IRCE S p A: Remuneration report pursuant to art. 123-ter TUF

REPORT ON THE REMUNERATION POLICY

AND ON THE REMUNERATION PAID in accordance with Articles 123 – ter of the consolidated finance law and 84 – trimester of the Issuers’ Regulations

Report approval date: March 15, 2022

Year to which the report refers: 2021

Website:www.irce.it

This Report is drawn up in accordance with Articles 123 – ter of the Consolidated Financial Law (Italian Legislative Decree no. 58 of February 24, 1998) and 84 – quarter of the Issuers’ Regulation (Consob Regulation 11971 of 14/05/1999), based on Diagram 7 – bis of appendix 3A of the same regulation.

This report is structured in two sections.

The first section illustrates the company’s policy on the remuneration of the board of directors, general managers, executives with strategic responsibilities and the control body with reference to the 2022 – 2024 financial years, and the procedures used for the remuneration. adoption and implementation of this policy.

The current Board expiring proposes to the newly appointed Board to submit to the General Meeting any update of the objectives set in the remuneration policy in order to take into account the evolution of financial returns and the inflationary scenario.

The second section provides, with respect to each member of the board of directors, general managers and managers with strategic responsibilities and the controlling body:

the representation of each of the components of the compensation, including the treatments provided in the event of termination of office or employment relationship, highlighting its consistency with the company’s compensation policy for 2021;

the analytical illustration of the remuneration that was paid during the reference year in any capacity and in any form whatsoever by the company and by its subsidiaries or associated companies, indicating the elements of said remuneration that refer to activities carried out in years prior to 2021. And also highlighting the royalties to be paid one or more subsequent years for the activity carried out in 2021, indicating an estimated value for elements that are not objectively quantifiable.

TITLE I

The Company’s Board of Directors set up its own Compensation Committee by decision of 04/30/2019, which will remain in office until the approval of the 2021 accounts.

The Remuneration Committee is made up of three non-executive Directors appointed by the Board of Directors, the majority of whom are independent: Mrs. Francesca Pischedda, independent and non-executive director and Chairman of the Committee, Mr. Gianfranco Sepriano, non-executive director and Mrs. Gigliola Di Chiara independent and non-executive director.

At least one member of the Compensation Committee has expertise and experience in accounting and financial matters and/or compensation policies deemed appropriate by the Board when appointed.

The work of the Committee is coordinated by a President, Mrs. Francesca Pischedda, and minutes of the meetings are regularly written.

During 2021, a one-hour meeting was held in which all Committee members participated.

A meeting is scheduled for the current fiscal year.

The Chairman of the College of Statutory Auditors attended the discussions of the Compensation Committee.

The Compensation Committee:

  • – presents to the Board of Directors proposals for the development of the general compensation policy for executive corporate officers, directors exercising special mandates and key executives;

  • – carries out a periodic assessment of the adequacy, overall consistency and effective implementation of the general policy adopted for the compensation of executive corporate officers, other directors exercising special mandates and main executives, in using for this last mission the information provided by the directors, and formulates the related proposals;

  • – presents to the Board of Directors proposals concerning the compensation of executive corporate officers and other directors exercising special mandates and also sets the performance objectives linked to the variable part of this compensation, monitors the implementation of the decisions adopted by the Board itself by verifying in particular the effective achievement of performance objectives.

In the exercise of its functions, the Remuneration Committee was able to access the information and social functions necessary for the exercise of its functions without having recourse to an external consultant.

The Board of Directors has defined a compensation policy for directors and key executives.

Remuneration policy for the Board of Directors

The compensation policy for executive corporate officers or directors exercising special mandates defines guidelines with reference to the themes and according to the criteria indicated below:

  • a) The fixed part and the variable part are sufficiently balanced according to the Company’s strategic objectives and risk management policy, also taking into account the sector in which it operates and the characteristics of the activity actually carried out;

  • b) Maximum limits are considered for the variable components;

  • c) The fixed portion is determined at an amount sufficient to remunerate the services rendered by the director if the variable portion were not to be paid due to failure to achieve the performance objectives set by the Board of Directors;

  • d) Performance objectives are pre-established, measurable and linked to the creation of shareholder value over a medium-long time scale;

  • e) The payment of a significant part of the variable component of the remuneration is deferred for an adequate period of time in relation to the moment when it vests; the size of this part and the duration of the deferral are in line with the characteristics of the activity carried out and with the associated risk profiles;

  • f) Contractual agreements allowing the company to request the total or partial reimbursement of the variable elements of the remuneration paid (or to deduct the sums committed in the deferral), established on the basis of figures which turned out to be grossly erroneous on a date later, are not considered;

  • g) No indemnity is provided for early termination of the term of office of director or for its non-renewal;

  • h) Share-based compensation plans are not contemplated.

The remuneration of the executive directors and key managers is established in such a way as to align their interests with the pursuit of the primary objective of the company, namely the creation of value for shareholders, also in the medium term.

The total remuneration of the executive directors and key managers includes: – fixed remuneration (component a);

– short-term variable compensation based on the achievement of predefined objectives, measured annually, on the basis of an economic and financial index (component b);

medium-term variable compensation linked to the achievement of objectives, measured on the basis of an economic and financial index, over a period of three years (equal to the duration of the Board’s term of office) (component c).

The variable part of the remuneration (components b and c) is acquired in favor of the addresses upon reaching a minimum objective, which is set and expressed by the “ROCE” index, in relation to the consolidated financial statements.

The failure to achieve the minimum objective, does not allow the recognition of the same.

ROCE is calculated as the ratio of adjusted EBIT to capital employed.

EBIT is restated for income/expenses from transactions on copper and energy derivatives and net of the provision for share of variable compensation referred to in this document. Capital employed is the average of the values ​​at the beginning and end of the financial year of the algebraic sum of net working capital and fixed assets, net of funds of any kind.

The ROCE index relating to the variable portion of compensation linked to short-term objectives (component b) is calculated on the basis of the consolidated financial statements for the previous year. In correspondence with the percentage values ​​retained by the ROCE, the performance bonuses are set in table A below.

ROCE

Annual variable compensation (€)

ROCE ≤ 4%

0 €

4%

€3,000

9%

€5,000

12%

€10,000

ROCE > 15%

€15,000

Table A

The medium-term variable compensation component (component c) is linked to the improvement in the ROCE index achieved during the three years of office on the Board of Directors compared to the ROCE achieved during the previous three years.

This improvement, expressed as an average annual percentage, is calculated as follows:

ROCE4, ROCE5, ROCE6 are the results obtained during the first, second and third year of the Board of Directors.

ROCE1, ROCE2 and ROCE3 refer to the results obtained during the previous three years.

The values ​​of the medium-term variable compensation are presented in Table B, as the results of a three-year base cross, between the average ROCE value of the reference period and the improvement achieved, compared to the previous three-year period.

The variable part C of the remuneration is paid, if applicable, after the presentation to the General Meeting of the consolidated financial statements for the last financial year of the three-year term of office of the Board of Directors.

Remuneration (€)

Improvement

ROCE

m≤3%

3%

5%

10%

20%

m > 30%

2%

10,000

15,000

20,000

4%

10,000

15,000

20,000

30,000

9%

10,000

15,000

20,000

30,000

40,000

12%

15,000

20,000

30,000

40,000

50,000

ROCE > 15%

20,000

30,000

40,000

50,000

60,000

Table B

There is no treatment in the event of termination of mandate or employment relationship.

No exception or exceptional circumstance is foreseen for the implementation of this remuneration policy.

The remuneration of non-executive directors is not linked to the economic results achieved by the Company.

Non-executive directors do not benefit from share-based incentive plans.

There are no agreements entered into between the Company and the directors providing for indemnities in the event of resignation or dismissal/dismissal without just cause or in the event of a severance of relations following a public offer.

College of Statutory Auditors

With regard to the inspection body, the following should be noted:

  • the salaries of all the Statutory Auditors, including those who are accountants or confirmed bookkeepers, are determined without application of professional rates, and by remunerating all of the activity carried out;

  • the compensation is considered to have been reached with regard to the criteria of arduousness of the position, predetermination on an annual basis and invariability for the three-year variable compensation;

  • any form of variable remuneration is excluded;

  • the remuneration is differentiated according to the specific functions performed and, in particular, a higher remuneration than that of the statutory auditors has been awarded to the Chairman;

  • the absence of compensation for substitute auditors is noted as long as they do not succeed the effective auditors.

Christopher S. Washington