PININFARINA S.P.A. 2015 REPORT on CORPORATE GOVERNANCE
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(Translation from the Italian original which remains the definitive version) PININFARINA S.p.A. 2015 REPORT ON CORPORATE GOVERNANCE AND OWNERSHIP STRUCTURE Pursuant to article 123-bis of the Consolidated Finance Act (traditional management and control model) (approved by the Board of Directors on 24 March 2016) (website: www.pininfarina.com) 1 CONTENTS 1. ISSUER’S PROFILE page 4 2. INFORMATION ABOUT THE COMPANY’S OWNERSHIP STRUCTURE page 4 a) The company’s share capital page 4 b) Restrictions on transfers of securities page 4 c) Shareholders with significant interests in the share capital page 4 d) Securities that convey special rights page 4 e) Employee stock ownership: mechanisms to exercise voting rights page 4 f) Voting right restrictions page 5 g) Shareholders’ agreements pursuant to article 122 of the Consolidated Finance Act page 5 h) Change of control clauses and bylaws provisions governing tender offers page 5 i) Mandates to increase the share capital and authorisations to repurchase own shares page 5 - Share capital increases - Authorisations to repurchase own shares l) Management and coordination page 5 - Termination benefit in the event of resignation or termination without just cause or end of the employment relationship due to a tender offer - Rules governing the election and replacement of directors and amendments to the bylaws 3. COMPLIANCE page 6 4. BOARD OF DIRECTORS page 6 4.1 Election and replacement page 6 - Amendments to the bylaws - Succession plans 4.2 Composition page 7 4.3 Functions of the Board Of Directors page 9 4.4 Delegated bodies page 10 - Chief Executive Officers - Chairperson of the Board of Directors - Executive Committee - Reports to the Board of Directors 4.5 Other executive directors page 11 4.6 Independent directors page 11 4.7 Lead Independent Director page 12 5. PROCESSING OF COMPANY INFORMATION page 12 6. INTERNAL COMMITTEES OF THE BOARD OF DIRECTORS page 13 7./8. NOMINATION AND REMUNERATION COMMITTEE page 13 9. DIRECTORS’ FEES page 14 10. CONTROL AND RISK COMMITTEE page 14 2 11. INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM page 15 11.1 Director Responsible for the Internal Control and Risk Management System page 15 11.2 Internal Audit Manager page 15 11.3 Organisational Model (pursuant to Legislative decree no. 231/2001) page 16 11.4 Independent auditors page 17 11.5 Manager in Charge of Financial Reporting page 17 11.6 Coordination among parties involved in the internal control and risk management page 17 system 12. INTERESTS OF DIRECTORS AND TRANSACTIONS WITH RELATED PARTIES page 17 13. ELECTION OF STATUTORY AUDITORS page 17 14. COMPOSITION AND ACTIVITIES OF THE BOARD OF STATUTORY page 19 AUDITORS 15. RELATIONS WITH SHAREHOLDERS page 20 16. SHAREHOLDERS’ MEETINGS page 20 17. OTHER CORPORATE GOVERNANCE PRACTICES page 21 Committee for Transactions with Related Parties 18. CHANGES TO THE ANNUAL REPORTING DATE page 22 ANNEX 1: Section on the “Main Characteristics of the Existing Risk Management and Internal Control Systems Applicable to Financial Disclosures”, pursuant to article 123- bis.2.b), of the Consolidated Finance Act page 23 Table 2 – Composition of the Board of Directors and its Committees page 25 Table 3 – Composition of the Board of Statutory Auditors page 26 3 1. ISSUER’S PROFILE The Pininfarina Group’s core business is in the automotive industry and, consequently, is based on close collaboration with carmakers. Operating as a global partner, its highly flexible approach enables it to work with customers through the entire product development process - design, planning, development, industrialisation and manufacturing of limited series - or to provide support during any one of these phases. The Group has facilities in Italy, Germany, United States and China. Its customers are located mainly in Italy and Germany. The headquarters of Pininfarina S.p.A., the parent, are located at Via Bruno Buozzi 6, Turin. The shares of Pininfarina S.p.A. have been traded on the Italian Stock Exchange since 1986. The company’s governance structure is consistent with a traditional management and control model. 2. INFORMATION ABOUT THE COMPANY’S OWNERSHIP STRUCTURE PURSUANT TO ARTICLE 123-BIS OF LEGISLATIVE DECREE NO. 58/1998 AS AT 24 MARCH 2016 a) The company’s share capital The company’s subscribed and paid-up share capital amounts to €30,166,652 and is fully comprised of ordinary shares with a unit nominal amount of €1. The shares are registered and dematerialised. STRUCTURE OF THE SHARE CAPITAL No. of % of share Stock exchange Rights and obligations shares capital Ordinary shares 30,166,652 100% Italian Stock Shares with limited voting rights Exchange Shares without voting rights b) Restrictions on transfers of securities Further to the 2008 agreement to restructure the company’s financial debt, the shares of Pininfarina S.p.A. held by the majority shareholder, Pincar S.r.l. in liquidation ( Pincar ), (76.062% of the share capital) are pledged to its banks. c) Shareholders with significant interests in the share capital Based on the communication received pursuant to article 120 of the Consolidated Finance Act, the following parties hold a significant interest, i.e., more than 2% of the share capital: SHAREHOLDERS WITH SIGNIFICANT INTERESTS IN THE SHARE CAPITAL Shareholder Shares held directly % interest in the ordinary % interest in the voting share capital share capital Pincar S.r.l. in liquidation 22,945,566 76.062 76.062 The threshold for equity investments to be qualified as “significant” was increased from 2% to 3% on 18 March 2016 (Legislative decree no. 25 of 15 February 2016). d) Securities that convey special rights There are no securities that convey special rights. e) Employee stock ownership: mechanisms to exercise voting rights There is no employee stock ownership plan. 4 f) Voting right restrictions Pursuant to the Framework Agreement, as disclosed to the market on 30 December 2008, all Pininfarina shares held by Pincar are pledged to lending banks to secure Pincar’s and Pininfarina’s fulfilment of the obligations they have undertaken towards the lending banks pursuant to the Framework Agreement and the Rescheduling Agreement. Under the pledge agreements: (i) dividends and any other distribution of amounts payable on the Pininfarina shares or any other financial instruments issued by Pininfarina and held by Pincar shall be paid to the lending banks; and (ii) the pledgers shall retain the voting right, but the lending banks may exercise the voting right in the event of default (for example, Pininfarina’s failure to comply with some contractual obligations). g) Shareholders’ agreements pursuant to article 122 of the Consolidated Finance Act On 14 December 2015, Pincar signed a shareholders’ agreement (the “Agreement ”) with Tech Mahindra Limited (“Tech Mahindra ”) and Mahindra & Mahindra Limited (“M&M ”) for Pininfarina S.p.A. (“Pininfarina ” or the “company ”), that provides for a stand-still commitment and stipulations about the exercise of voting rights for all the ordinary Pininfarina shares held by Pincar (22,945,566 shares, equal to approximately 76.063% of the company’s ordinary share capital with voting rights, the “Shares ”), as better detailed below. The Agreement is, therefore a shareholders’ agreement pursuant to article 122.1/5.b of the Consolidated Finance Act. The Agreement was signed as part of the arrangements for the possible acquisition of the Share by the Investors, directly or through a company owned by them, which is subject to the occurrence or waiver of certain condition precedents (the “Acquisition ”). The Agreement does not in itself have an impact on the company’s control, since the stipulations concerning the exercise of voting rights attached to the Shares will be applicable only upon or after the possible execution of the Acquisition (the “Closing date ”), after which Pininfarina’s control will be in any case acquired, directly or indirectly, by the Investors. Under the Agreement, Pincar cannot sell or transfer in other ways the Shares from the execution date of the Agreement to the Closing date, which shall occur on or before 30 June 2015. Moreover, Pincar has agreed, in line with the Investors’ instructions, (i) to present a list of candidates for the position of director and, should the statutory auditors resign, for the position of statutory auditor to be appointed at the shareholders’ meeting (those candidates respectively designated as the “New directors” and the “New statutory auditors” by the Investors) to be held on or after the Closing date (the “Shareholders’ meeting”) and (ii) should the Shareholders’ meeting appointing the New directors and the New statutory auditors be held on the Closing date, to attend that Shareholders’ meeting and to vote in favour of the appointment of the New Directors and the New statutory auditors. The Investors have agreed to appoint Paolo Pininfarina as director and Chairperson of the Board of Directors. The Agreement does not include specific provisions about the term of office and/or its renewal; therefore, the term of office will be limited to the first appointment of the company’s Boards of Directors and statutory auditors. h) Change of control clauses and bylaws provisions governing tender offers If the heirs of Sergio Pininfarina, Lorenza Pininfarina, Paolo Pininfarina and the heirs of Andrea Pininfarina, severally or jointly, cease to hold, directly or indirectly, at least 30.1% of the voting rights of Pininfarina, except for the sales transactions covered by the Framework Agreement, upon such event being communicated by the Agent Bank, the Rescheduling Agreement shall be terminated without retroactive effect. The company bylaws do not contain special provisions governing tender offers. i) Mandates to increase the share capital and authorisations to repurchase own shares Share capital increases At present there is no mandate to increase the share capital. Authorisations to repurchase own shares At the date of this report, no authorisations to repurchase own shares exist.