FINANCIAL STATEMENT 2011

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1 STATEMENT years led by your challenges

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4 INglass S.p.a. Financial Statements 2. INglass S.p.a. Consolidated Financial Statements 3

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6 INDEX INglass S.p.a. Financial Statements Balance sheet Profit and loss Explanatory notes to the financial statements for the year ended 31 december 211 Notes on the main items of the balance sheet Explanatory notes on the main items of the profit and loss Annexs Minutes of the ordinary shareholders meeting Board of statutory auditors report on the financial statements as at 31 December 211 Report on operations financial statements as at 31 December 211 Independent Auditors Report pag. 8 pag. 11 pag. 13 pag. 18 pag. 25 pag. 27 pag. 34 pag. 36 pag. 38 pag INglass S.p.a. Consolidated Financial Statements Balance sheet Profit and loss Explanatory notes to the consolidated financial statements as at 31 December 211 Comment to the main asset items Comment to the main liability items Comment to main profit and loss account items Annexs Report on operations consolidated financial statements as at 31 December 211 pag. 48 pag. 51 pag. 53 pag. 58 pag. 62 pag. 66 pag. 68 pag. 72 5

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8 1 AS AT 31 DECEMBER 211 COMPANY: REGISTERED OFFICE: SHARE CAPITAL: TREVISO REGISTER OF COMPANIES - REG. NO.: TREVISO ECONOMIC ADMINISTRATIVE REGISTER (R.E.A.) - REG. NO. TAX IDENTIFICATION NO.: VAT REG. NO.: INglass S.p.A. SAN POLO DI PIAVE (TV) - Via Piave 4 Euro 2.75., fully paid up

9 1. 1 BALANCE SHEET BALANCE SHEET - ASSETS A) RECEIVABLES FROM SHAREHOLDERS FOR CAPITAL CONTRIBUTIONS B) FIXED ASSETS I) INTANGIBLE ASSETS 2) Research, development and advertising costs 3) Industrial patents and intellectual property rights 4) Concessions, licenses, trademarks and similar rights 5) Goodwill 7) Other intangible assets Total intangible assets II) TANGIBLE ASSETS 1) Land and buildings 2) Plant and machinery 3) Industrial and commercial equipment 4) Other assets 5) Assets under construction and advances Total tangible assets III) ASSETS 1) Equity investments in: a) Subsidiaries b) Associated and affiliated companies d) Other companies 2) Receivables a) from subsidiaries d) from other parties Total financial assets TOTAL FIXED ASSETS

10 C) CURRENT ASSETS I) INVENTORY 1) Raw, ancillary and consumable materials 2) Work in progress and semi-finished products 4) Finished products and goods Total inventory II) RECEIVABLES 1) Trade receivables falling due within one year 2) From subsidiaries falling due within one year 3) From associated and affiliated companies due within one year 4-bis) Tax receivables falling due within one year 4-ter) Prepaid taxes 5) From others falling due within one year From others beyond one year Total receivables IV) CASH AND CASH EQUIVALENTS (AVAILABILITIES) 1) Bank and post office deposits 3) Cash and valuables on hand Total cash on hand TOTAL CURRENT ASSETS D) PREPAYMENTS AND ACCRUED INCOME Accrued income Prepayments TOTAL PREPAYMENTS AND ACCRUED INCOME TOTAL ASSETS

11 LIABILITIES AND SHAREHOLDERS EQUITY A) SHAREHOLDERS EQUITY I) SHARE CAPITAL III) REVALUATION RESERVE IV) LEGAL RESERVE VII) OTHER RESERVES a) Conversion reserve b) Other (merger reserve) c) Other (exchange gains) VIII) PROFIT (LOSS) CARRIED FORWARD IX) PROFIT (LOSS) FOR THE PERIOD Total shareholders equity B) PROVISIONS FOR RISKS AND CHARGES 1) Provisions for retirement pensions and similar obligations 2) Provisions for taxes, including deferred taxes 3) Other provisions Total provisions for risks and charges C) EMPLOYEE SEVERANCE INDEMNITY PROVISIONS D) PAYABLES 4) Due to banks within one year Due to banks beyond one year 5) Due to other lenders within one year Due to other lenders beyond one year 6) Advance payments 7) Trade payables falling due within one year 9) Payables to subsidiaries due within one year 1) Payables to assoc. companies due within one year 12) Taxes payable falling due within one year 13) Payables to social security inst. due within one year 14) Other payables falling due within one year Total payables E) ACCRUED LIABILITIES AND DEFERRED INCOME Accrued liabilities Deferred income Total accrued liabilities and deferred income TOTAL LIABILITIES AND SHAREHOLDERS EQUITY MEMORANDUM ACCOUNTS 1 Leasing fees Risk linked to receivables sold with recourse Sureties and guarantees provided Derivative financial instruments Total memorandum accounts

12 1. 2 PROFIT AND LOSS PROFIT AND LOSS A) VALUE OF PRODUCTION 1) Revenue from sales and services 2) Changes in inventories for work in progress, semi-finished and finished products 4) Increase in fixed assets for internal work 5) Other revenue and income - Other income Total value of production B) PRODUCTION COSTS 6) Raw, ancillary, consumable materials and goods 7) Services 8) Use of third- party assets (property not owned/ leases and rentals) 9) Personnel a) Wages and salaries b) Social security contributions c) Employee severance indemnity Total personnel costs 1) Depreciation, amortization and write-downs a) Amort. intangible assets b) Depr. tangible assets d) Write-down of receivables included in current assets Total depreciation, amortization and write-downs 11) Changes in inventories of raw and consumable materials 12) Provisions for risks 13) Other accruals 14) Misc. operating expenses Total production costs DIFF. BETWEEN VALUE OF PRODUCTION AND PRODUC. COSTS (OPERATING INCOME) C) INCOME AND EXPENSES 16) Other financial income d) from others from others (Associated and affiliated companies) 17) Interest and other financial expense - to others

13 bis) Profit and loss on exchange rates Total financial income and expense D) VALUE ADJUSTMENTS TO ASSETS 19) Write downs a) of equity investments Total value adjustments to financial assets E) EXTRAORDINARY INCOME AND EXPENSE 2) Income - other extraordinary income Total extraordinary income and expense PROFIT (LOSS) BEFORE TAXES 22) Income taxes for the period Current taxes Deferred taxes Prepaid taxes 23) PROFIT (LOSS) FOR THE PERIOD It is hereby certified that these financial statements are true and correct and correspond to the company s book-keeping entries. The Chairman of the Board of Directors Maurizio Bazzo 12

14 1. 3 EXPLANATORY NOTES TO THE FOR THE YEAR ENDED 31 DECEMBER 211 Field of activities The Company manufactures and sells moulds and injection systems (hot runners) intended primarily for the automotive sector. Group structure Company INglass S.p.A. is the holding company of the industrial group bearing the same name, with registered office in San Polo di Piave (TV), Italy, Via Piave No. 4. The relationships with subsidiaries, associates, with the parent company and the companies controlled by the latter are described later in these Notes. Layout and Contents of these Financial Statements These Financial Statements for the year ended 31 December 211 have been drawn up pursuant to the laws in force and are comprised of: - the balance sheet, prepared as envisaged by the provisions of arts and 2424 bis of the Italian Civil Code; - the profit and loss account, prepared as envisaged by the provisions of arts and 2425 bis of the Italian Civil Code; - these Explanatory Notes which provide the information required pursuant to Art of the Italian Civil Code, Leg. Decree n. 127/1991 and by other relevant laws, in addition to the information of any other source that was considered essential for a truthful and accurate representation of the Company s performance, even if not explicitly required by any legal provision in force. The above-mentioned documents were prepared pursuant to the rules and regulations applicable to the preparation of Financial Statements; these rules and regulations have been construed according to and integrated with the applicable accounting principles defined by Italy s National Boards of Chartered Accountants (Consigli Nazionali dei Dottori Commercialisti e dei Ragionieri) and by the Italian Accounting Body (Organismo Italiano di Contabilità -O.I.C.). The assessment criteria used to prepare the financial statements as at 31 December 211 are in line with those used to draw up the previous period s Financial Statements. For comparative purposes, the balance sheet and the profit and loss account also provide data for the financial year ending on 31 December 21. The annexed documents provide an overview of the Company s financial, equity and economic situation. A cash flow statement is also included (Annex 1). Please note that pursuant to Art ter of the Italian Civil Code, no items of the balance sheet or of the profit and loss account were compounded. Assessment criteria and accounting principles These financial statements have been drawn up pursuant to the principles of Art bis of the Italian Civil Code; details are provided hereafter: - individual items were valued on a prudential basis in view of the continuation of business activities in the future, bearing in mind the economic value of the considered asset or liability item; - the valuation considered risks and losses incurred in the year, including those that emerged after year-end. The following assessment criteria were implemented pursuant to Art of the Italian Civil Code, in addition to the accounting principles provided by the Italian Board of Chartered Accountants and by the Italian Accounting Body (O.I.C.): Intangible assets Intangible assets are entered at purchase or manufacturing cost, including any additional charges, and systematically amortised on a straight-line basis 13

15 taking into account their residual useful life. Assets were entered with the prior consent of the Board of Statutory Auditors, if so required by the law. The amortization periods adopted for the items included in intangible assets are shown below: Research and development costs Patent rights End-user licences for software applications Trademarks Goodwill Improvement of third-party assets 4 years 4 years 3 years 1 years 1 years 5 years The decision to amortise goodwill over 1 years takes into account the Company s field of business and its consolidated and long-standing presence on international markets where it operates with leading and reliable customers that bear witness to its stability. Research costs were booked in the profit and loss account in the period when they were incurred. With the prior consent of the Board of Statutory Auditors, development costs with long-term utility incurred in connection with a specific project are handled as capital costs when their future recovery is considered reasonably certain. After the initial recognition, these costs are taken into account to determine the operating results; amortization rates are calculated relative to the period in which revenues expected from the project will occur. According to the amortization schedule, costs will be amortized over a period of up to four financial years, at the latest. Industrial patents and intellectual property rights refer to clearly identifiable assets able to generate profits in the future; such rights are amortised according to the expected residual useful life of the asset concerned. Intangible assets are written down in case of any longlasting loss in value; should the reasons for the writedown cease to exist in subsequent financial periods, the original value of the asset is restored. Tangible assets Tangible assets are entered at purchase or construction cost, including any reasonably ascribable additional charges. Tangible assets are systematically depreciated on a straight line basis in each period according to economic and technical depreciation rates that take into account the asset s residual useful life; rates are halved in value for assets that have became available for use during the period. The following are the depreciation rates that were applied and deemed to be representative of the estimated residual useful life of the assets concerned: Buildings 3% Light construction 1% Machinery 15,5% General systems 1% Equipment 25% Electronic office machines 2% Office furniture and equipment 12% Transport vehicles 2% Cars 25% Notwithstanding the already calculated depreciation, tangible assets are written down when they suffer a long-lasting loss in value; should the reasons for the write-down cease to exist in the following financial periods, the original value of the asset would be restored. Please note that depreciable real property used in the business (buildings) was written up pursuant to the Italian Law Decree D.L. 185/28; no financial charges of items entered under assets were capitalised. Financial assets Equity investments in associated and affiliated companies included in the financial assets were entered at their acquisition or subscription price plus any directly attributable cost using the cost method. The book value of stakes held in participated companies was assessed to determine whether it was lower or higher than the portion of shareholders equity resulting from the last available financial statements of the company concerned. If the book value exceeded the shareholders equity and the decision was made to maintain such higher value, reasons were provided to justify said decision. If the analysis revealed a misalignment of a long- lasting nature between the carrying value of the equity investment and the corresponding portion of the shareholders equity, the carrying value of the investment was written down and provisions were made to cover losses resulting from any negative equity of the company concerned. Should the reasons for the write-down cease to exist in the following financial periods, the original value of the asset would be restored. Financial receivables are stated at their nominal value. Inventory Inventories were entered at the lesser of either purchase or manufacturing cost and their estimated salvage or replacement value. Raw, ancillary, consumable materials and goods are entered at the lesser of their purchase cost (calculated according to the average cost method) and their expected replacement value estimated on market trends at year-end. Contract work in progress was valued on the basis of the production costs incurred, obtained as a summation of direct production costs borne in the period and a percentage of other indirect production costs that can be reasonably ascribed thereto. Should this value, which also includes costs incurred to finish the goods, exceed the agreed contractual value, the latter is considered. Receivables Receivables are entered at their expected salvage value, net of any prudential write-downs and considering any single event that has occurred or that is expected to occur, based on certain and exact evidence, that may lead to a loss. Receivables sold with recourse are removed from the balance sheet and replaced with the amount of the advance received. The corresponding recourse risk is highlighted in the Memorandum Accounts and additional information, if needed, is provided in the Notes to the Financial Statements. 14

16 Cash and cash equivalents Cash and cash equivalents consist of bank deposit and cash balances and were entered at the nominal value of the sums available for the company at the end of the accounting period. Accruals and deferrals These items include expense or revenue common to two or more accounting periods and were entered based on actual accrual during the period: expense or revenue items were assessed from an accounting standpoint and matched to the periods in respect of which they were incurred. Provisions for risks and charges In application of the prudence and accrual basis accounting principles, provisions for risks and charges include the provisions made to hedge losses or debts of a specific nature which are known to exist or are likely to arise, but in connection to which, at the end of the financial year, the amount or the date of occurrence are still unknown. Provisions for risks and charges were made based on the best possible estimate at the time of drawing up these financial statements, using all points of information available. Risks giving rise to potential liabilities of no reasonably assessable amount were listed in a Supplementary Note, but no specific provision was made for them. Employee severance indemnity Provisions for employee severance indemnity (socalled fondo TFR) include all payables owed by the company to its employees as severance indemnity. The value of the item is determined in accordance with the labour legislation and the labour contracts in force, considering all forms of ongoing remuneration. It is reassessed based on the indicators set by applicable laws in force. As of 1 January 27, following the Italian legislative decree D.Lgs. 252/25 and its implementation decrees, rules governing the employee severance indemnity provisions have changed considerably. In particular, employees may choose whether to have severance indemnity payments made into an independent pension scheme of their choice or whether to let the company run a scheme for them (in this case the company shall make severance indemnity payments into a treasury account held by Italy s Social Security Institute INPS). TFR payables are entered at nominal value. Payables Payables are entered at nominal value based on economic and legal prudential criteria. Acknowledgement of revenue Revenue is shown net of returned goods, discounts, allowances and bonuses as well as net of taxes directly related to the sale of goods and the provision of services. Typical revenue derives from the manufacturing of goods according to a specific contract to be performed within less than one year. Revenue from sales is stated at the time title is transferred, typically after completion or delivery of the finished goods. Revenue from provision of services is acknowledged as of the date when services are delivered, or as of the date when payment for the services is collected. Financial revenues and revenues from regular lease fees are acknowledged on an accrual basis. Book entry of costs and expenses Costs and expenses were recorded on an accrual basis. Contributions For contributions proportioned to the purchasing of tangible or intangible assets, the recognised value will be later suspended and entered under the item Deferred income, in order to ensure the correct correlation with the depreciation or amortization values related to the assets in respect of which the contributions have been granted. Income taxes for the financial year Taxes were entered on the basis of an estimate of the taxable income pursuant to the applicable legislation in force. They are stated net of advances paid, deductions for taxes withheld and tax credit and are charged either to the Taxes payable item or to the Tax receivables item in the current assets according to their nature. Deferred and prepaid taxes Deferred or pre-paid taxes are calculated based on the temporary differences between the value of assets and liabilities entered in the statutory financial statements and their corresponding tax value according to the tax rates that are likely to be applied in the periods in which the temporary differences that have generated them will fall due. In particular for the evaluation of this effect, the current IRES (Corporate income tax) and IRAP (Regional tax on production activities) tax rates were applied of 27,5% and 3,9% respectively. Prepaid taxes, including tax concessions for fiscal losses carried over, were booked provided there was reasonable certainty about their future reimbursement. Liabilities for deferred taxes and receivables for prepaid taxes were entered, respectively, under provision for taxes and receivables for prepaid taxes. Risks, commitments and guarantees Risks, commitments and guarantees are listed in the memorandum accounts, stating their amount at period-end. Conversion criteria for items listed in foreign currencies Any receivables and payables that were originally stated in a foreign currency have been converted into Euro at the exchange rate applicable on the date in which the associated operations were performed and updated to the exchange rate applicable at periodend. Any exchange rate differences arising from updates that were accrued and not collected in the period are entered in the profit and loss account under item C17 bis and any net income is appropriated to the dedicated reserve that will not be distributed until collection. Exchange rate differences arising from receivables and payables in foreign currency are also entered in the profit and loss account under item C17 bis. 15

17 Exceptions pursuant to art. 2423, paragraph 4 of the Italian Civil Code No use was made of the exceptions envisaged by art. 2423, paragraph 4 of the Italian Civil Code because the evaluation criteria laid down by the legislator were deemed fit to provide a true and correct representation of the Company s assets and liabilities, financial and economic performance. Derivative financial instruments The Company uses financial instruments to protect profits from unfavourable fluctuations in interest rates and fluctuations in foreign currency exchange rates. Derivative contracts on interest rates and foreign currency exchange rates, entered into for the purpose of hedging exposure, generate effects on the profit and loss account, which correlate to those concerning the hedged debt instrument. Interest differentials paid during the year are shown under financial income and charges on an accrual basis. The fair value of derivatives contracts was determined according to generally accepted valuation models and techniques and is stated in the Notes. The notional value of outstanding contracts at year-end is stated in the memorandum accounts. Had the leasing operations been considered equivalent to goods purchased by means of a credit line provided by leasing institutes and had depreciation been carried out as for other technical fixed assets, then the shareholders equity would have been higher by approximately 37.- thousand Euro while the profit (loss) for the year would have been lower by approximately 5.- thousand Euro, net of the associated tax effect. The information required pursuant to item 22 of Art of the Italian Civil Code is provided below (amounts are expressed in thousands of Euro): Leasing operations Operating assets acquired through leasing contracts are entered in the Financial Statements in accordance with the accounting principles laid down by applicable legislation in force requiring lease fees to be considered as operating costs. ASSETS: a) Current contracts: Leased assets at the end of the previous year, net of total depreciation and amortization at the end of the previous year + Leased assets acquired during the year - Net value of leased assets redeemed and transferred during the year - Amortization and depreciation for the year LEASED ASSETS AT YEAR-END b) Redeemed assets Overall higher value of the assets redeemed, as determined by the finance method, compared to book value at year-end LIABILITIES: Implicit debt for leasing operations at the end of the previous year + Implicit debt incurred during the year - Reimbursement of capital shares and redemptions during the year - Reimbursement of advance fees c) Current value of leasing fees not due at year-end - of which due in the next period - of which due after next year-end within 5 years - of which due beyond 5 years d) Total gross effect at year-end (a+b-c) e) Tax effect f) Effect on the Shareholders equity at year-end (d-e) (1.46) (95) (6)

18 EFFECTS ON THE PROFIT AND LOSS ACCOUNT Write-off of fees related to leased goods Interest payable for the period Depreciation and amortization in the period Effect on the results before taxes Assessment of the tax effect Effect on the net profit (loss) for the period 1.69 (13) (1.46) (8) 25 (55) Relations with related parties and offbalance-sheet agreements The Company s transactions with related parties in FY 211 involved primarily the transfer of goods, provision of services and contribution of assets to associated and affiliated companies. All transactions occurred at market conditions. Below is an overview of the main equity, financial and economic highlights concerning relationships with the subsidiaries and associated companies: Description Receivables from customers Finance receivables Payables to suppliers Revenue Costs HRS Flow do Brasil HRS France HRS GmbH HRS Hot Runner Systems NA HRS Hong Kong INglass HRS Makine Kalip INglass Tooling & HR China Total subsidiaries SCC Iberica Solar4Life S.r.l Total associated companies The Company has not entered into any off-balancesheet agreements whose mention is required to assess the equity, financial and economic performance of the Company. Other disclosures Consolidated Financial Statements Event though the Company holds majority stakes in a number of subsidiaries, pursuant to art. 27, paragraph 3, of the Italian legislative decree D.Lgs. 127/1991 it is under no obligation to draw up the Consolidated Financial Statements, since the latter are prepared by parent company Deimos S.r.l. 17

19 1. 4 NOTES ON THE MAIN ITEMS OF THE BALANCE SHEET ASSETS ITEM B I) INTANGIBLE ASSETS The amount of intangible assets at year-end was Euro (Euro FY 21). Changes recorded by this item during the year are illustrated in Annex 2. The most remarkable increase in this item is linked to research and development costs- whose capitalisation for the year amounted to Euro as a result of the decision to capitalise costs connected to the HRSflow MULTITECH project. beginning of 212. The sum of Euro under advances refers to a deposit for the purchase of the building area located next to the current production plant. A draft agreement was entered into to that end. ITEM B-III) ASSETS At year-end financial assets amounted to Euro (Euro in FY 21) and included: ITEM B-II) TANGIBLE ASSETS The total net value of tangible assets at year-end was (Euro in FY 21). Changes during the accounting period are shown in Annex 3 to these Financial Statements. Assets under construction and advances include under advance payments - Euro Euro for costs incurred at the end of the financial year for the purchase of a piece of machinery that turned out not to be suitable for the Company s business needs and, therefore, was returned to the supplier at the (in units of Euro) Equity investments in subsidiaries: HRS France HRS Hot Runner Systems NA INglass Tooling & HR China HRS Flow do Brasil HRS GmbH HRS Hong Kong 86 INglass HRS Makine Kalip Total Equity investments in associated companies: 18 SCC Iberica Solar4life S.r.l. Synesis S.r.l. Key Automation S.r.l. Total

20 Equity investments in other companies: Banca Credito Coop. Prealpi Banca Popolare di Vicenza Veneto Banca Total Receivables From subsidiaries Other receivables Total Details and changes in equity investments are listed in Annex 4/5 to these Financial Statements. The carrying value of the stake in the company governed by Chinese law (Inglass Tooling & Hot Runner Manufactoring China Co. Ltd) was restored for Euro 175., thus offsetting the partial writedown made in previous years. The Directors based their decision to restore the carrying value of the investment on the positive results achieved by the subsidiary in recent years. At year-end the capital authorised by the Chinese authorities was therefore totally freed up in the amount of Euro , of which INglass S.p.A. holds 65,79% while SIMEST S.p.A. s overall contribution (pursuant to Italian Law 1/9) accounts - directly and indirectly for the remaining 34,21% of the Chinese company s share capital. Also the value of the equity investment in HRS Hong Kong LTD was restored to Euro 86, leading to a corresponding reversal of provisions for losses made last year. The stake in the French subsidiary (HRS France) was fully written down and the risk provisions to cover the negative equity associated with it were increased. Accordingly, the specific risk provisions were adjusted to Euro , in order to take into account the French subsidiary s negative equity. Please see the table attached for more details. During FY 211 the carrying value of the stake in the Brazilian subsidiary (HRS Flow do Brasil) was increased to Euro as a result of the transformation of certain trade receivables, amounting to Euro , into capital contributions of the subsidiary. For a residual part (Euro ) the carrying value grew as a result of a capital increase in cash. However, as at 31 December 211 it was necessary to write down Euro in order to adjust the carrying value of the investment to the corresponding portion of shareholders equity of the subsidiary,. Equity investments in the Canadian, German and Turkish subsidiaries remained unchanged. The purchase of the stake in Key Automation S.r.l. is part of the Company s business diversification strategy through the acquisition of know-how and technologies in contiguous areas. The amount reported in the Financial Statements is compliant with the subsidiary s shareholders equity booked at year end. The equity investment in Banca di Credito Cooperativo Prealpi remained unchanged, while new stakes were acquired in Banca Popolare Vicentina and Veneto Banca. Receivables from subsidiaries are non-interest bearing loans. For details, please refer to the table concerning relationships with related parties of these Notes Long term receivables from others refer to receivables from the insurance company for directors severance indemnities (Euro ) and to the bank deposit of Euro that was pledged to back the bank guarantee issued to SIMEST S.p.A. for the China project (Italian Law 1/9) that will reach maturity on ITEM C-I) INVENTORY This item includes inventories of raw, ancillary, consumable materials and goods (the latter are control units, and are entered separately) in addition to work in progress and semi-finished products and amounted to Euro (Euro in FY 21). It can be broken down as follows: 19

21 Raw materials and consumables Work in progress and semi-finished products Finished products and goods balance at balance at Total The increase in inventories is linked to an increase in turnover, with the Company buying raw materials for new orders and the completion of work in progress. ITEM C-II) RECEIVABLES C-II-1) Trade receivables : amounted to Euro (Euro in FY 21).These are all receivables falling due within the next financial year and are broken down as follows: Crediti verso clienti Rettifiche adeguamento cambi F.do svalutazione crediti balance at (65.999) balance at ( ) Net amount Trade receivables are broken down as follows (amounts in thousands of Euro): Italian customers: Euro ; EU (European Union) customers: Euro ; Non EU customers: Euro This item is net of invoices issued for customer advances not yet collected at year end (Euro thousand). Please note that at 31 December 211, following sales made with recourse procedures, trade receivables amounting to Euro were cancelled from the Financial Statements. The corresponding recourse risk is shown separately in the Memorandum Accounts.Provisions for bad and doubtful accounts changed as follows during the year: Opening balance at 1/1/21 Use during the year Provisions for the period (85.134) Balance at 31/12/ During the year losses on receivables amounted to Euro 85.- thousand, and were fully offset by provisions for bad debts. Directors decided to appropriate Euro thousand to the provisions for bad and doubtful accounts after specifically assessing accounts receivable, taking into account the risk of insolvency and past experience with losses on receivables, as well as the current eco- 2

22 nomic and financial situation. C-II-2) Receivables from subsidiaries came to Euro (Euro in FY 21); please refer to the table that illustrates relationships with related parties contained in these Notes for a detailed overview of the receivables from subsidiaries. C-II-3) Receivables from associated companies totalled Euro (Euro in FY 21); please refer to the table that illustrates relationships with related parties contained in these Notes for a detailed overview of the receivables from associated companies. C-II-4-bis) Tax receivables This item posted Euro (Euro in FY 21) and refers to miscellaneous taxes receivable. The largest component is represented by VAT receivables for Euro C-II-4-ter) Prepaid taxes This item was booked under tax assets pursuant to the national accounting principle n. 25, for Euro Prepaid taxes (IRES - Corporate income tax ; IRAP - Regional corporate tax) and associated tax effects Prepaid taxes Temporary differences Tax effect (31.4% or 27,5% rate ) Temporary differences Tax effect (31.4% or 27,5% rate ) Entertainment expenses Product Warranty Fund Provisions for doubtful accounts Goodwill amortization Trademark amortization Depreciation of building Provisions for risks Total prepaid taxes

23 This item decreased by Euro due to the recovery of differences allocated in previous years. Please note that Directors decided not to make any allocation of deferred tax assets on temporary differences which have arisen in the current year (mainly provisions for bad and doubtful accounts and provisions for risks and charges). The amount stated in this item is expected to be recovered beyond one year. C-II-5) Other receivables amounted to Euro (Euro in FY 21). The decrease of Euro is mainly attributable to the collection of receivables from Italy s Ministry of Education (MIUR) for research contributions. As at 31 December 211 this item includes accounts receivable within the following accounting period for Euro , while the amount falling due after the following financial year is Euro (securities). ITEM C-IV) CASH AND CASH EQUIVALENTS (AVAILA- BILITIES) This item totalled Euro (Euro in FY 21) and represents a temporary cash surplus at year-end available in bank deposits or as cash in hand. ITEM D) PREPAYMENTS AND ACCRUED INCOME Accruals amount to Euro (Euro in FY 21) and refer to prepaid expenses. Prepayments amount to Euro (Euro in FY 21); this item consists primarily of costs for lease agreements that will be charged to future financial periods, in addition to insurance policies and customer service and maintenance agreements. No significant amounts fall due after the following year-end. LIABILITIES ITEM A) SHAREHOLDERS EQUITY Changes in this item s sections and the overview required by Art. 2427, no. 7-bis of the Italian Civil Code are detailed in Annex 5 to these Notes. Here is a detailed overview of the item: I. Share Capital: Euro , consisting of shares for a nominal unit value of 1..- Euro each; this item remained unchanged over FY 21; III. Revaluation reserve: Euro ; this item remained unchanged as compared to the previous year. The reserve, which complies with Italian Law Decree D.L. 185/28, resulted from the write-up of the industrial building; the higher values booked were considered for tax purposes; IV. Legal reserve: Euro This item increased by Euro due to the result allocation of FY 21 VII. Other reserves: Euro This includes the merger reserve created during FY 29 (Euro ) and the reserve pursuant to art. 2426, paragraph. 1, no. 8-bis of the Italian Civil Code (Euro ); VIII. Profit (loss) carried forward: Net profit carried forward amounted to Euro and grew due to the result allocation of FY 21; IX. Profit for the year: Euro ITEM B) PROVISIONS FOR RISKS AND CHARGES 1) Provisions for retirement pensions and similar obligations: this item totalled Euro and consists of the provision for supplementary clientele indemnity related to agency agreements that were ongoing at year-end (Euro ), and of the provisions for the executives severance indemnity (Euro ). Changes are shown below: Balance at 1/1/211 Use during the period Provisions for the period Balance at 31/12/ ) Provisions for taxes, including deferred taxes: this item amounted to Euro as a result of the following changes: Balance at 1/1/211 Use during the period Entries for the period Balance at 31/12/ ( ) Provisions decreased both as a result of taxation on research grants received during FY 211, as described above, and as a result of the recovery of expected foreign exchange gains recorded in the previous year; the increase for the year refers to the allocation of deferred tax liabilities on expected foreign exchange gains for the current year. 3) Other provisions for risks amounted to Euro , and included: Product Warranty Fund: Euro This item increased by Euro 1..- over the previous year. In accordance with the prudence concept, the Company decided to adjust the value of previously appropriated funds following the increase in turnover. Provisions to cover shortfall in own funds: this item amounted to Euro and is comprised of provisions made to meet the shortfall in own funds of the French subsidiary resulting from the losses incurred by the latter. The change over the previous year is due to a reallocation of funds to cover losses linked to a write-down of the carrying value of certain subsidiaries and associated companies. Funds for risks: Euro 2..-, this item increased by Euro compared to the previous FY as a result of the need to deal with some potential charges derived from observations put forward by the Tax Authorities (Agenzia delle Entrate) following tax inspections performed during 21 and concerning FY 25 and 26 and 28. ITEM C) EMPLOYEE SEVERANCE INDEMNITY PROVI- SIONS (TFR FUND) At year-end this item amounted to Euro

24 The following changes were recorded during the year: Opening balance of TFR fund Use for payment of employee severance indemnity or transfer to schemes Increase due to appropriations and/or write ups TFR fund balance at 31/12/211 The average number of Company employees was as follows: White-collar workers Blue-collar workers Managers Total ITEM D) ACCOUNTS PAYABLE D-4) Due to banks Amounts owed to banks amount to Euro (Euro in FY 21). and are predominantly variable rate loans. The Company decided to hedge part of the risk resulting from interest rate oscillations through derivative contracts described below in the Memorandum Accounts section. Short-term items include advances on credit lines (Euro ) and amounts due for mortgage loans falling due during FY 212 (Euro ). Debts falling due beyond five years totalled Euro and are secured by a mortgage on the industrial building owned by the Company. A medium-long term loan agreement signed in FY 21 includes contract clauses that require compliance with certain economic/ financial parameters (covenants) based on the results of the financial statements as at 31 December of each year. Results presented in the financial statements as at 31 December 211 reveal that in FY 211 the equity and economic ratios defined in the loan agreement were complied with. D-5) Due to other lenders This item totalled Euro (Euro in FY 21) and is entirely ascribable to a subsidised loan received from MIUR (Italian Ministry for University and Research) for a research project. The loan is repayable in six-monthly instalments, at variable subsidized rate, reaching maturity in FY 216. The amount falling due beyond the next FY is Euro D-6) Advance payments These are down payments received from customers; at year-end they amounted to Euro (Euro in FY 21). The geographical breakdown of this item is as follows (amounts in thousands of Euro): EU down payments: Euro 54.-; (96.92) Non-EU down payments: Euro D-7) Trade payables Trade payables amount to Euro (Euro in FY 21) and include debts arising from the purchase of goods and services to be used in the manufacturing process. These items fall due during the next financial year. The geographical breakdown of trade payables is shown below (amounts in thousands of Euro): Italian suppliers: Euro ; Foreign suppliers: Euro D-9) Payables to subsidiaries This item was worth Euro (Euro in FY 21) and refers primarily to services provided by subsidiaries. For a detailed overview of the payables to subsidiaries item, please refer to the table that illustrates relationships with related parties contained in these Notes. D-1) Payables to associated companies These are amounts due for marketing services received and totalled Euro (Euro in FY 21). For a detailed overview of the payables to associated companies item, please refer to the table that illustrates relationships with related parties contained in these Notes. D-12) Taxes payable Total taxes payable amounted to Euro (Euro in FY 21), entirely falling due by the end of the following financial year. The item is comprised mainly of amounts withheld (withholding tax), taxes due for the period, net of advances paid, of which IRES for Euro thousand and IRAP for Euro thousand. D-13) Payables to pension and social security institutions Amounting to Euro (Euro in FY 21) these payables include mainly amounts payable to INPS (Italy s National Social Security Institute) for the December contributions and amounts due to INAIL (Italian National Institute for Work Insurance) that will be paid in the first months of the next period. There are no pending disputes with any social security or insurance institutions. D-14) Other payables Other payables amount to Euro (Euro in FY 21) and refer mainly to payables to employees for December 211 s salaries and wages settled in January 212 and to payables for accrued but untaken holiday as of 31 December 211 and bonuses payable to employees for the year 211. ITEM E - ACCRUED LIABILITIES AND DEFERRED IN- COME Accrued liabilities amount to Euro (Euro in FY 21) and they refer both to interests payable on financing and to the adjustments of insurance policies. Deferred income, for a total of Euro (Euro 23

25 in FY 21) refers to the deferral of part of the research contribution in order to establish a correlation with the depreciation or amortisation of assets for which the contribution was granted. The part falling due beyond the following financial year but within the next 5 years - amounts approximately to Euro 8.- thousand. ACCOUNTS, COMMITMENTS, RISKS AND OTHER ME- MORANDUM ACCOUNTS Memorandum accounts These are liabilities arising from financial leasing agreements which were valued taking into account the value of residual fees at year-end including the agreed redemption price at maturity. Liabilities for sureties and bank guaranties in favour of the Company are included. Please note that some bank guarantees were issued in favour of the Company s customers to guarantee the deposits received from them and their guaranteed performance for a total of Euro As a countermeasure to highly variable financial charges, in recent years the company signed some derivative contracts, namely: - hedging contracts (interest rate swap-irs) directly linked to unsecured loan contracts and/or lease contracts in place, whereby the company can take a variable rate and pay a fixed rate. - Contracts to hedge the risk of exchange rate fluctuations in respect of specific future supplies. - Pursuant to Article 2427-bis of the Italian Civil Code, in addition to the main elements of the contracts, the table below indicates the fair value of interest rate swaps and currencies, as calculated by the issuer: Type of contract Notional amount as at Difference against market value as at al 31/12/211 Date of signature Maturity IRS IRS IRS IRS IRS CURRENCY CURRENCY (1 (5.978) (3.27) (74.268) (53.96) 3/7/28 5/2/21 16/2/211 27/6/211 5/1/211 14/11/211 14/11/211 8/7/213 17/1/213 18/2/216 3/6/216 17/12/213 26/9/213 26/9/213 24

26 1. 5 EXPLANATORY NOTES ON THE MAIN ITEMS OF THE PROFIT AND LOSS ACCOUNT ITEM A 1 - REVENUE FROM SALES AND SERVICES Revenue from sales and services, net of discounts, allowances and bonuses, amount to Euro This item can be broken down as follows (amounts in thousands of Euro): Sales and services Italy: Euro ; Sales and services EU: Euro ; Sales and services non-eu: Euro ITEM A 4 INCREASE IN FIXED ASSETS FOR INTER- NAL WORK This item amounted to Euro and results from the capitalisation of costs relative to expenditure on research and development for the HRSflow MUL- TITECH project. ITEM A 5 - OTHER REVENUE AND INCOME This item amounted to Euro It includes capital gains (Euro 35.- thousand), contingent assets (Euro 22.- thousand). Euro 71.- thousand refer to grants for study and research expenses (namely for the MIUR project pursuant to the Italian Ministerial Decree DM 11/7/26) in the amount of amortization accrued in the period. ITEM B 6 RAW, ANCILLARY, CONSUMABLE MATE- RIALS AND GOODS Services by third parties Utilities, insurance and maintenance Transport Technical consulting services Commercial costs Administrative costs Other costs of services Total This item also includes the gross remuneration for the Managing Board (approximately Euro ), the remuneration for the Board of Statutory Auditors (Euro ) and for the Audit Firm (Euro ). ITEM B 8 - USE OF THIRD-PARTY ASSETS (PROPERTY NOT OWNED)/ LEASES AND RENTALS This item includes: Leasing fees Real estate rental Other This item is broken down as follows: Total Purchase of raw materials Purchase of consumables and packaging Other purchases Total ITEM B 7 - COST OF SERVICES This item is broken down as follows: ITEM B 12 PROVISIONS FOR RISKS This item totalled Euro and is comprised of prudential provisions for any costs that might be incurred as a result of the tax inspection occurred in 21 (Euro ) and provisions for the Product Warranty Fund (Euro 1..- ) both previously commented under Provisions for risks and charges of these Notes. ITEM B 13 - OTHER PROVISIONS These include the Directors Severance Indemnity provisions. 25

27 ITEM B 14 OTHER OPERATING EXPENSES This item amounts to Euro and includes all costs not entered under the previous items, namely misc. taxes, contingent liabilities and misc. expenses. ITEM C - INCOME AND EXPENSE C-16) Other financial income This item includes interest receivable for Euro of which Euro 5..- from associated companies. C-17) Interest and other financial expense This item amounts to Euro and includes interest payable and bank charges, of which Euro thousand are related to the costs of medium-long term financing. C-17-bis) Profit and loss on exchange rates This item includes: Exchange rate profit Expected exchange rate profit Exchange rate loss Expected exchange rate loss Total (15.24) (21.17) ( ) (Euro/thou.) Profit (loss) before taxes Theoretical taxes (*) Actual taxes The difference is due to: 1) IRAP(Regional tax on production activities) 2) Net temporary differences 3) Net permanent differences Total difference (*) Theoretical taxes calculated by applying the IRES (Corporate income tax) rate of 27,5%. OTHER DISCLOSURES The only write-up performed during the year refers to a company building in accordance with the Italian Law Decree DL 185/28. No other asset was written up. No capitalization of finance costs was undertaken for asset items. Furthermore, no receivables fall due beyond five years. From the end of the accounting period to date, no event has occurred that may undermine the reliability of the represented state of the Company s financial and accounting position. % 1, 27,5 48,47 12,15 3,21 5,61 2,97 ITEM E 22 INCOME TAXES FOR THE PERIOD This item included: Current taxes Deferred taxes Prepaid taxes ( ) (1.192) Total ( ) Taxes for the period are determined taking account deferred tax receivables and payables arising in the year. Deferred tax payables refer to revenue accrued in previous years and taxed during FY 211 and net income for FY 211 to be taxed in the following years. The following table shows the reconciliation between the actual and theoretical tax charges: San Polo di Piave, 5 May 211 On behalf of the Board of Directors The Chairman (Maurizio Bazzo) 26