Medacta : 2023 Remuneration Report

REMUNERATION REPORT

Medacta's Annual Report 2023

INDEX

1.	INTRODUCTION	94
2.	REMUNERATION GOVERNANCE	94
3.	REMUNERATION PHILOSOPHY AND PRINCIPLES	98
4.	REMUNERATION FRAMEWORK FOR BOARD OF DIRECTORS	100
5.	REMUNERATION FRAMEWORK FOR GROUP EXECUTIVE MANAGEMENT	102
6.	OWNERSHIP OF SHARES AND OPTIONS	110
7.	OTHER REMUNERATION-RELATED INFORMATION UNDER CO (AUDITED)	110
8.	RELATED PARTY COMPENSATION	110
9.	REPORT OF THE STATUTORY AUDITOR ON THE REMUNERATION REPORT	111

90	Medacta's Annual Report 2023 l Remuneration Report

MYSOLUTIONS PERSONALIZED ECOSYSTEM

ER S O N A L I

Z

S

P

E

D

E

I

N

C

T

O

ATIE

O

U

P

NT

A

S

L

N O

Y

N

O

IT RI

NG

D

T

C

S

O

IE

T

N

M

A

N

A

O

S

E

T

D

L

T

T

A

M

A

L

P

E

E

G

N

C

E

Y

A

A

T

L

I

G

Y

O

N

S

N

I

REALITY

M

AUGMENTEDE FICATION TOD

E

S

M

O

CUTI

N A

XE

N

SURGICAL PLATFORM

RI

OL

E

S

V

An innovative solution that features advanced planning tools,

NA

O

LI

S

Z

revolutionary

R

E

and augmented reality to

Etracking

system,

P

D

potentially improve surgery accuracy and

efficiency, with low

upfront capitalDinvestmentG

and cost per case compared to

3

P

IN

N

L AN

other technologies.

PERSONALIZED 3D PLANNING

PRECISE

EXECUTION

PATIENT ENGAGEMENT

EFFICIENT CASE MANAGEMENT

A D V A N C E D P L A N N I N G

The protocol is based on CT derived images. These enable an accurate and personalized plan to optimize implant positioning and joint balancing. NextAR is a cloud-based system based on

MySolutions platform, accessible from any device.

Support patient education, preparation, rehabilitation, and monitoring, before and after surgery. MySolutions is designed around patient needs and expectations: POP (Patient Optimized Pathway) provides an easy-to-use interactive tool, enabling healthcare professionals to stay connected with their patients.

Remuneration Report l Medacta's Annual Report 2023

91

LETTER FROM THE CHAIRMAN OF THE

HUMAN RESOURCES & REMUNERATION COMMITTEE

" Our commitment is to align compensation with the company's strategic goals, performance, and shareholder interests, promoting sustainable success for both individuals and the organization as a whole"

Dear Shareholders,

As Chair of the Human Resources and Remuneration Committee, I am pleased to share with you the Medacta Remuneration Report for the Financial Year ending December 31, 2023. This report explains our remuneration system, its governance and how Medacta's 2023 performance affected the variable incentive remuneration to the Group Executive Management team.

In 2023, Medacta enjoyed a successful year, achieving strong financial results across all its objectives despite challenging geopolitical and economic conditions. The company continued to execute its strategy, achieving an impressive top-line growth rate of 19.5% at constant currency compared to the previous year. This expansion enabled us to not only retain all our employee positions worldwide but also to add 193 jobs in critical areas, thereby ensuring the company's ability to execute our value creation strategy. Our global workforce grew by 13%, and our total expenditure on compensation, benefits, and social costs rose by an average of approximately 18%. This increase reflects the hiring of a higher number of experienced staff to strengthen our organization and support sustained growth.

Over the past years, Medacta has demonstrated remarkable resilience and strength, overcoming macroeconomic challenges and achieving notable milestones. In line with our vision for future expansion, we have dedicated some time and effort to strategically evaluate the expansion of our Group Executive Management. This initiative reflects Medacta's commitment to driving innovation, enhancing operational efficiency, and fostering accelerated growth. After assessing different scenarios, we are excited to propose to the Board of Directors the promotion of three seasoned professionals: Massimiliano Bernardoni as Chief Innovation Officer, Giovanni Niccolò Galli as Chief Commercial Officer and Asif Hussain as Chief People Officer.

Intheyear2023,theHumanResourcesandRemuneration Committee dedicated a substantial amount of time to enhance our commitment to the Employer Value Proposition and revitalize our processes related to Talent Management and Learning & Development. Significantly, pivotal decisions were reached to refine our flexible working guidelines, bolster the employee

92	Medacta's Annual Report 2023 l Remuneration Report

referral scheme, amplify the impact of the #BeMedacta awards, optimize people metrics, and advance various other strategic initiatives. Concurrently, in 2023, the Headquarters Talent Management Process executed numerous learning and development training programs, initiating the implementation of Personal Development plans. We firmly believe that these proactive measures will fortify our hiring and retention systems, positioning us for sustained success in the future.

In 2023, we engaged in a comprehensive review and collaborative discussion with management to formulate robust and competitive compensation strategies and recognition schemes. Our objective was to cultivate a culture of continual learning and growth among our people, aligning closely with both employee and organizational needs. We made a strategic decision to recommend to the board of directors, who approved a modification to the short-term incentive scheme for the group executive management team. This involved identifying new metrics and adjusting weights to uphold and further fortify the robust connection between pay and performance, aligning the compensation structure more closely with the interests of our shareholders. Furthermore, the committee diligently evaluated the optimal number of Group Executive members to achieve a balance between effective governance, operational efficiency, and strategic agility, supporting the company's sustained growth into the future. Additionally, in 2023, we enhanced the remuneration structure introducing a new cycle of the Long-Term Incentive Plan which was also approved by the Board of Directors in March 2023. This initiative opened doors for both existing and new eligible Medacta employees to actively participate in the Group's future long-term success and prosperity.

As we look ahead, our commitment is to proactively assess and refine our remuneration programs, ensuring their continued relevance in the ever-evolving landscape in which we operate. Our focus remains on maintaining competitiveness to attract and retain top-tier talent, while also recognizing and rewarding individual performance, competence, and desired behaviors in alignment with #BeMedacta values and leadership principles. Recognizing the growing significance of ESG topics to all stakeholders, we acknowledge the integral role they

play. As Medacta advances its sustainability targets, the Human Resources and Remuneration Committee will endeavor to further fortifying the correlation between sustainability objectives and the remuneration of Medacta's management.

As always, we encourage and pursue open and regular dialog with our shareholders and their representatives to drive valuable improvements in our compensation system and practices. In accordance with the Articles of Association1, at the annual shareholders' meeting in May 2024, we will ask for approval of the maximum aggregate remuneration amount to be awarded to the Board of Directors for the period until the next annual shareholders' meeting in 2025. In addition, the shareholders will be asked to approve (i) the maximum overall fixed compensation of the Group Executive Management in 2025, (ii) the maximum overall variable short-term compensation for the Group Executive Management for the work performed in 2023, and (iii) the maximum overall variable long-term compensation of the Group Executive Management that may be allocated in 2025. Finally, the annual shareholders' meeting will approve the amount of remuneration to Board Members for consulting services in a function other than Board Members until the next annual shareholders' meeting as well as cast a consultative vote on this Remuneration Report.

On behalf of the Board of Directors, I express sincere gratitude for your continued support. This report aims to provide valuable insights, and we are confident that our compensation system consistently rewards performance in a manner that is both balanced and sustainable, closely aligned with the best interests of our shareholders. We eagerly anticipate the ongoing dialogue and collaboration ahead.

Philippe Weber

Chairman of the Human Resources & Remuneration Committee

1 Medacta's Articles of Association are available on Medacta's website at https://www.medacta.com/EN/corporate-governance?goto=organizational-regulations.

Remuneration Report l Medacta's Annual Report 2023

93

1. INTRODUCTION

This Remuneration Report is in compliance with the Swiss Code of Obligations (CO) art. 732 et seqq (that entered into force on January 1, 2023), Medacta's Articles of Association and, with respect to compensation disclosure, to the SIX Exchange Regulation Directive on Corporate Governance and to the Swiss Code of Best Practice for Corporate Governance. We structured this report by first describing the Remuneration Governance of the Group followed by the Remuneration philosophy and principles and the Compensation Framework for Board of Directors and Group Executive Management (GEM). We conclude with reporting the Ownership of Shares and Options, the other compensation-related information under the CO (Audited), the related party compensation and the report of the statutory auditor on the Remuneration Report.

2. REMUNERATION GOVERNANCE

The remuneration landscape at Medacta is mainly structured by the Human Resources & Remuneration Committee (hereinafter referred as either "Human Resources & Remuneration Committee" or "HR & RemCo") as well as the Board of Directors and is approved by the shareholders of Medacta. The overall responsibility for the implementation of the statutory remuneration principles and the remuneration principles set out in the Company's Articles of Association lies with the Board of Directors. However, as illustrated in the table below, the Human Resources & Remuneration Committee serves in an advisory capacity for remuneration matters while the Board of Directors retains the ultimate decision authority, all within the limits set by the Annual General Meeting (AGM), which approves the maximum aggregate amounts of remuneration for the Board of Directors and the Group Executive Management at each shareholders' meeting.

Remuneration Principles (Article of Association)

Remuneration Report

Maximum aggregate amount of remuneration for the Board

Individual remuneration of Board Members

Maximum aggregate amount of remuneration (including STIP and LTIP) for GEM

Proposes

HR & RemCo

HR & RemCo

HR & RemCo

HR & RemCo

HR & RemCo

ReviewsApproves

Board

AGM

Board

Board*

* AGM has a consultive vote

Board

AGM

Board

Board

AGM

Maximum aggregate amount of remuneration of the CEO

HR & RemCo

Board

Individual remuneration of other GEM Members

HR & RemCo

Board

Shareholders of Swiss listed companies have significant influence on the remuneration of governing bodies and the principles governing remuneration must be defined in a company's articles of association.

94	Medacta's Annual Report 2023 l Remuneration Report

The compensation principles outlined below are derived and summarized from Medacta's Articles of Association:

• Approval of remuneration by the AGM (article 12): the annual shareholders' meeting votes separately and bindingly on the proposals by the Board of Directors regarding the aggregate amounts of (a) the compensation of the Board of Directors for the term of office until the next shareholders' meeting and (b) (i) the maximum overall fixed compensation of the Group Executive Management in the subsequent business year, (ii) the maximum overall variable short-term compensation for the Group Executive Management for the work performed in the previous business year, and (iii) the maximum overall variable long-term compensation of the Group Executive Management that may be allocated in the subsequent business year.
• Principles of remuneration of the Board of Directors (article 25): the compensation may consist of a fixed base fee (including a lump sum compensation for expenses) paid in cash and/or awarded in shares (depending on the function in the Board of Directors, the number of committee activities and the functions in the committees). In exceptional cases, the Members of the Board of Directors may be awarded performance-related compensation.
• Principles of remuneration of the Group Executive Management (article 26): the compensation of the Members of the Group Executive Management may consist of a fixed compensation paid in cash (which consists of a base salary and can also contain other compensation elements and benefits); a variable short-term compensation paid in cash and/or shares; and variable long-term compensation paid in shares or equity-linked rights.
• Short-termvariable compensation and long-term compensation plans (article 26): the short-term variable compensation is paid in cash and/or shares and depends on the level of achievement of specific pre-defined targets for a one year performance period; the long-term compensation approved by the Board of Directors is intended to incentivize Members of the Group Executive Management, selected key managers and employees to support the long-term performance of the Company and creation of shareholder value.
• Loans and credits (article 28): Medacta shall not grant loans, credits, pension benefits other than from occupational pension funds or securities to current or former Members of the Board of Directors or the Group
  Executive Management2 or to persons closely associated with them.
• Agreements related to compensation and maximum contract terms of Group Executive Management (article 24): the employment agreements of the Members of the Group Executive Management shall in principle be concluded for an indefinite period. If the Board of Directors considers a fixed term appropriate, such fixed term shall not exceed one year. With respect to employment agreements entered into for an indefinite period, the maximum notice period shall not exceed 12 months. Non-competition agreements for the time following termination of an employment contract and the associated compensation are permitted to the extent that this is justified from a business perspective. The compensation for such a non-competition obligation shall not exceed in total the average of the compensation paid to the respective Member of the Group Executive Management during the last three financial years prior to termination.
• Additional compensation for new Members of the Group Executive Management (article 29): if newly appointed Members of the Group Executive Management take office after the annual shareholders' meeting has approved the aggregate maximum amount of compensation of the Members of the Group Executive Management for the next business year, such newly appointed Members may receive an aggregate compensation in each case of up to 30% of the last aggregate amount of compensation for the Group Executive Management approved by the annual shareholders' meeting.
• Additional services by Members of the Board of Directors (article 25): the Members of the Board of Directors providing consulting services to the Company or other group companies in a function other than as Members of the Board of Directors may be compensated in cash according to standard market rates subject to approval by the annual shareholders' meeting.

At the AGM 2023, we amended the Medacta Group Articles of Association to reflect the new provisions of the Swiss Corporate law and to further strengthen shareholders' rights. In addition, Medacta's Organizational Regulations3 including the Charter of the Human Resources & Remuneration Committee (in combination with the Articles of Association) describe and define the roles and responsibilities of the Human Resources & Remuneration Committee and the Board of Directors.

1. Advance payments of fees for lawyers, court fees and similar costs relating to the defense against corporate liability claims up to a maximum amount of CHF 1'000'000 are not subject to this provision.
2. Medacta's Organizational Regulations (including the charters of the Board Committees) are available on Medacta's website at: https://www.medacta.com/EN/corporate-governance?goto=organizational-regulations.

Remuneration Report l Medacta's Annual Report 2023

95

2.1 ROLE AND ACTIVITIES OF THE HUMAN RESOURCES & REMUNERATION COMMITTEE

Medacta's Human Resources & Remuneration Committee is comprised of a minimum of two Members of the Board of Directors who are elected annually and individually by the AGM for a one-year period until the next AGM. The Chairman of the HR & RemCo is appointed by the Board of Directors and is independent.

The 2023 Annual General Meeting (AGM) confirmed Philippe Weber and Riccardo Braglia as respectively Chairman and Member of the HR & RemCo. The Chairman of the Board from time to time attends the HR & RemCo meetings as a non-voting guest; however, he is not present during meetings or parts thereof during which his own performance or remuneration is discussed.

In general, the purpose of the Human Resources & Remuneration Committee is to advise and assist the Board of Directors with regards to compensation-related matters of Medacta with a focus on setting guidelines on remuneration for both Members of the Board of Directors and the Group Executive Management. As a core responsibility, the HR & RemCo makes proposals annually (or more often as required) to the Board of Directors related to the compensation package of the Members of the Group Executive Management and Board of Directors. For a more detailed overview of the Members, working methods and main duties and responsibilities of the HR & RemCo, as well as details regarding their meetings held in 2023, please refer to the sub-heading entitled "Human Resources & Remuneration Committee" in the Corporate Governance Report (section 3.5 "Internal Organizational Structure"), included in this Annual Report.

The HR & RemCo meets at such frequency as it deems necessary to fulfill its duties, normally ahead of ordinary Board meetings and at least four times per year. The HR & RemCo met four times in 2023 for an average duration of one hour and a half. In all the four HR & RemCo meetings all Members were present, and all were organized in person at Medacta's Swiss corporate offices either in Castel San Pietro or Rancate.

The Chairman of the Human Resources & Remuneration Committee reports to the Board of Directors at the Board meetings following each Human Resources & Remuneration Committee meeting, ensuring that the Board of Directors is kept informed in a timely and appropriate manner of all material matters within the Human Resources & Remuneration Committee's area of responsibility. Additional meetings may be held and may be convened at the request of either the Board of Directors or any Human Resources & Remuneration Committee Member. The Human Resources & Remuneration Committee may invite to meetings and shall communicate periodically with the CEO, the CFO and the Group HR Director, as well as such other persons as the Human Resources & Remuneration Committee deems appropriate, also including external advisors. During Financial Years 2022 and 2023, the Human Resources & Remuneration Committee and selected Medacta's managers appointed by the Human Resources & Remuneration Committee (Group HR Director and Senior Strategic Financial Advisor) worked with HCM International Ltd. as external independent advisor on remuneration matters and on assisting the development of the Long-Term Incentive Plan scheme. HCM International Ltd. does not have any additional mandates at Medacta. Furthermore, the Human Resources & Remuneration Committee regularly holds private sessions with Members of the Group Executive Management, except on those meetings or the part of meetings in which their own performance or remuneration is discussed.

96	Medacta's Annual Report 2023 l Remuneration Report

In accordance with the article 19 of the Articles of Association and the Human Resources & Remuneration Committee Charter, the following topics were discussed during 2023:

Topic

Review and Approval of the 2022 Remuneration Report

Proposals to the Board of Directors regarding the approval of the individual compensation of the Chairman and the other members of the Board of Directors

Proposals to the Board of Directors regarding the individual compensation (fixed and variable compensation) of the Members of the Group Executive Management

Long-Term Incentive Plan (LTIP):

• LTIP scheme review;
• Change of the LTIP regulation;
• Performance update;
• Execution timing.

Remuneration Report:

• set-upof the Report structure
• Remuneration Report review

Review of benchmarking peer group and external benchmark for Group Executive Management remuneration

Regulatory updates on cross-border commuters

Updates on Medacta Employer Value Proposition

Updates on the implementation of Talent Management and Learning & Development processes

Review of remuneration principles, strategy and systems

Individual targets and weighting of 2023 variable short-term incentive for the members of the Group Executive Management *

March		May		September		December



						
						
						
				
				
				
						


* To be proposed at the AGM 2024 meeting for approval.

2.2 ROLE AND ACTIVITIES OF THE SHAREHOLDERS REGARDING THE AGM

The Board of Directors will submit five separate remuneration-related resolutions for shareholders' approval at the AGM

2024 (as illustrated in Exhibit below):

• the maximum aggregate amount of remuneration of the Board of Directors for the term of office until the next annual shareholders' meeting (i.e. until the next annual shareholders' meeting in 2025);
• the maximum overall fixed remuneration of the Group Executive Management to be paid for the Financial Year ending December 31, 2025;
• the maximum overall variable short-term remuneration for the Group Executive Management that may be paid or allocated for the business year ended December 31, 2023;
• the maximum overall variable long-term remuneration of the Group Executive Management that may be allocated in for the business year ending December 31, 2025;
• the amount of remuneration to Members of the Board of Directors for consulting services to the Company or other group companies in a function other than as Members of the Board of Directors, until the next annual shareholders' meeting (i.e. until the next annual shareholders' meeting in 2025).

Remuneration Report l Medacta's Annual Report 2023

97

In addition, the Board of Directors will submit this Remuneration Report to a separate consultative vote for the shareholders at the AGM 2024.

			2023		2024		2025	2026
Board						Binding vote on maximum
					aggregate board compensation
Remuneration
	Fixed					Binding vote on
					maximum
						overall compensation
GEM	Short - Term	Binding vote on maximum
overall compensation
Remuneration						Binding vote on
	Long - Term
					maximum
					overall compensation
	January	April	December	May	December	April	December
	2023		2023	2023	2024	2024	2025	2025
			AGM		AGM		AGM

The Board of Directors may present to the annual shareholders' meeting deviating or additional proposals for approval in relation to the same or different time periods.

If the shareholders' meeting does not approve the amount of the proposed fixed and variable compensation, as the case may be, the Board of Directors may either submit new proposals at the same shareholders' meeting, convene a new extraordinary shareholders' meeting and make new proposals for approval or may submit the proposals regarding compensation for retrospective approval at the next annual shareholders' meeting.

At the Annual General Meeting (AGM) 2023, the Board of Directors submitted five separate remuneration-related proposals, which were all approved by the shareholders:

• the maximum aggregate amount of remuneration for the Members of the Board of Directors for the term from the AGM 2023 until the AGM 2024: CHF 1'100 thousand;
• the maximum overall fixed remuneration of the Group Executive Management to be paid for the Financial Year ending December 31, 2024: CHF 1'200 thousand;
• the maximum overall short-term remuneration of the Group Executive Management to be paid for the Financial Year ending December 31, 2022: CHF 1'350 thousand;
• the maximum overall variable long-term remuneration of the Group Executive Management to be allocated in the Financial Year ending December 31, 2024: CHF 800 thousand;
• the maximum aggregate amount for services covered by article 25(3) of theArticles of Association (Consulting Services) for the period until the AGM 2024: CHF 150 thousand.

In addition, shareholders approved the FY 2022 Remuneration Report in a consultative vote.

3. REMUNERATION PHILOSOPHY AND PRINCIPLES

Medacta's Human Resources & Remuneration Committee gives careful consideration to the remuneration framework for the Members of the Board of Directors and the Group Executive Management. In order to reflect their different roles, the remuneration of the Board of Directors and the Group Executive Management are designed according to different standards and considerations.

Medacta's remuneration landscape is designed to support the Company's strategic plans and to provide a balance between motivating the Members of the Board of Directors and the Group Executive Management to deliver on the near-

98	Medacta's Annual Report 2023 l Remuneration Report