Rába Jármûipari : RÁBA Plc. - Corporate Governance Report

CORPORATE GOVERNANCE REPORT

according to the Corporate Governance Recommendations

of Budapest Stock Exchange

2023

Index
Introduction	3
1.1. A brief presentation of the operation of the Board of Directors and the distribution of
responsibilities and tasks between the Board of Directors and the management	3
1.1.1. Short description of the Board of Directors' activity	3
1.1.2. Authority and tasks of the Board of Directors	4
1.1.3. Management	4
1.1.3.1. Chief Executive Officer	4
1.1.3.2. Deputy Chief Executive Officer	4
1.1.3.3. Commercial Director	4
1.1.3.4. Human resources Director	5
1.1.4. Relationship between the Board of Directors and the Management	5
1.2. An introduction of the Board of Directors, Supervisory Board (and Audit Committee) and
management members, a presentation of the boards' structures	5
1.2.1. Members of Board of Directors	5
1.2.2. Members of Supervisory Board (and Audit Committee)	6
1.2.3. Members of management	6
1.2.4. Structure of Supervisory Board and Audit Committee	6
1.3. Meetings of the Board of Directors, Supervisory Board (and Audit Committee) held in the given
period	7
1.4. Presentation of the work done by the Board of Directors, the Supervisory Board and the
management as well as the considerations for assessing their individual members	7
1.5. Operation and tasks of the Supervisory Board and Audit Committee	7
1.5.1. Supervisory Board	8
1.5.2. Audit Committee	8
1.6. System of internal controls, evaluation of the activities performed in the given period, efficiency
and effectiveness of the risk management procedures	8
1.7. Activity of the auditor	10
1.8. Publication policy, insider people	10
1.9. Exercising shareholders' rights	10
1.10. Rules for the settlement of the General Meeting	11
1.11. Remuneration policy, remuneration report	11

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Introduction

The Company

RÁBA Plc. is registered as a public limited company in Hungary by Győr Court of Justice as Court of Registration. The main market of Rába shares is the Hungarian Stock Exchange (BSE); so according to this, Rába takes into consideration the Hungarian Corporate Governance Policy and the obligatory legal regulations concerning to it.

RÁBA Plc. has always endeavoured to implement the h ighest standards of corporate governance structures and practices regarding to the national and international expectations. The main goal of the corporate governance system is to consider the interests of the shareholders of RÁBA Plc. and the broader group of stakeholders. Thereby it is ensured that the company enhances major value for its owners and people.

The Code of Corporate Governance introducing the corporate governance principles of RÁBA Plc. is available at the web site of the Company:

https://raba.hu/wp-content/uploads/befektetoknek/alapdokumentumok/Raba_Plc_Code_of_Corporate _Governance_2014.pdf

RÁBA Plc. and its subsidiaries are committed to the increasing business profit achieved according to the company directives and in an ethical way. The basic target is to ensure a stable, permanent positive business. This target determinates also the desired attitudes, which are fixed in the Code of Ethics and Business Conduct. The Code of Ethics and Business Conduct is available at the web site of the Company:

https://raba.hu/wp-content/uploads/befektetoknek/alapdokumentumok/Raba_Plc_Code_of_Ethics_2023.11.pdf

Rába Group

RÁBA Plc. controls the Rába Group, which is one of the biggest automotive groups of Hungary. The main point of the effective integration of Rába Gro up is the successful coordination of the activity of the subsidiaries. Rába Group consists of RÁBA Plc. as parent company and Rába Axle Ltd, Rába Automotive Components Ltd, Rába Vehicle Ltd. and RE KARD LLC. as wholly-owned subsidiaries.

1.1. A brief presentation of the operation of the Board of Directors and the distribution of responsibilities and tasks between the Board of Directors and the manage- ment

1.1.1. Short description of the Board of Directors' activity

The number of board members is between 3 and 7 persons. The chairman and the members of the Board of Directors are elected by the General Meeting of Shareholders for a definite period of time not exceeding five (5) years. Members of the Board of Directors can be recalled from office at any time without any cause and can be re-elected upon expiry of their mandate. The Board of Directors consists of 7 (seven) members at present. The term of the individual board members ends at the date stipulated in the resolution of the general meeting of shareholders adopted about the election of the board members.

Members of the Board of Directors or the members of the Supervisory Board may not (apart from the acquisition of shares or positions in public limited companies) acquire shareholding and may not be a chief executive officer or supervisory board member in business organisations conducting a main activity identical to that of the Company, except the general meeting grants approval to such acquisition or position.

Executives and the Supervisory Board members of the Company shall inform the companies about their new executive or Supervisory Board positions within 15 days from the acceptance of such po- sitions.

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Unless the general meeting gives approval, the members of the Board of Directors and the Members of the Supervisory Board and their relatives may not conclude on their own behalf or in their own favour contracts falling within the scope of activities of the Company except for contracts which are usually concluded as part of the every-day life.

1.1.2. Authority and tasks of the Board of Directors

The Board of Directors shall be the executive organ of the Company. The Board of Directors is not an operative management body, it is not involved in the Company's daily business. It makes deci- sions, it is responsible for all matters relating to the Company's management and course of business not fell under the exclusive competence of the General Meeting or other corporate bodies by the Articles of Association of the Company or by the law.

The detailed rules for the tasks, the authority and operation of the Board of Directors are contained in the Articles 19-21 of the Articles of Association of RÁBA Plc and in the Rules of Procedure of the Board of Directors, that are available at the web site of the Company:

https://raba.hu/wp-content/uploads/befektetoknek/alapdokumentumok/Raba_Plc_Articles_of_Association_20221025.pdfhttps://raba.hu/wp-content/uploads/befektetoknek/alapdokumentumok/Raba_Plc_Rules_of_Procedure_Board_2022.pdf

1.1.3. Management

The management is responsible for the operative control of the Company. The management consists of three persons besides the Chief Executive Officer: the Chief Financial Officer, Commercial Director and Human resources Director.

1.1.3.1. Chief Executive Officer

The Chief Executive Officer shall be elected by the Board of Directors for an indefinite time-period.

The Board of Directors exercises the fundamental employer's rights (establishing, terminating employment relations, amendment of employment contracts, establishment of remuneration, severance pay), establishes the performance requirements and the related benefits (performance based wages or other benefits) and the other employer's rights (especially vacation, foreign visit permits) in relation to the Chief Executive Officer.

The detailed rules for the tasks and the authority of the Chief executive Officer are contained in the Article 22 of the Articles of Association of RÁBA P lc, which is available at the web site of the Com- pany:

https://raba.hu/wp-content/uploads/befektetoknek/alapdokumentumok/Raba_Plc_Articles_of_Association_20221025.pdf

1.1.3.2. Deputy Chief Executive Officer

The Deputy Chief Executive Officer is the deputy of the employer's number one chief. The Chief Executive Officer exercises the fundamental employer's rights (establishing, terminating employment relations, amendment of employment contracts, establishment of remuneration, severance pay) and the other employer's rights, establishes the performance requirements and the related benefits (performance based wages or other benefits) in relation to the Deputy Chief Executive Officer.

The scope of activities of the general deputy general manager includes the performance of tasks related to specific case group, organizational unit and the general deputy tasks in the absence of the CEO, the management of the financial, accounting, business planning tasks of the Group, monitoring of the operation of the Group's companies, financial analysis thereof, preparation of the guidelines, coordination of the sale and leasing of assets.

1.1.3.3. Commercial Director

The Chief Executive Officer exercises the fundamental employer's rights (establishing, terminating employment relations, amendment of employment contracts, establishment of remuneration, severance pay) and the other employer's rights, establishes the performance requirements and the related

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benefits (performance based wages or other benefits) in relation to the Commercial Director.

Managing of the strategic sourcing process of the Company, determination of the sourcing strategy and signing of the related strategic contracts, preparation and approval of the frame agreement for strategic services on Group level, searching of the market, business possibilities, determination of the business development directions, managing of the exploration process of the new business op- portunities, establishment of new relations, identification of new businesses (product/client), managing of the introduction projects of new product/client, the management of the process of preparing offers, the support of the pricing activity, the preparation of the sales plan, as well as overseeing the process of customer relations and the development of the sales and marketing strategy fall within the Commercial Director's activity.

1.1.3.4. Human resources Director

The Chief Executive Officer exercises the fundamental employer's rights (establishing, terminating employment relations, amendment of employment contracts, establishment of remuneration, severance pay) and the other employer's rights, establishes the performance requirements and the related benefits (performance based wages or other benefits) in relation to the Human resources Director.

Planning, organization, managing, coordination and controlling of the human resources manage- ment, preparation and implementation of the human resources development (human strategy) fitting into the business plan, creation of management information systems, planning systems, analysing methods fall within the Human resources Director's activity.

1.1.4. Relationship between the Board of Directors and the Management

The members of the management may attended the normal and extraordinary meeting of the Board of Directors ad hoc.

The management reports to the members of the Board of Directors quarterly. They are informed on the operation of the Company and the Group, introduced the efficiency's difference from the base period and the business plan.

The management prepares ad hoc analysis about the significant changes of the operation of the Company and the Group, and about the projects different from the business plan for the Board of Directors.

1.2. An introduction of the Board of Directors, Supervisory Board (and Audit Commit- tee) and management members, a presentation of the boards' structures

1.2.1. Members of Board of Directors

Hetzmann, Béla, Chairman of the Board of Directors, mandate from 04.12.2020 till 19.05.2026 (not independent)

dr. Csüllög, Nóra, Member of the Board of Directors , mandate from 04.12.2020 till 19.05.2026 (in- dependent)

Jakab, László, Member of the Board of Directors, mandate from 30.09.2021 till 21.04.2023 (inde- pendent)

Lang-Péli, Éva, Member of the Board of Directors, mandate from 04.12.2020 till 19.05.2026 (not independent)

Majoros, Csaba, Member of the Board of Directors, mandate from 04.12.2020 till 19.05.2026 (inde- pendent)

Mráz, Dániel Emánuel, Member of the Board of Direct ors, mandate from 04.12.2020 till 19.05.2026 (independent)

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Simon, Attila János, Member of the Board of Directo rs, mandate from 22.04.2023 till 19.05.2026 (independent)

Dr. Szász, Károly, Member of the Board of Directors , mandate from 30.09.2021 till 19.05.2026 (in- dependent)

CV of the members of Board of Directors is available at the web site of Rába Plc:

https://raba.hu/en/vallalat/

1.2.2. Members of Supervisory Board (and Audit Committee)

Prof. Dr. Palkovics, László, Chairman of the Supervisory Board (and Audit Committee), mandate from 25.01.2023 till 30.04.2027 (independent)

Lepsényi, István, Chairman of the Supervisory Board (and Audit Committee), mandate from 04.12.2020 till 24.01.2023 (independent)

Dr. Harmath, Zsolt, Member of the Supervisory Board (and Audit Committee), mandate from 17.04.2016 till 30.04.2027 (independent)

dr. Szabó, Sándor József, Member of the Supervisory Board (and Audit Committee), mandate from 04.12.2020 till 30.04.2027 (independent)

Prof. Dr. Palkovics, László, Chairman of the Supervisory Board (and Audit Committee), mandate from 25.01.2023 till 30.04.2027 (independent)

CV of the members of Supervisory Board (and Audit Committee is available at the web site of Rába Plc:

https://raba.hu/en/vallalat/

1.2.3. Members of management

Hetzmann, Béla, Chief Executive Officer Lang-Péli, Éva, Deputy Chief Executive Officer Vida, László, Commercial Director

Kőszegi Enikő, Human Resources Director

CV of members of management is available at the web site of RÁBA Plc: https://raba.hu/en/vallalat/

1.2.4. Structure of Supervisory Board and Audit Committee

Supervisory Board

Supervision of the Company's executive management is performed by the Supervisory Board elected by the General Meeting of Shareholders. The Supervisory Board of the Company is made up of three members. The task of the Supervisory Board is to supervise the management of the Company in favour of the supreme body and with the purpose of protecting the Company's interest.

The chairman and the members of the Supervisory Board are elected by the General Meeting of Shareholders.

The members of the Supervisory Board are elected for a definite period of time, no longer than five years. Members of the Supervisory Board can be re-elected or recalled, without cause. The term of a member of the Supervisory Board elected through interim election, shall expire when the term of the other members of the Supervisory Board expire.

Audit Committee

From among the independent members of the Supervisory Board the general meeting of shareholders shall elect a three-member Audit Committee.

If the Supervisory Board has three members, and all are independent pursuant to the law, they are automatically elected by the General Meeting of Shareholders to become members of the Audit

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Committee. The chairman of the Audit Committee is elected by the members from among them- selves. The termination of the membership in the Audit Committee is governed by the rules for the termination of the membership in the Supervisory Board. The membership in the Audit Committee is also terminated if the membership in the Supervisory Board is terminated.

1.3. Meetings of the Board of Directors, Supervisory Board (and Audit Committee) held in the given period

The Board of Directors of Rába Plc. had got 4 times meeting held by personal attendance or by means of telecommunication and 11 times written voting in 2023, with an average attendance of 100 per cent. The Board of Directors discussed the submissions to the General Meeting, the main events concerning the Group and their effects, the periodical and expected results, the plans and prospects of the companies, among others on its meetings.

The Supervisory Board (and Audit Committee) had got 4 times meeting held by personal attendance or by means of telecommunication and 9 time written voting in 2023, always with an attendance of 100%. The Committees discussed the main events of the Company, its economic, financial situation and the reports of the internal auditor on their meetings.

1.4. Presentation of the work done by the Board of Directors, the Supervisory Board and the management as well as the considerations for assessing their individual members

The base of the evaluation of the Board of Directors' and Management' work is the strategy and the business plan.

The Board of Directors makes a detailed on analysis based strategy plan generally for 4 years. This plan will be controlled every year and does the necessary updates. With the evaluation of the work done for realizing the plan the Committee qualify the correctness of the strategy and evaluate itself work. The Board of Directors generally prepares a report on the Company's business operations in the last business year for the annual general meeting.

The work of the Chief Executive Officer is evaluated through the fulfilment of the business plan. This evaluation will take place formally at the last Board of Directors' Meeting after the Annual General Meeting, when they determine the payable amount of annual bonus for the Chief Executive Officer.

The Supervisory Board expresses the opinion previously on evaluation of the performance of the Chief Executive Officer and the Deputy Chief Executive Officer.

The annual work of the Deputy Chief Executive Officer, the Commercial Director and the Human resources Director was evaluated by the Chief Executive Officer in framework of the "annual personal efficiency evaluation" (APEE). The payable amount of the bonus is determinated by fulfilment of business and personal targets.

The evaluation of the work of the Chief Executive Officer will be documented in the records of the Board of Directors' Meeting, and the evaluation of the work of the Chief Financial Officer, the Technical Director, the Commercial Director and the Human Resources Director will be documented on the personal efficiency evaluation sheet.

The Supervisory Board reviews its activity in the previous year yearly. The annual general meeting discusses the Report of the Supervisory Board under the approval of the annual financial statements.

1.5. Operation and tasks of the Supervisory Board and Audit Committee

Considering that the professional introduction of the Committee members is presented in Item 1.2 and the Item 1.3 gives information on the meetings held, this Item is about the operation and tasks of the committees.

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1.5.1. Supervisory Board

Supervision of the Company's executive management is performed by the Supervisory Board elected by the General Meeting of Shareholders. The Supervisory Board of the Company is made up of three members. The task of the Supervisory Board is to supervise the management of the Company in favour of the supreme body and with the purpose of protecting the Company's interest.

The chairman and the members of the Supervisory Board are elected by the General Meeting of Shareholders.

The members of the Supervisory Board are elected for a definite period of time, no longer than five years. Members of the Supervisory Board can be re-elected or recalled, without cause. The term of a member of the Supervisory Board elected through interim election, shall expire when the term of the other members of the Supervisory Board expire.

The detailed rules for the tasks, the authority and operation of the Supervisory Board are contained in the Articles 23-24 of the Articles of Association of Rába Plc and in the Rules of Procedure of the Supervisory Board, that are available at the web site of the Company:

https://raba.hu/wp-content/uploads/befektetoknek/alapdokumentumok/Raba_Plc_Articles_of_Association_20221025.pdfhttps://raba.hu/wp-content/uploads/befektetoknek/alapdokumentumok/Raba_Plc_Rules_of_Procedure_SB_2016.pdf

1.5.2. Audit Committee

From among the independent members of the Supervisory Board the general meeting of shareholders shall elect a three-member Audit Committee.

If the Supervisory Board has three members, and all are independent pursuant to the law, they are automatically elected by the General Meeting of Shareholders to become members of the Audit Committee. The chairman of the Audit Committee is elected by the members from among them- selves. The termination of the membership in the Audit Committee is governed by the rules for the termination of the membership in the Supervisory Board. The membership in the Audit Committee is also terminated if the membership in the Supervisory Board is terminated.

The Audit Committee shall - unless it is composed automatically of the members of the Supervisory Board - prepare its own procedures. If it is composed automatically of the members of the Supervisory Board, its procedures are identical with those of the Supervisory Board.

Furthermore, the Audit Committee is governed by the special provisions concerning the of public- interest entities of Act CXX of 2001 on the Capital Market.

The detailed rules for the tasks, the authority and operation of the Audit Committee are contained in the Article 24.5 of the Articles of Association of Rába Plc and in the Rules of Procedure of the Supervisory Board, that are available at the web site of the Company:

https://raba.hu/wp-content/uploads/befektetoknek/alapdokumentumok/Raba_Plc_Articles_of_Association_20221025.pdfhttps://raba.hu/wp-content/uploads/befektetoknek/alapdokumentumok/Raba_Plc_Rules_of_Procedure_SB_2016.pdf

1.6. System of internal controls, evaluation of the activities performed in the given period, efficiency and effectiveness of the risk management procedures

The elements of the internal controlling system function as a group of closely interrelated mechanisms and cover all activities of the organisation, namely:

- the regulatory environment and internal rules regulating the activities of the company (control- ling environment),

- the survey, analysis, evaluation and management of the factors threatening the regular and efficient performance of activities (integrated risk management system),

- the adoption of measures ensuring regular operation (controlling activities),

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- the ongoing communications tasks related to the above activities (information and communication system),

- the continuous monitoring and controlling of activities (monitoring activity).

The compliance function and the risk control function form part of the internal controlling system, performing the key task of ensuring the integrity of the organisation and of its operation.

The Company is committed to business profitability achieved through ethical means, in accordance with corporate guidelines and views long-term, positive business as its key objective. This defines the desirable forms of conduct outlined in the Code of Ethics and Business Conduct.

The Company has developed a general procedure for the receipt and review of breaches, irregular- ities, as well as of claims regarding integrity and corruption risks to thus ensure the effective management of corruption risks within the organisation and to improve the resilience of the organisation in the face of corruption.

The Company has set its strategic objectives, longer-term directions and the order of precedence of its goals in the strategic plan and the short-term goals in its business plans and has developed the organisational structure best suited to achieve our goals and to carry out our tasks in the most efficient manner. The Company has devised a financial plan that ensures that any situation threatening with insolvency can be avoided, i.e. the company's liquidity position remains positive throughout the financial year. All our employees are expected to take an active part in the efficient implementation of the Company's strategic objectives. For this management has provided the employees with clearly formulated information regarding the strategic goals and the operational objectives broken down by organisational units, to ensure they can identify with and pay special attention to such goals and objectives when performing their tasks.

The Company's organisational structure nurtures financially viable, efficient and profitable work, facilitates the implementation of interrelated processes and the flow of work-related information and has a logically built reporting route. The corporate management system and internal controlling operating within the Company ensure the transparent, regular, regulated, economical, efficient and profitable use of available funds.

The Company operates an integrated risk management system, within which risks inherent to the operation of the Company and associated with the organisational targets are identified and analysed in a comprehensive manner to be managed in the interest of efficient and profitable operation and identifies the measures necessary to reduce the individual risks to the level below the tolerance threshold, as well as the sphere of organisational units effected by the measure, the method and procedural order of continuous monitoring of such measures.

The flowchart prepared in the course of establishing the controlling environment serves at the same time as the risk universe that defines the basis and the structure of risk management.

All elements of the risk management process (methodology, risk assessment, analysis, manage- ment) are subjected to regular review by the Company, upon new activities and organisational changes risks are assessed and evaluated.

Controlling activities, i.e. procedures supplementing the controlling environment (tools, procedures, mechanisms) have been developed by the management in order to manage risks and facilitate the fulfilment of Company goals in terms of operating effectiveness and efficiency, the reliability of financial reporting and compliance with the applicable regulations, requirements and guidelines. Controls are developed by the management subject to the complexity and significance of the process at hand, in consideration of Company goals and of risks identified.

The Company has developed its information and communication system in such a way that it can provide objective information to management, executive bodies and partners. On the other hand, it ensures that through the appropriate communication channels, external information reaches the organisational unit where such information can be utilised. In view of the importance of the reliability

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of information, internal rules make sure that in an official form only verified information can be circulated within or in justified cases leave the Company, and that confidential information is not released to unauthorised parties.

In accordance with the provisions of the Hungarian and European Union data protection regulations (GDPR), the Data protection and data security regulations of the Company regulate the records kept on the internal data management processes of the Company, as well as the range of personal data managed, the definition of the way of data management, as well as the rights of those involved.

The acting internal control organization works under the supervision of the Supervisory Board. It does its activity based on and according to the approved yearly internal control plan, which will be completed with ad-hoc monitoring.

The internal controls done during 2023 didn't found any deficiency dangerous for the operation of the company or for the interests of shareholders. There was any offence against law. All the deficiencies written in the internal control reports are solved or under way and all the proposals of these reports are launched.

The Company's shareholders are informed about the operation of the internal control system by the Company's publications.

1.7. Activity of the auditor

In 2023 the audit of Rába Group was done by KPMG Hu ngária Kft. Mr. Attila Sándor Juhász was the auditor in charge. The company does not provided other professional services different from the audit in 2023.

1.8. Publication policy, insider people

In its publication policy Rába Plc. uses statutory and required rules according to the publicize rules and regulations of law, the rules of Budapest Stock Exchange and the rules of its own Articles of Associations. The places of publicize are: the website of the company (www.raba.hu) and the official website of Budapest Stock Exchange according to the articles of associations; and the capital market publication system operating by the Central Bank of Hungary.

According to 199§ of Capital Market Act, based on Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse Rába Plc. ensures that the records concerning persons with access to insider information, working for Rába in labour relation or in other quasi contract, are kept in accordance with the provisions of the law. Directives of Capital Market Law are valid to the insider people.

1.9. Exercising shareholders' rights

The shareholders may exercise shareholders' rights in relation to the Company provided that they are registered in the Company's Register of Shareholders and their ownership of shares is certified by a shareholding certificate.

The shareholding certificate is not required for exercising shareholders' rights if the Register of Shareholders is compiled by way of shareholder's identification initiated by the Company,

Shareholders shall be entitled to participate in the General Meetings and to vote if they hold shares with voting rights. To exercise shareholders' rights at the General Meeting of Shareholders, either in person, or through the authorised representative, the shareholder's name has to be shown in the Register of Shareholders at 6 p.m., on the second working day preceding the starting day of the General Meeting of Shareholders, based on the shareholder's identification initiated by the Company for the period between the 7th and the 5th working day preceding the General Meeting of Share- holders.

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