Comer Industries S p A : REPORT ON CORPORATE GOVERNANCE AND OWNERSHIP STRUCTURES

REPORT ON CORPORATE GOVERNANCE AND OWNERSHIP STRUCTURES

drafted pursuant to Art. 123-bis of Italian Legislative Decree No. 58/1998

Traditional administration and control model

Issuer: Comer Industries S.p.A.

Website:www.comerindustries.com

Fiscal Year 2023

Approved by the meeting of the Board of Directors held on March 13, 2024

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Reg. Reggio Emilia Business Register no. 07210440157 - Share Capital 18,487,338.60 euros fully paid-up - Tax Code 07210440157 - VAT code IT 01399270352

DEFINITIONS AND GLOSSARY ............................................................................................. 4

• 1. Profile of the Issuer .......................................................................................................... 8

• 2. Information on ownership structures (pursuant to At. 123-bis, para.

  1, TUF) as of March 13, 2024 .................................................................................... 10

a. Structure of share capital ............................................................................................ 10

• b. Restrictions on the transfer of securities (pursuant to Art. 123-bis,

  para. 1, letter b) TUF) ................................................................................................... 10

• c. Relevant equity interests (pursuant to Art. 123-bis, para. 1, letter c)

  TUF) .......................................................................................................................................... 10

• d. Securities that confer special rights (pursuant to Art. 123-bis, para.

  1, letter d) TUF) ................................................................................................................ 11

• e. Employee share ownership: mechanism for exercising voting rights

  (pursuant to Art. 123-bis, para. 1, letter e) TUF) ........................................ 11

• f. Restrictions on voting rights (pursuant to Art. 123-bis, para. 1, letter

  f) TUF) ..................................................................................................................................... 11

• g. Agreements between shareholders (pursuant to Art. 123-bis, para.

  1, letter g) TUF) ................................................................................................................ 11

• h. Change of control clauses (pursuant to Art. 123-bis, para. 1, letter h) TUF) and provisions of the By-laws on public takeover bids

  (pursuant to Art. 104-bis, para. 1-ter, and 104-bis, para. 1, TUF) .... 11

• i. Delegated powers to increase share capital and authorizations to purchase treasury shares (pursuant to Art. 123-bis, para. 1, letter

  m), TUF) ................................................................................................................................. 12

• j. Management and coordination activities (pursuant to Articles 2497

  et seq. of the Italian Civil Code) ............................................................................. 16

• 3. Compliance (pursuant to Art. 123-bis, para. 2, letter a), first part,

  TUF) .......................................................................................................................................... 18

• 4. Board of Directors ............................................................................................................ 19

  • 4.1 Role and competency of the Board of Directors .................................................... 19

  • 4.2 Appointment and replacement of Directors (pursuant to Art. 123-bis,

    para. 1, letter l), first part, TUF) ..................................................................................... 21

  • 4.3 Composition (pursuant to Art. 123-bis, para. 2, letters d) and d-bis,

    TUF) .................................................................................................................................................. 24

  • 4.4 Functioning of the Board of Directors (pursuant to Art. 123-bis, para. 2,

    letter d) TUF) .............................................................................................................................. 28

  • 4.5 Role of the Chair of the Board of Directors ............................................................... 30

  • 4.6 Executive Directors .................................................................................................................. 32

  • 4.7 Independent Directors and Lead Independent Director ................................... 33

• 5. Management of company information ................................................................. 36

• a. Procedure on the Management and Dissemination of Inside Information .......................................................................................................................... 36

• b. Procedure on the Maintenance of the Insider Register ............................ 36

• c. Internal Dealing Procedure ........................................................................................ 37

• 6. Internal Committees of the Board of Directors (pursuant to Art. 123-

  bis, para. 2, letter d), TUF) ........................................................................................ 38

  6.1 Additional committees ........................................................................................................... 40

• 7. Self-assessment and succession of directors - Appointment and

  Remuneration Committee ........................................................................................... 40

  • 7.1 Self-assessment relating to fiscal year 2023 and succession of directors ............................................................................................................................................................. 40

  • 7.2 Appointment and Remuneration Committee ........................................................... 40

• 8. Remuneration of directors .......................................................................................... 45

• 9. Internal Control and Risk Management System ............................................ 46

  • 9.1 Chief Executive Officer .......................................................................................................... 51

  • 9.2 Control, Risk and Sustainability Committee ............................................................. 51

  • 9.3 Head of the Internal Audit function .............................................................................. 57

  • 9.4 The Organization and Management Model pursuant to Legislative

    Decree No. 231/2001) .......................................................................................................... 58

  • 9.5 Audit firm ....................................................................................................................................... 60

  • 9.6 Financial reporting officer and other company roles and functions .......... 60

  • 9.7 Coordination between parties involved in the Internal Control and Risk

    Management System .............................................................................................................. 61

10. Interests of Directors and Transactions with Related Parties .............. 63

11. Board of Statutory Auditors ....................................................................................... 66

• 11.1 Appointment and replacement ......................................................................................... 66

• 11.2 Composition and functioning of the Board of Statutory Auditors

  (pursuant to Art. 123-bis, para. 2, letter d) TUF) ................................................. 68

• 12. Relations with shareholders ...................................................................................... 72

13.

Shareholders' Meetings (pursuant to Art. 123-bis, para. 1, letter l) and para. 2, letter c), TUF) ......................................................................................... 73

• a. Right to participate and vote in the Shareholders' Meeting ................... 74

• b. Conduct of the Shareholders' Meeting ................................................................. 75

• 14. Additional corporate governance practices (pursuant to Art. 123-bis,

  para. 2, letter a), second part, TUF) ..................................................................... 76

• 15. Changes from the end of the fiscal year of reference ................................ 77

• 16. Considerations on the Letter of the Chair of the Corporate

  Governance Committee dated December 14, 2023 ..................................... 78

Tables ................................................................................................................................................ 79

DEFINITIONS AND GLOSSARY

The following is a list of the main terms used in the Report. Unless otherwise specified, these terms have the meanings indicated below. Where not otherwise specified, the definitions of the following terms provided in the Code of Corporate Governance are to be considered incorporated herein by reference: directors, executive directors (cf. Def. (1) and Def. (2)), independent directors, significant shareholder, chief executive officer (CEO), governance body, control body, business plan, concentrated-ownership company, large company, sustainable success and top management.

Directors	The members of the Board of Directors (as defined below).
Executive Directors	Directors who have received delegated management powers
and/or who occupy executive positions at the Company or a
subsidiary of strategic importance or at the parent company,
when the position also concerns the Company.
Non-Executive	Directors who have not been assigned delegated operational or
Directors	management powers or any particular positions by the Board of
Directors.
Independent	Directors who meet the independence requirements set by the
Directors	By-laws.
Shareholders'	The Issuer's Shareholders' Meeting.
Meeting
Shares	The ordinary shares of Comer Industries (as defined below).
Borsa Italiana	Borsa Italiana S.p.A.
Code or Code of	The Code of Corporate Governance of listed companies
Corporate	approved by the Corporate Governance Committee.
Governance
Italian Civil Code,	The Italian Civil Code.
Civil Code or C.C.
Board of Statutory	The Company's internal control body.
Auditors
Control, Risk and	The internal board committee formed pursuant to Art. 6,
Sustainability	Recommendation 32, of the Code of Corporate Governance, also
Committee	assigned consultative, propositional and investigative functions
with regard to sustainability and sustainable development.
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Appointment and Remuneration Committee Related-Party Committee

Board of Directors Start Date of Trading or Listing Financial Reporting Officer

Issuer, Company or Comer Industries Fiscal Year or Fiscal Year 2023

Group Instructions to the Market Rules

MAR

Euronext MilanRPT ProcedureMarket Rules

Consob Issuers Regulation Consob Markets Regulation Consob Related

Parties Regulation

The internal board committee formed on the basis of Articles 4 and 5 of the Code of Corporate Governance.

The committee composed solely of Independent Directors who have been assigned the functions and tasks provided for in the Consob Related Parties Regulation.

The Issuer's Board of Directors.

The date of July 12, 2023, on which the trading of the Company's ordinary shares began on Euronext Milan.

The executive responsible for preparing the company's accounting documents pursuant to Art. 154-bis of the TUF and Art. 19 of the By-laws.

Comer Industries S.p.A., headquartered in Reggiolo (RE), Italy, at Via Magellano 26.

The fiscal year ended December 31, 2023.

The Company and its subsidiaries and investees.

The Instructions to the Rules on the Markets organized and managed by Borsa Italiana S.p.A.

Regulation (EU) No 596/2014 of the European Parliament and of the Council of April 16, 2014 on market abuse.

The regulated market organized and managed by Borsa Italiana S.p.A.

The Procedure for Transactions with Related Parties approved by the Company on May 29, 2023.

The Rules on the Markets organized and managed by Borsa Italiana S.p.A.

The Regulation issued by Consob by resolution no. 11971 of May 14, 1999.

The Regulation issued by Consob by resolution no. 20249 of December 28, 2017, as amended.

The Regulation issued by Consob by resolution no. 17221 of March 12, 2010, as amended.

ReportRemuneration ReportStatutory Auditors Audit FirmBy-laws Consolidated Finance Act/TUF

This report on corporate governance and ownership structures drafted pursuant to Art. 123-bis of the TUF and in accordance with the format prepared by Borsa Italiana.

The remuneration report drafted pursuant to Art. 123-ter TUF and Art. 84-quater of the Consob Issuers Regulation, available pursuant to the law from the company's office, Borsa Italiana S.p.A. and the Issuer's website at the addresswww.comerindustries.com, in the section "Governance/Shareholders' Meeting".

The members of the Board of Statutory Auditors.

Deloitte S.p.A., Bologna, Piazza Malpighi 4/2, with headquarters and administrative office in Milan, Italy at Via Tortona 25, registered in the Register of Auditors pursuant to Articles 6 et seq. of Legislative Decree No. 39 of January 27, 2010, as amended by the Legislative Decree of July 17, 2016, with registration number 132587.

The Company's by-laws.

Legislative Decree No. 58 of February 24, 1998.

INTRODUCTION

This Report has been drafted in accordance with current regulations and the Code of Corporate Governance, as well as the format prepared by Borsa Italiana.

The Report was approved by the Board of Directors during its session of March 13, 2024 and may be consulted on the Company's website,www.comerindustries.com, in the section

"Governance/Shareholders' Meeting".

1. Profile of the Issuer

The Issuer controls a Group that designs and manufactures: (a) advanced engineering systems and mechatronic solutions for power transmissions, which are sold to companies that design and manufacture machinery for agriculture, industry, construction and mining; and (b) motors and transmissions for the renewable energy sector and electric vehicles. In particular, the Group's range consists of products including, without limitation, speed gearboxes, drive shafts, pump drives, speed increasers, reducers, gearboxes, orbital motors, rigid and steering drive axles and various types of planetary drives. For each of these categories, the Group can offer a wide range of models suited for various applications, thus enabling it to meet customers' needs in terms of both the adaptability of components to the machines designed and in technological terms.

Comer Industries is organized according to the traditional administration and control model characterized by the presence of the Shareholders' Meeting, the Board of Directors and the Board of Statutory Auditors, in accordance with Articles 2380-bis et seq. of the Italian Civil Code.

The Board of Directors has formed three internal committees with consultative, propositional and investigate functions: (a) the Appointment and Remuneration Committee, (b) the Control, Risk and Sustainability Committee and (c) the Related-Party Transactions Committee.

The Related-Party Transactions Committee is assigned the competencies relevant to transactions with Related Parties, in accordance with the provisions of the Consob Related Parties Regulation.

The Company's corporate governance system is organized according to certain principles dictated by the Code of Corporate Governance.

The Issuer has published its non-financial statement pursuant to Legislative Decree No. 254/2016 on a voluntary basis, available from the Company's website,

www.comerindustries.com, in the section "Investor Relations/Financial Documents".

The Board of Directors guides the Issuer towards the goal of sustainable success. In December 2019, through its Our Bright Impact program, Comer Industries launched a systematic development plan of progressive integration of sustainability and corporate responsibility into the business.

According to the guidelines of that plan, various transversal initiatives were implemented across all areas of the company, from culture to strategy, from planning to communication. With the Our Bright Impact program, Comer Industries particularly committed to contributing to the achievement of the Sustainable Development Goals (SDGs), an integral part of the United Nations 2030 Agenda and a point of reference for the construction of astrategy based on sustainability.

To ensure consistency with company strategy, in 2023 sustainability development guidelines were redefined in a Long-Term Plan with a time horizon until 2030 (the "2030 Plan"), in accordance with the timing indications of European Community targets. The 2030 Plan, which during the session of December 27, 2023 was approved by the Control, Risks and Sustainability Committee - an internal committee of the Board of Directors also set up to support the Board in analyzing the topics relevant to the generation of value in the long term - is integrated with the business plan and company development strategy, adapting strategic sustainability objectives into projects consistent with the growth of the business. It lays down the qualitative and quantitative indicators and related targets in the three ESG areas: environmental, social and governance.

For further information regarding the sustainability development model, goals and sustainability performance of Comer Industries, please refer to Chapter 1 of the Non-Financial Statement prepared for fiscal year 2023, available on the Company's website,www.comerindustries.com, in the section "Investor Relations/Financial Documents".

As of the date of this Report, Comer Industries qualifies as an "SME" pursuant to Art. 1, para. 1, letter w-quater.1) of the TUF and Art. 2-ter of the Consob Issuers' Regulation, as its market capitalization does not exceed Euro 1,000,000,000.

As of the date of this Report, the Issuer does not qualify as a "large company" but does qualify as a "concentrated-ownership company". In this Report, it is periodically illustrated how the Company has availed itself of the options for flexibility of application of the Code (see Paragraphs 4.3 and 7.1).

2.

Information on ownership structures (pursuant to At. 123-bis, para. 1,

TUF) as of March 13, 2024

a. Structure of share capital

As of the date of this Report, the subscribed and paid-in share capital of Comer Industries is Euro 18,487,338.60 and is divided into 28,678,090 Shares, without nominal value, and a total of 45,018,179 voting rights.

In particular, the By-laws also call for a mechanism of increased voting rights, pursuant to Art. 127-quinquies TUF, whereby each Share held by the same party for a consecutive period of at least 36 (thirty-six) months from the date of entry into a specific list, periodically updated and kept by the Company, is assigned two votes. In particular, pursuant to Art. 5.7 of the By-laws, the following may benefit from double-voting shares:

• a) those who have held shares by virtue of an ownership right giving rise to voting rights for a period of at least 36 months starting (i) from a date coinciding with or following the Start Date of Trading or (ii) from a date not more than 36 months prior to the Start Date of Trading;

• b) those for which the requirement set out in the previous point is attested by (i) continuous enrollment, for a period of at least 36 months, in the special list specifically instituted by the Company, and (ii) a specific notice of continuous share ownership for the entirety of the above period, issued by the intermediary with which the shares are deposited pursuant to current legislation.

The Shares, registered and without nominal value, have regular dividend entitlement, are indivisible, freely transferable, subject to the dematerialization scheme pursuant to Articles 83-bis et seq. of the TUF and related implementing regulations and are entered into the centralized management system managed by Monte Titoli.

b. Restrictions on the transfer of securities (pursuant to Art. 123-bis, para. 1, letter b) TUF)

As of the date of the Report, the By-laws do not include restrictions of any kind on the transfer of the Shares.

c. Relevant equity interests (pursuant to Art. 123-bis, para. 1, letter c) TUF)

As of the date of this Report, the relevant equity interests in Comer Industries, according to the notices submitted pursuant to Art. 120 TUF, are presented in Table 1 in the Appendix.

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