FOR INFORMATIONAL PURPOSES ONLY. SPANISH VERSION PREVAILS.
Directors' Remuneration Policy COLONIAL SFL, SOCIMI, S.A. 2027-2029 Table of contents
- Introduction 2
- Process for reviewing the Policy and summary of key changes 3
- Our remuneration philosophy 4
- Our remuneration practices are good for our shareholders 4
- Remuneration Policy for the Executive Director 5
- Remuneration Policy for Directors in their capacity as such 10
- Remuneration Policy for new appointments 11
- Process to determine the Remuneration Policy 12
- Consideration of employees' terms of remuneration 13
- Consistency with the Company's strategy, interests and long-term sustainability 13
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Term of validity 14
Introduction
This document sets out the Directors' Remuneration Policy at Colonial SFL, SOCIMI, S.A. (hereinafter, interchangeably, "Colonial SFL" or the "Company") for 2027-2029 (the "Remuneration Policy" or the "Policy"), drawn up by the Board of Directors (the "Board") at the proposal of the Nomination and Remuneration Committee (the "Committee"). This Remuneration Policy is consistent with the principles of our current policy.
One of the key principles of the Directors' Remuneration Policy at Colonial SFL is its alignment with stakeholders, especially our shareholders. In this regard, the Board -and specifically the Committee- has consulted Colonial SFL's main shareholders and taken into account the information provided by institutional investors and proxy advisors in the consultation process it carries out on a regular basis. Furthermore, both the Board and the Committee have taken into account the provisions of the Code of Good Governance of Listed Companies in relation to the remuneration of directors.
Our Remuneration Policy has been considered in the context of remuneration for all employees as a whole. The Executive Director's remuneration components follow the same principles as those applied to Colonial SFL's management team.
In addition, based on market data and internal forecasts, the Board, at the proposal of the Committee, has considered the suitability and relevance of each remuneration component. In particular, the Committee has confirmed that the Remuneration Policy remains aligned with the Company's business interests for the forthcoming period. Section 2 sets out the reasons for the main changes to the current Remuneration Policy.
The Board, at the proposal of the Committee, will submit this Remuneration Policy for approval at the 2026 Ordinary General Meeting of Shareholders, which is scheduled for 18 June 2026, to replace the current Directors' Remuneration Policy approved at the General Meeting of Shareholders of 15 June 2023. This Policy will come into force on 1 January 2027 and will remain in force until 31 December 2029, subject to the possibility of the Board putting forward, at the proposal of the Committee, a new policy for approval before the expiry of this Remuneration Policy, or amendments to the Remuneration Policy, if it deems it appropriate.
Process for reviewing the Policy and summary of key changes
After the 2025 General Meeting of Shareholders, Colonial SFL's Committee conducted a thorough review of the current Remuneration Policy. The Committee considered the results of the votes held in recent years in relation to the Annual Report on Directors' Remuneration (96.05% in 2025, and 90.5% in 2024), as well as those relating to the Directors' Remuneration Policy approved on 15 June 2023 (80.92% of votes in favour).
The following factors were also taken into account:
Internal factors
External factors
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Colonial SFL's short- and long-term strategic priorities, with a focus on
the creation of long-term value and sustainability. Colonial SFL's performance in recent years.
Consistency with the remuneration policy applicable to the Company's
employees as a whole.
The need to attract, retain and motivate talent in the competitive market in which Colonial SFL operates.
The Company's corporate governance structure.
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Changes to the macroeconomic situation.
The recommendations of institutional shareholders and proxy advisors.
Recent regulatory developments applicable to listed companies.
The market practices of real estate companies that are relevant to Colonial SFL.
General corporate governance recommendations and regulations at both national and international levels.
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In view of the conclusions resulting from the review, the Committee has proposed this Remuneration Policy to the Board with the following features:
The new Remuneration Policy being proposed is consistent with the one approved by the General Meeting of Shareholders on 15 June 2023.
Regarding the Executive Director, the Committee has carried out a thorough analysis of all the components of his remuneration, with a comprehensive and strategic approach, specifically examining to the following factors:
The need to retain and motivate the Executive Director in the complex macroeconomic situation of recent years, as well as the significant corporate milestones achieved by the Company, including the cross-border merger by absorption of its subsidiary Société Foncière Lyonnaise (SFL) and the capital increase subscribed for by Criteria Caixa, S.A.U., where his leadership led to positive results by the Company.
Maintaining the amounts of the Executive Director's fixed remuneration, variable annual remuneration and long-term incentives unchanged over the term of the 2024-2026 policy. The increase in the remuneration of Colonial SFL's employees over the last three years has also been analysed.
The Executive Director's total target remuneration with respect to comparable companies. In this respect, a group of European REITs comparable in terms of size by capitalisation, asset volume, revenue and number of employees had been considered.
The pay-for-performance principle established in the Remuneration Policy. The Executive Director's remuneration package has a significant variable component, with the long-term incentive accounting for a particularly significant part of it.
In view of the foregoing, the Board, following the proposal made by the Committee, has proposed setting the Executive Director's fixed remuneration at
€850,000 from this Remuneration Policy's date of entry into force. This is a 6.25% increase (2% in annualised terms since the last increase). This is below the average increase in the remuneration of Colonial SFL's employees and Management Committee, as well as that of the top executives of the remuneration benchmarking group in the last three years. On the other hand, the remuneration structure will continue to rely heavily on the variable components (including both variable annual remuneration and the long-term incentive).
In addition, the extraordinary bonus envisaged in the previous policy has been removed in response to the comments and recommendations received from institutional investors and proxy advisors. If the Company wishes to apply such an incentive at any time, it will submit it to the General Meeting of Shareholders for approval.
As for directors in their capacity as such, the maximum annual aggregate remuneration for all directors remains at €2,700,000 in total.
Our remuneration philosophy
We believe that our remuneration philosophy fosters a fair long-term approach, including pay-for-performance components to attract and retain the best talent, in line with our shareholders' interests.
Under our philosophy, the Company's remuneration decisions are guided by a set of basic principles at every level:
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PAY-FOR-PERFORMANCE
Ensuring that the Executive Director's remuneration is commensurate with both the overall results of the Company and his individual performance.
When making decisions about remuneration, the Company places particular emphasis on risk-adjusted performance and on rewarding conducts that foster sustained value creation for the Company. As a result, remuneration at the Company is not excessively mechanical, rigid or short-termist.
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ALIGNMENT WITH STAKEHOLDER INTERESTS
Aligning our Executive Director's interests with those of our shareholders by tying a significant portion of his total remuneration to the Company's financial and operating results and to the creation of long-term value for shareholders. Variable remuneration also depends on the attainment of environmental, social or governance (ESG) objectives linked to our sustainability strategy.
Decisions on the Executive Director's remuneration are made taking into account the interests of the Company's employees as a whole and other stakeholders, as well as the surrounding circumstances.
COMPETITIVENESS ED
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The long-term success of the Company depends on the talent of our employees. Our remuneration philosophy plays a significant role in attracting, appropriately motivating and retaining the best talent.
Thanks to its competitive overall remuneration and a suitable balance between reward and growth, the Company is able to attract and retain the best professionals.
When making decisions on the design of the Remuneration Policy, the Company takes into account the remuneration practices of comparable companies chosen according to a series of objective criteria.
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TRANSPARENCY
It is important to be transparent with the Company's shareholders in relation to the Remuneration Policy. We outline the main terms of the remuneration plans and, where appropriate, any actions taken in response to significant events.
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Principles applicable to the Executive Director Principles applicable to non-executive Directors
Our remuneration practices are good for our shareholders
Our Remuneration Policy includes sound governance processes that further strengthen our performance-based payment philosophy. These include, among others:
WHAT WE DO
Risk-based remuneration: Most of the remuneration paid to the Executive Director is variable remuneration linked to the Company's financial results, the performance of its shares or both.
Instrument-based long-term incentive linked to a multi-year target measurement period: Most of the variable remuneration must be paid in the form of instruments that accrue gradually over several years to ensure that they are in line with sustainable performance. Instrument-based remuneration can be based primarily on the attainment of targets linked to the creation of value. Instruments that have accrued may not be disposed of until at least one year after they were delivered.
Permanent shareholding: The Executive Director is expected to hold
a number of shares worth twice his fixed remuneration.
Proportionality and risk management: Our Remuneration Policy ensures that the Executive Director has a vested interest in the Company's short- and long-term performance. Furthermore, it includes provisions to reduce inappropriate risk-taking, such as limits on maximum remuneration, the possibility of deferring part of the variable annual remuneration in the form of shares if the target incentive is exceeded, clawback clauses, multiple metrics and risk identification processes for the Board and the management team.
Sound processes to involve shareholders in remuneration and governance matters.
Malus and clawback clauses .
Obtaining external advice.
WHAT WE DON'T DO
There are no contracts with guaranteed pay rises or variable remuneration that is not linked to business performance.
No hedging, pledging, short selling or derivative contracts are allowed on the value of the shares received during the required shareholding period.
Non-executive Directors do not take part in remuneration schemes or systems linked to the Company's or individual employees' performance. They do not take part in pension plans or other social welfare schemes.
The benefits granted do not exceed market practices.
Remuneration Policy for the Executive Director
As at the date of submission of this Remuneration Policy to the Ordinary General Meeting of Shareholders, the only Executive Director is the CEO.
Remuneration components
The three main components of ordinary remuneration are: (i) fixed remuneration; (ii) variable annual remuneration; and (iii) instrument-based long-term incentives.
Fixed components
Variable
annual remuneration
Long-term incentive
Fixed remuneration
Social welfare plan
Other benefits
+
May include a deferred
share component
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Instrument-based
Multi-year target measurement period Required holding period
Future remuneration scenarios: our focus on performance-related remuneration
Variable remuneration accounts for most of the Executive Director's total remuneration: it is "at risk", linked to performance.
The graph provides examples of the Executive Director's total potential remuneration based on this Remuneration Policy. Below are the possible outcomes and the assumptions on which they are based.
Fixed components1
All
scenarios
Includes the following components:
Variable annual remuneration
Minimum
No incentive would be paid
Target
100% of fixed remuneration
Maximum
140% of the target incentive
Long-term incentive (LTIP) 2
Minimum
No incentive would be paid
Target
200% of fixed remuneration
Maximum
150% of the target incentive
Fixed remuneration
Social welfare plan
1 Benefits are not included, as they include insurance premiums that are subject to annual variation and their total amount is not significant in relation to the total remuneration package.
2 The amounts provided as the value of the long-term incentive do not take into account any potential share price fluctuations.
Instrument-based remuneration is the most significant component of the Executive Director's total remuneration:
In a target scenario, 48% of total remuneration would be instrument-based.
In a maximum scenario, if the Board resolved to pay in the form of shares the part of the variable annual remuneration over and above the incentive target, the resulting instrument-based remuneration could account for more than 60% of the total.
Potential instrument-based
remuneration (>60%)
Maximum
Target
Minimum
100 %
Performance-based remuneration (72%)
48%
24%
28%
Performance-based remuneration (79%)
Instrument-based remuneration
(48%)
54%
25%
21%
05. Remuneration Policy for the Executive Director (cont.)
Remuneration components for the performance of executive functions: fixed components
Fixed remuneration
Aim
To attract and retain the Executive Director with the profile needed by the Company to achieve its strategic targets.
Amount
2027:
€850,000.
This amount may be revised during the term of the current Remuneration Policy under certain circumstances, such as (but not limited to) due to material changes in the business or in the Executive Director's skills and responsibilities or extraordinary performance by the Company. If these circumstances arise, the Board, at the proposal of the Committee, may decide to increase the amount. This would be explained and set out in detail in the relevant Annual Report on Directors' Remuneration.
Performance
Determined by the Board, at the proposal of the Committee, based on the following considerations:
Unlike non-executive Directors, the Executive Director will not receive any specific remuneration in respect of his position as member of
the Company's Board or its Committees.
Any fixed remuneration received from other subsidiaries of the Company will be deducted from the fixed remuneration received at Colonial SFL.
Amount in
The specific characteristics of the role and the degree of responsibility and involvement required of the Executive Director.
The individual's skills and experience.
The trend in the contribution made by both the position itself and the individual holding it.
The terms of remuneration applicable to the Company's employees as a whole.
Market data in companies of a similar size and complexity as Colonial SFL.
Social welfare plan
Aim
To offer competitive post-retirement benefits.
Amount
Performance
The Executive Director is the beneficiary of a defined-contribution welfare scheme covering the contingencies of retirement, disability
and death.
The Executive Director's social welfare scheme recognises the vesting of economic rights in the event of a dismissal or termination of employment prior to the occurrence of the contingencies covered, unless the dismissal or termination is justified. In addition, this social welfare plan is compatible with any compensation to which he may be entitled.
Amount: 15% of fixed remuneration.
Other benefits
Aim
To provide competitive benefits.
Amount
Performance
Benefits include the usual ones in the sector, such as the use of a company car, life insurance, family health insurance and cover for accident and disability. This is in line with the benefit policy applicable to the management team.
The Executive Director may, where appropriate, receive benefits associated with a relocation or other benefits that are customary in the local market where he is based. In addition, the Committee may propose to the Board the payment of certain repatriation-related bonuses in the event of termination of the relationship.
Without prejudice to the foregoing, expenses incurred by the Executive Director in the performance of his services to the Company, such as, inter alia, travel or representation expenses, which will be borne by the Company provided they are duly justified, and the use and enjoyment of the means made available to him for the proper performance of his duties, shall not be considered remuneration.
Finally, the executive Director (like the non-executive Directors and the senior officers of the Company), is the beneficiary of a group third-party liability insurance policy taken out by Colonial SFL that covers liability for the actions and conduct of Board members and executives of the Company as a result of the discharge of their duties, as well as any losses arising from cyber attacks or failures in cybersecurity.
Maximum amount: €90,000.
05. Remuneration Policy for the Executive Director (cont.)
Remuneration components for the performance of executive functions: variable components
Variable annual remuneration
Aim
To provide incentives and reward the attainment of certain annual financial, non-financial and individual targets consistent with the Company's strategy and in line with shareholders' interests.
Amount
Annual target incentive (achieved by attaining the targets): 100% of fixed remuneration. Maximum annual incentive: 140% of fixed remuneration (140% of the annual target incentive).
Performance
The Board, at the proposal of the Committee, approves the metrics, weightings and targets at the start of each fiscal year. The calibration of targets is carried out in accordance with the business plan, historical data and projected results. The results of comparable companies may also be considered. The incentive payout level is determined based on Colonial SFL's overall financial and strategic results. Individual performance may also be taken into account. The Board, at the proposal of the Committee, has the power to review metrics, weightings and targets on a yearly basis to ensure that they remain aligned with the Company's strategy.
The Board, at the proposal of the Committee, determines the payment levels after the close of the fiscal year based on the degree of attainment of the targets. A breakdown of these levels will be provided in the relevant Annual Report on Directors' Remuneration. The Board, upon the proposal of the Committee, has the power to adjust the level of the variable annual remuneration to ensure that the outcome is fair and balanced in light of the Company's overall performance and the return created for shareholders.
The evaluation of the results and the determination of the corresponding payment are made on the basis of the data provided by the management team, which is previously audited. In this assessment, the Committee also considers the associated risks. In relation to this, any positive or negative economic effects arising from extraordinary events that may distort the results of the assessment may be ignored when proposing the quantitative target achievement level.
The annual variable remuneration will be paid in cash after the end of the year to which the target performance relates. If the amount is higher than the target incentive, the Board may decide, at the Committee's proposal and if it deems it appropriate, to defer the excess in the form of shares for one year. If applicable, the delivery of the shares will be subject to the Executive Director remaining at Colonial SFL or its subsidiaries during the deferral period, unless the termination of the relationship is for reasons attributable to the Company or in other cases in which he is deemed by the Board to be a good leaver. The Executive Director will be entitled to receive, on the date of delivery of the deferred shares, a cash amount equivalent to the dividends that accrue on the deferred shares during the deferral period.
The Board, at the proposal of the Committee, has the power to decide to apply the malus and/or clawback clauses on the variable annual remuneration (see the section on malus and clawback clauses).
Metrics
The variable annual remuneration is usually linked to financial and value creation targets (such as rental income, earnings per share or debt ratio). Strategic and non-financial targets (such as sustainability) may be included but may not account for more than 30% of the annual target incentive.
Some metrics may be measured relative to a comparator group of companies that are competitors or perform similar activities.
05. Remuneration Policy for the Executive Director (cont.)
IV. Remuneration components for the performance of executive functions: variable components (cont.)
Long-term incentive
Aim
To maximize total shareholder return in the long term.
Amount
Annualised target incentive (attained when achieving the targets, at the award price, i.e. excluding changes to share value): 200% of fixed remuneration.
Maximum annualised incentive (at the award price, excluding changes to share value): 150% of the annual target incentive.
Performance
The delivery of shares and/or share options is subject to attaining certain targets and remaining at the Company for a minimum multi-annual period of three years.
The Board, following the proposal made by the Committee, approves the metrics, weightings, targets and, where appropriate, the comparison group for each allocation to ensure that it remains aligned with the Company's strategy.
The Board, at the proposal of the Committee, determines the payment levels after the end of the target measurement period, based on the degree of attainment of the targets. The incentive levels for interim results will be decided by the Board, following the proposal of the Committee, and a breakdown will be provided in the relevant Annual Report on Directors' Remuneration. The Board, at the proposal of the Committee, has the power to adjust the payment level to ensure that the outcome is fair and balanced in light of the Company's overall performance and shareholder experience.
The results can be assessed, and the payment according to certain metrics can be established, based on data provided by external consultants. In this assessment, the Committee also considers the associated risks. In relation to this, any positive or negative economic effects arising from extraordinary events that may distort the results of the assessment may be ignored when proposing the quantitative target achievement level.
The Executive Director is required to keep his shares, net of tax, for at least one year after their delivery, without prejudice to the requirement to always hold a number of shares worth two years' fixed remuneration.
The Executive Director will be entitled to a cash amount or amount in shares equal to the dividends produced by the shares earned during the target measurement period. This amount will be paid on the date of release of the shares.
The Board, at the proposal of the Committee, has the power to decide to apply the clawback clause on the incentive (see the section on malus and clawback clauses).
Metrics
The incentive is usually linked to financial and value creation metrics (such as total shareholder return, NTA per share or earnings per share). Strategic and non-financial targets (such as sustainability) may be included but may not account for more than 30% of the maximum incentive.
Some metrics may be measured relative to a comparator group of companies that are competitors or perform similar activities.
Assessment of performance in annual variable remuneration and the long-term incentive
Following a proposal from the Committee, the Board shall have the authority to agree to the possible reassessment or amendment of performance-linked remuneration in the event of significant internal or external changes that warrant such a review. The circumstances that may lead to an amendment of the remuneration components include the following:
Any corporate restructuring transaction involving acquisition, disposal, merger, spin-off, share exchange, capital increase or reduction, or any reorganisation resulting in a substantial change in the size, activity or nature of Colonial SFL's business, as well as financial transactions that automatically modify Colonial SFL's share price (for example, dividend distributions, share splits or reverse share splits, or discounted capital increases, etc.).
Substantial changes in the companies forming part of the comparison group considered, where applicable, for the relative measurement of the metrics.
Substantial changes in the macroeconomic environment that could significantly alter the current economic situation.
And, ultimately, any other circumstance which the Board deems requires adapting the remuneration components or which may affect the Company, the value of its shares or the determination of the degree of achievement of the objectives.
Remuneration Policy for the Executive Director (cont.)
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Malus and clawback clauses
Following a proposal from the Committee, the Board has the authority to cancel (malus) and/or recover (clawback) all or part of the annual variable remuneration and/or long-term incentives in the following circumstances:
If the Company sustains significant losses and the Committee considers that they are due to serious failures in risk management by the Company, to which the wilful misconduct or gross negligence of the Executive Director contributed;
If the Executive Director seriously breaches the Company's regulations and internal policies;
If the Company's financial statements are restated, provided that the external auditors confirm such restatement, which is not due to a change in accounting regulations, and provided that, in accordance with such restatement, the variable remuneration to be paid is lower than that originally accrued or no remuneration has been paid in accordance with the Company's variable remuneration system; and
If the remuneration paid was calculated based on data subsequently shown to be inaccurate and, as a result, the variable remuneration payable would have been lower than that originally accrued or no remuneration at all would have been payable under the Company's variable remuneration system.
The Board may apply the clawback clause for two years following the payment of variable remuneration.
Minimum shareholding requirement
The Executive Director is required to acquire and maintain a certain number of shares in Colonial SFL (five years after his appointment or longer if the requirement is significantly increased) to align his interests with those of Colonial SFL's long-term shareholders. The requirement amounts to two years' fixed remuneration.
To meet this requirement, shares subject to unvested incentive plans shall not be taken into account.
The Committee shall periodically review compliance with this requirement.
Essential terms and conditions of the contract
Pursuant to the Spanish Limited Liability Companies Law, when a member of the Board is appointed CEO or is entrusted with executive functions under any other title, a contract must be entered into between such person and the company, which must be approved in advance by the Board with a vote in favour by two-thirds of its members.
The contract shall stipulate the items for which remuneration may be received for the performance of executive functions, including, where applicable, any severance compensation for early termination of such functions. The Executive Director may not receive any remuneration for the performance of executive functions where the relevant amounts or items are not provided for in the corresponding contract. Such a contract shall comply with the parameters established in the Remuneration Policy in force at any given time.
Any variable remuneration that may be agreed by the Board following a proposal from the Committee and established in the Executive Director's contract must include the limits and technical safeguards necessary to ensure that such remuneration is linked to his professional performance and does not derive solely from the general performance of the markets or the Company's sector of activity, or from other similar circumstances.
The CEO currently serves as Executive Director of Colonial SFL and, pursuant to the provisions of the Spanish Limited Liability Companies Law, has signed a contract with the Company, which has been approved by the Board.
The contract entered into with the Executive Director sets out his remuneration, rights and financial compensation.
The essential terms and conditions of the Executive Director's contract, in addition to those referred to above in the Remuneration Policy, are set out below:
Term | The term of the contract shall be linked to the duration of his appointment as CEO. If the CEO's appointment is renewed, the contract shall be automatically extended for the period corresponding to such renewal of office, unless otherwise resolved by the Board, in which case a new contract must be approved. |
Severance payments for termination of the contractual relationship | He would be entitled to receive additional and special compensation by way of severance payment in the event of unjustified termination or non-renewal of his office, or a substantial reduction in his functions. The severance payment shall also accrue (i) if he leaves or resigns from his post as a result of a change of control in the Company or a material change in the composition of the Board; (ii) in the event of an amendment to the terms of his contract without his consent; and (iii) in any other cases that may be established by the Board. The severance pay calculation will be based on two years of his fixed remuneration and annual target variable remuneration, excluding any other amounts that he may have received, as well as any rights that may arise under the long-term incentive in force at any given time. In the event of a change of control of the Company, a material change in the composition of the Board, a substantial reduction in his functions or an amendment to the terms agreed in his contract without his consent, the Executive Director shall have a specified period (6 months for changes of control and 3 months in all other cases), calculated from the effective date of the aforementioned resolutions or changes, in which to notify the Board in writing of his resignation or decision to step down, in which case he shall be entitled to the aforementioned severance pay. For the purposes of applying the foregoing, the effective date of the change of control or the material change in the composition of the Board shall be deemed to be the date on which such circumstances are published on the CNMV website as "inside information" or other "relevant information". If the Board resolves to substantially reduce his functions or amend the terms of his contract without his consent, the effective date shall be the date on which he receives formal notice of the resolution. |
Non-compete clause | The Executive Director shall be subject to a non-compete clause for 6 months from the date of termination of his relationship with Colonial SFL, where such termination occurs as a result of voluntary resignation without cause. The non-compete clause shall be remunerated with a gross amount equivalent to 6 months of his fixed annual remuneration, payable on a pro rata basis throughout the duration of the non-compete period. If an Executive Director notifies the Company of his resignation or decision to step down in the above cases of change of control of the Company, a material change in the composition of the Board, a substantial reduction in his functions or an amendment to the terms of his contract without his consent, the remuneration for the non-compete clause shall be deemed absorbed by (and therefore no additional payment shall be due beyond) the severance pay received. |
No remuneration other than that specified in this section 05 is envisaged.
Remuneration Policy for Directors in their capacity as such
The Directors, in their capacity as such, are remunerated in accordance with their level of dedication, qualifications and responsibilities. Accordingly, the amounts of the remuneration payable to the Directors in their capacity as such are determined to encourage dedication without compromising their independent judgement.
In accordance with the provisions of the Spanish Limited Liability Companies Law and Colonial SFL's Company Bylaws, the annual remuneration of the Company's Directors for their membership of the Board and its Committees shall consist of: (i) a fixed annual amount; and (ii) attendance fees for meetings of the Board and its committees. The Directors, as such, do not take part in the incentive plans or welfare schemes. They shall only be reimbursed, at the request of the Director, for reasonable and justified travel and accommodation expenses incurred in attending meetings of the Board or its Committees.
The maximum annual aggregate amount of remuneration payable to all Directors of Colonial SFL as a whole for their position as members of the Company's Board and its Committees is established at €2,700,000 in total. If the number of Board members (13) increases, the aforementioned maximum amount may be increased by 10% per new member.
The fixed remuneration and attendance fees for meetings of the Board paid to each Director for their position as members of the Company's Board and its Committees shall be determined by the Board, following a proposal from the Committee. In stipulating the fixed remuneration for each Director, consideration will be given to the functions and responsibilities assigned to each of the Directors, their position on Board Committees and their dedication, in addition to any other objective circumstances that may be deemed relevant, ensuring that this is competitive with the remuneration at other similar companies in terms of their capitalisation, size and geographical scope of their operations.
In this regard, within the maximum annual remuneration amount established for all Directors of Colonial SFL for their membership of the Company's Board and its committees, the Board may allocate to one or more Directors, as part of their fixed remuneration, a specific remuneration amount for a particular financial year having regard to their functions, responsibilities, dedication and other objective circumstances considered relevant arising during a given fiscal year. Such amounts may be revised during the term of the current Remuneration Policy under certain circumstances, such as (but not limited to) material changes in the business or the structure of the Board, term of office or responsibilities, and exceptional performance by the Company. If these circumstances arise, the Board, at the proposal of the Committee, may decide to increase the amount. This would be explained and set out in detail in the relevant Annual Report on Remuneration of Directors.
For information purposes, it is hereby stated that the allocation approved by the Board of Directors for the 2026 fiscal year is as follows: (a) in respect of fixed remuneration: (i) each member of the Board of Directors shall receive
€50,000 per annum and the Chairman €500,000 per annum; and (ii) for membership of each of the Committees -the Nomination and Remuneration Committee, the Audit and Control Committee and the Sustainability Committee- members shall receive €25,000 per annum and the Chairmen of such Committees €50,000 per annum; and (b) in respect of attendance fees:
(i) each member shall receive €5,000 for attendance at each meeting of the Board of Directors and the Chairman €7,500 for attendance at each meeting;
(ii) for attendance at meetings of the Executive Committee, members shall receive €3,000 per meeting; and (iii) for attendance at meetings of the aforementioned Committees, members shall receive €3,000 per meeting and the Chairmen of such Committees €4,800 per meeting.
Each year, the Company will report the amount paid to each Director in respect of their position as members of the Company's Board and its Committees in the annual report on Directors' remuneration, which will be submitted to an advisory vote as a separate item on the agenda of the Company's General Meeting of Shareholders.
Directors, in their capacity as such, must perform their duties for the term established in the Bylaws (a four-year term of office) and may be re-elected one or more times for periods of equal duration.
Lastly, the Directors (as well as the Executive Director and the senior officers) are beneficiaries of the Directors' and Officers' liability insurance policy (D&O) taken out by Colonial SFL that covers liability arising from acts and conduct of the members of the Board and officers of the Company in the performance of the duties inherent to their functions, as well as claims arising from cyberattacks or cybersecurity failures.
Remuneration Policy for new appointments
New Executive Directors shall be remunerated in accordance with the approved Remuneration Policy. Additionally, the recruitment policy set out below allows the Board, following a proposal from the Committee, to adopt, where appropriate, the following measures for the benefit of Colonial SFL and its shareholders. In terms of internal promotions, any element of variable remuneration granted in connection with a previous position may be paid in accordance with its original terms. The arrangements relating to the remuneration of any newly appointed Executive Director shall be disclosed as soon as reasonably practicable following such appointment.
Fixed remuneration
Fixed remuneration shall be set at an appropriate level to attract the best candidate, taking into account their skills, experience, and current remuneration.
Benefits
Benefits shall be aligned with the Remuneration Policy in force. Where appropriate, new Executive Directors may receive relocation benefits or other benefits reflecting standard market practice in the territory where they perform their functions. Additionally, the Board, following a proposal from the Committee, may resolve that Colonial SFL shall pay certain allowances linked to the repatriation of the Director upon termination of the relationship.
On an exceptional basis and to facilitate the recruitment of a new Executive Director, the Committee may propose that the Board approve an extraordinary bonus. The purpose of this bonus shall include, among others, compensating the candidate for the loss of bonuses pending vesting at their previous employer, which they are required to forfeit as a consequence of joining Colonial SFL. In such a case, the Committee shall seek to ensure that the bonus reflects the nature, vesting schedule, and value of the incentives forfeited.
In the event of the appointment of a new non-executive Director, the remuneration package shall be aligned with the Remuneration Policy described in the preceding section.
Where a non-executive Director is appointed with different functions and responsibilities, the remuneration shall be benchmarked and determined by reference to comparable profiles in companies of similar size and complexity.
Process for determining the Remuneration Policy
The Company's procedures and the competent bodies for determining, approving and reviewing the Remuneration Policy and its terms and conditions are described below.
Nomination
and Remuneration Committee
Board
of Directors
General Meeting of Shareholders
Determination of the Policy and its remuneration components
It proposes the policy to the Board.
It approves the Policy and submits it to the General Meeting for a vote.
It approves the Policy at least every three years.
It approves any modification or
replacement of the policy.
It proposes to the Board the maximum annual amount to be paid to Directors in their capacity as such and each Director's remuneration.
It proposes to the General Meeting the maximum annual amount to be paid to Directors in their capacity as such.
It determines the remuneration of each Director.
It approves the maximum annual aggregate remuneration for all Directors in their capacity as such.
It proposes to the Board the Directors' remuneration for the performance of executive functions and the terms and conditions of their contracts.
It determines Directors' remuneration for the performance of executive functions and the terms and conditions of their contracts.
It approves the remuneration systems applicable to Directors for the performance of executive functions.
Application of the Policy
It proposes the amount of fixed annualremuneration for Executive Directors and the annual variation.
It proposes the parameters for determining the variable components and assesses them for payment purposes.
It proposes, where appropriate, the cancellation of payment or the clawback of variable components.
It assesses and, where appropriate, approves the proposals of the Committee in relation to the implementation of the Policy.
Revision of the Policy
It verifies compliance with the Policy and
periodically reviews its implementation. It ensures that individual remuneration is proportionate.
Transparency of the Policy
It ensures transparency in relation to remuneration and the inclusion in the annual report of information concerning Directors' remuneration.
It submits the Annual Report on Directors' Remuneration to the Board for approval and verifies the information on Directors' remuneration contained in the corporate documentation.
It prepares the specific report supporting the Remuneration Policy.
It approves the Annual Report on the Directors' Remuneration to be put to the vote at the General Meeting in an advisory capacity.
It approves theAnnual Report on the Remuneration of Directors in an advisory capacity.
Consideration of employees' remuneration conditions
The Committee proposes to the Board decisions regarding specific executive remuneration arrangements within the broader context of remuneration for Colonial SFL employees.
The remuneration structure for the rest of the employees is based on the principle that it should be sufficient to attract and retain the best talent and remain competitive within our sector, rewarding employees for their contribution to our overall results. It is guided by local market practice and by the level of responsibility, reflecting the nature of Colonial SFL's business. There is clear alignment between the remuneration structures applicable to officers and those for the rest of the employees, in the way remuneration principles are applied, as well as in the mechanics of the salary review process and the design of incentives, which are broadly consistent throughout the organisation.
The metrics to which annual variable remuneration and long-term incentives are linked are aligned for the management team and the rest of eligible employees. There is a strong focus on performance-related remuneration, with appropriate levels of differentiation to ensure that remuneration is invested in the talent that will make the greatest contribution to the execution of Colonial SFL's strategy.
The remuneration approach for Executive Directors is consistent with the remuneration package applicable to the members of the Management Committee and other officers. In general, a significantly greater proportion of the Executive Director's total remuneration is linked to the Company's performance compared with the rest of the employees, such that remuneration will increase or decrease in line with business performance, thereby aligning the interests of the Executive Director and the shareholders.
Each year, the Board and the Committee are informed of the structure and amount of the remuneration arrangements applicable to all employees. Following a proposal from the Committee, the Board may also consider the annual salary increase budgets for employees and the remuneration of the management team.
Alignment with the Company's strategy, interests and long-term sustainability
The characteristics of the Remuneration Policy that ensure alignment with the Company's strategy, interests and long-term sustainability are set out below:
The total remuneration of the Executive Director consists mainly of the following components: fixed elements, annual variable remuneration and long-term incentive. For the Executive Director, this long-term element accounts for no less than 48% of total remuneration under a standard target-achievement scenario.
This long-term incentive forms part of a multi-year framework designed to ensure that the assessment process is based on long-term performance and takes into account the Company's underlying economic cycle. This remuneration is granted and paid in the form of shares based on value creation, thereby aligning officers' interests with those of shareholders. In addition, it is structured in overlapping cycles which, as a general rule, continue indefinitely, maintaining a permanent long-term focus in all decision-making.
There is an appropriate balance between the fixed and variable components of remuneration. The Executive Director's variable remuneration system is fully flexible and allows for no amount to be payable under this heading if the minimum performance thresholds are not achieved.
The metrics for both annual and long-term variable remuneration are linked to the achievement of a combination of financial and non-financial objectives, reflecting the Company's strategic priorities at any given time.
The shares granted to the Executive Director are subject to a one-year holding period, without prejudice to the requirement to maintain permanent shareholding of an amount worth two years' fixed remuneration.
There is no guaranteed variable remuneration.
Additionally, the Remuneration Policy includes the following features designed to reduce exposure to excessive risk. The Committee periodically reviews human resources and remuneration practices with the aim of making such proposals to the Board that serve the best interests of the Company, including the following:
The manner in which risks, controls and conduct considerations are integrated into core human resources practices, including performance assessment, remuneration, promotions and succession planning.
Measures to mitigate inappropriate risk-taking:
Limits on variable remuneration.
Possible deferral of payment of the portion of annual variable remuneration exceeding the target incentive.
Multiple metrics, some of which may be adjusted based on different
risks.
Multi-year vesting periods.
Share retention and permanent shareholding requirements.
Malus and clawback clauses
Prohibition on hedging, pledging, short selling or derivative contracts on the value of shares received during the holding period.
Updates on regulatory developments that have had, or may have in the future, an impact on human resources practices.
The Committee coordinates with other committees to ensure that Colonial SFL's remuneration policies and practices achieve an appropriate balance between properly rewarding performance and managing remuneration-related risks.
The Committee is also provided with information to track results, together
with a summary of risks, controls and conduct assessments.
Specific measures for identifying and managing any potential conflicts of interest are set out in the Board Regulations. Such measures also establish the code of conduct applicable to the Board members.
Term of validity
The Board, following a proposal of the Committee, shall put this Remuneration Policy to the vote at the 2026 Ordinary General Meeting of Shareholders, and, once approved, it shall enter into force on 1 January 2027, replacing the remuneration policy currently in force, approved by the General Meeting of Shareholders held on 15 June 2023.
This Remuneration Policy shall remain in force until 31 December 2029, without prejudice to the fact that the Board, following a proposal from the Committee, may propose for approval a new policy at an earlier date or amendments to the Remuneration Policy, if deemed appropriate.