SNGN Romgaz : Nomination and Remuneration Committee Report for the year 2023

2023

ANNUAL FINANCIAL REPORT on the remuneration, benefits and/or other advantages granted to the Members of the Board and Officers of S.N.G.N. ROMGAZ S.A.

2023 ANNUAL FINANCIAL REPORT on the remuneration, bennefits and/or other advantages granted to Members of the Board and

Officers OF S.N.G.N. ROMGAZ S.A.1

This report is drafted in accordance with the following provisions:

• - Art. 107 of Law No. 24/2017 on financial instruments and market operations issuers 2 respectively: the issuer drafts a clear and comprehensible report providing a broad image on the remunerations, including all benefits, regardless of the form, granted or due individually to executives, including the ones new recruited and former executives, during the last financial year, according to the remuneration policy provided in Art. 106 and

• - Art. 55 (3) of GO No. 109/2011 on public companies corporate governance 3, respectively: The

  Nomination and Remuneration Committee of the Board of Directors (…) elaborates an annual report on the remunerations and other benefits granted to directors and managers, members of the supervisory committee and members of the board, respectively, during the financial year

to be presented and submitted SNGN ROMGAZ SA General Meeting of Shareholders 4 approval, convened on April 25, 2024 and made public on ROMGAZ website, according to Art. 107 (7) of Law 24/2017, following the approval.

According to Article 107 (6) of Law 24/2017, this Report was prepared in line with the vote within the OGMS meeting of April 26, 2023, taking note of the 2022 Annual Financial Report on the remuneration and other advantages granted to Mombers of the Board and Officers of ROMGAZ , with 99.2996% of the total valid votes cast.

This Report is supplemented by the information in Annual Consolidated Report and the Financial Statements available on ROMGAZ website -www.romgaz.ro section Investors  Annual Reports  2023.

• 1 Hereinafter, Report or The Report

• 2 Hereinafter, Law 24/2017

• 3 Hereinafter, GEO 109/2011

• 4 Hereinafter, ROMGAZ GMS

Table of Contents

I. Report Premises ......................................................................................................... 4

I.1. Applicable Legal and Internal Rules ............................................................................. 4

I.2. Role and Functions of ROMGAZ Nomination and Remuneration Committee ............................. 4

I.3. Status of Mandates of Directors and Officers for 2023 Financial Year .................................... 5

II. Remuneration Report for 2023 Financial Year .................................................................. 6

II.1. Structure of Report ................................................................................................ 6

II.2. Report Content ..................................................................................................... 7

III. Conclusions ........................................................................................................... 17

Annex 1. GMS Resolutions on ROMGAZ BoD member mandates during the reference period ......... 18

Annex 2. ROMGAZ BoD Resolutions on BoD member mandates during the reference period ......... 20

I. Report Premises

I.1. Applicable Legal and Internal Rules

For the presentation, structuring and analysis of information included in the Report, the following aspects were taken into account:

a) applicable legal provisions:

•  Articles 106 and 107 of Law 24/2017;

•  Articles 55 (2) and (3) of GEO 109/2011;

•  Article 37 of GEO 109/2011, regarding remuneration of ROMGAZ5 BoD members;

•  Article 38 of GEO 109/2011, regarding remuneration of ROMGAZ Officers

•  Article 39 of GEO 109/2011, regarding benefits and/or other advantages granted to ROMGAZ BoD members and Officers;

•  Article 111, Article 142, Article 15318 of Law No. 31/1990 on companies.

• b) Applicable ROMGAZ Internal Regulations and Rules:

  •  ROMGAZ Article of Incorporation, updated and approved by ROMGAZ EGMS Resolution No. 17/2023;

  •  Internal Rules of the Nomination and Remuneration Committee, approved by Romgaz BoD on August 28, 2018, as reviewed and approved on December 19, 2023;

  •  ROMGAZ Corporate Governance Code;

  •  ROMGAZ Remuneration Policy, approved by GMS on April 28, 2022.

• c) ROMGAZ GMS Resolutions, relevant for the period under review (2023 financial year), and, respectively, Annex 1 to this Report - GMS Resolutions on ROMGAZ BoD members mandates for the period under review;

• d) ROMGAZ BoD Resolutions on Company Officers6 issued during the reporting period are included in Annex 2 - ROMGAZ BoD Resolutions on the Officer mandates for the reporting period.

I.2. Role and Functions of ROMGAZ Nomination and Remuneration Committee

The Nomination and Remuneration Committee (NRC) of ROMGAZ 7 is an advisory committee set up under ROMGAZ BoD, with duties related to training of BoD members, remuneration of BoD members and of Officers in compliance with the remuneration policy, and assessment of BoD and executive management performance.

Following amendments to Law No. 187/2023, the Government Emergency Ordinance No. 109/2011 on corporate governance of public entities, and the Government Ordinance No. 639/July 27, 2023 on approving the enforcement guidelines of GEO No. 109/2011, NRC has no longer competencies in the BoD member selection process; such competencies are transferred to the Selection and Nomination Committee set up by administrative act of the public supervisory authority (PSA). In such context, ROMGAZ NRC Rules was reviewed and approved by BoD Resolution No. 116 of December 19, 2023.

In accordance with the reviewed ROMGAZ NRC Rules, the main purpose of the Committee is:

• a) involvement in the BoD member recruitment and selection process;

• b) to organise training sessions for the BoD members;

• c) to make proposals for the remuneration of BoD members and of Officers, by complying with the remuneration policy transmitted by Agenţia pentru Monitorizarea şi Evaluarea Performanţelor Întreprinderilor Publice (the Agency for Performance Monitoring and Evaluation of Public Entities) (AMEPIP);

• d) to support the BoD in assessing its own performance, as well as the performance of the executive management.

• 5 hereinafter, ROMGAZ BoD

• 6 CEO, Deputy CEO and CFO

• 7 hereinafter, ROMGAZ NRC

In terms of remuneration activity, ROMGAZ NRC:

•  makes proposals for ROMGAZ GMS on the BoD members' remuneration level;

•  makes proposals for the Officers' remuneration within the general limits set by ROMGAZ GMS and the law;

•  elaborates BoD members' and Officers' Remuneration Policy, and submits such for the endorsement of ROMGAZ BoD and the approval of ROMGAZ GMS;

•  submits the BoD members' and Officers' Remuneration Policy for endorsement to ROMGAZ BoD and for approval to the ROMGAZ GMS, with the occasion of each significant change, and at least every four years;

•  drafts an Annual Report on Remuneration, Benefits and/or other Advantages granted to BoD members and to Officers, and such report shall be submitted to ROMGAZ GMS meeting when also annual financial statements are approved.

Following the selection procedure in accordance with GEO No. 109/2011 and appointment of the Board of Directors for a 4-year term mandate, ROMGAZ BoD Resolution No. 28 modified on March 20, 2023 ROMGAZ NRC composition, as shown in the table below:

ROMGAZ NRC Composition in 2023
January 01 - March 19	March 20 - December 31
Sorici Gheorghe Silvian - Chairperson Batog Cezar - member Drăgan Dan Dragoș - member	Sorici Gheorghe Silvian - Chairperson Braslă Răzvan - member Drăgan Dan Dragoș - member

I.3. Status of Mandates of Directors and Officers for 2023 Financial Year

The status of on-going mandates of ROMGAZ BoD members and ROMGAZ Officers for the period under review (year 2023), is shown in Annex 1 and Annex 2 to this Report.

With respect to ROMGAZ BoD members, after reviewing information included in Annex 1, it can be concluded that during the financial year 2023:

•  before March 15, 2023, the mandates of ROMGAZ BoD members were provisional, with an initial term of 4 months, and extended by another 2 months;

•  as of March 16, 2023, following the selection procedure, the shareholders of the Company appointed BoD members for a 4-year term mandate.

With respect to ROMGAZ Officers, the information included in Annex 2 shows that during 2023:

•  before May 15, the mandates of ROMGAZ Officers members were provisional, with an initial term of 4 months, and extended by another 2 months;

•  as of May 16, 2023, the BoD appointed three Officers for a 4-year term mandate.

During the interim mandates, Romgaz BoD members and Officers remuneration consisted exclusively of a fixed allowance.

For the 4-year term mandates, Romgaz shareholders approved by Resolution No.12 of September 11, 2023 the following:

•  financial and non-financial performance indicators resulted from the Governance Plan,

•  variable annual component of the remuneration of BoD members and Officers, as well as addenda for the non-executive BoD members,

•  addendum to the Contract of Mandate of BoD members,

•  threshold of the monthly fixed allowance for the executive BoD members and Officers,

•  threshold of the annual variable component of the remuneration of the executive BoD members and Officers.

The variable remuneration of Officers has been the scope of addenda approved by ROMGAZ BoD Resolution No. 87 of September 19, 2023.

From the date of approval by ROMGAZ GMS (for BoD members), and, respectively, by ROMGAZ BoD (for Officers) of the addendum establishing the variable component until termination of the Contract of Mandate, for each mandate year, the variable component of remuneration shall be granted on a pro-rata basis for the time worked in the year based on the Contract of Mandate.

Payment of the variable remuneration is annual, within maximum 15 days from the approval by the General Meeting of Shareholders of the Company's audited financial statements and submission of the Nomination and Remuneration Committee's Annual Report.

Against this background, in 2023 financial year, ROMGAZ BoD members and Officers received remuneration for their performed activity only in form of a monthly fixed allowance; variable remuneration was not granted.

The Deputy Chief Executive Officer has concluded a contract of mandate for the BoD member position and a contract of mandate for the Officer position. He was strictly entitled to receiving payment for the fixed monthly component based on the contract of mandate for BoD member position.

Also, according to terminated and/or effective contracts of mandate in 2023, ROMGAZ BoD members and Officers received the equivalent value of rights representing benefits and other advantages, which must be recorded in the annual financial statements, according to article 39 of GEO no. 109/2011.for 2023 financial year, values are detailed by position in Chapter II of the Report.

Because of the aforementioned aspects, the Report presents remuneration and benefits or other advantages given to ROMGAZ BoD member and Officers exclusively in form of:

•  value of fixed monthly component - as the only form of remuneration granted for fulfiling mandates in 2023, and

•  value of benefits and/or other advantages stipulated in terminated or effective contracts of mandate, and paid during the reporting period.

II. Remuneration Report for 2023 Financial Year II.1. Structure of Report

According to Article 107 of Law 24/2017 corroborated with the provisions of Article 55 (2) and (3) of GEO no. 109/2011, information contained in this Report is structured by category:

•  total remuneration split by components, the relative ratio of fixed component and of variable component, including:

  •  explanatory note regarding on how the total remuneration complies with the adopted remuneration policy including how it contributes to the long-term performance of the Company;

  •  information on the application of performance criteria;

•  other rights, in form of benefits and/or advantages, which, according to the law, are not part of the remuneration of BoD members and Officers for performing the mandate;

•  annual change in remuneration, issuer's performance and of the average remuneration based on full-time equivalent of issuer's employees who are not BoD members and Officers at least not for the past 5 financial years, presented together in a way that allows comparison;

•  any remuneration received from any entity belonging to the same group;

•  information on using the possibility to recover variable remuneration;

•  information on contract term, negotiated termination notice period, amount of damages for unjust termination of mandate;

•  number of shares and share options granted or offered, and the main conditions for exercising relating rights, including the exercising price and date together with any modification thereof;

•  considerations justifying any annual bonus scheme or non-monetary benefits;

•  additional or early retirement pension schemes, if any;

•  information on any deviation from the procedure for the implementation of the Remuneration Policy.

II.2. Report Content

II.2.1. Total remuneration split by the relative ratio of fixed component and of variable component.

a) Remuneration of Company's non-executive BoD members

Fixed remuneration

Gross value of fixed allowance of non-executive BoD members:

•  was established by ROMGAZ GMS resolutions for their appointment;

•  complies with the threshold established in Chapter 6 - Remuneration of Non-Executive BoD members of ROMGAZ Remuneration Policy.8

Variable remuneration

Interim non-executive BoD members did not benefit from the variable component of the remuneration during the mandate term.

For the 4-year term mandates, the gross value of variable component of non-executive BoD members:

•  was established by ROMGAZ GMS resolution for approval of financial and non-financial performance indicators;

•  is compliant with the threshold established in Chapter 6 - Remuneration of Non-Executive BoD members of ROMGAZ Remuneration Policy.9

Calculation method of variable component of remuneration

Due annual variable remunertion is the product between the variable component of remuneration set in the addendum to the contract of mandate and the total degree of achievement of the performance indicators.

=

where:

CVn CV GTIn

• - variable component of remuneration due to BoD member in year "n", RON;;

• - variable component of remuneration established by addendum to the contract of mandate, RON;

• - total degree of fulfilment of performance indicators in year "n".

20

= ∑( )

=1

where:

- fulfilment degree of performance indicator "i" in year "n"; - weighting coefficient relating to performance indicator "i".

8 namely, twice the average of monthly gross average salary over the past 12 months for the activity carried out in accordance with ROMGAZ' main business, at the level of class of activity, in accordance with the classification of activities of the national economy, as communicated by the National Institute of Statistics, prior to the appointment.

9 namely, maximum 12 monthly fixed allowances.

Depending on the total degree of fulfilment of the performance indicators (TDAn) the variable component is granted as follows:

•  TDA  100%, the variable component is fully granted;

•  50%  TDA < 100%, the variable component is granted proportionally;

•  TDA < 50%, the board member could be revoked.

Below are financial and non-financial performance indicators and relating achievement degree for 2023:

1. Financial Indicators

Item no.	Indicator	Objective	Non-executive BoD members Weight	Degree of Achievement influenced with target established January-December 2023	Non-executive BoD members Weight in degree of fulfilment
1	Revenue	budget (reviewed)	4%	1.02	4.07%
2	EBITDA margin	minimum 41%	2%	1.91	3.83%
3	Operating expenses from RON 1,000 operating income	maintain budget level	3%	1.13	3.38%
4	Labour productivity (in value units)	budget	2%	1.06	2.12%
5	CAPEX	minimum 70% budget	3%	0.80	2.40%
6	Ratio between net debt and EBITDA	<4,5	2%	2.07	4.15%
7	Operating income margin	budget	2%	1.3	2.61%
8	Dividend payout ratio	minimum provided by the applicable regulations	2%	1.02	2.03%
Degree of fulfilment of financial indicators	20%	24.58%

2. Non-Financial Indicators

Item no.	Indicator	Objective	Non-executive BoD members Weight	Degree of Achievement influenced with target established January-December 2023	Non-executive BoD members Weight in degree of fulfilment
1	Natural gas production decline	maintaining the annual decline of maximum 2.5% as compared to 2022	2%	0.99	1.98%
2	Emissions in the application area 1t	reduction/maintenance of CO2 emissions directly generated by electricity generation plant	3%	1.01	3.03%

Item no.	Indicator	Objective	Non-executive BoD members Weight	Degree of Achievement influenced with target established January-December 2023	Non-executive BoD members Weight in degree of fulfilment
3	Fulfilment of gas supply obligation	100% of the contracted gas quantity	3%	1.00	3.00%
4	Customer satisfaction score	minimum 75%	10%	1.33	13.30%
5	Market share	higher than 40%	2%	1.60	3.20%
6	Average number of training hours per employee	minimum 8	3%	1.81	5.43%
7	Number of safety trainings	100% of the employees	3%	1.00	3.00%
8	Total frequency of recorded accidents	maximum 0.8%	4%	1.71	6.84%
9	Rate of independent members in the Board of Directors	higher than 55%	5%	0.93	4.65%
10	Number of BOD meetings	minimum 12	7%	4.33	30.31%
11	Attendance rate at BOD meetings	minimum 90%	6%	1.08	6.48%
12	Number of Audit Committee meetings	minimum 4 per year	6%	3.25	19.50%
13	Rate of women in executive positions	minimum 30%	8%	1.11	8.88%
14	Timely reporting of company performance indicators	full compliance with reporting deadlines	9%	1.00	9.00%
15	Implementation of the National Anti-Corruption System	timely implementation	9%	1.00	9.00%
Degree of fulfilment of non-financial indicators	80%	127.60%
DEGREE OF FULFILMENT OF PERFORMANCE INDICATORS FOR NON-EXECUTIVE BoD MEMBERS	100%	152.18%

In 2023, the degree of fullfilment of performance indicators for non-executive BoD members was 152.18%. Payment of due variable remuneration shall be made following the presentation of this report to the GMS and approval of Company's annual audited Financial Statements.

Details regarding the net remuneration/other benefits for ROMGAZ BoD members - 2023 financial year

Net total remuneration granted to all of Romgaz non-executive BoD members for 2023 financial year was RON 1,131,171 representing exclusively the fixed component, according to point I.3 of this Report.

Estimated net variable remuneration due to all of Romgaz non-executive BoD members for 2023 financial year is RON 902,472 in total.

Ite m no.	Name and surname	Fixed remuneration (RON)	Granted Variable remuneration (RON)	Estimated Variable remuneration (RON)	Daily allowance (RON)	*travel expenses (RON)
1	Drăgan Dan Dragoș	188,529	0	150,412	684	0
2	Jude Aristotel Marius**	0	0	0	0	0
3	Simescu Nicolae Bogdan	36,037	0	0	0	0
4	Cezar Batog	36,037	0	0	0	0
5	Balazs Botond	188,529	0	150,412	14,609	2,533.45
6	Sorici Gheorghe Silvian	188,529	0	150,412	0	0
7	Virgil Marius Metea	36,037	0	0	0	0
8	Nuţ Marius-Gabriel	152,491	0	150,412	684	1,242.40
9	Braslă Răzvan	152,491	0	150,412	0	0
10	Stoian Elena-Lorena	152,491	0	150,412	1,420	0
TOTAL	1,131,171	0	902,472	17,397	3,775.85

*travel expenses include transportation by private car, parking expenses, other travel expenses.

**during the reporting period, Mr. Jude Aristotel Marius was executive BoD member and also occuped the Deputy CEO position.

b) Romgaz officers/BoD members remuneration

Fixed remuneration

Both for the interim mandates, as well as the for the 4 year term mandates, the amount of the Officer's monthly gross fixed indemnity were approved by the appointing Romgaz BoD Resolutions and comply with the following:

•  the regulated limit at Chapter 7 - Chief Executive Officer's remuneration in Romgaz Remuneration Policy10

•  the regulated limit at Chapter 7 - Officers' remuneration, others than the Chief Executive Officer in Romgaz Remuneration Policy11

Variable remuneration

ROMGAZ interim officers did not bennefit of the remuneration variable component during the mandate contract.

For the 4 year term mandates, the Officers' remuneration variable companent was established by addendums to the mandate contracts, approved by ROMGAZ BoD Resoution and:

•  Complies with the limit set by ROMGAZ GMS Resolution approving the financial and nonfinancial performance indicators;12

•  Complies with ROMGAZ remuneration Policy, Chapter 7 - 7.2. Chief Executive Officer's remuneration;

10 6 times the average of the monthly gross average salary over the last 12 month for work carried out in accordance with the main business registered by ROMGAZ, at the level of class of activity, in accordance with the classification of activities of the national economy, as communicated by the National Institute of Statistics, prior to nomination.

11 Up to 6 times the average of the monthly gross average salary over the last 12 month for work carried out in accordance with the main business registered by ROMGAZ, at the level of class of activity, in accordance with the classification of activities of the national economy, as communicated by the National Institute of Statistics, prior to nomination 12 24 fixed monthly allowances for the Chief Executive Officer and Deputy Chief Executive Officer and up to 12 fixed monthly allowances for the Chief Financial Officer