PROSPECTUS

"2024-2026 PERFORMANCE SHARE PLAN"

PREPARED PURSUANT TO ARTICLE 114-BIS OF LEGISLATIVE DECREE NO. 58 OF FEBRUARY 24, 1998, ARTICLE 84-BIS AND ANNEX 3A, SCHEDULE 7, OF CONSOB REGULATION NO. 11971 OF MAY 14, 1999 AND SUBSEQUENT AMENDMENTS

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Rome, March 22, 2024

Definitions

In addition to the terms defined elsewhere in this Prospectus, for the purposes of this document, the terms listed below shall have the following meanings:

"Grant"

indicates the grant of the Rights to each

Beneficiary according to the terms and conditions

set out in the Regulation.

"Shareholders' Meeting"

the Shareholders' Meeting of the Company.

"Allocation"

the determination, after verification of the

achievement of the Performance Targets, of the

number of Shares that each Beneficiary will

receive free of charge, as decided by the Board of

Directors, after consulting the Appointments and

Remuneration Committee, at the end of the

Performance Period.

"Shares"

the ordinary shares of the Company, listed on the

STAR segment of the Euronext Milan market

managed by Borsa Italiana S.p.A., with no par

value.

"Bad Leaver"

all conclusion of employment situations other

than those defining a Good Leaver.

"Beneficiaries"

the beneficiaries of the Plan, pursuant to

paragraph 1 of the Prospectus, as identified by the

Board of Directors, after consultation with the

Appointments and Remuneration Committee.

"Change of Control"

(a) the acquisition, directly or indirectly, by one

or more third parties of the control of the

Company pursuant to Article 93 of the CFA; (b)

the acquisition, directly or indirectly, by one or

more third parties, of a number of shares or of a

shareholding in a Subsidiary, subject to a

Beneficiary Relationship, provided that they are

different from the Company, of a total of more

than 50% of the relevant share capital, unless the

Company continues to hold control pursuant to

Article 2359 of the Civil Code; (c) the definitive

transfer to one or more third parties of the

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Company or of the business unit subject to the

Beneficiary Relationship.

It is understood that the Changes of Control

identified in subparagraphs b) and c) above shall

apply only with respect to the Beneficiaries who

have an existing Relationship with the

Subsidiary, the Company or business unit subject

to the Change of Control.

"Clawback"

the clause according to which the Company shall

be entitled to request the Beneficiaries to return

all or part of the Shares that may have been

allocated or an equivalent amount of money

under the Plan if such have been received on the

basis of data that subsequently prove to be clearly

erroneous and the differences between the data

used and the adjusted data were such as to have

caused, if known in time, the non-Allocation of

the Shares.

"Code"

the Corporate Governance Code for listed

companies approved in January 2020 by the

Corporate Governance Committee.

"Appointments

and

Remuneration the internal committee to the Board of Directors

Committee"

set up in accordance with Articles 4 & 5 of the

Corporate Governance Code.

"Delivery"

the delivery of Shares to each of the Plan

Beneficiaries following the Allocation resolved

by the Board of Directors at the end of the

Performance Period. Delivery of the Shares will

occur following the approval of the financial

statements for fiscal year 2026.

"Board of Directors"

the Board of Directors of the Company.

"Rights Grant Date"

the date on which the Board of Directors, in

consultation with the Appointments and

Remuneration Committee, indicates the number

of Rights granted to each Beneficiary.

"Share Allocation Date"

indicates the date on which the Board of

Directors, at the end of the Performance Period

and once the degree of achievement of the

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Performance Targets has been verified, resolves

on the number of Shares to be allocated to each

Beneficiary and arranges for the notice of the

Share Allocation to be sent to the Beneficiaries.

"Rights"

the rights assigned to the Beneficiaries to receive

free Shares at the end of the Performance Period

based on the achievement of the Performance

Targets.

"Prospectus"

this Prospectus related to the Plan, drawn up

pursuant to Article 114-bis of the CFA and

Article 84-bis of the Issuers' Regulation.

"Good Leaver"

the following termination scenarios:

▪ removal from the office of Director prior to the

conclusion of the term of office without cause;

▪ resignation from the office of Director if the

Beneficiary, without just cause, undergoes a

revocation or non-confirmation of the proxies

such that his or her relationship with the

Company or the subsidiary is substantially

altered;

▪ conclusion of the Company's Board of

Directors not followed by renewal;

▪ with particular reference to Senior Executives

and Managers, dismissal without just cause;

▪ death or disability of the beneficiary (due to

illness or injury ascertained by a medical-legal

expert report by a professional appointed by the

Company) that entails the abstention from

carrying out his or her duties for a period,

continuous or non-continuous, of more than

eight (8) months;

▪ voluntary resignation, only on the condition

that the Beneficiary fulfils the statutory

retirement requirements and in the 30

subsequent days presents a request to access the

relative benefits;

"Group" or "Avio Group"

collectively, Avio S.p.A. and its subsidiaries

pursuant to Article 2359 of the Civil Code and

Article 93 of the CFA and IFRS 10 -

Consolidated Financial Statements.

"Grant Letter"

the communication letter informing the

Beneficiaries of their participation in the Plan and

containing the number of Rights granted and the

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Performance Targets on which the Allocation of

the Shares is conditional.

"Base Number"

For each Beneficiary, the number of Shares

obtainable upon achievement of 100% of the

Performance Targets under the terms and

conditions set forth in the Regulation.

"Performance Targets"

indicates the objectives of the Plan governing

the Allocation of Shares to each Beneficiary at

the end of the Performance Period, once the

degree of achievement of the Performance

Targets has been verified, after consulting the

Appointments and Remuneration Committee.

"Performance Period"

the three-year period 2024-2025-2026 of the

Plan, against which the achievement of the

Performance Targets is verified.

"Plan"

the 2024-2026 Plan based on financial

instruments reserved to the Beneficiaries and

governed by the Regulation (as may be amended)

and related annexes.

"Relationship"

the relationship of employment and/or

collaboration and/or management between the

individual Beneficiary and the Company or one

of the Subsidiary companies.

"Regulation"

the Regulation governing the terms, conditions

and procedures of the Plan, which will be

approved by the Board of Directors of the

Company following the approval of the Plan by

the Shareholders' Meeting.

"Issuers' Regulation"

Consob Regulation No. 11971, approved by

Resolution of May 14, 1999 and subsequent

amendments and supplements.

"Company"

Avio S.p.A., with registered office at via Leonida

Bissolati No. 76, Rome, enrolled at the Rome

Companies Registration and Tax No.

09105940960.

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"CFA"

Legislative Decree No. 58 of February 24, 1998

and subsequent amendments and supplements.

Introduction

Since the Company's listing in 2017, Avio's Remuneration Policy has included variable management compensation plans linked to the Company's long-term performance, which seek to align management's interests with those of shareholders, ensuring retention of key people and rewarding the achievement of strategic plan goals. In continuity with the Performance Share Plan, cycle 2023-2025, the Company intends to launch a new cycle 2024-2026, designed to strengthen the link between management remuneration and the perspective of institutional investors and shareholders.

On March 22, 2024, the Board of Directors resolved to submit for approval to the Shareholders' Meeting in ordinary session called for April 23, 2024, in single call, an incentive plan that provides for the right to proceed with the grant of rights to be received free of charge up to a total maximum of 220,000 Shares of the Company, subject to the achievement of predetermined Performance Targets, at the end of the Performance Period (the "Plan").

The Plan is addressed to the Chief Executive Officer/General Manager, Senior Executives and other Managers with strategic roles for Avio, identified by the Board of Directors, after consulting the Appointments and Remuneration Committee, among those who hold key positions with a significant impact on the creation of value for the Shareholders within the Company and/or its Subsidiaries.

This Prospectus was prepared in accordance with Article 114-bis of the CFA and Article 84-bis of the Issuers' Regulation and complies with, also in terms of the numbering of the relative paragraphs, the indications of Schedule 7 of Annex 3A of the same Issuers' Regulation. As better specified in this Prospectus, some aspects related to the implementation of the Plan will be defined by the Board of Directors on the basis of the powers granted to it by the Shareholders' Meeting.

The information resulting from the motions that - subject to the approval of the Plan by the Shareholders' Meeting and in compliance with the general criteria set out therein - the Board of Directors shall adopt in order to implement the Plan, shall be provided in the manner and within the time limits set out in Article 84-bis, paragraph 5, letter a) of the Issuers' Regulation.

The purpose of this Prospectus is to provide Shareholders with the information necessary to exercise their right to vote in an informed manner at the Shareholders' Meeting.

The Prospectus is made available to the public at the Company's registered office and on the Company's website www.avio.com, in the Investors/Shareholders' Meeting 2024 section in accordance with the law.

The Plan is to be considered of particular relevance pursuant to Article 114-bis, paragraph 3 of the CFA and Article 84-bis, paragraph 2, letters a) and b) of the Issuers' Regulation.

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1. Beneficiaries

  1. Indication of the names of the beneficiaries who are members of the Board of Directors of the Company, of the Company's parent company and of the Subsidiaries.
    The Plan is addressed, among others, to the Chief Executive Officer Mr. Giulio Ranzo.
    The Plan is also intended for Senior Executives and other Managers with strategic roles for the Group.
  2. Indication of the categories of employees targeted by the plan or employees of the Company and its parent company or subsidiaries.
    As per the Plan Regulation, the Beneficiaries were identified at the sole discretion of the Board of Directors, having consulted with the Appointments and Remuneration Committee, from among the Executives, Senior Executives and/or Executive Directors of the Company and the Group who hold key positions and who have a significant impact on the creation of value for the Company and its stakeholders.
    The report will be supplemented according to the methods and within the terms indicated in Article 84-bis, paragraph 5, letter a) of the Issuers' Regulation.
  3. Names of the beneficiaries of the plan belonging to the groups indicated at point 1.3, letters a), b) and c) of Annex 3A, Scheme 7 of the Issuers' Regulation.
    The names of the Beneficiaries and the other information required by paragraph 1.3 of Schedule 7 of Annex 3A to the Issuers' Regulation shall be provided according to the terms and conditions set out in Article 84-bis, paragraph 5, letter a) of the Issuers' Regulation.
  4. Description and numeric indication of the beneficiaries of the plan, according to the categories indicated at point 1.4, letters a), b) and c) of Annex 3, Schedule 7 of the Issuers'
    Regulation.
    1. of Senior Executives other than those indicated at letter b) of paragraph 1.3
      Not applicable: Avio S.p.A. is a "small" company in accordance with Article 3, paragraph
      1, letter f) of Regulation No. 17221 of March 12, 2010.
    2. For "small" companies, pursuant to Article 3, paragraph 1 (f) of Regulation No. 17221 of March 12, 2010, the aggregate indication of all the Senior Executives of the issuer of the financial instruments
      At the date of preparation of this Prospectus, the Chief Executive Officer/General Manager and the Senior Executives of Avio S.p.A. and other Managers of the Group have been identified as Beneficiaries of the Plan, subject to its approval.
    3. of any other categories of employees or collaborators for which differentiated features of the plan are provided for (e.g. executives, senior managers, white-collar employees etc.)

Not applicable. As indicated above, the Plan's Beneficiaries include managerial figures who occupy positions deemed to be important for the growth and sustainability of the Group's business over the long term.

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2. Reasons for the adoption of the Plan

2.1 Plan objectives

The Plan is a valuable tool for incentivising and retaining Beneficiaries, as parties playing a key role in achieving Avio's objectives, and aligning their interests with those of the shareholders.

The incentivisation and retention of Beneficiaries through the allocation of instruments representing the value of the Company on the basis of the achievement of certain Performance Targets is, in fact, an indispensable tool for the Company to pursue its path in line with the objectives it has set itself.

Specifically, by adopting the Plan the Company intends to:

  • align the interests of the Beneficiaries with those of the shareholders and Avio's strategic plan;
  • link the remuneration of the Beneficiaries, as subjects who play a key role in the achievement of Avio's objectives, to the achievement of specific pre-setlong-term objectives in line with the indications of the Code;
  • support and reward the achievement of long-term objectives, allowing the priority objective of value creation to be pursued over a long-term horizon while directing Beneficiaries towards decisions that pursue the creation of value for the Company in the medium to long term;
  • support the attraction, retention and engagement of key staff in line with the corporate culture, while pursuing an efficient choice in terms of the costs generated by the Plan.

The Plan provides for:

  • the Grant of a certain number of Rights to Beneficiaries;
  • a three-year performance period;
  • the Allocation and Delivery of shares subject to the Board of Directors' verification of the Performance Targets achieved in the reference year.

The Board of Directors believes that an incentive plan based on the vesting of the right to the free allocation of shares deferred over the medium term and based on Performance Targets is the incentive tool that most effectively responds to the Company's interests.

In particular, the three-year Performance Period allows Beneficiaries to take advantage of a reasonable time frame to achieve the economic benefits of the Plan, consistent with the objectives of loyalty and alignment of the interests of Beneficiaries and Shareholders in the medium to long term that the Plan proposes.

For the purposes of retention, the Allocation of the Shares is subject to the verification by the Board of Directors, inter alia, that on the Date of Allocation of the Shares the Beneficiary's relationship with the Company or with the relevant Subsidiary is still in force and that, with reference to the role held, he/she is still a Beneficiary within the Company or the relevant Subsidiary.

The Allocation of Shares is closely linked to the creation of value for the Company and aims to motivate, involve and incentivise the Beneficiary to achieve the Company's objectives, also aligning its activities with those of its stakeholders.

The Plan is part of a remuneration policy strategy that seeks to balance the fixed and variable

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components that form the remuneration of Avio's top management, considering the advisability of offering an incentive able to drive long-term results according to certain Performance Targets, in line with market best practices.

2.2 Key variables and performance indicators.

The Allocation of Shares is subject to the achievement of the Performance Targets for the three-year period 2024/2026.

The Performance Targets identified by the Board of Directors consist of:

  • Three-yearcumulative reported EBITDA, which allows a measurement of medium- term profitability that does not take into account non-recurringcomponents, with an incentive determination weighting of 40%;
  • Average Return on Invested Capital, defined as EBIT Reported / Net Invested Capital, with an incentive determination weighting of 40%;
  • ESG indicators, with a 20% overall incentive determination weighting:
    • Gender diversity, defined as the ratio between female employees and male employees (5%).
    • Gender pay gap, defined as the ratio between the remuneration of female employees and male employees at the same grade (5%)
    • Waste management, defined as the percentage of waste recovered (5%).
    • Employee training, Defined as the average annual hours of training provided in the three-year period (5%).

Performance Targets will be measured relative to the specific three-year span 2024/2026.

For each of the indicators, there is:

  • a minimum performance level (threshold), upon achievement of which the minimum number of Rights granted, equal to 50% of the Base Number, are allocated and below which no bonus is recognised;
  • a target performance level, upon achievement of which the Base Number (target) of the Rights granted are allocated;
  • a maximum performance level, upon achievement of which the maximum number of Rights granted, equal to 150% of the Base Number, are allocated.
  • for intermediate performance levels, a number of Rights calculated by linear interpolation are granted.

The following diagram summarises, for each target, the percentage weighting for the purpose of determining the incentive and the expected performance range:

Indicator

Weighting

Performance levels

Minimum

Target

Maximum

Cumulative three-year Reported

40%

75% of the

Budget

125% of the

EBITDA

budget

budget

Average Return on Invested

40%

70% of the

Budget

130% of the

Capital

budget

budget

Gender diversity

5%

94.7%

19%

105.3%

ESG

Gender pay gap

5%

96%

98%

102%

Indicators

Waste management

5%

90%

60%

110%

Employee training

5%

90%

30,000 hours

110%

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The details of the Performance Targets will be communicated to the Beneficiaries in the Grant Letter, which must be signed for acceptance by the Beneficiary.

  1. Criteria for determining the number of shares to be allocated
    The Grant of Rights will be made by the Company's Board of Directors, after consultation with the Appointments and Remuneration Committee, subject to approval of the Plan by the Shareholders' Meeting on April 23, 2024.
    In determining the number of Rights to be granted to each Beneficiary, the Board of Directors mainly takes into account the role covered and the importance of the function within the Avio Group.
    The number of Rights to be granted to Grantees shall be determined by the Board of Directors at the time of the Grant, after consultation with the Appointments and Remuneration Committee. The number of Rights is calculated considering the average Avio share price in the month preceding the meeting of the Board of Directors that approved the financial statements.
    In addition, the Plan provides a mechanism for granting dividends distributed during the Performance Period. Specifically, should the Shareholders' Meeting distribute dividends to Shareholders during the Performance Period, the Beneficiaries will be allocated a number of additional shares determined by the amount of total dividends distributed during the three- year period. The additional shares will be determined by considering the value of the Share at the time of the Grant, calculated as the average Avio share price in the month preceding the Board of Directors meeting that approved the financial statements for the year before the plan began.
  2. Reasoning behind any decision to allocate remuneration plans based on financial instruments not issued by the Company.
    Not applicable. The Plan is based solely on Shares of the Company.
  3. Assessments concerning significant tax and accounting implications
    The preparation of the Plan was not influenced by significant tax or accounting considerations.
  4. Support to the Plan by the special fund for investment for the incentivisation of the involvement of workers in enterprises, as per Article 4, paragraph 112 of Law No. 350 of December 24, 2003.

The Plan does not receive support from the special fund for the incentivisation of the involvement of workers in enterprises, as per Article 4, paragraph 112 of Law No. 350 of December 24, 2003.

3. Approval procedure and timeframe for the granting of the instruments.

3.1 Powers and functions delegated by the Shareholders' Meeting to the Board of Directors to implement the Plan.

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Avio S.p.A. published this content on 22 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 March 2024 18:10:37 UTC.