Annual Report Elica Group 2010 by Elica

/ annual report / 2010 / elica group /

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ABOUT ELICA VALUES AND COMMANDMENTS THE PEOPLE CORPORATE GOVERNANCE

4 LETTER TO THE SHAREHOLDERS 6 CHIEF EXECUTIVE OFFICER’S VIEW 10 FINANCIAL HIGHLIGHTS

taste

28 DOMESTIC USE RANGE HOODS -OWN BRAND PRODUCTION -THIRD-PARTY BRAND PRODUCTION 34 ELECTRIC MOTORS 34 PURIFIERS 38 40 YEARS OF HISTORY 44 40 YEARS OF DESIGN 46 COMMUNICATIONS AND PROMOTIONS 52 ERMANNO CASOLI FOUNDATION

touch

feel

2010 CONSOLIDATED FINANCIAL STATEMENTS 66 DIRECTOR’S REPORT 81 FINANCIAL STATEMENTS 139 AUDITORS’ REPORT

56 CORPORATE SOCIAL RESPONSIBILITY 60 INTERNALLY ADDRESSED INITIATIVES 63 EXTERNAL INITIATIVES

listen

look

LETTER TO THE SHAREHOLDERS

FRANCESCO CASOLI

Dear Shareholders, in 2010 a complex cycle came to an end: our company has taken important decisions which have positioned us to tackle the coming years in optimum shape. The approach focused on significant investments to expand internationally and to improve productivity. Important awards in our sector have been very encouraging. Elica views its human resources as the basis of an unmatchable competitive advantage. Elica is a company made up of men and women who share with us not only their professional experience, but also their life experience. It is increasingly important to foster a passion for the common goal which has always been - and always will be - achieving excellence. We have never lost sight of, in every strategic decision faced, the interests of the shareholders who have believed in us and have honoured us with their trust. Into the future we will maintain this outlook of sharing and transparency.

Francesco Casoli, Executive Chairman

CHIEF EXECUTIVE OFFICERâ&#x20AC;&#x2122;S VIEW ANDREA SASSO In 2010 the market experienced a turnaround from the preceding two years with growth of over 4%(1). Growth was particularly strong in Asia and South America, with a good performance also in the CIS(2) and with Europe reporting substantial stability. In Asia the growth principally stems from China, today one of the largest global markets, and to India, the fastest growing market in the world. In 2009, we focused on capitalising on every opportunity to further consolidate our leadership and in 2010 we achieved a central objective of our strategic plan through entering the highest-potential markets: in India, in May, we signed a joint venture with one of the leading local operators and in China, in September, we acquired a majority holding in the company operating under the Puti brand, a leading Chinese home appliance brand.

(1) Company estimates, volume data (2) Commonwealth of Independent States

We therefore fulfilled all our objectives for last year: we significantly consolidated our leadership position, while continuing to invest in innovation and design. Above all else, we continue to believe in the people of Elica: we have invested heavily in training to create an all encompassing culture and values shared by all. Today Elica is the only global player in the range hood sector and 2010 Guidance, communicated to the market in July, was outperformed with: - consolidated revenues of Euro 368 million, growth of 9.9%; - EBITDA of Euro 26 million, growth of 30.6%; - Managerial Working Capital on consolidated revenues of 11.7%, a decrease of 0.3% on 2009. Other important results have been achieved, such as a level of production of range hoods in Low Cost Countries and the Group brand sales both amounting to approx. 35%. On the financial front, the Group has generated significant operating cash flows of over Euro 34 million, bringing the Net Debt at December 31, after the impact of investment operations, to Euro 35 million. The achievement of these objectives has depended on all sectors of Group activity. We have improved industrial efficiency and optimised margins with a significant increase in EBITDA on the previous year, and implemented World Class Manufacturing. We have improved corporate information flows, introducing an integrated management system and, thanks to the Variety Reduction Plan of Elica, we have improved Managerial Working Capital flows, achieving greater efficiency and ensuring that working capital serves the needs of the business. At Eurocucina – the Milan Furniture Trade Show, we presented new products, renewing 30% of the catalogue. We invested over 3% of revenues in innovation and technology: the future will increasingly feature multifunctional and multisensory products and we have already begun to focus on this area. In addition to these results, important awards have been received which recognise the extent of our commitment: in March, for the third consecutive year, Elica was listed in the annual Top Employers as one of the top 25 companies to work for in Italy; in July, for the second consecutive year, we won the Enterprise Award for Innovation of Confindustria, as recognition of our entrepreneurial culture centred around innovation; in November, we received the 2010 China Awards in the category “Capital Elite – M&A” following the acquisition and in December, in Mexico, from the Instituto Nacional para la Educaciòn de los adultos the award for commitment to improve education in relation to our employees at ELICAMEX. Also in December the Great Place to Work Institute recognised Elica as the leading company to work for in Italy, having already received top placements in the previous 3 years. All these awards are the fruit of the labour of a team of people who everyday bring passion and determination to implement the philosophy of the Elica Group: bringing “new air” to the world. Results in 2010 beating expectations are a source of great pride and position us to face into 2011 confident of achieving similarly strong results. With a European and North American market which we expect to be substantially stable, coupled with growth in South America and very strong growth in India and China, the challenge is not just to achieve growth, and to maintain and improve our global leadership, but to absorb the impacts of the current trend of increasing raw material costs forecast throughout 2011. The response of the Elica Group to these new challenges will once again be prudent cost control and creativity and passion in product innovation.

Andrea Sasso, Chief Executive Officer

I geni sono le parti del cromosoma che definiscono i caratteri degli esseri viventi. Ogni specifica sfumatura del nostro essere è descritta da un particolare gene, in maniera incredibilmente dettagliata: ad esempio, i geni che controllano l’olfatto sono in grado di individuare oltre 10.000 variazioni anche se non tutti possono percepire l’intera gamma e molti lo fanno in maniere differenti. Questo significa che alcune sostanze possono essere dolci per alcuni e insipide per altri. Questo potrebbe essere il motivo per cui per molti anni nella cultura occidentale si è rifiutato di riconoscere il quinto gusto, quello dell’umami. Ancora oggi, malgrado il mondo scientifico lo abbia riconosciuto pienamente nel 2000, in Europa continuiamo a descrivere i sapori come dolci, amari, salati e aspri, ignorando completamente l’umami.

In Giappone, dove questo quinto gusto fu scoperto nel 1908 dal chimico giapponese Kikunae Ikeda, la stimolazione dell’umami è molto utilizzata in cucina nella realizzazione di piatti complessi, studiati dagli chef per stimolare contemporaneamente 3 o addirittua 4 sapori fondamentali nello stesso piatto, mentre in occidente raramente se ne stimolano più di 2.

In Japan, where chemist Kikunae Ikeda discovered this fifth taste in 1908, umami stimulation is widely used in the preparation of complex dishes studied by chefs to simultaneously stimulate three or sometimes even four fundamental flavours in the same dish, while in the West we rarely stimulate more than two.

[taste] Genes are that par t of the chromosome that define all the features of living beings. Every single nuance of our being is described by a particular gene in an incredibly detailed manner. The genes that control the sense of smell, for example, can identify more than 10,000 variations of odors even though not everyone can actually perceive the entire range and many do so in different ways. This means that what is perceived as sweet by one person, can be considered bland by another. This could be why, for so many years now, western culture has refused to recognise the fifth taste – umami. Although it was fully recognised by the scientific community in the year 2000, in Europe today we still describe our flavours as sweet , bitter, sour or salty, completely ignoring umami.

14 20 22 24

ABOUT ELICA VALUES AND COMMANDMENTS THE PEOPLE CORPORATE GOVERNANCE

4 LETTER TO THE SHAREHOLDERS 6 CHIEF EXECUTIVE OFFICER’S VIEW 10 FINANCIAL HIGHLIGHTS

taste

touch

FINANCIAL HIGHLIGHTS

ELEKTRA HOOD

Consolidated revenues EURO MILLIONS

400

398.8

426.8

385.4

335.1

368.3

300 200 100 0

2006

2007

2008

2009

2010

Range hood revenues EURO MILLIONS

330.7

Electric motor revenues

359.2 319.7

400

287.9

313.1

EURO MILLIONS

300

200

100

2006

2007

2008

2009

EBITDA

EURO MILLIONS

39.8

38.5

22.7

47.2

2006

2007

23.9

2010

2008

2009

2010

2006

EURO MILLIONS

12 8.3

9.2

22.1

2.6

Cash (Net Debt)

2007

2008

4.3

3.6

2007

2009

2010

3.2

-15

(2.3) (22.9)

-30 0.2 2006

0.7

3 2008

2009

2010

EPS*

-45

(34.9) 2006

2007

2008

(34.9) 2009

2010

ROCE*

EURO / CENTS

RATIO

15.1

16.2

8.3%

8.9%

7.5

6.2

(*) Earning per Share

2009

10.6

Group Net Profit

2008

10 5

2007

55.2

26.2 20.1

65.7

67.6

EBIT

EURO MILLIONS

2010

68.1

5.1%

2.4%

2% 0.4 2006

2007

2008

2009

2010

2006

(*) Return On Capital Employed

2007

2008

1.9%

2009

2010

/ about elica_p.14 / values and commandments_p.20 / corporate governance_p.24 /

/ the people_p.22

ICO HOOD

ABOUT ELICA

The Group was founded in the ‘70s when Ermanno Casoli, founder of the Elica Group and father of the current Chairman Francesco Casoli, left Fabriano in the heart of Le Marche for Paris to present his idea to Philips: the first extractor fan - predecessor of the range hood. Ermanno Casoli dreamed of a technology which would clear the air of odours and vapours, maintain clean air and guarantee a better quality of life. From this dream - which became reality - the history of the Elica Group began. Forty years of development and success is based on the philosophy of Elica: bringing new air to the world, continually offering the latest developments to all levels and all partners - from clients to suppliers, to investors, to employees, right up to the local communities which host the Group throughout the world. This motto which sums up the approach to thinking and working within the Elica Group is coupled with a constant striving for the best quality: in life, in relationships, in products and in the productive processes.

In 2010 Elica entered new markets, not just as a supplier, but as part of the market, signing in May a joint venture in India, which created Elica PB India Private Ltd., and in September acquiring a majority of the Chinese company Zhejiang Putian Electric Co. Ltd. which earned the Elica Group a China Awards 2010 recognition in the category “Capital Elite – M&A”, recognising the quality of its international operations. The Group continuously renews its most recognisable calling card: the product. In 2010 alone 30% of the catalogue was renewed, with the presentation at the Furniture Trade Fair and Eurocucina of some of the most ground-breaking products: Sombra and Skin, which received the Red dot award: 2011 design product for its high quality and aesthetic aspect; Ico, the range hood with lower energy consumption at comparable service level; Bubble, designed by Stefano Giovannoni and manufactured in polycarbonate; in addition to a series of multisensory products such as Feel, Uno, Air4Ear and Alba, which surprises the consumer through involving all senses. Elica’s philosophy of bringing new air means investing in its human capital: for Elica, people are the most important resource. This year the Group was recognised by the Great Place to Work 2011 awards, with Elica placed first in the category of best places to work in Italy. In addition, for the third consecutive year Elica was included in the Top Employers Italy 2011 and for many years has organised with the support of the Ermanno Casoli Foundation a training course for all levels of employees which links the arts and industry. This philosophy has made the Elica Group, listed on the Italian Stock Market since 2006, the world leader in the range hoods for domestic use sector in terms of units sold and has allowed the Group to establish a leadership position at European level also in the design, production and marketing of electric motors. With approx. 2,800 employees throughout the world, annual production of approx. 17 million units of range hoods and motors and 9 production sites, 4 of which in Italy, one in Poland, one in Mexico, one in Germany, one in India and one in China, Elica is an international group with an Italian heart. Passion – innovation - well-being - listening to external and internal needs and ambitions: these are the most important characteristics which today set the Group and its products apart throughout the world.

SPACE HOOD

BUSINESS UNIT KITCHEN RANGE HOODS

MOTORS

Since its foundation Elica has expanded its presence in the kitchen range hoods for domestic use market to today become world leader with a market share of 17%(1). The Range Hood Business Unit designs, produces and markets kitchen hoods for domestic use, both own brand (comprising 35% of sales revenues) and brands for the principal international home and kitchen appliance producers (65% of sales revenues). The Group brand products are universally recognised as unique items, both in their form and in the highly innovative technological content. The sophistication of the materials used together with a constant focus on maximising efficiency and reducing consumption ensures the quality of the final product. A highly personalised range, co-design, introduction of greatly innovative licensed technologies and high manufacturing and servicing quality distinguishes the Group as a highly qualified partner for supply to Original Equipment Manufacturers (OEM). For many years, well-known companies such Whirlpool, Electrolux, Indesit Company, Fagor, Bosch-Siemens, General Electric and Mabe renew their trust in the Group, safe in the knowledge of receiving cutting-edge technology, a personalised range and a high degree of professionalism.

The Motors Business Unit has developed alongside the Range Hood Business Unit, which through the FIME brand, designs, produces and markets electric motors for home appliances, range hoods and boilers for domestic use and is the leader on the European market. In the traditional boiler sector, FIMEâ&#x20AC;&#x2122;s market share for motors is today 67%, while in the steam boilers sector holding 15% of the market. Thanks to the experience and professionalism acquired over the years, the Elica Group can offer clients electromechanical design for electric motors, fluid dynamics and electronic design, creating not just motors, but integrated systems for the movement and treatment of air. Recently, the Group also entered the commercial refrigeration sector, utilising innovative technologies to create energy-saving ventilation systems. The FIME brand ventilation systems respond to the increasing security regulations and to the need to lower consumption, with an added focus on the well being of the person and the environment which is the hallmark of all Group endeavours. The client portfolio of the Motors Business Unit includes the major producers within the sector: Indesit Company, Whirlpool, Electrolux, General Electric, Bosch, Vaillant, Riello, Ariston Thermo Group and Viessmann.

(1) Volume data as per the Company

PRODUCTION SITES

THE AMERICAS

The Elica Group has 9 production sites with a wide geographic spread, of which four in Italy, one in Poland, one in Mexico, one in Germany, one in India and one in China. The global expansion has been strategically undertaken to become the only supplier in the sector capable of offering high quality products and services internationally. In 2010 this objective was realised following the entry into the Asian markets of China and India - two of the markets with the highest development potential. The policy to establish proximity with clients allows a timely response to their demands and to develop an offer focused on the individual needs and styles of the target consumer, thus expanding market share. The Elica Group has not forgotten its roots and is located in its original headquarters at Fabriano and in 2010 carried out 65% of total production (2), in Italy, promoting the development of a business culture which is increasingly “glocal” tapping into all of the knowledge which is part of the global production and sales network.

The American market accounts for 18% of the global range hood market in volume terms. The Elica Group therefore decided to tap into the potential opportunities offered in this region. The opening of the ELICAMEX Mexican factory served the dual purpose of establishing both a productive and commercial presence. In 2010, the Group further increased its market share in volume terms in the Americas to 10%, thanks principally to the OEM business which includes important clients such as Mabe, Whirlpool, General Electric, Electrolux and BSH. The trading company Elica Inc., with offices in Chicago, is dedicated entirely to the North American market and in which it promotes and distributes the Elica brand serving the medium-high and high-end segments.

DISTRIBUTION NETWORKS Third party brand products are distributed directly through close relationships with Original Equipment Manufacturer clients which have been developed and consolidated over the years. Brand products are sold through various distribution channels: ×× kitchen manufacturers, some examples in Italy include Boffi, Valcucine, Ernestomeda, Scic and Scavolini, and overseas the Nobia Group, Nobilia and the Alno Group; ×× distributors, which include among their clients home furnishing stores, kitchen studios, contracts; ×× mid/high range retailers, for example, Darty, El Corte Inglés, John Lewis; ×× kitchen studios, specialised kitchen furnishing stores, which are supplied directly. To improve the distribution of Elica Group products globally, a direct sales presence exists in various strategic geographic areas: Europe, the Commonwealth of Independent States, Asia and the Americas. The mission is not just to improve distribution efficiency, but also to improve market share through the creation of a dedicated support structure.

EUROPE The Group holds a 41% volume market share in Europe, with the strongest presence in Italy. In addition to the long-standing direct sales structures in Italy and in Poland, in 2008 a direct presence was added in Germany following the acquisition of Gutmann, leader in the high-end range hood sector and in 2010 a dedicated organisation was introduced to Spain which allowed the Group to achieve strong results in a geographic area experiencing market difficulties.

CIS The Elica Group established a direct presence in this market through its representative office in Moscow. The Russian market is very different from the European market and thanks to the direct presence established and the logistical proximity to clients the Group can guarantee a timely response to clients and can serve the specific demands of consumers in this area.

ASIA In Asia, the Group has been present since 2002 following the joint venture with Fuji Industrial, leader in Japan in the production of range hoods. The agreement led to the creation of ARIAFINA - today a leading brand for high-end range hoods. ARIAFINA designs and markets home appliances created specifically for the Japanese market and boasts a showroom in the main shopping street of Osaka. The Asian market is particularly appreciative of the Made in Italy brands and this partnership has led to the development of products which unite cutting-edge technology with the elegance and aesthetic beauty of Italian design. In 2010, the significant international expansion of the Group focused on the entry into the two leading Asian markets: India and China. In May 2010, Elica entered the Indian market, whose growth is among the strongest globally, through a Joint Venture with the Indian entrepreneur Pralhad Buthada, one of the leading players in the region with proven product knowledge and long-standing relationships with the range hoods and home appliance distributors. Elica PB India Ltd. was therefore created, which produces and markets own brand and third party brand range hoods, hobs and ovens for the Indian market. In September of the same year a majority 55% holding in the Chinese company Zhejiang Putian Electric Co. Ltd. was acquired, which operates under the “Puti” brand, a leader in the Chinese home appliance sector producing and marketing range hoods, gas hobs and kitchenware sterilisers. The Group has therefore entered the second largest range hood market – with a product line boasting a high level of brand awareness, a central position in the distribution network and a solid, high quality production base with strong potential for future development. Putian (3) is one of the leading players in the Chinese range hood market and the principal company developing western style range hoods, today focusing on the medium-high end of the market, designed and developed internally. The production site is located in Shengzhou, a major Chinese industrial district for the production of kitchen home appliances. The Elica Group consolidates its position as a global player in the range hoods sector through entering these two markets, acquiring increased global share and creating the opportunity to serve the OEM client base with local production, while increasing purchasing from Low Cost Countries.

(2) Volume of range hoods produced

(3) Zhejiang Putian Electric Co. Ltd

Amsterdam: un edificio industriale che ospitava un’antica tipografia viene ristrutturato per diventare un ristorante molto particolare. Nei 1200 metri quadrati di spazio aperto, vengono predisposte una serie di moderne cucine ad isola, affiancate a tavoli da pranzo e sedie. Qui le persone pagano per cucinarsi la propria cena, affiancate dalla supervisione di chef professionisti, seguendo il menu della serata proposto dal ristorante. Il contatto con il cibo è una parte imprescindibile del piacere che proviamo quando mangiamo: la superficie liscia dei pomodori, l’ambigua mollezza delle carni, i rumori delle verdure che soffriggono, le cromie che mutano continuamente nelle fasi di cottura.

Cucinare è un’attività che ci coinvolge totalmente, mette in movimento ogni nostro senso, mettendoci in competizione con la nostra autostima e creando un legame stretto con le persone che ci circondano. Molto più che mangiare.

Cooking is a fully enveloping activity, it engages all of our senses, it is an intense challenge that creates a close bond with those around us. Even more so than the simple act of eating.

[touch] Amsterdam: an industrial building that once held an ancient printing press has been conver ted into a very special restaurant . In the 1,200 m 2 of open space a series of modern kitchen islands have been placed surrounded by dinner tables and chairs. People pay to cook their own meals here, guided by professional chefs and following a preset menu proposed by the restaurant itself. One of the greatest pleasures of a meal lies in direct contact with the food we eat: the smoothness of the sur face of a tomato, the ambiguous softness of a piece of meat , the sound of vegetables frying in the pan, the ever-changing colours of food as it cooks.

14 20 22 24

ABOUT ELICA VALUES AND COMMANDMENTS THE PEOPLE CORPORATE GOVERNANCE

56 CORPORATE SOCIAL RESPONSIBILITY

touch

60 INTERNALLY ADDRESSED INITIATIVES 63 EXTERNAL INITIATIVES

feel

listen

VALUES

THE REFERENCE POINT FOR ALL THE ACTIVITIES OF THE ELICA GROUP

LOVE YOUR CUSTOMERS, PUT PASSION INTO WORKING FOR THEM USE INNOVATIVE THINKING MAKE IT EASY FOR EVERYONE TO BE INVOLVED IN THEIR OWN WORK EMPLOY AND COMMUNICATE TOTAL ENERGY IDENTIFY NEW OBJECTIVES AND ACHIEVE THEM STAY CURIOUS AND NEVER STOP LEARNING WANT TO WIN SEE CHANGES AS AN OPPORTUNITY FIGHT TO REDUCE COSTS AND SIMPLIFY YOUR WORK

COMMANDMENTS THE INSPIRING PRINCIPALS FOR ELICA GROUP'S WORK

1 MANAGE PEOPLE SO THAT THEY CAN MANAGE THEIR WORK 2 DELEGATE, DELEGATE, DELEGATE 3 WORK TOWARDS OBJECTIVES 4 PERSEVERE, PERSEVERE, PERSEVERE 5 REWARD THE ACCEPTANCE OF RISK AND RESPONSIBILITY 6 ESTABLISH SELF-MANAGING TEAMS TO SOLVE PROBLEMS 7 TRY TO ACHIEVE THE IMPOSSIBLE 8 DON'T GET TANGLED UP IN A BUREAUCRATIC MENTALITY 9 COMMUNICATE, COMMUNICATE, COMMUNICATE 10 DON'T MAKE THE COMPANY TOO COMPLICATED

HUMAN RESOURCES ELICA GROUP IN THE WORLD

34 618 1,989 159

EXECUTIVES

WOMEN

42.4 %

WHITE-COLLAR

MEN

57.6 %

BLUE-COLLAR

TOTAL EMPLOYEES

2,800

OTHERS

163

DEGREE HOLDERS

631

DIPLOMA HOLDERS

717

OTHER TITLES

TOTAL EMPLOYEES IN THE WORLD

2,800

ITALIAN EMPLOYEES

1,511

STEFANO ROMITI INDEPENDENT DIRECTOR AND LEAD INDEPENDENT DIRECTOR

BORN IN ROME (RM) ON 17/11/1957 APPOINTED A DIRECTOR BY RESOLUTION DATED 27/04/2009

GENNARO PIERALISI DIRECTOR

BORN IN MONSANO (AN) ON 14/02/1938 APPOINTED A DIRECTOR BY RESOLUTION DATED 27/04/2009

GIOVANNI FREZZOTTI INDEPENDENT DIRECTOR

BORN IN JESI (AN) ON 22/02/1944, APPOINTED BY RESOLUTION DATED 27/04/2009

INTERNAL CONTROL COMMITTEE

REMUNERATION COMMITTEE

FRANCESCO CASOLI EXECUTIVE CHAIRMAN BORN IN SENIGALLIA (AN) ON 5/6/1961 APPOINTED A DIRECTOR BY RESOLUTION DATED 27/04/2009.

ANDREA SASSO CHIEF EXECUTIVE OFFICER, BORN IN ROME ON 24/8/1965, APPOINTED BY RESOLUTION DATED 27/04/2009

CORRADO MARIOTTI CHAIRMAN BORN IN NUMANA (AN) ON 29/2/1944, APPOINTED BY RESOLUTION DATED 27/4/2009

FRANCO BORIONI ALTERNATE AUDITOR BORN IN JESI (AN) ON 23/06/1945 APPOINTED BY RESOLUTION DATED 27/4/2009

STEFANO MARASCA STATUTORY AUDITOR BORN IN OSIMO (AN) ON 9/8/1960 APPOINTED BY RESOLUTION DATED 27/4/2009

GILBERTO CASALI STATUTORY AUDITOR BORN IN JESI (AN) ON 14/1/1954 APPOINTED BY RESOLUTION DATED 27/04/2009

DANIELE CAPECCI ALTERNATE AUDITOR BORN IN JESI (AN) ON 03/04/1972 APPOINTED BY RESOLUTION DATED 27/4/2009

LAURA GIOVANETTI

e mail: l.giovanetti@elica.com

p.: +39 0732 610727

MARCO BONFIGLI AMERICAS GENERAL DIRECTOR

ALESSANDRA FAGOTTI B2C SALES DIRECTOR

GUIDO CERULLO CHIEF OF PRODUCT DEVELOPMENT

ALESSANDRO GASPARRI CHIEF LOGISTIC OFFICER

VINCENZO MARAGLIANO CHIEF FINANCIAL OFFICER

ALESSANDRO CIABATTI MARKETING & INNOVATION DIRECTOR

SANDRO GATTUSO CHARMAN & GENERAL MANAGER ZHENJIAN PUTIAN ELECTRIC CO. LTD

ROBERO OLIVIERI B2B SALES DIRECTOR

MARCO SCIPPA CHIEF OF HUMAN RESOURCES

ROBERTO DI FIORE CHIEF OF INDUSTRIAL AREA

MASSIMO W. LO CAMPO CHIEF INTEGRATION OFFICER

ANDREA SASSO CHIEF EXECUTIVE OFFICER

FABRIZIO STRONATI CHIEF PROCUREMENT OFFICER

GIANNA PIERALISI EXECUTIVEDIRECTOR BORN IN M ONSANO (AN) ON 12/12/1934 APPOINTED A DIRECTOR BY RESOLUTION DATED 27/04/2009

FIORENZO BUSSO INDEPENDENT DIRECTOR BORN IN MILAN (MI) ON 11/9/1942 APPOINTED A DIRECTOR BY RESOLUTION DATED 27/04/2009

MEMBERS OF THE BOARD OF DIRECTORS

ELICA URBANO URBANI CHIEF EXECUTIVE OFFICER AIRFORCE S.P.A.

MEMBERS OF THE BOARD OF STATUTORY AUDITORS

/THE PEOPLE /CORPORATE BOARD

/KEY INTERNATIONAL PEOPLE

KEIICHI KASHIMURA CHAIRMAN & REPRESENTATIVE DIRECTOR ARIAFINA CO., LTD

MANUEL FERNANDEZ MANAGING DIRECTOR EXKLUSIV– HAUBEN GUTMANN GMBH

INVESTOR RELATIONS MANAGER

PRALHAD BHUTADA DIRECTOR AND CHIEF EXECUTIVE OFFICER ELICA PB INDIA PRIVATE LTD

RENYAO DU DIRECTOR ZHEJIANG PUTIAN ELECTRIC CO. LTD

TOP MANAGEMENT

BUBBLE HOOD

CORPORATE GOVERNANCE

SKIN HOOD

In 2010, the Elica Group took further steps in the development of its Corporate Governance system, initiated on listing on the Stock Market (November 2006) and which has paved the way over recent years for the development of an increasingly sophisticated Internal Control System. The events which have dominated the global market have focused greater attention on the management of risks at all levels with the development of a more “proactive” management of unforeseen events and difficulties of various types which the Company has had to cope with in the pursuit of its internationalisation objectives. During the year and based on the more stringent requirements demanded of certain companies (listed on the Stock Market, of significant size or with frequent contacts with Public Administration) the Control System has been centred on the best Anglo-Saxon traditions, drawn up also in view of harmonisation with international financial community requirements (firstly European and also other highly industrialised countries). Elica has taken steps to comply with the reform on the “Auditing of accounts” introduced by Legislative Decree 39/2010, taking the opportunity to introduce an ambitious standardisation of its Internal Control and governance System to international benchmarks (the project, begun in the middle of 2010, will be completed by the end of the first half of 2011). In addition to this Elica has continued to responsibly apply the criteria introduced by the Self-Governance Code (Corporate Governance section of the Borsa Italiana website) and all regulatory requirements with particular regard to Law 262/2005 and Legislative Decree 231/2001. Further details are extensively provided in the Corporate Governance and Shareholder Structure Report available on the company website www.elicagroup.com.

PRINCIPAL ACTIVITIES IN 2010 The activities with impact on the internal governance structure of the Company and its control bodies in the year included: ×× evaluation of the efficacy and the effective functioning of the Internal Control System, expressing a favourable opinion on the System, placing emphasis on its development and adjustment, currently in progress; ×× identification of the main business risks, taking into account the characteristics of the activities undertaken by the Issuer and by its subsidiaries, and present them for examination to the Board of Directors on the approval of the interim financial statements;

×× confirmation of the Chief Executive Officer to oversee the functioning of the Internal Control System, identifying the principal business risks and the necessary modifications to the Internal Control System; ×× appointment of the Internal Control Manager in the person of the Elica Group Internal Audit Manager, with the duty to develop the Internal Control System and to support the activities of the Internal Control Committee and the Board of Directors; ×× delegation to the Executive Directors the powers necessary and appropriate to carry out the Corporate Governance activities.

STRUCTURAL ACTIONS That outlined above was supported in the year also by activities of particular impact on the corporate structure with immediate and future effects on the medium and long-term development. In particular, in 2010, the Company implemented a complete integrated accounting-management IT reporting system, which guarantees timely provision of information in line with high qualitative standards and guaranteeing high levels of control. The adoption of this support in 2010 by the Polish subsidiary and the motors division of the Issuer was completed by the remaining business unit at the beginning of the current year. Among the most significant activities undertaken for the structuring and standardisation of the Internal Control System, the Company began a project focused on complete and updated mapping of the processes and controls concerning the administrative-accounting information flows, utilising the experience and expertise of a qualified external company, specialised in Financial Accounting Advisory Services, with a significant investment made whose effects will be seen following the 2011 first half-year period but, as established by the project, in coming years will cover the entire Group consolidation scope.

/ domestic use range hoods_p.28 > own brand production > third-party brand production / electric motors_p.34 / purifiers_p.34 / 40 years of history_p.38 / 40 years of design_p.44 / communications and promotions_p.46 / ermanno casoli foundation_p.52

DOMESTIC USE RANGE HOODS /OWN BRAND PRODUCTION

SINFONIA HOOD

Elica The Elica brand was created in 1970 with an expansive vision: to bring healthy air to kitchens throughout the world. For 40 years the products of the Elica brand have satisfied millions of clients internationally for their quality, reliability and technology. In 2002, the Elica Collection was created, a selection of groundbreaking innovative products, through which Elica experimented with a new concept - focussed on the importance of design and centred on the expertise of famous international designers.

This laboratory of ideas and technologies generated a new way of thinking in relation to the range hood, which became a distinguishing and character infusing object within each individual kitchen. Today Elica has developed the most extensive range of products in the world, housed under a single brand and which calls on all of the knowledge and experience acquired over the years. Conceptualising, designing, creating and distributing products throughout the world - from Italy to Poland, from Mexico to Japan and from China to India â&#x20AC;&#x201C; establishing a common identity, results in the production of high quality, innovative and elegant items which create a better standard of living within the home. A single brand has been created to follow the path of design and technological innovation, to develop the product and to refine the design.

Gutmann The Gutmann brand is positioned at the high-end of the brand architecture of the Elica Group. In the factory at M端hlacker, range hoods are produced which in their size, form and material, satisfy the specific design requirements of clients. Gutmann is focused on exclusivity, through industrial process based on handcrafting and attention to detail. The leadership of Gutmann allows the Elica Group to expand in Germany and other European countries, leading the exclusive segment of the market, providing extractor units tailor-made to fit into unique surroundings.

SOMBRA HOOD

Turbo Air Turbo Air, for over 35 years, has represented “Pure Italian Technology”, a brand of products which draws on entirely Italian inspired excellence. The design, technology and attention to the product places Turboair as the brand through which the Elica Group is present in the medium range of the Asian, CIS, Far East and Italian markets.

Ariafina ARIAFINA was created as a joint venture with Fuji Industrial, a Group partnership which facilitated entry into Japan. The high-end range hood brand ARIAFINA links Japanese productive know-how with Italian style, a product of refined taste and elegance which establishes the product as a design object.

Arietta Arietta is the brand marketed in North America which marries quality and competitivity for efficient products, drawing on design experience and the Group’s construction knowledge.

Jet Air Jet Air is the brand in which the Group has been present on the Russian market for many years and is a product of the rich history of the Made in Italy brand, particularly loved and appreciated for its functionality, technology and aesthetic beauty.

Puti Acquired as part of the joint venture with Zhejiang Putian Electric Ltd., a producer of hobs and range hood and kitchen sterilisers, Puti is a leading brand in the home appliance sector in China. These products are recognised for the high technological and aesthetic content, linking a Chinese tradition and know-how with a western style and the experience of the Elica Group.

DOMESTIC USE RANGE HOODS /THIRD-PARTY BRAND PRODUCTION

For 40 years, the Elica Group has supplied not only products but also services to important industrial groups, with whom it partners in an optimised coming together of design, processes, research and production. The goal is to provide an integrated service which begins with the idea, which turns into a concept, and then into an industrial project and results in the creation of a series of personalised products, perfectly in line with the needs of the client and the market. With a constant requirement for innovation from

clients, the Elica Group has acquired experience and a technical capacity which anticipates and exceeds international standards in terms of environmental protection, energy saving and security. Production for the Original Equipment Manufacturers (OEM) is the most significant contributor to the volumes and revenues of the Elica Group.

ELECTRIC MOTORS

PURIFIERS

Fime

Luxerion

The FIME brand over the years has developed its presence in the market to become a leader in the domestic ventilation sector with range hood ventilators and electric motors for home appliances and in the heating sector with ventilators for boilers. With the advantage of over 30 years experience in the ventilation and heating sector, the Elica Group today, through the FIME brand, holds a leadership position in the European market. In line with the spirit of synergy and partnership which has always characterised relations with the large industrial groups it supplies, the Elica Group has developed extensive know-how not just in electromechanical design of electric motors, but also in the fluid dynamics and electronic design which today allows the provision of integrated client systems for the movement and treatment of air. The design, as with production, is also carried out and controlled within the motors structure. The technicians have the most modern calculation and simulation instruments for fluid dynamics and electromagnetism, controls integration and for structure mechanics available to them. Together with the virtual instruments, the instruments for the support and checking of projects and products are also available within the laboratory. In line with the industrial policy of the Group, the motors Business Unit is increasingly orientated towards production focused on the well being of the individual and the environment. The FIME brand ventilation systems respond increasingly to the regulatory requirements concerning sustainability and the lowering of consumption, in all sectors of application. The experience developed has facilitated the entry into the commercial refrigeration sector with technologically innovative products which focus on the saving of energy.

Luxerion is the first line of multifunctional appliances which combine lighting and the purification of air - created to improve well-being in the domestic environment. With Luxerion, Elica and Artemide have focussed on the interplay of light and air to create a new experience and new ways of conceiving of the environment. Cutting-edge technology and exclusive design have created a new object, which revolves around the emerging focus of clients on high quality living. In addition to the Luxerion products, Elica has created new models to combine with the range hood products in order to offer a complete range for the living room and kitchen.

LUXERION AZIO

Zucchero invertito * chimica degli alimenti > Liquido denso ottenuto dalla decomposizione dello zucchero in glucosio e fruttosio. Ha una capacità dolcificante molto maggiore dello zucchero.

Inver ted sugar * food chemistry A mixture of equal par ts of glucose and fructose resulting from the hydrolysis of sucrose. It is a much stronger sweetener than sugar.

Amaro * percezione organolettica L’amaro è uno dei gusti di base. Le principali sostanze che ne identificano il gusto sono: chinino, genziana, caffeina.

Bitter * organoleptic perception Bitterness is one of the fundamental flavours. The main substances that offer this flavour are: quinine, gentian root and caffeine.

[feel]

14 20 22 24

ABOUT ELICA VALUES AND COMMANDMENTS THE PEOPLE CORPORATE GOVERNANCE

4 LETTER TO THE SHAREHOLDERS 6 CHIEF EXECUTIVE OFFICER’S VIEW 10 FINANCIAL HIGHLIGHTS

taste

touch

feel

Astringente * definizione alimentare Gli astringenti sono prodotti che agiscono sugli strati superficiali nella mucosa della lingua, contraendoli, e provocano una sfumatura del gusto simile alla sensazione di asprezza. Esempio perfetto: i tannini (vino, castagno) ma anche caffĂ¨, tĂ¨ e cacao.

Astringent * nutritional definition Astringents are products that contract the super ficial layers of the tongueâ&#x20AC;&#x2122;s mucous and provoke a taste similar to the sensation of tar tness. A per fect example: tannins (wine and chestnut), but also coffee, tea and cocoa.

Flavour * percezione organolettica Un insieme di sapori e odori evocato da sostanze tenute in bocca. Sono escluse le sensazioni tattili e visive.

Flavour * organoleptic perception The sensation produced by flavours and aromas together when in the mouth. Touch and sight are not included in flavour.

FEEL HOOD

40 YEARS OF HISTORY ELICA: FROM AN IDEA TO WORLDWIDE SUCCESS

Elica was founded 40 years ago following the brilliant idea of one man, Ermanno Casoli, who succeeded in bringing to life an exceptional concept: in 1970, in a garage, the first prototype of the current kitchen range hood was built, in a compact size so it could be easily transported anywhere. Initial production utilised a handcrafted system for the building of suspended steel range hoods. This was subsequently replaced by a dedicated factory for the production of hoods with semi-industrial productive systems which allowed the Company to rapidly develop, selling its products also in foreign markets. Elica quickly established an international outlook: in 1972, Ermanno Casoli went to Paris to present to Philips the first range hood. In the ‘70s the Casoli family incorporated the company SIC S.p.A. (“SIC”). In 1975, the first technical laboratory and quality control office were introduced. After the premature passing of Ermanno Casoli, the business was managed first by his wife and in 1978 by his son Francesco, currently Chairman of Elica. In this period, the growth of Elica was based on the ongoing development of the range hood, with a focus on continuous research into technological and functional innovation and in the originality of the style of the product. At the same time, the Company developed a strong commercial strategy: in 1982 Elica launched the Lego range hood in collaboration with Giorgetto Giugiaro, developing a system which allowed the interchanging of the front part of the unit on which the aesthetic quality is based. At the end of the ‘80s, changes in raw material prices caused significant alterations within the market: the use of inox steel in the production of range hoods improved the aesthetic quality of the units. Elica also launched on the market new types of stylish wall-mounted range hoods with a strong visual impact.

Expansion in the 1990s was founded on organic growth, through consolidation of commercial relationships with large OEM clients and through acquisitions of holdings in sector companies. In 1994, Elica commenced production at Serra San Quirico, which focused on the processing of inox steel and today is specialised in the production of medium/ high-end range hoods and in 1998 began production in the new Mergo production facility, today the most automated site of the Group. At the same time, the relationship with the arts emerged and consolidated and in 1997 the Arts award in memory of Ermanno Casoli was introduced: the presence in the field of the arts became stronger with the creation of the Ermanno Casoli Foundation in 2007. In 1999, Elica acquired a 10% shareholding in Fox DESIGN, a company operating in the kitchen range hood market. From 2000 collaboration began with famous international designers: among the most significant is that with David Lewis. In the same year, holdings were acquired in Airforce, a company operating in the range hood sector, and in Jet Air, which offered the opportunity to expand into Russia, Eastern Europe and South America. In 2001, Bafin, a subsidiary of Elica, spun-off the electromechanical and electronic activities respectively into FIME, leader in the production of electric motors for home appliances and transformers, and into Roal Electronics.

In 2002, the Group began to look outside Europe and signed a joint venture with Fuji Industrial, the leading Japanese producer of range hoods, and which was consolidated in May 2006 through the acquisition of a majority stake. This agreement led to the creation of Ariafina, today a leading brand in Japan for high-end range hoods. The success of this partnership – which has further strengthened the Elica product range in Asia – led to the opening of an Ariafina showroom in Osaka’s principal shopping street in November 2005. In 2003, control of Fox DESIGN and a further stake in Airforce was acquired - leading to a total shareholding of 45%. In 2004, Elica acquired approx. 49% of I.S.M., a company specialised in metal sheet manufacture, in order to integrate the sheet metal phase into the entire production cycle. At the end of 2005, Fime Polska was incorporated, which opened a factory in Wroklaw for the production of motors used in home appliances, today Elica Group Polska, an important centre also for the production of range hoods in one of the most important industrial districts in Eastern Europe. 2006 began with the acquisition of the remaining 40% of Jet Air and the motors business unit of Turbo Air, a brand focussed on the Eastern European markets and in particular the CIS. Internationally ELICAMEX S.A. de C.V. was incorporated in Mexico (Queretaro), with the objective to carry out onsite production for the American market and to manage logistical and distribution flows in order to offer a more complete and timely service to clients.

On November 10, 2006, in order to assist the development of a structured governance process and to improve transparency within the company, the Company was listed on the Italian Stock Market in the Star segment, a segment for companies which meet the highest levels of corporate governance and operational transparency. The listing comprehensively marked the movement from a family-based company to a strongly professional entity. In the two year period 2007-2009, Elica incorporated through merger four subsidiary companies: Jet Air, FOX DESIGN, Turbo Air and FIME. In January 2007, the Group acquired a further holding in Airforce, increasing its stake to 60%; in September, an important agreement with NOBIA AB was signed, a leading Swedish group involved in the production and sale of kitchens in order to further strength its European presence. In December, Elica signed an important supply contract with Whirlpool Corporation, the world’s leading producer of home appliances, allowing further expansion into the American market. In addition, Whirlpool acquired a 5% holding in Elica, which between 2008 and 2010 increased to 10%.

BUBBLE HOOD

In 2008, Elica and Artemide, a world leader in the lighting sector, signed an important three-year agreement which created a new market segment: LUXERION™ - the first line of multifunctional products which integrate design, lighting and air purification. In the same year, in a strategic location in the Brera area of Milan the Elica Showroom was opened: a space specifically designed to host events for the promotion of products and the development of synergies with other brands within the kitchen, furnishing and lighting sectors. At the end of the year, the Elica Group acquired 100% of the German company Gutmann GmbH, leader in the high-end kitchen range hood market specialised in the production of high performing “customised” range hoods. This operation saw the Group strength its leadership position in the high-end segment.

kitchenware sterilisers. The Elica Group therefore entered the Chinese market - the second largest range hood market – with a product line boasting a high level of brand awareness, a central position in the distribution network and a solid, high quality production base with strong potential for future development. Thus the Elica Group consolidated its position as a global player in the range hoods sector with a direct presence in Europe, The Americas, India and China, gaining market share in the respective local markets, and, at the same time, creating the opportunity to serve the OEM client base with local production and increase procurement from Low Cost Countries.

In 2010, Elica further distinguished itself with the creation of the Elica Collection, focusing on the exclusive segment and offering the most extensive range of products on the market; the Company entered the Indian market also in 2010 through a joint venture with Pralhad Bhutada, one of the leading local operators. Through this agreement, the Group gained a foothold in one of the largest Asian markets with one of the highest growth rates in the world. A few months after the establishment of the joint venture, Elica opened its first store in the centre of Mumbai. The space covers approx. 120 sq. metres on two levels and is testament to the strategy of the company to consolidate its strong development on international markets. In the same year a majority 55% holding was acquired in the Chinese company Zhejiang Putian Electric Co. Ltd., which operates under the “Puti” brand, a leader in the Chinese home appliance sector producing and marketing range hoods, gas hobs and

1970 ERMANNO CASOLI FOUNDED ELICA S.P.A.

1972 ACQUISITION OF THE CONTRACT WITH PHILIPS

1990 FRANCESCO CASOLI BECAME CHIEF EXECUTIVE OFFICER

2000 ACQUISITION OF 60% OF JET AIR AND 20% OF AIRFORCE

2002 INCORPORATION OF JOINT VENTURE ARIAFINA BETWEEN ELICA S.P.A. AND FUJI INDUSTRIAL

2003 ACQUISITION OF 100% OF FOX AND ANOTHER 25% OF AIRFORCE

THE GROWTH

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988

2009 MERGER BY INCORPORATION OF FIME S.P.A.

2006 FOUNDATION OF ELICAMEX; ACQUISITION OF JET AIR; ELICA S.P.A. INCREASES ARIAFINA HOLDING TO 51%

2010 FOUNDED ELICA PB INDIA PRIVATE LTD., JOINT VENTURE BETWEEN ELICA S.P.A. AND PRALHAD BHUTADA; ACQUISITION OF 55% OF ZHEJIANG PUTIAN ELECTRIC CO. LTD.

2007 MERGER BY INCORPORATION OF JET AIR, TURBO AIR, FOX DESIGN AND ACQUISITION UP TO 60% OF AIRFORCE

2008 SALE OF ACEM BUSINESS DIVISION; ACQUISITION OF GUTMANN; ELICA S.P.A. AND ARTEMIDE AGREEMENT

2005 FOUNDATION OF FIME POLSKA

8 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

ELICA, 40 YEARS OF DESIGN Elica’s design evolution began with its founder, Ermanno Casoli, the first designer of the legendary range hood, the prototype of which was built so as to be easily transported and shown overseas. This led to the birth of the range hood which is installed within a wall unit and above the stove, a ground breaking idea which improves environmental conditions - filtering fumes and expelling the vapours from cooking. The small range hood is suited for the family home with a front part which displays the brand in addition to the extractor and light controls. In order to offer the market a unit customisable with other Tiarko Meunier brands, the French designer developed an adaptable concept: a standard body whose interchangeable frontal panel - the last part to be assembled - differentiates the final product. With this concept Elica was able to supply home appliance manufacturers and kitchen designers a customised product. One of the product creators was Giorgietto Giugiaro who, in the mid-eighties, created a personalised product with a distinct clip-on plastic front on painted folding sheet metal. The product developed to serve the needs of the furniture market as a whole, ultimately providing kitchen manufacturers with a wide range of original

solutions: built-in, integratable or wall-mounted range hoods. In 1987, the chimney-style range hood was produced in inox steel, becoming a kitchen icon, through which Elica established a new strategy - the product, from previously being a “hidden” object, came to play a leading role in the kitchen environment. In the nineties, the German Phoenix Design created the new chimney style range hood with a model, Tamaya, which utilised the extensive expertise of Guy Tienot, a French designer from Philips, in the design of the light and control panels. A design revolution took place in 2000 with David Lewis - an avant-garde English artist working with Bang&Olufsen – bringing conceptual innovation to both the form and style, introducing the use of aeronautic material, coloured anodised aluminium and other new materials. Wall Carpet showcases this new style, upon which in 2002 the Group centred the Elica Collection - the high-end range for the new millennium, subsequently integrated in 2010 in the Elica brand. Elica had introduced a new concept into the kitchen. Together with Castiglia Associati, kitchens designers, Modula was created, the horizontal model, with an aluminium extrusion in tailor-made sizes and

equipped with power sockets as an additional service to the extracting functions. In 2004, Om was presented, the first vertical range hood in the world, framed by a glass window, an “air cleaner”, whose success resulted in recognition by the Design Index of ADI. Today the vertical range hood sector represents approx. 30% of the sector. In 2005, Evolution was launched, the system which includes all the functions of a range hood in a smallsize steel cylinder, to be hung as a light fixture and customisable; covered by strass for Star and other beautifying elements embodying a revolutionary motor comprising five exclusive Elica trademarks. In 2007, design and technology combined again to produce the EDS3 trademark under which the Company produced Space, the most silent range hood in the world. In 2008 the collaboration with Artemide, a global player in the lighting sector led to the creation of Luxerion, the first line of multifunctional appliances which unite the treatment of air and lighting in order to further improve well-being within the kitchen and professional environment. In relation to the arts - always close to the heart of the Group - in 2007 the Ermanno Casoli Foundation was created as a meeting point between the world of the contemporary arts and industry. Thanks to this in 2009 Elica met Gaetano Pesce and together created Pescecappa, an iconic range hood, with 15 numbered units signed by the versatile architect. In 2010 Skin was created, the range hood inspired by retro radio equipment designs from the seventies, designed by Fabrizio Crisà (Elica Design Centre), which won the Red Dot Design Award 2011 and Bubble, an air bubble in thermoplastic designed by Stefano Giovannoni, a leading Made in Italy designer. Today, a focus is trained on breaking out of the home appliance sector, creating products with multiple functionalities for a new relationship between the client and the unit - with a more sensorybased experience and providing information in an

increasingly user-friendly manner. In addition to the sense of smell, on which the range hood has focused upon for some time, the new products focus on the sense of sight through the new Alba series, which illuminates the environment; while for the sense of taste the Uno range hood was developed, a range hood which integrates the microwave oven; in relation to the sense of touch, the interaction with the feel range hood highlights the control panels for air and lighting. The completion of the senses, with hearing, is provided by Air4Ear, the sound-based range hood which introduces a new experience thanks to integrated HI-FI: a sound immersion experience - a highly naturalised sensory experience – inducing an acute and full awareness of its perception. In 2011, Clip - designed by Ludovica and Roberto Palomba - an ethically aware range hood which is inspired by contemporary society, with a design based on its original concept. Riccardo Diotallevi, an award winning industrial architect, working with Elica for 17 years and today the Communication Manager, collaborated on the establishment of a corporate identity and the strategic choices of the various designers. These 40 years of evolution recount how Elica has created and revolutionised the traditional image of the range hood, transforming it into a central feature of the kitchen, thanks to ongoing design and technological innovation and product development focussed on guaranteeing an improved quality of life. Elica brings new air to the kitchen and throughout the home.

COMMUNICATIONS AND PROMOTIONS / INDOOR COMMUNICATION Elica Anniversary To mark the 40th anniversary of the founding of the company, the Chairman Francesco Casoli sent to all employees of the Elica Group throughout the world a video message, searchable also on YouTube, to celebrate this important event.

â&#x20AC;&#x153;Elica celebrates 40 years. on August 5, 1970, my father Ermanno registered the company brand. Elica was his creation and from that moment, as with all things, began to grow and to transform. As a father, he watched it develop for a while, then he left us and Elica continued its journey carrying him within its DNA: determination, originality, brilliance, passion and the desire to introduce, through our range hoods, a degree of well-being into homes. This teaching has pushed us to always look forward, following the times which change, while also anticipating such change. We have understood how to serve with passion our clients and we have grown with them, transforming our product. We have understood also how to invest well in our brand, improving it through the development of innovative systems and technologies which have also helped our clients to become more competitive. The design has driven the level of quality, which has been undertaken not just as a simple aesthetic exercise to create a beautiful product, but also in the organisational model, a reference point for all of our growth operations in the world and consequently for reorganisation: the opening and the acquisition of new factories follows not just a detailed business strategy,

but is the basis for harmonious development, which allows everyone to work better, with respect for the regions in which our plant operate. We began 40 years ago in Le Marche and our focus now is to become increasingly international, because no matter which country we find ourselves in, we are always in the same world: it is our desire that the Japanese, the Polish, the Mexicans, the Germans, the Indians and the Chinese become a little bit Italian and us Italians can also become a little bit Japanese, Polish, Mexican, German, Indian and Chinese. For all that we are and that we will become, the recognition goes to my mother, to all those who have accompanied us on this journey, in the past, today and who will accompany us in the future, who understood that at times we need to clench our teeth, but who have never lost that DNA which my father Ermanno left and which is at the root of Elica. These roots are our strength and are deeply planted in this land which allows us to grow strong as a single tree, which extends its branches throughout the world. Elica brings New Airâ&#x20AC;?.

Elica News Internal communication plays a primary role in the company: Elica News, the quarterly house organ of the Group, breaks down distance, shares knowledge and facilitates involvement. A copy of the newspaper is sent to the home of every employee. Elica News does not just provide information, but imparts the Group company model and philosophy and contributes in creating a strong company environment. Since 2010, Elica News has assumed an international character and is published in the languages of the countries in which our production facilities are present. All Group employees can write articles in the house organ: factory workers and office workers within each production site have their own structure in which to write suggestions or describe situations. The publishing is coordinated at a central level by the headquarters of Fabriano. In 2010, Elica News completely redesigned the graphics/style of the magazine. The format was enlarged and more in line with a magazine. Starting with the cover, the idea was to dedicate each issue to a specific theme or a concept of particular importance. The page layout was redesigned in order to guarantee greater graphic cohesion, simplicity and legibility. This resulted in the creation of a more distinct identity and with a sharper communication, in line with the values of the Group, adding an international angle thanks to the voices of the worldwide factories, while remaining rooted in its local origins. Another instrument utilised to facilitate internal communication is the Face to Face, a series of periodic meetings, every two months, between the Chairman, the Chief Executive Officer and personnel. The meetings which are carried out on appointment, allow each employee of the Group to express their opinion directly to company senior management. The Happy Birthday service also contributes to creating a better workplace environment: every day all employees receive an email which contains the names of colleagues whose birthday takes place that day. The Elica headquarters at Fabriano perfectly encapsulate the value of communication: the offices are organised in abundant open space and encourage collaboration and continuous communication, surrounded by large windows establishing that everyone has access to each other. At the centre of the offices is the “Piazza Elica”, a large room lit up every day by the large windows, at the centre of which is an extensive bar and at the sides a number of tables and armchairs where people can sit to chat, but also to discuss company strategies. The area is strongly favoured by Chairman Casoli to create and encourage sharing and participation, which today acts as a true meeting point of employees, managers and executives, to share a coffee or host an informal work meeting. Piazza Elica is also a chosen place to discuss and communicate reorganisations following industrial operations such as acquisitions or mergers.

/ COMUNICAZIONE OUTDOOR SHOWROOMS The showrooms are for the Elica Group a place to promote the product and the ideal base for events and meetings with other players in the kitchen sector. After the two showrooms, one in Milan, in the Brera area and the other in Osaka, in the fashion district, Elica has now opened a new space in the city of Mumbai in India. A few months from the creation of the joint venture with the Indian entrepreneur Prahlad Bhutada, among the leading local players in the range hood sector, Elica established its first store in India. A space which confirms the goal of the company to consolidate its firmly established development strategy on international markets and to fully embrace one of the leading markets in Asia. The project, which covers an area of approx. 120 sq.m., located on two levels, is the result of a collaboration between the architect Riccardo Diotallevi, Communication Manager of Elica and the Indian designer Santosh Baheti and exclusively utilises locally sourced materials with the objective to encourage the closest possible exchange of knowledge and cultures, as is central to the company spirit. The approach to the product by the visitor is made as real as possible through the mounting of products: an embossed kitchen hob simulates a kitchen environment in which the Elica range hood becomes the main player, showcasing its performance and high quality. A play on colours and emotional suggestions characterise the entire showroom. The exterior, covered in grey aluminium, pays homage to the technological innovation of the products shown, the sand colour concrete tiles used for the internal flooring evoke nature and the orange of the display panels establish the brand identity bringing to mind the colour of fire utilised traditionally for cooking. At the location the Elica brand products are sold to the public, which in addition to range hoods includes kitchen stoves and ovens.

EVENTS “Less than air” by Andrea Nacciaritti At the furniture trade fair, the showroom of Milan hosted the “Less than air” show of Andrea Nacciaritti, a Le Marche artist among the winners of the third edition of the Terna Award for contemporary art. The show, curated by Marcello Smarrelli, artistic director of the Ermanno Casoli Foundation, was a significant success with the public, with the participation of hundreds of visitors. The diversified series of Pescecappa at the Farnesina Palace Elica in collaboration with the Ermanno Casoli Foundation on October 21 presented in Rome at the Farnesina Palace, Foreign Affairs Ministry offices, the diversified series of Pescecappa, the range hood conceived by Gaetano Pesce. An edition composed of 15 units, unique objects numbered and signed by the artist. Pescecappa, already part of the Farnesina Design

collection, is in fact closer to a work of art than an electrical appliance and it is the public’s curiosity and openness to new ideas, such as in those who follow the contemporary arts, the fashion and design worlds, which comprises one of the most suitable audiences open to the idea to transform a range hood into a functional decoration, which can fit into their collections of artworks. Important figures participated at the presentation such as the Minister for Foreign Affairs, Gaetano Pesce, Francesco Casoli, Chairman of Elica and Marcello Smarrelli, artistic director of the Ermanno Casoli Foundation.

TRADE FAIRS The trade fair activity of Elica Group in 2010 focused around some key exhibitions within the home appliance, kitchen and home heating sectors. FTK Eurocucina, Milan At the Furniture Trade Fair of Milan, the Elica Group participated in the fourth edition of the FTK (Technology for the Kitchen) , a part of Eurocucina for innovative home appliances. The Group presented its brands and the models from the various catalogues: not just a wide range of products, but also new design concepts for products, which today fit into a wide range of architectural environments: among furniture, in the kitchen, wall mounted up to the ceiling, island and suspended range hoods or built-in to a suspended ceiling and air purifiers. The new objects presented have multifunctional and multisensory characteristics to improve the life of the individual. The works and the research carried out in collaboration with the academic world in relation to sustainability were also presented. “Ecodesign & Eco-innovation. Design with air for new styles of sustainable living”, begun by the ProCam Department (Industrial Design Section) of the Faculty of Architecture of the University of Camerino. In line with this also was the “made through a sustainable revolution”, a project focused on conceptualising a slogan or a claim related to environmental themes. The project involved students of the Communication and Marketing course of the Psychology 2 Faculty of the University of La Sapienza of Rome. KBB, Birmingham Between March 21 and 24 the Group participated with the Elica brand together with the distribution partner DR. Cooker Hoods at the KBB of Birmingham (United Kingdom) show, the largest British trade fair for the kitchen and bathroom and home furnishings sectors, presenting the new products for the English market. ICEM, Rome Between September 6 and 8 in Rome the Group took part presenting the FIME brand to ICEM – International Conference on Electrical Machines. ICEM is one of the most important meeting points between industry and the universities. FIME, the principal sponsor of the show, created a stand to communicate with company materials and information the latest ventilation, heating and commercial refrigeration products.

ADVERTISING CAMPAIGN Air is precious – Do not waste it In 2010 Elica launched the new company slogan: “New air”, two words which sum up the present and the future of the Group but also much of the past and the innovative spirit behind the founding of the venture. Elica is open to ideas, challenges and the capacity of the individual. New air is a new motto created by the Göttsche agency, the first step in a communication project which seeks to “think outside the box”. The new advertising campaign was launched at Eurocucina FTK 2010 at which the message was: “AIR is precious. DON’T waste it”. Air is central to everything, a very serious message, but in the Elica style, communicated in a calm voice and with a very subtle irony.

WEB Restyling of the website The principal company website, www.elica. com, which averages 41,000 visits per month, at the FTK Eurocucina Trade Fair (Furniture Trade Fair) underwent a substantial restyling with the introduction of new brand images, new content and a new style of presenting the products. The site was simplified and updated with the new events, news and services offered. Myelica.com A new website was created www.myelica.com dedicated to the Elica customer, in order to have a direct contact with the users of the Elica products and to offer dedicated services such as guarantee extensions, technical assistance and the purchase of accessories or spare parts. Catalogue of products FTK – Eurocucina, a bi-annual event at the Milan Furniture Trade Fair, sees the presentation of the state-of-the-art technology and design research within the sector. The Elica brand was presented with a new image and a new catalogue with 30% of the range updated. New models were conceived to work closely with the individual to help them to define the space which they inhabit. The new design concept shifts the point of view from the object to the person. New easy to use electronic interfaces were presented, in which the range hood provides its services according to the cooking needs: boiling, frying or roasting. This design introduced cleverly streamlined the range hood, improving manageability and avoiding the effects of accidental bumps. People are part of the environmental culture, which looks forward to future generations, in the ongoing development cycle of the planet. New motorisation systems and the introduction of LED lighting have allowed the new range hoods designed to reduce electrical consumption by over 50% compared to traditional products. The desire is to create multifunctional products for a closer relationship between the individual and the machine, for an object capable of providing information to the sensory channel more suited to the user and to create a special experience.

MCE, Milan Between March 23 and 27 in Milan, the Group took part with FIME in the international show for civil and industrial plant for the heating, renewable energy and air-conditioning sectors. FIME, at the Expocomfort 2010 Show, presented the full range of the most advanced boiler heater technologies for comfort, efficiency and energy saving.

ERMANNO CASOLI FOUNDATION MISSION

ACTIVITIES

Dedicated to the memory of the founder of Elica, the Ermanno Casoli Foundation was established in 2007 in order to strengthen the link between the worlds of the arts and industry, promoting initiatives in which contemporary art could act as a development tool and one through which a greatly innovative workplace environment is allowed to thrive. The opening of a dialogue between the arts and industry took place in a natural and spontaneous manner, within an industrial family with a strong company tradition supportive of creativity and with an interest in all that relates to artistic production. Since its creation, the Foundation has explored the benefits which the arts can provide to business in terms not just of innovation, but also in terms of bringing people together and in creating an identity â&#x20AC;&#x201C; doing so through a range of activities. The Foundation has become even more convinced over the years of the importance of the arts as a tool for economic development. Today, competitivity is increasingly dictated by an ability to innovate: therefore the arts has assumed a key role in driving organisations to follow new and unexplored paths. Its great benefit is the ability to carry out quality research without a need to defer to the codes and protocols required by other areas.

ERMANNO CASOLI AWARD In 1998, the Award was inaugurated to highlight an artistic project with a focus on the world of enterprise and the persons working within it. In choosing the winner, the various factors which are at the heart of the Foundation are taken into consideration: experimentation, the mixing of different styles, the active involvement of the viewer, a distinct outlook, quality of content, an ability to look at things in a different light and the idea of the arts as an ethical model. In 2010, the winner of the XI edition of the Ermanno Casoli Award was the artist Francesco Arena, who included in his work a group of Elica employees. The work, entitled Teste, centres on the importance of the past as a source of art and the function of memory as an instrument of knowledge in the present. The artist created in clay six important figures in the history of Le Marche. The six portraits are positioned at different points in the headquarters of Elica. Through an original hydraulic mechanism, whenever it rains the heads are sprayed with jets of water of varying strength which progressively cover the clay, slowly making the features of the personalities unrecognisable.

E-STRAORDINARIO Through a series of conceptual meetings and workshops, famous international artists work together with the employees of a business. Following three years of development in Fabriano in November 2010 the E-STRAORDINARIO project was brought to the Elica factory of Jelcz-Laskowice in Poland. The internationalisation of the initiative was made possible through a consolidated work methodology, with a joint approach by an artist, a curator and a trainer. The project, entitled E-STRAORDINARIO on tour in Poland, co-curated by Marcello Smarrelli,

artistic director of the Ermanno Casoli Foundation and Stach Szablowski, curator of the Zamek Ujazdowski Contemporary Arts Centre of Varsavia, involved the Polish artist Grzegorz Drozd and the trainer Monica Schwertner. The project which Drozd proposed for E-STRAORDINARIO on tour is based on a collective action concept and has highlighted the creative potential of the community of factory workers. After having being introduced to the factory through a self presentation video, the artist, together with the trainer who acted as mediator between the artistic world and the industrial world, undertook a musical performance with office and factory workers. In a company environment, each individual is part of a wider and a more complex system in which the joint actions of all are focused on a common objective: Similarly, in the project developed by Grzegorz Drozd, each employee participated in the pursuit of a shared goal - the creation of a collective work of art in which everyone played a creative role. The final result of the workshop was a video clip created from the recording of the performance. Musical instruments utilised in the workshop were donated to charity. The project was documented through a video created by the director Anton Giulio Onofri.

E-STRAORDINARIO out of the company The training activities of the Ermanno Casoli Foundation are carried out also outside of the company with employees visiting important displays of Italian and international art. The initiative is an important social occasion and assists the formation of a group identity, based on the sharing of experiences and social and cultural values. In this way the arts become not just a training exercise, but aid the cause of social responsibility. In December 2010, the top managers of Elica visited the Galleria Borghese, the MAXXI and the MACRO. These three galleries were chosen as they display different types of collections and highlight how art is always contemporary to its times, which cover common themes through the ages. This activity encouraged greater knowledge of the Italian artistic heritage and served to strengthen the creativity and innovation within the Group. At the end of two days the participants were encouraged to develop links between these activities and their professional environment. In particular, the differences between artistic creativity and innovation were reflected upon with an “exploration” of the environmental characteristics which influence the creative work groups.

LESS THAN AIR Less than air is a project of Andrea Nacciarriti which the Elica Group developed in collaboration with the Ermanno Casoli Foundation on the occasion of the 49th International Furniture Fair in Milan (April 14-19, 2010). The idea developed from the desire of the artist to visualise air, something which is usually invisible and visible only through the effects of wind and the movement of its molecules against material objects. Andrea Nacciarriti, together with some technicians of the Elica Tech Lab - the research and certification laboratory of the Group - carried out a series of experiments seeking to give form and concreteness to that which nature renders invisible - to provide a tangible experience of air. The attempt to render air molecules pliable opened up for the artist the possibility to activate and forcefully feel their movement, acting as an indicator of the physical and conceptual potential of the most unpredictable and vital “material”, which no one can take away from. Through a long period of experimentation, various appliances were developed for the production and circulation of air flow.

PESCECAPPA The collaboration of the Elica Group with the Ermanno Casoli Foundation has led to experimental works such as that with Gaetano Pesce which created Pescecappa, an unusual range hood. Noted for his ability to operate across the boundaries of the architectural, visual arts and design worlds, Gaetano Pesce revisited a central appliance in the contemporary kitchen, taking its predecessor as the starting point: the chimney-style hood. Pescecappa is displayed today as part of the Farnesina Design Collection as an example of creativity and excellence in Italian design and since 2010 has been available in a series of 15 one-off creations.

/ corporate social responsibility_p.56 / /internally addressed initiatives_p.60 / external initiatives_p.63

Corporate Social Responsibility. Elicaâ&#x20AC;&#x2122;s interpretation of social responsibility considers responsibility not just towards the environment and the localities which host the production sites and offices of the Group throughout the world but also towards the individual, the most important resource for the Company. Social responsibility for Elica is a priority which is embodied in the rights of workers, the caring for individuals, the implementation of an inclusive industrial relations system, the contribution to sustainable development, the reduction of emissions and consumption in the production processes and proper and transparent communication. Growth and international acquisitions over recent years have expanded the Elica Group to an organisation of 2,800 persons, of which 1,300 abroad. Elica is an international and multicultural Group, made up of persons who every day work with passion and who provide the true competitive edge: a satisfied and content person and who lives well within the company is the most important success factor for the entire organisation.

The focus on the well-being of the individual within Elica, enabling people to live well not just within the company but also outside of the professional context, led, after three years of awards in the Great Place to Work, an international institution which evaluates excellent workplace environments, to the gaining in 2011 of the award for the best Italian workplace environment: Elica is the best company to work for in Italy. In addition, another important result was achieved: for the third consecutive year, Elica was recognised as a leader for human resource management with Top Employers 2011. Elica Group Polska was also awarded the prestigious Top Employer Polska 2011 certificate. Top Employers is a survey conducted by the CRF Institute which selects, identifies, evaluates and certifies the leading businesses who value human capital and implement the best practices in the HR field. These awards recognise the significant work carried out by the business over recent years and the continuity and the success of this strategy.

2010 CONSOLIDATED FINANCIAL STATEMENT Nel 1999 la Fondazione Paul Guinot (una delle più grandi associazioni per non-vedenti in Francia) sviluppò e propose un programma che prevedeva di far mangiare le persone nella totale oscurità. Questa iniziativa ebbe un grande successo; oggi ci sono ristoranti in cui si mangia al buio in molte grandi città d’Europa, come Berlino, Londra, Zurigo. I camerieri di questi ‘dark restaurants’ sono non-vedenti e sanno muoversi con destrezza in questo ambiente insolito e ostile. Chi ha provato questa esperienza racconta che si stabilisce con il cameriere del proprio tavolo un rapporto speciale, una sorta di attrazione dalla voce di questa persona invisibile, da cui dipendiamo per tutte le necessità della cena.

[listen] In 1999 the Paul Guinot Foundation (one of the largest associations for the visually impaired in France) developed a pilot project that had people dining in total darkness. It was a great success and today “dark restaurants” are operating all over Europe in cities such as Berlin, London and Zurich. The waiting staff of these eateries are all blind, yet move around the unusual and seemingly hostile environment with great adroitness. Those who have eaten in these restaurants tell us that they establish a truly special relationship with their waiter, developing a special attraction to the voice of this invisible person on whom they depend for the successful outcome of their meal.

Una volta eliminato il senso della vista, tendiamo ad acuire maggiormante gli altri sensi: l’olfatto, il gusto, l’udito, il tatto. Per questo la cena diventa più intensa e i cibi si delineano con incredibile precisione nella nostra mente, invece che nel nostro sguardo. Ogni piccola sfumatura di sapore viene analizzata con chimica attenzione dal nostro palato; ogni odore cerca di suggerirci il gusto che stiamo per provare. È così che si ascolta un pesce.

66 DIRECTOR’S REPORT 81 FINANCIAL STATEMENTS 139 AUDITORS’ REPORT

Once we have been deprived of our sight , our other senses become more acute: the senses of smell, taste, hearing and touch are all enhanced. The dining experience becomes more intense and the food served is sketched into our mind’s eye, rather than through sight , with incredible precision. Every nuance of flavour is analysed by our palates with heightened intensity, every aroma preparing us for the flavour we are about to enjoy. This is how you listen to a fish.

56 CORPORATE SOCIAL RESPONSIBILITY 28 DOMESTIC USE RANGE HOODS -OWN BRAND PRODUCTION -THIRD-PARTY BRAND PRODUCTION 34 ELECTRIC MOTORS 34 PURIFIERS 38 40 YEARS OF HISTORY 44 40 YEARS OF DESIGN 46 COMMUNICATIONS AND PROMOTIONS 52 ERMANNO CASOLI FOUNDATION

60 INTERNALLY ADDRESSED INITIATIVES 63 EXTERNAL INITIATIVES

feel

listen

look

INTERNALLY ADDRESSED INITIATIVES TRAINING HUMAN RESOURCES The focus of the Company on the management of human resources permeates all processes, from the first step - that of selection: Elica seeks individuals who understand and share the values of the company and who are able to express this in their activities. The choice of human resources is therefore a fundamental element: Elica searches for the “right persons”, that is to say persons who have a DNA similar to the company’s DNA. In this manner, it is possible to create a situation in which team spirit, sharing and innovation guarantee high levels of performance and motivation. Elica employees are known for their international outlook, their willingness to deal with new challenges and to act outside their comfort zone; multiculturalism, an ability to work in different areas, flexibility in integration, an ability to critically analyse one’s own point of view; an ability to widen one’s horizons; innovation, a willingness to view things from a different point of view, attempting to achieve the impossible; intellectual curiosity, which drives a hunger for “knowledge” and the will to discover the world. Therefore Elica has drawn up an innovative selection system, called Touch: the name draws on a metaphor between the DNA of the company and that of the candidate to identify, recognise and select the resources who over the long-term will bring value not just through their technical abilities, but also and particularly for their “awareness” and who will become part of the Elica family.

In 2010, Elica continued to invest in training and has successfully implemented the internationalisation process: a large number of courses were organised for employees, not just on issues strictly related to the business, but also concerning issues which develop and stimulate the growth and curiosity of the individual. In Mexico, the Group attained from the Instituto Nacional para la Educaciòn de los adultos, an award for its commitment to the improvement of the education of those who work with ElicaMex. Training is considered an investment in the future, which creates a sense of value in human capital within the person and a sense of belonging to the Group. For Elica therefore training is a very important development instrument and a strategic element for growth for the entire organisation at all levels. The individual as a whole and not just as an employee is at the heart of the award winning system established by the company. Investing in human capital, in the individual, in their way of thinking, is considered strategic to remain competitive internationally. Elica strongly believes in this and invests in human capital, encouraging the individual to produce new ideas and seek inspiration also from worlds which may appear far away. During the year Italian courses were organised for non-EU employees who work in Italy and computer literacy courses for blue-collar workers. In addition a training system for top and middle management based on three fundamental guidelines was put in place: ×× innovation ×× internationalisation ×× own brand channels Each manager may send the employee to specific outside courses to improve skills. These activities are chosen together with the Human Resources Department. During the year Elica has continued to collaborate with important Italian business schools such as Bocconi, ISTUD and Luiss with the objective of recruiting, employer branding and education: the business school and the Company enjoy a relationship of reciprocal exchange of know-how and experience, in a relationship which works both ways.

TECHNICALMANAGERIAL TRAINING Language courses. Language courses are tailor-made for the specific needs of employees. The course is monitored through an initial test and a final test. WCM for plant. An internal theoretical course for the introduction of the Kaizen methodologies at factory level. Computer literacy. A course teaching basic IT skills to factory operators in view of possible job rotation within the assembly and warehouse sections with regard to recording data. Hi mind. New Mind Executive Masters International, the first executive masters of Elica, begun in 2008 and revised in 2010. The only one of its type, drawn up for the specific needs of the Group, the training course involves 20 high potential managers within the group companies both in Italy and abroad. The high level master degree, entirely in the English language, is focused on the creation of professional figures with a strong managerial culture, capable of successfully dealing with the current highly competitive environment. A systemic approach has been established which expands the various specialised areas with a view to integrating and developing the business. The training programme is also innovative, based on active methodologies such as project work and business games, both in the classroom and distance learning, action learning, internal testimony, business games. E-Straordinario. A project for the training of personnel which utilises the arts and creates a link between the arts and industrial production. Elica in fact utilises the contemporary arts as an instrument which may have benefits also in the industrial setting. For many years the Group has worked together with the Ermanno Casoli Foundation to promote the contemporary arts, also through initiatives which create a link with architecture and industrial design. The objective of E-Straordinario is to transpose the dynamics of the arts into a manufacturing business setting, in which the product is distinguished by its high design content and at the same time an improved climate within the company is created, bringing new points of view and challenging concepts which translate into innovation and fresh ideas. E-Straordinario 2010, “on tour in Poland” involved 50 employees at the Polish factory.

ENVIRONMENT AND SECURITY Particular attention was focused on the impact of production on the surrounding environment. The environmental vision of the Company is to ensure processes and products which respect the environment throughout their entire life cycle, seeking to reduce the consumption of non-renewable energy and of waste from production. The Group complies with all of the environmental regulations in force and also to voluntary international environmental rules: since 1999, the Environmental Management System certificate has been held under the UNI EN ISO 14001 regulation. Elica is committed to specific guidelines and procedures for the management of chemical substances, with preventative and informative measures in relation to workplace security and for environmental protection in place. The company constantly monitors emissions into the atmosphere, verifying the correct use of emission reduction plant and has introduced to some factories separated waste collection with the goal to extend this practice to all Group factories throughout the world. Attention to the individual relates also to a focus on their workplace security and their health. The Group takes a “safety first” attitude: protection of workers relates to all sectors within the Group and primarily is a civic and moral duty in addition to a legal obligation. The aim is to have zero accidents and to achieve this continuous improvement in processes in all areas is pursued, from environmental security to quality control and logistics, involving all departments and motivating all human resources at every level through the three guidelines: Organisation, Control and Communication. To guarantee compliance with the protection of the environment and workplace security by all employees, a specific department was established, Environment Health Safety, which includes the Prevention Protection Service and which operates according to the World Class Manufacturing Approach in order to reduce where possible the number of accidents, developing a culture of prevention, continually improving the design of the workplace and improving specific professional skills, guaranteeing the correct management of the environmental and security aspects.

CORPORATE COHESION

THE PROJECTS OF ELICA LIFE

In 2008, Elica signed the first Corporate Cohesion Contract, whose excellence was recognised the following year through the Ethics and Business Award and used as a reference point for second level contracts. The guidelines of the Agreement focus principally on two aspects: the remuneration policy, a system which awards the commitment of employees to reaching the company objectives, and a sense of belonging, so that the individuals within Elica feel a sense of pride in belonging to a Group which values the worker, which is close to them both in a professional and personal sense. The Agreement has contributed to creating a more collaborative and content environment for employees: in order to develop the closest synergy possible between the private and the professional life of the individual, the Company grants for example also new fathers parental leave and the option for new mothers to manage in a flexible manner their maternity leave.

Member card and new member card 2010, for all Group employees. The card provides the opportunity to access a series of services at a reduced price (for health, consultancy, stores, bookstore, clothes…) in all of the regions in which Elica is present. In 2010, the contact base was widened and more beneficial agreements for employees were signed. Elica for Young Persons 2010 – I Am: Elica has contributed to study vacations abroad for the children of employees to learn English, expanding their horizons and knowledge of other cultures: society of the future will be increasingly orientated towards multiculturalism. Elica already respects this tendency: the company was founded with a strong outward focus, towards internationalisation, in the belief that only through understanding the world is it possible to grow and expand, always with total respect for other cultures. Multiculturalism is therefore seen as an opportunity for growth and a basis for ongoing innovation: inspiration and new ideas are in everything, also in that which appears furthest away. In 2010 the destination was the Kingswood Centre of Overstand Hall, near Norwich; the Colchester Campus of the University of Essex, 50 minutes from London. The young persons undertook 20 hours of lessons a week and participated in sporting and recreational activities. At the end of the courses, they received a certificate of attendance. Elica for Young Persons every year can count on the contribution of a number of Group suppliers which participate in the project as partners, sharing with the Company an understanding of training as a key to success and of investment in the growth of the new generations as a unique possibility for “joint” growth.

WELFARE Aware that is not possible to “create excellence” if one does not live within an excellent workplace for the well-being of the employee, not just within the business but also outside, Elica has created the Elica Life* programme which is annually reviewed, adding or improving initiatives aimed at fostering the well-being of employees, always flexible to the needs of the individual, imparting and consolidating company strategies and values. The objective of the programme, involving all employees, is to create through a series of periodic initiatives direct contact between the company and the employee, which goes outside the professional realm. The activity which the Group pursues together with the Ermanno Casoli Foundation can be expanded upon within this space, with the mission to communicate – in a manner beneficial to all – two worlds historically far apart: the arts and business.

AERÒ-Elica fitness, the fitness centre of Elica, opened in April 2010, created to promote the well-being which supports the company. Physical well-being creates also mental and social well-being. With a view to sharing and openness, the fitness centre was opened by the Chairman, Francesco Casoli, the Chief Executive Officer, Andrea Sasso and by the Human Resources Director, Marco Scippa. AERÒ is a space fitted out as a gym, with latest generation machines, and with a philosophy which extends beyond physical fitness: the philosophy of well-being and the quality of life. The aim is to promote a culture which encourages healthy choices and the care of the person, offering opportunities and “instruments” which improve awareness and encourage behaviours which improve “well-being”. A trainer is constantly present in the fitness centre, who can guide employees in the physical activities most suitable to them, with personalised schedules and ongoing advice during training. The principal focuses of the fitness/wellbeing programme of Elica are: physical exercise, health and proper diet. The fitness centre also improves flexibility, versatility and reciprocal understanding.

EXTERNAL INITIATIVES The Elica Group has developed over time an environmental culture shared with its stakeholders, in the absolute belief that respect for the environment is a fundamental value for mankind and at the same time a strategic factor for competitivity and sustainable development of the business model. The Corporate Social Responsibility activities of the Group therefore seek to contribute to the training of talent, the well-being of the local community and the protection of the external environment. In 2010, Elica signed the Charter for Equal Opportunities and Equality in the workplace, promoted by Sodalitas with patronage of the President of the Italian Republic: a declaration of intent for the fostering of an inclusive corporate culture and human resources policies, free from discrimination and prejudice, which values the talents of all and their diversity.

SOCIAL INITIATIVES The collaboration of Elica with the SOLIDORO Social Cooperative in order to integrate into the workplace disadvantaged persons and those subject to marginalisation continued. The Cooperative carries out manual work, such as assembly or packaging for any type of industrial or craft product, assembly or packaging for common use objects, craft and manual works, including mechanical repairs of any type. The collaboration with Elica has enabled SOLIDORO to employ 13 persons full-time. The Jonathan Project The Elica Group supports the Jonathan Onlus association created by a rescue community in the province of Naples. The project, the first in Italy, reintegrates minors who have spent time in detention, through a work placement period in companies. The objective is twofold: create a “social” return and assist the development of a collective conscience in relation to respect, trust in others and discipline. In 2010 Elica took part in the “Il viaggio (The journey)” project: a group of young persons from detention institutions who have never sailed were trained to compete, together with sailing experts, in the Regatta of the Three Gulfs. The Company actively participated in this human, educational and disciplinary experience.

INDUSTRIAL RELATIONS The industrial relations of the Elica Group are based on an inclusive system. For Elica, the Trade Union Organisations are the principal contact point in which a dialogue is opened with employees and which can assist the well-being of all employees. In addition to the meetings established by collective and company contracts, the Elica Group has created annual meetings respectively with the Company Trade Union Representatives and with the External Trade Union Organisations to report upon the work carried out during the year and the objectives for the new year, also through external training. The nature of these annual meetings, carried out outside the company and in an extremely informal manner, are not influenced by the classic company/trade union dynamics. The meetings are an occasion to share company strategies and to seek to improve the relationship between the parties through training activities and role plays. 2010 in this manner featured therefore the “employment sustainability plan”: in the agreement signed with the trade union organisations, it was established that in this period of significant oversupply due to the international economic situation, the Company - in order to limit the social impact within Italy - has undertaken all alternative instruments available to avoid redundancies. This type of extremely innovative agreement provides for investment and training, at a time of great crisis where the majority of businesses are speaking of closing factories and significant downsizing and has been taken as an example by other local companies. The best industrial relations practices have also been exported to Poland, where Elica is the only Italian company to have signed a collaboration agreement with Solidarnosc (the largest Polish trade union organisation), establishing social dialogue, the improvement of working conditions and development and training as a central part of operation.

/ 2010 consolidated financial statements / / directorâ&#x20AC;&#x2122;s report_p.66 / financial statements_p.81 / auditorsâ&#x20AC;&#x2122; report_p.139

DIRECTORâ&#x20AC;&#x2122;S REPORT THE ELICA GROUP TODAY The Elica Group has been present in the cooker hood market since the 1970s and is today world leader in terms of units sold. It is also a European leader in the design, manufacture and sale of motors for central heating boilers for domestic use. With approx. 2,800 employees and an annual output of approx. 17 million units of kitchen hoods and motors, the Elica Group has 9 plants - of these, four are in Italy, one is

THE MACROECONOMIC ENVIRONMENT IN 2010 AND OUTLOOK 2011 In the Eurozone overall GDP(3) in 2010 recovered, with inflation remaining under the 2% target and difficulties on the debt market affecting particularly the peripheral countries. GDP is expected at around 1.7%, with particularly strong growth in German GDP of approx. 3.5%. In 2011 GDP is forecast to increase by 1.6%, lower than 2010 principally due to the deficit reduction policies introduced by governments in the main European countries. Inflation is expected to rise due to the increase in raw material costs, particularly energy costs.

in Poland, one in Mexico, one in Germany, one in India and one in China. With many yearsâ&#x20AC;&#x2122; experience in the sector, Elica has combined meticulous care in design, judicious choice of material and cutting edge technology guaranteeing maximum efficiency and reducing consumption making Elica the prominent market figure it is today. The company has revolutionized the traditional image of the kitchen cooker hood: it is no longer seen as simple accessory but as a design object which improves the quality of life.

In the United States GDP is forecast to grow by 2.8% against a rise in consumer prices of 1.6%. Quantitative Easing 1 has only partially stemmed the fall in the wealth of American households, stabilising the property market and with positive effects only for the stock market. In 2011, GDP is forecast to grow 3%, thanks principally to the approval of a new economic stimulus plan. Prices may rise by an increase in inflation, principally through an increase in raw material prices and the stepping up of Quantitative Easing 2. In Japan, 2010 confirmed exit from recession after bottoming out in 2009. 2011 should see a continuation of the recovery begun in 2010, in line with the global economy.

(3) Gross Domestic Product

In relation to commodities, significant price increases occurred in 2010 with high levels of volatility for most commodities. In 2011, the existence of large amounts of liquidity globally are expected to lead to a significant increase in the principal commodity prices. Price increases are expected to partially reduce in the second part of the year as a result of slowed demand from China.

In China, GDP grew by 10% in 2010, with a slowdown expected in 2011 due to governmental measures introduced to halt inflation. The emerging markets in 2010 saw particularly strong growth, principally as a result of an improved debt situation in comparison to the developed countries. This movement was driven by countries such as Brazil, which benefitted from the increase in raw material prices, particularly agricultural products. According to the latest IMF(4) estimates, 2010 should see growth of 7.1% for the entire emerging countries area, while for 2011 a slight slowdown to 6.4% is forecast. On the inflationary front, consumer prices are expected to have increased in 2010 by 6.2%, and also according to the IMF, to ease back slightly in 2011 to 5.2%.

In relation to exchange rates, 2010 saw a significant depreciation in the Euro following the sovereign debt problems. A correction in the strength of the Euro against the US Dollar is expected in the first part of the year. In the second part of the year, the Euro should strengthen against the US Dollar due to the expected actions of the FED(5) on interest rates and the lesser use of the Dollar for financing within the carry trade. The Japanese Yen is forecast to gain ground.

(4) International Monetary Fund (5) Federal Reserve System

CURRENCY MARKETS Exchange rate movements resulted in a small gain recorded in the income statement and the translation negative reserve decreased by Euro 3,922 thousand.

In 2010 the Euro weakened against all the currencies in which the Group carries out its commercial transactions. Exchange rate movements had a small positive impact on the income statement.

average 2010

average 2009

31-dEc-10

31-dEc-09

USD

1.33

1.39

-4.62%

1.34

1.44

-7.21%

GBP

0.86

0.89

-3.61%

0.86

0.89

-3.29%

116.21

130.34

-10.84%

108.65

133.16

-18.41%

JPY PLN

3.99

4.33

-7.74%

3.98

4.10

-3.05%

MXN

16.74

18.80

-10.97%

16.55

18.92

-12.54%

INR

60.45 (*)

n/a

59.76

n/a

RMB

9.04 (*)

n/a

8.82

n/a

IAS/ IFRS The consolidated financial statements of Elica S.p.A. for the year ended December 31, 2010 were prepared in accordance with IAS/IFRS issued by the International Accounting Standards Board and approved by the European Commission, and in accordance with article 9 of Legislative Decree No. 38/2005.

The accounting principles utilised for the preparation of the Consolidated Financial Statements are consistent with those utilised for the preparation of the Consolidated Financial Statements for the year ended December 31, 2009. These Consolidated Financial Statements are presented in thousands of Euro and all the amounts are rounded to the nearest thousandth, unless otherwise specified.

(*) the average exchange rate of the Indian Rupee and the Chinese Renminbi was calculated for the period in which the Indian and Chinese subsidiaries were consolidated.

FINANCIAL AND OPERATING REVIEW In Euro thousands

FY 10

FY 09

10 Vs 09 %

368,265

335,135

9.9%

26,194

20,059

30.6%

7.1%

6.0%

10,553

732

revenue margin

2.9%

0.2%

Financial income/(costs)

(982)

(2,079)

revenue margin

-0.3%

-0.6%

Net profit for the year

Revenues EBITDA revenue margin EBIT

1,341.7%

(52.8%)

5,577

782

revenue margin

1.5%

0.2%

613.2%

Group net profit

4,262

231

revenue margin

1.2%

0.1%

Basic earnings per share

7.48

0.41

1,745.2%

Diluted earnings per share

7.48

0.41

1,745.2%

In Euro thousands

31-dEC-10

31-dEc-09

Trade receivables

89,276

85,589

Inventories

42,671

41,451

(88,742)

(86,806)

43,205

40,234

11.7%

12.0%

Other net receivables/payables

(3,869)

(6,963)

Net Working Capital

1,745.2%

EBITDA is the operating profit (EBIT) plus amortisation and depreciation and write-downs of goodwill for losses in value. EBIT is the operating profit from continuing operations as reported in the consolidated Income Statement.

Trade payables Managerial Working Capital as a % of revenues

39,336

33,271

as a % of revenues

10.7%

9.9%

In Euro thousands

31-dEc-10

31-dEc-09

25,102

19,235

(76)

(2,430)

Bank loans and mortgages

(30,457)

(14,780)

Long-term debt

(30,533)

(17,210)

(23)

(1,903)

Bank loans and mortgages

(29,426)

(23,058)

Short-term debt

(29,449)

(24,961)

Net Debt

(34,880)

(22,936)

Cash and cash equivalents Finance leases and other lenders

Finance leases and other lenders

(*) The earnings per share for the years 2010 and 2009 were calculated by dividing the Group net result by the number of outstanding shares at the respective reporting dates.

Net debt is the algebraic sum of amounts due under finance leases and other borrowings (current and non-current) plus bank borrowings and mortgages (current and non-current), less cash and cash equivalents, as reported in the balance sheet. The account “Other net receivables/payables” include

2010 OPERATING PERFORMANCE In 2010, Group consolidated revenues increased by 9.9% on the previous year. Revenue growth was seen both in the range hoods business unit (+8.7%) and more markedly in the motors business unit (+16.8%). Growth in revenues was strongest in the Americas and the rest of the world; Europe also recorded growth. In the range hoods business unit, “own brand” revenues grew by 18.1% on 2009, while third party brand products increased 4.0%, despite the Group having implemented restructuring activities concerning clients with below average credit reliability. The EBIT margin was 2.9%, substantially in line with 2009. The operating performance was achieved thanks to revenue growth and activities focused on a more efficient and flexible operating cost structure, in addition to production localisation to Poland and Mexico. In 2010, the Temporary Lay-off Scheme(6) was utilised, along with social security measures aimed at maintaining the level of personnel employed. On the completion of the industrial restructuring (begun in 2008) the present financial statements include restructuring costs of Euro 1.2 million relating to labour costs compared to Euro 1.9 million provisioned in 2009.

the accounts “Other receivables/payables” and “Tax receivables/payables” and Provisions for risks and charges of current assets/liabilities.

Exchange rate movements had a positive impact on EBITDA of approx. Euro 0.9 million and exchange gains in the year amounted to Euro 0.3 million. Net interest expense, including the financial component of IAS 19, reduced by 31% on 2009 (Euro 1.3 million in 2010 compared to Euro 1.9 million in 2009), although with a higher average debt. Managerial Working Capital on net revenues improved from 12.0% in December 2009 to 11.7% in December 2010. This improvement was achieved through the optimisation of trade payables and a reduction in the level of inventories as a percentage of revenues. Although positive cash flow was generated by the business, the Net Debt increased from Euro 22.9 million at December 31, 2009 to Euro 34.9 million at December 31, 2010. The increase in the debt is due to the M&A activities carried out in 2010 and the payment of the earn-out for the acquisition in 2008 of the German subsidiary Exklusiv-Hauben Gutmann Gmbh.

(6) Temporary Lay-off Scheme

RECONCILIATION BETWEEN PARENT COMPANY AND CONSOLIDATED NET EQUITY AND NET PROFIT The following table contains a reconciliation between the Shareholders’ Equity and profit for the year of Elica S.p.A. and Consolidated Shareholders’ Equity and net profit.

As at December 31, 2009 IN EURO THOUSANDS As per Parent Company Financial Statements

Net profit

Shareholders’ equity

(6,550)

121,113

Elimination of the effect of intercompany operations net of tax effect: (142)

(278)

Non-realised gains on sale of goods

Non-realised gains on fixed assets

(533)

Tax effect

256

(1,027)

134

380

Dividends received from consolidated companies Share of expenses/(income) from equity investments Carrying value of consolidated companies Net equity and result for the year of consolidated companies

(105,760) 8,358

93,648

Allocation of differences to assets of consolidated companies and related depreciation and write-down Intangible and tangible assets

(43)

Consolidation difference

1,148 15,210

As per Consolidated Financial Statements

782

124,157

Group share

231

122,045

Minority interest share

551

2,112

As at December 31, 2010 IN EURO THOUSANDS As per Parent Company Financial Statements

Net profit

Shareholders’ equity

1,594

129,824

Elimination of the effect of intercompany operations net of tax effect: Non-realised gains on fixed assets

(252)

(80)

(410)

208

(4,587)

Other

(341)

(52)

Share of expenses/(income) from equity investments

(592)

(216)

Non-realised gains on sale of goods Tax effect Dividends received from consolidated companies

Carrying value of consolidated companies Net equity and result for the year of consolidated companies

(75,897) 9,596

75,755

Allocation of differences to assets of consolidated companies and related depreciation and write-down Intangible and tangible assets

(54)

Consolidation difference

6,671 8,485

As per Consolidated Financial Statements

5,577

139,530

Group share

4,262

131,220

Minority interest share

1,315

8,310

GUIDANCE FOR 2011 In 2011, Elica Group management will continue to implement its strategic plans designed to develop the business and to strengthen its competitive position. In particular: ×× launch of new products both in the own brand business unit and in the third party brand business unit;

×× maintenance of the competitive position in the principal markets of the previous consolidation area and growth in Asia; ×× acceleration of the production outsourcing plans in Poland and Mexico; ×× acceleration of the purchasing process in the Low Cost Countries, utilising also the new Chinese subsidiary Putian; ×× aligning productive capacity with demand; ×× increase in industrial and corporate efficiencies; ×× investment focus on the core activities.

ELICA S.P.A. AND THE FINANCIAL MARKETS

The graph shows the performance of the Elica S.p.A. share price in 2010 in comparison to the average performance of other listed companies on the STAR segment. Shareholder

The Share Capital consists of 63,322,800 ordinary voting shares. At December 31, 2010, the shareholders of Elica S.p.A. were as follows:

Number of shares held

FAN Srl

Shareholding

33,440,445

52.81%

Elica S.p.A.

6,332,280

10.00%

Whirlpool Corporation

6,332,280

10.00%

Henderson Global Investors

1,736,926

2.74%

116,245

0.18%

Francesco Casoli

70,000

0.11%

Gianna Pieralisi

52,000

0.08%

Others

15,242,624

24.08%

Total

63,322,800

100.00%

S.A.F.E. S.a.p.a.

At December 31, 2010, Elica held 6,332,280 shares from the buy-back programme; at the date of the present report the number of shares was 4,432,596.

SHARES HELD BY DIRECTORS, OFFICERS, STATUTORY AUDITORS AND KEY EXECUTIVES The table below provides details of the shares of Elica S.p.A. held by members of the Board of Directors, Board of Statutory Auditors and key executives at December 31, 2010: Name

No. of shares at Dec. 31, 2009

No. of shares acquired

No. of shares sold

No. of shares at Dec. 31, 2010

Francesco Casoli

70,000

Gianna Pieralisi

52,000

5,850

4,100

Senior executives

The number of shares at December 31, 2010 is not in line with that published in the “2009 Consolidated

SIGNIFICANT EVENTS IN 2010 The Board of Directors met on March 30, 2010 and approved the Consolidated Financial Statements and the proposal of the Individual Financial Statements of Elica S.p.A., as well as the proposal for the Individual Financial Statements of FIME S.p.A., a company merged with Elica S.p.A. from January 1, 2010. On April 26, 2010, the Shareholders’ AGM of Elica S.p.A. approved the Individual Financial Statements of FIME S.p.A., the Individual Financial Statements of Elica S.p.A. and a stock grant plan, called the 2010 Stock Grant Plan, for employees, including senior management, advisors and executive directors of the Company and of its subsidiaries considered “key managers” for the achievement of the business growth and development objectives of the Company, as well as the consequent extension to utilise treasury shares acquired by the Company under the Shareholders’ Meeting resolution of August 3, 2007. The Shareholders’ AGM of Elica S.p.A. attributed to the Board of Directors, with the faculty to delegate, all powers necessary and/or considered opportune to implement the Plan. In execution of the above-stated shareholders’ meeting resolution, the Board of Directors of the Company on April 26, 2010 approved the 2010 Stock Grant Plan Regulation, defined the 2010 performance objectives and identified some of the Plan beneficiaries. On February 1, 2010, the associated company I.S.M. Srl sold the entire holding in Sider S.r.l.. This holding arose from the conferment to Sider S.r.l. of the “productive-industrial” business unit on December 14, 2009.

Financial Statements” following the change in the composition of the “Senior executives”.

On May 3, 2010, Elica S.p.A. signed a Joint Venture agreement with Mr. Bhutada and several senior managers. Under the joint venture agreement the Elica Group subscribed to a share capital increase of a newlyincorporated Indian company (called Elica PB India Private Ltd.) for a 51% stake; the remainder of the share capital was subscribed by Pralhad Bhutada and other senior managers of the company. In July 2010 Elica S.p.A. signed agreements with the Chinese shareholders Mr. Renyao Du and his wife Ms. Dong Wenhua which provided for the acquisition by Elica of a majority holding in the Chinese company Zhejiang Putian Electric Co. Ltd, operating under the “Puti” brand, a leader in the Chinese home appliance sector producing and marketing range hoods, gas hobs and kitchenware sterilisers. Consideration of approx. Euro 13 million was paid for 55% of the share capital. The Elica Group can consolidate its position as a global player in the range hoods sector through entering the Chinese market, with the Group already established in Europe, The Americas and India (with consistently increasing market shares) and also creates the opportunity to serve the OEM client base with local production and increases purchasing from Low Cost Countries. On August 6, 2010, the Board of Directors approved the half-year report at June 30, 2010 and on the proposal of the Remuneration Committee, resolved to include in the Stock Grant Plan 2010 a further 14 beneficiaries, chosen from among the Group’s key managers, in place of the 12 beneficiaries already identified by the Information Document of March 30, 2010, assigning to them 140,000 Company shares, and consequently updated the Information Document.

On October 4, 2010 Elica S.p.A. sold the residual 10% holding in the Company Acem Srl to Nikel, a stake which was previously held by FIME S.p.A.. On October 26, 2010 the Company exercised the purchase option on the leased property on which the Mergo factory is located. On December 15, 2010 the Company also exercised the purchase option on the leased property on which the Castelfidardo factory is located. On November 11, 2010, the Board of Directors of the Company, in accordance with the powers attributed by article 19 of the by-laws, approved modifications to the by-laws necessary to comply with Legislative Decree No. 27/2010 and Legs. Decree 39/2010. At the same time the Board also adopted, with prior approval of the independent directors, the new Procedure for Transactions with Related Parties as per article 2391 bis of the civil code and article 4 of the CONSOB Regulation concerning related parties approved through resolution No. 17221 of March 12, 2010 and subsequent amendments. The amended by-law and the procedure are available on the Company’s internet site in the Investor Relations section. In the final months of 2010, the companies Elica Finance Limited and Elica International S.à.r.l. were liquidated.

Information in relation to the treatment of personal data With reference to the provisions on the protection of personal data, the Company updated and implemented the Document on personal data security in accordance with articles 33-34-35-36 and regulation 19 and 26 of Attachment B, of the Technical Regulations in relation to minimum security requirements, pursuant to Legislative Decree No. 196/2003.

Information relating to the environment The Elica Group operates in compliance with all regulations - local, national and international – for the protection of the environment both in relation to products and the productive cycles. It is highlighted that the types of activities carried out have limited implications in environmental terms and in terms of atmospheric emissions, waste disposal and water disposal. The maintenance of such standards however requires the incursion of costs for the Group.

Information relating to personnel The Elica Group, in its commitment to continuous improvement, has undertaken initiatives focussed on increasing security levels at the plant, reducing and monitoring risks and training personnel for more conscientious behaviour and prudency in the workplace, further improving the already low staff turnover levels and accidents.

Exposure to risks and uncertainty and financial risk factors The Elica Group’s operations are exposed to different types of financial risks, or risks associated to changes in exchange rates, interest rates, commodity prices and cash flow. In order to mitigate the impact of these risks on the company’s results, the Elica Group commenced the implementation of a financial risk monitoring system through a “Financial Risk Policy” approved by the Board of Directors of the Parent Company. Within this policy, the Group constantly monitors the financial risks related to the operating activities in order to assess any potential negative impact and undertakes corrective action where necessary. The main guidelines for the Group risk policy management are as follows: ×× identify the risks related to the achievement of the business objectives; ×× assess the risks to determine whether they are acceptable compared to the controls in place and require additional treatment; ×× reply appropriately to risks; ×× monitor and report on the current state of the risks and the effectiveness of their control. The Group “Financial Risk Policy” is based on the principle of a dynamic management and the following assumptions: ×× prudent management of the risk with a view to protecting the expected value of the business; ×× use of “natural hedges” in order to minimise the net exposure on the financial risks described above; ×× undertake hedging operations within the limits approved by Management and only in the presence of effective and clearly identified exposures. The process for the management of the financial risks is structured on the basis of appropriate procedures and controls, based on the correct separation of the activities of conclusion, settlement, registration and reporting of the results.

ELICA GROUP STRUCTURE AND CONSOLIDATION SCOPE The Elica Group is currently the world’s largest manufacturer of kitchen range hoods for domestic use and is leader in Europe in the sector of motors for boilers used in home heating systems.

Parent Company Elica S.p.A. Fabriano (AN) is the parent company of the Group.

Subsidiaries at the publication date of the 2010 Consolidated Financial Statements Elica Group Polska Sp.zo.o Wroclaw – (Poland). This company has been operational since September 2005 in the production and sale of electric motors and from December 2006 in the production and sale of exhaust range hoods for domestic use; ELICAMEX S.A. de C.V. Queretaro (Mexico). The company was incorporated at the beginning of 2006 (Elica S.p.A. owns 98% directly and 2% through Elica Group Polska Sp.zo.o). Through this company, the Group intends to concentrate the production of products for the American markets in Mexico and reap the benefits deriving from optimisation of operational and logistical activities; Leonardo Services S.A. de C.V. Queretaro (Mexico). This wholly-owned subsidiary was incorporated in January 2006 (the Parent Company owns 98% directly and 2% indirectly through Elica Group Polska Sp.zo.o). Leonardo Services S.A. de C.V. manages all Mexican staff, providing services to ELICAMEX S.A. de C.V.; ARIAFINA CO., LTD Sagamihara-Shi (Japan). Established in September 2002 as a 50/50 joint venture with Tokyo-based Fuji Industrial and leader in Japan with over 70% of the range hood market. Elica S.p.A. acquired control of this joint venture in May 2006 to provide further impetus to the development of the important Japanese market, where high-quality products are sold; Airforce S.p.A. Fabriano (AN). This company operates in a special segment of the production and sale of hoods sector. The holding of Elica S.p.A. is 60%; Airforce Germany HochleistungsDunstabzugssysteme GmbH Stuttgart (Germany). Airforce S.p.A. owns 95% of Airforce Germany HochleistungsDunstabzugssysteme GmbH, a company that sells hoods in Germany through so -called “kitchen studios”;

Elica Inc. Chicago, Illinois (United States). The company aims to develop the Group’s brands in the US market by carrying out marketing and trade marketing with resident staff. The company is a wholly owned subsidiary of ELICAMEX S.A. de C.V.; Exklusiv-Hauben Gutmann GmbH Mülacker (Germany) - a German company entirely held by Elica and the German leader in the high-end kitchen range hood market, specialised in “tailor made” and high performance hoods. Elica PB India Private Ltd. Pune (India); in June 2010 Elica S.p.A. signed a joint venture agreement subscribing 51% of the share capital of the newly-incorporated Indian company. Elica PB India Private Ltd. is involved in the sale of Group products. Zhejiang Putian Electric Co. Ltd. Shengzhou (China), a Chinese company held 55% and operating under the “Puti” brand, a leader in the Chinese home appliances sector, producing and marketing range hoods, gas hobs and kitchenware sterilisers. Putian is one of the leading players in the Chinese range hood market and the principal company developing western style range hoods. The production site is located in Shengzhou, a major Chinese industrial district for the production of kitchen home appliances.

Associated companies I.S.M. Srl Cerreto d’Esi (AN). The company, of which Elica S.p.A. holds 49.385% of the Share Capital, operates within the real estate sector.

Changes in the consolidation scope At the end of 2010, the Irish company Elica Finance Limited and the Luxembourg company Elica International S.à.r.l. were liquidated, while respectively in June and September 2010 the companies Elica India and Putian entered the consolidation scope. The Indian company Elica PB India Private Ltd joined the Elica Group following a joint venture agreement between Elica S.p.A. and Mr. Bhutada and a number of the principal managers of the company. The Elica Group acquired control of the company Putian through purchasing a majority 55% holding.

ELICA GROUP INTER-COMPANY AND OTHER RELATED-PARTY TRANSACTIONS In 2010, transactions were entered into with Subsidiary companies – key data according to local accounting principles and performance in the year

subsidiaries, associated companies and other related parties. All transactions were conducted on an arm’s length basis in the ordinary course of business.

IN EURO THOUSANDS

Assets

Liabilities

Elicamex S.a. dE C.V.

31,403

8,654

22,749

29,470

1,276

Elica Group Polska Sp.zo.o

51,575

23,312

28,263

73,454

4,848

Airforce S.p.A.

8,005

6,166

1,839

17,798

101

Ariafina

6,812

3,259

3,553

15,594

1,134

Leonardo

Net equity

Revenues

Net result

478

476

3,089

-41

24,593

16,429

8,164

21,274

195

Elica Inc.

337

256

718

Airforce GE (*)

188

8,276

179

-20

3,648

4,520

-873

3,545

-959

12,439

5,363

7,076

7,398

2,736

Exklusiv Hauben Gutmann GmbH

Elica PB India Private Ltd. Zhejiang Putian Electric Co. Ltd

Elica S.p.A. also carries out financial operations with Group companies as part of a general plan to centralise treasury management activities. These loans are interest bearing and at market rates.

Transactions with consolidated companies have been eliminated from the Consolidated Financial Statements. As a result they are not reported in these notes.

(*) Airforce Germany HochleistungsDunstabzugssysteme Gmbh

Associated companies

The table below summarises key operating and financial data for associated companies, as derived from the companies’ financial statements in accordance with Italian GAAP.

Associated companies: Key data at Dec. 31, 2009 in Euro thousands

Registered Office

% held

Share Capital

Net equity

Net result

I.S.M. Srl

Cerreto d'Esi (AN)

49.385

2,328

177

Associated companies: Key data at Dec. 31, 2010 in Euro thousands

Registered Office

% held

Share Capital

Net equity

Net result

I.S.M. Srl

Cerreto d'Esi (AN)

49.385

1,996

(311)

No separate disclosure of these positions was given in the financial statements, given the limited amounts involved.

The table below shows the operating and financial amounts from transactions with associated companies for 2010. IN EURO THOUSANDS

Payables

Receivables

Costs

Revenues

I.S.M. Srl

Total

CORPORATE GOVERNANCE AND SHAREHOLDER STRUCTURE REPORT In accordance with article 123-bis of Legislative Decree No. 58/98, with article 89-bis of CONSOB Resolution No.11971/1999 and successive amendments and integrations of article I.A.2.6 of the

EVENTS AFTER DECEMBER 31, 2010 AND OUTLOOK The ongoing demand analysis activity by Management continues. In the first months of 2011, management forecasts were confirmed concerning demand levels, which were also utilised to develop the impairment test. The principal markets in which the Group carries out its trading activities improved slightly; demand visibility remains limited however. In January 2011, following the issue of “radiation” certificates at the end of 2010, the companies Elica Finance Limited and Elica International S.à.r.l. were liquidated. On January 31, 2011 the period for the share capital increase as per article 2439, paragraph 2 of the civil code approved by the Board of Directors on June 27, 2007, based on the delegation of power by the Shareholders’ Meeting of April 12, 2006, elapsed without any subscriptions. The subscribed and paid-in share capital therefore remains unchanged at Euro 12,664,560.

Regulation Instructions of Markets Organised and Managed by Borsa Italiana S.p.A., Elica S.p.A. provides complete disclosure on the Corporate Governance system adopted, at March 22, 2011, in line with the recommendations of the Self-Governance Code, in the Annual Corporate Governance Report, available on the website of the Company www.elicagroup.com in the Investor Relation/Corporate Governance section.

In addition, on February 14, 2011, Elica S.p.A., following the authorisation of the Board of Directors’ to utilise treasury shares at the same date, sold 1,899,684 shares, equal to 3% of the share capital, to First Capital S.p.A., at the price of Euro 1.64 Euro per share - higher than the average market price over the previous 3 months. The acquisition of a significant holding by an investor such as First Capital S.p.A., which seeks to establish a holding within the company, is considered a strategically important operation for the future development of the Elica Group. On March 19, 2011, Elica S.p.A. signed an agreement for the acquisition of a further 15% stake in the Chinese Company Zhejiang Putian Electric Co. Ltd. Following this fresh investment, Elica will increase its holding in Putian to 70%, having acquired a 55% stake in 2010. The Elica Group considers this consolidation of control to be a strategically important move given the excellent results achieved in 2010 and the expected future development of the market and the company itself. Elica S.p.A. signed, among other agreements, an equity transfer agreement with Putian minority shareholders, Renyao Du and Dong Wenhua, which modifies and supplements the equity transfer agreement signed with the same parties in July 2010. In particular, under the new equity transfer agreement, the Company commits to purchase a further 15% holding in Putian for consideration of Renminbi 278.312.573 (approx. Euro 29.983.148 at the official ECB Euro/Renminbi exchange rate of March 18, 2011). The payment shall be made in one settlement on fulfilment of the conditions illustrated below. The acquisition of the holding in Putian will be

carried out through dedicated credit lines. The new equity transfer agreement remains subject to the fulfilment of certain conditions including the granting by the Chinese authorities of the necessary authorisations, the establishment of guarantees in favour of Elica and substantial fulfilment of the conditions. It is expected that the conditions will be fulfilled by May 2011; Elica has the right to withdraw from the new equity transfer agreement if the conditions are not met within four months of signing of the agreement. Following the completion of the operation, Elica will hold 70% of the share capital of Putian, while the remaining 30% will be held by Mr. Renyao Du. According to the accounting standards applied, this alteration in the holding will be recognised from the moment in which the operation is concluded, as a capital operation (an operation with shareholders in their capacity as shareholders) and therefore recognised directly as a decrease of shareholders’ equity, which consequently will reduce by an amount of approx. Euro 30 million.

Compliance pursuant to Section VI of the regulation implementing Legislative Decree No. 58 of 24 February 1998 concerning market regulations (“Market Regulations”) In accordance with article 36, Elica S.p.A., having control, directly or indirectly, over some companies registered in countries outside of the European Union, the financial statements of the above-mentioned companies, prepared for the purposes of the Elica Group Consolidated Financial Statements, were made available in accordance with the provisions required by the current regulations. For the reasons for which it is considered that the Company is not under the direction and control of the parent company, in accordance with article 37, reference is made to paragraph 8 “Disclosure in accordance with IAS 24 on the payment of management and related parties”.

Fabriano, March 22, 2011

For the Board of Directors The Chairman Francesco Casoli

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(3) Gross Domestic Product

(4) International Monetary Fund (5) Federal Reserve System

CURRENCY MARKETS Exchange rate movements resulted in a small gain recorded in the income statement and the translation negative reserve decreased by Euro 3,922 thousand.

In 2010 the Euro weakened against all the currencies in which the Group carries out its commercial transactions. Exchange rate movements had a small positive impact on the income statement.

average 2010

average 2009

31-dEc-10

31-dEc-09

USD

1.33

1.39

-4.62%

1.34

1.44

-7.21%

GBP

0.86

0.89

-3.61%

0.86

0.89

-3.29%

116.21

130.34

-10.84%

108.65

133.16

-18.41%

JPY PLN

3.99

4.33

-7.74%

3.98

4.10

-3.05%

MXN

16.74

18.80

-10.97%

16.55

18.92

-12.54%

INR

60.45 (*)

n/a

59.76

n/a

RMB

9.04 (*)

n/a

8.82

n/a

(*) the average exchange rate of the Indian Rupee and the Chinese Renminbi was calculated for the period in which the Indian and Chinese subsidiaries were consolidated.

FINANCIAL AND OPERATING REVIEW In Euro thousands

FY 10

FY 09

10 Vs 09 %

368,265

335,135

9.9%

26,194

20,059

30.6%

7.1%

6.0%

10,553

732

revenue margin

2.9%

0.2%

Financial income/(costs)

(982)

(2,079)

revenue margin

-0.3%

-0.6%

Net profit for the year

Revenues EBITDA revenue margin EBIT

1,341.7%

(52.8%)

5,577

782

revenue margin

1.5%

0.2%

613.2%

Group net profit

4,262

231

revenue margin

1.2%

0.1%

Basic earnings per share

7.48

0.41

1,745.2%

Diluted earnings per share

7.48

0.41

1,745.2%

In Euro thousands

31-dEC-10

31-dEc-09

Trade receivables

89,276

85,589

Inventories

42,671

41,451

(88,742)

(86,806)

43,205

40,234

11.7%

12.0%

Other net receivables/payables

(3,869)

(6,963)

Net Working Capital

1,745.2%

Trade payables Managerial Working Capital as a % of revenues

39,336

33,271

as a % of revenues

10.7%

9.9%

In Euro thousands

31-dEc-10

31-dEc-09

25,102

19,235

(76)

(2,430)

Bank loans and mortgages

(30,457)

(14,780)

Long-term debt

(30,533)

(17,210)

(23)

(1,903)

Bank loans and mortgages

(29,426)

(23,058)

Short-term debt

(29,449)

(24,961)

Net Debt

(34,880)

(22,936)

Cash and cash equivalents Finance leases and other lenders

Finance leases and other lenders

(*) The earnings per share for the years 2010 and 2009 were calculated by dividing the Group net result by the number of outstanding shares at the respective reporting dates.

the accounts “Other receivables/payables” and “Tax receivables/payables” and Provisions for risks and charges of current assets/liabilities.

In 2010, the Temporary Lay-off Scheme(6) was utilised, along with social security measures aimed at maintaining the level of personnel employed. On the completion of the industrial restructuring (begun in 2008) the present financial statements include restructuring costs of Euro 1.2 million relating to labour costs compared to Euro 1.9 million provisioned in 2009.

(6) Temporary Lay-off Scheme

As at December 31, 2009 IN EURO THOUSANDS

Net profit

As per Parent Company Financial Statements

Shareholders’ equity

(6,550)

121,113

Elimination of the effect of intercompany operations net of tax effect: (142)

(278)

Non-realised gains on sale of goods

Non-realised gains on fixed assets

(533)

Tax effect

256

(1,027)

134

380

Dividends received from consolidated companies Share of expenses/(income) from equity investments Carrying value of consolidated companies

(105,760)

Net equity and result for the year of consolidated companies

8,358

93,648

Allocation of differences to assets of consolidated companies and related depreciation and write-down Intangible and tangible assets

(43)

Consolidation difference

1,148 15,210

As per Consolidated Financial Statements

782

124,157

Group share

231

122,045

Minority interest share

551

2,112

As at December 31, 2010 IN EURO THOUSANDS

Net profit

As per Parent Company Financial Statements

Shareholders’ equity

1,594

129,824

Elimination of the effect of intercompany operations net of tax effect: Non-realised gains on fixed assets

(252)

(80)

(410)

208

(4,587)

Other

(341)

(52)

Share of expenses/(income) from equity investments

(592)

(216)

Non-realised gains on sale of goods Tax effect Dividends received from consolidated companies

Carrying value of consolidated companies

(75,897)

Net equity and result for the year of consolidated companies

9,596

75,755

Allocation of differences to assets of consolidated companies and related depreciation and write-down Intangible and tangible assets

(54)

Consolidation difference

6,671 8,485

As per Consolidated Financial Statements

5,577

139,530

Group share

4,262

131,220

Minority interest share

1,315

8,310

ELICA S.P.A. AND THE FINANCIAL MARKETS

The graph shows the performance of the Elica S.p.A. share price in 2010 in comparison to the average performance of other listed companies on the STAR segment. Shareholder

The Share Capital consists of 63,322,800 ordinary voting shares. At December 31, 2010, the shareholders of Elica S.p.A. were as follows:

Number of shares held

FAN Srl

Shareholding

33,440,445

52.81%

Elica S.p.A.

6,332,280

10.00%

Whirlpool Corporation

6,332,280

10.00%

Henderson Global Investors

1,736,926

2.74%

116,245

0.18%

Francesco Casoli

70,000

0.11%

Gianna Pieralisi

52,000

0.08%

Others

15,242,624

24.08%

Total

63,322,800

100.00%

S.A.F.E. S.a.p.a.

At December 31, 2010, Elica held 6,332,280 shares from the buy-back programme; at the date of the present report the number of shares was 4,432,596.

No. of shares at Dec. 31, 2009

No. of shares acquired

No. of shares sold

No. of shares at Dec. 31, 2010

Francesco Casoli

70,000

Gianna Pieralisi

52,000

5,850

4,100

Senior executives

The number of shares at December 31, 2010 is not in line with that published in the “2009 Consolidated

Financial Statements” following the change in the composition of the “Senior executives”.

Parent Company Elica S.p.A. Fabriano (AN) is the parent company of the Group.

Associated companies I.S.M. Srl Cerreto d’Esi (AN). The company, of which Elica S.p.A. holds 49.385% of the Share Capital, operates within the real estate sector.

Airforce Germany HochleistungsDunstabzugssysteme GmbH Stuttgart (Germany). Airforce S.p.A. owns 95% of Airforce Germany HochleistungsDunstabzugssysteme GmbH, a company that sells hoods in Germany through so -called “kitchen studios”;

subsidiaries, associated companies and other related parties. All transactions were conducted on an arm’s length basis in the ordinary course of business.

IN EURO THOUSANDS

Assets

Liabilities

Elicamex S.a. dE C.V.

31,403

8,654

22,749

29,470

1,276

Elica Group Polska Sp.zo.o

51,575

23,312

28,263

73,454

4,848

Airforce S.p.A.

8,005

6,166

1,839

17,798

101

Ariafina

6,812

3,259

3,553

15,594

1,134

Leonardo

Net equity

Revenues

Net result

478

476

3,089

-41

24,593

16,429

8,164

21,274

195

Elica Inc.

337

256

718

Airforce GE (*)

188

8,276

179

-20

3,648

4,520

-873

3,545

-959

12,439

5,363

7,076

7,398

2,736

Exklusiv Hauben Gutmann GmbH

Elica PB India Private Ltd. Zhejiang Putian Electric Co. Ltd

Elica S.p.A. also carries out financial operations with Group companies as part of a general plan to centralise treasury management activities. These loans are interest bearing and at market rates.

Transactions with consolidated companies have been eliminated from the Consolidated Financial Statements. As a result they are not reported in these notes.

(*) Airforce Germany HochleistungsDunstabzugssysteme Gmbh

Associated companies

The table below summarises key operating and financial data for associated companies, as derived from the companies’ financial statements in accordance with Italian GAAP.

Associated companies: Key data at Dec. 31, 2009 in Euro thousands

Registered Office

% held

Share Capital

Net equity

Net result

I.S.M. Srl

Cerreto d'Esi (AN)

49.385

2,328

177

Associated companies: Key data at Dec. 31, 2010 in Euro thousands

Registered Office

% held

Share Capital

Net equity

Net result

I.S.M. Srl

Cerreto d'Esi (AN)

49.385

1,996

(311)

No separate disclosure of these positions was given in the financial statements, given the limited amounts involved.

The table below shows the operating and financial amounts from transactions with associated companies for 2010. IN EURO THOUSANDS

Payables

Receivables

Costs

Revenues

I.S.M. Srl

Total

Fabriano, March 22, 2011

For the Board of Directors The Chairman Francesco Casoli

81 FINANCIAL STATEMENTS 139 AUDITORS’ REPORT

ONSIBILITY

INITIATIVES

look

Secondo Brian Wansink (Executive Director presso il USDA’s Center for Nutrition Policy and Promotion) una semplice predisposione della struttura mentale porta gli individui ad apprezzare i cibi che credono essere buoni e a non gustare dei cibi che credono essere cattivi. Affermazione di una banalità quasi disarmante, che curiosamente sta alla base di una delle attività commerciali più floride della nostra società globalizzata, il Food Design: il progetto del packaging, del naming, del colore, dell’odore, della consistenza e dell’aspetto che il cibo deve avere per essere un prodotto vendibile. Ogni aspetto degli alimenti commercializzati è opera di designer il cui unico scopo è individuare la chiave corretta di successo, che sia essa un giusto odore o uno specifica variazione cromatica del cibo.

Il Food Design non solo influenza profondamente le nostre scelte, ma cambia concretamente la nostra percezione: un esperimento condotto da un istituto di ricerca americano ha messo in evidenza come una identica tipologia di cereali stimola nei bambini reazioni chimiche gustative differenti a seconda della confezione da cui vengono versati. Molto più buoni quelli dalla confezione dei Power Rangers*.

Food Design not only greatly influences the choices we make but actually changes our perception: an experiment conducted by an American research institute has shown that the exact same cereal stimulates the chemical reactions of the taste buds of children differently depending on the package from which it was poured. The cereal from the Power Rangers * box was so much tastier.

[look] According to Brian Wansink (Executive Director of the USDA’s Center for Nutrition Policy and Promotion) people appreciate food they think is good and do not like food they perceive as “bad”, due to a simple predisposition of their mental structure. This is an affirmation of an almost disarming banality that , curiously enough, is the basis of one of the most booming industries of our globalised society – Food Design: the packaging, name, colours, fragrances, consistency and appearance that food must have to induce people to buy it . Behind every aspect of food on the market is a designer whose task it was to discover the key to its saleability – be it the aroma or the particular hue of a food item.

(*) Power Rangers is a registered trademark of SCG Power Rangers LLC

CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS Independent Auditors Deloitte & Touche S.p.A.

Registered office and Company Data Elica S.p.A. Registered office: Via Dante, 288 – 60044 Fabriano (AN) Share capital Euro 12,664,560.00 Tax Code and Companies’ Register Number: 00096570429 Ancona REA No. 63006 VAT Number 00096570429

ELICA GROUPCONSOLIDATED FINANCIAL STATEMENTS Registered Office at Via Dante, 288 - 60044 Fabriano (AN) AT DECEMBER 31, 2010 Share Capital Euro 12,664,560.00 fully paid-in Consolidated Income Statement In Euro thousands

Note

FY 10

FY 09

Revenues

5.1

368,265

335,135

Other operating revenues

5.2

2,371

2,831

Changes in inventories of finished and semi-finished goods

5.3

3,838

4,720

Increase in internal work capitalised

5.4

2,633

2,937

Raw materials and consumables

5.5

(193,686)

(180,198)

Services

5.6

(73,873)

(66,676)

Labour costs

5.7

(72,397)

(66,854)

Amortisation & Depreciation

5.8

(15,641)

(16,556)

Other operating expenses and provisions

5.9

(10,221)

(9,896)

5.10

(736)

(1,940)

(2,771)

10,553

732

Restructuring charges Write-down of Goodwill for loss of value EBIT Share of profit/(loss) from associates

5.11

(592)

107

Financial income

5.12

1,383

1,197

Financial charges

5.13

(2,678)

(3,069)

Exchange gains/(losses)

5.14

313

(207)

8,979

(1,240)

(3,402)

2,022

5,577

782

1,315

551

4,262

231

Pre-tax result Income taxes

5.15

Net profit for the year of which: Minority interests share

5.16

Group net profit Basic earnings per Share (Euro/cents)

5.17

7.48

0.41

Diluted earnings per Share (Euro/cents)

5.17

7.48

0.41

In Euro thousands

FY 10

FY 09

Net profit

5,577

782

3,922

467

(20)

(1)

Total other comprehensive income statement items, net of tax effects:

3,995

470

Total comprehensive profit

9,572

1,252

Minority interests share

1,577

448

Group comprehensive net profit

7,995

804

Comprehensive Consolidated Income Statement

Other comprehensive income statement items: Exchange differences on the conversion of foreign financial statements Net change in cash flow hedges Income taxes on other comprehensive income statement items

of which:

Consolidated Balance Sheet In Euro thousands

Note

31-dEc-10

31-dEc-09

Property, plant & equipment

5.19

83,680

69,100

Goodwill

5.20

41,168

33,818

Other intangible assets

5.21

23,868

21,093

Investments in associated companies

5.22

1,717

2,309

Other financial assets

5.23

Other receivables

5.24

1,920

200

Tax receivables

5.25

Deferred tax assets

5.35

9,357

9,200

Financial assets available-for-sale

5.26

614

680

Derivative financial instruments

5.31

189

Total non-current assets

162,549

136,436

Trade and financial receivables

5.27

89,276

85,589

Inventories

5.28

42,671

41,451

Other receivables

5.29

4,281

3,841

Tax receivables

5.30

7,589

9,663

Derivative financial instruments

5.31

649

770

Cash and cash equivalents

5.32

25,102

19,235

169,568

160,549

332,117

296,985

Liabilities for post-employment benefits

5.33

9,182

9,554

Provisions for risks and charges

5.34

8,254

5,752

Deferred tax liabilities

5.35

7,890

5,328

Finance leases and other lenders

5.36

2,430

Bank loans and mortgages

5.37

30,457

14,780

Other payables

5.38

1,510

1,381

Tax payables

5.39

978

1,058

Derivative financial instruments

5.31

58,347

40,283

Current assets Total assets

Non-current liabilities Provisions for risks and charges

5.34

953

1,082

Finance leases and other lenders

5.36

1,903

Bank loans and mortgages

5.37

29,426

23,058

Trade payables

5.40

88,742

86,806

Other payables

5.38

9,022

14,686

Tax payables

5.39

5,764

4,699

Derivative financial instruments

5.31

310

311

134,240

132,545

Share Capital

12,665

Capital reserves

71,123

Hedging, translation and stock option reserve

(3,411)

(8,431)

Treasury shares

(17,629)

Profit reserves

64,210

64,086

4,262

231

131,220

122,045

Capital and reserves of minority interests

6,995

1,561

Minority interest profit

1,315

551

8,310

2,112

139,530

124,157

332,117

296,985

Current liabilities

Group profit Group shareholders' equity

5.41

Minority interest equity

5.42

Consolidated shareholders’ equity Total liabilities and shareholders’ equity

Consolidated Cash Flow Statement In Euro thousands

31-dEc-10

31-dEc-09

Opening cash and cash equivalents

19,235

14,968

EBIT- Operating profit

10,553

732

Amortisation, depreciation and write-downs

15,641

16,556

2,771

26,194

20,059

Trade working capital

5,673

16,001

Other working capital accounts

2,663

(3,633)

(2,007)

(2,122)

1,437

355

630

(7)

34,589

30,752

(23,798)

(16,243)

(6,559)

(4,792)

(11,026)

(11,748)

(6,213)

(64)

361

Write-down of Goodwill for loss of value EBITDA

Exchange rate effect Income taxes paid Change in provisions Other changes Cash flow from operating activity

Net increases Intangible assets Property, plant & equipment Equity investments and other financial assets Exchange rate effect Purchase of equity investments

5.45

(10,127)

(33,925)

(16,243)

120

(1,066)

Increase (decrease) financial payables

6,627

(7,744)

Net changes in other financial assets/liabilities

(815)

(181)

Cash flow from investments Other movements in share capital Dividends

Interest paid

(1,796)

(1,188)

Cash flow from financing activity

4,135

(10,179)

Change in cash and cash equivalents

4,799

4,330

1,068

(63)

25,102

19,235

Effect of exchange rate change on liquidity Closing cash and cash equivalents

Statement of changes in Consolidated Shareholders’ Equity In Euro thousands

Balance at December 31, 2008

Share Capital

12,665

Share premium reserve

71,123

Acquisition Retained of earnings treasury shares

(17,629)

61,871

Hedge, trans. & stock option reserve (9,081)

Result for the year

Total Group NE

Total MIN. NE

Total

3,579

122,528

1,966

124,494

Change in cash flow hedges net of the tax effect

Recognition of stock options

569

(103)

466

Differences arising from translation of foreign subsidiaries’ financial statements Total comprehensive gains /(losses)

572

(103)

469

Net profit for the year

231

551

782

Total gains/(losses) recognised in the income statement

231

551

782

Allocation of net profit

3,501

(3,579)

Other movements

(220)

(302)

(522)

Dividends

Balance at December 31, 2009

(1,066)

12,665

71,123

(17,629)

64,086

(8,431)

231

122,045

2,112

124,157

Recognition of stock options

1,366

Differences arising from translation of foreign subsidiaries’ financial statements

3,660

262

3,922

Change in cash flow hedges net of the tax effect

Total gains/(losses) recognised directly to equity

5,099

262

5,361

Net profit for the year

4,262

1,315

5,577

Total gains/(losses) recognised in the income statement

4,262

1,315

5,577

310

(79)

(231)

Allocation of net profit Other movements Dividends

Balance at December 31, 2010

(186)

4,621

4,435

12,665

71,123

(17,629)

64,210

(3,411)

4,262

131,220

8,310

139,530

Table of contents â&#x20AC;&#x201C; Notes to the consolidated financial statements for the year ended 1 Group structure and activities December 31, 2010 2 Accounting principles and basis of consolidation

Significant accounting estimates

Composition and changes in the consolidation scope

Notes to the consolidated income statement, balance sheet and cash flow statement

Guarantees, commitments and contingent liabilities

Risk management policy

Disclosure pursuant to IAS 24 on management compensation and related-party transactions

Disclosure pursuant to article 149 of the CONSOB Issuerâ&#x20AC;&#x2122;s Regulation

Positions or transactions arising from exceptional and/or unusual transactions

Events after the year-end

1 Group structure and activities Elica SpA is a company incorporated under Italian law based in Fabriano (AN - Italy). The main activities of the Company and its subsidiaries as well as its registered office and secondary offices are illustrated in the Directors’ Report on Operations under “Elica Group structure and Consolidation Scope”. The Euro is the functional and presentation currency of Elica and all of the consolidated companies, except for the foreign subsidiaries Elica Group Polska Sp.zo.o,

2 Accounting principles and basis of consolidation The Consolidated Financial Statements were prepared in accordance with International Financial Reporting Standards, issued by the International Accounting Standards Board and approved by the European Union, as well as in accordance with Article 9 of Legislative Decree No. 38/2005 and related CONSOB regulations. The Consolidated Financial Statements at December 31, 2010 are compared with the previous year and consist of the Balance Sheet, the Income Statement, the Comprehensive Income Statement, the Cash Flow Statement, the Statement of changes in Shareholders’ Equity and the Explanatory Notes thereto. The financial statements and related notes comply with the minimum disclosure requirements of IFRS, as supplemented, where applicable, by the provisions enacted by law and by CONSOB. The Group did not make any changes in the accounting principles applied between the comparative dates of December 31, 2009 and December 31, 2010. Furthermore, neither the International Accounting Standards Board (IASB) nor the International Financial Reporting Interpretation Committee (IFRIC) have revised or issued standards or interpretations due to take effect on January 1, 2010 that have had a material effect on the Consolidated Financial Statements, except as described below. The Consolidated Financial Statements were prepared on the basis of the historical cost convention, except for some financial instruments which are recognised at fair value. The financial statement accounts have been measured in accordance with the general criteria of prudence and accruals and on a going concern basis, and also take into consideration the economic function of the assets and liabilities.

ELICAMEX S.A. de C.V., Leonardo Services S.A.de C.V., ARIAFINA CO., LTD, Elica Inc., Elica PB India Private Ltd and Zhejiang Putian Electric Co.Ltd which prepare their financial statements in the Polish Zloty, the Mexican Peso (ELICAMEX S.A. de C.V. and Leonardo Services S.A. de C.V.), Japanese Yen, US Dollar, Indian Rupee and Chinese Renminbi respectively. The Board of Directors today approved the Consolidated Financial Statements for the year ended December 31, 2010 and authorised its publication.

Basis of Consolidation The Consolidated Financial Statements for the year ended December 31, 2010 include the financial statements of the Company and the companies it controls directly or indirectly (the subsidiaries). Control is exercised when the company has the power to determine the financial and operating policies of an entity so as to benefit from its activity. The separate financial statements at December 31, 2010 of the Parent Company Elica S.p.A. were prepared in accordance with IFRS, in accordance with Legislative Decree No. 38/2005 and CONSOB regulations. The financial statements of the Italian subsidiaries were prepared in accordance with Legislative Decree No. 127/91 as supplemented, where necessary, by accounting standards issued by the Italian Accounting Profession (Consiglio Nazionale dei Dottori Commercialisti e dei Ragionieri) and, in the absence of standards laid down by this latter, by accounting standards issued by the IASB as well the documents issued by the Italian Accounting Standards Setter. The financial statements of foreign subsidiaries were prepared in accordance with applicable local regulations. All the Group companies have provided the data and information required to prepare the Consolidated Financial Statements in accordance with IFRS. For information on the consolidation scope and the associated companies reference should be made to sections “4 Composition and changes in the consolidation scope” and “8 Disclosure pursuant to IAS 24 on management compensation and relatedparty transactions”. The results of subsidiaries acquired or sold during the year are included in the Consolidated Income Statement from the date of acquisition until the date of sale. All significant transactions between companies included in the consolidation scope are eliminated. Gains and losses arising on inter-company sales of tangible fixed assets are eliminated, where considered material.

Minority interest share in the net assets of consolidated subsidiaries are recorded separately from the Group Shareholders’ Equity (“Minority Interest”). Minority Interest Net Equity includes the amount attributable to the minority shareholders at the original acquisition date (see below) and changes in equity after that date. Losses attributable to minority shareholders in excess of the minority interest share in the subsidiary’s equity are allocated to equity attributable to the shareholders of the Parent Company, except to the extent that the minority shareholders are subject to a binding obligation and are capable of making additional investments to cover the losses. Consolidation of foreign companies and translation into Euro of foreign-denominated items The assets and liabilities of consolidated foreign companies in currencies other than the Euro are translated using the exchange rates at the balance sheet date. Revenues and costs are translated into Euro using the average exchange rate for the year. Translation differences are recognised in the translation reserve until the investment is sold. At December 31, 2010, the consolidated foreign companies whose operating currency is other than the Euro are Elica Group Polska Sp.zo.o, ELICAMEX S.A. de C.V., Leonardo Services S.A. de C.V, ARIAFINA CO., LTD, Elica Inc Elica PB India Private Ltd and Zhejiang Putian Electric Co. Ltd, which use the Polish Zloty, the Mexican Pesos (ELICAMEX S.A. de C.V. and Leonardo Services S.A. de C.V.), the Japanese Yen, the US Dollar, the Indian Rupee and the Chinese Renmimbi respectively. The exchange rates used for translation purposes are set out below:

average 2010 USD JPY

31-DEC-10

1.33

1.34

116.21

108.65

3.99

3.98

PLN MXN

16.74

16.55

INR

60.45 (*)

59.76

RMB

9.04 (*)

8.82

(*) the average exchange rate of the Indian Rupee and the Chinese Renminbi was calculated for the period in which the Indian and Chinese subsidiaries were consolidated.

Business Combinations Business combinations are recognised according to the acquisition method. According to this method, the amount transferred in a business combination is valued at fair value, calculated as the sum of the fair value of the assets transferred and the liabilities assumed by the Group at the acquisition date and of the equity instruments issued in exchange for control of the company acquired. Accessory charges to the transaction are generally recorded to the income statement at the moment in which they are incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recorded at fair value at the acquisition date; the following items form an exception, which are instead valued according to the applicable standard: ×× deferred tax assets and liabilities; ×× employee benefit assets and liabilities; ×× liability or equity instruments relating to sharebased payments of the company acquired or sharebased payments relating to the Group issued in substitution of contracts of the entity acquired; ×× assets held for sale and Discontinued Operations. Goodwill is calculated as the excess of the amounts transferred in the business combination, of the value of minority interests’ net equity and the fair value of any holding previously held in the acquired company compared to the fair value of the net assets acquired and liabilities assumed at the acquisition date. If the value of the net assets acquired and the liabilities assumed at the acquisition date exceeds the sum of amounts transferred, of the value of minority interest net equity and the fair value of any holding previously held in the acquired company, this excess is immediately recorded to the income statement as income deriving from the transaction concluded. The share of minority interest net equity, at the acquisition date, may be valued at fair value or proquota of the value of net assets recognised of the acquired entity. The valuation method is chosen on the basis of each individual transaction. Any amount subject to conditions established by the business combination contract are valued at fair value at the acquisition date and included in the value of the amounts transferred in the business combination for the determination of goodwill. Any changes subsequent to the fair value, which qualify as adjustments in the measurement period, are included in goodwill retrospectively. The changes in the fair value which qualify as adjustments in the measurement period are those which are based on further information on the facts and circumstances which existed at the acquisition date, obtained during the measurement period (which may not exceed a period of one year from the business combination). In the case of business combinations undertaken in a series of phases, the holding previously held by the Group in the acquired entity is revalued at fair value at the acquisition of control date and any profit or loss is recorded to the income statement. Any amounts related to the holding previously held and recorded to Other comprehensive Profits or Losses are reclassified in the income statement as if the holding had been sold. If the initial values of a business combination are incomplete at the period-end in which the business combination took place, the Group reports in its consolidated financial statements the provisional values of the items for which the final calculations could not be made. These provisional values are adjusted in the measurement period to take account of the new information obtained on the facts and circumstances existing at the acquisition date which, if known, would have had effects on the value of assets and liabilities recognised at this date. Business combinations before January 1, 2010 were recognised according to the previous version of IFRS 3.

Investments in associated companies and joint ventures

Accounting principles and policies

An associated company is a company in which the Group has significant influence, but not full control or joint control. The Group exerts its influence by taking part in the associated company’s financial and operating policy decisions.

The main accounting principles and policies adopted in the preparation of the Consolidated Financial Statements are described below.

A joint venture is a contractual agreement whereby the Group undertakes a jointly controlled business venture with other parties. Joint control is defined as a contractually shared control over a business. It exists only when the strategic financial and operating decisions of the business require the unanimous approval of all of the parties that share control.

Property, plant and equipment are recorded at purchase or production cost, including any directly attributable costs. Some assets have been adjusted under specific revaluation legislation prior to January 1, 2004 and are considered representative of the fair value of the asset at the revaluation date (“deemed cost” as per IFRS 1).

The profits and losses, assets and liabilities of associated companies and joint ventures are recorded in the Consolidated Financial Statements using the Equity method, except where the investments are classified as held for sale. Under this method, investments in associated companies and joint ventures are recorded in the Balance Sheet at cost, as adjusted for changes after the acquisition of the net assets of the associated companies, less any impairment in the value of the individual investments. Losses of the associated companies and joint ventures in excess of the Group share are not recorded unless the Group has an obligation to cover them. Any excess of the acquisition cost over the Group’s share in the fair value of the identifiable assets, liabilities and contingent liabilities at the acquisition date, is recognised as Goodwill. Goodwill is included in the carrying value of the investment and is subject to an impairment test. Any excess of the Group’s share in the fair value of the identifiable assets, liabilities and contingent liabilities of the associated company over the cost of acquisition is recorded in the Income Statement in the year of acquisition. Unrealised profits and losses on transactions between a Group company and an associated company or joint venture are eliminated to the extent of the Group’s share in the associated company or joint venture, except when the unrealised losses constitute a reduction in the value of the asset transferred.

Property, plant & equipment

Depreciation is calculated on a straight-line basis on the cost of the assets based on their estimated useful lives applying the following rates:

buildings lightweight buildings

3.0% 10.0%

plant and machinery

10.0% - 15.5%

industrial and commercial equipment

10.0% - 25.0%

office furniture and equipment

12.0%

EDP

20.0%

commercial vehicles

20.0%

automobiles

25.0%

Assets held under finance leases are recorded as property, plant and equipment and depreciated on a straight-line basis over their estimated useful lives, on the same basis as owned tangible fixed assets. Purchase cost is also adjusted for capital grants already allocated to the Group companies. These grants are recognised in the income statement by gradually reducing the depreciation charged over the useful life of the assets to which they relate. Maintenance, repair, expansion, modernisation and replacement costs that do not lead to a significant, measurable increase in the production capacity and useful life of the asset are charged to the income statement in the year incurred. Goodwill Goodwill arising on the acquisition of a subsidiary or other business combinations represents the excess of the acquisition cost over the Group’s share in the fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary at the acquisition date. Goodwill is recognised as an asset and reviewed at least annually for any impairment. An impairment loss is recorded immediately in the Income Statement and is not restated in a subsequent period.

On the sale of a subsidiary, any Goodwill not amortised attributable to the subsidiary is included in determining the gain or loss on the sale. Goodwill arising on acquisitions prior to January 1, 2004 is carried at the amount recognised under Italian GAAP after an impairment test at that date. Research and development costs The research costs are recognised in the Income Statement in the year in which they are incurred. Development costs in relation to projects are capitalised when all of the following conditions are satisfied: ×× the costs can be reliably determined; ×× the technical feasibility of the product is demonstrated, ×× the volumes, and expected prices indicate that costs incurred for development will generate future economic benefits; ×× the technical and financial resources necessary for the completion of the project are available. The development costs capitalised are amortised on a straight-line basis, commencing from the beginning of the production over the estimated life of the product. The carrying value of the development costs are reviewed annually through a test in order to record any loss in value when the asset is no longer in use, or with greater frequency when there are indications of a possible loss in the carrying value. All other development costs are charged to the Income Statement when incurred. Other intangible assets The other intangible assets acquired or produced internally are recorded under assets, in accordance with the provisions of “IAS 38 – Intangible Assets”, when it is probable that the use of the asset will generate future economic benefits and when the cost of the asset can be determined reliably. The useful life of the intangible assets are classified as definite or indefinite. Intangible fixed assets with a definite useful life are amortised monthly for the duration of the period. According to management and expert estimations the most important software utilised by the Group has a useful life of 7 years. The useful life is reviewed on an annual basis and any changes are made in accordance with future estimates. The intangible assets with indefinite useful life are not amortised but are subject annually or, more frequently where there is an indication that the activity may have suffered a loss in value, to a verification which identifies any reduction in value. Impairment Test At each balance sheet date, the Group assesses whether events or circumstances exist that raise doubts as to the recoverability of the value of tangible and intangible fixed assets with a definite useful life. If there are any indications that there has been an impairment, the Group estimates the recoverable value of the tangible and intangible assets so as to determine the extent of the impairment loss (if any). Intangible assets with an indefinite useful life – in particular Goodwill – are subject to an impairment test at least annually or when there is an indication of a loss in value. In these situations, the recoverable value of these assets is estimated so as to determine the amount of the impairment.

The recoverable value is the higher between fair value less costs to sell and value in use. In accordance with the accounting standards, the impairment test is performed in respect of each individual asset, where possible, or in respect of groups of assets (Cash-Generating Units - CGU). Cash-Generating Units are identified depending on the organisational and business structure of the Group as units that generate cash on an autonomous basis as a result of the continuous use of the assets allocated. If the recoverable value of an asset (or a CGU) is considered lower than its carrying value, it is reduced to its recoverable value. An impairment is recognised in the income statement immediately unless the asset consists of land or buildings other than investment property recorded at the revalued amount; in this case, the impairment loss is charged to the revaluation reserve. When the reasons for the impairment no longer exist, the carrying value of the asset (or CGU) – except for Goodwill – is increased to the revised estimate of its recoverable value. The new value cannot exceed the net carrying value if no write-down for impairment had being recorded. The reversal of an impairment loss is recorded immediately in the Income Statement unless the asset is stated at the revalued amount, in which case the reversal is credited to the revaluation reserve. Inventories Inventories are recorded at the lower of purchase or production cost and net realisable value. The purchase cost of raw, ancillary, supplies and goods for resale is determined using the weighted average cost method. The production cost of finished goods, work in progress and semi-finished goods is determined considering the cost of the materials used plus direct operating costs and overheads. Net realisable value represents the estimated selling price less expected completion costs and selling costs. Obsolete and slow moving inventories are written down taking account of their prospects of utilisation or sale. Trade receivables and loans and other financial assets Financial assets other than trade receivables, loans and cash and cash equivalents are initially recorded at fair value, including charges directly related to the transaction. Trade receivables and loans are recorded at nominal value which normally represents their fair value. In the event of a significant difference between nominal value and fair value, the receivables are recorded at fair value and subsequently valued at amortised cost using the effective interest rate method. The receivables are adjusted through a provision for doubtful debt so as to reflect their realisable value. The provision is calculated as the difference between the carrying amount of the receivables and the present value of the expected cash flow discounted at the effective interest rate on initial recognition.

Non-current assets held for sale

Derivative instruments and hedge accounting

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying value and market value less selling costs.

Derivative financial instruments are used with the intention of hedging, in order to reduce the foreign currency or interest rate risk or from fluctuations in market prices. In compliance with IAS 39, the derivative financial instruments can be recorded in accordance with the “hedge accounting” method only when at the beginning of the hedge, the formal designation and documentation relating to the hedge exists, it is presumed that the hedge is highly effective, such effectiveness can be reliably measured and the hedge is highly effective over the accounting periods for which it was designated. All the derivative financial instruments are measured at fair value, in accordance with IAS 39. When the financial instruments have the necessary characteristics to be recorded under hedge accounting, the following accounting treatment is applied:

Non-current assets (and disposal groups) are classified as held for sale when their carrying value is expected to be recovered by means of a sales transaction rather than through use in company operations. This condition is met only when the sale is highly likely, the assets (or group of assets) are available for immediate sale in their current condition and, consequently, management is committed to a sale, which should take place within 12 months of the classification as held for sale. Cash and cash equivalents Cash and cash equivalents include cash balances and bank current accounts and deposits repayable on demand plus other highly liquid short term financial investments that can be readily converted into cash and are not subject to a significant risk of a change in value. Financial liabilities and Equity instruments Financial liabilities and equity instruments issued by the Group are classified based on the substance of the contractual agreements that generated them and in accordance with the respective definitions of financial liabilities and Equity instruments. Equity instruments consist of contracts which, stripped of the liability component, give rights to a share in the assets of the Group. Accounting policies adopted for specific financial liabilities and Equity instruments are indicated below. Trade payables and other financial liabilities Trade payables and other financial assets are recorded at nominal value which generally represents their fair value. In the event of significant differences between nominal value and fair value, trade payables are recorded in the balance sheet at fair value and subsequently measured at amortised cost using the effective interest rate method. Bank and other borrowings Bank borrowings – comprising of medium/long-term loans and bank overdrafts – and other borrowings, including the liabilities deriving from finance leases, are recorded in the balance sheet based on the amounts received, less transaction costs, and subsequently measured at amortised cost using the effective interest rate method.

×× for derivatives that hedge scheduled transactions (i.e. cash flow hedges), changes in the fair value of derivative instruments are allocated to Equity for the portion considered effective while the portion considered ineffective is recognised in the Income Statement; ×× for derivatives that hedge receivables and payables recorded in the balance sheet (i.e. fair value hedges), differences in fair value are recognised in full in the Income Statement. Moreover, the value of the receivables/payables hedged is adjusted for the change in the risk hedged, again in the Income Statement; ×× for derivatives classified as hedges of a net investment in a foreign operation, the effective portion of profits or losses on the financial instruments are recorded under net equity. The cumulative gains or losses are reversed from the net equity and recorded in the income statement on the sale of the foreign operation. If the hedge accounting cannot be applied, the profits or losses deriving from the fair value of the derivative financial instruments are immediately recognised in the income statement. Concerning the management of the risks related to the exchange rates and interest rates reference should be made to section 7 “Risk management policy” of the Notes. Treasury shares Treasury shares are recorded at cost as a reduction of Shareholders’ Equity. The gains and losses deriving from trading of treasury shares, net of the tax effect are recorded under Equity reserves. Employee benefits Post-employment benefits Italian post-employment benefits are considered equivalent to a defined benefit plan. For defined benefit plans, the cost of the benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each year. Actuarial gains and losses that exceed 10% of the fair value of the benefits defined by the Group are amortised over the estimated average remaining employment service of the employees taking part in the scheme.

Post-employment benefits recognised in the balance sheet represent the fair value of liabilities under defined benefit plans as adjusted for unrecorded actuarial gains and losses. Finally, the Group records the interest on employee benefit plans under finance costs. Up to December 31, 2006, the employee leaving indemnities of the Italian companies were considered as defined benefit plans. The regulations of this provision were modified by Law No. 296 of 27 December 2006 (“2007 Finance Act”) and subsequent Decrees and Regulations issued at the beginning of 2007. In view of these changes, and specifically with reference to companies with more than 50 employees, this fund is now to be considered a defined benefit plan exclusively for the amounts matured prior to January 1, 2007 (and not paid at the balance sheet date), while subsequent to this date they are similar to a defined contribution plan.

Assets held under finance leases are recorded as assets of the Group at the lower of their fair value at the date of the lease contract and the present value of the minimum payments due under the lease contract. The corresponding liability towards the lessor is included in the Balance Sheet as a finance lease obligation. Finance lease payments are divided between a capital portion and an interest portion in order to apply a constant interest rate on the residual liability. The finance costs are recorded directly in the Income Statement for the year. Operating lease costs are recorded on a straight-line basis over the term of the lease agreement. Benefits received or receivable as an incentive for entering into operating lease agreements are also recorded on a straight-line basis over the duration of the operating lease agreement. Foreign currency transactions

Share-based payments The Group recognises additional benefits to some members of senior management and some employees through stock option plans. In accordance with IFRS 2 – Share-based payments, these plans represent a remuneration component of the beneficiaries; therefore, the cost representing the fair value of these instruments at the granting date is recognised in the income statement on a constant quota criteria over the period between the assignment date and that of maturity, and directly recorded to shareholders’ equity. Subsequent changes in the fair value to the assignment date do not have an effect on the initial value.

In the preparation of the financial statements of the individual Group companies, transactions in foreign currencies entered into by Group companies are translated into the functional currency (the currency in the main area in which the company operates) using the exchange rate at the transaction date or otherwise at the date on which the fair value of the underlying assets/liabilities is determined. Foreign currency assets and liabilities are translated at the balance sheet date using the exchange rate at the balance sheet date. Non-monetary assets and liabilities valued at historical cost in foreign currency are translated using the exchange rate at the transaction date.

Provisions for risks and charges

Exchange differences arising on such transactions or on the translation of monetary assets and liabilities are recorded in the Income Statement except for those arising on derivative financial instruments qualified as cash flow hedges. These differences are recorded in Equity if unrealised, otherwise they are recorded in the Income Statement.

Provisions are recorded when the Group has a current obligation that is the result of a past event and it is probable that the Group will be required to fulfil the obligation. Provisions are made based on management’s best estimate of the cost of fulfilling the obligation at the balance sheet date and are discounted to the present value when the effect is significant. Revenues and income Revenues from the sale of goods are recognised when the goods are shipped and the Company has transferred the significant risks and rewards of ownership of the goods to the buyer. Interest income is recorded on an accruals basis based on the amount financed and the effective interest rate applicable: this represents the rate at which the expected future cash flow along the life of the financial asset is discounted to equate them with the carrying amount of the asset. Dividends are recorded when the shareholders have the right to receive them. Leases and lease agreements Leasing contracts are classified as finance lease contracts when the terms of the contract are such that they substantially transfer all of the risks and rewards of ownership to the lessee. All the other leases are considered operating leases.

Public grants Grants from public bodies are recorded when there is a reasonable certainty that the conditions required to obtain them will be satisfied and that they will be received. Such grants are recorded in the income statement over the period in which the related costs are recorded. The accounting treatment of benefits deriving from a public loan obtained at a reduced rate are similar to those for public grants. This benefit is calculated at the beginning of the loan as the difference between the initial book value of the loan (fair value plus direct costs attributable to obtaining the loan) and that received, and subsequently recorded in the income statement in accordance with the regulations for the recording of public grants. Income tax Income taxes for the year represent the sum of current and deferred taxation. Deferred income taxation is recorded on temporary timing difference between the statutory financial statements and the fiscal assessable result, recorded under the liability method. The deferred taxes are calculated based on the fiscal rates applicable when the temporary differences reverse. The deferred tax charges are recognised in the income statement with the exception of those

relating to accounts recognised in equity in which case the deferred tax charges are also recognised in equity. Deferred tax income is recognised when the income taxes are considered recoverable in relation to the assessable results expected for the period in which the deferred tax asset is reversed. The carrying value of deferred tax assets is revised at the end of the year and reduced, where necessary. The compensation between deferred tax assets and liabilities is carried out only for similar items, and if there is a legal right to compensation the current deferred tax assets and liabilities; otherwise they are written separately under receivables and payables. Elica S.p.A. and the subsidiary Airforce S.p.A. (since 2008) have opted for a consolidated tax regime in Italy. This means that the IRES (Corporation Tax) charge is calculated on a tax base representing the aggregate of the taxable income and tax losses of the individual companies. Transactions plus reciprocal responsibilities and obligations between the consolidating company and the aforementioned subsidiary company are defined by a specific consolidation agreement. With regard to responsibility, the agreement provides that the Parent Company is jointly liable with the subsidiary for: ×× amounts due by the subsidiary under Article 127(1) of the Income Tax Code; ×× payment of amounts due to the tax authorities, should it emerge that sums declared in the consolidated tax return have not been paid; ×× consolidation adjustments made based on figures supplied by the subsidiary and contested by the tax authorities. The group tax liability is shown under “Tax payables” or “Tax receivables” in the accounts of the consolidating company, less payments made on account. In the accounts of the subsidiaries and in the present accounts of the Elica Group the debt for the transfer of income taxes to the parent company is recorded under “Other payables”. The receivables which derive from the transfer of income tax losses are classified in the account “Other receivables”. Earnings per share Basic earnings per share is calculated based on the net profit of the Group and the weighted average number of shares outstanding at the balance sheet date. Treasury shares are excluded from the calculation. Diluted earnings per share equate to the basic earnings per share adjusted to assume conversion of all potentially dilutable shares, i.e. all financial instruments potentially convertible into ordinary shares with a dilutive effect on earnings. Accounting principles, amendments and interpretations from January 1, 2010 The following accounting standards, amendments and interpretations were applied for the first time by the Group from January 1, 2010. IFRS 3 (2008) -Business combinations Under the transition provisions of the standard, the Group adopted IFRS 3 (revised in 2008) – Business combinations in prospective manner, for business combinations taking place at or after January 1, 2010. In particular, the updated version of IFRS 3 introduced important amendments, described below, principally relating to: the governance of step acquisitions of subsidiary companies; the faculty to value at fair value

any minority interests acquired in a partial acquisition; the allocation to the income statement of all the costs related to a business combination and the allocation at the acquisition date of payments subject to conditions. Step acquisitions of a subsidiary In the case of a step acquisition of a subsidiary, IFRS 3 (2008) establishes that a business combination occurs only in the moment in which control is acquired and that, at this moment, all of the net assets identifiable of the company acquired must be valued at fair value; minority interests must be valued according to their fair value or based on a proportion of the fair value of the net assets identifiable of the company acquired (a method previously permitted in the prior version of IFRS 3). In a step acquisition of a holding, the previously held share, until that time recorded according to IAS 39 – Financial instruments: recognition and measurement, or according to IAS 28 - Investments in associated companies or according to IAS 31 – Investments in joint ventures, must be treated as if it had been sold and reacquired at the date in which control is acquired. The holding therefore must be valued at the fair value at the acquisition date and the profits and losses from the valuation must be recorded to the income statement. Any amount previously recorded to shareholders’ equity as Other comprehensive profits and losses, which must be recorded to the income statement following the sale of the assets to which it refers, must be reclassified in the income statement. Goodwill or income deriving from an acquisition of control of a subsidiary must be calculated as the sum of the price paid for gaining control, the value of minority interests (valued according to one of the methods permitted by the standard), the fair value of the minority holding previously held, net of the fair value of the identifiable net assets acquired. According to the previous version of the standard, step acquisitions were recognised transaction by transaction, as a series of separate acquisitions which generated overall goodwill calculated as the sum of the goodwill generated by each individual transaction. Accessory charges to the transaction IFRS 3 (2008) establishes that accessory charges to business combination operations are recognised to the income statement in the period in which they are incurred. According to the previous version of the standard, these charges were included in the acquisition cost of the net assets of the company acquired. Recognition of payments subject to conditions IFRS 3 (2008) establishes that payments subject to conditions are considered part of the transfer price of the net assets acquired and are valued at fair value at the acquisition date. If the combination contract establishes a right of repayment of some price elements on the fulfilment of certain conditions, this right is classified as an asset of the purchaser. Any subsequent changes to the fair value must be recorded as an adjustment to the original accounting treatment only if resulting from additional or improved information concerning the fair value and if occurring within 12 months from the acquisition date; all other changes must be recorded to the income statement. The previous version of the standard established that payments subject to conditions were recorded at the acquisition date only if their payment was considered

probable and the amount could be reliably calculated. Every subsequent change to the value of these payments was recorded as an adjustment to goodwill. IAS 27 (2008) - Consolidated and separate financial statements The amendments of IAS 27 principally relate to the treatment of transactions or events which modify the holding in subsidiary companies and the allocation of losses of the subsidiary to minority interests. IAS 27 (2008) established that once control of an entity has been attained, transactions in which the parent company acquires or sells further minority shares without amending the control exercised on the subsidiary are considered transactions with shareholders and therefore must be recognised to net equity. The carrying amount of the controlling investment and of the minority interest must be adjusted to reflect the change in the share of the investment held and any difference between the amount of the adjustments allocated to minority interests and the fair value of the price paid or received against the transaction is recorded directly to shareholders’ equity and is allocated to the shareholders of the parent company. No adjustments will be made to the goodwill and the profits or losses recorded to the income statement. Accessory charges to these operations must be recorded in shareholders’ equity in accordance with paragraph 35 of IAS 32. Accounting standards, amendments and interpretations not yet effective and not adopted in advance by the Group The standards which may apply to the Group are summarised below. On November 4, 2009, the IASB issued a revised version of IAS 24 – Related party disclosures which simplifies the type of information required in the case of transactions with related parties controlled by the state and clarifies the definition of related parties. The standard must be applied from January 1, 2011. The adoption of the amendment will not have any impact on the valuation of any accounts in the financial statements. On November 12, 2009, the IASB published IFRS 9 – Financial instruments: the standard was amended on October 28, 2010. The standard, applicable from January 1, 2013, is the first step toward the full replacement of IAS 39 and introduces new criteria for the classification and measurement of financial assets and liabilities and for the derecognition from the financial statements of financial assets. In particular for financial assets the new standard utilises a single approach based on the management method of financial instruments and on the contractual cash flow characteristics of the financial assets in order to determine the measurement criteria, replacing the various rules established by IAS 39. For financial liabilities however the standard is amended with regard to the accounting treatment of the fair value changes of a financial liability allocated as a financial liability valued at fair value through the income statement, in the case in which these relate to changes in the credit position of the liability. According to the new standard these changes must be recorded to Other comprehensive profits and losses and no longer transferred to the income statement. At the date of the present financial statements, the relevant bodies of the European Union have not yet concluded the process necessary for the application of the new standard.

On May 6, 2010, the IASB issued amendments to the IFRS’s (“improvement”) which will be applicable from January 1, 2011; the amendments which affect the presentation, recognition and valuation of financial statement accounts are as follows - omitting however those which will result in only terminology changes or editing of existing standards with minimal effect in accounting terms or those which have effects on standards or interpretations not applicable to the Group: ×× IFRS 7 – Financial Instruments: disclosures: the amendment emphasises the link between additional information of a qualitative nature and that of a quantitative nature required by the standard on the nature and extent of risks concerning financial instruments. This should enable readers of the financial statements to collate the information presented and acquire a general appraisal of the nature and the extent of risks relating to financial instruments. The disclosure requirement regarding financial assets which have matured but were renegotiated or written down and the disclosure related to the fair value of collateral was eliminated. ×× IAS 1 - Presentation of financial statements: the amendment requires that the reconciliation of the changes of all net equity items is presented in the notes or in the financial statements. ×× IAS 34 Interim financial reporting: clarifications were provided through examples in relation to the additional information which must be presented in the Interim Financial Statements. On October 7, 2010, the IASB published an amendment to IAS 7 – Financial instruments: additional disclosures, applicable for the accounting periods after July 1, 2011. The amendments were issued in order to improve understanding of transfers of financial assets, including understanding the possible effects of any risks pertaining to the company which has transferred these assets. The amendments also require additional information in the case in which a disproportionate amount of these transactions are carried out in an accounting period. At the date of the present Financial Statements, the relevant bodies of the European Union have not yet concluded the process necessary for the implementation of the amendments. On December 20, 2010, the IASB issued a minor amendment to IAS 12 – Income taxes which requires entities to value deferred taxes deriving from an asset based on the method by which the carrying value of this asset will be recovered (through continuous use or through sale). Following this amendment SIC-21 – Income taxes – Recovery of revalued non-depreciable assets will no longer be applicable. The amendment is effective as of January 1, 2012. At the date of the present Financial Statements, the relevant bodies of the European Union have not yet concluded the process necessary for the implementation of the amendments described above.

3 Critical judgements and significant accounting estimates In the preparation of the Consolidated Financial Statements in accordance with IFRS, the Groupâ&#x20AC;&#x2122;s management must make accounting estimates and assumptions which have an effect on the values of the assets and liabilities and disclosures. The actual results may differ from these estimates. The estimates and assumptions are revised periodically and the effects of any change are promptly reflected in the financial statements. In this context it is reported that the situation caused by the current economic and financial crisis resulted in the need to make assumptions on a future outlook characterised by significant uncertainty, for which it

cannot be excluded that results in the coming years will be different from such estimates and which therefore could require adjustment, currently not possible to estimate or forecast, which may even be significant, to the book value of the relative items. The account items principally concerned by uncertainty are: Goodwill, doubtful debt provision and inventory write downs, non-current assets (tangible and intangible), pension funds and other postemployment benefits, provisions for risks and charges and deferred tax assets. Reference should be made to the comments of each individual account in the financial statements for further information on the estimates mentioned.

4 Composition and changes in the consolidation scope

At December 31, 2010, the consolidation scope includes the companies controlled by the Parent Company, Elica S.p.A.. Control exists where the Parent Company has the power to determine, directly or indirectly, the financial or management policies of an entity so as to obtain benefits from the activities of the company. The following table contains a list of the companies consolidated on a line-by-line basis and controlled directly or indirectly by the Parent Company.

Companies consolidated by the line-by-line method: Company

Registered office

Curr.

Share Capital

Direct holding

Elica S.p.A.

Fabriano (AN)

EUR

12,664,560

Elicamex S.a. de C.V.

Queretaro (Mexico)

MXN

458,633,513

Elica Group Polska Sp.zo.o

Wroklaw (PolAND)

PLN

78,458,717

Airforce S.p.A.

Fabriano (AN)

EUR

ARIAFINA CO., LTD

Sagamihara - Shi (JAPAN)

JPY

Leonardo

Queretaro (Mexico)

Exklusiv Hauben Gutmann GmbH

Indirect holding

Total holding

2 (b)

100

103,200

10,000,000

MXN

1,250,000

2 (b)

100

MÜhlacker (GermanY)

EUR

25,000

100

Elica Inc.

Chicago, Illinois (UNITED STATES)

USD

5,000

100 (a)

100

Airforce GE (*)

Stuttgart (GermanY)

EUR

26,000

95 (c)

Elica PB India Private Ltd.

Pune (India)

INR

41,000,000

Zhejiang Putian Electric Co. Ltd

Shengzhou (CHina)

RMB

29,300,000

(A) Held through ELICAMEX S.A. de C.V.

(B) Held through Elica Group Polska Sp.zo.o

At the end of 2010, the Irish company Elica Finance Limited and the Luxembourg company Elica International S.à.r.l. were liquidated, while respectively in June and September 2010 the companies Elica India and Putian entered the consolidation scope. The Indian company Elica PB India Private Ltd joined the Elica Group following a joint venture agreement between Elica S.p.A. and Mr. Bhutada and a number of the principal managers of the company.

(*) Airforce Germany HochleistungsDunstabzugssysteme Gmbh

The Elica Group acquired control of the company Putian through purchasing a majority 55% holding. The following table contains a list of associated companies consolidated under the Equity method and held directly or indirectly by the Parent Company:

Associated companies measured under the Equity method Company

Registered office

Curr.

Share capital

% held directly

I.S.M. Srl

Cerreto d’Esi (AN)

EUR

10,327

49.385

% held indirectly

Total held

49.385

Concerning data and information on associated companies, reference should be made to section 8 of the Notes.

In 2010, the associated company I.S.M. Srl sold the entire holding in Sider S.r.l.. This holding arose from the conferment to Sider S.r.l. of the “productiveindustrial” business unit on December 14, 2009. The company I.S.M. Srl amended its corporate scope with entry from the present year to the real estate sector.

5 Notes to the consolidated income statement, balance sheet and cash flow statement CONSOLIDATED INCOME STATEMENT 5.1 Revenues Details of the Group’s revenue are as follows: IN EURO THOUSANDS Revenues from product sales

2009

2010

Changes

335,091

367,854

32,763

411

367

335,135

368,265

33,130

Service revenues Total

For an analysis on revenues, reference should be made to the paragraph “Financial and operating review” in the Directors’ Report. The increase in the present account is due to the change in the consolidation scope for approx. Euro 12.5 million. Clients who comprise more than 10% of total revenues IN EURO THOUSANDS

The Americas

constituted 24.39% of revenues in 2010 compared to 30.5% in 2009. The table below provides an analysis of sales by geographic area, regardless of the origin of the goods and services.

Europe + CIS

Other countries

Consolidated

Year 2010

31,601

293,492

43,172

368,265

Year 2009

26,266

283,852

25,017

335,135

The Group’s activities are located in Italy, Mexico, Japan, Poland, Germany, the United States, India and China. The change in the consolidation scope had an effect of Euro 12.5 million on the account “Other Countries”.

5.1.1 Segment information The form of segment reporting is by business sector in which the Group operates. The breakdown by segment is as follows: “Hoods”: production and sale of range hoods and accessories; “Motors”: production and sale of electric motors.

Segment revenues are determined in accordance with the classification of the products sold in a business sector. Segment results are determined by taking into account all the costs that can be allocated directly to sales in a specific segment. Costs not allocated to the segments include all costs not directly attributable to the area, including manufacturing, sales, general, administrative costs, as well as financial income and charges and taxes. Inter-segment revenues include revenues between Group segments that are consolidated on a line-by-line basis in relation to sales made to other segments. Assets, liabilities and investments are allocated directly on the basis of their classification in a specific sector.

The following tables contain segment information by business segment as defined above: INCOME STATEMENT

Hoods

Electric motors

Not allocated and eliminations

Consolidated

2010

2009

2010

2009

2010

2009

2010

2009

313,074

287,897

55,190

47,238

368,265

335,135

917

272

20,429

19,963

(21,346)

(20,235)

Total revenues

313,991

288,169

75,619

67,201

(21,346)

(20,235)

368,265

335,135

Segment result:

34,296

(*) 22,884

6,958

(*) 2,186

41,254

(*)25,069

Overheads not allocated

(30,701)

(*)(24,337)

EBIT

10,553

732

Share of profit/(loss) from associates

(593)

107

(593)

107

Financial income

1,383

1,197

1,383

1,197

Financial charges

(2,677)

(3,069)

(2,677)

(3,069)

Exchange gains/(losses)

313

(207)

313

(207)

Profit/(loss) before taxes

8,979

(1,240)

8,979

(1,240)

Income taxes

(3,402)

2,022

(3,402)

2,022

Net profit from normal operations

5,577

782

5,577

782

Net profit from discontinued operations

5,577

782

5,577

782

Segment revenue: customers Inter-segment

Net profit for the year

(*) The data relating to the previous year was reclassified for comparability with December 31, 2010.

BALANCE SHEET

Hoods

dEc-10

Electric motors

dEc-09

Assets: Segment assets

Not allocated and eliminations

dEc-10

dEc-09

Consolidated

dEc-10

dEc-09

dEc-10

dEc-09

210,481

188,474

74,512

66,946

(5,046)

(4, 369)

279,948

251,051

Investments in ass. companies

1,717

2,309

1,717

2,309

Unallocated assets

50,314

43,625

50,452

43,625

Total operational assets

332,117

296,985

Total assets

332,117

296,985

Liabilities

(79,972)

(78,241)

(23,005)

(22,490)

5,046

4,371

(97,931)

(96,360)

Liabilities not allocated

(94,656)

(76,468)

(94,656)

(76,468)

Net equity

(139,892)

(124,157)

(139,530)

(124,157)

Total operational liabilities

Segment liabilities

Total liabilities

(332,117)

(296,985)

(332,117)

(296,985)

5.2 Other operating income IN EURO THOUSANDS Rental income Operating grants

2009

2010

Changes

255

(157)

Ordinary gains on disposal

316

234

(82)

Claims and insurance payouts

145

340

195

Expenses recovered

540

258

(282)

Other revenues and income

1,575

1,402

(173)

Total

2,831

2,371

(460)

The reduction in this account is principally due for Euro 282 thousand to the decrease in expenses recovered and for Euro 157 thousand to the decrease in operating grants (in 2009, this account included grants received from Business Associations).

5.3 Changes in inventories of finished and semi-finished goods

5.4 Increases on internal work capitalised

The account changes in finished and semi finished product inventory, amounting to Euro 3,838 thousand, decreased by Euro 882 thousand on 2009, in line with the Group policy to reduce inventories.

The account Increases on internal work capitalised amounts to Euro 2,633 thousand (Euro 2,937 thousand in the previous year) and mainly relates to the capitalisation of charges regarding the design and development of new products, the in-house construction of mouldings and equipment and the up-grading of technical-management software.

5.5 Raw and consumable materials IN EURO THOUSANDS

2009

2010

Changes

Purchases of consumable materials

1,100

1,774

674

Purchases of supplies

457

872

415

147,813

163,489

15,676

15,057

6,366

(8,691)

Purchase of finished products

4,537

9,574

5,037

Packaging

9,031

8,322

(709)

Purchase of raw materials Change in inventory of raw materials, consumables and goods for re-sale

Other purchases Shipping expenses on purchases Total

The consumption of raw materials increased on 2009, in absolute terms by Euro 13,488 thousand, which includes an effect from the change in the consolidation scope of Euro 6,937 thousand.

351

550

199

1,852

2,737

885

180,198

193,686

13,488

This increase follows the increase in production volumes. The account improved one percentage point on revenues and the change in finished and semifinished products on 2009.

5.6 Service expenses IN EURO THOUSANDS

2009

2010

Changes

26,429

30,262

3,833

Transport

7,457

7,503

Finished goods inventories

4,007

3,951

(56)

Consulting

6,157

6,644

487

Maintenance

3,144

2,280

(864)

Utilities

3,744

3,983

239

Commissions

2,214

2,513

299

Travel expenses

2,039

2,748

709

Advertising

1,173

2,118

945

Insurance premiums

1,219

1,349

130

Directors & Statutory Auditor fees

908

1,112

204

Trade fairs and promotional events

311

1,006

695

Industrial services

563

599

Banking commissions and charges

360

438

6,951

7,366

415

66,676

73,873

7,197

Outsourcing expenses

Other services Total

100

Service expenses increased by Euro 7,197 thousand, with an effect of the change in the consolidation scope of Euro 3.8 million. Outside contractor costs increased by Euro 3.8 million, following the increase in production volumes. As a percentage of revenues and the change in finished product inventories, net of consolidation scope changes, these costs reduced by 1%. This contraction is principally due to the increase in revenues as the costs largely relate to fixed costs. The account other services includes communication services (Euro 964 thousand), technical assistance costs (Euro 2,037 thousand), canteen costs (Euro 441

thousand), cleaning costs (Euro 605 thousand), vehicle expenses (Euro 381 thousand), training courses (Euro 384 thousand), and costs for import services (Euro 742 thousand).

5.7 Labour costs Labour costs incurred by the Group in 2009 and 2010 were as follows: IN EURO THOUSANDS

2009

2010

Changes

Salaries and wages

46,700

49,455

2,755

Social security expenses

14,673

15,348

675

Employee leaving indemnity

2,214

2,998

784

Other costs

3,267

4,596

1,329

66,854

72,397

5,543

Total

The account increased following the change in the consolidation scope by Euro 807 thousand. The residual increase in the account is principally related to the effects of the new collective work contract (national and supplementary) and the performance-based remuneration policy which the company has implemented. The account â&#x20AC;&#x153;Other costsâ&#x20AC;? includes Euro 1,884 thousand concerning the 2010 Stock Grant Plan, in addition to temporary employee costs of Euro 1,799

Workforce

thousand (Euro 1,601 thousand in 2009) and leaving incentive costs of Euro 1,848 thousand, with an impact on the income statement, net of the utilisation of the restructuring fund provisioned in 2009, of Euro 1,318 thousand (see note 5.35). The table below shows the Group workforce at December 31, 2009 and December 31, 2010.

31-dEc- 09

31-dEc-10

Changes

524

618

1,772

1,989

217

Executives White-collar Blue-collar Others Total

159

139

2,338

2,800

462

Employee numbers increased by 453 following the consolidation of the newly-acquired subsidiaries.

5.8 Amortisation and depreciation Amortisation and depreciation decreased on the previous year from Euro 16,556 thousand to Euro 15,641 thousand in 2010. The break-down of this account is reported under fixed assets.

101

5.9 Other operating expenses and provisions The details of the account are as follows: IN EURO THOUSANDS

2009

2010

Leasing and rental

1,280

1,222

(58)

Rental of vehicles and industrial equipment

1,810

1,881

Expenses for hardware, software and patents

1,192

1,048

(144)

543

764

221

(12)

Various equipment

201

190

(11)

Catalogues and brochures

147

598

451

Losses and bad debts

1,622

1,517

(105)

Provisions for risks and charges

1,876

1,687

(189)

Other prior year expenses and losses

1,152

1,254

102

Total

9,896

10,221

325

Other taxes Magazine and newspaper subscriptions

The increase principally follows an increase of Euro 451 thousand in the account “Catalogues and brochures”. In the present year the Group updated the range and drew up catalogues, also for participation at the Eurocucina trade fair. The account “Other prior year expenses and losses” principally includes expenses for damages and penalties amounting to Euro 195 thousand, income taxes relating to the previous year of Euro 42 thousand, charitable donations for Euro 137 thousand

Changes

and samples for Euro 428 thousand. The changes in the consolidation scope has an effect on the account of Euro 246 thousand.

5.10 Restructuring charges The account Restructuring charges includes charges concerning restructuring operations as described in note 5.44.

5.11 Share of profit/(loss) from associates IN EURO THOUSANDS

2009

2010

Changes

Share of profit/(loss) from associates

107

(592)

(699)

Total

107

(592)

(699)

The amounts recorded under this heading relate to the Equity method of accounting for investments in the associated company I.S.M. Srl. The result is due to the reorganisation within the company.

In the current year, the associated company, following the sale of the mechanical processing division, changed its corporate scope in line with the current activities carried out (real estate).

5.12 Financial income The details of financial income are reported below, which is in line with that of the previous year:

IN EURO THOUSANDS

2009

2010

Changes

Income from other non-current financial assets

(17)

Interest on bank deposits

(11)

Other financial income

1,118

1,326

208

Total

1,197

1,383

186

Interest income from customers

102

According to the Second Modifying Agreement, Whirlpool purchased on the market 1,899,684 ordinary shares of the Company, comprising 3% of the Share Capital. The account “Other financial income” also includes interest for the discounting of payables for an amount of Euro 238 thousand.

The increase in “Other financial Income” principally includes income of Euro 950 thousand (Euro 633 thousand in 2009) relating to the fee from Whirlpool of Euro 0.50 for every share purchased in accordance with the Shareholder Agreement, the Modifying Agreements thereof and the Supplementary Agreement signed on March 8, 2010.

5.13 Financial charges IN EURO THOUSANDS

2009

2010

Changes

1,819

1,468

(351)

on other borrowings

145

179

on employee leaving indemnity

574

544

(30)

Discounts on sales

516

430

(86)

Financial charges: on overdrafts and bank loans

Other financial expenses

Other financial expenses Losses/(Gains) from cash flow hedges transferred from equity

Net financial gains/(losses) from traded financial instruments

42 -

Total

3,069

2,677

(392)

The reduction in financial charges of Euro 392 thousand is principally due to lower overdraft and bank loan charges following a reduction in the average debt during the year and the favourable movement of interest rates.

Euro 56 thousand refers to the recording of a CAP option to hedge interest rate fluctuations as described in paragraph 7 “Information on risk management” of the present Notes.

5.14 Exchange gains/(losses) IN EURO THOUSANDS Exchange losses

2009

2010

Changes

(5,201)

(11,083)

(5,882)

Exchange gains

5,159

11,671

6,512

Charges on derivative instruments

(929)

(317)

612

Profits on derivative instruments

764

(722)

(207)

313

520

Total exchange gains/(losses)

Net exchange gains in 2010 excluding transactions in derivative instruments amounted to gains of Euro 588 thousand compared to losses of Euro 42 thousand in 2009. The account includes the balance of the non-realised gains and losses deriving from the adjustment at the end of the year of debtor and creditor positions in foreign currencies of a loss of Euro 361 thousand in 2010 compared to a loss of Euro 978 thousand in 2009. The exchange gains and losses increased considerably on the previous year following greater volatility of the currencies in which the Group operates, specifically, US Dollars, Polish Zloty and Mexican Pesos and to an increase of exposure in Polish Zloty. A large part of the exchange gains and losses are concentrated in the Parent Company Elica S.p.A. (gain of Euro 473 thousand), in Elica Group Polska Sp.zo.o

(loss of Euro 101 thousand) and in ELICAMEX S.A. de C.V. (gain of Euro 234 thousand). For further information on exchange gains and losses in the year, reference is made to the Directors’ Report. The account “Net financial gains/(losses) on derivative instruments” in 2010 amounted to a loss of Euro 275 thousand compared to a loss of Euro 165 thousand in 2009, and relates principally to income on currency derivatives, which in accordance with the accounting standards may not be treated as hedging operations, although they were made for this purpose, and are recorded at fair value through the Profit and Loss account.

103

5.15 Income taxes Deferred and current taxes in 2010 are broken down as follows: IN EURO THOUSANDS

2009

2010

Changes

(3,116)

(3,712)

(596)

Deferred taxes

5,138

310

(4,828)

Total income taxes

2,022

(3,402)

(5,424)

Current income tax

Total income taxes in 2010 of Euro 3,402 thousand is due to the increase in assessable income of the companies in the consolidation scope. The tax credit of the subsidiary Elica Group Polska Sp.zo.o reduced following its utilisation. This credit arose following admission to the Special Economic Zone by the Polish Tax Authorities in February 2007, in which the Group acquired tax credit rights related to an investment programme, equal to Polish Zloty 41 million, to be realised by December 31, 2011, which require the maintenance of a workforce of 160 persons until December 31, 2016.

In 2010, the Parent Company was subject to a tax rate (share of pre-tax income payable in taxes) of 31.63%, in line with 2009, based on the corporate income tax (IRES) and regional business tax (IRAP) rates applicable to the reported taxable income for the year ended December 31, 2010. For foreign subsidiaries the tax rate varies from country to country. The table below shows a reconciliation between the theoretical and effective income taxes (“IRES” for the Italian Group companies) paid by the Parent Company.

Theoretical IRES rate Theoretical IRAP rate IN EURO THOUSANDS

Income taxes - Current - Deferred – cost (income) [A] TOTAL INCOME TAXES PROFIT/(LOSS) BEFORE TAXES +

Tax calculated using local tax rate

Tax effect of expenses/revenues exempt/not deductible for tax purposes

Tax effect on the different tax rates of the foreign subsidiaries

Decrease/increase in deferred tax assets/liabilities due to changes in tax rates

Other differences [B] Effective tax charge and tax rate net of substitute tax

Effective tax charge and tax rate net of substitute tax

Substitute Tax effect [C] Effective tax charge and tax rate

104

2009

2010

27.50%

4.13%

Assessable

Income taxes

Regional taxes

Total

% on pre-tax profit

Assessable

Income taxes

Regional taxes

Total

% on pre-tax profit

1,583

1,534

3,116

2,096

1,616

3,712

(5,084)

(54)

(5,138)

(381)

(310)

(3,501)

1,479

(2,022)

282.4%

1,715

1,687

3,402

19.1%

(1,240)

8,980

(341)

27.5%

2,470

27.5%

(2,142)

(589)

47.5%

(11,934)

861

9.6%

(2,775)

(763)

61.5%

(2,587)

(711)

-7.9%

0.0%

(102)

(27)

-0.3%

(6,156)

(1,693)

136.5%

(5,541)

2,592

28.9%

(877)

-9.8%

(1,258)

101.5%

(550)

44.4%

(6,156)

(3,502)

282.4%

(5,541)

0.0% 1,715

5.16 Result attributable to minority interest The minority interest profit relates to those subsidiaries not wholly owned by the Elica Group and in particular they relate to ARIAFINA CO., LTD (minority interest 49%), Airforce S.p.A. (40%), Airforce Germany Hochleistungs-Dunstabzugssysteme

GmbH (43%), Zhejiang Putian Electric Co. Ltd (45%) and Elica PB Private Ltd. (49%). The effect on the present account of the change in the consolidation scope was Euro 784 thousand.

105

19.1%

5.17 Basic earnings per shareDiluted earnings per share The calculation of basic and diluted earnings per share is based on the following data: 2010

2009

4,262

231

56,990,520

7.48

0.41

56,990,520

7.48

0.41

4,262

231

56,990,520

From continuing and discontinuing operations: Net profit for the year (thousands of Euro) Average number of ordinary shares net of treasury shares Basic earnings per share Weighted average number of ordinary shares to calculate diluted earnings per share Diluted earnings per share From continuing operations: Net profit for the year (thousands of Euro) Average number of ordinary shares net of treasury shares Basic earnings per share Weighted average number of ordinary shares to calculate diluted earnings per share Diluted earnings per share

7.48

0.41

56,990,520

7.48

0.41

The earnings per share was calculated based on the Group net profit and the weighted average shares outstanding, excluding the treasury shares, at December 31.

5.18 Other information on the Income Statement accounts The research and development costs charged in the Income Statement in 2009 and 2010 are summarised in the table below: IN EURO THOUSANDS

2009

2010

Changes

R&D costs expensed

5,318

5,789

471

800

885

6,118

6,673

555

752

758

Amortisation of capitalised R&D costs Total R&D costs R&D costs capitalised during the year

â&#x20AC;&#x153;Development costs capitalised in the yearâ&#x20AC;? regards product design and development activities. The increase mainly relates to the cost of developing new products.

106

CONSOLIDATED BALANCE SHEET 5.19 Property, plant and equipment The table below shows details of the changes in property, plant and equipment in 2009 and 2010.

Property, plant & equipment IN EURO THOUSANDS

31-DEC-08

Increases

Disposals

Other movements

31-DEC-09

Land and buildings

50,365

1,411

335

52,111

Plant & equipment

70,696

3,296

(1,555)

252

72,689

Commercial and industrial equipment

Historical cost

83,925

4,359

(3,268)

302

85,318

Other assets

9,178

1,079

(986)

(53)

9,218

Assets in progress and advances

1,425

1,158

277

2,860

215,589

11,303

(5,810)

1,114

222,196

31-DEC-08

Deprec.

Disposals

Other movements

31-DEC-09

Land and buildings

11,688

1,635

(2)

13,321

Plant & equipment

52,366

4,564

(1,171)

55,823

Commercial and industrial equipment

73,923

5,913

(3,239)

125

76,722

7,603

547

(850)

(70)

7,230

145,580

12,658

(5,260)

117

153,096

Total

IN EURO THOUSANDS Accumulated depreciation

Other assets Total

IN EURO THOUSANDS

31-DEC-08

Increases

Disposals

Other movements

Deprec.

31-DEC-09

Land and buildings

38,677

1,411

336

(1,635)

38,789

Plant & equipment

18,330

3,296

(385)

188

(4,564)

16,866

Commercial and industrial equipment

10,002

4,359

(29)

177

(5,913)

8,596

Net value

Other assets

1,576

1,079

(137)

(547)

1,989

Assets in progress and advances

1,425

1,158

277

2,860

70,010

11,303

(550)

995

(12,658)

69,100

31-DEC-09

Increases

Disposals & Reclass.

Other movements

31-DEC-10

Land and buildings

52,111

1,000

1,387

13,159

67,657

Plant & equipment

72,689

4,532

(1,550)

4,555

80,226

Commercial and industrial equipment

85,318

4,902

(3,847)

526

86,900

Other assets

9,218

1,400

(504)

865

10,980

Assets in progress and advances

2,860

401

(2,636)

235

860

222,196

12,235

(7,149)

19,340

246,623

Total

Property, plant & equipment IN EURO THOUSANDS Historical cost

Total

107

IN EURO THOUSANDS

31-DEC-09

Deprec.

Disposals & Reclass.

Other movements

31-DEC-10

Land and buildings

13,321

1,856

(14)

921

16,084

Plant & equipment

55,823

4,403

(1,041)

1,954

61,139

Commercial and industrial equipment

76,722

4,702

(3,680)

278

78,022

7,230

628

(483)

323

7,698

153,096

11,588

(5,218)

3,476

162,943

Accumulated depreciation

Other assets Total

IN EURO THOUSANDS

31-DEC-09

Increases

Disposals & Reclass.

Other movements

Deprec.

31-DEC-10

Land and buildings

38,790

1,000

1,402

12,237

(1,856)

51,573

Plant & equipment

16,866

4,532

(509)

2,601

(4,403)

19,087

8,596

4,902

(167)

249

(4,702)

8,878

Other assets

1,988

1,400

(21)

542

(628)

3,282

Assets in progress and advances

2,860

401

(2,636)

235

69,100

12,235

(1,931)

15,864

Net value

Commercial and industrial equipment

Total

The investments made in the year mainly regarded the upgrading and expansion of facilities, improvements to the manufacturing plant and machinery, the acquisition of new mouldings and equipment for the launch of new products and the development of hardware for the implementation of new technical-logistical-administrative projects. The reclassification from fixed assets in progress to land and buildings relates to the Polish factory. The column â&#x20AC;&#x153;other movementsâ&#x20AC;? principally includes the positive exchange rate effect of approx. Euro 1.9 million, consolidation adjustments and the impact from changes in the consolidation scope of Euro 14,386. Property, plant and equipment are adequately insured against fire, weather damage and similar risks by

860 (11,588)

83,680

means of insurance policies arranged with leading insurance companies. They include assets obtained under finance lease agreements. As highlighted in the table below, nearly all the finance leasing contracts held by Group companies were redeemed in the year. Details of the historical cost, accumulated depreciation and depreciation charged to the income statement in the year as a result of application of the method recommended by IAS 17 for the accounting treatment of assets held under finance lease agreements are provided below.

Leased assets Table of leased assets IN EURO THOUSANDS

Land and buildings

Plant & equipment

Commercial and industrial equipment

Total

Gross value

16,415

10,773

7,321

34,509

Accumulated depreciation

(4,967)

(9,873)

(7,251)

(22,091)

31/12/2009

11,448

900

12,418

932

449

1,872

Depreciation at December 31, 2009

491

Gross value

139

Accumulated depreciation

(24)

31/12/2010

115

Depreciation at December 31, 2010

108

by previous legislation as considered representative of the fair value of the property, plant and equipment when the revaluation was made.

It is recalled that the historical cost criteria was retained as the measurement criteria for property, plant and equipment after initial recognition. The historical cost includes revaluations permitted

5.20 Goodwill IN EURO THOUSANDS

31-DEC-09

31-DEC-10

Changes

Goodwill

33,818

41,167

7,349

Goodwill

33,818

41,167

7,349

Details of the allocations are provided below: IN EURO THOUSANDS

31-DEC-09

Other movements

Acquisitions/ (write-downs)

31-DEC-10

Changes

19,896

3,863

10,059

13,922

10,059

-10,059

7,349

41,167

7,349

Cost per CGU Electric motors Hoods Gutmann Hoods

19,896

Putian Total book value of goodwill

33,818

In line with the Group’s strategic vision, in 2010, the CGUs were identified as the Range Hood CGU, the Motors CGU and the Putian CGU. Group Management have noted that the effects of the integration of the commercial, industrial, supply chain and management reporting processes do not allow and will no longer allow the cash flows generated by the Range Hoods CGU and the Gutmann Range Hoods CGU to be considered as independent, as was the case in 2009, the first year post-acquisition. Therefore, it was decided to unify from the present year the Gutmann Range Hood CGU and the Range Hoods CGU as a single unit called the Range Hoods CGU. The distinction between the cash flows of the range hood business and the motors business is due to the different uses which the two products satisfy within the market. In particular, range hoods are focused on the final consumer combining functional aspects the removal of odours and filtering of fats, with the satisfaction of other consumer needs such as the lighting of the worktop and the enhancement of the kitchen with a highly technological and well designed product. The electric motor is produced exclusively for other industries belonging to the heating sector (components for wall and gas boilers) or the electrical appliances sector (components for refrigerators, for electric ovens or for range hoods). Management decided to maintain the new CGU as independent, created in 2010, as the relative cash flows are still entirely identifiable due to the level of integration of the new company with the rest of the Group. The goodwill acquired on the mergers was allocated to the CGU’s as described above based on the estimated benefits deriving from the synergies created. The allocation of the goodwill to the Putian CGU is based on the 55% acquisition of this company, commented upon in note 5.45.

The recoverable value of the CGU’s to which the individual goodwill is allocated is verified through the determination of the value in use considered as the current value of the expected cash flows utilising a rate which reflects the risks of the individual CGU’s at the valuation date. Such calculations discount the cash flows projected by the respective CGU’s over a time horizon of five years, of which the first (2011) based on the updated budget and the subsequent years (2012-2015) estimated as follows. The years 2012-2015 were extrapolated from the 2011 budget, utilising an annual average growth rate of revenues of 4% for the Range Hoods CGU, of 7% for the Motors CGU and of 10.5% for the Putian CGU, in line with the best estimates available. Raw material costs are expected to record an average annual increase as a percentage of revenues for the Range Hoods CGU and the Putian CGU of 0.5%, with an increase of 0.8% expected for the Motors CGU. These changes reflect the values in the 2011 budget for the various categories of goods of which the average is for an increase of 2% on the previous year. The variable operational cost components (direct labour, outsourcing and commercial costs) are expected to remain constant in terms of revenues while the fixed operating cost components are projected to increase by 2% in the 2011 budget for the Rang Hood and Motor CGU ‘s and by 3.8% for the Putian CGU, in line with inflation. The working capital absorbed by the CGU’s is expected to remain constant in terms of revenues at around 9.0% for the Range Hoods CGU, 18.5% for the Motors CGU and 3,5% for Putian CGU. The terminal value was determined through the discounting of the perpetual return of cash flow freely available estimated for 2015 and a growth rate of 2% (3.8% for the Putian CGU).

109

The Putian CGU resulted in a coverage of the book value through the value in use of 1.81 times. The change in these assumptions could give rise to a significantly different value in use and thus difficulties of “impairment”. For this reason, and considering the uncertainties which currently pervade the market, management will monitor periodically the circumstances and the events which affect the above-mentioned assumptions and future trends.

The discount rate (WACC) was estimated net of taxes (in line with the discount flows) of 9% (8.35% in 2009) for the Range Hood CGU and the Motors CGU and of 8.7% for the Putian CGU. These are the principal assumptions used by the Group to predict future developments. Regarding the CGU’s analysed, the valuations made did not result in the recognition of a loss in value of Goodwill at December 31, 2010. The Range Hoods CGU has a coverage of the book value against the value in use of 1.24 times. The Motors CGU has a coverage of the book value against the value in use of 1.04 times.

5.21 Other intangible assets The table below shows details of changes in other intangible assets in 2009 and 2010.

Intangible assets IN EURO THOUSANDS

31-DEC-08

Increases

Decr.

Other movements

Amort.

31-DEC-09

Development Costs

2,586

449

321

(812)

2,544

Industrial patents and intellectual property rights

2,505

4,295

2,983

(1,736)

8,047

Concessions, licenses, trade marks & similar rights

2,238

(156)

2,090

Assets in progress and advances

4,025

419

(7)

(3,855)

582

Other intangible assets

8,845

122

(15)

(1,194)

7,830

20,199

5,288

(22)

(474)

(3,898)

21,093

31-DEC-09

Increases

Decr.

Other movements

Amort.

31-DEC-10

Development Costs

2,544

758

157

(885)

2,575

Industrial patents and intellectual property rights

8,047

3,708

(24)

(1,974)

9,793

Concessions, licenses, trade marks & similar rights

2,090

855

(965)

1,989

582

2,302

(392)

2,491

7,830

150

(734)

(228)

7,018

21,093

6,928

(24)

(77)

(4,052)

23,867

Net value

Total

Intangible assets IN EURO THOUSANDS Net value

Assets in progress and advances Other intangible assets Total

110

At December 31, 2010, intangible assets amounted to Euro 23,867 thousand, an increase of Euro 2,774 thousand on the previous year. “Development costs” relate to product design and development activities. The increase is mainly attributable to the cost of developing new products. “Industrial patents and intellectual property rights” includes patents, intellectual property rights and software programs. The increase for the year, primarily for the parent company, mainly refers to the implementation of the integrated SAP and Octopus projects and the continuous upgrading of technical and management reporting software.

(including integrated SAP and Octopus), and also the development of new products, including two projects focused on energy efficiency. The column “Other changes” includes reclassifications to the other intangible fixed assets account, in addition to the impact from exchange rate movements. The account “Other intangible fixed assets” relates principally to the recording both of technologies developed and the client portfolio deriving from the acquisition of the German subsidiary Exklusiv Hauben Gutmann GmbH in 2008. The “Other changes” column includes in total an exchange gain of Euro 190 thousand. The method applied to amortise intangibles is considered appropriate to reflect the remaining useful life of the assets.

“Concessions, licenses, brands and similar rights” refers to the registration of brands by Group companies. The intangible assets in progress refer in part to advances and the development of projects for the implementation of new IT platforms and the design and development of new software applications

5.22 Investments in associated companies The table below shows changes in investments in associated companies: IN EURO THOUSANDS

31-DEC-09

Acq. or subscrip.

Change in consol. area

Reval./ (Write-downs)

31-DEC-10

Investments in associated companies

2,309

(592)

1,717

Total

2,309

(592)

1,717

The balance in the column Revaluations/(Writedowns) of a net decrease of Euro 592 thousand refers to the balance of the adjustments made in the year to investments recorded under the Equity method, shown in the table below.

For further clarifications, reference is made to paragraph 5.11. The table below shows the carrying values at the end of the previous year and as at December 31, 2010.

IN EURO THOUSANDS

Purchase cost

Pro-quota Balance post-acquisition at gain/loss 31-DEC-09 (exclud. dividends)

Purchase cost

Pro-quota Balance post-acquisition at gain/loss 31-DEC-10 (exclud. dividends)

I.S.M. Srl

1,899

410

2,309

1,899

(182)

1,717

Total

1,899

410

2,309

1,899

(182)

1,717

5.23 Other financial assets The account at December 31, 2010 amounts to Euro 30 thousand, unchanged on December 31, 2009, principally comprising an insurance investment.

111

5.24 Other receivables (non-current) The breakdown of the other receivables is as follows: IN EURO THOUSANDS Employees Other receivables Total

31-DEC-09

31-DEC-10

Changes

159

141

(18)

1,778

1,737

200

1,920

1,720

The increase in “Other receivables” is principally due to a receivable of the Polish subsidiary, concerning a supplier. This account includes payables beyond 5 years of Euro 85 thousand.

5.25 Tax receivables (non-current) Non-current tax receivables did not change significantly on the previous year, amounting to Euro 6 thousand.

5.26 Financial assets available-forsale This account regards investments held by the Elica Group in other companies. The investments are held in unlisted companies whose shares are not traded on a regulated market. Therefore, as there were no purchases or sales of these shares in the last year, their fair value cannot be determined in a reliable manner. The carrying value at cost of the investments is shown below:

IN EURO THOUSANDS

31-DEC-09

Meccano S.p.A.

31-DEC-10

Changes

UnifabrianoSoc. S.r.l.

Consorzio Energia

Ceced

(1)

ACEM Srl

162

(162)

INOX MARKET

489

560

Other minor investments Total

680

614

(66)

The decrease in the account is principally due to the sale of the holding in ACEM Srl. The change in the investment value in the company Inox Market Mexico S.A. de C.V. is entirely due to exchange rate movements.

5.27 Trade receivables and loans The account consists of:

IN EURO THOUSANDS

31-DEC-09

31-DEC-10

Changes

Trade receivables

85,581

89,269

3,688

(1)

85,589

89,276

3,687

Receivables from associated companies Total

112

Trade receivables and loans increased by Euro 3,687 thousand. The effect on the present account of the change in the consolidation scope was Euro 3,042 thousand. This account does not include any receivables due after more than five years at the year-end. Receivables are recorded net of provisions of Euro 3,927 thousand made following an analysis of the credit risk on receivables and on the basis of historical data on credit losses, considering that a substantial portion of the receivables are insured by prime international insurance companies.

Management considers that the value approximates the fair value of the receivables. The charge for the year, considered adequate to adjust receivables to their realisable value, was Euro 1,517 thousand. The receivables from the associated company ISM refer to normal operations of the Group.

5.28 Inventories IN EURO THOUSANDS

31-DEC-09

Raw material, ancillary and consumables

31-DEC-10

Changes

15,160

19,798

4,638

(903)

(1,201)

(298)

Total

14,257

18,597

4,340

Products in work-in-progress and semi-finished

13,733

11,823

(1,910)

(870)

(603)

267

Total

12,863

11,220

(1,643)

Finished products and goods for resale

14,769

13,381

(1,388)

(708)

(1,040)

(332)

14,061

12,341

(1,720)

270

513

243

41,451

42,671

1,220

Raw materials obsolescence provision

Work-inâ&#x20AC;&#x201C;progress obsolescence provision

Finished products obsolescence provision Total Payments on account Book value

Final inventories increased by a net amount of Euro 1,220 thousand, but reduced by Euro 2.1 million on a like-for-like consolidation scope. This follows the Group policy to reduce working capital. Inventories are stated net of obsolescence provisions of approximately Euro 2,844 thousand, in order to take into consideration the effect of waste, obsolete and slow moving items and the risk estimates of the use of some categories of raw and semifinished materials based on assumptions made by management.

Inventories also include materials and products that were not physically held by the Company at the balance sheet date. These items were held by third parties on display, for processing or for examination. Recognition of the inventories at current value does not entail any difference from recognition with the average weighted cost method.

5.29 Other receivables (current) The breakdown is as follows: IN EURO THOUSANDS

31-DEC-09

31-DEC-10

Other receivables

2,523

2,462

(61)

Prepayments and accrued income

1,318

1,818

500

Total

3,841

4,281

440

The increase is principally due to the recording under prepayments of the receivable created following the payment of the upfront amounts for the new bank loans and for the new operating lease contract. The account includes payables beyond five years of Euro 218 thousand.

113

Changes

5.30 Tax receivables (current) The break down of the account “Tax Receivables” is summarised in the table below. IN EURO THOUSANDS

31-DEC-09

31-DEC-10

Changes

IRAP

252

(230)

IRES

3,966

2,828

(1,138)

VAT

4,121

2,836

(1,285)

Other tax receivables

1,324

1,904

580

Total

9,663

7,589

(2,074)

The change in the income tax and regional tax receivables is the difference between the payments on accounts and income tax payables for the year 2010.

The increase in the account “other tax receivables” is principally due to the increase of the foreign company tax receivables.

5.31 Derivative financial instruments IN EURO THOUSANDS

31-DEC-09 Assets

Derivatives on foreign exchange Derivatives on interest rates Total

31-DEC-10

Liabilities

725

Assets

Liabilities

288

574

143

265

166

770

311

839

310

189

770

311

649

310

770

311

838

310

of which Non-current Current Total

For a description of the above account reference should be made to paragraph 7 “Risk management” of the present notes.

5.32 Cash and cash equivalents IN EURO THOUSANDS Bank and postal deposits Cash in hand and similar Total

31-DEC-09

31-DEC-10

Changes

19,224

25,078

5,854

19,235

25,102

5,867

This account reflects positive balances held in bank current accounts and cash on hand. The decrease was due to a different composition in the Group’s net financial position. The book value of these assets reflects their fair value. For further information, reference should be made to the section on the net financial position in the Directors’ Report on operations.

5.33 Liabilities for post-retirement benefits The Elica Group reports obligations of Euro 9,182 thousand, reflecting the present value of its retirement benefit obligations accruing at the period end in favour of employees of the Group’s Italian companies and representing termination benefits at the end of the employment period. The most recent actuarial calculation of the present value of the provision was performed at December 31, 2010 by Mercer Human Resource Consulting S.r.l.

114

The amounts recognised in the Income Statement may be summarised as follows: IN EURO THOUSANDS Costs relating to current employee services Net actuarial losses recognised in the year Financial charges Total

31-DEC-09

31-DEC-10

Changes

2,123

2,986

863

574

544

(30)

2,701

3,541

840

The changes for the year regarding the present value of retirement benefit obligations were as follows:

IN EURO THOUSANDS

Balance at 31-DEC-09

Opening balance

Balance at 31-DEC-10

11,023

Change in consolidation scope/method

Costs relating to current employee services Curtailment effect

9,554

11,023

9,554

2,123

2,986

Net actuarial losses recognised in the year

2,214

2,997

Financial charges

574

544

Benefits provided

(2,186)

(1,032)

Pension fund

(2,071)

(2,881)

9,554

9,182

Total

The Group has decided to use the corridor method. Under this method it may elect not to recognise the actuarial gains or losses, where these do not exceed 10% of the present value of the defined benefit obligation. Following these adjustments, actuarial losses have not been recorded at December 31, 2010 of Euro 891 thousand, while in 2009 these losses amounted to Euro 1,064 thousand.

Lastly, the Group shows the interest component of the charge relating to employee defined-benefit schemes under â&#x20AC;&#x153;Financial chargesâ&#x20AC;?, with a resulting increase of Euro 544 thousand in this item for the period. The cost of current retirement benefits and net actuarial losses were recorded under staff costs. The costs relating to current employee services and utilisations of pension funds respectively include the charges and liquidations in the year.

Assumptions adopted for the calculation 31-DEC-09

31-DEC-10

Discount rate to determine the obligation

5.00%

5.10%

Expected salary growth rate

2.90%

Rate of inflation

2.00%

Discount rate to determine pension cost

5.75%

5.00%

At December 31, 2010 the Company had 2,800 employees (2,338 in 2009), as detailed in paragraph 5.7.

115

5.34 Provisions for risks and charges The composition and movements of the provisions are as follows: IN EURO THOUSANDS

31-DEC-09

Provisions

Other movements

31-DEC-10

Supplementary agent termination benefits

372

Directors’ termination benefits

109

Product warranty provisions

893

271

(298)

Provisions for risks

3,133

1,437

(1,181)

Restructuring provisions

1,860

736

(1,318)

1,278

Personnel provision

279

2,843

(215)

2,907

Other Provisions

189

(102)

Total

6,835

181

Utilisations -

551 109

5,468

866 20

(3,115)

3,409

9,207

of which Non-current

5,752

Current

1,082

Total

The “Supplementary agent termination benefits” are intended to cover possible charges upon termination of relations with agents and sales representatives. The Directors’ termination benefits regard the termination benefits for the Parent Company’s Executive Chairman. “Product warranty provisions” represent an estimate of the costs likely to be incurred to repair or replace items sold to customers. These provisions reflect the average warranty costs historically incurred by the Group as a percentage of sales still covered by warranty.

8,254 953

6,834

9,207

The “Provisions for risks” relates to likely costs and charges to be incurred as a result of ongoing legal disputes. The provisions have been determined based on the best possible estimates, considering the available information. The “Restructuring Fund” was provisioned in the year against charges concerning restructuring operations as described in paragraph 5.44. During the year this fund was principally used for leaving personnel for Euro 1,318 thousand. The “Personnel Fund” includes the higher cost estimated by the company for contractual indemnity and for employee bonuses. The column “Other movements” exclusively relates to exchange gains/losses.

5.35 Deferred tax assets – Deferred tax liabilities At December 31, 2010, details of deferred tax assets and liabilities, determined on the basis of the assetliabilities method, were as follows:

IN EURO THOUSANDS Deferred tax assets Deferred tax liabilities Net deferred tax liabilities

116

31-DEC-09

31-DEC-10

Changes

9,200

9,357

157

(5,328)

(7,890)

(2,562)

3,872

1,467

(2,405)

The table below shows all the types of timing differences that gave rise to deferred taxes:

IN EURO THOUSANDS

31-DEC-09

Assets

Credit/Debit to P&L

Liabilities

Other move./NE

deferred tax assets

deferred tax liab.

31-DEC-10

Assets

Liabilities

Provisions

1,585

352

(836)

(147)

1,922

Goodwill

1,032

(528)

148

(19)

(1,729)

884

(2,239)

Losses carried forward

4,417

(19)

1,402

(25)

415

3,460

(24)

Inventory write-down

587

(198)

(66)

866

(230)

Restructuring charges

367

363

(202)

145

351

(453)

(218)

(235)

Gains, grants Merger adjustments

(585)

(45)

(427)

(1,013)

(150)

242

(231)

(153)

Employee leaving indemnity

(934)

Amortisation & Depreciation

265

(108)

(126)

457

(110)

Set up and expansion costs

370

Elimination of intercompany profits

Exchange differences

212

(110)

(65)

174

Stock Option

(519)

Employee bonuses

(799)

799

Allocation purchase price

(2,582)

(188)

(2,393)

275

(13)

440

(348)

(401)

363

(592)

9,200

(5,328)

3,553

(3,864)

(2,715)

9,358

(7,890)

Other Total

The column “Other movements” includes all the movements of “deferred tax assets and liabilities” which do not have an effect on the Income Statement in the deferred tax income or charge accounts; principally they include exchange rate effects, the tax impact on the Stock Grants and the adjustments

following the adoption of the Group accounting principles of the newly acquired companies. The calculation of deferred tax assets was carried out through critically evaluating the existence of future recoverability requisites of these assets.

5.36 Finance leases and other lenders Finance leases and other lenders

Minimum payments due under finance lease agreements and other loans

Present value of minimum payments due under finance lease agreements and other loans

IN EURO THOUSANDS

31-DEC-09

31-DEC-10

31-DEC-09

31-DEC-10

Due within one year

2,113

1,903

Due within five years

2,488

2,430

4,601

105

4,333

268

4,333

- due within one year

1,903

- due beyond one year

2,430

Due over five years

of which: - future financing costs - Present value of obligations under finance leases of which:

117

Finance lease payables refer to plant and machinery. As outlined in the note concerning fixed assets, during the year all Group leased assets were redeemed. The current value of the minimum payments due at December 31, 2010 is Euro 99 thousand, of which Euro 23 thousand due within 12 months.

The interest rates are linked to one-month or three-month Euribor and are set at the date the finance lease agreement is signed. All finance lease agreements involve a fixed repayment plan and there is no contractual provision for rescheduling the debt.

5.37 Bank loans and mortgages IN EURO THOUSANDS

Balance at 31-DEC-09

Balance at 31-DEC-10

Changes

Bank loans and mortgages

37,838

59,883

22,045

Total

37,838

59,883

22,045

23,058

29,426

6,368

Within two years

3,566

10,357

6,791

Within three years

3,442

6,649

3,207

Within four years

3,482

6,369

2,887

Within five years

3,523

2,992

(532)

766

4,090

3,324

Total

37,838

59,883

22,045

Less amounts to be repaid within one year

23,058

29,426

6,368

Due beyond one year

14,780

30,457

15,677

Bank loans and mortgages have the following repayment schedules On demand or within one year

Beyond 5 years

The majority of borrowings indicated above carry a floating rate of interest. While it is exposed to interest rate risk, in 2010 the Group did not systematically hedge its exposure as, given the expectations of constantly generated cash flows, it is inclined to repay early its bank loans, thus eliminating the need for any such “hedge”.

For further information on interest rate hedges, reference should be made to paragraph 7 “Risk management” of the present notes.

5.38 Other Payables Other Payables (non-current) IN EURO THOUSANDS

31-DEC-09

31-DEC-10

Changes

Other payables

294

234

INAIL contributions – earthquake suspension 1997

(7)

INPDAI contributions – earthquake suspension 1997 Employee INPS contributions – earthquake 1997 Freelance INPS contributions – earthquake 1997 Total

The increase in the account, in the “other payables” category refers to obligations assumed by the parent company toward a consortium to which it belongs. The decrease of the other accounts relate principally

(4)

1,176

1,082

(94)

1,381

1,510

129

to the discounting and repayment of earthquake suspension payables following the earthquake in 1997. The balance includes Euro 728 thousand to be paid beyond 5 years.

118

Other payables (current) IN EURO THOUSANDS

31-DEC-09

31-DEC-10

Changes

Payments to social security institutions

2,641

2,169

(472)

Other payables

7,317

993

(6,324)

Payables to personnel for remuneration

3,809

4,792

983

Customers

158

103

(55)

Accruals and deferred income

210

266

Customer advances

548

596

102

14,686

9,022

(5,664)

Directors and Statutory Auditors Total

The account “Other payables” in 2009 included Euro 6,376 thousand relating to the payable for the “earn out” deriving from the purchase of the company Gutmann on November 11, 2008. The account “Payables to personnel for remuneration” increased

in line with the changes in the cost of labour. The account “Payables to Social Security Institutions” decreased due to redundancies within the Parent Company. The present account includes payables beyond 5 years for Euro 22 thousand.

5.39 Current and non-current tax liabilities Tax payables (non-current) IN EURO THOUSANDS

31-DEC-09

31-DEC-10

Changes

ILOR (former local income tax) payable – earthquake suspension

218

201

(17)

Other taxes payable

198

183

(15)

(3)

609

563

(46)

1,058

978

(80)

Employee leaving indemnity payable – earthquake suspension Flat tax payable – earthquake suspension Taxes on equity reserves – earthquake suspension Total

The decrease of the other account relates principally to the discounting and repayment of earthquake suspension payables following the earthquake in 1997. This account includes payables beyond 5 years for Euro 576 thousand.

Tax payables (current) IN EURO THOUSANDS Other taxes Flat tax IRPEF withheld Ires payable for the year Total

The account increased by Euro 1,065 thousand. This increase relates both to income tax payables which increased by Euro 619 thousand and other

31-DEC-09

31-DEC-10

Changes

1,083

2,159

1,076

422

(422)

2,314

2,105

(206)

880

1,499

619

4,699

5,764

1,065

tax payables principally concerning the foreign subsidiaries. The flat rate tax was paid during the year.

119

5.40 Trade payables IN EURO THOUSANDS

31-DEC-09

Trade payables Associated companies Total

Trade payables mainly include payables for trade purchases and other costs. Management believes that the book value of trade payables and other payables reflects their fair value. The payables to associated companies were cancelled, given the change in activities of the associated company.

5.41 Group shareholders’ equity For the analysis on the movements in Shareholder’s Equity, reference should be made to the relative table. Comments are provided on each of the Equity reserves.

Share Capital The share capital at December 31, 2010 amounts to Euro 12,664,560, consisting of 63,322,800 ordinary shares with a par value of Euro 0.2 each, fully subscribed and paid-in.

31-DEC-10

Changes

84,027

88,742

4,715

2,779

(2,779)

86,806

88,742

1,936

Capital reserves The capital reserves amount to Euro 71,123 thousand and relate entirely to the Share Premium Reserve. The costs of the IPO, amounting to Euro 3,650 thousand, net of the relevant tax effect of Euro 2,190 thousand, were charged to the Share Premium Reserve, in accordance with IAS/IFRS.

Hedging, translation and stock grant reserve This account, negative for Euro 3,411 thousand (in 2009 negative for Euro 8,431 thousand), changed as follows: conversion of financial statements expressed in foreign currencies (ELICAMEX S.A. de C.V., Leonardo S.A. de C.V., Elica Group Polska Sp.zo.o, ARIAFINA CO., LTD, Elica Inc., Elica PB India Private Ltd. and Zhejiang Putian Electric Co Ltd) resulting in an increase of Euro 3,922 thousand, including the fair value changes of cash flow hedges, net of the tax effect of Euro 73 thousand and the recording of a decrease of Euro 79 thousand due to the elimination of income statement items in 2009 recorded to this account. The Stock Grant Plan reserve is also recorded to this account, approved by the shareholders’ meeting by April 26, 2010. The amount referring to 2010 is reserved to this account, net of the tax effect.

Treasury shares

Opening balance at January 1, 2010 Changes Closing balance at December 31, 2010

At December 31, 2010, the treasury shares in portfolio represent 10% of the Share Capital. In February 2011, 3% of the shares were sold, as previously outlined in the Directors’ Report.

120

Number

Book value (in ‘000 of Euro)

6,332,280

17,629

6,332,280

17,629

Retained earnings IN EURO THOUSANDS

31-DEC-09

31-DEC-10

Changes

Legal reserve

2,533

(0)

Undistributed earnings

2,566

9,239

6,673

IAS transition reserve

1,675

53,437

46,887

(6,550)

3,875

64,086

64,210

124

Extraordinary reserve Reserve restricted under Law 488/92 Total

The retained earnings includes the allocation of the profit for the year 2009 amounting to Euro 310 thousand and other movements of Euro 186 thousand. At December 31, 2010, the Stock Market capitalisation of the company was Euro 90.9 million. The market value of the share does not equate with today’s market consensus value (7) - while however reflects the book value of Group shareholders’ equity. As described in the paragraph “Events after December 31, 2010 and outlook” which should be referred to for further details, following the purchase of a further 15% of the subsidiary company Putian, in 2011, on completion of the operation the change in the holding in the investment will be treated as an operation between shareholders decreasing, in accordance with the accounting standards applied, the Group shareholders’ equity by approx. Euro 30 million (this amount is based on exchange rates at March 18, 2011).

5.42 Minority interest shareholders’ equity The account increased by Euro 6,198 thousand principally due to the increase of Euro 1,315 thousand for the allocation of the 2010 minority profit, an increase of Euro 262 thousand relating to the minority interest share of the translation effect of the financial statements of the companies ARIAFINA CO., LTD, Elica PB India Private Ltd. and Zhejiang Putian Electric Co. Ltd and to the allocation of the share of net equity to minority interests of the two newly consolidated companies. The change in the consolidation scope had an effect of Euro 5,750 thousand. The reconciliation between Net Equity and profit attributable to shareholders of the Parent Company and the corresponding consolidated items is provided in the Directors’ Report.

5.43 Net debt, default risk and covenants (In accordance with CONSOB No. DEM/6064293 of 28 July 2006) In Euro thousands

31-DEC-10

Cash and cash equivalents

25,102

Finance leases and other lenders

31-DEC-09 19,235

(76)

(2,430)

Bank loans and mortgages

(30,457)

(14,780)

Long-term debt

(30,533)

(17,210)

(23)

(1,903)

Bank loans and mortgages

(29,426)

(23,058)

Short-term debt

(29,449)

(24,961)

Net Debt

(34,880)

(22,936)

Finance leases and other lenders

For further information on the net financial position movements, reference should be made to the Directors’ Report.

Concerning the default risk and covenants on debt reference should be made to section 7 “Risk management” of the Notes.

121

(7) Average of the target price indications provided to the market by brokers familiar with the Company.

5 .44 Significant non-recurring events and operations A summary of the non-recurring operations, considered significant, during the year and with their relative impact, net of taxes, on the Net Equity and Net Profit are shown below. IN EURO THOUSANDS

Net Equity Amount

As per accounts a) Restructuring charges b) Whirlpool financial income Gross notional book value

Net Profit %

139,530

Amount

5,577

503

0.4%

503

8.5%

(688)

(0.5%)

(688)

(11.6%)

139,346

5,393

A) The account refers to the Group industrial reorganisation charges of Euro 736 thousand after the tax effect. B) This account relates to the fee paid by Whirlpool net of the tax effect, for the acquisition of 1,899,684 shares of the Company, in accordance with the Second Modifying Agreement of the Share Option Agreement of June 15, 2009 and the Supplementary Agreement of March 8, 2010. These agreements concern, among other issues, the purchase of shares of the Company by Whirlpool until February 23, 2010 and subject to the payment of Euro 0.50 on each share purchased. Further information on the modifying agreement is contained in the Annual Corporate Governance and Shareholder Report available on the website www.elicagroup.com.

122

5.45 Acquisitions and asset transfers Acquisition of the holding in Zhejiang Putian Electric The Elica Group in 2010 acquired 55% of the Chinese company Zhejiang Putian Electric, as described in the paragraph “Significant events in 2010” within the Directors’ Report. The effects of this transaction are summarised in the table below. IN EURO THOUSANDS

Carrying value – Group principles

Property, plant & equipment Usage rights of the land Other intangible assets

Fair value adjustments

Fair value

4,184

3,327

7,511

5,507

Trade receivables

6,831

Inventories

3,055

Other receivables

595

Deferred tax assets

526

3,251

(11,184)

(543)

(2,208)

(2,752)

Provisions for risks and charges

Lease payables (Current)

Trade payables

(1,636)

Other payables

(540)

Tax payables

(289)

Cash and cash equivalents Lease payables (Non-current) Bank loans and mortgages Deferred tax liabilities

Total Shareholders' Equity

10,914

Amount acquired (55%)

6,003

Goodwill

7,373

Total acquisition cost

13,378

Payable to former shareholder

Cash and cash equivalents acquired

3,251

Net cash flow from the acquisition

As described in the paragraph “Events after December 31, 2010 and outlook” which should be referred to for further details, at March 19, 2011, the Group has signed an agreement for the acquisition of a further 15% stake in the Chinese company.

123

10,127

6 Guarantees, commitments and contingent liabilities a) Contingent liabilities The Parent Company and its subsidiaries are not involved in administrative, judicial or arbitration proceedings that are underway or have been settled by means of a ruling or arbitration award issued in the last 12 months and which might have or might have had an effect on the financial situation or profitability of the Group. Group companies have valued the contingent liabilities that could arise from pending judicial proceedings and have made appropriate provisions in their financial statements on a prudent basis. The provision included in the Group consolidated financial statements at December 31, 2010 for contingent risks and charges relating to legal disputes amount to Euro 1,564 thousand. In relation to the current dispute with a former consultant of the Company, this is adequately covered by the other risks provision, in consideration of the evaluations drawn up by the legal team appointed. Management considers that the provision for risks in order to cover possible liabilities from pending or potential disputes is, on the whole, adequate.

b) Guarantees and commitments Commitments with suppliers for the purchase of raw materials amount to Euro 3,308 thousand while the amount relating to fixed asset purchases at December 31, 2010 was approx. Euro 1,627 thousand, principally relating to investments in the productive capacity such as equipment, plant and buildings for the expansion of industrial activities. On December 10, 2007, FAN S.A. (now “FAN Srl”), parent company of Elica S.p.A., and Whirlpool signed a shareholder agreement (the “Shareholder Agreement”) which provides for (i) a purchase contract by Whirlpool of Elica shares, representing 5% of the share capital (the “5% Holding”) and (ii) regulations concerning the governance of the Company.At the same time, in accordance with the Shareholder Agreement, Whirlpool and the company signed an options agreement on Shares (the “Share Options Agreement”) providing Whirlpool with the right to purchase Treasury Shares of the Company up to a further 10% of the Shares with voting rights of the Company, for a period of 18 months from the date of receiving from Elica the communication of the purchase of the 5% Share (the “Option Period”).This Agreement was modified through two additional agreements signed between Whirlpool Europe S.r.l. and Elica S.p.A. respectively on December 3, 2008 (the “Modifying Agreement”) and June 15, 2009 (“the “Second Modifying Agreement”). On December 18, 2009, Whirlpool Europe Srl, Prop Srl and Elica S.p.A., signed, thus confirming their respective obligations, the communication issued by FAN S.A. relating to the merger by incorporation of the same into Prop Srl, which at the same time changed its

name to FAN Srl Following the merger, FAN Srl with registered offices in Rome, via Parigi, No.11, registered in the Rome Company Registration Office at No.10379911000, assumed the rights and obligations of FAN S.A. and continues all activities of FAN S.A., including the Shareholder Agreement. On March 8, 2010, Whirlpool Europe S.r.l. and FAN S.r.l. signed a further modification to the Agreement under which the parties agree that (i) the 10% holding in Elica reached by Whirlpool on February 23, 2010, was considered as being reached by Whirlpool on December 31, 2009 in accordance with the terms of the Agreement and (ii) any provision of the Agreement dependent on the holding by Whirlpool of 10% of the share capital of Elica at the closing of the option period, as extended by the Second Modifying Agreement, is fully enacted. On December 18, 2010, Whirlpool Europe S.r.l. and FAN S.r.l. announced that the Shareholder Agreement had been renewed for a further threeyear period and without amendments, as neither Party communicated to the other its opposition to the renewal of the agreement, in accordance with the conditions at point 5.3 of the Shareholder Agreement Extract. The matters outlined above had no impact on the control of Elica S.p.A. which pursuant to article 93 of the Consolidated Finance Act, continues to be indirectly held by Ms. Gianna Pieralisi. For further information reference is made to the “Annual Corporate Governance and Shareholder Report” of Elica S.p.A., updated to March 22, 2011 and available on the website of the Company www.elicagroup.com in the Investor Relation/ Corporate Governance section as well as the extracts of the Agreement published in accordance with law on the site www.consob.it. Elica S.p.A. is committed to the following guarantees: ×× two sureties in favour of Bank DnB Nord for a value of Euro 3,000 thousand and PLN 15,000 for credit lines granted to the subsidiary Elica Group Polska Sp.zo.o; these sureties will expire in 2012. ×× a guarantee in favour of a supplier of the Mexican subsidiary for the purchase of plant up to a maximum amount of Euro 195 thousand; this guarantee will be valid until 120 days following the last payment date established and however not beyond January 31, 2012. A guarantee provided by the bank PEKAO is in place for the Polish subsidiary concerning a supplier for PLN 120,000 valid until 5/3/2011. The Chinese company is the beneficiary of two guarantees for a maximum amount of Renminbi 66 million, the debtors are in a good financial state and Elica has the right to compensation from the Chinese shareholder on an open account following the payment for the investment.

124

c) Operating leases At the balance sheet date there were rental agreements for several industrial and commercial properties, motor vehicle rental agreements and operating leases for hardware and photovoltaic panels. The payments due by the Group under the property rentals and operating leases are summarised in the following table:

Data in Euro thousands

31-DEC-09

31-DEC-10

Property rentals

1,128

1,701

Car and fork lift rental

2,187

3,001

Hardware operating leases

1,848

1,825

4,419

5,173

10,946

Other operating leases Total

Data in Euro thousands

31-DEC-10

Within 1 year

1-5 years

Over 5 years

Property rentals

1,701

927

774

Car and fork lift rental

3,001

1,318

1,683

Hardware operating leases

1,825

644

1,165

Other operating leases

4,419

379

1,481

2,560

10,946

3,268

5,102

2,577

Total

increase in other operating leases principally relates to an operating leasing contract for photovoltaic panels signed by the parent company.

7 Risk management policy Introduction The Elica Group’s operations are exposed to different types of financial risks, or risks associated to changes in exchange rates, interest rates, commodity prices and cash flow. In order to mitigate the impact of these risks on the company’s results, the Elica Group commenced the implementation of a financial risk monitoring system through a “Financial Risk Policy” approved by the Board of Directors of the Parent Company. Within this policy, the Group constantly monitors the financial risks related to the operating activities in order to assess any potential negative impact and undertakes corrective action where necessary.

The main guidelines for the Group risk policy management are as follows: ×× identify the risks related to the achievement of the business objectives; ×× assess the risks to determine whether they are acceptable compared to the controls in place and require additional treatment; ×× reply appropriately to risks; ×× monitor and report on the current state of the risks and the effectiveness of their control. The Group “Financial Risk Policy” is based on the principle of a dynamic management and the following assumptions: ×× prudent management of the risk with a view to protecting the expected value of the business; ×× use of “natural hedges” in order to minimise the net exposure on the financial risks described above; ×× undertake hedging operations within the limits approved by Management and only in the presence of effective and clearly identified exposures;

125

The process for the management of the financial risks is structured on the basis of appropriate procedures and controls, based on the correct separation of the activities of conclusion, settlement, registration and reporting of the results. The paragraphs below report an analysis of the risks which the Elica Group is exposed to, indicating the level of exposure and, for the market risks, the potential impact on the results deriving from hypothetical fluctuations in the parameters (sensitivity analysis).

Market risk Within these types of risks, IFRS 7 includes all the risks directly or indirectly related to the fluctuations of the general market prices and the financial markets in which the company is exposed: ×× foreign currency risks; ×× commodity risk, related to the volatility of the prices of the raw materials utilised in the production processes; ×× interest rate risk. In relation to these risk profiles, the Group uses derivative instruments to hedge its risks. The Group does not engage in derivative trading. The paragraphs below individually analyse the different risks, indicating where necessary, through sensitivity analysis, the potential impact on the results deriving from hypothetical fluctuations in the parameters.

Foreign currency risks

Group has higher revenues than costs; therefore changes in the exchange rates between the Euro and these currencies impact the Group results as follows: ×× the appreciation of the Euro has negative effects on revenue and operating results; ×× the depreciation of the Euro has positive effects on revenues and operating results. The amount of the exchange risk, defined in advance by management of the Group on the basis of the budget for the period, is gradually hedged over the acquisition process of the orders, up to the amount of the orders corresponding to budget projections. The hedge is made through agreements with third party financiers of forward contracts for the purchase and sale of foreign currency. As previously described, these operations are undertaken without any speculative or trading purpose, in line with the strategic policies of a prudent management of the cash flows. As well as the trading risks just described, the Group is also exposed to balance sheet translation risks. The assets and liabilities of companies consolidated in currencies other than the Euro may be translated into Euro at varying exchange rates, whose amount is recorded in the “translation reserve” under Group Net Equity. The Group monitors this exposure, against which there were no hedging operations at the balance sheet date; in addition, against the total control by the Parent Company over its subsidiaries, the governance on the respective foreign currency operations is greatly simplified. The values are shown below at December 31, 2010 of the balance sheet accounts in foreign currencies for the most significant currencies:

The Group’s operating currency is the Euro. However, the Group companies trade also in American Dollars (USD), British Pounds (GBP), Japanese Yen (JPY), Polish Zloty (PLN), Mexican Pesos (MXN), Swiss Francs (CHF), Russian Roubles (RUB), Chinese Yuan (CNY) and the Indian Rupee (INR). In all of these currencies, except for the Swiss Franc and the Polish Zloty, the Elica

In Euro thousands Divisa

2010 Assets

2009 Liabilities

Assets

Liabilities

CHF

(299)

(311)

GBP

498

(39)

946

(21)

JPY

123

PLN

(7,387)

6,305

17,275

(11,536)

RUB

(2)

(3)

USD

10,098

(3,568)

8,945

(3,968)

(868)

904

658

(779)

364

2,458

(3,941)

27,985

(16,618)

MXN INR Total

126

For the purposes of the sensitivity analysis on the exchange rate, the potential movements on the Euro/CHF, Euro/GBP, Euro/YEN, Euro/PLN, Euro/ RUB, Euro/USD, Euro/MXN and EUR/INR rates were analysed.

In Euro thousands Currency

The following table shows the sensitivity to reasonably possible movements in the exchange rates, maintaining all other variables unchanged, of the pre tax profit, due to changes in the value of current assets and liabilities in foreign currencies:

2010 Depreciation of foreign currencies 5%

2009 Appreciation of foreign currencies 5%

Depreciation of foreign currencies 5%

Appreciation of foreign currencies 5%

CHF

(16)

GBP

(22)

(44)

JPY

(4)

(6)

PLN

(57)

(273)

302

RUB

(2)

USD

(311)

344

(237)

262

(2)

(6)

(541)

598

MXN INR Total

(305)

337

The hedging operations at December 31, 2010 with financial counterparties have a total Fair Value of approx. Euro 430 thousand. The table below shows the details of the notional and Fair Values: Currency

31-DEC-10

Notional (in foreign currency/000)

31-DEC-09

Fair Value (Euro/000)

Notional (in foreign currency/000)

Fair Value (Euro/000)

USD Forward

2,000

4,100

-19

Options

8,650

241

9,200

196

730

500

-1

6,014

14,145

127

37,465

259

75,000

430

435

GBP Forward Options PLN Forward Options

JPY Options Total

For the purposes of the sensitivity analysis on the exchange rate, the potential movements on the EUR/ USD, EUR/GBP, EUR/PLN and EUR/JPY and the EUR and foreign exchange interest rate curves were analysed. In the stress testing we have stressed, as well as the spot to spot exchange rate, also the monetary curve rates at December 31, 2010 in order to show the effect of changes in the rate curve.

For this purpose, the maximum change in the interval between November 2010 and the first week of January 2011 was considered. For the EUR/USD, EUR/PLN and EUR/JPY exchange rates, a 5% stress was applied, while for the EUR/GBP exchange rate a 3% stress was applied. For the interest rates, variable based on forward exchange contracts, a stress of 12% was applied for the Eurozone, 5% for the USA, PL and JP rates and 3% for the UK rates.

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The following table shows the sensitivity to the movements in the exchange rates and the rate curves indicated, maintaining all other variables unchanged,

of the Fair Value of the operations in foreign currencies at December 31, 2010 (compared with December 31, 2009):

2010

in Euro

USD Notional 10,650 USD/000

Exchange depreciation Currency depreciation EURO Currency depreciation Sensitivity to Depreciation Exchange appreciation Currency appreciation EURO Currency appreciation Sensitivity to Appreciation

GBP Notional 730 GBP/000

PLN Notional 20,159 PLN/000

JPY Notional 75,000 JPY/000

212,667

24,712

(163,196)

9,837

5,629

853

(847)

(44)

(2,418)

(338)

1,337

(5)

215,878

25,227

(162,706)

9,788

(185,371)

(26,241)

254,145

(4,412)

(4,671)

(856)

881

(44)

2,424

337

(2,624)

(187,618)

(26,760)

252,402

(4,451)

2009

in Euro

USD Notional 13.300 USD/000

Depreciation of foreign currencies 5%

GBP Notional 500 GBP/000

PLN Notional 37,465 PLN/000

298,419

27,007

(134,419)

6,389

1,211

(5,693)

Currency depreciation EURO 25% Currency depreciation 25 %

(2,510)

(816)

7,029

Sensitivity to Depreciation

302,298

27,401

(133,084)

(247,173)

(29,429)

292,074

(2,694)

(816)

6,399

Currency appreciation 25 %

6,198

1,211

(6,289)

Sensitivity to Appreciation

(243,669)

(29,035)

292,184

Commodity risk

Interest rate risk

The Group is subject to market risk deriving from fluctuations in commodity prices used in the production process. The raw materials purchased by the Group (including copper and aluminium) are affected by the trends of the principal markets. The Group regularly evaluates its exposure to the risk of change in the price of commodities and manages this risk principally through fixing the price of contracts with suppliers. Based on this strategy, the Elica Group does not adopt any hedging through derivative financial instruments, as the Company implements a hedging policy based on quantities. In particular, as illustrated by Management, between the end and the beginning of the year, on the basis of the production budget for the year, the raw material orders are made establishing the delivery period and the price to be paid. Operating in this manner, the Group covers the standard cost of the raw materials contained in the budget from possible increases in commodity prices, achieving the operating profit objective.

The management of the interest rate risk by the Elica Group is in line with the consolidated practices over time to reduce the volatility risk on the interest rates, while at the same time minimising the borrowing costs within the established budget limits.

Appreciation of foreign currencies 5% Currency appreciation EURO 25%

The Groupâ&#x20AC;&#x2122;s debt carries mainly a floating rate of interest. Relating to the Group debt (as already described prevalently at a variable rate), from the sensitivity analysis a change of -10 bps in the interest rate curve in the short-term incurs lower financial charges of Euro 22 thousand, while a change of 10 bps in the same interest rate curve converts into higher financial charges of Euro 22 thousand. The Group hedges the interest rate risk through the utilisation of Interest Rate Swap and through CAP options against specific medium-long term loans at variable rate.

128

The table below shows the details of the notional and Fair Values: Instrument Dati in migliaia di Euro

31-DEC-10 Notional

31-DEC-09 Fair Value

Notional

Fair Value

Interest Rate Swap

12,969

79.3

915

(23)

CAP

10,573

19.4

6,550

40.1

Total

23,542

98.7

7,465

17.6

Also the interest rate risk is measured through sensitivity analysis, in accordance with IFRS 7. The changes in the interest rate curve utilised for the sensitivity analysis were based on the volatility of the market rates. The analysis shows that a change of the interest rate curve in the short-term of -10 bps and of the medium/ long-term curve of -50 bps converts into a decrease in the Fair Value of the Interest Rate Swap at December 31, 2010 of Euro 210 thousand. A change of the interest rate curve in the short-term of 10 bps and of the long-term curve of +50 bps converts into an increase in the Fair Value of the Interest Rate Swap of Euro 204 thousand. With reference to the CAP option the sensitivity analysis carried out on the interest rate curve shows against a change in the short-term curve of -10 bps and in the medium/long-term curve of -50 bps, the Fair Value of the CAP decreases by Euro 14 thousand. A change in the interest rate curve in the short-term of 10 bps and a change in the medium/long-term curve of 50 bps converts into an increase in the Fair Value of the CAP of Euro 28 thousand.

Credit risk The credit risks represent the exposure of the Elica Group to potential losses deriving from the noncompliance of obligations by trading partners. This risk derives in particular from economic-financial factors related to a potential solvency crisis of one or more counterparties. The Group only deals with well known and reliable clients. It is Group policy to analyse clients in order to award a credit rating. Moreover, the collection of receivables is monitored during the year so that the exposure to losses is not substantial.

The maximum theoretical exposure to the credit risk for the Group at December 31, 2010 is the carrying value of the financial assets recorded in the accounts, and the nominal value of the guarantees given on debts and commitments to third parties as indicated in paragraph 6 â&#x20AC;&#x153;Commitments, guarantees and contingent liabilitiesâ&#x20AC;?. At December 31, 2010, trade receivables of Euro 89.1 million (Euro 85.6 million at December 31, 2009), included approx. Euro 6.7 million (Euro 8.5 million at December 31, 2009) concerning overdue receivables. 0.5% of receivables (0.6% at December 31, 2009) were overdue by 60 days. The amount of trade receivables reported in the balance sheet is net of the allowance for doubtful accounts. The allowance is made on the basis of past experience and on the basis of specific considerations on the individual customers. The doubtful debt provision was created based on the guidelines contained in the attachment to the Financial Risks Policy specifically relating to the management of credit risk. For the management of credit risk, the Group utilises insurance coverage to guarantee against the non payment of a significant part of its clients.

Liquidity risk The liquidity risk represents the risk related to the unavailability of financial resources necessary to meet short-term commitments assumed by the Group and its own financial needs. The principal factors which determine the liquidity of the Group are, on the one hand, the resources generated and absorbed by the operating and investment activities and on the other the maturity dates and the renewal of the payable or liquidity of the financial commitments and also market conditions. These factors are monitored constantly in order to guarantee a correct equilibrium of the financial resources.

129

The following table shows the expected cash flows in relation to the contractual expiries of trade payables and various financial liabilities from derivatives:

Data at December 31, 2010 IN EURO THOUSANDS

within 12 months

Finance leases and other lenders

1-5 years

over 5 years

Bank loans and mortgages

29,426

26,367

4,090

Trade and other payables

97,764

1,510

127,213

27,953

4,090

Total

Data at December 31, 2009 IN EURO THOUSANDS

within 12 months

Finance leases and other lenders

1-5 years

over 5 years

1,903

2,430

Bank loans and mortgages

23,058

14,014

766

Trade and other payables

101,492

1,381

Total

126,453

17,825

766

During the year, the Group signed with major financial counterparties two Medium-Long term loan contracts which include an obligation to respect financial covenants based on the Consolidated Financial Statements. In particular the structure of the covenants on some of the Medium/long-term loans do not immediately determine default of the line through non respecting of the limits, but in first instance an increase in the cost of the loan. At December 31, 2010 the level of the covenants in question were significantly better than the terms of the first threshold to increase the cost of the loan or of the default of the credit line.

Management believes that at the present moment, the funds available, in addition to those that will be generated from operating and financial activities, will permit the Group to satisfy its requirements deriving from investment activities, working capital management and repayment of debt in accordance with their maturities. For details on the net financial position, reference should be made to note 5.43 of the notes.

Classification of the Financial instruments IN EURO THOUSANDS

31-DEC-10

31-DEC-09

Financial assets available-for-sale

614

680

Derivative financial instruments

189

Non-current assets

833

710

Derivative financial instruments

649

770

Cash and cash equivalents

25,102

19,235

Current assets

25,751

20,005

Other financial assets

Finance leases and other lenders

2,430

Bank loans and mortgages

30,457

14,780

Non-current liabilities

30,533

17,210

1,903

29,426

23,058

Finance leases and other lenders Bank loans and mortgages Derivative financial instruments Current liabilities

130

310

311

29,759

25,272

Hierarchy of Fair Value according to IFRS 7. IFRS 7 requires that the classification of financial instruments valued at fair value is determined based on the quality of the input sources used in the valuation of the fair value. The IFRS 7 classification implies the following hierarchy: ×× Level 1: determination of fair value based on prices listed in active markets for identical assets or liabilities. The instruments which the Group operates directly on active markets or in “Over the Counter” markets characterised by an adequate level of liquidity belong to this category;

by an adequate level of liquidity are included in this category; ×× Level 3: determination of the Fair Value based on valuation models whose input is not based on observable market data. The classification of the financial instruments may have a discretional element, although not significant, where in accordance with IFRS, the Group utilises, where available, prices listed on active markets as the best estimate of the fair value of derivative instruments. All the derivative instruments in place at December 31, 2010 and December 31, 2009 belong to level 2 of the fair value hierarchy.

×× Level 2: determination of fair value based on other inputs than the listed prices included in “Level 1” but which are directly or indirectly observable. In particular instruments which the Group operates on “Over the Counter” markets, not characterised

Instruments in place at December 31, 2010 The table below shows the following information on derivative instruments at December 31, 2010: ×× The notional value of the derivative contracts, broken down by maturity; ×× The book value of these contracts, represented by their fair value.

in Euro

Notional Value

Book Value

Interest rate risk

Maturity within 1 year

Maturity over 1 year

Cash Flow hedge as per IAS 39

1,853

11,116

Not considered hedges under IAS 39

2,768

7,805

Total derivatives on interest rates

4,621

18,921

Foreign currency risks

Maturity within 1 year

sales

purchases

sales

purchases

8,478

4,943

977

431

8,478

4,943

977

431

Fair Value hedge as per IAS 39

Considered hedges under IAS 39 - On commercial operations - On financial operations Not considered hedges under IAS 39 - On commercial operations - On financial operations Total derivatives on foreign exchange

131

The situation at December 31, 2009 is outlined below:

in Euro

Notional Value

Book Value

Interest rate risk

Maturity within 1 year

Cash Flow hedge as per IAS 39

915

6,550

Total derivatives on interest rates

915

6,550

Foreign currency risks

Maturity within 1 year

Sales

purchases

Sales

purchases

9,698

5,700

112

3,450

435

9,698

5,700

112

3,450

435

Fair Value hedge as per IAS 39 Not considered hedges under IAS 39

132

8 DISCLOSURE PURSUANT TO IAS 24 ON MANAGEMENT COMPENSATION AND RELATED-PARTY TRANSACTIONS The Group is indirectly controlled by the Casoli Family through Fintrack S.p.A. of Fabriano. Francesco Casoli, Chairman of Elica S.p.A., is the majority shareholder and Sole Director of Fintrack S.p.A., a holding company that does not carry out management and coordination activities in accordance with article 2497 and subsequent of the civil code. This conclusion derives from the fact that the majority shareholder does not carry out management activities within the company and, although exercising their voting rights at the shareholdersâ&#x20AC;&#x2122; meeting, does not exercise any managerial directives or have any involvement in the production and financial programmes. The Company therefore carries out its operations through a totally Name

autonomous and independent decision-making process. Gianna Pieralisi Casoli holds a life-time right of usufruct on 68.33% of the shares of Fintrack S.p.A., thus exercising control over the Issuer, pursuant to article 93 of the Consolidated Finance Act.

8.1 Remuneration of Directors, Statutory Auditors and Senior Management with strategic responsibility The remuneration of the above-mentioned parties is indicated below (in Euro thousands):

Office

Duration

Emoluments Nonmonetary benefits

Bonus and other incentives

Others

Francesco Casoli

Chairman of the Board of Directors

Acc. app 2011

341

100

154

Andrea Sasso

Chief Executive Officer

Acc. app 2011

111

180

602

Gianna Pieralisi

Executive Director

Acc. app 2011

161

Gennaro Pieralisi

Director

Acc. app 2011

Giovanni Frezzotti

Director

Acc. app 2011

Stefano Romiti

Director

Acc. app 2011

Fiorenzo Busso

Director

Acc. app 2011

11 10

280

756

Total

695

The bonuses have not yet been paid.

Name

Office

Duration

Corrado Mariotti

Chair. Board of Statutory Auditors

Acc. app 2011

Stefano Marasca

Statutory Auditor

Acc. app 2011

Gilberto Casali

Statutory Auditor

Acc. app 2011

Franco Borioni

Alternate Auditor

Acc. app 2011

Daniele Capecci

Alternate Auditor

Acc. app 2011

Total

The senior managers with strategic responsibilities in Elica S.p.A are the following: the Administration, Finance and Control Director, the Supply Chain Director, the B2B Commercial Director, the B2C Commercial Director, the Industrial Area Director, the Human Resource Director, the Marketing

Emoluments Nonmonetary benefits

124

and Innovation Director, the Elicamex General Manager, the Product Management Director and the ICT and Business Integration Director. Aggregate remuneration for 2010 amounts to Euro 1,524 thousand, in addition to Euro 425 thousand as bonuses not yet paid.

133

Bonus and other incentives

Others

8.2 Share-based payments Stock options assigned to the members of the Board of Directors and senior executives are listed below. Options assigned during the year Name

Office held

Number of options

Average exercise price

Andrea Sasso

CEO

Senior executives

Options held at the end of the year Average expiry

Number of options

Average Average exercise price expiry

62,333

Euro 5

31/12/2011

70,071

Euro 5

31/12/2011

The number of options held at year-end decreased on the previous year due to the exit from the Group of some beneficiaries. Stock grants assigned to the members of the Board of Directors and senior executives are listed below.

Stock grant allocated to the plan in the year

Stock grant matured at year-end

Name

Office held

Number of stock grant

Andrea Sasso

CEO

3,166,140

844,304

Senior executives

508,990

169,664

Others

140,000

46,676

In the column “Stock grant allocated to the plan”, we indicate the amount of shares which have been allocated in the year to plans, while in the column “Stock grant matured” we have indicated the number of these shares whereby the required condition matured in the year. These shares will be effectively allocated at the end of the vesting period, on the condition that the party remains in the company, as indicated also in the disclosure document published on the website www.elicagroup.com in the Investor Relations section.

134

8.3 Information on subsidiary companies The tables below show key data for subsidiaries and the amount of transactions entered into with them at and for the year ended December 31, 2010.

Subsidiary companies – key data according to local accounting principles: IN EURO THOUSANDS

Assets

Liabilities

Net equity

Elicamex S.a. dE C.V. Elica Group Polska Sp.zo.o

31,403

8,654

22,749

29,470

1,276

51,575

23,312

28,263

73,454

4,848

Airforce S.p.A.

8,005

6,166

1,839

17,798

101

Ariafina

6,812

3,259

3,553

15,594

1,134

Leonardo

Revenues

Net result

478

476

3,089

(41)

24,593

16,429

8,164

21,274

195

Elica Inc.

337

256

718

Airforce GE (*)

188

179

(20)

3,648

4,520

(873)

3,545

(959)

12,439

5,363

7,076

7,398

2,736

Exklusiv Hauben Gutmann GmbH

Elica PB India Private Ltd. Zhejiang Putian Electric Co. Ltd

Elica also has financial relations with Group companies as a result of loans made to them as part of a general plan to centralise cash management activities. These loans are interest bearing and at market rates. Transactions with consolidated companies have been eliminated from the Consolidated Financial Statements. As a result they are not reported in these notes.

8.4 Information on associated companies The table below shows the operating and financial amounts arising from transactions with associated companies for 2010. No separate indication of these positions was given in the financial statements as the amounts involved were limited. All transactions were conducted on an arm’s length basis in the ordinary course of business. The table below summarises key operating and financial data for associated companies, as derived from the companies’ financial statements in accordance with Italian GAAP and local GAAP for foreign companies.

Associated companies Summary data at December 31, 2010 IN EURO THOUSANDS

Registered office

% held

Share capital

Net equity

Net result

I.S.M. Srl

Cerreto d’Esi (AN)

49.385

1,996

(311)

Summary data at December 31, 2009 IN EURO THOUSANDS

Registered Office

% held

Share Capital

I.S.M. Srl

Cerreto d’Esi (AN)

49.385

135

Shareholders’ equity 2,328

Net result 177

(*) Airforce Germany HochleistungsDunstabzugssysteme Gmbh

Commercial transactions with associated companies IN EURO THOUSANDS

Payables

Receivables

Costs

Revenues

I.S.M. Srl

Total

8.5 Transactions with other related parties In 2010, transactions with other related parties took place. All transactions were conducted on an armâ&#x20AC;&#x2122;s length basis in the ordinary course of business. The table below shows the main operating and financial amounts arising from trading transactions with FASTNET S.p.A. (30% interest held by the parent company of Elica), with Roal Electronics S.p.A. (21.276% interest held by the parent company of Elica) and with Fintrack S.p.A. (company that indirectly controls the Parent Company, Elica S.p.A.).

Elica Group and FASTNET S.p.A. IN EURO THOUSANDS

31-DEC-09

31-DEC-10

Payables

Cost and Charges

Elica Group and Fintrack S.p.A. IN EURO THOUSANDS

31-DEC-09

31-DEC-10

1,017

1,013

Receivables Revenues and Income

Elica Group and Roal Electronics S.p.A. IN EURO THOUSANDS

31-DEC-09

Receivables Payables Revenues and Income Cost and Charges

The operating and financial balances arise from trading transactions conducted to purchase goods and services on an armâ&#x20AC;&#x2122;s length basis. The trading relationship with FASTNET S.p.A. forms part of a strategic partnership to develop projects and implement advanced technological solutions. These projects have accompanied and continue to accompany the growth of the business; from intranet solutions to extranet solutions, from wiring to wireless solutions, from software consultancy

31-DEC-10

1,048

1,137

3,107

3,275

to hardware consultancy and from training to web marketing. The transactions with Fintrack S.p.A. regard management and administrative/accounting services. It is noted that the receivable is related to the sale in 2007 of the shareholding in Roal Electronics S.p.A. The transactions with Roal Electronics S.p.A. relate to the supply of electronic control systems for equipment.

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9 Disclosure pursuant to article 149 of the CONSOB Issuer’s Regulation The following table, prepared pursuant to article 149 of the CONSOB Issuer’s Regulations, reports the payments made in 2010 for audit and other services

carried out by the audit firm and entities associated with the audit firm.

Type of service

Party providing the service

Company

Audit

Deloitte & Touche S.p.A.

Elica S.p.A.

Audit

Deloitte & Touche S.p.A.

Air Force S.p.A.

Audit

Deloitte & Touche S.p.A.

ELICAMEX S.A. de C.V.

Audit

Deloitte & Touche Sp.z o.o.

Elica Group Polska Sp.zo.o

Audit

Deloitte & Touche GmbH

Exklusiv Hauben Gutmann GmbH

Audit

Deloitte Touche Tohmatsu CPA Ltd. Zhejiang Putian Electric Co. Ltd

Other services

Deloitte Network

Elica Group Polska Sp.zo.o

Other services

Deloitte & Touche S.p.A.

ELICAMEX S.A. de C.V.

Total

Type of service

Party providing the service

Company

Audit

B S R and Co. (K.P.M.G. affiliated)

Elica PB India Private Ltd.

Total

10 Positions or transactions arising from exceptional and/or unusual transactions

260

9 435

Remuneration in Euro thousands 8 8

11 Events after the year-end For information on events after the year-end, reference should be made to the Directors’ Report.

In 2010, no operations classifiable in this category were recorded.

Fabriano, March 22, 2011

Remuneration IN EURO THOUSANDS

For the Board of Directors The Chairman Francesco Casoli

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Declaration of the Consolidated Financial Statements as per Article 81-ter of CONSOB Regulation No. 11971 of 14 May, 1999 and subsequent modifications and integrations The undersigned Andrea Sasso, as Chief Executive Officer, and Vincenzo Maragliano, Executive responsible for the preparation of the corporate accounting documents of Elica S.p.A., affirm, and also in consideration of article 154-bis, paragraphs 3 and 4, of Legislative Decree No. 58 of 24 February, 1998: ×× the accuracy of the information on company operations and ×× the effective application, of the administrative and accounting procedures for the compilation of the consolidated financial statements for 2010.

It is also declared that: the Consolidated Financial Statements: a) corresponds to the underlying accounting documents and records; b) were prepared in accordance with International Financial Reporting Standards adopted by the European Union and also in accordance with article 9 of Legislative Decree No. 38/2005; c) provide a true and correct representation of the economic, balance sheet and financial situation of the issuer and of the companies included in the consolidation. The Directors’ Report includes a reliable analysis on the performance and operating result as well as the situation of the issuer together with a description of the principal risks and uncertainties to which they are exposed.

Fabriano, March 22, 2011

The Chief Executive Officer Andrea Sasso

Executive responsible for the preparation of corporate accounting documents Vincenzo Maragliano

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AUDITORSâ&#x20AC;&#x2122; REPORT

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

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CONTACTS & CREDITS

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HEADQUARTERS

CONCEPT DESIGN & ART DIRECTION

Elica S.p.A. Via Dante, 288 60044 Fabriano (AN), Italia P. +39 0732 610 1 F. +39 0732 610 249 info@elica.com www.elica.com www.elicagroup.com

zup associati, Perugia

COORDINATION Investor Relations Manager Elica Laura Giovanetti

EDITING

MARKETING&INNOVATION

Ufficio Stampa Elica Lea Ricciardi

P. +39 0732 610 200 F. +39 0732 610 740

VISUAL SUPERVISING

INVESTOR RELATIONS

Communication Manager Riccardo Diotallevi

P. +39 0732 610 727 F. +39 0732 610 390

PHOTOGRAPHY

PRESS RELATIONS P: +39 0732 610 315 F: +39 0732 610 289

SHOWROOM

Studio 33, Pesaro Marco Fagioli Stefano Menconi

PRINTING CTS Grafica, CittĂ di Castello

Via Pontaccio, 10 20121 Milano (MI), Italia P. +39 02 72095812 Azuchimachi 3-5-12 Sumitomoseimei Honmachi Bldg 1f, Cyuou-ku, Osaka-shi, Osaka-fu, Japan 541-0052 P. +81 06 6265 2151

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