Medacta : 2020 Remuneration Report

REMUNERATION REPORT

Medacta's Annual Report 2020

INDEX

1.	INTRODUCTION	82
2.	REMUNERATION GOVERNANCE	82
3.	REMUNERATION PHILOSOPHY AND PRINCIPLES	86
4.	REMUNERATION FRAMEWORK FOR BOARD OF DIRECTORS	87
5.	REMUNERATION FRAMEWORK FOR GROUP EXECUTIVE MANAGEMENT	90
6.	OWNERSHIP OF SHARES AND OPTIONS	96
7.	OTHER REMUNERATION-RELATED INFORMATION UNDER THE OAEC (AUDITED)	96
8.	RELATED PARTY COMPENSATION	96
9.	REPORT OF THE STATUTORY AUDITOR ON THE REMUNERATION REPORT	97

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Next-generation Augmented Reality surgical platform based on proprietary single use technology, improving efficiency and accuracy in computer-assisted surgery with a low upfront capital investment and low cost per procedure.

NextAR is the latest addition to Medacta's MySolutions platform, providing personalized solutions that will support the surgeon to take care of patients as individuals. Together with our comprehensive implant portfolio and surgical techniques, MySolutions empowers Medacta's holistic approach to personalized medicine.

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

INTELLIGENCE DRIVEN PERSONALIZATION

Prior to surgery, the surgeon uses a 3D virtual model of the patient knee to choose the best implant and position to restore his unique anatomy. The plan is created leveraging Medacta's experience with the award-winning MySolutions platform and new advanced tools.

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LETTER BY THE CHAIRMAN OF THE REMUNERATION COMMITTEE

Dear Shareholders,

We are pleased to introduce Medacta's Remuneration Report for the Financial Year ended December 31, 2020. This document follows a similar structure to the prior year's report and describes Medacta's remuneration governance, remuneration philosophy and principles, the responsibilities and procedures involved in determining the compensation of Members of the Board of Directors and Group Executive Management, the forms of compensation and how Medacta's performance results impacted the variable incentive payments of the Group Executive Management. In addition, I am pleased to announce that following the Extraordinary General Meeting (EGM) held on December 18, 2020, we welcomed our new Board member Riccardo Braglia to the Remuneration Committee.

In 2020, Medacta's operations were strongly impacted by the COVID-19 pandemic. We responded quickly to the rapid spread of the pandemic by implementing personnel safety measures and activating business continuity plans. The effect of the pandemic on Medacta's performance required the introduction of prudent discretionary initiatives in cost containment in order to soften the financial impact on our business. This prompt effort allowed Medacta to maintain a healthy financial condition, retain all of our employees worldwide and add 82 new jobs in critical areas to maximize the company's ability to rebound rapidly.

As COVID-19 rapidly started to spread throughout the world, the Remuneration committee worked very close with the Group Executive Management in providing support through challenging decisions on people and compensation. To support the aforementioned discretionary initiatives in cost containment, early in April 2020, this committee along with the Group Executive Management, decided to postpone the implementation of the already designed long-term incentive plan to a later date and voluntarily reduce Board of Directors and Group Executive Management compensation. Our Founder and Chairman of the Board, Dr. Alberto Siccardi and our Chief Executive Officer Ing. Francesco Siccardi decided to reduce their 2020 total compensation by 50%. The other members of the Board and Group Executive Management decided to reduce their total compensation by 20%.

The COVID-19 developments during the first months of the second semester along with the initiatives introduced by Group Executive Management, enabled Medacta to largely compensate the sales decrease in the first half, although these were limited by further restrictions from the COVID-19 pandemic resurgence starting in the end of October. Overall, despite the second wave in October, Medacta managed to close the second semester with an impressive 7.6% growth rate as compared to the previous year period (full year performance was negative 2.1% in constant currency) ultimately performing better than the market, gaining new customers and investing in innovation, people and technology to sustain our momentum.

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This performance is primarily due to our dedicated people who deserve recognition and rewards. As a consequence, we decided to propose for approval at the Board of Directors meeting held on March 30, 2021 a long-term incentive plan for our Group Executive Management, selected key managers and employees of Medacta. The purpose of the plan will be to provide the eligible Medacta employees with an opportunity to become shareholders of the company, and hence align their interests to those of Medacta's other shareholders, to participate in the future long-term success and prosperity of the Group, and to enhance and reward loyalty of the employees, especially in this extraordinary period.

Our most valuable assets to our continuing success are made by People and the #beMedacta culture, as also described in the Sustainability Report 20191. To support and nurture this culture, it is essential that our compensation system reflects and rewards similar values. That is why the Remuneration Committee and Board of Directors will actively manage the medium- to long-term evolution of remuneration at Medacta. For the coming year, we expect to continue our focus on the structure of our short and long variable incentive plans, particularly with respect to maintaining and further strengthening the strong link between pay and performance.

In accordance with the Articles of Association2, at the annual shareholders' meeting in May 2021, 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 2022. In addition,

the shareholders' meeting will be asked to approve (i) the maximum overall fixed compensation of the Group Executive Management in 2022, (ii) the maximum overall variable short-term compensation for the Group Executive Management for the work performed in 2020, and (iii) the maximum overall variable long-term compensation of the Group Executive Management that may be allocated in 2022 (if the long-term incentive plan is ultimately adopted). Finally, the annual shareholders' meeting will approve the amount of remuneration to Board members for consulting services in a function other than as Board members until the next annual shareholders' meeting as well as cast a consultative vote on this Remuneration Report.

We encourage and pursue open and regular dialogue with our shareholders and their representatives as we continue to evolve our compensation systems and practices.

On behalf of Medacta and the Remuneration Committee, I would like to thank our shareholders for their continued feedback and ongoing support.

Philippe Weber

Chairman of the Remuneration Committee

1. Medacta's Sustainability Report 2019 is available on Medacta's website at https://www.medacta.com/EN/sustainability.
2. 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 2020

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