LU VE S p A : Remuneration report

LU-VE S.p.A.

Via Vittorio Veneto 11 - 21100 Varese

REA [Economic and Administrative Index] Number: VA-191975

Tax Code: 01570130128

ANNUAL REPORT

ON REMUNERATION AND COMPENSATION

POLICY

MARCH 2023

CONTENTS

Letter from the Chairman of the Committee ............................................................................. 4

Definitions ............................................................................................................................... 6

Introduction ........................................................................................................................... 11

SECTION I ............................................................................................................................... 12

2023 Remuneration Policy ...................................................................................................... 12

1. Purposes and principles of the Remuneration Policy ............................................................ 12

• 1.1 Purposes ........................................................................................................................ 12

• 1.2 General principles .......................................................................................................... 13

• 1.3 Scope of application and duration ................................................................................. 14

• 1.4 Changes with respect to the previous financial year ..................................................... 15

2. Corporate bodies and individuals involved ............................................................................ 16

• 2.1 Shareholders' Meeting .................................................................................................. 16

• 2.2 Board of Directors .......................................................................................................... 16

• 2.3 Remuneration and Appointments Committee .............................................................. 18

• 2.4 Managing Directors ....................................................................................................... 19

• 2.5 Board of Statutory Auditors ........................................................................................... 19

• 2.6 Independent experts ..................................................................................................... 19

• 2.7 Process for the definition and approval of the Remuneration Policy ............................ 19

3.

Policy Description ................................................................................................................... 21

• 3.1 Remuneration of members of the Board of Directors ................................................... 21

• 3.2 Remuneration of the General Manager ........................................................................ 23

• 3.3 Remuneration of Key management personnel .............................................................. 25

• 3.4 Short-term incentives: the annual variable component (MBO) .................................... 27

• 3.5 Medium/long-term incentives ....................................................................................... 31

• 3.6 Non-monetary benefits ................................................................................................. 33

• 3.7 Indemnity in case of termination of office or termination of the employment

relationship ............................................................................................................................. 34

3.8 Remuneration of members of the Board of Statutory Auditors .................................... 35

3.9 Remuneration of the Manager of the Internal Audit function ...................................... 35

3.10 Permitted exemptions to this policy .............................................................................. 36

SECTION II .............................................................................................................................. 37

Fees paid in 2022 and other information ................................................................................ 37

1. PART ONE ............................................................................................................................... 38

1.1 Description of the remuneration paid to members of the Board of Directors in the 2022

financial year .......................................................................................................................... 38

• 1.2 Remuneration of members of the Board of Statutory Auditors in the 2022 financial year

  45

• 1.3 Remuneration of Key management personnel in the 2022 financial year .................... 45

• 1.4 Information on the application of ex post correction mechanisms for the variable

remuneration component ...................................................................................................... 46

1.6 Waivers to the 2022 Remuneration Policy .................................................................... 47

1.7 Comparative information .............................................................................................. 47

1.8 Disclosure regarding the vote made by the shareholders' meeting on Section II of last

year's report ........................................................................................................................... 49

2. PART TWO .............................................................................................................................. 50

1. Fees paid in the 2022 financial year .............................................................................. 50

2. Cash incentive plans in favour of members of the management body, general manager and other key management personnel .................................................................................. 53

3. Equity shareholdings held as at 31 December 2022 ...................................................... 55

LETTER FROM THE CHAIRMAN OF THE COMMITTEE

Dear Shareholders,

I am pleased to present the Annual Report of the LU-VE Group on the 2023 remuneration policy and on the remuneration paid in 2022, which will be submitted to the Shareholders' Meeting scheduled for 28 April 2023. The Report - approved by the Board of Directors, on the proposal of the Remuneration and Appointments Committee I chair - was prepared in compliance with the applicable regulatory provisions of art. 123-ter of Italian Legislative Decree 58/1998 and art. 84- quater of Consob Issuers' Regulation and of the relative disclosure schedules, as amended and supplemented, in December 2020, in accordance with Directive (EU) 2017/828 (SHRD II), as well as the principles and recommendations dictated by the Corporate Governance Code to which the Company adheres.

The Remuneration Policy of the LU-VE Group proposed by the Board of Directors for the year 2023, though essentially in line with the one submitted to the vote of the Shareholders' Meeting of 29 April 2022, introduces important new elements, also with regard to the changes made to the Group governance, and takes into account the renewal of the corporate bodies that the next Shareholders' Meeting will be called to resolve.

Sadly, Mr. Iginio Liberali, Founder and Chairman of the Company, died in December 2022. The office of Chairman was assigned by the Board of Directors to the CEO Matteo Liberali, until the next Shareholders' Meeting. The introduction of the figure of the Honorary Chairman will also be submitted to the Shareholders' Meeting. In February of this year, the General Manager was also appointed, who will take office in the coming weeks.

The proposed Remuneration Policy was developed with the aim of paying increasing attention to sustainability issues and the pursuit of sustainable success. This leads to a significant variable component for Executive Directors, the General Manager and the Key management personnel, which can exceed 50% for Executive Directors if both the short-term (MBO) and medium-term (LTI) portion are considered, including over-achievements. Within this framework, ESG factors acquire greater weight, in particular emissions and accidents up to a maximum of 25% for MBO.

I believe it is appropriate to draw attention to some aspects of the 2023 Remuneration Policy set out in Section I of the Report. In particular, the 2023 Remuneration Policy:

takes into account the principles and recommendations of the Corporate Governance Code and was developed using benchmarks in order to be in line with the LU-VE comparables identified; provides for maximum disbursement limits if the targets are exceeded. A higher ceiling of 20% of the target for EBITDA has been introduced, while a ceiling of 10% remains for all other parameters; dictates the guidelines of a new medium/long-term monetary incentive plan called "2023-2025 LTI Plan" to replace the 2020-2022 LTI Plan, which expired on 31 December 2022, in which two further performance objectives were introduced, compared to the previous plan, and in particular: (i) a parameter aimed at reducing Scope 1 and 2 emissions given the same consolidated EBITDA, attributable to ESG policies and actions identified in the Sustainability Plan approved by the Board of Directors last February; (ii) profitability parameter (EBITDA) of the US subsidiary Zyklus, by virtue of its importance for the Group as reflected in the new 2023-2026 Business Plan;

envisages the attribution to the Chairman, any Vice Chairman and any Honorary Chairman, of a fixed remuneration, specific for the office, in addition to the one envisaged for all the Directors in general and any remuneration attributed to them in their capacity as Executive Directors;

requires the economic and financial parameters considered for the attribution of the short and medium-long term variable component to be conceived with the aim of incentivising the company's growth and while maintaining a moderate and decreasing leverage compared to the starting values; provides, for the General Manager and for the Key management personnel, the possibility of disbursing bonuses up to a maximum of 25% of the Gross Annual Remuneration for the period to which they refer. They are also established by the Board, on the proposal of the Executive Directors and subject to the favourable opinion of the Remuneration and Appointments Committee.

The LU-VE Group's Remuneration Policy 2023 is on the whole designed to foster the recruitment of talent and the retention of all staff, as well as to pursue the general interest and the balancing of the interests of the various stakeholders, with particular reference to the wellbeing of employees and respect for the environment.

I think that the information provided in the Report may allow investors to find consistency between the company objectives achieved and the incentives assigned, in a context of continuous adaptation to the evolution of the LU-VE Group and the environmental, cultural and macroeconomic conditions in which it works.

I hope you will be able to appreciate the work that has been done, which also benefits from the engagement and ongoing relationship with investors.

Thank you also on behalf of the other members of the Committee appointed by the Board of Directors for your appreciation of the Company's 2023 Remuneration Policy as described in Section I of the Report, as well as for the disclosure of the remuneration paid in application of the 2022 Remuneration Policy set forth in Section II of the Report.

Stefano Paleari

Chairman of the Remuneration and Appointments Committee