WPG German Holdco GmbH

Lohmar

Befreiender Konzernabschluss zum Geschäftsjahr vom 01.01.2021 bis zum 31.12.2021

Comer Industries S.pA.

Reggiolo(ER)/Italy

Consolidated financial report December 31, 2021

Index

Letter from the president

General information

Directors' report

Consolidated financial statements and explanatory notes

Report of the board of statutory auditors

Report of the independent auditors

Letter from the President

At Comer Industries we have always defined ourselves as "Unconventional makers" with the desire and objective of not stopping with just ideas but committing ourselves to making them tangible and achievable.

In a macroeconomic context that has seen our country regain stability and credibility in the eyes of the world, in 2021 we demonstrated our commitment to making an ambitious project real, pursuing a growth strategy that has allowed us to achieve important international goals.

The year that just ended is destined to be remembered as the moment that saw us execute one of the most important operations of acquiring a foreign company.

The acquisition of Walterscheid Powertrain Group is the ultimate expression of our industrial strategy of growth and our firm will to be a major player in our sector at an international level. It was undoubtedly a complex operation, which saw our best resources at work in a context that was certainly not favorable. But in addition to the great satisfaction of having successfully completed the project, we are also pleased to have been able to do so without any impact on our ordinary business, which has continued to grow and which today sees us engaged in the market even more than before.

The acquisition has also generated great attention in Italy and abroad. We proudly welcome the analyses of all those observers who, even at an international level, have indicated our company as an example of entrepreneurial excellence in the Italian economic fabric and a leader at a global level.

The project fully reflected the "unconventional" approach: thinking big, strategically and courageously, remaining faithful to our solid history by looking at the world from new points of view, with the aim of building an industrial Group of global stature and long-term investment prospects.

The union of Comer Industries and Walterscheid Powertrain Group - with their shared core values of commitment to sustainable investment, cutting-edge technology, focus on stakeholders and strategic focus on growth - has become a milestone in the history of our industry and created the world's leading mechanical engineering company in the agriculture sector.

In 2021 our commitment to sustainability - social, environmental, and economic - also continued with the Our Bright Impact project. For us, the word sustainability does not only mean maximum attention to people and the planet - which we want to leave to our children better than we found it - but above all it means profitable investments that, looking to the future, meet the needs of a changing society.

We ended 2021 with a pro-forma turnover that exceeded one billion euros, an ambitious goal that we had set ourselves and that we managed to achieve with great satisfaction and a lot of work.

For 2022 we are aiming at new big goals.

These first months have shown a positive trend and we are confident that - thanks to the work and passion of those who dedicate themselves every day to the Comer Industries Group, creating value in the company - the next months can also continue in this direction. As of today, the integration process has begun and will continue with the maximum commitment of all and will see us at the forefront as leaders who care about the planet, the people, and the society we operate in. We want to continue to improve, strong in our values and our history that has laid the foundation for a future of growth.

The macroeconomic and geopolitical context is still unstable and sees humanity facing complex situations at an international level, but despite this we are strong, we have a clear idea of the future, and we have a strategy and products that respond to market demand. Tomorrow will present us with new challenges and we are ready to face them with passion and commitment, stronger, bigger, and even more aware of our positive impact on the world.

As is its nature, the Comer Industries Annual Report that you have in your hands describes the performance of our Group and the economic and financial performance of the last financial year, the result of the company's market positioning, and the rightness of the choices - some of them courageous - made in recent years.

But it is above all a reflection of who we are: a solid, healthy Group, with a clear and effective strategy and a leadership based on innovation and credibility. Always result-oriented: the result of today, but above all the result of tomorrow.

Reggiolo, March 28, 2022

Matteo Storchi, President & CEO

General Information

Board of Directors

Matteo Storchi President & CEO

Cristian Storchi Vice President and Director

Arnaldo Camuffo Independent Director

Luca Gaiani Director

Lee M. Gardner Director

Joseph P. Huffsmith Director

Matteo Nobili Director

Paola Pizzetti Independent Director

Marco Storchi Director

Board of Statutory Auditors

Luigi Gesaldi Chairman

Corrado Baldini Statutory Auditor

Massimiliano Fontani Statutory Auditor

Independent Auditors

Deloitte & Touche S.p.A.

Comer Industries S.p.A.

Headquarters and Administrative Offices: 42046 Reggiolo (RE) Italy - Via Magellano 27

Reg. in the Reggio Emilia Business Register no. 07210440157

Approved share capital 18,487,338.60 euros fully subscribed and paid-up

Tax Code 07210440157 - VAT no. IT 01399270352

Art. 2497 bis of the Italian Civil Code. - The company is subject to direction and coordination by Eagles Oak S.r.l., with registered offices in 41126 Modena, Via del Sagittario 5

Share Parent 2,000,000 euros fully paid - Modena Business Register no. 03699500363

DIRECTORS' REPORT FOR THE YEAR 2021

Summary of the results of Comer Industries Group

Comer Industries at a glance

(million euros)	12/31/2021	12/31/2020	Change in %
REVENUE FROM SALES	598,1	396,2	51,0%
Adjusted EBITDA	75,4	50,1	50,4%
% of sales	12,6%	12,6%
EBITDA	78,2	48,6	61,0%
% of sales	13,1%	12,3%
Amortization and Depreciation	(21,4)	(18,2)	17,5%
EBIT	56,8	30,4	87,1%
% of sales	9,5%	7,7%
NET PROFIT	39,4	21,8	81,2%
% of sales	6,6%	5,5%
Adjusted NET PROFIT	41,1	25,9	58,9%
% of sales	6,9%	6,5%
COMMERCIAL WORKING CAPITAL	206,1	84,7	N/A
% of sales	34,5%	21,4%
INVESTED CAPITAL	522,7	140,2	N/A
ROI [EBIT / Invested capital (%)]	10,9%	21,7%
NET FINANCIAL POSITION	(177,0)	3,2	N/A
Adjusted NET FINANCIAL POSITION	(120,7)	26,7	N/A
Adjusted Net Financial Position / Adjusted EBITDA	(1,6)	N/A
Adjusted EBITDA / Net financial charges	87,4	101,2
TOTAL CASH FLOW	51,7	38,1	N/A
CASH CONVERSION RATE	66%	78%
CAPEX	18,8	11,7	61,2%
% on sales	3,1%	2,9%
EQUITY	345,6	143,4	N/A
Adjusted Net Financial Position / Equity	N/A	N/A
ROE [Adjusted Net Profit / Equity]	11,9%	18,0%
Adjusted EPS [Adjusted Net Profit / nr. Shares]	1,43	1,27	N/A
AVERAGE PERSONNEL EMPLOYED IN THE PERIOD	3.505	1.335	N/A

1. Significant events in the 2021 financial year

2021 was a year of recovery for the world economy. The vaccination campaign that began in the early months of the year has led to a containment of the pandemic, fueling expectations of a return to normal social and economic life.

During 2021 Comer Industries carried out the analyses and assessments that led to the conclusion of the acquisition of 100% of the share capital of WPG Holdco (WPG Acquisition), parent company of Walterscheid Powertrain Group, a major player in the Off-Highway sector (components and drive systems for the agricultural, industrial, construction and mining equipment sectors), present in 75 countries, with a 2021 turnover of 485 million euros.

Walterscheid Powertrain Group was founded by Jean Walterscheid in 1919 in Siegburg, North Rhine-Westphalia, and after more than 100 years of history it is one of the leading players in the industry of propulsion systems and services for off-highway and industrial applications.

The transaction was communicated to the market on July 15, 2021 and took the form of a reverse take-over pursuant to Article 14 of the AIM Italia Regulation. The acquisition of 100% of the share capital of WPG Holdco was completed on December 1, 2021 against payment of a consideration of approximately 203 million euros, with a cash outlay of 40 million euros and the entry of WPG Parent B.V., currently the sole shareholder of WPG Holdco controlled by the private equity fund One Equity Partners, into the capital of Comer Industries with a 28.00% stake.

As a result of the completion of the WPG Acquisition, as of December 1, 2021 the following have become members of the Board of Directors of Comer Industries S.p.A. Joseph Patrick Huffsmith and Lee Merle Gardner, as resolved at the September 14, 2021 shareholders' meeting. Moreover, a shareholders' agreement was entered into between Eagles Oak S.r.l. and WPG Parent B.V. aimed at regulating their relations as shareholders of Comer Industries. Note that the shareholders' agreement defines the commitment of WPG Parent B.V. to maintain ownership of at least 50% of the shares held in Comer Industries S.p.A. until six months after completion of the Transaction.

The merger of the two companies created a group that is one of the most important global players in the agricultural mechanics sector, present in all the main markets of the world with pro-forma 2021 revenues in excess of one billion euros.

With this transaction, Comer Industries and Walterscheid Powertrain Group sought to establish a European champion, one of the world leaders of mechanics in the agricultural sector, with long-term development prospects.

Walterscheid Powertrain Group operates in a sector that is complementary to that of Comer Industries's business, since it too has significant experience in the application of new solutions in the field of specialized transmission products and systems for machines used in numerous industrial sectors, from agriculture to mining to energy.

Specifically, Walterscheid Powertrain Group covers the entire range of OEM components, including a wide selection of aftermarket services in addition to manufacturing: the combination of both segments creates great value for customers.

Walterscheid Powertrain Group has a strong reputation in the market for its high product quality, its engineering skills, its strong propensity for innovation, and its long-term customer relationships.

Walterscheid Powertrain Group is able to provide a wide range of services (component distribution, field service, digital solutions, high value-added services) for machine operators, workshop partners, construction equipment dealers. Walterscheid Powertrain Group covers all channels and segments in the aftermarket for transmission services and shafts and universal joints, with a strong brand positioning.

2. The global macroeconomic scenario and the reference market

The global economy entered 2022 in a weaker position than was foreseen in the IMF's last forecast, which dates back to last October. Rising energy prices and supply difficulties resulted in higher and geographically broader inflation than expected, with the United States, emerging markets, and developing countries being particularly affected. The downsizing of the Chinese real estate market and lower-than-expected growth in private consumption also point to cautious growth prospects.

Global growth is estimated to be around 4.4% in 2022, down 0.5 percentage points from last October's IMF forecast, 5.9% in 2021, in line with declines in the growth forecasts of the two largest economies (See Chart 1.1). The estimate takes into account the effects of mobility restrictions and border closures that are expected to weigh on growth in the first quarter of 2022. These negative effects are expected to dissipate beginning in the second quarter. Estimates are based on information available as of January 18, 2022.

Source: World Economic Outlook January 2022, IMF

Among the changes in economic estimates for 2022, the removal of the Build Back Better fiscal policy package from the benchmarks, the early withdrawal of monetary accommodation, and continued supply chain disruptions contributed to a 1.2 percentage point lowering of estimates for the United States. As for Canada, weaker results noted at the end of 2021 and a forecast of weaker external demand for 2022 - related to revised US estimates - led to a 0.8 percentage point downgrade.

In the euro area, persistent supply difficulties and the already noted consequences of the pandemic led to a revision of 0.4 percentage points, driven by a 0.8 percentage point decline in Germany, largely due to the economy's exposure to supply chain shocks.

In the UK, slowdowns due to the pandemic and supply difficulties (particularly in the labor and energy markets) resulted in a downward revision of growth to 4.7%, minus 0.3 percentage points.

The lowering of the 2022 forecast is driven by revisions to estimates for some large emerging markets. In China, disruptions in the real estate sector were the premise of a broader slowdown. This led to the downward revision of estimates for 2022 to 4.8%, down 0.8 percentage points compared to October. The forecast also weakened in Brazil, where the fight against inflation required a strong monetary policy response that will weigh on domestic demand.

Disruptions in the supply chain, volatility in energy prices and wage pressures in certain geographical areas could increase inflation uncertainty. Rising benchmark rates in more advanced economies could raise financial stability risks in emerging and developing economies. Other global risks could crystallize if geopolitical tensions remain high.

The situation in Ukraine is evolving rapidly after Russia recognized the two separatist republics of the Donbass. The West condemned the decision and initiated sanctions against Russia. The risk of escalation could impact energy supplies from Russia to Europe with a consequent increase in inflation.

On the interest rate front, in the US, as price and wage pressures increase, the Federal Reserve decided to accelerate its asset purchase plan and signaled that it will raise rates more than expected in 2022.

The European Central Bank (ECB) announced that it will end net asset purchases under the pandemic emergency purchase program in March 2022, but will temporarily increase net purchases by a modest amount under its longer-term asset purchase program. Moreover, the ECB committed to maintaining key interest rates at current levels until adequate progress is made towards stabilizing inflation in the medium term.

Agricultural sector.

The CEMA business climate index released in January 2022 further stabilized at high levels after several months of slight downward correction that began after a record high in May and June, when it reached its highest level since 2008. In January 2022, the index increased slightly to 56 points (scale of -100 to +100).

In the first nine months of the year, worldwide industrial unit sales increased in all key regions, albeit with uneven results by region and product. In North America, sales in the tractor and combine markets grew 49% and 10% respectively, and in European markets 31% and 13%. In South America and the rest of the world, there were increases in demand for combine harvesters and tractors of 38% and 12% respectively.

In the fourth quarter growth remained above 10% in all countries, although with lower results than in the first months of the year.

In contrast, Q4 2021 saw a less pronounced market recovery than earlier in the year. Demand continues to increase in most geographical areas. In North and South America, tractor demand increased 10% for tractors under 140 Hp and 23% for tractors over 140 Hp. In Europe, the tractors and combine harvesters market increased respectively by 16% and 17%.

Industrial sector and wind power.

As reported in the economic bulletins of the VDMA (the main German association bringing together the leading players in the mechanical engineering industry), the investment incentive programs promoted by the governments of the main industrialized countries and the fiscal measures implemented, in conjunction with the improvement in the economic environment, have led to a rapid recovery from the lows reached following the pandemic.

In the first nine months of the year, global demand for construction equipment remained stable compared to Q3 2020, increasing in North America and Europe by 10%, by 86% in South America while decreasing by 13% in the Rest of the World. In the fourth quarter of 2021 the recovery was stronger; global demand for construction equipment increased across all sub-segments, with compact and utility equipment up 13% and construction equipment up 16%. The greatest growth was seen in South America (up 87%) and North America (up 23%), while in Europe and the Rest of the World growth was 19% and 6%, respectively. Comparing these results to the final months of 2019 shows that machine production has already surpassed pre-pandemic levels.

As for the wind sector, based on reports from leading wind tower manufacturers, 2021 saw a sharp increase in commitments from more than 50 countries to combat climate change. These commitments, which in some cases are linked to specific targets for wind energy installations, represent a strong potential for the wind energy industry and are reflected in the continued improvement of the demand outlook in the medium and long term.

As far as the near future is concerned, forecasts therefore speak of a positive outlook for 2022, especially in Latin America and Asia.

3. Comments on key performance indicators

The Group monitors its performance using various indicators that may not be comparable to similar measurements adopted by other groups. Group Management considers that these indicators provide a comparable measurement of the results on the basis of standardized performance factors, facilitating the identification of operating trends and allowing management to take action also during the year with swift corrective actions whenever necessary.

3.1 Definition of the indicators.

The performance indicators used by the Group and disclosed in this report are based on the following definitions:

"Cape": indicates, for each Reference Period, the increase occurring in investments in tangible and intangible fixed assets (net of revaluations, capital grants and the effects of currency conversion) which, following International Accounting Standards, are recorded in the corresponding heading in equity, reduced by disinvestments and excluding the equity effects (i) of internal capitalizations of costs for internally generated development activities, (ii) the impacts related to the application of IFRS 16.

"Commercial Working Capital": indicates, at a consolidated level, the algebraic sum of the following items: (+) non-current and current assets: Inventories;

Trade Receivables;

(-) non-current and current liabilities:

Trade payables.

"Invested Capital': indicates, at a consolidated level, the algebraic sum of the following items:

(+) Commercial working capital,

(+) Tangible (including Rights of use), intangible and financial fixed assets

(+) Tax and deferred tax assets, current tax assets

(+) Other short and long-term receivables, of a non-financial nature;

(-) Other short and long-term payables, of a non-financial nature;

(+) Current and deferred tax liabilities

(-) Severance Indemnity Fund (TFR) and provisions for liabilities and charges.

"Cash Conversion rate: is the ratio of operating cash flow to EBITDA [adjusted]

"EBITDA": represents the value of Operating Profit (EBIT) adjusted by the amount of the following entries: (+) Amortization, Depreciation and Write-Downs of Receivables and other provisions for risks and charges, in particular:

•	amortization of intangible fixed assets;
•	depreciation of tangible fixed assets;
•	other write-downs of fixed assets;
•	write-downs of receivables included in current assets and of cash equivalents;
•	provisions for contingent liabilities

"EBITDA [adjusted]": represents EBITDA as previously defined, adjusted for impacts traceable to the accounting treatment prescribed by the IFRS 2 standard in relation to stock option and/or stock grant plans, listing and/or collection costs, and the IFRS 16 standard in relation to lease contracts.

"EBIT": is the Operating Profit in the consolidated income statement.

"EPS (Earning per share) adjusted": Net profit [adjusted], as defined below, on total number of shares outstanding at the date of approval of the financial statements.

"Total cash flow from operations"'. Cash flow from operating activities - Net cash flow from investing activities (excluding IFRS 16 impacts).

"Net Financial Position": indicates the net financial position calculate as the difference between cash and cash equivalents and debt of a financial nature as follows:

(+) non-current and current assets (A):

•	Other short-term financial receivables
•	Marketable securities at fair value
•	Cash and cash equivalents

(-) non-current and current liabilities (B):

•	Long-term loans
•	Long-term derivative financial instruments
•	Short-term loans
•	Short-term derivative financial instruments
•	Other short- and long-term financial payables (including payables relating to lease contracts recognized in accordance with IFRS 16)
•	Non-current trade payables

A + B: Net Financial Position.

The above net financial position, as represented, achieved the same results that would have been obtained according with recommendation reported in the Consob Communicate DEM/6064293 on July 28, 2006 and in the Recommendation ESMA 32-382-1138 on March 4, 2021.

"Net Financial Position [adjusted]": this represents the net financial position as defined above, adjusted to neutralize the impact of the accounting treatment of lease contracts provided by IFRS 16.

"Net financial charges": indicates the value of the heading "Net financial income and charges" adjusted by the following algebraic sum:

(+) losses on exchange deriving from financial debt expressed in currencies other than the Euro or from other transactions carried out to hedge exchange risks (if not accounted for in the reserve for cash flow hedging in 12 accordance with IFRS 9), costs and losses deriving from transactions carried out to hedge the risk of changes in interest rates, bank costs and charges not capitalized and not already included in consolidated EBITDA;

(-) gains on exchange deriving from financial debt expressed in currencies other than the Euro or from other transactions carried out to hedge exchange risks, revenues and proceeds deriving from transactions carried out to hedge the risk of changes in interest rates.

(+) financial costs relating to the IFRS 16 accounting treatment of leasing contracts;

(+/-) financial costs from differences in fair value according to the IFRS 2 treatment of listing processes with financial markets or multilateral trading systems, regardless of how the listing took place.

"Equity": indicates the algebraic sum of share capital, statutory reserves, profits/losses and other similar reserves corresponding to the total of the "Share capital and reserves" heading.

"Average staff in the year": simple average on the basis of the workforce employed by the Group, including temporary workers.

"ROE (Return on equity)": Net profit [adjusted], as defined below, divided by Equity. "ROI (Return on investment)": EBIT divided by Invested Capital as defined above.

"Net profit": indicates the result of the consolidated income statement.

"Net Profit [adjusted]": represents net profit as previously defined, adjusted for impacts traceable to the accounting treatment prescribed by IFRS 2 standards relating to stock option and/or stock grant plans, listing and/or collection costs net of their relative tax effect.

The Group prepares the income statement according to the nature of costs and the cash flow statement with the indirect method.

3.2 Comments on the indicators.

Comer Industries Group achieved consolidated revenues of 598.1 million euros (+51% compared to the previous year), which include the results of the Comer Industries brands, amounting to 563.4 million euros (+42.20% compared to December 31, 2020) and revenues from the Walterscheid brands (consolidated for the month of December only) amounting to 34.7 million euros.

This result was achieved due to the WPG Acquisition and the effect of continued strong demand and better prices in the markets the Group operates in.

Revenues generated abroad represent 90% of the total. The revaluation in the second half of the year in relation to the main reference currencies used by Comer Industries alone, in particular the US dollar, the Chinese Yuan, the Indian Rupee and the Brazilian Real, had a positive impact of over 0.8 million euros. The amount of revenues at the same exchange rates as the previous period showed an amount of 562.5 million euros (+42% compared to the previous year).

The agricultural sector, which had experienced a contraction in 2020, underwent a strong recovery resulting in a 55% increase in turnover. No less important, the continuously growing industrial sector closed the year with +47% compared to the previous year, driven by the Asia Pacific market and the development of new products and ranges.

At a geographical level the greatest growth occurred in the emerging markets, particularly in Asia and South America. On the basis of product type it is worth noting a growth linked to planetary gearboxes and wheel drives for the industrial construction market.

The Group has, therefore, proven in this half-year its ability to fully exploit market opportunities, besides benefiting from the full effects of the rationalization projects introduced in the past aimed at controlling overhead. Capitalizing on the efficiency gains achieved through continuous improvements in business processes, in the first half of the year the Group was able to achieve operating profitability, as a percentage of turnover, higher than that achieved in 2020 and up 50.4% on the first half of last year.

Adjusted EBITDA amounted to 75.4 million euros, equal to 12.6% of sales, compared to 50.1 million euros in the previous year, an improvement of 50.4%. Operating profitability both in absolute terms and as a percentage of revenues has been growing steadily for five consecutive years.

The [adjusted] net financial position showed a negative balance of 120.7 million euros, while the net financial position was negative by 177 million euros, a worsening compared with the previous year due to the business combination transaction mentioned in the previous paragraph. The balance as of December 31,2021 includes 63.7 million euros of cash, gross of loans for 184.4 million euros and 56.3 million euros of financial payables arising from the accounting treatment of leases in accordance with IFRS 16. The Group was able to generate cash from operating activities for 51.7 million euros (net of investments for the period) and distributed dividends for 10.2 million euros.

Net profit reached 39.4 million euros, corresponding to 6.6% of turnover compared to 21.8 million in the previous year (5.5% of turnover). The [adjusted] net profit, which for 2021 excludes the impact of the treatment of stock grants in accordance with IFRS 2, amounted to 41.1 million euros (25.9 million euros in 2020), corresponding to 6.9% of turnover.

ROE, calculated on [adjusted] net profit, stands at 11.9% compared to 18% in the previous year and benefited from the growth in operating income. Earnings per share [adjusted] stand at 1.43 euros per share (1.27 per share in 2020).

4. Unaudited 2021 pro-forma income statement

Below is the Group's unaudited pro-forma income statement for fiscal year 2021, which is intended to retroactively represent the WPG Acquisition as if it had occurred on January 1, 2021.

The 2021 Pro-forma income statement was prepared based on the following historical data:

•	Consolidated income statement included in the Consolidated financial statements for the year ended December 31, 2021 of the Comer Industries Group, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, which includes WPG's revenues for the month of December.
•	Income statement as of January 1 - November 30, 2021 of the WPG Group, prepared according to the International Financial Reporting Standards adopted by the European Union. The WPG Group's

Consolidated income statement of January 1 - November 30, 2021 was prepared for internal purposes since there is no legal obligation in this regard, and has not been audited.

The unaudited 2021 pro-forma income statement was not examined by the independent auditors Deloitte & Touche S.p.A., as there is no requirement to do so.

The unaudited 2021 pro-forma income statement was prepared solely for illustrative purposes by making appropriate pro-forma adjustments to the historical data described above to retroactively reflect the significant effects of the Acquisition. In order to properly interpret the unaudited 2021 pro forma income statement, consider the following issues:

•	Given that these are historical and virtual accounting representations based on assumptions, if the WPG Acquisition had actually been carried out on the date taken as reference for the preparation of the 2021 pro-forma income statement, rather than on the effective date, the historical data would not necessarily have been the same as those reflected in the pro-forma income statement.
•	The accounting treatment of the business combination was framed within the international accounting standard IFRS 3 "Business Combinations" and recorded on a provisional basis, since it is not yet possible to complete the process of determining the fair value of the net assets to be acquired under the Transaction, as no valuations, appraisals, or other specific information relating to these assets and useful for valuation purposes is yet available. Accordingly, any economic effects that could result from establishing the fair values of the net assets acquired are not reflected in the unaudited 2021 pro-forma consolidated income statement. Any adjustments deriving from the definition of the purchase price allocation will be included in the consolidated financial statements of the Comer Industries Group within the term envisaged by IFRS 3 (within 12 months of the date of the Transaction).
•	The data of the 2021 pro-forma income statement do not in any way intend to represent a forecast of future results and therefore should not be used in this sense. The pro-forma data do not reflect the prospective data as they are prepared in such a way as to represent only the effects of the Transaction that can be isolated and objectively measured, without taking into account the potential effects due to changes in the policies of the Comer Industries Group Management, which have a high component of discretionary power, and operational decisions resulting from the outcome of the WPG Acquisition.

The accounting standards adopted for the preparation of the unaudited 2021 pro-forma income statement are the same as those used for the preparation of the Comer Industries Group's 2021 consolidated financial statements, specifically the International Financial Reporting Standards adopted by the European Union, it being understood that this income statement does not represent a "complete set of financial statements" under IAS 1.

Unaudited Pro-Forma Consolidated Income Statement for the year ended December 31, 2021

UNAUDITED CONSOLIDATED INCOME STATEMENT (thousand euros)	Pro-forma 12/31/2021
Revenues from contracts with customers	1.048.486
Other operating revenues	7.623
Change in stock of fin. and semi-fin. goods and work in progress	72.009
Cost of purchases	(664.486)
Personnel costs	(227.463)
Other operating charges	(105.132)
Allowance for bad debts and other provisions for risks	(818)
Depreciation/amortization	(43.247)
OPERATING PROFIT (EBIT)	86.972
Net financial income / (charges)	(8.655)
Pre-tax profit	78.318
Income taxes	(23.982)
NET PROFIT/ (LOSS)	54.335

It should be noted that the costs associated with the WPG Acquisition, including one-off effects related to the transaction, have not been recognized in the unaudited 2021 pro-forma income statement as they are one-off in nature.

Some of the indicators recalculated considering the pro-forma 2021 economic data are summarized below:

(million euros)	12/31/2021
Adjusted EBITDA	128,2
% of sales	12,2%
EBITDA	131,0
% of sales	12,5%
Amortization and Depreciation	(44)
EBIT	87,0
% of sales	8,3%
NET PROFIT	54,3
% of sales	5,2%
Adjusted NET PROFIT	56,0
% of sales	5,3%
INVESTED CAPITAL	522,7
ROI [EBIT / Invested capital (%)]	25,1%
NET FINANCIAL POSITION	(177,0)
Adjusted NET FINANCIAL POSITION	(120,7)
Adjusted Net Financial Position / Adjusted EBITDA	(0,9)
Adjusted EBITDA / Net financial charges	(14,8)
ROE [Adjusted Net Profit / Equity]	16,2%

5. Investments

During the year, the Group invested 18.8 million euros in tangible and intangible fixed assets acquired from third parties, net of internal capitalizations and excluding the impact of the IFRS 16 accounting standard. The main investments were made in Italy for around 12.9 million euros and in the Group's foreign production subsidiaries, amounting to around 5.9 million euros.

Assets in Italy include the commissioning of a robotized cell with a Gleason Phoenix 280 CX bevel grinding machine and anthropomorphic robot and a Gleason 475 GMS gear metrology system for the processing flow of gears fully interconnected to factory logistics systems in a closed loop in view of industry 4.0.

Note also that the new gear cutting machines do not use lubricants for gear cutting, confirming the choice of environmentally friendly technologies for steel processing.

Two Mazak HCN 6800 and HCN 10800 horizontal machining centers were also purchased for machining gearboxes. These new work centers will go live in Q1 2022 and will be interconnected to factory logistics systems as per industry 4.0.

Also worth mentioning is the entry into service of the new industrial coating plant equipped with state-of-the- art mixing systems and application robots. The plant is fully interconnected with the factory's logistics systems and is equipped with the most advanced systems for the control and reduction of energy consumption. The technical and plant engineering choices and the adoption of water-based coating products ensure that the coating plant complies with the environmental-friendly approach adopted.

In addition to the assets described above, we would like to highlight the purchase of new latest-generation semi-automatic assembly lines designed with cyber-physical system concepts to combine productivity and high quality standards.

Also of note is the project to expand the Reggiolo production site with the construction of the new logistics hub adjacent to the production unit, which has resulted in an industrial hub of over 40,000 m ².

As part of this important project, it is worth mentioning the investments in general plant engineering and masonry works for the new hub and the investments in new intensive warehouses, automatic warehouses, latest generation loading/unloading systems, and dedicated software.

It is also worth mentioning the investments aimed at improving the road network inside and outside the production center and the investments related to the construction of new offices adjacent to the logistics areas served by a 225 kW photovoltaic system.

At the plant of Comer Industries (Jiaxing) Co. Ltd. in China, investments were made in masonry works and general plant engineering linked to the planned industrial expansion and the purchase of new semi-automatic assembly lines for the production of axles and gearboxes.

6. Research and Development

In 2021 Comer Industries continued its innovation on all product lines. Specifically, for the agricultural market, among others, a gearbox for driving auxiliary services ("pump drive") for sugar cane harvesting machinery was introduced, and validation of the first axle for agricultural tractors was completed.

In the industrial sector, on the other hand, it is worth mentioning the completion of the validation of a new - concept gearbox for earthmoving machines ("motorgrader"), the construction of prototypes of motor-wheels for 20-ton excavators with integrated hydraulic motor with the partner NABTESCO, and finally the launch of a new size of axle for aerial platforms from 18 to 23 meters (17 tons).

The Comer Industries cutting-edge systems are conceived inside the design department before being validated in the Mechatronics Research Center in Reggiolo (RE), a 2,100 sq m facility dedicated to product development activities such as type-approval and operating tests, static tests, component and devices characterization tests, endurance and fatigue tests, crash tests and structural tests.

All the cutting-edge engineering solutions and systems previewed at major trade-fair events are designed and produced to maximize machine efficiency in the business sectors where the Group operates.

7. Social responsibility

Comer Industries has always adopted a people-centric approach, placing all its stakeholders at the center of its corporate values whether they are employees, investors, suppliers, or the local communities where the company operates. In fact, during the year there were several initiatives concerning not only the training of its people, considered a factor of competitiveness with a strategic role within the broader business plan, but also for the development of the local region, as evidence of the attention that the company pays to social issues. In fact, for Comer Industries the surrounding region and the nearby communities are resources to be preserved, improved, and valued in terms of economic, social, and cultural development. Particularly worthy of note is the renovation project of Palazzo Sartoretti and the surrounding park, symbolic places of the culture of Reggiolo (RE) that returned to glory after the earthquake of 2012 thanks to the contribution of Comer Industries. The project reflects both the company's strong desire to preserve its historical roots, always looking to the future, and its attention to the local region. But that's not all. Palazzo Sartoretti has also been the subject of a redevelopment project thanks to a partnership between Comer Industries, the Municipality of Reggiolo, and the Reggio Children's Foundation, which has given rise to a 360-degree educational program, with the goal of studying the phenomena of mechanics and gears and explaining them with different languages (graphic, digital, etc.). The project aims to create real ateliers and laboratories that embrace many areas and aspects of education, taking advantage of the technical specialization and expertise in the field of mechanics that the company has developed from its inception. The local projects that the company believes in go beyond the places where Comer Industries has its roots, as evidenced by the long-standing collaboration with FAI for the protection of artistic and cultural heritage throughout Italy, and with the volunteer organization "Namaste, Onore a te" through which the company provides concrete support to the community of Bangalore, India, providing 10 deserving female students with the necessary resources to cultivate their talent and become nurses. Comer Industries's commitment to sustainability can also be seen in its support of its stakeholders and the funding of projects dedicated to innovation and new technologies. Participation in the Le Village by Credit Agricole project in Parma and in the development of the DeepTier platform in partnership with lungo and Gellify go in this direction. Le Village is an incubator that fosters knowledge and interaction between start-ups and financial and industrial businesses of the region, and offers opportunities for mutual development and exchange. DeepTier is a model of a fintech platform that offers support to the entire supply chain, from supply chain managers to sub-suppliers, both local and foreign, allowing all players in the chain to access different forms of advances and financing from financial institutions quickly and at advantageous conditions.

For years Comer Industries has been engaged in programs, initiatives, and support activities and partnerships involving the arts and the landscape, supporting innovation, education, and environmental sustainability, and more generally related to the creation of value for ourselves and for future generations.

8. Environment, health and safety

In continuity with the path already initiated in previous years, Comer Industries has extended the Health and Safety Management System according to the ISO 45001:2018 standard to all the Group's locations, ensuring uniform management of all aspects related to health and safety. During 2021 a total of 36 injuries were recorded with a frequency indicator value of 2.5 against more than 2,900,000 hours worked. Of note is the result of zero injuries achieved by the Bangalore plant.

Faced with the persistence of an uncertain global health situation and the constant evolution of national regulations, Comer Industries continued to guarantee a safe work environment for everyone's health through an in-depth review and application of government provisions and the corporate protocol in synergy with health authorities. Several actions were taken to ensure the proper application of preventive measures, including the installation of thermo facial scanners for temperature detection, daily distribution of surgical masks, cleaning and sanitizing procedures, and the use of teleworking.

Thanks to the measures introduced, the control tools in place within the Integrated System, and the collective responsibility of the Group's people, there were no outbreaks reported in 2021.

On the Environment front, the results achieved in 2021 show further progress in the processes of efficiency improvement and transition to the use of green energy. Projects to optimize production processes and the use of monitoring systems, including digital, in all production sites have enabled an overall reduction in energy consumption (-10%). Moreover, in 2021 Comer Industries significantly increased the percentage of clean energy used to power its processes: the final figure of 32% of total consumption (compared to 9% at the end of 2020) was achieved thanks to a plan for the progressive procurement of electricity from certified renewable sources and the expansion of the photovoltaic system, with a total installed capacity of over 2,100 kWp.

The combined effect of these interventions resulted in an overall reduction of over 20% in CO ₂ equivalent emissions attributable to internal processes. Note that in 2021 Comer Industries gave further impetus to its carbon footprint reduction strategy, also thanks to activities outside the company such as, for example, the impact linked to home-work commuting.

No critical issues have emerged during the year with relation to the environment.

9. Intergroup relations and dealings with related parties.

The Group has dealings with subsidiaries and other related parties at market conditions considered as normal in the respective reference market, taking account of the characteristics of the assets and the services provided.

Transactions between Comer Industries S.p.A. and its consolidated subsidiaries, which are entities related to the Company, are eliminated in the consolidated financial statements, and in compliance with IAS 24. Below is a summary:

Company	Sales of goods and services	Purchases and other operating costs	Financial income
(thousand euros)
Comer Industries S.p.A.	80.650	95.160	387
Comer Industries Components S.r.l.	83.522	10.767	0
Comer Industries INC	(233)	86.413	0
Comer Industries (Shaoxing) Co. Ltd.	7.527	0	50
Comer Industries (JiaXing) Co. Ltd.	38.616	5.922	104
Comer Industries UK Ltd	234	2.504	0
Comer Industries GmbH	212	0	0
Comer Industries India Pvt Ltd	1.599	1.617	0
Comer Industries do Brasil EIRELI	41	9.786	0
WPG German Holdco GmbH	0	0	67
WPG UK Holdco Ltd.	0	0	44
WPG US Holdco LLC.	0	0	0
Off-Highway Powertrain Services Germany GmbH	566	1.394	0
Walterscheid GmbH	122	13	18
Walterscheid Getriebe GmbH	2.460	422	0
Walterscheid Brasil Industria de Equipamentos Agricolas Ltda.	496	268	0
Walterscheid Powertrain (China) Co. Ltd.	40	293	0
Walterscheid A/S	0	0	0
Powertrain Services France SAS	136	395	0
Walterscheid Monguelfo S.p.A.	293	267	0
Walterscheid Russia LLC	0	96	0
Powertrain Services UK Limited	0	0	28
Powertrain Services (UK Newco) Ltd.	0	0	0
Walterscheid Inc. Woodridge	448	827	0
Powertrain Rockford Inc.	384	986	15
GKN Ohio Inc.	0	0	0
Walterscheid Cardan GmbH	16	0	0
Total	217.129	217.129	712

Company	Financial charges	Royalties	Dividends
(thousand euros)
Comer Industries S.p.A.	104	7.457	0
Comer Industries Components S.r.l.	0	0	1.000
Comer Industries INC	0	0	1.273
Comer Industries (Shaoxing) Co. Ltd.	0	0	0
Comer Industries (JiaXing) Co. Ltd.	50	(6.625)	0
Comer Industries UK Ltd	0	0	0
Comer Industries GmbH	0	0	350
Comer Industries India Pvt Ltd	0	(832)	0
Comer Industries do Brasil EIRELI	0	0	0
WPG German Holdco GmbH	174	0	0
WPG UK Holdco Ltd.	0	0	0
WPG US Holdco LLC.	212	0	0
Off-Highway Powertrain Services Germany GmbH	49	184	0
Walterscheid GmbH	15	468	410
Walterscheid Getriebe GmbH	16	(175)	6.174
Walterscheid Brasil Industria de Equipamentos Agricolas Ltda.	28	(31)	0
Walterscheid Powertrain (China) Co. Ltd.	0	(44)	0
Walterscheid A/S	0	0	0
Powertrain Services France SAS	0	(182)	0
Walterscheid Monguelfo S.p.A.	2	50	0
Walterscheid Russia LLC	0	4	0
Powertrain Services UK Limited	62	0	0
Powertrain Services (UK Newco) Ltd.	0	0	0
Walterscheid Inc. Woodridge	0	(98)	0
Powertrain Rockford Inc.	0	(176)	0
GKN Ohio Inc.	0	0	0
Walterscheid Cardan GmbH	0	0	0
Total	712	0	9.207

The "Financial income" heading refers mainly to interest accruing in the period on intercompany loans. As of December 31, 2021, the following intercompany loans are outstanding:

•	Loan to Comer Industries (Jiaxing) Co. Ltd. by Comer Industries (Shaoxing) Co. Ltd. for 1.9 million euros.
•	Loan to Comer Industries S.p.A. from Comer Industries (Jiaxing) Co. Ltd. for 8 million euros.
•	Loan to WPG German Holdco Gmbh by Comer Industries S.p.A. for 80.7 million euros.
•	Loan to WPG US Holdco LLC by Comer Industries S.p.A. for 90.9 million euros.

Company	Trade Receivables	Trade Payables	Other Receivables
(thousand euros)
Comer Industries S.p.A.	20.379	31.682	0
Comer Industries Components S.r.l.	15.976	7.001	0
Comer Industries INC	25	14.772	0
Comer Industries (Shaoxing) Co. Ltd.	3.135	0	0
Comer Industriers (Jiaxing) Co. Ltd.	22.625	4.518	0
Comer Industries UK Ltd	65	634	0
Comer Industries GmbH	100	0	0
Comer Industries India Pvt Ltd	666	1.387	0
Comer Industries do Brasil EIRELI	5	2.981	0
WPG German Holdco GmbH	24.066	60.123	0
WPG UK Holdco Ltd.	19.054	0	0
WPG US Holdco LLC.	0	19.981	0
Off-Highway Powertrain Services Germany GmbH	7.490	20.259	0
Walterscheid GmbH	71.038	9.327	498
Walterscheid Getriebe GmbH	159	8.667	0
Walterscheid Brasil Industria de Equipamentos Agricolas Ltda.	486	8.119	0
Walterscheid Powertrain (China) Co. Ltd.	281	983	0
Walterscheid A/S	0	0	0
Powertrain Services France SAS	8.345	2.854	0
Walterscheid Monguelfo S.p.A.	1.576	260	0
Walterscheid Russia LLC	46	307	0
Powertrain Services UK Limited	7.852	26.077	0
Powertrain Services (UK Newco) Ltd.	0	1.609	0
Walterscheid Inc. Woodridge	4.430	3.710	0
Powertrain Rockford Inc.	25.520	5.662	0
GKN Ohio Inc.	0	0	0
Walterscheid Cardan GmbH	19	2.424	0
Total	233.337	233.337	498

Company	Other Payables	Financial Receivables	Financial Payables
(thousand euros)
Comer Industries S.p.A.	0	171.908	8.138
Comer Industries Components S.r.l.	0	0	0
Comer Industries INC	0	0	0
Comer Industries (Shaoxing) Co. Ltd.	0	1.946	0
Comer Industriers (Jiaxing) Co. Ltd.	0	8.138	1.946
Comer Industries UK Ltd	0	0	0
Comer Industries GmbH	0	0	0
Comer Industries India Pvt Ltd	0	0	0
Comer Industries do Brasil EIRELI	0	0	0
WPG German Holdco GmbH	0	0	80.855
WPG UK Holdco Ltd.	0	0
WPG US Holdco LLC.	0	0	91.053
Off-Highway Powertrain Services Germany GmbH	0	0	0
Walterscheid GmbH	0	0	0
Walterscheid Getriebe GmbH	295	0	0
Walterscheid Brasil Industria de Equipamentos Agricolas Ltda.	0	0	0
Walterscheid Powertrain (China) Co. Ltd.	0	0	0
Walterscheid A/S	0	0	0
Powertrain Services France SAS	0	0	0
Walterscheid Monguelfo S.p.A.	0	0	0
Walterscheid Russia LLC	0	0	0
Powertrain Services UK Limited	0	0	0
Powertrain Services (UK Newco) Ltd.	0	0	0
Walterscheid Inc. Woodridge	203	0	0
Powertrain Rockford Inc.	0	0	0
GKN Ohio Inc.	0	0	0
Walterscheid Cardan GmbH	0	0	0
Total	498	181.992	181.992

Dealings with parent companies

The Group does not have commercial dealings with the majority shareholder, Eagles Oak S.r.l.

Relations with other related parties

It is disclosed that the "Other operating costs" heading includes professional consultancy provided by three Directors of the parent company Comer Industries S.p.A. for non-significant amounts.

10. The companies in the Group

On December 31, 2021, the Comer Industries Group is organized in a structure with Comer Industries S.p.A. at the top, possessing directly or indirectly 100% of 26 Italian and foreign subsidiaries that constitute the scope of consolidation.

The key figures of the consolidated subsidiary companies are summarized in the table below:

	% control	Main business	Share capital on 12/31/2021
Company
Comer Industries SpA	Parent Company	Design, production and sales in the agricultural and industrial sector	18.487.339 €
Comer GMBH	100%	Agency and trade in the agricultural and industrial sector	205.000 €
Comer Industries INC	100%	Sales with logistics services in the agricultural and industrial sector	$ 13.281.000
Comer Industries do Brasil EIRELI	100%	Sales with logistics services in the agricultural sector	6.112.000 BRL
Comer Industries UK Ltd	100%	Sales with logistics services in the agricultural and industrial sector	£ 265.000
Comer Industries Components Srl	100%	Production and sales in the agricultural and industrial sector	7.125.000 €
Comer Industries (ShaoXing) Co Ltd	100%	Sales in the agricultural sector	6.720.000 €
Comer Industries India Pvt Ltd	100%	Production and sales in the industrial sector	145.090.000 INR
Comer Industries (Jiaxing) Co Ltd	100%	Production and sales in the agricultural and industrial sector	11.700.000 €
WPG German Holdco GmbH	100%	Holding company	10.495 €
WPG UK Holdco Ltd.	100%	Holding company	£ 3.450
WPG US Holdco LLC.	100%	Holding company	$ 51.446
Off-Highway Powertrain Services Germany GmbH	100%	Aftersales and sales in the agricultural and industrial sector	2.050 €
Walterscheid GmbH	100%	Design, production and sales in the agricultural sector	17.895 €
Walterscheid Getriebe GmbH	100%	Design, production and sales in the agricultural and industrial sector	26 €
Walterscheid Brasil Industria de Equipamentos Ac	100%	Design, production and sales in the agricultural sector	1.933 BRL
Walterscheid Powertrain (China) Co. Ltd.	100%	Design, production and sales in the agricultural and industrial sector	20.799
Walterscheid A/S	100%	Aftersales and sales in the agricultural and industrial sector	2.367 DKK
Powertrain Services France SAS	100%	Aftersales and sales in the agricultural and industrial sector	2.139 €
Walterscheid Monguelfo S.p.A.	100%	Design, production and sales in the agricultural and industrial sector	2.580 €
Walterscheid Russia LLC	100%	Aftersales and sales in the agricultural and industrial sector	0
Powertrain Services UK Limited	100%	Holding company	£ 16.039
Powertrain Services (UK Newco) Ltd.	100%	Holding company	£
Walterscheid Inc. Woodridge	100%	Design, production and sales in the agricultural sector	$ 1.757
Powertrain Rockford Inc.	100%	Design, production, aftersales and sales in the agricultural and industrial sector	$ 1
GKN Ohio Inc.	100%	Dormant company	$
Walterscheid Cardan GmbH	100%	Design, production and sales in the industrial sector	25 €

	of which paid on 12/31/2021	Turnover 12/31/2021	Net profit 12/31/2021	Equity 12/31/2021	Number of employees 12/31/2021
Company		Eur/Mn ^*	Eur/Mn ^*	Eur/Mn ^*
Comer Industries SpA	18.487.339 €	354,9	15,9	276,9	877
Comer GMBH	205.000 €	n.a	0,1	0,4	0
Comer Industries INC	$ 13.281.000	94,8	3,6	23,2	30
Comer Industries do Brasil EIRELI	6.112.000 BRL	13,9	2,0	4,5	7
Comer Industries UK Ltd	€ 265.000	3,0	0,2	0,9	4
Comer Industries Components Srl	7.125.000 €	82,7	2,1	15,6	286
Comer Industries (ShaoXing) Co Ltd	6.720.000 €	7,5	0,2	11,1	2
Comer Industries India Pvt Ltd	145.090.000 INR	18,3	1,7	7,4	66
Comer Industries (Jiaxing) Co Ltd	11.700.000 €	198,3	20,5	48,7	278
WPG German Holdco GmbH	10.495 €		0,5	18,4	0
WPG UK Holdco Ltd.	£ 3.450		0,0	3,2	0
WPG US Holdco LLC.	$ 51.446		0,2	24,6	0
Off-Highway Powertrain Services Germany GmbH	2.050 €	5.841,0	-0,7	14,0	357
Walterscheid GmbH	17.895 €	9.184,0	-0,2	51,7	733
Walterscheid Getriebe GmbH	26 €	2.644,0	-0,4	7,2	221
Walterscheid Brasil Industria de Equipamentos Ac	1.933 BRL	630,0	-0,1	0,6	47
Walterscheid Powertrain (China) Co. Ltd.	20.799	1.452,0	0,2	12,5	106
Walterscheid A/S	2.367 DKK		0,0	1,3	0
Powertrain Services France SAS	2.139 €	1.350,0	0,1	77	31
Walterscheid Monguelfo S.p.A.	2.580 €	3.496,0	0,3	17,1	206
Walterscheid Russia LLC	0	355,0	0,1	2,0	9
Powertrain Services UK Limited	£ 16.039		0,3	14,4	0
Powertrain Services (UK Newco) Ltd.	£ -		0,0	0,1	0
Walterscheid Inc. Woodridge	$ 1.757	3.188,0	0,3	19,1	166
Powertrain Rockford Inc.	$ 1	6.081,0	0,3	46,6	157
GKN Ohio Inc.	$ -				0
Walterscheid Cardan GmbH	25 €	487,0	-	- 0,1	25

11. Non-financial information

In 2021 Comer Industries established its strategy regarding sustainability and social responsibility, following the presentation in 2019 of the "Our Bright Impact" project.

The Sustainability Report referring to 2020 was published during the year with the objective of communicating in a transparent and comprehensive way the Group's strategies, initiatives and performances with an economic, social and environmental impact. With regards to the 2021 financial year, consistent with this approach, Comer Industries is preparing to publish its Non-Financial Statement (NFS) pursuant to Leg. Decree 254/2016.

In line with its support of the UN 2030 Agenda and commitment to Sustainable Development Objectives, Comer Industries is implementing a concrete action plan aimed at contributing to the achievement of said objectives and a progressive integration of sustainability into its business model.

12. Significant events after the close of the year and business outlook

On February 21, 2022, the Board of Directors of Comer Industries reviewed and approved the proposed cross- border merger by incorporation into Comer Industries of the subsidiary WPG Holdco B.V. (non-operating parent of the newly acquired Walterscheid Group).

The aim of this operation was to achieve improved management efficiency, simplification and shortening of the control chain under Comer Industries.

This transaction will not have any accounting impact on the consolidated financial statements.

The strong geo-political pressures concerning Russia, Belarus and Ukraine can lead to situations of international, humanitarian and social crises of a significant dimension with consequent strong negative impacts for the populations of these countries. However, it is reasonable to expect that the events currently underway, extraordinary in nature and extent, will have direct and indirect repercussions on economic activity, whose related potential effects on: i) supply chains, in particular with reference to supply and to prices of raw materials and energy, ii) development of demand on international markets and iii) inflation and interest rate trends are not predictable.

The Group points out that aggregate revenues from nations affected by the crisis in Eastern Europe correspond to just over 2% of 2021 pro-forma revenues and that there are no significant outstanding credit positions or effects on the supply chain.

13. Proposal for the allocation of profit

The Board of Directors proposes the Shareholder's Meeting to approve, in conjunction with the first coupon, the distribution of a dividend of 0,5 euros for each share held at the date of approval. The dividend shall be payable on May 4, 2022 (the so-called payment date) with distribution date May 2, 2022 (the so-called exdate). In this case, all those registered as Comer Industries S.p.A. shareholders at the end of the accounting day of May 3, 2022 (the so-called record date) will be entitled to the dividend.

The remainder of the profit for the year of the parent company Comer Industries S.p.A. will be allocated to the Legal Reserve in the amount of 794,189 euros, as envisaged by article 2430 of the Italian Civil Code, and the remainder to the extraordinary reserve.

Reggiolo, Italy, March 28, 2022

For the Board of Directors

Matteo Storchi, President & CEO

Consolidated financial statements and explanatory notes

Comer Industries S.p.A.

Headquarters and Administrative Offices: 42046 Reggiolo (RE) Italy - Via Magellano 27

Reg. in the Reggio Emilia Business Register no. 07210440157

Share capital 18,487,338.60 euros fully subscribed and paid-up

Tax code 07210440157 - VAT no. IT 01399270352

Art. 2497 bis of the Italian Civil Code. - The company is subject to direction and coordination by Eagles Oak S.r.l., with registered offices in 41126 Modena, Via del Sagittario 5

Share Parent 2,000,000 euros fully paid - Modena Business Register no. 03699500363

Contents:

Consolidated balance sheet

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated cash flow statement

Consolidated statement of changes in equity

Explanatory notes to the consolidated financial statements

CONSOLIDATED BALANCE SHEET

(thousand euros)

ASSETS	Notes	12/31/2021	12/31/2020
Non-current assets
Tangible fixed assets	6.1	204.735	76.481
Intangible fixed assets	6.2	328.058	3.605
Real estate investments in joint venture		0	0
Investments		1.279	0
Tax assets and deferred tax receivables	6.3	41.311	8.414
Other long-term receivables	6.4	829	284
Total		576.212	88.784
Non-current assets held for sale
Assets held for sale		0	0
Current assets
Inventories	6.5	228.628	83.254
Trade receivables	6.6	196.130	85.701
Other short-term receivables	6.6	8.896	1.428
Current tax assets	6.7	17.264	7.903
Other short-term financial receivables		202	0
Short-term financial derivatives	6.8	601	1.214
Cash and cash equivalents	6.8	85.744	38.177
Total		537.464	217.677
TOTAL ASSETS		1.113.676	306.461

LIABILITIES AND SHAREHOLDERS' EQUITY	Notes	12/31/2021	12/31/2020
Share capital and reserves
Issued capital		18.487	13.109
Share premium reserve		187.881	27.944
Other reserves		32.071	24.109
Retained profits (losses)		107.173	78.213
- Retained earnings		67.744	56.448
- Net profit/(Loss)		39.429	21.765
Total	6.9	345.612	143.375
Minority interests		0	-
Total shareholders' equity	6.9	345.612	143.375
Non-current liabilities
Long-term loans	6.8	177.743	-290
Other Long-term loans	6.8	47.592	19.771
Tax liabilities and deferred taxes	6.10	20.692	1.270
Post-employment benefits	6.11	157.800	9.228
Other long-term payables	6.13	9.768	213
Long-term provisions	6.12	9.845	3.332
Total		423.440	33.524
Current liabilities
Trade payables	6.13	218.611	84.209
Other short-term payables	6.13	40.375	16.349
Current tax liabilities	6.14	21.816	3.991
Short-term loans	6.8	29.203	12.358
Short-term financial derivatives	6.8	114	255
Short-term employee benefits	6.11	7.379
Other Short-term loans	6.8	8.739	3.691
Short-term provisions	6.12	18.387	8.709
Total		344.624	129.562
TOTAL LIABILITIES		1.113.676	306.461

CONSOLIDATED INCOME STATEMENT	Notes	12/31/2021	12/31/2020
(thousand euros)
Revenues from contracts with customers	6.16	598.110	396.207
Other operating revenues	6.17	5.778	2.733
Change in stock of fin. and semi-fin. goods and work in progress		45.090	(2.244)
Cost of purchases		(424.237)	(246.035)
Personnel costs	6.18	(86.810)	(67.112)
Other operating charges	6.20	(59.710)	(34.967)
Allowance for bad debts and other provisions for risks		(627)	(461)
Depreciation/amortization	6.1 - 6.2	(20.764)	(17.743)
OPERATING PROFIT (EBIT)	6.21	56.831	30.378
Net financial income / (charges)	6.22	(1.996)	(980)
Pre-tax profit		54.835	29.398
Income taxes	6.23	(15.406)	(7.632)
NET PROFIT/ (LOSS)		39.429	21.765
of which pertaining to minority interests		-	-
of which pertaining to the Group		39.429	21.765
Earnings/(loss) per share (in euros)	6.24	1,37	1,07
Diluted earnings/(loss) per share (in euros)	6.24	1,37	1,07

CONSOLIDATED COMPREHENSIVE INCOME STATEMENT	31.12.2021	12/31/2020
(thousand euros)
Net profit/(loss)	39.429	21.765
Other components of the comprehensive income statement which will subsequently be reclassified in profit/loss for the period: (net of taxes)
Net (loss)/gain on cash flow hedges	(743)	1.367
of which fiscal impact	178	(328)
Exchange differences on translating foreign financial statements	6.333	(4.112)
Total other components in the comprehensive income statement that will subsequently be reclassified in profit/(loss) for the period net of taxes	5.768	(3.074)
Other components of the comprehensive income statement which will not subsequently be reclassified in profit/(loss) for the period: (net of taxes)
(Loss)/profit from revaluation of defined benefit plans	(316)	(113)
of which fiscal impact	50	20
Total other components of the comprehensive income statement that will not subsequently be reclassified in profit/(loss) for the period net of taxes	(265)	(93)
Total comprehensive profit /(loss) net of taxes	44.932	18.598

CASH FLOW STATEMENT	Notes	12/31/2021	31/12/2020
(thousand euros)
A- Operating activities
Net profit for the year		39.429	21.765
Reconciliation of net profit to operating cash flows:
Depr. of tangible assets, am. of intangible assets and depr. of property investments net IFRS 16 imps		16.215	14.014
Other impact from IFRS 2 gross to deferred tax impact		2.194	5.389
Provisions for bad debts, net of uses		(84)	263
Provisions for employee benefits net of uses		2.774	2.654
Provisions for liabilities and charges net of uses		8.649	4.692
Net change in deferred taxes		(3.007)	37
Effect of conversion on balance sheet		6.568	(3.928)
Changes in working capital
Inventories	6.5	(45.090)	2.244
Trade receivables	6.6	(33.099)	(8.708)
Tax assets/liabilities		(1.345)	6.318
Other receivables		7.362	(421)
Trade payables		75.528	6.543
Other liabilities		(641)	1.554
Changes in severance indemnity net of provisions		(2.789)	(2.726)
Changes in provisions for risks and charges net of write-downs			0
A - Cash flow provided by operating activities		72.664	49.692
B - Investing activities
Net investments in tangible fixed assets	6.1	(18.036)	(11.894)
Net investments in intangible fixed assets	6.2	(1.600)	(1.240)
Divestments of tangible fixed assets	6.1	823	1.080
Divestments of intangible fixed assets	6.2	21	131
Effect of conversion of fixed assets		(1.949)	338
Effect of conversion of equity investments		(198)	0
B - Net cash flow provided by investing activities		(20.939)	(11.586)
C - Net cash flow from IFRS 16 impact
Increase IFRS 16	6.1	(5.694)	(833)
Asset impairment IFRS 16		0	0
Depreciation of tangible fixed assets IFRS 16	6.1	4.549	3.729
Net chareges IFRS 16		1.133	(2.754)
Effect of conversion of IFRS 16 investments		(103)	51
C - Net cash flow from IFRS 16 impact		(115)	193
D - Business combinations
Net increases arising from company acquisition net of cash acquired	5.1.1	(190.514)	0
D - Business combinations		(190.514)	0
E - Financing activities
Repayments of short-term loans		(7.962)	(8.254)
Repayments of long-term loans		(1.569)	(4.694)
New short-term loans		24.807	7.000
New long-term loans		179.602	0
Change in the fair value of financial derivatives		472	(1.348)
Changes in capital and reserves		5.503	(3.164)
IFRS 2 impact: IPO costs			(2.583)
Tax impact on IPO costs		(6.568)	3.928
Changes in capital and reserves from warrants		2.389	0
Dividends paid in the period		(10.205)	(7.143)
E - Net cash flows from financing activities		186.470	(16.259)
CHANGE IN CASH AND CASH EQUIVALENTS (A+B+C+D+E)		47.567	22.041
Opening balance of cash and cash equivalents		38.177	16.136
Increase (decrease) in cash and cash equivalents		47.567	22.041
Closing balance of cash and cash equivalents		85.744	38.177

Consolidated statement of changes in equity

	Other Reserves
(thousand Euros)	Share capital	Share premium reserve
Shareholder's equity on 01/01/2020	13.109	27.944
2020 Profit/(Loss) for the year
IAS 19.93A - Actuarial gain
Changes in conversion reserve
Cash flow hedge reserve
Subtotal: Other Comprehensive income Results
Dividend distribution
Allocation of 2019 result
Stock grant impact
Shareholder's equity on 12/31/2020	13.109	27.944
2021 Profit/(Loss) for the year
IAS 19.93A - Actuarial gain
Changes in conversion reserve
Cash flow hedge reserve
Subtotal: Other Comprehensive income Results
Dividend distribution
Allocation of 2020 result
Warrant capital increase	239
Warrant share premium reserve		2.151
Acquisition impacts: share capital increase	5.139
Share premium reserve from acquisition		157.787
Stock grant impact
Shareholder's equity on 12/31/2021	18.487	187.881

	Other Reserves
(thousand Euros)	Stock Grant Reserve	Legal Reserve	Extraordinary reserves	Conversion Reserve
Shareholder's equity on 01/01/2020	3.181	2.000	10.702	1.857
2020 Profit/(Loss) for the year
IAS 19.93A - Actuarial gain
Changes in conversion reserve				(4.112)
Cash flow hedge reserve
Subtotal: Other Comprehensive income Results				(4.112)
Dividend distribution
Allocation of 2019 result		622	8.523
Stock grant impact	2.807
Shareholder's equity on 12/31/2020	5.987	2.622	19.225	(2.256)
2021 Profit/(Loss) for the year
IAS 19.93A - Actuarial gain
Changes in conversion reserve				6.333
Cash flow hedge reserve
Subtotal: Other Comprehensive income Results				6.333
Dividend distribution
Allocation of 2020 result
Warrant capital increase
Warrant share premium reserve
Acquisition impacts: share capital increase
Share premium reserve from acquisition
Stock grant impact	2.194
Shareholder's equity on 12/31/2021	8.181	2.622	19.225	4.078

	Other Reserves
(thousand Euros)	F.T.A. Reserve	C.F.H. Reserve	Consolidation Reserve
Shareholder's equity on 01/01/2020	(5.923)	(129)	3.543
2020 Profit/(Loss) for the year
IAS 19.93A - Actuarial gain
Changes in conversion reserve
Cash flow hedge reserve		1.039
Subtotal: Other Comprehensive income Results		1.039
Dividend distribution
Allocation of 2019 result
Stock grant impact
Shareholder's equity on 12/31/2020	(5.923)	910	3.543
2021 Profit/(Loss) for the year
IAS 19.93A - Actuarial gain
Changes in conversion reserve
Cash flow hedge reserve		(565)
Subtotal: Other Comprehensive income Results		(565)
Dividend distribution
Allocation of 2020 result
Warrant capital increase
Warrant share premium reserve
Acquisition impacts: share capital increase
Share premium reserve from acquisition
Stock grant impact
Shareholder's equity on 12/31/2021	(5.923)	345	3.543

	Other Reserves
(thousand Euros)	Retained earnings	Profit/(Loss) for the period	Total Equity
Shareholder's equity on 01/01/2020	54.329	18.501	129.114
2020 Profit/(Loss) for the year		21.765	21.765
IAS 19.93A - Actuarial gain	(93)		(93)
Changes in conversion reserve			(4.112)
Cash flow hedge reserve			1.039
Subtotal: Other Comprehensive income Results	(93)	21.765	18.598
Dividend distribution	(7.143)		(7.143)
Allocation of 2019 result	9.356	(18.501)
Stock grant impact			2.807
Shareholder's equity on 12/31/2020	56.448	21.765	143.375
2021 Profit/(Loss) for the year		39.429	39.429
IAS 19.93A - Actuarial gain	(265)		(265)
Changes in conversion reserve			6.333
Cash flow hedge reserve			(565)
Subtotal: Other Comprehensive income Results	(265)	39.429	44.932
Dividend distribution	(10.205)		(10.205)
Allocation of 2020 result	21.765	(21.765)
Warrant capital increase			239
Warrant share premium reserve			2.151
Acquisition impacts: share capital increase			5.139
Share premium reserve from acquisition			157.787
Stock grant impact			2.194
Shareholder's equity on 12/31/2021	67.744	39.429	345.612

1. General information

Comer Industries S.p.A. is an Italian company with headquarters and administrative offices in Via Magellano 27 in Reggiolo (RE), Tax code and registration in the Business Register no. 07210440157 with approved Share Capital of 18,487,338.60 fully subscribed and paid up as of 31 December 2021, divided into 28,678,090 shares.

Comer Industries is the leading global player in the design and manufacture of advanced engineering systems and mechatronics solutions for power transmissions. It operates in the agricultural machinery, construction and forestry equipment, energy and industrial sectors.

The Group is structured into 11 operating units specialized by product families spread over thirteen production sites in the Italian provinces of Reggio Emilia, Mantua, Matera and Monguelfo, as well as in Bangalore, India, Jiaxing and Taican, China, Lohmar and Sohland, Germany, Cachoeirinha, Brazil, Woodbridge and Rockford, Illinois, USA. Key international markets are managed through owned subsidiaries in Brazil, China, Germany, Great Britain, India and United States.

Pursuant to art. 2497 bis of the Italian Civil Code, note that Comer Industries S.p.A. is subject to direction and coordination by Eagles Oak S.r.l., with registered office in Modena, Viale del Sagittario 5, Share Capital 2,000,000 euros fully paid, Tax code and registration in the Business Register no. 03699500363, which has control, being the owner of the absolute majority of shares.

The consolidated financial statements as of December 31, 2021 were approved by the Board of Directors on March 28, 2022.

2. Scope of consolidation

The scope of consolidation as of December 31, 2021 changed radically as a result of the transaction completed in December 2021, incorporating 18 foreign companies that are part of the Walterscheid Group. See section 5.1.1 for further details on the WPG Acquisition. Moreover, the liquidation of the French subsidiary Comer Industries Sarl was completed in the fourth quarter.

Company name	Office	Currency	Share capital	% control	Parent company
Comer Industries Spa	Reggiolo (RE) - Italia	KEUR	18.487	Holding	Eagles Oak Srl
Comer GmbH	Pfullendorf - Germania	KEUR	205	100	Comer Industries Spa
Comer Industries Inc.	Charlotte (N.C.) - U.S.A	KUSD	13.281	100	Comer Industries Spa
Comer Industries U.K. Ltd.	Leicester- Regno Unito	KGBP	265	100	Comer Industries Spa
Comer Industries Components Srl	Matera - Italia	KEUR	7.125	100	Comer Industries Spa
Comer Industries (Shaoxing) Co. Ltd	Shaoxing - P.R.C.	KEUR	6.720	100	Comer Industries Spa
Comer Industries do Brasil EIRELI	Limeira (SP) - Brasile	KBRL	6.112	100	Comer Industries Spa
Comer Industries India Pvt Ltd	Bangalore - India	KINR	145.090	95	Comer Industries Spa
				5	Comer Ind. Com. Srl
Comer Industries (Jiaxing)	Jiaxing - P.R.C.	KEUR	11.700	65,8	Comer Industries (Shaoxing) Co. Ltd.
				34,2	Comer Industries Spa
WPG German Holdco GmbH	Lohmar, Germany	KEUR	10.495	100	Walterscheid Powertrain Holdco B.V.
WPG UK Holdco Ltd.	Leek, United Kingdom	KGBP	3.093	100	Walterscheid Powertrain Holdco B.V.
WPG US Holdco LLC.	Rockford, IL, USA	KUSD	58.546	100	Walterscheid Powertrain Holdco B.V.
Off-Highway Powertrain Services Germany GmbH	Lohmar, Germany	KEUR	2.050 -	89,9	Walterscheid GmbH
				10,1	WPG German Holdco GmbH
Walterscheid GmbH	Lohmar, Germany	KEUR	17.895	100	Walterscheid Powertrain Holdco B.V.
Walterscheid Getriebe GmbH	Sohland, Germany	KEUR	26	89,84	Walterscheid GmbH
				10,16	WPG German Holdco GmbH
Walterscheid Brasil Industria de Equipamentos Aqricolas Ltda.	Cachoeirinha, Brasil	KBRL	8.410	99,99	Powertrain Services UK Limited
				0,01	Powertrain Services (UK Newco) Ltd.
Walterscheid Powertrain (China) Co. Ltd.	Jiangsu, China	KCNY	162.618	100	WPG UK Holdco Ltd.
Walterscheid A/S	Ishøj, Denmark	KDKK	25.111	100	Powertrain Services UK Limited
Powertrain Services France SAS	Chanteloup-les-Vignes, France	KEUR	2.139	100	Off-Highway Powertrain Services Germany GmbH
Walterscheid Monguelfo S.p.A.	Monguelfo-Tesido, Italy	KEUR	2.580	100	Powertrain Services UK Limited
Walterscheid Russia LLC	Moscow, Russian Federation	KRUB	10	50	WPG UK Holdco Ltd.
					Powertrain Services UK Limited
Powertrain Services UK Limited	Leek, United Kingdom	KGBP	14.231	100	WPG UK Holdco Ltd.
Powertrain Services (UK Newco) Ltd.	Leek, United Kingdom	KGBP	-	100	Powertrain Services UK Limited
Walterscheid Inc. Woodridge	Woodridge, IL, USA	KUSD	2.000	100	WPG US Holdco LLC.
Powertrain Rockford Inc.	Rockford, IL, USA	KUSD	1	100	WPG US Holdco LLC.
GKN Ohio Inc.	Woodridge, IL, USA	KUSD		100	Walterscheid Inc. Woodridge
Walterscheid Cardan GmbH	Hohe Borde OT Irxleben, Germany	KEUR	25	100	Walterscheid GmbH
Matsui Walterscheid Ltd.	Koga, Japan	KJPY		40	Walterscheid GmbH

At the reference date of these consolidated financial statements the parent company Comer Industries S.p.A. is held by Eagles OAK S.r.l.

With regards to the summary of economic-asset/liability relations with related parties of the Group, reference should be made to the details in the Management Report.

3. Accounting standards adopted

3.1 Declaration of compliance with IFRS

The consolidated financial statements of Comer Industries S.p.A. have been drawn up in compliance with the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board ("IASB") and approved by the European Union and in force at the balance sheet date. The notes to the consolidated financial statements have been integrated, on a voluntary basis, with the additional information required by Consob and by the provisions issued by it in implementation of art. 9 of Italian Leg. Dec. 38/2005 (resolutions 15519 and 15520) of July 27, 2006 and the DEM/6064293 communication of July 28, 2006, pursuant to art. 78 of the Issuers' Regulations, the EC document of November 2003 and, where applicable, the Italian Civil Code. "IFRS" also refers to the International Accounting Standards ("IAS") still in force, as well as all the interpretive documents issued by the IFRS Interpretation Committee, previously called the International Financial Reporting Interpretations Committee ("IFRIC") and before that, the Standing Interpretations Committee ("SIC").

3.2 Contents and form of the consolidated financial statements

The unit of currency used is the Euro, and all values are expressed in thousands of euro unless otherwise indicated.

The presentation layout for the consolidated balance sheet makes a distinction between current and non- current assets and liabilities, in which:

•	non-current assets include balances of assets realizable after more than one year and include intangible, tangible and financial assets and deferred tax assets;
•	current assets include the balances of assets realizable within 1 year;
•	non-current liabilities include payables falling due after more than 1 year, including financial debts, provisions for liabilities and charges and liabilities for employee benefits and deferred tax liabilities;
•	current liabilities include payables falling due within 1 year, including the short-term portion of medium-long-term loans and of provisions for liabilities and charges and liabilities for employee benefits.

The consolidated income statement is presented according to a "costs by nature" classification.

The cash flow statement has been drawn up on the basis of the indirect method and is presented in compliance with IAS 7, classifying cash flows between operating, investment and financing activities.

3.3 Relevant accounting standards

The Comer Industries S.p.A. Group adopted International Accounting Standards and International Financial Reporting Standards as of 2007, with the transition date to IFRS effective January 1,2006.

Continuing these principles, the consolidated financial statements as of December 31,2021, were therefore drawn up according to the IAS / IFRS adopted by the European Union.

The consolidated financial statements are presented in thousands of euros. The financial statements are prepared on a cost basis, except for financial instruments that are measured at fair value.

The preparation of the financial statements in accordance with IFRS (International Financial Reporting Standards) requires judgments, estimates and assumptions that have an effect on the assets, liabilities, income and expenses. The actual results may differ from the results obtained using these estimates.

The accounting policies have been applied consistently in all Group companies and for all periods presented.

3.4 Principles of consolidation

(i) Subsidiaries

Companies are defined subsidiaries when the parent company has the authority, directly or indirectly, to conduct business so as to obtain benefits from such activities. In defining control, consideration is also given to potential voting rights that can currently be freely exercised or converted. These potential voting rights are not taken into account for the purposes of the consolidation process upon allocation to minority shareholders of the results of operations and the share of capital and reserves they are entitled to.

The financial statements of subsidiaries are consolidated from the date on which the Group gains control and de-consolidated from the date that this controlling interest ceases.

The global integration method is adopted for the consolidation of subsidiaries, involving undertaking the total amount of assets and liabilities and all costs and revenues, irrespective of the extent of the Group's interest. The book value of consolidated equity investments is therefore offset against any relative capital and reserves. The shares of capital and reserves and profits pertaining to minority shareholders are shown separately under a specific capital and reserve item and on a separate line of the consolidated income statement. Intercompany dividends distributed by foreign subsidiaries are eliminated in the consolidation process using the proportionate approach provided for by IAS 21, since, even in the case of distribution of profit reserves generated in previous years, the investor's percentage equity ownership is not considered to be affected.

(ii) Related companies

Related companies are those companies over which the Group has considerable influence but in which it does not exercise any control over the management. The consolidated financial statements include the accrued share of the profits and losses of related companies, measured using the equity method from the date on which any such significant influence on operation started until its termination. Similar to that described above for the subsidiaries, the acquisition of related companies is also recorded under the purchase method; in this case, any acquisition cost in excess of the Group's share of the fair value of net assets acquired is included in the value of the equity investment.

(iii) Transactions eliminated as part of the consolidation process

Intercompany balances and profits and losses resulting from intercompany transactions are eliminated in the consolidated financial statements. Profits arising from intercompany transactions with associated companies are eliminated as part of the valuation of the equity investment using the equity method. Intercompany losses are eliminated only if there is evidence that these were realized in detriment to third parties.

3.5 Sectoral information

Industry-related information is given with reference to sectors of activity. The information includes both costs directly attributable and costs allocated according to reasonable assumptions. General and administrative costs, ICT and HR services, fees for directors, statutory auditors and Group management departments, as well as costs relating to the global sourcing area (organized according to purchasing group of product category) have been allocated to sectors on the basis of turnover.

The Group operates in the following sectors:

―

Agricultural sector. This mainly consists of speed increasers, speed reducers, bevel gearboxes, PTO driveshafts, wheel drives and axles for agricultural use, especially manufacturers of combine harvesters and tractors, haymaking, harvesting, irrigation and mixing, and land preparation and working machines.

―

Industrial sector. This includes products such as modular planetary drives, travel and hoist drives, slew drives and rigid and steering axles for construction and forestry machinery manufacturers, from the shipbuilding to the airport building and mining industries. Components for municipalities, for the extraction industry and material handling sectors. Products for the wind power and renewable energy sector as well as for driving the augers of biogas machines.

3.6 Treatment of foreign currency transactions

(i) Foreign currency transaction

The functional currency and reporting currency adopted by Comer Industries Group is the Euro. Transactions in foreign currencies are converted into Euro on the basis of the exchange rate at the transaction date. The monetary assets and liabilities are converted at the exchange rate on the balance sheet date. Any exchange rate differences arising out of conversion are recognized in the income statement. Non-monetary assets and liabilities measured at historical cost are converted at the exchange rate at the transaction date. The monetary assets and liabilities measured under fair value are converted into euros at the exchange rate on the date the fair value was determined.

(ii) Conversion of financial statements drawn up in foreign currencies

The assets and liabilities of companies based in non-EU countries, including adjustments arising from the consolidation process, relating to goodwill and fair value adjustments arising from the acquisition of a non-EU company, are converted at the exchange rate prevailing on the closing date of the balance sheet. Revenues and costs of these companies are converted at the average exchange rate for the period, closest to the exchange rates on the dates on which the individual transactions took place. Foreign exchange differences arising from the conversion process are recorded directly in a special provision under capital and reserve called the conversion reserve.

Below is the table with the exchange rates applied for the conversion of financial statements:

	Exchange rates
	Spot Exchange Rates		Annual Av. Exch. Rates
	12/31/2021	12/31/2020	2021	2020
€/GBP	0,840	0,899	0,860	0,890
€/USD	1,133	1,227	1,183	1,142
€/CNY	7,195	8,023	7,628	7,875
€/BRL	6,310	6,374	6,378	5,894
€/INR	84,229	89,661	87,439	84,639
€/CHF	1,033	1,080	1,081	1,071
€/CZK	24,858	26,242	25,640	26,455
€/DKK	7,436	7,441	7,437	7,454
€/JPY	130,380	126,490	129,877	121,846
€/NOK	9,989	10,470	10,163	10,723
€/RUB	85,300	91,467	87,153	82,725
€/SEK	10,250	10,034	10,147	10,485
€/HUF	369,190	363,890	358,516	351,249
€/PLN	4,597	4,560	4,565	4,443

3.7 Acquisitions

Business combinations are recognized according to the acquisition method.

According to this method, the consideration transferred in a business combination is measured at fair value, calculated as the sum of the fair values of the assets transferred and the liabilities assumed by the Group at the acquisition date. Any transaction costs are recognized in the income statement at the time they are incurred.

Goodwill is determined as the excess of the sum of the consideration transferred in the business combination, the value of shareholders' equity pertaining to minority interests, and the fair value of any equity investment previously held in the acquired company over the fair value of the net assets acquired and liabilities assumed at the acquisition date. If the value of the net assets acquired and liabilities assumed at the date of acquisition exceeds the sum of the consideration transferred, the value of shareholders' equity pertaining to minority interests, and the fair value of any equity investment previously held in the acquired company, this excess is immediately recognized in the income statement as income from the transaction concluded. The portions of shareholders' equity of non-controlling interests at the date of acquisition may be measured at fair value or at the pro-rata value of the net assets recognized for the acquired company. The choice of valuation method is made on a transaction-by-transaction basis. If the initial values of a business combination are incomplete at the balance sheet date that the business combination occurred on, in its consolidated financial statements the Group reports the provisional values of the items for which recognition cannot be completed. These provisional values are adjusted during the measurement period to reflect new information gathered about facts and circumstances existing at the acquisition date which, if known, would have affected the value of the assets and liabilities recognized at that date.

3.8 Property, plant and equipment

(i) Owned fixed assets

Property, plant and equipment are measured at historical cost and are reported net of depreciation (see point (iv) below) and impairment losses (see paragraph 3.9). The cost of internally produced fixed assets include materials, direct labor, and a portion of indirect production costs. The cost of fixed assets, whether purchased externally or manufactured internally, includes incidental costs directly chargeable and necessary to operate the asset and, when relevant and subject to contractual obligations, the current value of the estimated cost for the dismantling and removal of fixed assets.

Financial charges relating to specific loans used for the acquisition of tangible fixed assets are charged to the income statement on an accruals basis. According to the provisions of IAS 20, any capital grants obtained as a result of investment incentives granted by the public administration are deducted from the historical cost of any related capitalized fixed assets, when put into operation. No fixed assets are available for sale.

(ii) Fixed assets under finance leases

Assets held by the Group under leasing contracts, including operating leases, in accordance with the IFRS 16 standard in force since January 1, 2019, are recognized as assets with a balancing entry in financial payables. In particular, assets are recognized at a value equal to the current value of future payments at the date of signing the contract, discounted using the applicable incremental borrowing rate for each contract.

(iii) Subsequent costs

The costs of replacing certain parts of the fixed assets are capitalized when it is probable that these costs will result in future economic benefits and can be reliably measured. All other costs, including the costs of maintenance and repairs, are attributed to the income statement as incurred.

(iv) Depreciation

Depreciation is charged to the income statement on a straight-line basis and on the estimated useful life of fixed assets and their residual possible use. Land is not depreciated. The estimated useful life results in the following depreciation rates by homogeneous category:

Buildings	2.5%-3%
Light construction, general and specific plants	10-15.5%
Equipment, models and molds	20 - 25%
Furniture and furnishings	12%
Electronic office equipment	18 - 20%
Motor vehicles and internal transport	20 - 25%

The estimated useful life of assets is revised annually and any changes in rates, where necessary, are made prospectively.

For assets purchased and/or that became operational during the year, depreciation is calculated using the rates set out above, but adapted pro-rata temporis to any such set-up date.

3.9 Other intangible assets

(i) Research and development costs

The costs of research with the aim of acquiring new technical knowledge are charged in the income statement when incurred.

The development costs incurred for the creation of new products, versions, accessories or new production processes are capitalized when:

•	these costs can be reliably determined;
•	these products, versions or processes are technically and commercially feasible;
•	the expected volumes and realization values indicate that the costs incurred for development will generate future economic benefits;
•	the resources to complete the development project exist.

The capitalized cost includes the materials and the mere cost of direct labor. Other development costs are charged to the income statement when incurred. The capitalized development costs are measured at cost, net of accumulated amortization, (see next point (v)) and impairment losses (see para.3.9)

(ii) Other intangible assets

Other intangible fixed assets, which all have finite useful lives, are measured at cost and are recorded net of accumulated amortization, (see next point (v)) and impairment losses (see para.3.9)

The use of software licenses is amortized over their period of use (3-5 years).

The costs incurred internally for the creation of trademarks or goodwill are charged to the income statement when incurred.

(iii) Subsequent costs

Subsequent costs incurred for intangible fixed assets are capitalized only if they increase the future financial benefits of the specific capitalized fixed asset, otherwise they are charged in the income statement as incurred. Incidental financing costs.

(iv) Amortization

Amortization is charged to the income statement on a straight-line basis based on the estimated useful life of the capitalized fixed assets. The estimated useful lives are as follows:

Patents and trademarks	5 years
Development costs	3-5 years
Software licenses	5 years

The useful life is reviewed annually and any changes in rates, where necessary, are made prospectively.

3.10 Impairment of assets

The book values of the assets, except for stocks, financial assets regulated by IFRS 9 and deferred tax assets, are subject to review at the balance sheet date, in order to determine if any impairment indicators exist. If the assessment reveals the presence of such indicators, the estimated realizable value of the asset is calculated in the manner indicated below. Please note that the estimated realizable value of goodwill and intangible fixed assets not yet used is estimated at least once per year, or more frequently if events indicate the possibility of a loss of value.

A tangible or intangible asset, including rights of use (as defined by IFRS 16), suffers an impairment if it is not able to recover the book value at which the asset is recorded in the financial statements through the use or sale thereof. The purpose of the verification (impairment test) provided by IAS 36, is to ensure that tangible and intangible fixed assets are not carried at a value higher than their realizable value, consisting of the net realizable value or value in use, whichever is higher.

The value in use is the current value of future financial flows that are expected to be generated by the asset or by the cash generating unit to which the asset belongs. Expected cash flows are discounted using a pretax discount that reflects the current market estimate of the cost of money reported at the time and risks specific to the asset. If the carrying amount exceeds the recovery value, the assets or the cash generating units to which they belong are written down until they reflect the recovery value. Such losses are accounted for on the income statement.

If the conditions that led to the impairment cease to exist, the assets previously written down are proportionally reversed until reaching at most the value that the assets would have had in the absence of previous impairments, net of amortization calculated on the historical cost. Restorations of value are recognized in the income statement.

The goodwill value previously written down can never be reinstated.

3.11 Equity investments

Equity investments in associates are measured using the equity method, as required by IAS 28.

If impairment with respect to the amount determined using the above method is detected, the equity investment is written down accordingly.

3.12 Cash and cash equivalents

Cash and cash equivalents include cash on hand, bank and postal deposits and securities with an original maturity of less than three months.

3.13 Current financial assets, receivables and other assets

Financial assets, as provided for by the new IFRS 9 - "Financial Instruments: recognition and measurement" (as revised in July 2014) which replaces IAS 39 - "Financial Instruments: Recognition and Measurement", are classified, on the basis of the Group's management methods and the related contractual cash flow characteristics, in the following categories:

•	Amortized cost: financial assets held exclusively for the purpose of collecting the contractual cash flows are classified in the Amortized cost category. They are valued using the amortized cost method, recording the income in the income statement using the effective interest rate method;
•	Fair value through other comprehensive income ("FVOCI"): financial assets whose contractual cash flows are represented exclusively by the payment of principal and interest and which are held in order to collect the contractual cash flows as well as the flows deriving from the sale of the same are classified in the FVOCI category. They are measured at fair value. Interest income, exchange rate gains/losses, impairment losses (and related write-backs) of financial assets classified in the category FVOCI, are recorded in the income statement; other changes in the fair value of assets are recorded among the other components of OCI. When these financial assets are sold or reclassified to other categories, due to a change in the business model, the cumulative gains or losses recognized in OCI are reclassified to the income statement;
•	Fair value through profit or loss ("FVTPL"): the FVTPL category is residual in nature by collecting financial assets that do not fall under the Amortized cost and FVOCI categories, such as financial assets purchased for trading or derivatives, or assets designated as FVTPL by management at the date of initial recognition. They are measured at fair value. Gains or losses resulting from this measurement are recognized in the income statement;
•	FVOCI for equity instruments: financial assets represented by equity instruments of other entities (i.e. investments in companies other than subsidiaries, associates and joint ventures), not held for trading purposes, can be classified in the FVOCI category. This choice can be made instrument by instrument and requires changes in the fair value of these instruments to be recognized in the OCI and not to be reversed to the income statement either on sale or on impairment of the same. Only dividends from these instruments will be recognized in the income statement. The fair value of financial assets is determined on the basis of quoted bid prices or through the use of financial models. The fair value of unlisted financial assets is estimated using specific valuation techniques adapted to the specific situation. Valuations are regularly carried out in order to verify whether there is objective evidence that a financial asset or group of assets may be impaired. If there is objective evidence, the impairment loss is recognized as a cost in the income statement for the period.

3.14 Derivative financial instruments

The Group holds derivative financial instruments subscribed for hedging purposes; however, in cases in which the derivative financial instruments do not meet all the conditions applicable to hedge accounting as per IFRS 9, the changes in fair value of these instruments are recorded in the income statement as financial charges and/or income.

Therefore, the derivative financial instruments are recorded in compliance with the hedge accounting regulations when:

•	the hedge ratio is formally designated and documented at the beginning of the hedge;
•	it is presumed that the hedge is highly effective;
•	the effectiveness can be reliably measured and the hedge itself is highly effective during the designated periods.

The fair value of derivative financial instruments against exchange risks (forward) is their market value on the balance sheet date, which coincides with the discounted market value of the forward.

The accounting method for derivative financial instruments varies depending on whether or not the conditions and requirements of IAS 9 are met. Specifically:

(i) Cash flow hedges

In the case of a derivative financial instrument for which the hedging ratio to variations in cash flows generated by an asset or liability or a future transaction (underlying hedged item) believed to be highly probable and that could affect the income statement is formally documented, the effective portion, originating from the adjustment of the derivative financial instrument to the fair value, is charged directly to a reserve under capital and reserves. When the underlying hedged cash flow occurs, any such reserve is removed from capital and reserves and assigned to the income statement as operating charges and revenues, while any non-effective portion or overhedging, portion is immediately allocated to the income statement as financial charges and/or income.

When a hedging instrument reaches maturity, is sold or exercised, or the company changes the relationship with the underlying hedged item, and the forecast transaction, though it has yet to take place, is still considered likely, the resulting profits or losses originating from the adjustment of the financial instrument to the fair value remain under capital and reserves and are charged to income statement when the transaction takes place as described above. If the probability of the underlying transaction occurring is no longer likely, the related profits or losses from the derivative contract, originally recorded under capital and reserves, are immediately charged to the income statement.

(ii) Hedges of monetary assets and liabilities (Fair value hedges)

Where a derivative financial instrument is used to hedge changes in value of monetary assets or liabilities already recorded in the financial statements that could affect the income statement, profits and losses related to changes in fair value of the derivative financial instruments are immediately recorded in the income statement. Likewise, the profits and losses relating to the hedged item modify the carrying amount of any such item and are recorded in the profit and loss account.

3.15 Inventories

Stocks are recorded, in each homogeneous category, at the purchase cost, including incidental and production costs and the corresponding net realizable or market value at year-end, whichever is lowest. The cost is determined according to the weighted average cost method.

As far as goods manufactured by the Company (semi-finished, work in progress and finished goods) are concerned, the cost of production includes all directly chargeable costs (raw materials, consumables, energy utilities, direct labor), and the cost of manufacturing (indirect labor, depreciation, etc.) in the amount reasonably attributable to the products.

Any stock impairment risks are hedged by the relevant stock depreciation allowance recorded as an adjustment to the corresponding assets item. Amounts thus obtained do not differ significantly from current costs on the closing date of accounts.

3.16 Interest-bearing financial payables

All interest-bearing financial liabilities are valued as per the amortized cost method; the difference between this value and the settlement value is charged to the income statement during the term of the loan.

3.17 Liabilities for employee benefits

(i) Defined contribution plans

The Group participates in public or privately defined contribution pension schemes on a mandatory, contractual or voluntary basis. The payment of contributions fulfills the Group's obligation towards its employees. The contributions are costs recognized in the period in which they are due.

(ii) Defined benefit plans for employees for Italian companies

The defined benefit plans for employees are payable on or after the termination of the period of employment in the Group. These mainly include the severance indemnities which are calculated separately for each plan using actuarial methods to estimate the amount of future benefit accrued to employees during the year and in previous years. The resulting benefit is discounted and recorded net of the fair value of any related assets. The interest rate used to calculate the present value of the obligation was determined in accordance with para. 78 IAS 19, of the Iboxx Corporate A index with duration 7-10 determined at the date of valuation. To this end, the yield for a duration comparable to the overall duration of the worker's covered by the assessment was chosen.

In the case of increases in plan benefits, the portion of the increase relating to the previous employment period is charged to the income statement on a straight line basis over the period in which the related rights will be acquired. If the rights are acquired immediately, the increase is immediately recorded in the income statement.

The expected present value of benefits payable in the future related to the length of employment in the current period, conceptually similar to the accrued share of the employee severance indemnity, is classified under personnel costs in the income statement while the implicit financial charges are reclassified in the applicable financial section.

(iii) Employee defined benefit plans for German and American subsidiaries

Certain group companies offer defined benefit, post-employment, and other long-term pension plans. The cost of providing benefits under the plan is determined using the projected unit credit method. The companies' net obligation is calculated separately for each plan by estimating the amount of future benefit that employees have accrued in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

Measurements, including actuarial gains and losses and the return on plan assets (excluding interest), are recognized immediately in the balance sheet, with a corresponding debit or credit to retained earnings, through comprehensive income for the period they occur in. Remeasurements are not reclassified to earnings in subsequent periods.

Costs for past services are recognized in earnings on the date of the plan amendment or reduction. Interest is calculated by applying the discount rate to the defined benefit liability.

The companies' obligation with respect to other long-term employee benefits is equal to the future benefit that employees have received in exchange for their current work and in prior periods. This benefit is discounted to determine its present value.

3.18 Income taxes

Income taxes recognized in the income statement include current and deferred taxes. Income taxes are generally stated on the Income Statement, except when they refer to items directly accounted for in equity. In this case, the income taxes are also charged directly to capital and reserves, as a variation to the amount recorded.

Current taxes are taxes calculated by applying the tax rate in effect on the balance sheet date and adjustments to prior year taxes to taxable income.

Deferred taxes are calculated using the so-called liability method on timing differences between the amount of assets and liabilities recorded in the consolidated financial statements and the corresponding values recognized for tax purposes. Deferred taxes are calculated according to the designated method of reversal of timing differences, on the basis of realistic estimates of financial charges resulting from the application of the tax legislation in force at the date in which the financial statements were prepared.

Deferred tax assets are recognized only if it is probable that sufficient taxable income will be generated in future years to realize these deferred taxes.

3.19 Provisions for risks and charges

Provisions for risks and charges relate to costs and charges of a specific nature and certain or likely existence, the amount and date of occurrence of which are not known at the close of the period. Provisions are recognized when

•	the existence of a pending liability arising from a past event is probable;
•	it is likely that fulfillment of the obligation will be onerous;
•	the amount of the obligation can be estimated reliably.

Provisions are recorded at the value reflecting the best estimate of the amount the company would reasonably pay to settle the obligation or transfer it to third parties at the end of the period.

The costs that the Group expects to incur to carry out restructuring plans are recorded in the financial year the Company formally defines the plan and the interested parties have a valid expectation that the restructuring will happen.

The provisions are periodically updated to reflect any variations in estimates of costs and realization times. Revisions of the provision estimates are charged in the same income statement item that had previously held the provision.

The notes to the consolidated financial statements illustrate the contingent liabilities consisting of:

•	possible, but not probable, obligations arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly under the control of the company;
•	present obligations arising from past events the amount of which cannot be reasonably estimated or the fulfillment of which will probably not be burdensome.

3.20 Current financial liabilities, trade payables and other payables

Trade payables and other payables, which mature within the normal commercial terms, are not discounted and are recognized at cost (identified by nominal value) reflecting their settlement value.

Current financial liabilities include the short-term portion of borrowings, including payables for cash advances and other financial liabilities. Financial liabilities are measured at amortized cost by recording charges in the income statement using the effective interest rate method, with the exception of financial liabilities purchased for trading purposes or derivatives, or those designated as FVTPL by management at the date of initial recognition, which are measured at fair value through profit or loss (see para. Financial derivatives).

3.21 De-recognition of financial assets and liabilities

Financial assets

A financial asset is derecognized when:

•	the rights to receive cash flows from the asset are extinguished;
•	the Group retains the right to receive cash flows from the asset, but has assumed the contractual obligation to pay them in full and without delay to a third party;
•	the Group has transferred the right to receive cash flows from the asset and has transferred substantially all risks and rewards of ownership of the financial asset or has neither transferred nor retained all risks and rewards of ownership of the asset, but has transferred control of the asset.

In cases where the Group has transferred the rights to receive cash flows from an asset and has neither transferred nor retained all the risks and benefits or has not lost control over it, the asset is recognized in the balance sheet to the extent of its residual involvement in the asset. The residual involvement that takes the form of a guarantee on the transferred asset is valued at the lower of the initial book value of the asset and the maximum amount that the Group could be required to pay.

In cases where the residual involvement takes the form of an option issued and/or purchased on the transferred asset (including options settled in cash or similar), the extent of the Group's involvement corresponds to the amount of the transferred asset that the Group may repurchase; however, in the case of a put option issued on an asset measured at fair value (including options settled in cash or similar), the extent of the Group's residual involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

Financial liabilities

A financial liability is derecognized when the obligation underlying the liability is extinguished, canceled or discharged.

In cases where an existing financial liability is replaced by another from the same lender, under substantially different conditions, or the conditions of an existing liability are substantially changed, this exchange or change is treated as a de-recognition of the original liability and the recognition of a new liability, with any differences between the carrying amounts recognized in the income statement.

In the case of changes to financial liabilities defined as non-substantial, the financial liability is not derecognized and the value of the debt is recalculated keeping the original effective interest rate unchanged, discounting the modified cash flows, thus generating a positive or negative effect on the income statement.

3.22 Revenue

(i) Revenue from contracts with customers

Revenues are recognized to the extent in which it is probable that the economic benefits will be achieved by the Group and the related amount can be reliably determined, regardless of the date of payment. Revenues are measured at the fair value of the amount received or to be received, taking into account the contractually defined payment terms and excluding taxes and duties.

Revenue from the sale of goods is recognized when the Company has transferred control of the goods to the purchaser. Revenue is measured at the fair value of the consideration received or to be received, net of returns and rebates, commercial discounts and volume reductions.

3.23 Costs

Costs are recognized when they relate to goods and services purchased and/or received during the period or by systematic allocation of an expense from which future benefits are spread over time.

3.24 Financial income and charges

The financial income and charges are reported on an accrual basis based on the interest accrued to the net value of the related financial assets and liabilities by applying the effective interest rate. The financial income and charges include gains and losses on exchange and gains and losses on derivative instruments that must be recognized in the income statement if they fail to meet the requirements to be considered hedging (see para.3.13 and following).

3.25 Share-based payments - equity-settled payment transactions

The incentive plan based on the Parent Company's ordinary shares (Stock Grant Plan), reserved for CEO of Comer Industries S.p.A., was terminated.

The cost of transactions settled with capital instruments is determined by the fair value on the date on which the assignment is made, using an appropriate valuation method.

Such cost, corresponding to the increase in shareholders' equity, is recorded under personnel costs over the period in which the conditions relating to the achievement of objectives and/or the provision of the service are met. The cumulative costs recognized for these transactions at the end of each financial year up to the vesting date are commensurate with the expiry of the vesting period and the best estimate of the number of equity instruments that will actually.

The service or performance conditions are not considered when the fair value for the plan is defined at the assignment date. However, the likelihood that these conditions are met in defining the best estimate of the number of equity instruments that will be accrued is considered. Market conditions are reflected in the fair value at the assignment date. Any other condition linked to the plan, which does not involve a service obligation, is not considered as a maturity condition. Non-accruing conditions are reflected in the fair value of the plan and imply the immediate recognition of the cost of the plan, unless there are also service or performance conditions.

No cost is recognized for rights that do not accrue because the performance and/or service conditions are not met. When the rights include a market condition or a non-vesting condition, they are treated as if they had accrued regardless of whether or not the market conditions or other non-vesting conditions to which they are subject are met, it being understood that all other performance and/or service conditions must be met.

If the conditions of the plan are modified, the minimum cost to be recognized is the fair value at the grant date in the absence of the modification, assuming that the original conditions of the plan are satisfied. In addition, a cost is recognized for each change that results in an increase in the total fair value of the payment plan, or is otherwise favorable to employees; this cost is measured with reference to the date of the change. When a plan is derecognized by the entity or the counterparty, any remaining element of the plan's fair value is immediately expensed to the income statement.

3.26 Use of estimates

The preparation of the consolidated financial statements requires that the Directors apply accounting standards and methods that, in certain circumstances, are based on difficult and subjective valuations and estimates based on past experience and assumptions which are from time to time considered reasonable and realistic depending on the relative circumstances. The application of these estimates and assumptions affect the amounts reported in the schedules forming the financial statements, such as the statement of financial position, the Income statement, the Statement of Comprehensive Income, the Cash flow Statement and the Statement of Changes in Shareholders' equity, as well as the information provided. The final values of the accounting items for which these estimates and assumptions were used may differ from those reported in the financial statements due to uncertainties regarding the assumptions and the conditions on which the estimates are based. Estimates and assumptions are reviewed periodically and the effects of each variation recognized in the period in which the estimate is revised if the revision affects only the current period, or even in subsequent periods if the revision affects the current period and those in the future. The financial statement items which, more than others, require a greater degree of discretion by the directors when making estimates and for which a change underlying the assumptions used could have a significant impact on the financial statements are: deferred taxes, allowance for doubtful accounts, provisions for product warranty risks, other provisions for legal risks, the inventory write-down provision for semi-finished and finished products and transactions with payment settled with equity instruments.

3.27 Public grants

Public grants are recognized when there is reasonable certainty that they will be received and that all the conditions referring to them have been satisfied. Grants relating to components of cost are recognized as revenues, but are systematically spread over a number of financial periods so as to match the recognition of the costs they are intended to offset. A grant relating to an asset is recognized as a revenue in constant amounts along the expected useful life of the asset in question.

In the event the Group receives a non-monetary grant, the asset and the relative grant are recognized at nominal value and released in the income statement in constant amounts along the expected useful life of the asset in question.

Law 124 of 2017 provides for compulsory disclosure of subsidies, grants, appointments or economic advantages received from the Public Administration or, in any case, involving public resources.

From a systematic reading of the regulation, the facilitating measures aimed at all companies have not been included (by way of example but not limited to tax facilitating measures such as hyper-amortization, superamortization, tax credit for research and development and facilitating measures such as the Wages Guarantee Fund) as these advantages are not aimed at a specific company.

During the year, the Group Italian companies only received State Aid that targeted all companies, and therefore for any details reference should be made to the National Register of State Aid.

3.28 Accounting standards

3.28.1 Accounting standards, amendments and interpretations effective from January 1, 2021 adopted by the Group.

•

On March 31, 2021, the IASB published an amendment entitled "Covid-19-Related Rent Concessions beyond June 30, 2021 (Amendments to IFRS 16)" by which it extends the period of application of the amendment issued in 2020 by one year, providing lessees the option to account for rent reductions related to Covid-19 without having to analyze contracts to assess whether the definition of lease modification in IFRS 16 was met. Therefore, lessees who applied this option in 2020 accounted for the effects of rent reductions directly in the income statement on the effective date of the reduction. The 2021 amendment, which is only available to entities that have already adopted the 2020 amendment, applies beginning April 1, 2021, and early adoption is permitted. The adoption of these amendments has not had any effect on the Group's consolidated financial statements.

•

On June 25, 2020, the IASB published an amendment called "Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4)". The amendments allow the extension of the temporary exemption from applying IFRS 9 until January 1, 2023 for insurance companies. The adoption of this amendment has not had any effect on the Group's consolidated financial statements.

•

On August 27, 2020, the IASB, following the reform on interbank interest rates such as IBOR, published the document "Interest Rate Benchmark Reform - Phase 2" which contains amendments to the following standards:

―	IFRS 9 Financial Instruments
―	IAS 39 Financial Instruments Recognition and Measurement
―	IFRS 7 Financial Instruments Disclosures
―	IFRS 4 Insurance Contracts
―	IFRS 16 Leases

All amendments are effective from January 1,2021. The adoption of this amendment has not had any effect on the Group's consolidated financial statements.

3.28.2 New accounting standards and amendments not yet applicable and not early adopted by the Group on December 31, 2021

•

On May 14, 2020, the IASB published the following amendments:

―	Amendments to IFRS 3 Business Combinations, the amendments are intended to update the reference in IFRS 3 to the Conceptual Framework in the revised version, without resulting in any changes to the provisions of the standard.
―	Amendments to IAS 16 Property, Plant and Equipment, the purpose of the amendments is not to allow the deduction from the cost of property, plant and equipment of the amount received from the sale of goods produced during the testing phase of the asset itself. These sales revenues and related costs will therefore be recognized in the income statement.
―	Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets, the amendment clarifies that all 'costs that relate directly to the contract' must be considered when estimating whether a contract is onerous. Accordingly, the assessment of whether a contract is onerous includes not only incremental costs (such as the cost of direct material used in the work), but also all costs that the company cannot avoid because it has entered into the contract (such as the portion of the depreciation of machinery used to fulfill the contract).
―	Annual Improvements 2018-2020: amendments were made to IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 9 Financial Instruments, IAS 41 Agriculture, and Illustrative Examples of IFRS 16 Leases.

All amendments will enter into force on January 1,2022. The Directors do not expect a significant effect in the consolidated financial statements of the Group from the adoption of these amendments.

• On May 18, 2017, the IASB published IFRS 17 - Insurance Contracts, which is intended to replace IFRS 4 - Insurance Contracts.

The objective of the new standard is to ensure that an entity provides relevant information that faithfully represents the rights and obligations arising from insurance contracts issued. The IASB has developed the standard to eliminate inconsistencies and weaknesses in existing accounting policies by providing a single principle-based framework for all types of insurance contracts, including reinsurance contracts that an insurer holds.

The new standard also includes presentation and disclosure requirements to improve comparability between entities in this segment.

The new standard measures an insurance contract on the basis of a General Model or a simplified version of it, called the Premium Allocation Approach ("PAA").

The main features of the General Model are:

•	the estimates and assumptions of future cash flows are always current;
•	the measurement reflects the time value of money;
•	the estimates make extensive use of information observable on the market;
•	there is a current and explicit measurement of risk;
•	the expected profit is deferred and aggregated into groups of insurance contracts at the time of initial recognition; and,
•	the expected profit is recognized in the contractual hedging period taking into account the adjustments resulting from changes in the cash flow assumptions relating to each group of contracts.

The PAA (Premium Allocation Approach) method involves measuring the liability for the residual coverage of a group of insurance contracts provided that, at the time of initial recognition, the entity expects the liability to reasonably represent an approximation of the General Model. Contracts with a coverage period of one year or less are automatically eligible for the PAA method. The simplifications arising from the application of the PAA method do not apply to the measurement of liabilities for outstanding claims, which are measured using the General Model. However, it is not necessary to discount those cash flows if it is expected that the balance to be paid or collected will occur within one year of the date on which the claim occurred.

	An entity shall apply the new standard to insurance contracts issued, including reinsurance contracts issued, reinsurance contracts held and also investment contracts with a discretionary participation feature (DPF).
	The standard applies from January 1, 2023 but early application is permitted only for entities that apply IFRS 9 - Financial Instruments and IFRS 15 - Revenue from Contracts with Customers. The Directors do not expect a significant effect in the Group's consolidated financial statements from the adoption of this standard.

3.28.3 New accounting standards and amendments and interpretations not yet approved by the European Union as of December 31, 2021

• On January 23, 2020, the IASB published an amendment called 'Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current'. The purpose of the document is to clarify how to classify debt and other short-term or long-term liabilities. The modification applies from January 1,2023, however early application is permitted. The Directors do not expect a significant effect in the consolidated financial statements of the Group from the adoption of this amendment.

• On February 12, 2021, the IASB published two amendments called "Disclosure of Accounting Policies-Amendments to IAS 1 and IFRS Practice Statement 2" and "Definition of Accounting Estimates-Amendments to IAS 8". The amendments are intended to improve disclosure about accounting policies so as to provide more useful information to investors and other primary users of financial statements as well as to help companies distinguish changes in accounting estimates from changes in accounting policy. The modification will be applied from January 1, 2023, however, early application is permitted. The Directors do not expect a significant effect in the consolidated financial statements of the Group from the adoption of these amendments.

• On May 7, 2020, the IASB published an amendment called 'Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction". The document clarifies how deferred taxes should be accounted for on certain transactions that can generate assets and liabilities of equal amounts, such as leases and decommissioning obligations. The modification will be applied from January 1,2023, however, early application is permitted. The Directors do not expect a significant effect in the consolidated financial statements of the Group from the adoption of this amendment.

• On December 9, 2021, the IASB published an amendment called "Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 - Comparative Information". The amendment is a transition option related to comparative information on financial assets presented at the date of initial application of IFRS 17. The amendment is intended to avoid temporary accounting mismatches between financial assets and insurance contract liabilities, and thus improve the usefulness of comparative information for the readers of the financial statements. The amendments will apply from January 1,2023, together with the application of IFRS 17. The directors do not expect a significant effect in the consolidated financial statements of the Group from the adoption of this amendment.

4. Financial and non-financial risk management

The Group's business is exposed to various financial risks: market risk (including the exchange rate risk and interest rate risk), credit risk, liquidity risk, price and cash flow risk and other non-financial risks such as the risk related to climate change and cybersecurity. The risk management program is based on the unpredictability of financial markets and aims to minimize any negative impact on the financial performance of the Group. Comer Industries uses derivative financial instruments to hedge exposure to currency risk. The Group does not use financial derivatives for speculative purposes. Under this procedure the financial risk hedging is planned by a central function of the parent company which coordinates all the operating companies, reporting directly to the Chief Executive Officer.

(a) Market risk

(i) Risk of exchange rate

The Group operates internationally and is exposed to exchange rate risk due to exposure mainly to the US dollar, but also the Brazilian real, British Pound and the Chinese Yuan. The exchange rate risks are generated by forecasts of future commercial transactions and recognized assets or liabilities.

In order to manage the exchange rate risk generated by forecasts of future commercial transactions and recognized assets or liabilities denominated in a currency other than the functional currency of the Group (euro), the Group companies use repurchase agreements (forward), under the coordination of the central function.

In particular, the Group is exposed in dollars for sales and purchases made with third parties primarily in the US currency; Group policy is to cover from 70 to 90 percent of future transactions that are expected to be realized within 12 months in foreign currencies. Where necessary, derivative contracts previously stipulated are renewed at maturity in relation to the evolution of the business.

The Group is exposed to the conversion risk of net assets of subsidiaries in North America, Great Britain, China, India and Brazil. Considering the strategic importance of the subsidiaries for which the implementation of this activity is foreseen in the short term, the Group did not consider the signing of hedging contracts necessary for this purpose.

(ii) Interest rate risk

The interest rate risk is derived from medium-long term loans at variable rates. The Group's current policy is to use floating rate loans, monitoring the curve of interest rates.

(b) Credit risk

The Group's policy is to sell to customers after an evaluation of their credit capacity and therefore within preset credit limits. Historically, the Group has not suffered significant losses on receivables.

(c) Liquidity risk

Prudent management of liquidity risk implies maintaining sufficient available cash and cash equivalents and sufficient credit lines from which to draw. Due to the dynamic nature of the business, the Group's policy is to have revolving standby credit facilities that can be utilized at short notice.

(d) Price and cash flow risk

The Group is subject to the risk of fluctuations in metal prices, in particular, aluminum, copper and steel. The Group's policy is to cover the risk where possible, through commitments from suppliers in the medium term, with stockpiling policies when prices are at their lowest and agreements with customers. Furthermore, the Group has no significant interest-generating activities towards third parties and the revenues and the related cash inflows are, therefore, independent of changes in interest rates.

For the operational management of the above risks, please refer to paragraphs 6.15.1 - 6.15.6.

(e) Climate change risk

The Group manages the risks associated with climate change, as well as the increase in regulatory constraints in relation to the reduction of greenhouse gas emissions, and more generally the growing trend among civil society and end consumers towards the development of products and industrial processes with a lower impact on the environment. At present, the Group does not see a high risk related to climate change. The Directors believe that the gradual move towards a low-carbon economy will not have a significant impact on the business, and the technological change that may result is not expected to have any significant effect on its market.

(f) Information technology risk

The Group considers the operational continuity of its IT systems to be of great importance and has implemented risk mitigation measures in this regard aimed at ensuring network connectivity, data availability, and data security, while at the same time guaranteeing the processing of personal data in compliance with the European GDPR regulation and the national regulations applicable in individual EU member states. To this end, it has implemented and continues to optimize an Information Security Management System (ISMS).

5. Corporate information and industry-related information.

5.1 Corporate information

At the end of 2021, the scope of consolidation changed radically as a result of the transaction concluded in December 2021 and detailed in the Directors' Report, incorporating within it 18 foreign companies belonging to the Walterscheid Group. Moreover, the liquidation of the French subsidiary Comer Industries Sarl was completed in the fourth quarter.

5.1.1 Acquisition of Walterscheid Powertrain Group

On December 1, 2021, Comer Industries S.p.A. acquired 100% of WPG HoldCo B.V., parent company of Walterscheid Powertrain Group, a leader in the Off-Highway sector (components and drive systems for the agricultural, industrial, construction, and mining equipment sectors).

In the last month of the year, the Walterscheid Powertrain brand generated revenues of 34.7 million euros (485 million euros for the full year 2021) and EBITDA of 1.7 million euros (50.2 million euros for the full year 2021).

Transfer consideration

The following table summarizes the fair value of the components of the consideration transferred at the acquisition date:

(in euros)
Cash and cash equivalents	40.000.000
Equity instruments (n. 8,029,865 ordinary shares)	162.925.961
Total consideration transferred	202.925.961

The fair value of the common shares issued is based on the price of 20.29 euros per share as defined in the agreement signed on July 15, 2021.

The cash outlay for the WPG Acquisition is 190.5 million euros net of cash acquired.

Total values defined by provisional price allocation

The following summarizes the amounts related to the allocation of the excess price calculated as the difference between the total consideration transferred and the book equity acquired as of December 1, 2021.

(in euros)
Total consideration transferred	202.925.961
Shareholders' equity of the acquired company	(46.642.137)
Excess price	156.283.824
Step up inventory	3.004.470
Inventory obsolescence provision adjustment	(1.191.711)
Deferred tax liabilities	(495.789)
Goodwill increase	154.966.855
Purchase Price Allocation	156.283.824

The following details the amount of Net Equity acquired and the amount resulting from the provisional Purchase Price Allocation.

(in euros)	Shareholders' equity of the acquired company	Purchase price Allocation	Total consideration transferred
Goodwill	108.785.873	154.966.855	263.752.728
Other intangible fixed assets	61.285.249		61.285.249
Tangible fixed assets	121.679.554		121.679.554
Commercial working capital	116.950.041	1.812.758	118.762.799
Net financial debt	(182.314.432)		(182.314.432)
Deferred tax assets and liabilities	10.766.000	(495.789)	10.270.211
Other current and non-current assets and liabilities	(190.510.148)		(190.510.148)
Total	46.642.137	156.283.824	202.925.961

Following the provisional Purchase Price Allocation, identifiable net assets amounting to 1.3 million euros were combined with goodwill of 155 million euros, calculated as the residual value, thus bringing the amount of the item to 263.8 million euros.

Note that the Purchase Price Allocation commented on so far was determined on a provisional basis as of December 31, 2021, as no valuations and appraisals useful for valuation purposes are yet available. Accordingly, any economic effects that could result from establishing the fair values of the net assets acquired are not reflected in the 2021 consolidated data. Any adjustments deriving from the definition of the purchase price allocation will be included in the consolidated financial statements of the Comer Industries Group within the term envisaged by IFRS 3 (within 12 months of the date of the WPG Acquisition).

5.2 Sectoral information

Industry-related information is given with reference to sectors of activity. The information includes both costs directly attributable and costs allocated according to reasonable assumptions. General and administrative costs, ICT and HR services, fees for directors, Statutory Auditors and Group management departments, as well as costs relating to the global sourcing area (organized according to purchasing group of product category) have been allocated to sectors proportionally to the turnover.

The Group operates in the following sectors:

Agricultural sector. Products mainly consists of speed increasers, speed reducers, bevel gearboxes, PTO driveshafts, wheel drives and axles for agricultural use, especially manufacturers of combine harvesters and tractors, haymaking, harvesting, irrigation and mixing, and land preparation and working machines.

Industrial sector. This includes products such as modular planetary drives, travel and hoist drives, slew drives and rigid and steering axles for construction and forestry machinery manufacturers, from the shipbuilding to the airport building and mining industries. Components for municipalities, for the extraction industry and material handling sectors. Products for the wind power and renewable energy sector as well as for driving the augers of biogas machines.

	AGRICULTURAL Sector
Industry-related indicators	12/31/2021	12/31/2020	Dev.
(thousand euros)			%
Revenues from sales and services	307.708	198.201	55%
Adjusted EBITDA ^(*)	37.729	25.862
Adjusted EBITDA /sales (%)	12,3%	13,0%
EBITDA	39.189	25.097
EBITDA /sales (%)	12,7%	12,7%
Amortization, depreciation and write-downs	(12.590)	(10.070)
EBIT	27.265	14.684	86%
EBIT/sales (%)	8,9%	7,4%
Net financial income/(charges)	(1.027)	(490)
Income taxes	(7.374)	(3.685)
NET PROFIT	18.865	10.509	80%
Net profit / sales (%)	6,1%	5,3%

	INDUSTRIAL Sector			TOTAL
Industry-related indicators	12/31/2021	12/31/2020	Dev.	12/31/2021	12/31/2020
(thousand euros)			%
Revenues from sales and services	290.402	198.005	47%	598.110	396.207
Adjusted EBITDA ^(*)	37.654	24.248		75.383	50.110
Adjusted EBITDA /sales (%)	13,0%	12,2%		12,6%	12,6%
EBITDA	39.032	23.484		78.222	48.582
EBITDA /sales (%)	13,4%	11,9%		13,1%	12,3%
Amortization, depreciation and write-downs	(8.801)	(8.134)		(21.391)	(18.204)
EBIT	29.565	15.693	88%	56.831	30.377
EBIT/sales (%)	10,2%	7,9%		9,5%	7,7%
Net financial income/(charges)	(969)	(490)		(1.996)	(980)
Income taxes	(8.032)	(3.947)		(15.406)	(7.632)
NET PROFIT	20.564	11.256	83%	39.429	21.765
Net profit / sales (%)	7,1%	5,7%		6,6%	5,5%

^* Operating income before amortization, depreciation, impairment of receivables and IFRS 16 and 2 - as previously defined

The agricultural sector, which today accounts for 51% of turnover (50% in 2020), during the year saw an increase in turnover of 55%, with a slight drop in profitability due to the consolidation of the month of December alone relating to the German group acquired. The performance of the industrial segment was positive (especially in Asia), which, following the growth in volumes (+47%), improved its operating profitability (EBITDA [adjusted]), bringing it to levels very close to the sector standard.

6. Notes to the consolidated financial statements

6.1 Tangible fixed assets

The changes in technical fixed assets and the related accumulated depreciation during 2021 are described in the following tables, which show the values with a separate indication of grants received in the capital account, as a reduction of the investment value:

Description (thousand euros)	Land and buildings	Plant and machinery	Fixtures and fittings, tools and other equip.
01/01/2020	8.913	29.356	11.824
Increase	493	3.347	5.125
Decreases	0	(6)	(991)
Depreciation	(591)	(5.537)	(5.666)
Reclassifications	694	1.407	439
Conversion differences	(258)	27	(21)
12/31/2020	9.251	28.594	10.711
Acquisition balances	34.021	54.581
Increase	568	7.361	5.561
Decreases	(296)	(251)	(16)
Depreciation	(829)	(6.664)	(5.419)
Reclassifications	184	2.102	(196)
Conversion differences	343	1.396	18
12/31/2021	43.241	87.118	10.659

Description (thousand euros)	Other assets	Tangible fixed assets in progress	Right of use	Total
01/01/2020	3.106	2.757	25.530	81.486
Increase	2.663	266	894	12.789
Decreases	(83)	0	(62)	(1.142)
Depreciation	(756)	0	(3.729)	(16.278)
Reclassifications	(1.769)	(770)	0	0
Conversion differences	(72)		(51)	(374)
12/31/2020	3.089	2.252	22.583	76.481
Acquisition balances	2.946		30.132	121.680
Increase	2.327	2.219	6.175	24.211
Decreases	(260)		(482)	(1.304)
Depreciation	(910)		(4.549)	(18.372)
Reclassifications	(253)	(1.836)		(0)
Conversion differences	180		103	2.040
12/31/2021	7.119	2.636	53.963	204.735

Excluding the increase due to the acquisition of the Walterscheid Group, which as shown in the table involved a change in the basis of consolidation of 121.7 million euros, during the year approximately 17.2 million euros (2.9% of revenues) were invested in tangible fixed assets, net of decreases and "Rights of use". Changes during the period are shown below:

Description

(thousand euros)	Land and Buildings	Other goods	Total
01/01/2020	24.078	1.452	25.530
Increases	465	429	894
Decreases	(62)	0	(62)
Amortization	(3.060)	(669)	(3.729)
Conversion differences	(50)	(1)	(51)
12/31/2020	21.371	1.212	22.583
Acquisition balances	27.302	2.832	30.134
Increases	5.892	726	6.618
Decreases	(934)	-75	(1.009)
Amortization	(3.774)	(691)	(4.465)
Conversion differences	101	2	103
12/31/2021	49.959	4.005	53.964

Among the most significant assets developed in Italy are various machines for gear machining, new gear cutting machines that do not use lubricants for cutting, and a new industrial painting plant equipped with the latest generation of mixing systems and robots, fully integrated into the company's management system as per Industry 4.0.

6.2 Intangible fixed assets

The changes in intangible assets are shown below, indicating values net of government capital grants and whose increase mainly reflects the acquisition of the Walterscheid group:

Description
(thousand euros)	Goodwill	Development and certification costs	Trademarks and know-how
01/01/2020		1.098	57
Increases
Decreases
Amortization		(446)	(13)
Reclassifications		11
Conversion differences		0	0
12/31/2020	0	662	44
Acquisition balances	108.786
Increases	155.182
Decreases
Amortization		(362)	(13)
Reclassifications		122
Conversion differences	0	0	0
12/31/2021	263.968	422	30

Description
(thousand euros)	License and trademark concessions	Other intangible fixed assets	Intangible fixed assets in progress	Total
01/01/2020	2.560	4	256	3.976
Increases	900		340	1.240
Decreases	(43)		(88)	(131)
Amortization	(1.006)			(1.466)
Reclassifications	(116)		105	0
Conversion differences	(13)	(1)	0	(14)
12/31/2020	2.281	3	614	3.605
Acquisition balances	1.948	59.337		170.071
Increases	891		709	156.782
Decreases			(21)	(21)
Amortization	(1.365)	(650)		(2.390)
Reclassifications	421		(543)	0
Conversion differences	13	(1)	0	12
12/31/2021	4.189	58.689	758	328.058

The item breaks down as follows:

(i) Goodwill

Goodwill arises from business combinations in accordance with IFRS 3 and represents the excess of the cost of the acquisition over the Group's stake in the fair value of the acquirer's identifiable assets, liabilities and contingent liabilities existing at the time of the acquisition. For further details see paragraph 6.2.1 and following of this document.

(ii) Development and approval costs and intangible fixed assets in progress

These capitalizations are mainly related to internal orders associated with the development of new products on the basis of specific requests and different versions made directly by its own customers. During the period intangible fixed assets in progress have been capitalized development costs of 709 thousand euros; 21 thousand euros however represent the decreases for waived projects. These projects meet the requirements of paragraph 57 of IAS 38, as the Group analyzed the technical feasibility of the same, as well as the intention to complete the project, to introduce new products on the market and the availability of technical and financial resources, as well as a reliable identification of own costs and their ability to produce future economic benefits. These expenses are amortized on the basis of the probable useful life generally estimated to be 3 to 5 years, depending on the sector they are intended for.

(iii) Concessions, licenses and patents

The increases in the period relate to the capitalization of external costs for the realization of projects already described in the report on operations or to software licenses and applications for the logistics and research and development area.

(iv) Other intangible assets

The item includes developed technology, customer relationships, software and other fixed assets with finite useful lives resulting from the acquisition of the German group. These fixed assets are amortized on a straight-line basis over a period defined by the following amortization rates:

―	Brand: 9 years
―	Technology developed: 8 years
―	Relationships with customers: 12 years.

6.2.1 Goodwill

This item as of December 31, 2021 is broken down as follows:

―	108.8 million euros deriving from the acquisition of the balances of the newly acquired German group.
―	0.2 million euros from the allocation of the price paid by WPG German Holdco Gmbh for the acquisition of Walterscheid Cardan Gmbh concluded in December 2021.
―	155 million euros from the provisional allocation of the price paid by Comer Industries S.p.A. for the acquisition, as described in greater detail in paragraph 5.1.1.

Therefore, the entire value of goodwill, amounting to 263.9 million euros, arises from the provisional allocation of the price paid for the WPG Acquisition.

6.2.2 Impairment losses on intangible fixed assets with an indefinite useful life and goodwill

Goodwill, amounting to 263.9 million euros, was not amortized in accordance with IAS 36, but was subject to impairment testing by management.

The impairment test, the criteria for which were approved by the Board of Directors on February 14, 2022, was carried out using the Discounted Cash Flow (DCF) method net of tax, provisionally assuming that the entire goodwill would be allocated to the Walterscheid Group. The expected cash flows used in the calculation of the DCF were determined on the basis of a 5-year business plan that takes account of various scenarios and expectations for development in the various markets. Based on information available at the end of 2021.

These flows were reduced by a discount factor in order to consider the risk of unrealizability of projected future plans. Specifically, the discount rate was calculated using the Weighted Average Cost of Capital ("WACC"), i.e., by weighting the expected rate of return on invested capital net of the costs of hedging for a sample of companies in the same industry. The average cost of capital (WACC) was calculated as 8.05% and the estimated g rate was conservatively set at a value lower than the expected long-term inflation rate. The performance of the impairment test did not indicate the need to recognize any impairment of goodwill as of December 31,2021.

In confirmation of this, the sensitivity analysis - carried out by increasing the cost of capital used to discount expected cash flows by 100 basis points - did not reveal any need to write down the item, nor a variation of ±10% in expected cash flows.

Moreover, as a further element supporting the recoverability of goodwill, Comer Industries' market capitalization is well in excess of the Group's shareholders' equity.

6.3 Deferred tax assets

The details are as follows:

Description

(thousand euros)	12/31/2021	12/31/2020
Prepaid taxes	41.311	8.414
Subtotal deferred tax assets	41.311	8.414
Tax assets and deferred tax receivables	41.311	8.414

The balance of deferred tax assets rose by 32,898 thousand euros, of which 30,357 thousand euros derived from the consolidation of balances in the acquisition of the German group and 2,542 thousand euros from increased provisions made during the year.

For the detailed breakdown of this item please refer to the table below:

Prepaid taxes by company

(thousand euros)	12/31/2021	12/31/2020	2021
Description	Tot. Deferred Tax	Tot. Deferred Tax	Increase (Decrease)	Acquisition balances
Inventory obsolescence provision	5.846	1.803	304	3.739
Provision for guarantees and/or contractual risks	8.394	2.435	2.592	3.367
Temporary differences Italian Entities	2.436	2.492	(56)
Temporary differences Foreign Entities	23.750	492	9	23.251
Total prepaid taxes by company	40.427	7.222	2.849	30.357
Total prepaid taxes on consolidation	885	1.192	(307)
Total prepaid taxes recorded	41.311	8.414	2.542	30.357

The balance of temporary differences for foreign subsidiaries is mainly attributable to the pension fund of the German WPG group acquired.

6.4 Other long-term receivables

Description

(thousand euros)	12/31/2021	12/31/2020
Receivables from La Fondiaria insurance	0	44
Deposits for foreign rents	177	164
Other sundry incl. guarantee deposits in Italy	33	33
Other long-term receivables	619	43
Other long-term receivables	829	284

The item refers to guarantee deposits primarily for real estate in rental agreements and consumption. The balance increased during the year due to the long-term portion of tax credits for investments in new capital goods, of which 435 thousand euros relates to Industry 4.0.

6.5 Inventories

The changes are as follows:

Description		Net changes/	Acquisition	Conversion
(thousand euros)	12/31/2020	Increases	balances	differences	12/31/2021
Raw materials and packaging	23.350	16.070	40.159	1.158	80.736
Raw mtls and consumable obsol. provision	(487)	115	(5.772)	(87)	(6.231)
Raw materials, consumables and pkg	22.863	16.185	34.387	1.071	74.505
Semi-processed f. purchase and production	44.763	19.812	32.057	88	96.719
Semi-proc. obsolescence prov. f.purchase and p	(2.720)	(187)	(2.661)	0	(5.568)
Semi-processed	42.043	19.624	29.396	88	91.151
Finished products and goods for resale	21.831	7.160	41.741	1.690	72.422
Finished goods obsolescence provision	(3.483)	(652)	(5.239)	(76)	(9.450)
Finished goods	18.348	6.508	36.501	1.614	62.971
Inventories	83.254	42.318	100.284	2.772	228.628

The increase in inventories, net of the acquisition of balances of the German group, of around 46.9 million euros compared to December 31,2021 is strictly related to the increase in revenue volumes achieved in the year and the production outlook for the three months following December 31,2021. In particular, an increase in raw materials is recorded as an effect of the stock procurement campaign as a consequence of the general tension in the first half of the year in relation to the production capacity of the supply chain. However, the stock rotation index continues to improve as a result of the ongoing efficiency drive to localize the supply chain with respect to the positioning of the production plants.

Inventories are shown net of a provision for obsolescence for a total amount of approximately 21.2 million euros, an increase compared to December 31,2021 by 2.0 million euros net of the use for scrapping and the effects of the WPG Acquisition.

As of December 31, 2021, the value of intercompany profits not yet realized with third parties amounted to a total of 4,773 thousand euros (against 4,094 thousand euros on December 31, 2020) before tax estimated at a total of 1,313 thousand euros (1,127 thousand euros as of December 31,2020) recorded under deferred tax assets. The increase in this adjustment compared to the previous year is mainly due to the increase in intercompany stock at the American subsidiary.

6.6 Trade receivables and other short-term receivables

The changes are as follows:

Description
(thousand euros)	12/31/2020	Net Change	Acquisition balances	Conversion differences	12/31/2021
Short-term receivables from customers	88.813	28.260	79.732	4.923	201.726
Bad debt provision	(3.112)	(53)	(2.381)	(51)	(5.597)
Trade receivables	85.701	28.207	77.350	4.871	196.130
Advances paid to suppliers	103	1.239	1.112		2.454
Receivables from social security institutions	213	(178)			35
Prepayments	790	(336)			454
Trade receivables from suppliers	75	(49)			26
Other short-term receivables	246	3.506	2.175		5.927
Other short-term receivables	1.428	4.181	3.287	-	8.896

The balance of trade receivables is influenced by the trend in turnover, especially in relation to the last few months of the year. Average collection days calculated on aggregate revenues for the last quarter stood at 66 days, an improvement versus the previous year (69 days).

The increase in the allowance for doubtful accounts mainly reflects the generic write-down calculated in accordance with IFRS 9, influenced this year by indicators representing greater macroeconomic risk due to the economic situation. During the year, the Group did not record any significant losses on receivables or release provisions set aside in previous years.

Note that there are no trade receivables due after the year.

With regard to other short-term receivables, the increase in the period is due to receivables from INAIL (National Institute for Insurance against Labor Accidents) for higher advances paid on an historical basis and sundry prepaid expenses on rents.

6.7 Current tax assets

The changes are as follows:

Description

(thousand euros)	12/31/2020	Net Change	12/31/2021
Italian and foreign VAT	6.054	6.777	12.831
Current taxes	1.816	2.616	4.433
Customs reimbursement for exports and sundry	33	(33)	0
Current tax assets	7.903	9.360	17.263

The current VAT credit of around 12.8 million euros is attributable to the parent company Comer Industries S.p.A. for 3.8 million euros (it was 1.2 million euros on December 31, 2020) and to the subsidiary Comer Industries Components S.r.l. for 6.0 million euros (it was 3.7 million euros on December 31, 2020). The remaining part relates to foreign companies and in particular to the GST credit held by the Indian subsidiary for around 2.4 million euros. During the year, the VAT credit of Comer Industries Component S.r.l. amounting to around 2.1 million euros outstanding at December 31, 2020 was partially collected.

The tax credit for 4,433 thousand euros mainly represents the excess of advances paid with respect to current taxes calculated on the profit generated during the year by some companies of the German group. The balance includes a tax credit relating to the parent company Comer Industries S.p.A. for investments in new capital goods amounting to 1.1 million euros, of which 0.9 million euros relating to industry 4.0.

In relation to the above mentioned subsidiaries, it should be noted that the tax system provides for the payment of advance payments for income taxes already withheld on commercial transactions, thus unavoidably generating tax credits during the financial period.

6.8 Financial assets and liabilities, guarantees

The net financial position has a negative balance of 177 million euros, down by approximately 180 million euros compared to December 31,2020 following the signing of the medium/long-term loan in the second half of the year for the WPG Acquisition. The balance as of December 31, 2021 includes approximately 86.2 million euros in cash and cash equivalents, 206.9 million euros in financial payables for loans, and approximately 56.3 million euros in financial payables arising from the accounting treatment of leases in accordance with IFRS 16, so the [adjusted] net financial position stands at 120.7 million euros.

The breakdown and movements compared to the previous year are shown below:

Description
(thousand euros)	12/31/2020	Acquisition balances	Increase	Decrease	12/31/2021
Cash and cash equivalents	(38.177)	(26.481)	(21.086)	0	(85.744)
Short-term loans	12.470		24.807	(7.311)	29.966
Medium/long-term loans	0		179.602	0	179.602
Total bank loans	(25.707)	(26.481)	183.323	(7.311)	123.824
Assets for short-term derivative financial instruments	(1.214)		(601)	1.214	(601)
Liabilities for short-term derivative financial instruments	255			(141)	114
Total Net financial position including derivatives	(26.666)	(26.481)	182.722	(6.238)	123.337
Transaction costs (Short-term portion)	(112)		(763)	112	(763)
Transaction costs (Mediul/long-term portion)	(290)		(1.859)	290	(1.859)
Total Net financial position [adjustment]	(27.068)	(26.481)	180.100	(5.836)	120.715
Other short term financial debt IFRS 16	3.691	5.042	175	(168)	8.739
Other long term financial debt IFRS 16	19.771	26.695	5.233	(4.107)	47.592
Total Net financial position	(3.607)	5.256	185.508	(10.111)	177.046

The financial treatment of assets and liabilities broken down by the categories identified by IFRS 9, is summarized in the following table:

Description	At fair value recog. in Income Statement	At fair value recog. in	At amortized
(thousand euros)		CFH reserve
Financial assets as of 12/31/21
Trade receivables
Other short-term receivables
Current tax assets
Short-term derivatives		601
Cash and cash equivalents
Total assets		601
Financial liabilities as of 12/31/20
Long-term loans			1.859
Trade payables
Other short-term payables
Current tax liabilities
Short-term derivatives	142	(256)
Short-term loans			763
Other Short-term loans
Other Long-term loans
Short-term liabilities arising from post-employment benefits
Total liabilities	142	(256)	2.622
Total	142	345	2.622

Description	costAt nominal value	Total book value	Fair Value
(thousand euros)
Financial assets as of 12/31/21
Trade receivables	196.130	196.130	196.130
Other short-term receivables	8.896	8.896	8.896
Current tax assets	17.264	17.264	17.264
Short-term derivatives	0	601	601
Cash and cash equivalents	85.744	85.744	85.744
Total assets	308.236	308.837	308.837
Financial liabilities as of 12/31/20
Long-term loans	(179.602)	(177.743)	(177.743)
Trade payables	(218.611)	(218.611)	(218.611)
Other short-term payables	(40.375)	(40.375)	(40.375)
Current tax liabilities	(21.816)	(21.816)	(21.816)
Short-term derivatives		(114)	(114)
Short-term loans	(29.966)	(29.203)	(29.203)
Other Short-term loans	(8.739)	(8.739)	(8.739)
Other Long-term loans	(47.592)	(47.592)	(47.592)
Short-term liabilities arising from post-employment benefits	(7.379)	(7.379)	(7.379)
Total liabilities	(554.080)	(551.572)	(551.572)
Total	(245.844)	(242.735)	(242.735)

6.8.1 Short-term derivative financial instruments

The detailed breakdown of the item short-term derivative financial instruments is shown below:

Description	Nominal value	Notional value	Fair Value
	in local currency	in euros
(thousand)	12/31/2021	12/31/2021	12/31/21
Forward hedges/synthetic forwards with positive fair value	15.000 USD	13.244	601
Forward hedges/synthetic forwards with negative fair value
Short-term financial derivates	15.000 USD	13.244	601
Derivatives on interest rates	10.500 €	10.500	(114)
Total derivates on interest rates	10.500 €	10.500	(114)
Total	25.500	19.816	487

With regard to the management of exchange risk, the Group has implemented hedging strategies on the main currencies, CNY and USD. In particular, on December 31,2021 expected cash flows for intercompany sales of manufactured products by Chinese subsidiaries totaling USD 15 million were covered (with a positive fair value of 0.6 million euros recognized in the CFH reserve).

For more information, reference should be made to para. 6.15.3 regarding the management of exchange risks.

With regards to derivatives on interest rates, it should be noted that an IRS contract is still in force to hedge a medium/long-term loan taken out in June 2017 that has now been extinguished early thanks to the generation of cash in the period. On December 31, 2021, it showed a negative fair value of a total of 114 thousand euros, recorded at fair value through profit and loss due to the loss of the underlying asset.

Reference should be made to para. 6.15.3 for more information.

6.8.2 Cash and cash equivalents

The value of 85,744 thousand euros compares with 38,177 thousand euros in the previous year. The difference is partly linked to the time flow of collections and payments and should be analyzed by combining the cash and cash equivalents of some companies with the bank payables of others, and partly due to the liquidity acquired through the consolidation of the German group. Liquidity is well distributed in all subsidiaries worldwide to meet the financing of core business and investments.

The values stated can be readily converted into cash and are subject to an insignificant risk of change in value. It is believed that the carrying value of Cash and cash equivalents approximates their fair value at the balance sheet date. Further information can be found in the cash flow statement and in the table below.

Description	Currency	Indexing	Value 12/31/2020
(thousand euros)
Cash and cash equivalents	USD		12.900
Cash and cash equivalents	EUR		14.735
Cash and cash equivalents	GBP		476
Cash and cash equivalents	R$		309
Cash and cash equivalents	INR		1.128
Cash and cash equivalents	CNY		8.629
Cash and cash equivalents	CZK		0
Cash and cash equivalents	DKK		0
Cash and cash equivalents	HUF		0
Cash and cash equivalents	NOK		0
Cash and cash equivalents	PLN		0
Cash and cash equivalents	RUB		0
Cash and cash equivalents	SEK		0
Total cash and cash equivalents			38.177

Description	Acquisition balances	Change	Value 12/31/2021	Nom. value 12/31/2021
(thousand euros)				(LC/000)
Cash and cash equivalents	11.055	6.306	30.262	34.274
Cash and cash equivalents	9.563	7.778	32.075	32.075
Cash and cash equivalents	432	(116)	792	471
Cash and cash equivalents	2.747	(152)	2.903	12.092
Cash and cash equivalents	20	(85)	1.063	89.455
Cash and cash equivalents	107	4.637	13.373	95.528
Cash and cash equivalents	514	27	541	13.433
Cash and cash equivalents	343	(61)	282	2.101
Cash and cash equivalents	13	0	13	4.806
Cash and cash equivalents	375	2.336	2.711	27.078
Cash and cash equivalents	10	2	12	57
Cash and cash equivalents	1.017	456	1.473	125.641
Cash and cash equivalents	285	(42)	243	2.489
Total cash and cash equivalents	26.481	21.086	85.744

6.8.3 Short-term loans and current portion of medium/long term loans

The item includes interest-bearing bank loans.

The value of 29,203 is made up of 29,966 thousand euros of short-term bank loans, shown net of the short-term portion of transaction costs treated according to the amortized cost method (IFRS 9) equal to 763 thousand euros.

The increase over the previous year of approximately 16.8 million euros is mainly due to the stipulation of a loan by Comer Industries S.p.A. with Unicredit in the amount of 10.5 million euros and the short-term portion of the loan from Credit Agricole. The current account debt at December 31,2021 of Comer Industries S.p.A. and Comer Industries Components S.r.l. relates to the balance of cash in transit linked to the payment of bills payable and direct remittances on December 31 and to lines not used.

Description	Currency	Indexing	Value 12/31/2020
(thousand euros)
Bank accounts overdraft and advance accounts with banks C EUR		0,00%	3.154
Bank accounts overdraft and advance accounts with banks C EUR		0,00%	2.005
UNICREDIT Loan short term instalment	EUR	0,00%	7.000
Mediocredito lt. loan (C.Comt.)	EUR	Eur1+0.45%	311
Crédit Agricole loan - short-term portions	EUR	Eur6+ Var Spread	0
Crédit Agricole loan - short-term portions	USD	Libor6+ Var Spread	0
Total short-term loans			12.470
Transaction costs short term	EUR	Amortized cost	(112)
Total short-term loans			12.358

Description	Change	Value 12/31/2021	Nom. value 12/31/2021
(thousand euros)			(LC/000)
Bank accounts overdraft and advance accounts with banks C EUR	4.624	7.779	7.779
Bank accounts overdraft and advance accounts with banks C EUR	5.282	7.287	7.287
UNICREDIT Loan short term instalment	3.500	10.500	10.500
Mediocredito lt. loan (C.Comt.)	(311)	0	0
Crédit Agricole loan - short-term portions	0	0	0
Crédit Agricole loan - short-term portions	4.400	4.400	5.000
Total short-term loans	17.495	29.966
Transaction costs short term	(651)	(763)	(763)
Total short-term loans	16.844	29.203

6.8.4 Long-term loans.

This item includes the long-term portions of the loan taken out in the second half of the year with Crédit Agricole.

The signed Financing Agreement breaks down as follows:

1.

Medium/long-term loan for a maximum principal amount of 170 million euros, broken down as follows:

140 million euros used for cash maturing on March 31, 2027.- 30 million euros, usable in cash and aimed at supporting general financial requirements of a revolving nature to be repaid in a single payment at the expiry of the related interest period as indicated in the request for use, with a maximum duration of five years.

2.

Medium/long-term loan in the amount of 50 million dollars, maturing on March 31, 2027.

This loan provides for compliance with consolidated operating covenants such as net financial indebtedness [adjusted] ratio to EBITDA [adjusted] of less than 3.00 and EBITDA [adjusted] to net financial charges greater than 5.00, which were satisfied in December 2021.

Further information can be obtained from the specific tables provided below.

Description
(thousand euros)	Currency	Indexing
Crédit Agricole loan - long-term portions	EUR	Eur6+Var Spread
Crédit Agricole loan - long-term portions	USD	Libor6+Var Spread
Total long-term loans
Transaction costs long term		0 Amortized cost
Total long-term loans

Description	Value 12/31/2020	Change	Value 12/31/2021	Nom. value 12/31/2021
(thousand euros)				(LC/000)
Crédit Agricole loan - long-term portions	0	140.000	140.000	140.000
Crédit Agricole loan - long-term portions	0	39.602	39.602	45.000
Total long-term loans	0	179.602	179.602
Transaction costs long term	(290)	(1.569)	(1.859)	(1.859)
Total long-term loans	(290)	178.033	177.743

Reported below is the breakdown of bank loans by nature, short and medium/long-term existing on December 31,2021:

Description	Legal entity	Balance 12/31/2020	New disbursement	Repayments
(thousand euros)
Mediocredito Italiano loan	Comer Ind. Compt. S.r.l.	311		(311)
Unicredit loan	Comer Ind. S.p.A.	0	10.500	0
Unicredit loan	Comer Ind. S.p.A.	7.000	0	(7.000)
Cacib Facility A1	Comer Ind. S.p.A.	0	20.000	0
Cacib Facility A2	Comer Ind. S.p.A.	0	120.000	0
Cacib Facility A3 $	Comer Ind. S.p.A.	0	44.002	0
Total		7.311	194.502	(7.311)

Description	Balance 12/31/2021	Of which			Maturity
(thousand euros)		< 1 year	> 1 year	> 5 years
Mediocredito Italiano loan	0	0	0	0	06/15/2021
Unicredit loan	10.500	10.500	0	0	07/31/2027
Unicredit loan	0	0	0	0	10/31/2021
Cacib Facility A1	20.000	0	20.000	4.000	03/31/2027
Cacib Facility A2	120.000	0	120.000	24.000	03/31/2027
Cacib Facility A3 $	44.002	4.400	39.602	4.400	03/31/2027
Total	194.502	14.900	179.602	32.400

6.8.5 Other short and medium-term financial payables

The heading refers to payables deriving from the application of the international accounting standard IFRS 16. The detail for the breakdown of the item payables on December 31,2021 and its variation is provided below:

Description	12/31/2020	Acquisition balances	Increase
(thousand euros)
Financial Liabilities ST	3.691	5.042	175
Financial Liabilities MLT	19.771	26.695	5.233
	Total 23.461	31.737	5.408

Description	Decrease	Conversion differences	12/31/2021
(thousand euros)
Financial Liabilities ST	(168)		8.739
Financial Liabilities MLT	(4.239)	132	47.592
	(4.407)	132	56.331

6.8.6 Commitments and guarantees

Guarantees given amount to 38,916 thousand euros (24,353 thousand euros in 2020) and consist of commitments of Comer Industries S.p.A. in the total amount of 29,811 thousand euros, all relating to the granting of local credit facilities in favor of subsidiaries.

The following are complete details of the system of commitments and risks for the Group:

		12/31/2021	12/31/2020
(thousand euros)	Exp.	Amount	Amount
Guarantees granted by Comer Industries S.p.A
Surety to Reggio Emilia VAT office for per Comer Industries S.p.A.	30/06/2021	0	221
Banco BPM for loan to Comer Industries Components S.r.l.	until revocation	2.500	2.500
Credem for loan to Comer Industries Components S.r.l.	until revocation	4.000	0
Surety in favour of Mediocredito for Comer Components	15/06/2021	0	311
Banca Nazionale del Lavoro for loan to Comer India	until revocation	1.496	1.417
Banca Nazionale del Lavoro for loan to Comer do Brazil	until revocation	837	828
Banca Nazionale del Lavoro for loan to Comer Ind (Jiaxing )Co Ltd	until revocation	8.800	8.800
Crédit Agricole for loan to Comer do Brazil	30/11/2022	475	471
Crédit Agricole for loan to Comer Ind (Jiaxing)Co Ltd	until revocation	11.703	0
Guarantees granted by Comer Industries Components S.r.l.
Surety to Region Basilicata office for Comer Industries Components S.r.l.	until revocation	5	5
Mortgage Building Via E. Ferrari Matera (Loc. La Martella) on Med. It loan	15/06/2021	0	9.800
Guarantees granted by WPG German Holdco GmbH via ABN AMRO Bank N.V.
Corporate Guarantee to ABN AMRO BANK N.V. - Frankfurt Branch for Cash Pool Intraday Facility	until revocation	7.000	0
Indemnity Letter to Banque Neuflize OBC for Cash Pool Intraday Facility	25/03/2025	450	0
Risk allocation Letter to ABN AMRO BANK N.V. - Belgium Branch for Cash Pool Intraday Facility	until revocation	200	0
Customs Bond to Hauptzollamt Köln (Customs) on behalf of Walterscheid GmbH	until revocation	51	0
Customs Bond to Hauptzollamt Köln (Customs) on behalf of Off-Highway Powertrain Services Germany GmbH	until revocation	26	0
Rental Guarantee to vanderToorn Vastgoed B.V. on behalf Off-Highway Powertrain Services Germany GmbH - NL Branch	31/12/2029	38	0
Guarantees granted by WPG US Holdco LLC via ABN AMRO Bank N.V.
Standy Letter of Credit to Western Surety Company for US Customs on behalf of Powertrain Rockford Inc. and Walterscheid Inc. Woodridge	until revocation	221	0
Standy Letter of Credit to Zurich American Insurance Company on behalf of Powertrain Rockford Inc. and Walterscheid Inc. Woodridge	until revocation	177	0
Guarantees granted by Off-Highway Powertrain Services Germany GmbH - AT Branch via Erste Bank AG
Rental Guarantee to Allegro Leasing Gesellschaft mbH	30/06/2028	68	0
Guarantees granted by Walterscheid GmbH
Letter of Comfort to Hofin GmbH on behalf of Walterscheid Monguelfo S.p.A.	31/12/2032	634	0
Warranty Bond to DS Smith Paper Deutschland GmbH on behalf of Off-Highway Powertrain Services Germany GmbH	22/07/2026	30	0
Guarantees granted by Off-Highway Powertrain Services Germany GmbH
Rental Guarantee to AB Ernst Norrthon on behalt of Off-Highway Powertrain Services Germany GmbH - SE Branch	31/12/2022	205	0
Total guarantees to third parties		38.916	24.353
Guarantees received from third parties
Comer Industries S.p.A from GLEASON	05/12/2021	0	34
Comer Industries S.p.A. from GLEASON	09/12/2021	0	40
Comer Industries S.p.A. from CMV Srl	28/02/2021	0	218
Comer Industries S.p.A. from GLEASON $	02/08/2021	0	145
Comer Industries S.p.A. from GLEASON $	02/08/2021	0	60
Comer Industries S.p.A. from GLEASON $	19/10/2022	40	0
Comer Industries S.p.A. from GLEASON $	30/06/2022	16	0
Comer Industries Components S.r.l. from PROJECT GROUP	28/11/2022	44	44
Walterscheid Getriebe GmbH from Starrag GmbH	23/11/2022	131
Total guarantees received from third parties		231	542

The Group has no commitments to finance leasing companies.

6.9 Net equity

The Parent Company's share capital as of December 31, 2021 consists of 28,678,090 shares with no par value and fully subscribed and paid up for 18,487,338.60 euros.

The capital increase in the year is attributable for 5,139 thousand euros to the acquisition of Walterscheid, which also generated a share premium reserve of 157,787 thousand euros. The additional capital increase of 239 thousand euros relates to the exercise of 238,945 warrants in July 2021.

The stock grant reserve refers exclusively to the Comer Industries 2019 Stock Grant Plan. In the period it increased by 2,194 thousand euros in relation to the accounting treatment of the cost of the service in accordance with IFRS 2, as the last tranche of this plan.

On April 28, 2021 dividends of 0.5 euros per share relating to the result for the 2020 financial year were paid for a total of 10.2 million euros.

Other reserves include:

Other reserves
(thousand euros)	12/31/2021	12/31/2020
Legal reserve	2.622	2.622
Available extraordinary reserves	19.225	19.225
Stock grant reserve	8.181	5.987
Consolidation reserve	3.543	3.543
FTA reserve (first time adoption IAS/IFRS)	(5.923)	(5.923)
Conversion reserve	4.078	(2.256)
CFH (Cash Flow Hedge) reserve	345	910
Total other reserves	32.071	24.109

Information regarding the distributability of the reserves can be found in the notes to the financial statements of the Parent Company Comer Industries S.p.A.

The increase in the translation reserve of about 6.3 million euros is mainly attributable to the revaluation of all the main currencies used by the Group, particularly the US dollar and the Chinese yuan against the euro. The cash flow hedge reserve contains the amount, at fair value, of the portion of hedges made on cash flows in foreign currency, considered effective according to the provisions of IFRS 9. The value is shown net of deferred taxation.

Reconciliation between the amount of capital and reserves and the result of operations shown in the financial statements of the Parent Company Comer Industries S.p.A. drawn up in compliance with the IAS/IFRS international accounting standards on December 31, 2021, and the amounts reported in the consolidated financial statements, drawn up in compliance with international standards, on the same date is as follows:

	12/31/2021		12/31/2020
Description	Shareholders' equity	Profit/(loss) for year	Shareholders' equity	Profit/(loss) for year
(thousand euros)
Impact of the result for the year on the shareholders' equity of the Parent Company	119.735	15.884	108.200	14.399
Other changes:
Capital increase	5.378
Share premium reserve increase	159.937
Increase/(decrease) other reserves
Stock grant reserve increase	2.194		2.807
Effects of revised IAS 19 Actuarial losses net of tax effect	(126)		(42)
Dividends distributed	(10.205)		(7.143)
Change Cash Flow Hedge Reserve IAS 38			31
FTA reserve from the application of IFRS 9
IAS/IFRS statutory shareholders'equity of Comer Industries Spa	276.913	15.884	103.851	14.399
Differences in adjusted capital and reserves of consolidated equity investments and their book value in Parent Company's financial statements	166.873	30.337	136.536	14.791
Write-off of intercompany dividends	(94.355)	(2.748)	(91.606)	(8.136)
Change in Cash Flow Hedge Reserve IAS 38 Comer Industries ShaoXing and Jiaxing	345		910
Write-off of exchange difference from calculation of the translation reserve	4.078		(2.255)
Effects of revised IAS 19 Actuarial losses net of tax effect Comer Industries Comt. S.r.l.	(491)		(398)
Subsidiary equity contribution to the Parent Company	76.451	27.589	43.186	6.655
Total effects from consolidation entries	(7.752)	(4.044)	(3.662)	711
Minority capital and reserves	-	-	-	-
Total IAS/IFRS shareholders' equity	345.612	39.429	143.375	21.765

It should be noted that during the year dividends were distributed in favor of the holding company Comer Industries S.p.A., relating to profits for the year and available reserves of some subsidiaries, mainly by Comer Industries INC. and Comer Industries Component Srl for an equivalent of 2.7 million euros.

Actuarial earnings from recalculating the employee severance indemnity for the year 2021 have been reported after changes in the reserves for retained earnings (as required by the revised IAS 19.93A) and amounted to 265 thousand euros, gross of the tax effect.

All the effects of the above are shown net of the related taxes.

6.10 Deferred tax liabilities

The deferred taxes are related to the tax effect of timing differences between the profit and loss for the year for statutory purposes of each company, and any associated taxable income.

The amounts so defined are detailed in the following table:

Deferred tax liabilities	12/31/2021	12/31/2020	2021
(thousand euros)	Tot. Deferred Tax	Tot. Deferred Tax	(Increase) Decrease	Acquisition balances
Temporary differences for Italian companies	175	128	47
Temporary differences for foreign companies	19.896	522	(216)	19.591
Total deferred taxes	20.071	650	(170)	19.591
Total deferred taxes on business combination	620	620	0
Total in financial statement	20.692	1.270	(170)	19.591

The balance of temporary differences between foreign subsidiaries is mainly due to different amortization rates.

6.11 Post-employment benefits

Variations in the provision were as follows:

Changes

(thousand euros)	12/31/2021	12/31/2020
Opening balance	9.228	9.300
Acquisition balances	155.996
Utilizations for resignations and prepayments	(619)	(547)
Settlement of complementary pension schemes and treasury fund	(1.942)	(2.294)
Appropriation in the current year	2.473	2.654
IAS 19 recalculation effects for the year of (before taxes)	43	115
Closing balance	165.179	9.228
Short-term balance	7.379
Long-term balance	157.800	9.228
	165.179	9.228

The economic and equity effects of the period, compared with the previous year, are summarized in the following:

Description:

(thousand euros)	12/31/2021	12/31/2020
Current service cost (current service cost)	(409)	(70)
Actuarial losses/(gain)	315	113
Financial charges	195	73
Tax effect on income statement	74	(1)
Tax effect on balance sheet	(117)	(31)
Total effect	58	83

This item refers to:

―	Employee benefits governed by the rules and regulations in force in Italy and recorded in the financial statements of Italian companies
―	Benefit plans defined after employment calculated on the basis of the final salary for all employees of its WPG subsidiaries in Germany and the USA.

With regard to the Italian branches, the total value of which amounts to 9.1 million euros, based on the actuarial valuation and interpretations available at the date of preparation of the financial statements, the Group has made the following distinction:

•	Employee severance indemnity installments accruing on January 1, 2007: considered a "defined contribution plan" in the case of both the option for complementary social security schemes as well as the option for the treasury fund of the National Security Institution (Inps). The accounting treatment is therefore the same as that in place for other types of contribution payments.
•	Employee severance indemnity provision on December 31, 2006: remains a "defined benefit plan" for which actuarial calculations must be made, although, compared to the calculations made to date (and reflected in the financial statements for the year ending December 31, 2006), excludes the component relating to future salary increases.

Liabilities for defined benefit plans have been determined on the basis of the following Group actuarial assumptions with value scales from 2020 to 2023:

Italian actuarial assumptions	Unit of measure	12/31/2021	12/31/2020
Discount rate	%	0,73	0,22
Expected rate of wage growth	%	0,50	0,50
Expected percentage of employees who resign prior to retirement (turnover)	%	5,0	5,0
Increase in annual cost of living rate	%	1,8	0,8
Employee severance indemnity annual increase rate	%	2,8	2,1

In accordance with new regulations of IAS 19, the values of the employee severance indemnity provision that would have been obtained by changing the above actuarial assumptions are as follows:

Changes	Actualised employee severance indemnity
(thousand euros)	provision
Turnover rate +1.0%	9.099
Turnover rate -1.0%	9.272
Increase in annual cost of living rate +0.25%	9.328
Increase in annual cost of living rate -0.25%	9.036
Discount rate +0.25%	8.970
Discount rate -0.25%	9.238

The negative effect of the period amounting to 255 thousand euros, gross of the tax impact, is reflected primarily in the actuarial loss accrued as a result of the change in the discount rate, from 0.22% to 0.73%, influenced by the decrease in rates and the trend in the spread on Italian government securities.

With regard to the German and American companies belonging to the WPG Group, the composition of the fund is shown below:

(thousand euros)	31/12/2021
Short-term balance	148.618
Long-term balance	7.379
Closing balance	155.997
Of which:
Assets arising from post-employment benefits	(23.108)
Liabilities arising from post-employment benefits	179.105
Closing balance	155.997

The companies maintain defined benefit plans in the balance sheet at the end of the employment relationship calculated with the last salary. Employees generally receive a fixed pension for each year they work. Benefits vary based on date of entry, length of employment, and worker's compensation. With respect to the US subsidiaries, the entire value of the plans is fully funded by assets.

Liabilities for defined benefit plans have been determined using the following actuarial assumptions:

Actuarial assumptions	Unit of measure	12/31/2021
Discount rate	%	1,00
Expected rate of wage growth	%	2,00
Employee severance indemnity annual increase rate	%	1,75

Actuarial assumptions	Unita di misura	31/12/2021
Discount rate	%	1,00
Expected rate of wage growth	%	2,00
Rate of increases to pensions in payment (%)	%	1,75

The interest rate used for discounting is based on yields on high-grade corporate bonds with an average rating of AA which, as of the December 31, 2021 reporting date, has not changed from the prior year.

Assumptions about future longevity are based on published statistics. As of December 31, 2021, the weighted average life of the bond was 15.1 years (15.2 years in 2020). The significant actuarial assumptions in determining the defined benefit obligations are discount rate and future salary growth. The sensitivity analysis was determined based on reasonable possible changes in the respective assumptions occurring at the end of the reporting period, holding all other assumptions constant:

•	If the discount rate is 0.5% higher (lower), the defined benefit obligation will decrease by 12.7 million euros (12.8 million euros in 2020)
•	If the projected future salary grows (decreases) by 0.5%, the defined benefit obligation would increase by 1.8 million euros (1.9 million euros in 2020).

The composition of personnel by category, based on average data, is as follows:

Contractual category	Average number for 2021	Average number for 2020
Executives	49	26
Managers and clerical staff	1.081	408
Labourers + temporary staff	2.375	901
Total	3.505	1.335

On December 31,2021 the Group headcount was 3,610 with an increase of 2,200 compared to the figure on December 31,2020, including 2,059 belonging to the companies of the acquired German group.

6.12 Short and long-term provisions

The provisions include:

Provisions for contingent liabilities

(thousand euros)	12/31/2021	12/31/2020
Provision for product warranty risks	17.051	7.105
Other provisions	1.165	1.447
Other provisions for contingent liabilities	172	156
Short-term provisions	18.388	8.709
Provision for contingent tax liabilities	8	13
Agent severance indemnity	428	428
Other provisions for contingent liabilities and legal expenses	2.235	450
Provision for long term product warranty risks	6.217	1.874
Other provisions for contingent liabilities	958	566
Long-term provisions	9.845	3.332

The product warranty provision includes the estimation of specific risks reported before preparation of the financial statements and relating to past productions. It also refers to coverage of general risks (the result of a calculation based on historical data) for repairs or replacement of products that did not conform to expectations. The balance at the end of the year is due to the best estimate of these risks in relation to open claims, not yet settled at year end.

The provision for contingent tax liabilities refers to potential liabilities relating to audits in progress not yet concluded abroad.

The Supplementary Agents Indemnity Fund includes provisions for reimbursements recognized in the event of termination of the agency relationship, quantified according to the methods indicated in the collective economic agreement of 20, 2002 for the regulation of agency relations and commercial representation in the industrial sectors and cooperation.

The provision for contingent liabilities and legal expenses represents the reasonable risk calculated in relation to litigation or potential liabilities still pending in court.

Lastly, the other short-term and long-term provisions for risks and charges cover the estimate of contingent liabilities mainly related to the reorganization of some of the Group.

6.13 Trade payables and other long and short-term payables

(i) Trade payables

The balance of 218,611 thousand euros shows an increase of approximately 134 million euros compared with the previous year, due in part to the increase in business volumes and in part to the acquisition described in the Directors' Report. The average payment days as of December 31,2021 (calculated on the cost of the last quarter's came) amounted to 113 days compared to 100 days in the previous year.

There are no payables expiring after more than one year or expired for more than 12 months.

(ii) Other long and short-term payables

The short-term balance amounting to 40,375 thousand euros includes amounts due to employees for services accrued and not paid as of the year-end closing. The increase in the period is mainly due to the values attributable to the German and American companies of the German group acquired during the year.

6.14 Current tax liabilities

The details are as follows:

Description

(thousand euros)	12/31/2021	12/31/2020
Tax balance for current taxes	15.009	2.120
Taxes for IRPEF withholdings	1.703	1.871
Other taxes due for withholdings and VAT for foreign companies	5.105
Current tax liabilities	21.816	3.991

At the end of the year there were liabilities with tax authorities for current taxes calculated on income for the period. The figure is up on the previous year mainly due to the consolidation of the German group.

The amount owed to the tax authorities for unpaid Irpef (personal income tax) is in line with the previous year.

6.15 Information on financial assets and liabilities

6.15.1 Management of liquidity risk

Liquidity risk is related to the difficulty in raising funds to meet commitments.

The control and implementation of appropriate policies for the management of liquidity risk in the presence of contingency guarantee the Company's survival and minimize the cost of funding.

This particular risk, unlike the others, manifests its effects in a very short time, with devastating consequences for companies.

It can result from insufficient resources available to meet financial obligations under the terms and deadlines set in the case of sudden revocation of uncommitted credit lines or of the possibility that the Company must honor its financial liabilities before their natural expiry.

As previously commented, the treasury activities of the Group are substantially centralized at the parent company.

The management of liquidity risk implies:

•	Maintaining credit lines defined as primary risk within a total of more than 80% of total credit lines and a substantial balance between the short and medium/long-term lines. This is necessary in order to avoid liquidity strains in the case of requests for reimbursement by the relevant financial partners.
•	Maintaining the average financial exposure for the year within an amount substantially equivalent to 80% of the total amount committed by the banking system.
•	Maintaining adequate liquidity derived from the cash flow generated by economic, characteristic and current operations.

It should be added that in managing this type of risk, the Group always tries to finance its investments with medium- to long-term unsecured claims (in addition to equity) in the breakdown of net debt, while covering current expenses using the short-term credit lines above.

To this end, the Group has long used appropriate tools to provide reliable predictions on the future trends in the net financial position (difference between income and expenditure in a given period) and implemented a maturity ladder, which enables the constant evaluation of expected cash flows, through the juxtaposition of cash inflows from operations, with outflows (repayment of loans, payment of operating costs, investments, etc.) within each time band. It is also pointed out that in the calculation of the net financial position, the counter-balancing effect from the nominal value of all those assets that are readily convertible into cash is added to incoming cash flow items generated by the operational management. In fact, in the latter case, the cash generated from the sale of these assets may be used immediately to meet the imminent financial commitments.

The actual quantification of the Group's exposure to liquidity risk is made possible by simulating different scenarios, based on assumptions that may actually occur and then assessing the impact of the latter on the maturity ladder, or the occurrence of certain events that may affect the liquidity of the Company.

The Group analyzes monthly the information obtained from the formulated scenarios regarding the trend of the net financial position together with the management of all conditions / positions of bank credit.

This analysis is carried out monitoring the quality of banking services and the corresponding costs on a regular basis.

All Cash Management activities are organized so as to reap the greatest benefit from banking products and the liquidity and funding are effectively managed under the best conditions, while limiting exposure to liquidity risk.

Note that during the year the average use of lines of credit by our Group was around 65%, a figure that was affected by the taking out of the medium/long-term loan. Management believes that the funds and credit lines currently available will enable the Group to satisfy its requirements arising from its investment, repayment of debts at their natural expiration and management of working capital.

Total credit lines amount to 428.3 million euros, of which 310.7 million euros related to potential short (96.4 million euros) and long term (214.1 million euros) cash requirements that the Group can use for investments and/or working capital management.

The following tables summarize the movements of credit and bank uses divided by type and by type of risk.

Analysis of bank loans and bank-related credit lines (excluding the credit line for foreign exchange and interest rate hedges)	12/31/2020	Decr.	Incr.	12/31/2021
(thousand euros)
Total bank loans by cash and cash equivalents	165.661	(4.311)	149.350	310.700
Total bank loans by guarantees	15.888	(11.917)	27.690	31.661
Total loans by insurance receivables	75.971	0	9.976	85.947
Total loans	257.520	(16.228)	187.016	428.308
Total bank uses by cash and cash equivalents	7.751	(751)	191.937	202.937
Total bank uses by guarantees	11.742	(221)	11.795	23.316
Total uses by insurance receivables	29.393	0	10.296	39.689
Total uses	48.886	(972)	214.028	265.942
% bank loan use / cash and cash equivalents	5%			65%
% total loan use	19%			62%

The term "primary risk" refers to the total of all the credit lines of ready cash and the financial sources not subject to any guarantee (overdraft, cash advances and medium/long-term unsecured loans), while the term "secondary risk" groups together all other forms of loans (credit line subject to collection, forfaiting of commercial invoices, leasing, etc.).

The detail for the breakdown of the credit lines by risk is provided below.

Loans broken down by risk level	12/31/2020	Decr.	Incr.	12/31/2021
(thousand euros)
	1st risk
Total bank loans by cash and cash equivalents 1st risk	151.011	(4.311)	149.350	296.050
Total bank loans by guarantees 1st risk	15.888	(11.917)	27.690	31.661
Total loans by insurance receivables 1st risk	75.971	0	9.976	85.947
Total loans 1st risk	242.870	(16.228)	187.016	413.658
	2nd risk
Total bank loans by cash and cash equivalents 2nd risk	14.650	0	0	14.650
Total loans 2nd risk	14.650	0	0	14.650
% 1st risk loans / total	94%			97%
% 2nd risk loans / total	6%			3%

6.15.2 Management of interest rate risk

The Group is exposed to interest rate risk associated with outstanding financial assets and liabilities. The objective of interest rate risk management is to limit and stabilize the negative effects on cash flows subject to changes in interest rates. As of December 31,2021, the Group has the following risks:

―	The risk attributable to interest rate trends concerns the future value, compared with the MTM assessment of December 31, 2021, of the IRS contracts (nominal value of 10.5 million euros) still outstanding, the underlying of which was repaid early in 2020. They are accounted for using the fair value through profit and loss method.
―	The risk related to financial instruments on which interest accrues that are at a variable rate and which are not hedged through other financial instruments, for which reference should be made to paragraph 6.15.4 in relation to the sensitivity analysis.

6.15.3 Management of exchange rate risk

In addition to that already written in the previous paragraph 3.12, it should be noted that the Group has significant transactions in the currency of non-EU countries (mainly USD/CNY, CAD and USD).

The exchange rate risk is hedged through purchase and sale of foreign currencies contracts (hedging contracts or synthetic forwards agreements).

Counterparties in these operations are the banks with which the Group normally operates.

The currencies involved are the USD and USD/CNY, and any such transactions carried out to hedge cash inflows connected with budgeted sales transactions, scheduled on a monthly basis, may well fall within those defined as "highly effective" on "highly probable" future transactions, and their economic effect is recorded on an accrual basis.

The efficacy assessment is aimed at proving the high correlation existing between the technical-financial characteristics of the risk being hedged (maturity, amount, etc.) and those of the hedging instrument, by carrying out specific retrospective and prospective tests using the US dollar offset method.

The types of derivative contracts most used are forward sales. The fair value of currency forward contracts is calculated by discounting back the difference between the notional amount determined at the contractual forward exchange rate and the notional amount determined at the forward exchange rate calculated on the closing date of accounts. Instead, the fair value of exchange rate options is calculated by using the Black & Scholes formula.

The fair value is correctly calculated by credit institutions, the counterparties to these transactions, and confirmed by the latter in the specific documentation thereon.

The hedging transactions were mainly concluded by BNP Paribas in the Asian area. Intercompany transactions in US dollars with the Brazilian subsidiary (USD/BRL exchange rate risk) and in Euros with the Indian subsidiary (EUR/INR exchange rate risk) are not subject to the hedging policy, as they are represented by minor annual trade amounts representing around 2.5% of total company flows.

For the purpose of assessing the impact of any exchange changes in the budget, the sensitivity analysis shown in the summary table in paragraph 6.15.4 is performed by using the exchange rates at year end adjusted for the minimum and maximum values recorded during 2021.

The fair value of a derivative contract is calculated using the official listing prices for instruments traded in regulated markets. The fair value of instruments that are not listed on regulated markets is calculated using valuation models that are appropriate for each category of financial instrument, with market data related to the balance sheet date (such as interest rates, exchange rates, and volatility), discounting the expected cash flows based on interest rate curves and converting amounts in other currencies to the Euro through exchange rates provided by the European Central Bank.

Additional information, along with the sensitivity analysis, was provided in the relevant parts of the notes to the financial statements, in accordance with IFRS 7, to which reference should be made.

It provides details on the amounts of the outstanding derivative transactions on December 31, 2021, specifying the fair value and notional value in euros for each instrument class.

2021 residual hedges

(thousand )

Operation	Currency	Nominal value	Notional value	Fair value
Hedges deemed effective		Amounts in local currency	Amounts in euros	Amounts in euros
Forward hedges/synthetic forwards	USD/CNY	15.000 USD	13.244	601
Total 2021 residual hedges			13.244	601
Short-term financial derivatives			13.244	601

6.15.4 Sensitivity analysis

The following analysis has been prepared in order to better identify the economic risks and changes in equity arising from possible changes in exchange rates.

The analysis is performed on year-end and average exchange rates for the period adjusted with the maximum and minimum values recorded over an observation period of 52 weeks in 2021, the volatility index of the main currencies used by the Group.

The aim of the simulation is to show the impacts on the Group's net profit and equity deriving from the translation of the financial statements of subsidiaries into the currency of the consolidated financial statements according to potential maximum fluctuations predicted by the analysis.



	Local currency
source: UIC	Equity	Net profit
US Dollar	128.552	4.333
GBP Pound	15.579	507
Chinese Reminbi	460.652	158.747
Indian Rupia	626.992	152.386
Brazilian Reais	31.854	12.453
Russian ruble	187.319	10.243



	range last 52 weeks 2021		Spot
source: UIC	min. val.	max. val.	12.31.2021
US Dollar	1,121	1,234	1,133
GBP Pound	0,839	0,906	0,840
Chinese Reminbi	7,160	7,965	7,195
Indian Rupia	83,439	90,596	84,229
Brazilian Reais	5,864	6,955	6,310
Russian ruble	80,642	92,384	91,467

	Equity impact			Net Profit impact
	(thousand euros)			(thousand euros)
	range last 52 weeks 2021		2021 Avg.365	range last 52 weeks 2021
source: UIC	min. val.	max. val.	days	min. val.	max. val.
US Dollar	1.215	(9.310)	1,183	203,0	(151,7)
GBP Pound	23	(1.352)	0,860	14,3	(30,5)
Chinese Reminbi	310	(6.194)	7,628	1.360,8	(880,7)
Indian Rupia	70	(523)	87,439	83,6	(60,7)
Brazilian Reais	384	(468)	6,378	171,3	(162,1)
Russian ruble	275	(20)	87,153	9,5	(6,7)

The Group considers that it is not subject to significant economic and equity impacts deriving from the management of transactions of the single legal entities forming part of the scope of consolidation in foreign currency.

With regard to interest rates, the risk of which derives from financial instruments with interest accruing at a floating rate that are not hedged via other financial instruments, a sensitivity analysis was performed in which the effects of a change in interest rates of ±50 basis points with respect to the spot interest rates at December 31,2021 were considered, all other variables remaining constant.

Potential impacts were calculated on floating rate financial liabilities as of December 31, 2021. The aforementioned change in interest rates would result in a higher (or lower) net pre-tax charge, as discussed below:



Loan	Indexing		Interest rate applied as of 12/31/2021	Amount of capital
Crédit Agricole loan Euro	Euribor 6 months	-0,537	1,75%	140.000 €
Crédit Agricole loan US Dollar	Libor 6 months	0,19918	2,099%	$ 50.000

	±50 bps
	min. val. (-50bps)		max val. (+50 bps)
Loan	Rate	Economic effect	Rate	Economic effect
Crédit Agricole loan Euro	1,75%	- €	1,75%	- €
Crédit Agricole loan US Dollar	1,900%	$ -8.576	2,599%	$ 21.528

6.15.5 Management of credit risk

The Group's policy is to sell to customers after an evaluation of their credit capacity and therefore within preset credit limits.

Note that the subsidiary Comer Industries (Jiaxing) Co. Ltd., as is customary in the reference market, can receive payment from its customers or pay their suppliers with instruments commonly known as Bank Acceptance Bills ("BAB"), governed by the Negotiable Instruments Law of the PRC of August 28, 2004. These instruments, which may also be in electronic form, typically have maturities from 6 to 12 months, as they are counter-guaranteed by banks of the highest credit standing ("guarantor banks"), can be held to maturity but also used as means of payment for the provision of other goods or services, or presented to other credit institutions at a discount ("transferee banks"). Typically, on such transactions, the liquidity is recognized with an offsetting decrease in trade receivables, as the Directors believe that the transaction meets the requirements for de-recognition of these assets set out in IFRS 9. Please note that the transferee banks, in the event of insolvency of the original debtor and the guarantor banks, may make claims against the Group. However, given the high credit standing of the guarantor banks, indicating an irrelevant credit risk, and in conjunction with the complete transfer of liquidity risk and interest rate risk, a substantial transfer of risks and benefits linked to the assigned credit can be assumed. Finally, it should be noted that at the date of preparation of the financial statements the Chinese subsidiary does not hold any active BABs maturing beyond December 31, 2021, while it issued BABs payable to the supply chain for 90.5 million yuan expiring in the first half of 2022.

Historically, the Group has not suffered significant losses on receivables.

The maximum theoretical exposure to credit risk for the Group as of December 31,2021 is represented by the book value of financial assets in the financial statements.

With reference to the changed economic conditions that marked the year 2021, it is believed that the risk connected to the reference value is higher. Consequently, the Group has strengthened its procedures for the selection of customers, monitoring of recoveries of credit and has set up a specific insurance coverage for 95% of receivables generated by the Holding company, in respect of the credit lines assigned. The risk of insolvency has been adequately reflected in the accounts by the allocation of the specific allowance for doubtful accounts.

As of December 31, 2021, the presentation of trade receivables (net of the related allowance for doubtful accounts) by maturity bracket is shown in the following table.

Description

(thousand euros)	12/31/2021	12/31/2020
Coming due	190.187	85.443
30 - 60 days past due	3.107	1.023
60 - 90 days past due	2.876	225
More than 90 days past due	5.557	2.123
Allowance for doubtful accounts	(5.597)	(3.112)
Trade receivables	196.130	85.701

The present values are influenced by the acquisition of the German group, which led to an increase in the item of 67.9 million euros, net of an allowance for doubtful accounts of 2.7 million euros.

6.15.6 Management of price risk

The Group is subject to the risk of fluctuation in the price of raw materials, particularly that of: aluminum, cast iron, copper and steel. Group companies review the sales prices of the products annually, transferring to customers increases in purchase costs in percentage terms compared to forecast indices, on the basis of specific trade indexing agreements.

6.16 Revenue from contracts with customers

The breakdown of revenues by geographic region is as follows:

Description

(thousand euros)	12/31/2021	12/31/2020	% change
ASIA PACIFIC	190.128	111.708	70,2%
EMEA	248.526	180.366	37,8%
LATIN AMERICA	29.604	17.397	70,2%
NORTH AMERICA	129.851	86.737	49,7%
Total turnover by geographic area	598.110	396.207	51,0%

Comer Industries closed fiscal year 2021 with a 51% increase in revenues.

The turnover generated outside national borders reached 90% of the total, a figure that is in line with market trends.

On a geographical level, of particular note are the growth of the Asia Pacific market, driven by the industrial sector, and of the Latin American market thanks to the agricultural sector.

6.17 Other operating revenues

The breakdown of other operating revenues is as follows:

Description

(thousand euros)	12/31/2021	12/31/2020
Recovery of production, repair, service and transport costs	1.534	1.376
Sale of scrap	707	314
Capital gains, photovoltaic remboursement	172	18
Capitalized costs net of disposal costs	403	340
Income from damage insurance	475	23
Other income and revenues	2.486	663
Total other income and revenues	5.778	2.733

The recovery of production, repairs, services and transport costs heading includes, among other things, bonuses and volume awards on supplies, charges for design and endurance test expenses, and the recovery of logistical and repair costs. The latter and waste material sales are up from 2020 but in line with the increase in sales volumes and production.

Costs capitalized during the year for industrial product development projects amount to 403 thousand euros. Other income and revenues increased in 2021 compared to the previous year also due to the amounts attributable to the German WPG Group.

6.18 Personnel costs

Personnel costs in absolute terms increased by 29.4% compared to the previous period, resulting in a 14.9% increase in the weighted average per capita cost compared to 2020 values. This trend was influenced in part by the use of social shock absorbers during the lockdown months that occurred in 2020 and by volume trends in Western countries where labor costs are higher.

The heading also contains the annual production bonus and provision of the variable salary in all the subsidiaries in the world, as the Group managed to meet the profitability targets established for 2021.

6.19 Remuneration of directors and statutory auditors

The fees of the Directors and Statutory Auditors of Comer Industries S.p.A. for the performance of their offices in the Parent Company and in the other enterprises included in the consolidation are as follows:

Description

(thousand euros)	12/31/2021	12/31/2020
Directors	1.211	861
C.E.O.
cost service value payment based on shares stock grant plan	2.194	5.389
Auditors	50	52
Total remuneration	3.455	6.303

The amounts include fees payable for the period resolved by the Shareholders' Meeting and the remunerations established by the Board of Directors for Directors attributed particular responsibilities, including bonuses. The values do not include social security and insurance contributions.

The Group does not have any stock grant and/or stock option plans in place as of today.

With reference to the incentive plan based on ordinary shares of Comer Industries S.p.A. called "Comer Industries 2019 Stock Grant Plan" approved on May 29, 2019, we point out the achievement of the performance targets and the confirmation of the accounting treatment according to IFRS 2.

6.20 Other operating costs and write-downs

The item other operating costs includes indirect charges associated with turnover, production and the corporate organizational structure such as rentals, utilities, leases and maintenance, insurance expenses, sales commissions, expenses related to product quality as well as losses in value related to impairment tests on rights of use relating to leased properties.

Write-downs include provisions for bad debts and warranty for the year, before any uses.

As required by Article 149-duodecies of the Issuer Regulation amended by Consob Resolution no. 15915 of May 3, 2007 published in the Official Gazette no. 111 of May 15, 2007 (SO 115), the remuneration for the year 2021 for services provided by the independent auditors Deloitte & Touche S.p.A. relating to the certification of the 2020 financial statements are as follows:

•	annual and infra-annual audit engagements on Italian companies for 92 thousand euros;
•	annual and infra-annual engagements for the audit of subsidiary companies for around 109 thousand euros;

All the above-described fees are included in the "other operating costs" heading.

6.21 Operating result

The operating result achieved, in absolute terms, is equivalent to 56,831 thousand euros, corresponding to 9.5% of the consolidated turnover, increasing compared to 7.7% of the previous year. This result is due to the combined effect of continuous process improvements and efficiency projects at production sites around the world.

Further information can be found in the Directors' Report on operations.

6.22 Net financial income / (charges)

The details are as follows:

Description

(thousand euros)	12/31/2021	12/31/2020
Exchange gain (loss)	(731)	(153)
Exchange gains and losses	(731)	(153)
Bank interest income	189	61
Other financial income	11	0
Total financial income from cash management	199	61
Interest on advances, loans and other short-term banking items	(12)	(97)
Interest on mortgages and medium/long-term loans	(480)	(185)
Interest on mortgages from amortized cost	(388)	(197)
Interest expense for discounting staff severance indemnity	(195)	(73)
Profit on fair value interest-rate hedging transactions as of 12/31	13	(4)
Total financial charges from cash management	(1.062)	(556)
Interest from IFRS 16 adoption	(403)	(331)
Net interest and other financial charges	(1.265)	(826)
Balance of cash management	(1.996)	(980)

Exchange gain (loss)

This item includes both realized differences between the historical exchange rates of the relevant transactions and the reference exchange rates of receipts and payments in foreign currency, and unrealized differences due to the translation of monetary items at the spot exchange rate at the end of the financial year. The loss for the period is mainly attributable to the latter case and, in particular, to the devaluation of the Brazilian real and of the Chinese yuan against the euro.

Interest and other net financial charges

The interest burden and amortized cost on mortgages and loans inevitably increased due to the medium/long-term loan agreement signed in 2021.

6.23 Income taxes

The total tax charge of 15,406 thousand euros includes current income taxes of 18,250 thousand euros (7,784 thousand euros in 2020), a positive change in deferred tax assets of 2,528 thousand euros, lower deferred tax liabilities of 185 thousand euros, a benefit from research and development credit Leg. Decree no. 145/2013 amounting to 191 thousand euros and withholding taxes on dividends amounting to 60 thousand euros.

The consolidated tax charge calculated net of withholding tax on dividends from subsidiaries and tax credits, stands on December 31, 2021 at around 33.1% against 26.5% calculated correspondingly on the 2020 period.

This worsening was mainly due to the non-deductibility of the costs of the transaction, posted to the income statement in the consolidated financial statements as envisaged by IFRS 3, and to the different taxation in the countries the Group operates in. In order to better understand the reconciliation between the tax burden recognized in the financial statements and the theoretical tax burden, the following explanatory table is provided wherein the IRAP is not considered as this, being a tax with a tax base different from income before taxes, would generate distortions between one year and another. The reconciliation was therefore determined with reference to the single IRES tax rate in force in Italy, equal to 24%.

Description

(thousand euros)	12/31/2021	12/31/2020
Consolidated pre-tax profit	54.835	29.398
Hypothetical parent company tax rate	24%	24%
Hypothetical income taxes on the income of the period	13.160	7.055
Tax effect of permanent differences for Italian companies	780	273
Effect from foreign tax rates that differ from theoretical Italian tax rate	813	623
Tax effect of taxing dividends from consolidated companies	142	100
Bonus tax credit lt. Leg. Decree 91/2014	(25)	(25)
Tax effect of tax subsidies for Italian companies ACE	(84)	(149)
Tax effect receivable for R&D Law190/2014 art.1c.35	(191)	(526)
Tax effect super-amortization (Law 208/2015) and hyper-amortization (Law 232/2016)	(590)	(582)
Taxes from previous years	(61)	(97)
Fiscal effect gain (loss) on IAS 19	0	0
Withholding tax deferred tax effect	0	0
Other Italian and foreign minor amounts included in IRAP impact on deferred tax	(261)	119
Income taxes on the income of the period recorded in the financial statements, excl. IRAP (regional tax on production act.)	13.683	6.792
Current IRAP	1.723	840
Income taxes on the income of the period recorded in the financial statements (current, deferred)	15.406	7.632

6.24 Earnings per share

At the bottom of the income statement, the earnings/(loss) per share is reported, determined according to that manner provided in IAS 33, as summarized below.

Description

(thousand euros)	12/31/2021	12/31/2020
Consolidated profit for the year pertaining to parent company shareholders	39.428.960	21.765.459
Number of shares making up the share capital	28.678.090	20.409.280
Profit per basic share for the current year in euro	1,37	1,07
Number of ordinary shares outstanding at the date of approval of the financial statements	28.678.090	20.409.280
Basic earnings per share on the number of shares outstanding at the date of approval of the financial statements	1,37	1,07

The means of calculation of diluted earnings (loss) per share are defined by IAS 33 - Earnings per share. The basic earnings (loss) per share is defined as the ratio between the economic result or the results of continuing operations of the Group attributable to the holders of ordinary shares and the average weighted ordinary shares in circulation during the financial period (28,678,090).

The diluted earnings per share corresponds to the basis as there are no anti-dilution effects.

6.25 Economic and balance sheet data of the company exercising direction and coordination of the company

In compliance with the provisions of art. 2497 bis of the Italian Civil Code, Comer Industries S.p.A. presents in this section the schedule of the essential data of the parent company Eagles Oak S.r.l.

As mentioned in the introduction, this company has exercised management and coordination activities over the parent company, Comer Industries S.p.A.

The last approved financial statements of Eagles OAK S.r.l. date back to December 31, 2020, already set out in the previous financial statements.

EAGLES OAK S.R.L.

Tax code and VAT number 03699500363

VIALE DEL SAGITTARIO 5 - 41126 MODENA MO

Economic and Administrative Index (R.E.A) 410236 MODENA Business Register no. 03699500363

Share Capital 2,000,000.00 euros, fully-paid

Stato patrimoniale

	31-12-2020	31-12-2019
Stato patrimoniale
Attivo
B) Immobilizzazioni
I - Immobilizzazioni immateriali	0	1.188
Ill - Immobilizzazioni finanziarie	31.916.782	35.064.557
Totale immobilizzazioni (B)	31.916.782	35.065.745
C) Attivo circolante
II - Crediti
esigibili entro l'esercizio successivo	81.382	0
Totale crediti	81.382	0
IV - Disponibilità liquide	638.470	1.125.371
Totale attivo circolante (C)	719.852	1.125.371
D) Ratei e risconti	0	1.112
Totale attivo	32.636.634	36.192.228
Passivo
A) Patrimonio netto
I - Capitale	2.000.000	2.000.000
Ill - Riserve di rivalutazione	72.462	72.462
IV - Riserva legale	400.000	174.384
VI - Altre riserve	18.732.125	13.164.742
IX - Utile (perdita) dell'esercizio	1.653.389	8.793.000
Totale patrimonio netto	22.857.976	24.204.588
D) Debiti
esigibili entro l'esercizio successivo	3.838.658	6.046.436
esigibili oltre l'esercizio successivo	5.940.000	5.940.000
Totale debiti	9.778.658	11.986.436
E) Ratei e risconti	0	1.204
Totale passivo	32.636.634	36.192.228

Conto economico

	31-12-2020	31-12-2019
Conto economico
B) Costi della produzione
7) per servizi	44.188	39.669
10) ammortamenti e svalutazioni
a), b), c) ammortamento delle immobilizzazioni immateriali e materiali, altre svalutazioni delle immobilizzazioni	1.188	1.188
a) ammortamento delle immobilizzazioni immateriali	1.188	1.188
Totale ammortamenti e svalutazioni	1.188	1.188
14) oneri diversi di gestione	1.144	853
Totale costi della produzione	46.520	41.710
Differenza tra valore e costi della produzione (A - B)	(46.520)	(41.710)
C) Proventi e oneri finanziari
15) proventi da partecipazioni
da imprese controllate	5.124.031	9.180.000
Totale proventi da partecipazioni	5.124.031	9.180.000
16) altri proventi finanziari
d) proventi diversi dai precedenti
altri	204	186
Totale proventi diversi dai precedenti	204	186
Totale altri proventi finanziari	204	186
17) interessi e altri oneri finanziari
verso imprese controllate	3.147.775	0
altri	276.651	288.598
Totale interessi e altri oneri finanziari	3.424.426	288.598
Totale proventi e oneri finanziari (15 + 16 - 17 + - 17-bis)	1.699.809	8.891.588
Risultato prima delle imposte (A - B + - C + - D)	1.653.289	8.849.878
20) Imposte sul reddito dell'esercizio, correnti, differite e anticipate
imposte correnti	0	77.085
imposte relative a esercizi precedenti	(100)	(20.207)
Totale delle imposte sul reddito dell'esercizio, correnti, differite e anticipate	(100)	56.878
21) Utile (perdita) dell'esercizio	1.653.389	8.793.000

These financial statements give a true and fair view and correspond to the accounting records.

Reggiolo, Italy, March 28, 2022

for the Board of Directors

Matteo Storchi, President & CEO

Report of the Board of Statutory Auditors

COMER INDUSTRIES SPA

Registered office in Reggiolo (RE) Via Magellano n. 27 Authorized Share Capital 18,487,338.60 Euros Fully paid

Reggio Emilia Business Register - registration and tax number 07210440157

The company is subject to management and coordination activities by Eagles Oak Srl, with registered offices in Modena

Via del Sagittario 5 - Share capital 2,000,000.00 Euros fully paid - Business Register in Modena no. 03699500363

Report of the Board of Statutory Auditors to the consolidated financial statements for the year as at 31 December 2021

Dear Shareholders,

the consolidated financial statements of Comer Industries S.p.A. for the year 2021 that was transmitted to us by the board of directors, together with the report on operations, prepared jointly with the 2021 financial statements, comply with the International Financial Reporting Standards (IFRS) Issued by the International Accounting Standards Board and adopted by the European Union.

The report that accompanies the financial statements, correctly summarizes all events that have occurred in the year 2021.

The report gives a clear view of the ownership structure of the company and of its organizational aspects.

During the year 2021. the company developed the analysis and evaluation activities that led to the completion of the acquisition of 100% of the share capital of WPG Holdco (WPG Acquisition), parent company of Walterscheid Powertrain Group, a major player in the Off-Highway sector.

The transaction was disclosed to the market on July 15. 2021 and took the form of n reverse take over pursuant to Article 14 of the AIM Italy Rules The acquisition of 100% of the share capital of WPG Holdco was completed on December 1, 2021 against payment of a consideration of approximately 203 million Euros, with a cash outlay of 40 million euros and the entry of WPG Patent B.V.. currently the sole shareholder of WPG Holdco controlled by the private equity fund Ono Equity Partners, into tho capital of Comer Industries with a 28.00% stake. For this reason, the consolidated income statement Included In the consolidated financial statements of the Comer Industries Group Includes revenues for the month of December from WPG.

In compliance with current regulations, we have verified the correctness and adequacy of the information contained in the documents relating to the consolidated financial statements and the report on operations for the year ended December 31, 2021; the legal audit of the accounts was entrusted to the auditors Deloitte & Touche S.p.A.

Our supervisory activity was carried out in compliance with the principles of conduct of the Board of Statutory Auditors issued by the Consiglio Nazionale dei Dottori Commercialisti ed Esperti Contabili (National Council of Chartered Accountants and Accounting Experts) and concerned in particular:

•	verifying the existence and adequacy - within the organizational structure of Comer Industries S.p.A, - of a department in charge of relations with subsidiaries;
•	examining the structure of the Group and the shareholding ratio in order to determine the consolidation area;
•	obtaining information on the business carried out by the subsidiaries and on the most important economic-financial and equity transactions regarding the Group's businesses by way of Information received from the Directors of Comer Industries S.p.A. and from the Independent Auditors,

In accordance with these principles we referred to the laws governing preparation of the consolidated financial statements.

The Board ascertained:

•	the correctness of the methods followed in identifying the consolidation area and the adoption of the consolidation principles of subsidiaries in compliance with the provisions of the IFRS and their effective amendments as at the date of the balance sheet;
•	compliance with the law relating to drawing up, preparation of the financial statements and report on operations;
•	the adequacy of the organization of the Parent Company, as regards to the inflow of information in the consolidation procedures; the compliance with the consolidation principles regarding the elimination of income and expenses, as well as the receivables and payables, of the consolidated companies;
•	the consistency of the Group's Management Report on Operations, prepared jointly with the Financial Statements for 2021, with the data and results of the consolidated financial statements in order to provide comprehensive information on the Group's economic and financial performance and on the risks to which the same is subject, as well as on significant events that took place after the closing date of the financial year that had no impact on the Financial Statements for 2021. The report focuses on the business perspectives of the Group in relation to effects of the COVID-19 epidemic.

We have verified the consolidation area, the consolidation principles and the accuracy of the valuation criteria applied.

The documentation examined and the information provided do not show any deviations from the laws that govern the preparation of the consolidated financial statements.

In our opinion, the consolidated financial statements, as a whole, correctly express the financial position and results of the Group for the year ended December 31. 2021 The financial statements and report on operations are consistent.

We have interacted with the Independent Auditors regarding the checks earned out for the purpose of preparing the Report for which we are responsible.

In this regard, the Independent Auditors explained that their report, issued pursuant to art. 14 of the Legislative Decree 38/2010, on April 1, 2022. The report states that the consolidated financial statements give a true and fair view of the financial position of the Comer Group as of December 31. 2021, and of the results of its operations and its cast) flows (cash flow statement) for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union (ISA Italia). This report also certifies the consistency of the management report with the consolidated financial statements and was issued after having carried out the procedures indicated in Auditing Standard (SA Italy) no. 720B.

Reggio Emilia, April 1, 2022

Luigi Gesaldi, Chairman

Corrado Baldini

Massimiliano Fontani

Report of the independent auditors

INDEPENDENT AUDITORS' REPORT

PURSUANT TO ARTICLE 14 AND 19-BIS OF LEGISLATIVE DECREE No. 39 OF JANUARY 27, 2010

To the Shareholders of Comer Industries S.p.A.

REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Opinion

We have audited the consolidated financial statements of Comer Industries S.p.A. and its subsidiaries (the "Comer Group"), which comprise the consolidated statement of financial position as at December 31, 2021, and the consolidated comprehensive income statement, consolidated statement of changes in equity and consolidated cash flows statement for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Comer Group as at December 31, 2021, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of Comer Industries S.p.A. in accordance with the ethical requirements applicable under Italian law to the audit of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of the Directors and the Board of Statutory Auditors for the Consolidated Financial Statements

The Directors are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union, and, within the terms established by law, for such internal control as the Directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the Directors are responsible for assessing the Comer Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they have identified the existence of the conditions for the liquidation of the Company or the termination of the business or have no realistic alternatives to such choices.

The Board of Statutory Auditors is responsible for overseeing, within the terms established by law, the Comer Group's financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with International Standards on Auditing (ISA Italia), we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

•	Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
•	Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Comer Group's internal control.
•	Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.
•	Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Comer Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Comer Group to cease to continue as a going concern.
•	Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
•	Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Comer Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicated with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

Opinion pursuant to art. 14 paragraph 2 (e) of Legislative Decree 39/10

The Directors of Comer Industries S.p.A. are responsible for the preparation of the Directors' Report of the Comer Group as at December 31, 2021, including its consistency with the related consolidated financial statements and its compliance with the law.

We have carried out the procedures set forth in the Auditing Standard (SA Italia) n. 720B in order to express an opinion on the consistency of the Directors' Report, with the consolidated financial statements of the Comer Group as at December 31, 2021 and on its compliance with the law, as well as to make a statement about any material misstatement.

In our opinion, the above-mentioned Directors' Report is consistent with the consolidated financial statements of the Comer Group as at December 31, 2021 and is prepared in accordance with the law.

With reference to the statement referred to in art. 14, paragraph 2 (e), of Legislative Decree 39/10, made on the basis of the knowledge and understanding of the Comer Group and of the related context acquired during the audit, we have nothing to report.

Statement pursuant to art. 4 of the Consob Regulation for the implementation of Legislative Decree 30 December 2016, no. 254

The Directors of Comer Industries S.p.A. are responsible for the preparation, on voluntary basis, of the non-financial statement pursuant to Legislative Decree 30 December 2016, no. 254.

We verified the approval by the Directors of the non-financial statement.

Pursuant to art. 3, paragraph 10 of Legislative Decree 30 December 2016, no. 254, this statement is subject of a separate attestation issued by us.

Bologna, Italy April 1, 2022

DELOITTE & TOUCHE S.p.A.

Stefano Montanari, Partner

This report has been translated into the English language solely for the convenience of international readers.