter, paragraph 3 of the Consolidated Financial Act.

Each candidate may appear in only one list under penalty of ineligibility and must be in possession of the integrity requirements provided by the applicable legal and regulatory provisions.

Each list must include a number of candidates equal at least to the minimum number, and not higher than the maximum number minus one, of directors who can be appointed in compliance with the Articles of Association, listed in progressive order, of which a number equal at least to the one provided for by the Consolidated Financial Act, regulations of the supervisory authority and/or codes of conduct of market management companies, must be in possession of the independence requirements provided for by the above regulations.

The lists must be lodged at the company registered office at least fifteen days prior to the date fixed for the shareholders' meeting first call.

Together with each list, within the presentation deadline, the shareholders that present it must lodge:

detailed information regarding the personal and professional characteristics of the candidates, declarations with which the individual candidates irrevocably accept the office, if appointed, and state, under their own responsibility and under penalty of exclusion from the list, the non-existence of causes of ineligibility or incompatibility, as well as the meeting of the requirements prescribed by the law for taking the office, and the possession of independence requirements, if any.

Lists that have been presented without observing the above-mentioned provisions are considered as not having been presented.

If two or more lists are presented and admitted, the number of directors shall be equal to that of the candidates of the list that has obtained the majority of votes plus one.

In this case, based on the outcome of voting, the candidates of the list that has obtained the majority of votes and the first candidate in the list that has obtained the second best result and is not in any way connected to the shareholders of the list with the majority of votes, will be elected.

The director chosen from among the minority list must be in possession of the independence requirements prescribed by applicable legislative provisions, rules of the supervisory authority and/or codes of conduct of market management companies.

If only one list is presented, or admitted to voting, the number of directors shall be equal to the number of candidates of said list, who will be appointed as directors.

If an equal number of votes are obtained from more than one list, crucial for the purposes of the election procedure, a second vote shall be held between such lists by all the shareholders present in the meeting. The Board of Directors shall remain in office for the period established by the shareholders' meeting at the time of appointment, for a maximum of three financial years, and precisely until the date of the Shareholders' Meeting convened to approve the financial statements for the last year of office. Directors whose term of office has expired may be re-elected.

If, during the year, for any reason, one or more directors should cease to hold office, the others shall take measures to replace them with a resolution approved by the Board of Statutory Auditors; the directors appointed in this way shall remain in office until the next Shareholders' Meeting. Should such a director be a member voted by the minority list, replacement is made preferably by selecting a candidate, in progressive order, from the list to which the director being replaced belonged, provided that the candidate is still eligible and willing to accept the office.

If, due to resignations or other causes, the majority of members of the Board of Directors no longer exists, the entire Board's term of office shall end and the directors remaining in office shall urgently convene the Shareholders' Meeting to appoint a new Board.

For other aspects not covered by the Articles of Association, reference shall be made to the provisions of the law and regulations in force.

The Articles of Association do not envisage requirements of independence, integrity and professionalism beyond those established for auditors in compliance with art. 148 of the Consolidated Financial Act for assuming the office of director.

The company is not subject to further sector provisions concerning the composition of the Board of Directors.

The lists presented by the shareholders shall comply with the principles laid down by art. 147-ter, paragraph 1-ter of the Consolidated Financial Act to ensure that the composition of the Board of Directors ensures gender balance.

Succession plans

In consideration of the structure and the size of the group, the Board of Directors has not adopted any succession plans for executive directors considering the replacement procedures adopted as appropriate to ensure continuity of company operations.

4.2 Composition (pursuant to art. 123-bis, paragraph 2, letter d) and d)-bis of the Consolidated Financial Act)

In compliance with company Articles of Association, the Board of Directors consists of three to twelve

members, elected by the Shareholders' Meeting. They shall remain in office for a period of no more than three financial years, as established at the time of appointment, and their office ends on the date of the Shareholders' Meeting convened to approve the financial statements for their last year of office.

At the end of 2020, the Board of Directors was composed as follows:

Filippo Casadio (Chairman of the Board of Directors, Executive Director);
Francesco Gandolfi Colleoni (Executive Director);
Gianfranco Sepriano (Non-Executive Director);
Orfeo Dallago (Non-Executive Director);
Francesca Pischedda (Independent Director);
Gigliola Di Chiara (Lead Independent Director).

The Board in office was appointed by the Ordinary Shareholders' Meeting of 30/04/2019 for the years 2019, 2020 and 2021 and its term of office will end on the date of the Shareholders' Meeting convened to approve the financial statements for the year 2021. Only one list was presented by the shareholder Aequafin S.p.A.; said list was approved unanimously.

A brief description follows of the personal and professional characteristics of each appointed director (in compliance with art. 144-decies of Consob Issuers' Regulations) on the basis of the declarations they provided, as attached to the lists, and as subsequently updated by them.

Chairman of the Board of Directors – Mr Filippo Casadio

He graduated in Economics and Commerce from the University of Turin; since 2008 he has been Chairman of the Board of Directors of IRCE S.p.A.

Executive Director – Mr Francesco Gandolfi Colleoni

He graduated in Engineering from the Politecnico di Torino; currently, he is Director of Research and Development at IRCE S.p.A.

Non-Executive Director – Mr Gianfranco Sepriano

He graduated in Economics and Commerce from the Bocconi University in Milan; he worked at Chase Manhattan Bank as head of para-banking activities in Italy, at Ansaldo S.p.A. as financial co-director, for Montedison Group as member of staff of the Group Management Committee, at Unione Manifatture S.p.A. as general manager, at Finanziaria Italiana di Partecipazioni S.p.A. as merchant bank executive and since 2000 he has been working as a consultant.

Non-Executive Director – Mr Orfeo Dallago

He graduated in Political Economics from the University of Trento; he has been working at Banca di Credito Cooperativo di Tuenno e Valle di Non since 1987.

Independent Director – Ms Francesca Pischedda

She graduated in Economics and Commerce from the University of Bologna; she is registered in the Bologna Register of Accountants and Tax Advisors and in the Register of Auditors; she currently works as an independent consultant in corporate, accounting and fiscal issues.

Independent Director – Ms Gigliola Di Chiara

She graduated in Economics and Commerce from the University of Ancona; she is registered in the Bologna Register of Accountants and Tax Advisors and in the Register of Auditors. She currently works as an independent consultant in corporate, accounting and fiscal issues as well as turnaround projects.

Diversity policies and criteria

The Board of Directors has not adopted policies on diversity related to the composition of management and control bodies for aspects such as age, gender and training and professional career, considering the company practice as consistent with the criteria ensuring an adequate balance in relation to the compliance

of the main objective of ensuring adequate levels of competence and professionalism of its members. At least one third of the Board of Directors' members, and one third of the Board of Statutory Auditors' members, are of the less represented gender.

Maximum number of offices held in other companies

The Board of Directors has not defined any general criteria concerning the maximum number of management and control offices in other companies that can be considered compatible with an effective performance of the role of director, taking into account the participation of directors in the committees set up within the Board. The lack of indication of the maximum number of offices is primarily due to the multitude of situations which are theoretically possible. Situations may vary depending on the characteristics of each individual Director, the type and size of company in which the Director holds other offices, and the complexity and specific features of the industry in which those companies operate. The situation also depends on the particular office held by the Director in those other companies (executive director, non-executive director, independent director, committee member, standing auditor, or chair of the board of statutory auditors). Because of this, rather than setting a maximum number of offices, the Board of Directors has deemed it preferable to opt for an assessment of the characteristics of each Director on a case-by-case basis (experience, characteristics, offices held).

Induction Programme

No specific induction programmes have been planned. The bodies delegated at meetings of the Board of Directors (or on other occasions) are responsible for detailing relevant issues for the purpose of company performance, business development, or the industry in which the company operates. This includes any evolution in these issues, or in the regulatory framework or applicable self-regulations.

4.3. Role of the Board of Directors (pursuant to art. 123-bis, paragraph 2, letter d) of the Consolidated Financial Act)

During 2020, the Board of Directors held 10 (ten) meetings lasting for an average of two hours. The attendance percentages are shown in Table 2 attached to this Report.

In implementing the obligations stated for listed issuers by art. 2.6.2 of the Market Rules of Borsa Italiana S.p.A., the company shall inform Borsa Italiana, within thirty days of the end of the previous solar year, on the Calendar of corporate events.

In compliance with art. 20 of the Articles of Association, the Board of Directors is vested with the widest powers for ordinary and extraordinary management of the company, without limitations, with the authority to carry out all actions that it considers appropriate for achieving corporate purposes, except for those that are reserved by the law to the Shareholders' Meeting.

The Board of Directors is also responsible for mergers in the cases provided by art. 2505 and art. 2505 bis of the Italian Civil Code, for setting-up and closing branches, for updating the Articles of Association to regulatory provisions and for reducing share capital in the event of the withdrawal of a shareholder and in the case provided by art. 2446, last paragraph, of the Italian Civil Code. In such cases art. 2436 of the Italian Civil Code shall apply.

The Board of Directors may delegate part of its powers to the Chairman and/or to the Managing Directors and/or to the executive committee, if appointed, and/or to the Vice Chairman.

The Board of Directors may also appoint one or more special attorneys-in-fact for specific actions or categories of actions, establishing their remuneration and limits of representation.

In particular, among the topics specified in the Code, the Board has exclusive responsibility for the following issues:

in compliance with the provisions of the Articles of Association:

it establishes, after examining the proposals of the relevant Committee, the remuneration of the

managing directors and of those with special offices;

it grants and repeals powers of directors, defining limitations and operating procedures;

in compliance within the principles of the Articles of Association regarding ordinary and extraordinary management:

it examines and approves the strategic, industrial and financial plans of the company and periodic monitoring of their implementation;
it examines and approves the strategic, industrial and financial plans of the group to which the company belongs, and periodic monitoring of their implementation;
it defines the corporate governance system;
it defines the structure of the group to which the company belongs;
it verifies the adequacy of the organisational, administrative and general accounting structure of the company and of the Group, with particular reference to the internal control and risk management system;
it assesses the general operating performance periodically comparing the results achieved with those planned;
it assesses the adequacy of the organisational, administrative and accounting structure of the subsidiaries with strategic importance, with particular reference to the internal control and risk management system.

With regard to the assessment and approval by the Board of transactions with significant economic, capital and financial importance, the following transactions are the exclusive decision-making responsibility of the Board, and therefore cannot be delegated: the acquisition of equity investments and/or companies or company branches by the company for an amount of, including financial debts comprised in the acquired equity investment and/or company or company branch, over € 10,000,000.00 and the sale of equity investments and/or companies or company branches the value of which, including financial debts comprised in the sold equity investment and/or company or company branch, is over € 10,000,000.00 and the issue of guarantees and sureties and rights in rem or similar obligations on company assets that are not deemed of interest to the company and/or connected to the ordinary management of amounts, of over € 10,000,000.00 and the prior approval of transactions with related parties.

The Chairman of the Board of Directors ensures that the documentation relating to the items on the agenda is notified to the directors and statutory auditors with suitable notice with respect to the date of the board meeting and also ensures that as far as items on the agenda are concerned sufficient time is given for a constructive debate to take place, encouraging the intervention of directors in the meetings.

The Board of Directors' meetings are attended by the Manager responsible for preparing the corporate accounting documents and the Management Control Manager, in order to provide the appropriate explanations about the items on the agenda.

The meetings are convened and chaired by the Chairman who coordinates and guide activities.

The Articles of Association does not stipulate a minimum number of meetings.

The Board of Directors can, by law, establish a remuneration for the Directors holding special offices.

When discussing the issues for which it is responsible, the Board also assesses the adequacy of the organisational, administrative and general accounting structure of the company.

The Board has assessed its own activities and those of its Committees, along with their size and composition, taking into account the professional qualifications, experience, managerial experience, gender, and length of time in office of its members. Assessment has also taken place in relation to the diversity criteria provided under art. 2 of the Code.

The Shareholders' Meeting has not authorised any exemption from the ban on competition provided for

by art. 2390 of the Italian Civil Code.

4.4. APPOINTED BODIES

Managing Directors

Among the current Directors in office, only the Chairman has received management powers.

Chairman of the Board of Directors

In order to ensure better company management and more efficient corporate governance, the Board has granted some of its powers to the Chairman.

The Chairman is vested with all the powers of ordinary and extraordinary management, with the exclusion of those powers that are the exclusive responsibility of the Board, and he also has an operating role within the organisational structure of the company.

The Chairman is the company's chief executive officer.

The Chairman has an investment in the company Aequafin S.p.A. which holds the majority of the issuer's share capital.

Executive Committee (pursuant to art. 123-bis, paragraph 2, letter d) of the Consolidated Financial Act)

The company has not appointed an Executive Committee.

Reporting to the Board

Within the terms provided for by art. 150, paragraph 1 of the Consolidated Financial Act, the Chairman reports to the Board of Directors and the Board of Statutory Auditors on the general business performance and outlook, and on the most significant transactions carried out by the company and its subsidiaries.

4.5 Other executive directors

In addition to the Chairman, the current Board of Directors includes another Executive Director: Mr Francesco Gandolfi Colleoni. He holds a managerial role within the company as Manager responsible for Research and Development.

4.6. Independent Directors

In compliance with the Corporate Governance Code in force in 2020, it should be noted that at present two of the six company directors are Independent Directors.

In order to identify the independent directors, the instructions given by the Corporate Governance Code were followed; in particular a director does not usually qualify as independent in the following, nonexhaustive cases:

a) if, directly or indirectly, even through subsidiaries, trustees or third parties, such director controls the issuer or is able to have a significant influence over it, or participates in a shareholder agreement through which one or more persons can control or have a significant influence over the issuer;
b) if such director is, or has been in the previous three years, a prominent representative of the issuer, of one of its subsidiaries having strategic importance or of a company subject to joint control with

the issuer, or of a company or a body which, even jointly with others through a shareholder agreement, controls the issuer or is able to have a significant influence over it;

c) if the director currently has (or has had in the previous year) a significant commercial, financial or professional relationship, either directly or indirectly:
- with the issuer, one of its subsidiaries, or any of its prominent representatives;
- with an individual who controls the issuer (even if it is done jointly with others through a shareholder agreement), or in the event of companies or entities, with their prominent representatives;
- or, if the director is (or has been in the previous three years) an employee of one of the abovementioned parties;
d) if such director receives (or has received in the previous three years) from the issuer or from a subsidiary or parent company a significant remuneration in addition to the fixed compensation as non-executive director of the issuer, including participation in incentive plans linked to the company's performance;
e) if such director has been a director of the issuer for more than nine years in the last twelve years;
f) if such director holds the office of executive director in another company in which an executive director of the issuer holds the position of director;
g) if such director is a shareholder or director of a company or of an entity belonging to the network of the company appointed to perform the audit of the accounts of the issuer;
h) if such director is a close relative of a person who is in one of the situations mentioned in the previous points.

After each appointment, the Board of Directors carries out its own assessment on compliance with the requirements of the Corporate Governance Code and with art. 148, paragraph 3 of the Consolidated Financial Act. This assessment is also done subsequently whenever material circumstances for the purpose of independence occur and, in any case, at least annually.

During the meeting following its appointment and based on the information provided by each Director, the Board of Directors has ascertained that two of its members (Ms Francesca Pischedda and Ms Gigliola Di Chiara) are in possession of the independence requirements according to the criteria set forth in the Corporate Governance Code for listed companies, and it has disclosed the results of its assessment.

At the meeting held on 15 March 2021, the Board of Directors carried out an assessment on the independence requirements, through the use of questionnaires, in accordance with Recommendation No. 7 of the Corporate Governance Code issued by the Corporate Governance Committee on 31 January 2020, which came into force on 1 January 2021. The outcome of this self-assessment procedure (on the basis of updated information given by each of the relevant directors) was that, according to the Board, the Directors Ms Francesca Pischedda and Ms Gigliola Di Chiara meet the independence requirements. The Board also recognised that the composition of the Board complies with the recommendations of current legislation, and with recommendation 7 of art. 2 of the Corporate Governance Code.

Moreover, the Board of Statutory Auditors has verified the application of the criteria and procedures adopted by the Board of Directors for assessing the independence of its own members and found them compliant with the indications provided by the Corporate Governance Code.

During the year a meeting of the independent directors was held. The other directors did not participate.

4.7. Lead Independent Director

In line with the policies established by the Corporate Governance Code for listed companies, since the role of Chairman of the Board of Directors coincides with that of the main person responsible for managing the company, the Board appointed a Lead Independent Director.

The Lead Independent Director acts as a point of reference for and coordination of the requests and contributions of the non-executive directors and collaborates with the Chairman of the Board of Directors in order to guarantee that the directors receive complete and timely information flows.

The Board appointed Ms Gigliola Di Chiara as Lead Independent Director.

5. Processing of corporate information

The Board has drafted a procedure for the disclosure of price sensitive documents and information regarding the company. Such procedure envisages that the external communication of said documents and information should be made by

the Head of Corporate Information, who defines the content of the communication through the preparation of a press release.

In particular:

the press releases and documents relating to so-called periodic reporting (financial statements, interim reports, etc.) and those relating to extraordinary transactions under the responsibility of the management body (mergers, demergers, acquisitions, capital increases, amendment of the Articles of Association, etc.) shall be approved by the Board of Directors; in the other cases, the external communication of price sensitive information shall be submitted to the Chairman of the Board of Directors for final approval before release.

The Head of Corporate Information then enters the information into the E-Market SDIR circuit and publishes the same on the website of the Company www.irce.it.

The Board of Directors of IRCE S.p.A. has also approved the "Internal Dealing" Code of Conduct, adopted pursuant to art. 114, Paragraph 7 of the Consolidated Financial Act, articles 152-quinquies et. seq. of Consob Issuers' Regulation 11971/99 and Regulation (EU) No. 596/2014 ("MAR") that governs the methods of communication and dissemination of information relating to operations on the Company's financial instruments carried out by Relevant Parties, Relevant Shareholders and Closely Associated Persons, in order to ensure greater market transparency and adequate preventive measures against market abuse.

6. Committees within the Board (pursuant to art. 123-bis, paragraph 2, letter d) of the Consolidated Financial Act)

The following committees are set up within the Board of Directors:

Control and Risks Committee;
Remuneration Committee;
Related-party Committee.

Under the coordination of the Chairman, no functions of one or more committees provided for by the Corporate Governance Code have been reserved within the Board.

No further committees in addition to those reported in this Section have been set up.

7. Nomination Committee

Taking into account the structure and size of the company, no Nomination Committee was established within the Board of Directors. The relevant functions, as indicated in the Corporate Governance Code, are therefore fulfilled by the Board of Directors.

8. Remuneration Committee

Reference should be made to the relevant paragraphs of the Remuneration Report published in compliance

with art. 123-ter of the Consolidated Financial Act.

9. Remuneration of directors

Reference should be made to the relevant paragraphs of the Remuneration Report published in compliance with art. 123-ter of the Consolidated Financial Act.

10. Control and Risks Committee

In compliance with the provisions of the Corporate Governance Code, the Board of Directors has set up an internal Control and Risks Committee with advisory and proposal-making functions.

Composition and functioning of the Control and Risks Committee (pursuant to art. 123-bis, paragraph 2, letter d) of the Consolidated Financial Act)

The Committee, which will remain in office until approval of the financial statements as at 31/12/2021, is composed of Ms Gigliola Di Chiara (Independent Non-Executive Director), acting as Chair, and of Mr Gianfranco Sepriano (Non-Executive Director) and Ms Francesca Pischedda (Independent Non-Executive Director).

Therefore, the Control and Risks Committee is composed of three of the six Board members selected from among non-executive directors, the majority of whom are independent.

The Committee members must possess the necessary knowledge, skills and experiences allowing them to fully understand and monitor the company strategies and risk approach.

The members of the Committee possess adequate experience of accounting and financial issues or risk management. The Chair coordinates the discussions and minutes are taken at meetings.

The Chairman of the Board of Statutory Auditors took part in the Committee meetings in 2020. Furthermore, at the invitation of the Committee, the following also took part in meetings in relation to items on the agenda: Standing Auditors, the Director responsible for the internal control and risk management system, the Head of Internal Audit, the Manager responsible for preparing the corporate accounting documents, members of the Supervisory Body, the Management Control Manager, and external audit company staff, experts and representatives (appointed to audit the accounts), all with advisory functions.

During 2020, the Committee met three times, as illustrated in Table 2 attached to this Report, while the meetings lasted an average of two hours.

In 2020 the following items were discussed: a) process of self-assessment of the Board of Directors and Committees, b) report on 2019 internal audit activities, c) the Internal Audit's activity plan for 2020, d) assessment on the correct application of accounting standards and their consistency for the purpose of preparing consolidated financial statements with the assistance of the Manager responsible for preparing the corporate accounting documents and with advice from the External Auditor and the Board of Statutory Auditors, e) adoption and implementation of protocols and measures aimed at preventing the risk of contagion from COVID-19 and implementation of the measures contained in the regulatory provisions issued following the spread of the pandemic, f) examination of the notices formulated in the letter sent by the Chairman of the Corporate Committee to all listed companies on 22/12/2020.

Subject to agreement and in discussing individual topics, during its own meetings, the Committee has interacted with the Director responsible for the internal control and risk management system, the Head of Internal Audit, the Chairman of the Board of Statutory Auditors, the Manager responsible for preparing the corporate accounting documents, the Management Control Manager and the Supervisory Body.

Functions attributed to the Control and Risks Committee

In compliance with art. 7 of the Corporate Governance Code, the Control and Risks Committee was attributed the following consultation and proposal functions by the Board of Directors:

a) providing the Board with prior opinions when required by the application criterion 7.C.1 of the Corporate Governance Code;
b) assessing, together with the Manager responsible for preparing the corporate accounting documents and the auditors, the correct implementation of accounting standards and, in the case of groups, their consistency for the purposes of drafting the consolidated financial statements;
c) expressing opinions on specific aspects regarding the identification of the main corporate risks and the design, implementation and management of the internal control system;
d) examining the periodic reports concerning the assessment of the internal control and risk management system, and those of particular significance drafted by the Internal Audit function;
e) monitoring the autonomy, suitability, effectiveness and efficiency of the Internal Audit function;
f) asking the Internal Audit function to carry out checks on specific operating areas, promptly notifying the Chairman of the Board of Statutory Auditors of this;
g) supporting, with appropriate investigations, the Board of Directors' assessment and decisions regarding the management of risks resulting from prejudicial facts of which the Board of Directors has become aware.

The Chair of the Control and Risks Committee reports to the Board of Directors, at the first available opportunity, on the activities carried out and on the adequacy of the internal control and risk management system.

In carrying out its duties, the Control and Risks Committee has had the opportunity to access company information and benefit from the assistance of various corporate functions as required to carry out its tasks. The Committee did not deem it necessary to appoint any other external consultants, other than those identified from time to time by the relevant corporate functions.

11. Internal control and risk management system

In compliance with the provisions of the Corporate Governance Code, the Board of Directors establishes internal control guidelines and periodically checks their suitability and effective functioning, making sure that the main corporate risks are identified and suitably managed.

The internal control system is based on the identification of the main risks related to the specific business carried out by the company and the compliance with the relevant corporate prevention procedures.

As part of the internal control and risk management system concerning the financial reporting process, IRCE S.p.A. has drafted administrative and accounting procedures for the preparation of the separate and consolidated financial statements and for any other communication of a financial nature.

The objectives of the financial reporting process can be identified in terms of the trustworthiness, accuracy, reliability, and timely nature of the disclosure. Risk management activities are an integral part of the internal control system.

The company has adopted the COSO Framework as a reference model.

11.1 Director responsible for the internal control and risk management system

The Chairman of the Board of Directors is the Director appointed to supervise the functions of the internal control and risk management system.

In his capacity as Body with management functions, the Director has constantly reported to the Board of Directors and the Control and Risks Committee on all the aspects of corporate management, including verification of the overall adequacy of the efficacy and efficiency of the internal control and risk management system.

The Director responsible for the internal control and risk management system may ask the Internal Audit function to carry out checks on specific operating areas and in respect of the internal rules and procedures in performing corporate operations, giving prompt notification of this to the Board of Directors, the Chairman of the Control and Risks Committee and the Chairman of the Board of Statutory Auditors.

11.2. Internal Audit

The Board of Directors has entrusted the Internal Audit function to an external professional, in the person of Mr Fabrizio Bianchimani, and has established his remuneration consistently with corporate policies. It has also ensured that he has adequate resources to fulfil his duties.

Mr Fabrizio Bianchimani has had direct access to all information needed to carry out his assignment.

The main activities carried out during the year were: assessment of the effectiveness and adequacy of the internal control and accounting systems, of the proper application of accounting and administrative procedures, as well as any updating thereof, periodic reports on the status of the internal control system and report on any critical issues.

Within the scope of its activities, during 2020 the Internal Audit, with reference to the Parent Company, performed control tests on the riskiest processes, in particular sales and distribution, purchasing and inventory management, as well as, according to a rotation rationale, on some processes considered to represent a normal risk, in particular the preparation of the financial statements, the management of the consolidation process, of the treasury, of investments and of taxes.

In relation to subsidiaries, the Internal Audit has been given the mandate to carry out specific control procedures at the Dutch company Smit Draad Nijmegen B.V., which were completed after the end of 2020. These specific activities are part of the process aimed at strengthening the Parent Company's audit procedures for its subsidiaries.

11.3. Organisational Model pursuant to Italian Legislative Decree 231/2001

In order to guarantee transparency and correctness in corporate operations, and to protect the expectations of shareholders and those that work for and with the company, IRCE S.p.A. has implemented, in compliance with corporate policies, the Organisational, Management and Control Model pursuant to Italian Legislative Decree 231/2001.

Such an action was also undertaken with the conviction that the adoption of the Organisational Model is a valid instrument to make those working for the company more sensitive to adopting, when carrying out and conducting their own activities, correct and standard behaviour aimed at preventing the risk of committing the crimes covered in Italian Legislative Decree 231/2001.

The company condemns behaviour contrary to current legal provisions and to the ethical principles also stated in the Code of Ethics adopted.

IRCE S.p.A. referred to the "Guidelines for the creation of organisation, management and control models" pursuant to Italian Legislative Decree No. 231 of 8 June 2001, issued by Confindustria (the general confederation of Italian industry). This document provides guidelines on interpreting and analysing the legal and organisational implications deriving from the introduction of Italian Legislative Decree 231/2001.

On 12 September 2019, the company updated its Code of Ethics and its Organisational, Management and Control Model, after the consulting company Soluzioni Srl completed the planned activities to review and update the 231 Model as well as all the relevant documentation.

In its current version, the Organisational Model intends to specifically prevent the following types of predicate-offences, as referred to in the corresponding article of the Decree indicated within parentheses: Crimes against the Public Administration (art. 24 and art. 25), Corporate crimes (art. 25 ter), Market abuse offences (art. 25-sexies), Manslaughter and serious and very serious injuries caused in breach of laws on health and safety protection at the workplace (art. 25-septies), Crimes of receiving stolen goods, money laundering and use of money, goods or benefits of unlawful origin, as well as selfmoney laundering (art. 25-octies), Computer crimes and unlawful data processing (art. 24-bis), Crimes against public trust (art. 25-bis), Crimes against industry and commerce (art. 25-bis.1), Environmental crimes (art. 25-undecies), Crimes committed by employing illegally staying third-country nationals (art. 25-duodecies), Transnational crimes (Law 146/2006, art. 3 and art. 10).

With reference to the changes in the list of predicate-offences, after the date of approval of the Model currently adopted, the methods for assessing the potential exposure of corporate activities to the risks of committing the aforementioned offences have been shared. As at the date of approval of this document, the activities planned for the assessment of such risks and for the consequent updating of the 231 Model adopted are being carried out by the consulting firm Soluzioni Srl, following its appointment by IRCE.

For issues regarding compliance with and interpretation of the Organisational Model, a Supervisory Body was set up when adopting the first version of the Organisational Model.

The current Supervisory Body, appointed by the Board of Directors on 12 September 2019, after corporate bodies were reappointed for the three-year period 2019-2021, is composed of all three previously appointed members. The Supervisory Body is composed as follows:

Mr Francesco Bassi, professional;
Mr Gabriele Fanti, professional;
Mr Gianluca Piffanelli, company employee.

During the first meeting after the appointment, Mr Francesco Bassi was appointed as Chair of the Supervisory Body.

The Body will remain in office for three years; more specifically until 31 August 2022.

During 2020 the Supervisory Body met six times: on 14 February, 7 April, 5 June, 2 July, 23 October and 13 November. Meeting minutes were regularly taken.

In regards to the option – provided for by the Corporate Governance Code – for issuers to evaluate the possibility of attributing the Board of Statutory Auditors with supervisory body duties pursuant to Italian Legislative Decree 231/2001, the Board of Directors has deemed it appropriate to define the composition of the Supervisory Body described above. No members of the Board of Statutory Auditors shall be appointed to the Supervisory Body and there shall be a prevalence of external professionals. This ensures both the adequate segregation of duties, and the availability of skilled individuals within the Supervisory Body with specific skills enabling them to effectively carry out the tasks assigned.

11.4. Independent Auditors

The Shareholders' Meeting of 10 June 2020 appointed Deloitte & Touche SpA to audit the accounts for the period 2020 - 2028.

11.5 Manager responsible for preparing the corporate accounting documents

The Board of Directors appointed Ms Elena Casadio, head of administration and finance of the company and director with proven professionalism and experience in financial and accounting issues, as "Manager responsible for preparing the corporate accounting documents".

In compliance with art. 24 of the Articles of Association: "Subject to the favourable opinion of the Board of Statutory Auditors, the Board of Directors appoints a manager, with proven professionalism and experience in finance and accounting, as Manager responsible for preparing the corporate accounting documents and fulfilling the duties provided for by current legal and regulatory provisions concerning periodic reporting".

11.6 Coordination among the parties involved in the internal control and risk management system

The Control and Risks Committee's meetings are attended by the Board of Statutory Auditors, subject to agreement and in order to discuss individual topics, the Director responsible for the internal control and risk management system, the Manager responsible for preparing the corporate accounting documents and the Head of the Internal Audit function.

12. Director interests and related-party transactions

In compliance with art. 4 of the Regulation on related-party transactions adopted by the Consob with Resolution No. 17221 of 12 March 2010, as subsequently amended by Resolutions No. 17389 of 23 June 2010 and No. 19925 of 22 March 2017, the Board of Directors has adopted a procedure for the management and approval of related-party transactions; this procedure, published on the company's website, has been applied, in compliance with said regulation, starting from 1 January 2011.

This procedure is available on the company website www.irce.it in the section "Investor relations/Corporate governance". It makes a distinction between transactions of greater importance, transactions of lesser importance, and transactions of negligible amount (subject to different provisions).

The Board did not consider it necessary to find further operating solutions, in addition to the procedure, to facilitate the identification of situations in which a director holds an interest on his/her own behalf or on behalf of third parties.

13. Appointment of Statutory Auditors

The appointment of members of the Board of Statutory Auditors is governed by art. 23 of the Articles of Association. The Shareholders' Meeting appoints a Board of Statutory Auditors consisting of 3 (three) Standing Statutory Auditors and 2 (two) Substitute Statutory Auditors. Minority shareholders have only the right to elect one Standing Statutory Auditor and one Substitute Statutory Auditors. The Board of Statutory Auditors is appointed on the basis of lists provided by the shareholders, in which the candidates must be listed using a progressive number. The list consists of two sections: one containing the three names of the candidates to the position of Standing Statutory Auditor and the other containing the two names of the candidates to the position of Substitute Statutory Auditor. Only shareholders who (together) hold an interest no lower than that laid down by the Consob Issuers' Regulations, and who have the obligation of proving ownership of the number of shares necessary for presenting the lists within the deadline laid down by the current pro-tempore regulations, have the right to present lists. In compliance with the Consob Issuers' Regulations, the notice of each Shareholders' Meeting convened to resolve on the appointment of Statutory Auditors shall include the interest necessary for presenting the relevant list. Each shareholder, as well as the shareholders belonging to the same group (as defined pursuant to the relevant legal provisions and regulations) or subscribing to a shareholder agreement regarding company shares, cannot present or vote for, directly, by third parties, or via trust companies, more than one list. Any candidate appearing on more than one list shall be disqualified; under penalty of ineligibility or disqualification, each Statutory Auditor shall meet the requirements of integrity and professionalism laid down by applicable legal provisions and regulations, shall hold offices of Standing Statutory Auditor in no more than five issuers (as defined pursuant to the relevant legal provisions and regulations) and administration and control offices in companies as per Book V, Title V, Chapters V, VI and VII of the Italian

Civil Code within the maximum limit allowed by applicable legal provisions and/or regulations. Outgoing Standing and Substitute Statutory Auditors can be re-elected. The lists must be lodged at the company registered office within the deadline provided for by the applicable pro-tempore provisions and this shall be mentioned in the relevant notice. Together with each list, within the presentation deadline, the shareholders that present it shall lodge: detailed information regarding the personal and professional characteristics of the candidates, declarations with which the individual candidates irrevocably accept the office, if appointed, and state, under their own responsibility, the non-existence of causes of ineligibility or incompatibility, as well as the meeting of the requirements prescribed by the law and by the Articles of Association for taking the office, where the conditions exist, the declaration stating the absence of any forms of association with shareholders who hold, also jointly, a controlling or majority interest. Lists that have been presented without observing the provisions of this article are considered as not having been presented.

The Statutory Auditors are elected as follows:

two standing statutory auditors and one substitute statutory auditor are selected from the list that obtained the highest number of votes in the Shareholders' Meeting, in the progressive order in which they are listed in the sections of the list;
the remaining standing statutory auditor and the other substitute statutory auditor are selected from the list that obtained the highest number of votes in the Shareholders' Meeting after the first one and that is not connected, according to the law and regulations in force, with the shareholders that have presented or voted the list resulting first in terms of numbers of votes, in the progressive order in which they are listed in the sections of the list;
if an equal number of votes are obtained from more than one list, crucial for the purposes of the election procedure, a second vote will be held between such lists by all the shareholders present in the meeting.

The standing statutory auditor indicated as the first candidate in the list that has obtained the highest number of votes after the first in the Shareholders' Meeting will be appointed as Chair of the Board of Statutory Auditors. If only one list is presented, the candidates indicated in said list will be elected, by relative majority vote, and the first candidate will be appointed as chair. If the requirements provided for by law and/or by the Articles of Association cease to be met, the Statutory Auditor's term of office will end. In the case of the replacement of a Statutory Auditor, the Substitute Statutory Auditor belonging to the same list as the former will take over. The powers, duties and functions of the Board of Statutory Auditors and its members are governed by the relevant provisions.

The lists presented by the shareholders shall comply with the principles laid down by art. 148, paragraph 1-bis of the Consolidated Financial Act so as to ensure that the composition of the board ensures gender balance.

14. Composition and functioning of the Board of Statutory Auditors (art. 123-bis, paragraph 2, letters d) and d-bis) of the Consolidated Financial Act)

The composition of the Board of Statutory Auditors in office at the end of the reporting period, as illustrated in Table 3 attached to this Report, is as follows:

Chairman: Mr Fabio Senese;
Standing Statutory Auditor: Mr Adalberto Costantini;
Standing Statutory Auditor: Ms Donatella Vitanza;
Substitute Statutory Auditor: Mr Gianfranco Zappi;
Substitute Statutory Auditor: Ms Claudia Maresca.

The Shareholders' Meeting that nominated the Board of Statutory Auditors was held on 10/06/2020 on the basis of the Articles of Association in force. The election for the three-year period 2020-2021-2022 took place according to the criterion of the list vote. The only list presented was that of the majority shareholder Aequafin S.p.A. and the candidates were elected unanimously.

A brief description follows of the personal and professional characteristics of each Standing Statutory Auditor (in compliance with art. 144-decies of Consob Issuers' Regulations) on the basis of the declarations

provided by each one and attached to the lists as well as any subsequent updates notified by those concerned.

Chairman of the Board of Statutory Auditors – Mr Fabio Senese

He is registered in the Bologna Register of Accountants and Tax Advisors and in the Register of Auditors. He works as a freelance mainly in national and international tax consultancy and in the management of tax assessment, collection and litigation procedures. He has worked as a technical consultant in civil and criminal proceedings.

He has held and still holds the positions of Statutory Auditor and External Auditor in companies operating in various production and service sectors, including those of navigation, transports, construction, fashion, medical biology, industry and commerce.

Standing Statutory Auditor – Mr Adalberto Costantini

He is an Accountant and Auditor registered in the Bologna Register of Accountants since 1993.

He has many years' experience in the auditing of important Italian groups and companies listed on the Stock Exchange in his capacity as senior manager of Ernst & Young Italia, audit division, at the Bologna office.

Since 2011 he has been working as a professional Accountant and Auditor in particular with regard to: corporate consultancy, corporate assistance in administrative and accounting issues, legal and voluntary auditing, corporate assessments, equity and economic due diligence, preparation of budgets and economic-financial outlook systems, support within the sphere of Italian Legislative Decree 231/2001.

During his professional career, he has held and currently holds numerous positions as Statutory Auditor and External Auditor in private companies and non-profit entities and he has also held the position of director in local utility companies subject to public control.

Standing Statutory Auditor – Ms Donatella Vitanza

Accountant and Auditor, she has been registered in the Register of Accountants of Bologna since 1991. In 2016, she achieved her Master's in Business Administration at the Bologna Business School.

She deals mainly with corporate, fiscal, company consultancy and legal auditing.

She held and still holds positions as Statutory Auditor and External Auditor in private companies and has been a standing Statutory Auditor at Irce S.p.A. (the only listed company) since 2014.

She has been a director of the Association of Accountants and Tax Advisors of Bologna since 2017.

During 2020, the Board of Statutory Auditors held 7 (seven) meetings. The meetings lasted an average of two hours.

The Chairman of the Board of Directors reported to the Board of Statutory Auditors adequately and in a timely manner on the activities performed, the general business performance and outlook, and on the most significant transactions – for size and characteristics – carried out by the Issuer and its subsidiaries at least quarterly, as established by law and the Articles of Association.

It is expected that during 2021 the Board of Statutory Auditors will hold a number of meetings in line with those held during the previous year.

No changes have been made to the composition of the Board between the end of the reporting period and the date this document was approved.

The Board of Directors has verified that the requirements of integrity, professionalism and independence of the Statutory Auditors have been met.

The Board has also verified that its members are qualified to carry out the functions of the control body

from the point of view of professionalism, availability of time and independence.

While carrying out such a verification, it was confirmed that the members of the Board of Statutory Auditors are in possession of the requirements of independence according to the criteria laid down by the Corporate Governance Code and by art. 148, paragraph 3 of the Consolidated Financial Act. In carrying out such assessments, the Board applied the criteria laid down by the Code with reference to directors.

In this regard, as envisaged by the Corporate Governance Code, the Board of Directors assesses the independence of its non-executive members, upon appointment and subsequently at least annually. During the self-assessment process, the principle of substance over form was adopted, bearing in mind that a director does not appear, as a rule, independent when certain, non-exhaustive cases occur, including having been a director of the issuer for more than nine out of the past twelve years.

The result of the assessment was sent to the Board of Directors for further disclosure as provided for by the Issuers' Regulations.

Any statutory auditor who, on his/her own behalf or on behalf of third parties, has an interest in a specific company transaction shall inform the other statutory auditors and the Chairman of the Board of Directors immediately and in detail about the nature, terms, origin and extent of his/her own interest.

The members of the Board of Statutory Auditors have adequate knowledge of the industry in which the Issuer operates, of the company dynamics and their development as well as the reference regulatory and self-regulatory framework.

Italian Legislative Decree 39/2010, "Implementation of Directive 2006/43/EC on statutory audit of annual and consolidated accounts, amending Directives 78/660/EEC and 83/349/EEC and repealing Directive 84/253/EEC", identified the Board of Statutory Auditors as the Control and Risks Committee and audit with supervisory functions on: i) financial disclosure process; ii) effectiveness of internal control systems; iii) statutory audit of annual and consolidated accounts; iv) independence of the independent auditor, in particular with respect to the provision of non-auditing services to the entity being audited.

In the light of the above, the Board of Statutory Auditors, while performing its activities, coordinated with the Internal Audit function, by acquiring information on the activities performed by the latter, and with the Control and Risks Committee, by taking part in the meetings held by the latter.

Furthermore, the Board of Statutory Auditors:

acquired information on activities performed by the Supervisory Body set up pursuant to Italian Legislative Decree 231/2001 as part of the organisation model adopted;
met periodically with the independent auditor also in order to receive information on the nature and extent of any services other than the audit of the accounts provided to the Issuer and its subsidiaries by the independent auditor and by entities belonging to the latter's network.

Fees paid to Statutory Auditors are consistent with the commitment required, the importance of their role and the company size and sector.

Diversity policies

In consideration of the group structure and size, the Board of Statutory Auditors has not adopted policies on diversity related to the composition of management and control bodies for aspects such as age, gender and training and professional career, considering the practice followed as based on criteria ensuring an adequate balance when representing diversity with reference to the above-mentioned aspects.

15. Relations with shareholders

IRCE S.p.A. has set up a special section on its own website, easily identifiable ad accessible under the heading Investor Relations of the menu located at the top of the home page, in which it provides information considered significant for shareholders, so as to allow shareholders to exercise their own rights consciously.

The Board of Directors has appointed an Investor Relations Manager in the person of Mr Gianfranco Sepriano, phone no. +39-0382-77535, e-mail address: [email protected].

16. Shareholders' Meetings (pursuant to art. 123-bis, paragraph 2, letter c) of the Consolidated Financial Act)

The functioning of the Shareholders' Meeting is governed by art. 9 to 14 of the company Articles of Association.

The regularly convened Shareholders' Meeting represents all shareholders and its resolutions taken in compliance with the law and the Articles of Association are binding to all shareholders. It can be ordinary or extraordinary according to the law.

Both the ordinary and extraordinary Shareholders' Meeting shall be convened through a relevant notice to be published within the deadlines and with the procedures laid down by the law.

Representation in the Shareholders' Meeting is subject to the law. Shareholders who have sent to the company, at least two working days before the meeting, the communication made by the intermediary in compliance with its accounting entries, in favour of the person entitled to vote, may take part in the Shareholders' Meeting. Each shareholder who is entitled to take part in the Shareholders' Meeting may be represented by another person in compliance with the law, by means of a written proxy or a proxy sent by electronic means when provided by appropriate regulatory provisions and in the manner established therein. In the latter case, the electronic notification of the proxy shall be made through the specific section of the company website according to the procedures specified in the notice of call.

Regulatory provisions shall apply to convening both ordinary and extraordinary Shareholders' Meetings and to the validity of their resolutions.

The whole Board of Directors takes part in the Shareholders' Meetings and reports on the activity carried out and scheduled and ensures that the shareholders receive adequate information on the relevant issues so that they can take informed decisions.

During the Shareholders' Meeting held to approve the financial statements, the Chair of the Remuneration Committee reported to the shareholders on how the committee performs its functions.

As for the functioning of the Shareholders' Meeting, the Rules for Shareholders' Meetings were approved as required by art. 12.4 of the Corporate Governance Code; this document is available on the company's website in the Investor relations/corporate governance section.

During the financial year there were no significant changes in the market capitalisation of company shares and in the ownership structure.

17. Further corporate governance procedures (pursuant to art. 123-bis, paragraph 2, letter a) of the Consolidated Financial Act)

No Committees in addition to those described in the previous Sections were appointed, while adoption of the Organisational Model in compliance with Italian Legislative Decree 231/2001 is discussed in paragraph three of Section 11.

18. Changes since the end of the reporting period

No changes have made to the corporate governance structure since the end of the reporting period up to the date of approval of this document.

Considerations on the letter of the Chair of the Corporate Governance Committee dated 22 December 2020

The recommendations included in the letter dated 22 December 2020 were brought to the attention of all Directors and of the members of the Board of Statutory Auditors.

The recommendations included therein were discussed at the meeting of the Board of Directors held on 16 March 2021, and the following information is provided, as requested in the communication sent by the Chair of the Corporate Governance Committee:

As for the introduction of the concept of business sustainability as part of the definition of strategies, of the internal control and risk management system and of the remuneration policy, also based on a materiality analysis concerning factors that can impact value generation over the long period, business strategies as well as the internal control and risk management system are accurately assessed in order to achieve the objectives, and the Executive Directors' remuneration is partially linked to short- and medium-term performance;
As for the pre-meeting information, on 16 March 2021 the Board of Directors approved the Rules for the Board of Directors, which identify the terms of notice and the methods according to which the documentation must be made available. In addition, it should be noted that during the aforementioned meeting, the results of the self-assessment process concerning the operation of the same were discussed, revealing an overall positive opinion on the adequacy of said information flows. Directors deemed that the disclosure was sufficient for the purpose of being able to respond and act in an informed manner;
As for the application of the independence requirements, the Code invites the Board of Directors to always justify on an individual basis the possible non-application of one or more independence criteria and to define in advance the criteria to be used for assessing the materiality of the relationships under examination. The Directors shall periodically verify whether these requirements continue to be met pursuant to art. 148, Paragraph 3 of the Consolidated Financial Act and art. 2, Recommendation 7 of the Corporate Governance Code according to codified criteria. Derogation from any independence criteria recommended by the Code is assessed, under the supervision of the Board of Statutory Auditors, on a case-bycase basis and with reference to the materiality of relationships, including the analysis of the position in general and not only of the mere economic impact.
As for the remuneration policy, the Company has adopted policies consistent with the development of corporate strategies and the pursuit of long-term interests. The weight of the variable component, distinguishing between components linked to annual and multi-year time horizons, is analysed in the Remuneration Report pursuant to Art. 125-ter of the Consolidated Financial Act, to which reference is made. Non-executive Directors and members of the control body are granted remuneration deemed adequate for the skills, professionalism and commitment required for the type of office held.

Imola, 16 March 2021

TABLE 1: INFORMATION ON THE OWNERSHIP STRUCTURE

S H A R E C A P I T A L S T R U C T U R E
	f h N o. o s a r e s	% h S C t o n e	i d / l i d L t U t s e n s e	i h d b l i i R t t g s a n o g a o n s
d h O i r n a r y s a r e s	2 8, 1 2 8, 0 0 0	1 0 0 %	M T A	h h h h E i i t t a c s a r e g v e s e r g h h d t t T i t o o n e v o e. e r g s a n b l f h i t i t o g a o n s o e h h l d h l d i t s a r e o e r s a r e o s e a d b l 2 3 6 t i 4 t o w n y a r c e s e f h l C l t I t i i i s e q. o e a a n v d C o e.

S I G N I F I C A N T E Q U I T Y I N V E S T M E N T S
l i D t e c a r n g p a r y	i h h l d D t r e c s a r e o e r	% d i i l t o n o r n a r y c a p a	% i i l t t o n v o n g c a p a
A E Q U A F I N S. A. p.	A E Q U A F I N S. A. p.	5 0. 0 4 5 %	5 0. 0 4 5 %
O G A N N A M A R I A M N A R D I	O G A N N A M A R I A M N A R D I	8 2 8 % 4.	8 2 8 % 4.

TABLE 2: COMPOSITION OF THE BOARD OF DIRECTORS AND THE COMMITTEES

BOA RD OF DIR ECT OR S											Con l an d R isks tro Com mit tee		Rem rati une on Com mit tee		Rel d-p ate arty Com mit tee
Off ice	Me mb ers	Yea r of birt h	Dat f e o firs t oin tme app nt *	In o ffic e sinc e	In o ffic e il unt	List ( M/m ) **	Exe ive cut	Non - ive cut exe	Ind nde nt as epe the per Cod e	Ind nde nt as epe the per Con ed Fina soli dat ncia l Ac t	No. of oth er offi * ces	( *)	( **)	( *)	( **)	( *)	( **)	( *)
Cha irm an	Filip adi Cas po o	194 8	198 7	30/ 04/ 201 9	202 1	M	X				0	10/ 10
Dire cto r	Fra Ga ndo lfi C olle oni nce sco	194 7	199 0	30/ 04/ 201 9	202 1	M	X				0	10/ 10
Dire cto r	nfra Gia Se ian nco pr o	194 6	199 0	30/ 04/ 201 9	202 1	M		X			0	10/ 10	M	3/ 3	M	1/1
Dire cto r	Orf Dal lag eo o	196 4	200 9	30/ 04/ 201 9	202 1	M		X			0	10/ 10	M	3/ 3	M	1/1	C	1/1
Dire cto r	Fra Pis che dda nce sca	197 5	201 3	30/ 04/ 201 9	202 1	M			X	X	0	10/ 10			C	1/1	M	1/1
Dire cto r	Gig liola Di Chi ara	196 8	201 6	30/ 04/ 201 9	202 1	M			X	X	1	10/ 10	C	3/ 3			M	1/1
DIR ECT OR S W HO SE	OF FIC E E ND ED DU RIN G T HE YEA R
-
mb of eti he ld d uri the Nu 10 er me ngs ng ye ar:											CR C:	3	RC :	1	RP C:	1

Quorum for presenting lists by non-controlling interests for the election of one or more members (pursuant to art. 147-ter Cons. Fin. Act): 2%

NOTES

* By first date of nomination of each director we mean the date on which such director was nominated for the first time (ever) in the Issuer's Board of Directors.

** This column indicates the list from which each director was selected (M: majority list; m: minority list; BoD: list presented by the BoD).

*** This column indicates the number of offices held as director or statutory auditor at other companies listed on a regulated market, in Italy or abroad, as well as in financial, banking, insurance companies or companies of significant sizes.

(*) This column indicates the attendance of directors at meetings respectively of the BoD and Committees (indicate the number of meetings they have attended compared with the overall number of meetings which they should have attended; e.g. 6/8 etc.).

(**) This column indicates the position of the director within the Committee: C, Chairman; M, Member.

E-MARKET SDIR
CERTIFIED

TABLE 3: COMPOSITION OF THE BOARD OF STATUTORY AUDITORS

B O A R D O F S T A T U T O R Y A U D I T O R S
O f f ice	be Me m rs	f b h Ye ir t ar o	Da f f irs te t o in * tm t ap p o en	f f In ice inc o s e	f f l In ice t i o un	** L is t	In de de t a p en n s he Co de t p er	Bo d m ing t ar ee s de d * t ten a	No f o he t . o r f f ice o s
C ha irm an	Fa b io Se ne se	1 9 6 1	2 0 1 4	3 0 / 0 6 / 2 0 2 0	2 0 2 2	M	X	7 / 7	8
S d ing S d tan ta tu tor Au y	i l la i Do tor te V tan na za	1 9 6 6	2 0 1 4	3 0 / 0 6 / 2 0 2 0	2 0 2 2	M	X	/ 7 7	8
S d ing S d tan ta tu tor Au y	i da l be Co in i A tor to tan t r s	9 6 1 5	2 0 1 1	3 0 / 0 6 / 2 0 2 0	2 0 2 2	M	X	/ 7 7	2 1
Su bs S t i tu te ta tu tor Au y	d G fra i tor ian Za i nco p p	9 3 8 1	2 0 1 4	3 0 / 0 6 / 2 0 2 0	2 0 2 2	M	X	0	0 1
A l S Au ter te ta tu tor na y	d C i lau d ia Ma tor res ca	1 9 8 2	2 0 1 4	3 0 / 0 6 / 2 0 2 0	2 0 2 2	M	X	0	2
		S T A	T U T O R Y A U D I T O R	S W H O S E O F F I C E	E N D E D D U R I N G T	H E Y E A R
-
Nu be f m ing he l d du ing he 7 t t m r o ee s ea r y r:
Q for ing l is by l l ing in for he lec ion f o be ( 1 4 8- Co F in. Ac ) 2 % t ts tro ter ts t t t to t. ter t uo rum p res en no n-c on es e o ne or m ore m em rs p urs ua n ar ns :

NOTES:

* By date of first nomination of each statutory auditor we mean the date on which the statutory auditor was nominated for the first time (ever) in the Issuer's Board of Statutory Auditors. ** This column indicates the list from which each statutory auditor was selected (M: majority list; m: minority list).

*** This column indicates the attendance of the statutory auditors at the meetings of the Board of Statutory Auditors (indicate the number of meetings they attended compared with the overall number of meetings they should have attended; e.g. 6/8 etc.).

**** This column indicates the number of offices held as director or statutory auditor by the person concered in compliance with art. 148-bis of the Consolidated Financial Act and the relevant implementation provisions contained in the Consob Issuers' Regulations.

The complete list of offices is published by Consob on its own website in compliance with art. 144-quinquiesdecies of Consob Issuers' Regulations.

Those holding office as members of the control body of only one Issuer are excluded from such disclosure obligation.

IRCE S.p.A. Group

Annual Report of the Manager responsible for preparing the corporate accounting documents

Year 2020

ANNUAL REPORT OF THE MANAGER RESPONSIBLE FOR PREPARING THE CORPORATE ACCOUNTING DOCUMENTS

INTRODUCTION

1. SCOPING AND DEFINITION OF THE SCOPE OF APPLICATION
2. FORMALISATION OF PROCESSES AND ANALYSIS OF RISKS AND CONTROLS

ANNUAL REPORT OF THE MANAGER RESPONSIBLE FOR PREPARING THE CORPORATE ACCOUNTING DOCUMENTS

INTRODUCTION

Art. 154-bis of the Consolidated Financial Act – incorporating the provisions of Italian Law No. 262 of 28 December 2005 (Provisions for the protection of savings and the regulation of financial markets) as subsequently amended, as well as Italian Legislative Decree 195/2007 on Transparency – has introduced the mandatory role of the "Manager responsible for preparing the corporate accounting documents" with specific responsibilities regarding provision of a true and fair view of the assets, liabilities and equity, financial position, and profit or loss of listed issuers, while also extending the scope of application to companies issuing financial instruments listed on regulated markets.

The Manager responsible for preparing the corporate accounting documents is responsible for the System and, to this end, she defines the administrative-accounting procedures for drafting the periodic accounting documents and any other financial communication, certifying, together with the Chairman, the adequacy and effective implementation during the period to which the documents refer.

The Board of Directors shall appoint the Manager responsible for preparing the corporate accounting documents and establish the relevant term of office; furthermore, in compliance with art. 154-bis of the Consolidated Financial Act, the Board shall ensure that the Manager is granted the adequate powers and means to exercise the assigned tasks and that the above procedures are fully complied with.

The controls on financial reporting are subject to evaluation and monitoring in order to check, over time, both its "design", i.e. the abstract suitability to mitigate identified risks in an acceptable manner, and the actual "operating powers", i.e. their actual functioning. The verification activities relating to the System adequacy and actual functioning are the responsibility of the Manager responsible for preparing the corporate accounting documents, through the manager's own structure and through the direct involvement of the managers responsible for the activities/processes, also through the support of the Internal Audit function.

The purpose of this document is therefore to fully report on the activities implemented by IRCE S.p.A., ranging from the identification of the scope under analysis to the outcome of the assessments of the reliability and adequacy of the internal control system, which could affect accounting and financial reporting that is functional to the certifications required by regulations, as listed below:

1. DEFINITION OF THE SCOPE OF APPLICATION
1. FORMALISATION OF PROCESSES AND ANALYSIS OF RISKS AND CONTROLS
1. TEST OF EFFECTIVENESS OF CONTROLS
1. EVALUATION OF EXCEPTIONS

As part of the internal control and risk management system concerning the financial reporting process, IRCE S.p.A. has drafted administrative and accounting procedures for the preparation of separate and consolidated financial statements and for any other communication of a financial nature.

The company has adopted the COSO Framework as a reference model.

This Report is submitted to the Board of Directors and the Board of Statutory Auditors of IRCE S.p.A. in order to allow for the fulfilment of the activity pursuant to art. 154-bis, paragraph 4, of the Consolidated Financial Act, as well as for the issue – by the delegated Management Body and the Manager responsible for preparing the corporate accounting documents – of the certification of adequacy, compliance, suitability, correspondence and actual application of the administrative and accounting procedures for the preparation of the separate and consolidated financial statements.

1. DEFINITION OF THE SCOPE OF APPLICATION

During the phase of definition of the scope of application, the following is identified:

a) the group's companies which are deemed significant on the basis of quantitative and qualitative criteria and in terms of their contribution to the consolidated financial reporting in the reporting period;
b) significant accounts by means of quantitative measurements and additional refinements of a qualitative nature ("significant items");
c) company processes ("significant processes") which are associated with the accounts subject to testing activities for the significant locations previously defined.

The objectives of the control – which aim to prevent any errors/fraud that could occur during the activities of initiation, registration, management and reporting of a transaction – have been identified by IRCE by taking into account:

the significant accounts, i.e. the items of the financial statements which are individually significant in terms of materiality;
the administrative and accounting processes which generate the significant accounts which are identified as specified above;
the relevance of the above-mentioned processes which are identified at the level of each company that belongs to the scope of consolidation.

IRCE S.p.A. has identified the scope of application on the basis of the materiality of the significant accounts, and their associated administrative-accounting processes for each individual company of the group, in relation to the consolidated financial statements.

In particular:

companies in the Group whose assets or turnover are respectively 2% higher than the total consolidated assets or 5% higher than the total consolidated turnover were considered significant and therefore included in the possible scope of application;
the selection of significant accounts was implemented by calculating a threshold of Group materiality by using a benchmark consisting of the higher of 1% of Shareholders' Equity and 5% of profit before tax;
the riskiest processes for the purposes of prescriptions pursuant to Italian Law 262 were identified.

In order to confirm the company and process scope deriving from the materiality analysis, the company has also implemented subsequent qualitative analysis.

By applying the model, it has been possible to identify the risk profile inherent in each process and the associated control activities used for monitoring purposes; the procedures and control matrices for each process which turned out to be sensitive on the basis of the abovementioned criteria were formalised.

2. FORMALISATION OF PROCESSES AND ANALYSIS OF RISKS AND CONTROLS

On an annual basis, the company:

monitors the processes which significantly contribute to change the items of the consolidated financial statements;
defines and implements testing plans;

guarantees the resolution of detected critical factors.

Taking account of the relevant scope, with reference to the Parent Company, during 2020 the Internal Audit performed control tests on the riskiest processes, in particular sales and distribution, purchasing and inventory management, as well as, according to a rotation rationale, on some processes considered to represent a normal risk, in particular the preparation of the financial statements, the management of the consolidation process, of the treasury, of investments and of taxes.

In relation to subsidiaries, the Internal Auditor has been given the mandate to carry out specific control procedures at the Dutch company Smit Draad Nijmegen B.V. These specific activities are part of the process aimed at strengthening audit procedures for subsidiaries of the Parent Company.

Imola, 16 March 2021

AI Terminal

IRCE

4035_cgr_2021-03-29_6882744a-b917-4590-9946-50f640ef8849.pdf

REPORT ON CORPORATE GOVERNANCE AND OWNERSHIP STRUCTURE pursuant to art. 123-bis of the Consolidated Financial Act (traditional administration and control model)

TABLE OF CONTENTS

TABLES

GLOSSARY

1. Issuer profile

GOVERNANCE

MISSION

CORPORATE RESPONSIBILITY

SME STATUS

3. Compliance (pursuant to art. 123-bis, paragraph 2, letter a) of the Consolidated Financial Act)

4. Board of Directors

Succession plans

Chairman of the Board of Directors – Mr Filippo Casadio

Executive Director – Mr Francesco Gandolfi Colleoni

Non-Executive Director – Mr Gianfranco Sepriano

Non-Executive Director – Mr Orfeo Dallago

Independent Director – Ms Francesca Pischedda

Independent Director – Ms Gigliola Di Chiara

Diversity policies and criteria

Maximum number of offices held in other companies

Induction Programme

4.4. APPOINTED BODIES

Managing Directors

Chairman of the Board of Directors

Reporting to the Board

4.5 Other executive directors

4.6. Independent Directors

4.7. Lead Independent Director

5. Processing of corporate information

7. Nomination Committee

8. Remuneration Committee

9. Remuneration of directors

10. Control and Risks Committee

Functions attributed to the Control and Risks Committee

11. Internal control and risk management system

11.1 Director responsible for the internal control and risk management system

11.2. Internal Audit

11.3. Organisational Model pursuant to Italian Legislative Decree 231/2001

11.4. Independent Auditors

11.5 Manager responsible for preparing the corporate accounting documents

11.6 Coordination among the parties involved in the internal control and risk management system

12. Director interests and related-party transactions

13. Appointment of Statutory Auditors

Chairman of the Board of Statutory Auditors – Mr Fabio Senese

Standing Statutory Auditor – Mr Adalberto Costantini

Standing Statutory Auditor – Ms Donatella Vitanza

Diversity policies

15. Relations with shareholders

18. Changes since the end of the reporting period

Considerations on the letter of the Chair of the Corporate Governance Committee dated 22 December 2020

TABLE 1: INFORMATION ON THE OWNERSHIP STRUCTURE

TABLE 2: COMPOSITION OF THE BOARD OF DIRECTORS AND THE COMMITTEES

TABLE 3: COMPOSITION OF THE BOARD OF STATUTORY AUDITORS

NOTES:

IRCE S.p.A. Group

Annual Report of the Manager responsible for preparing the corporate accounting documents

Year 2020

INTRODUCTION

ANNUAL REPORT OF THE MANAGER RESPONSIBLE FOR PREPARING THE CORPORATE ACCOUNTING DOCUMENTS

INTRODUCTION

1. DEFINITION OF THE SCOPE OF APPLICATION

2. FORMALISATION OF PROCESSES AND ANALYSIS OF RISKS AND CONTROLS

More from IRCE

Talk to a Data Expert