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2013 CONSOLIDATED FINANCIAL STATEMENTS

2 2013 Consolidated Financial Statement Elica Group

32013 Consolidated Financial StatementElica Group 2013 Consolidated Financial Statement Elica Group

DIRECTORS’ REPORT

4 The Elica Group today4 Letter to the shareholders5 Chief Executive Officer’s view7 2013 Economic overview and Outlook 20149 Currency markets9 IAS/IFRS10 Financial Highlights15 Financial and operating review18 Reconciliation between Parent Company and Consolidated net equity and net profit 20 Elica S.p.A. and the financial markets21 Significant events in 201323 Information relating to the environment23 Information relating to personnel24 Exposure to risks and uncertainty and financial risk factors25 Corporate boards26 Elica Group structure and consolidation scope27 Elica Group Inter-company and other related-party transactions29 Corporate governance and ownership structure report29 Remuneration Report30 Events after December 31, 2013 and outlook31 Compliance pursuant to Section VI of the regulation implementing legislative decree No. 58 of February 24, 1998 concerning market regulations (“Market Regulations”)31 Obligations in accordance with Article 70, paragraph 8 and Article 71, paragraph 1-bis of the “Issuers’ Regulation”

FINANCIAL STATEMENTS

33 Consolidated Income Statement34 Consolidated Comprehensive Income Statement35 Consolidated Balance Sheet36 Consolidated Cash Flow Statement38 Statement of changes in Shareholders’ Equity40 Notes to the Consolidated Financial Statements at December 31, 2013

147 Disclosure pursuant to Article 149 of the CONSOB Issuer’s Regulation

148 Declaration of the Consolidated Financial Statements as per Article 81-ter of CONSOB Regulation No. 11971 of May 14, 1999 and subsequent modifications and integrations

150 List of holdings in non-listed companies, including foreign, of over 10% at the reporting date

CONTENTS


THE ELICA GROUP TODAY

The Elica Group has been present in the cooker hood market since the 1970s, is chaired by Francesco Casoli and led by Giuseppe Perucchetti and today is the 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. With approximately 3,000 employees and an annual output of over 17 million units, the Elica Group has nine plants, including in Italy, Poland, Mexico, Germany, India and China. With many years’ 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 the Elica Group the prominent market figure it is today. The Group has revolutionised 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.

LETTER TO THE SHAREHOLDERS

Dear Shareholders,

2013 was marked by persistent economic and financial uncertainty. The marketplace continually demands key choices be made and the current crisis of confidence - which has impacted all sectors – presents an even greater challenge. The Elica Group however has managed in these circumstances to achieve overall revenue growth and to strengthen its global leadership, also through consolidation internationally. Our focus on governance in protection of shareholders’ interests on the one hand - and our corporate culture on which our responsible and open outlook is based on the other - have established Elica as a reliable, respected and strong Group - a Group which creates value for all our stakeholders. We have continued to invest in World Class Manufacturing - generating benefits in terms of production efficiency, cost reduction and improved workplace safety. We have placed an even greater focus on multiculturalism in the belief that diversity creates a more cohesive and competitive entity.We have maintained our commitment to the environment through improved products and processes - both in terms of production and logistics and delivering also financial benefits.We continue to believe in innovation and in design. Our products - serving clients and customers throughout the world - are the epitome of functionality, efficiency and quality. Our commitment to the ongoing creation of value for all our stakeholders encompasses the entire Elica Group. Our industrial and qualitative standards and benchmarks must however remain the same: excellent. They have positioned us as the recognised and renowned entity we are today and if we are to look to the future with confidence we must continue on this path.

Francesco CasoliExecutive Chairman

52013 Consolidated Financial StatementElica Group

CHIEF EXECUTIVE OFFICER’S VIEW

In 2013 Elica achieved excellent results and strengthened its basis for growth, even within a highly competitive environment in which a number of significant markets - such as those in Europe - continue to decline and present significant challenges. Based on an extensive ability to innovate and significant optimisation of the production base, Elica fully achieved all 2013 performance objectives, with consolidated revenue growth of 4.2% (+1.8% at like-for-like exchange rates), a significant improvement of the operating margin - increasing EBITD1 to Euro 28,9 million - and a reduction in the Net Debt to Euro 56,7 million. Elica confirmed its global sector leadership not just through expanding business volumes - but also through completing a number of fundamental steps in its long-term growth strategy. Elica’s central competitive advantage is product leadership. Ongoing research and development investment, supporting the design of the best products on the market in terms of design innovation, functionality and quality, is behind a product range of over 230 new range hood models, representing approx. one-third of segment revenues.In particolare lo sviluppo di modelli distintivi ed esclusivi a marchio proprio ha accresciuto l’identità e la riconoscibilità di Elica dando forte impulso all’espansione dei ricavi.In particular, the development of unique and exclusive own brand models have built the identity and recognition of Elica and driven revenue growth.Once again in 2013 the models which closest embody our innovative approach were recognised, with the 35cc accredited by the ADI Design Index, the Tiffany receiving the prestigious Reddot Design Award, the Sweet receiving the Interior Innovation Award and the SKIN the German Design Award.We also highlight the important work carried out in terms of brand identity, which further builds and strengthens our image in the eyes of the end consumer. This sharp focus on the brand has generated very positive results, with Elica brand revenues growing 10% in 2013.Investment in innovation also in our logistical/productive processes was escalated in the year, extending the World Class Manufacturing (WCM) programme to the Polish and Mexican production sites. These methodologies have already resulted in significant cost reductions and production efficiencies at the Italian production sites, while simultaneously improving employee safety. The goal is to further improve these performances and extend them to all international production sites, creating an increasingly integrated global value chain - from purchasing to logistics and from production to distribution.Elica’s global presence has opened up the extensive potential of international markets and therefore boosted growth. In 2013 sales in the Americas increased 15%, in the Rest of the world 16% at like-for-like exchange rates - with Europe substantially stable despite continued difficulties within a number of core markets (Italy, Spain and Portugal). Elica continues to invest in key European markets, where growth is forecast despite market decline, with penetration improved through a number of specific distribution channels. In particular, towards the end of the first quarter of 2014 a new commercial structure will be launched in France, establishing a presence throughout the country and guaranteeing an improved level of service to the third largest market. In order to outperform the competition it was essential for the company to prepare its organisational structure for overseas development, while also opening up to multi-culturalism and improving upon the skills necessary to succeed in such an environment, investing resources in both areas. From a productive standpoint, Elica

1 Before restructuring charges.


has chosen to serve the market through a ‘local for local’ approach, ensuring quicker decisions and improved flexibility in highly competitive and dynamic markets. This is behind the Restructuring and Reorganisation Plan implemented in the second half of 2013 involving both the Italian and overseas companies. The costs of the Plan had a significant impact on the 2013 Net Result, although over the medium/long-term it will strengthen the Company’s development potential and assist the achievement of our pre-fixed objectives.Encouraged by the excellent results achieved in 2013 in terms of growth and profitability, we will continue to pursue the guiding principles of our strategy, extending product leadership, accelerating global growth, strengthening value chain integration and continually optimising the organisational structure. Lastly but not leastly, in 2013 work began on the creation of a new product line entitled beyond the core, designed to penetrate new potential markets, based on Elica’s traditional business of air treatment - in particular air ventilation, filtration and purification.These new product classes, benefitting from the core technologies and know-how of the Elica tradition, enable the company to enter new consumer segments - and not necessarily confined only to the kitchen. They will be presented at Eurocucina 2014. On the basis of these commitments, we expect in 2014 to increase Consolidated Revenues by between 1% and 3%, the margin2 by between 4% and 7% and to reduce the Net Debt to Euro 52 million.

Our focus is to extend our recognition as the undisputed leader in the treatment of air through our ongoing commitment - creating exceptional value for our stakeholders.

2 Consolidated EBITDA before restructuring costs.


2013 ECONOMIC OVERVIEW AND OUTLOOK 2014

The slow exit from Eurozone recession began in 2013 with a gradual easing of the sovereign debt crisis. In July the ECB3, introduced qualitative forward guidance as an unconventional monetary policy instrument, with a commitment expressed to maintain the current low interest rates (or even lower) for an extended period of time. The guidance contributed to keeping money market rates and government bond yields under control.GDP4 in the Eurozone in 2013 reduced by 0.4% on 2012, with contained growth in Germany and France (respectively +0.5% and +0.2% on 2012) and continued recession in Italy and Spain (respectively -1.8% and -1.2% on the previous year). The consumer price index rose in the Eurozone by 1.4% on 2012.The most recent IMF5 estimates indicate growth for Eurozone GDP in 2014 of 1.0%, following two years of contraction, with the recovery extending also to countries such as Italy and Spain which have remained in recession to date. Inflation is expected to remain closer to 1% than to 2% over the next two-year period.In the United States, GDP in 2013 grew 1.9% against a consumer prices increase of 1.5% compared to 2012. The key event of 2013 was undoubtedly the announcement by the now former Chair of the FE6 Bernanke of a tapering according to the following timeframe: initiation by the end of 2013 and conclusion around the middle of 2014.The Federal Reserve is expected to gradually phase out bond purchases during 2014, maintaining however a wide base monetary supply in terms of system requirements. This policy will certainly result in increased medium/long-term interest rates. While in the Eurozone and Japan the effect will be partially offset by interest rate differential movements, in the emerging markets it may add to volatility.In 2014 GDP growth of 2.8% is forecast, with the consumer price index increasing 1.6%.The Japanese economy reported growth in 2013 of 1.7%. The Japanese recovery is well consolidated, thanks also to monetary stimulus and weakening exchange rates. The BoJ7 prosegue sul sentiero di stimolo quantitativo e qualitativo, attuato attraverso l’aumento della base monetaria di 70 trilioni di Yen giapponesi ogni anno, almeno fino a quando l’inflazione non sarà salita fino all’obiettivo del 2.0% (fine 2015).In China in 2013 GDP grew 7.7%; in 2014 further economic growth is forecast at 7.5%.The latest proposed reforms will surely assist more balanced and sustainable growth over the long-term, while in the short-term a number of reforms, such as the liberalisation of energy and public service prices, may temporarily slow growth and drive inflation.Indian GDP grew by 4.4% in 2013, with further growth of 5.4% expected in 2014.In relation to the Emerging countries, 2013 saw overall GDP growth of 4.7%. The latest IMF estimates predict growth in 2014 of approx. 5.1%Commodityin 2013 reported slight decreases, with the exception of the energy sector. The precious metal sector reported the worst performance, while industrial metals were impacted by fears of slowdown in China and surpluses at the major stock markets. Compared to previous years the Commodity market was impacted to a lesser degree by central bank policy (with the exception of precious metals), against a greater impact from the fundamentals. The reduced sensitivity of Commodities to central bank decisions should be confirmed in 2014.Opposing dynamics were seen on the currency markets in the first and second parts of 2013. In the first six months the Euro was relatively weak with the depreciation of the Japanese Yen continuing on from the final part of 2012 following the decisions taken

3 European Central Bank4 Gross Domestic Product5 International Monetary Fund6 Federal Reserve System7 Bank of Japan


by the BoJ. The emerging economy currencies, after a stable beginning, significantly weakened once the FED decided to scale back the QE8 plan. On the other hand, the second part of the year featured a strengthening of the Euro, which was among the best performing major currencies, benefitting from signs of economic growth. The weakness of the emerging economy currencies and the Japanese Yen however were significant in this development. For 2014 the weakening of the US Dollar is expected to level off, following which the FED will likely reduce liquidity on the market gradually. The expected manoeuvres by the ECB should result in a weakening of the Euro. Amid these developments, the Japanese Yen is also expected to weaken. On the other hand, in the second part of the year, the Dollar is forecast to depreciate once again on the back of a more expansive outlook by the FED. Improved Eurozone growth facilitated by fresh expansive moves by the ECB may further drive the single currency.In 2013 the global range hood market grew 3.3% on 20129, – with growth strengthening from the second quarter of the year.The European market reports a slight contraction (-1.0%) compared to the previous year, however amid a two-speed performance which has been evident for some time: a continuous drop in demand in Western Europe (-3.6%), partially offset by growth in Eastern Europe (+2.6%).The South-West European markets (Italy, Spain and Portugal) reported double digit contractions, with France undergoing a steeper decline in 2013 (-4.5% compared to -3% in 2012). The UK however reported a turn-around performance on the previous year with slight growth (+0.7%), while Germany saw substantial stability (+0.6%). The growth in Eastern Europe was driven particularly by the Russian (+14.9%) and Turkish (+3.5%) markets, amid a generalised contraction continuing on from 2012 in nearly all countries in the region.The North American range hood market expanded significantly (+7.0%), with growth accelerating form the second quarter of 2013, while Latin American market demand weakened substantially on the basis of a slowdown in Mexico (-6.4%).China, the largest range hood market, in 2013 picked up (expanding 8.2%), thanks to the recovering Chinese property market after the contraction of 2012.Based on the information currently available, the Elica Group forecasts for 2014 an improved global range hood market, with growth in the Americas of between 5% and 7%, in Asia of 0% and 3% and a return to growth in Europe after two years (between 0% and +2%).

8 Quantitative Easing9 Volume data estimated by the Company.


CURRENCY MARKETS

In 2013, the Euro average exchange rate strengthened against all currencies to which the Group is exposed.

Average 2013 Average 2012 % 2013/12/31 2012/12/31 %

USD 1,33 1,28 3.9% 1,38 1,32 4.5%

JPY 129,66 102,49 26.5% 139,21 113,61 22.5%

PLN 4,2 4,18 0.5% 4,15 4,07 2.0%

MXN 16,96 16,9 0.4% 18,07 17,18 5.2%

INR 77,93 68,6 13.6% 85,37 72,56 17.7%

CNY 8,16 8,11 0.6% 8,35 8,22 1.6%

RUB 42,34 39,93 6.0% 45,32 40,33 12.4%

GBP 0,85 0,81 4.9% 0,83 0,82 1.2%

IAS/IFRS

The financial statements of Elica S.p.A. for the year ended December 31, 2013 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 current Financial Statements are consistent with those utilised for the preparation of the Financial Statements for the year ended December 31, 2012, except in relation to the amendments made to IAS 19, which resulted in a restatement.

These Financial Statements are presented in thousands of Euro and all the amounts are rounded to the nearest thousandth, unless otherwise specified.

10 Bilancio Consolidato 2013 Elica Group

FINANCIAL HIGHLIGHTS

Millions of Euro 335,1 368,3 378,4 384,9 391,8

20090

100

200

300

400

500

2010 2011 2012 2013

Consolidates revenues

Millions of Euro 287,9 313,1 319,1 329,9 334,8

2009 2010 2011 2012 20130

100

200

300

400

Cooking area revenues

11Bilancio Consolidato 2013Elica Group

Millions of Euro 47,2 55,2 59,3 55,0 57,0

20090

20

40

60

80

100

2010 2011 2012 2013

Motors area revenues

Millons of Euro 20,1 26,2 26,5 27,0 28,9*

2009 2010 2011 2012 20130

10

20

30

40

EBITDA


Millions of Euro 0,7 10,6 12,0 12,1 6,9

2009 2010 2011 2012 20130

5

10

15

20

EBIT

Millions of Euro 0,2 4,3 4,2 5,0 1,4

20090

2

4

6

8

10

2010 2011 2012 2013

Group net profit

13Bilancio Consolidato 2013Elica Group

Millions of Euro -22,9 -34,9 -68,8 -62,3 -56,7

2009 2010 2011 2012 2013-75

-60

-45

-30

-15

0

15

CASH/(NET DEBT)

Euro/cents 0,4 7,5 6,9 8,3 2,2

2009 2010 2011 2012 20130

4

8

EPS*


Ratio 0.5% 6.3% 6.5% 6.7% 4.0%

20090%

2%

4%

6%

8%

10%

2010 2011 2012 2013

ROCE*


FINANCIAL AND OPERATING REVIEW

In Euro thousands FY 13 FY 12 restated 2013 Vs 2012 (%)

Revenues 391,849 384,892 1.80%

EBITDA before restructuring costs 28,853 26,962 7.00%

revenue margin 7.40% 7.00% -

EBITDA 22,857 26,962 -15.20%

Revenue margin 5.80% 7.00%

EBIT 6,869 12,062 -43.10%


Financial income/(costs) -4,445 -4,223 5.30%

revenue margin -1.10% -1.10% -

Net profit 1,426 5,062 -71.80%


Group Net Profit 1,357 5,011 -72.90%


Basic earnings per share 2,19 8,33 -73.70%

Diluted earnings per share 2,19 8,30 -73.60%

The earnings per share for the years 2013 and 2012 were calculated by dividing the Group Net Result by the number of outstanding shares at the respective reporting dates.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.


The account Other net receivables/payables include the accounts Other receivables/payables and Tax receivables/payables and Provisions for risks and charges of current assets/liabilities.

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.

In Euro thousands 2013/12/31 2012/12/31 restated

Trade receivables 74,497 77,465

Inventories 52,327 49,597

Trade payables (85,520) (88,716)

Managerial Working Capital 41,304 38,346

as a % of annualised revenues 10.5% 10.0%

Other net receivables/payables (13,237) (761)

Net Working Capital 28,067 37,585

as a % of annualised revenues 7.2% 9.8%


Cash and cash equivalents 27,664 29,551

Finance leases and other lenders (14) (333)

Bank loans and mortgages (37,757) (46,343)

Long-term debt (37,771) (46,676)



Short-term debt (46,568) (45,205)

Net Debt (56,675) (62,330)


2013 OPERATING PERFORMANCE

In 2013 Elica Group consolidated revenues totaled Euro 391,8 million - an increase of 4.2% at like-for-like exchange rates and of 1.8% including exchange rate effect on the previous year.The Cooking segment reported a 1.5% revenue increase, driven by own brand product sales (+4.5%). In 2013, Global range hood demand improved 3.3%10, returning to growth after the contraction of 2012 - driven principally by the recovery of the Chinese market. The Motors Segment in 2013 reported a 3.6% revenue increase, due principally to improved heating and ventilation segment sales. Analysing revenues from sales on the principal market11, the Americas12 contributed significantly to revenue growth (+14.7% on 2012). Asian revenues improved 2.7% - however significantly impacted by unfavourable exchanges, principally concerning the average exchange rate of the Japanese Yen and the Indian Rupee compared to the previous year. At like-for-like exchange rates Asian sales increased 15.9%. European sales were substantially stable (-0.6%) following the recovery in the second half of the year. EBITDA before restructuring costs of Euro 28,9 million (7.4% margin) improved 7.0% on Euro 27,0 million in 2012. The significant increase in the operating margin is due to the improved sales mix, the industrial and overhead costs streamlining programmes from the beginning of the year and the reduction in the principal raw material costs, which more than offset the unfavourable currency movements.EBITDA in 2013 of Euro 22,9 million was significantly impacted by the provisioning of restructuring costs related to the Workforce Restructuring Plan both in Italy and at the Chinese subsidiary (Euro 6,0 million).The reduction in EBIT to Euro 6,9 million from Euro 12,1 million in 2012 entirely concerns the significant impact of restructuring costs (Euro 6,0 million).The Group Net Profit totaled Euro 1,4 million compared to Euro 5,0 million in the previous year, following the allocations to the Workforce Restructuring Plan. The Managerial Working Capital on annualised revenues of 10.5% was slightly above the 10.0% level of December 31, 2012, due to the increase in inventories following an improved demand mix.The Net Debt at December 31, 2013 totaled Euro 56,7 million, reducing on Euro 62,3 million at December 31, 2012, thanks to the strong cash generation from operating activities.

10 Global range hood market volumes.

11 Data concerns sales revenues by geographic area and therefore does not refer to the breakdown by operating segment according to the various Group company locations.

12 Includes North, Central and South America.


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.


December 31, 2012 Restated and December 31, 2013

2012/12/31 restated 2013/12/31

In Euro thousands Net profit/(loss)

Shareholders’ equity

Net profit/(loss)

Shareholders’ equity

As per Parent Company Financial Statements 6,300 108,308 (1,749) 107,910

Elimination of the effect of intercompany operations net of tax effect:

Non-realised gains on fixed assets (164) (394) (56) (449)

Non-realised gains on sale of goods (8) (722) 171 (309)

Tax effect 46 294 (34) 261

Dividends received from consolidated companies (5,193) (5,193) (4,705) (4,705)

Other (1,232) 201 (1,801) (154)

Share of expenses/(income) from equity investments 17 17 (11) 6

Carrying value of consolidated companies 0 (77,260) (84,582)

Net equity and result for the year of consolidated companies

5,525 77,657 9,837 83,567

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

Intangible and tangible assets (229) 6,619 (227) 6,376

Consolidation difference 0 9,022 0 8,820

As per Consolidated Financial Statements 5,062 118,549 1,426 116,741

Group share 5,011 112,007 1,357 111,465

Minority interest share 51 6,542 69 5,276


ELICA S.P.A. AND THE FINANCIAL MARKETS

The graph shows the performance of the Elica S.p.A. share price in 2013 in comparison to the average of other companies listed on the STAR segment (performance of the FTSE Italia STAR index indicated). In the first half of 2013, the share price was loosely related to the movement of the STAR segment, while in second part of the year the share price was increasingly in line with the index.The Share Capital consists of 63,322,800 ordinary voting shares. The shareholding structure of Elica S.p.A. at December 31, 2013 is shown in the Corporate Governance Report, available on the Company website www.elicagroup.com, Investor Relations/Corporate Governance section and/or at http://corporation.elica.com/ (Investor Relations section).

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.674

Fonte: Bloomberg

ITSTAR

ELC IM


SIGNIFICANT EVENTS IN 2013

On January 16, 2013, Elica S.p.A., in accordance with Article 70, paragraph 8 and Article 71, paragraph 1-bis of the Consob Issuers’ Regulation, announced that it would employ the exemption from publication of the required disclosure documents concerning significant merger, spin-off, share capital increase through conferment of assets in kind, acquisition and sales operations.

The Board of Directors of Elica S.p.A. on February 14, 2013 approved the 2012 Fourth Quarter Report, prepared in accordance with IFRS accounting standards.

On March 15, 2013 the Board of Directors of Elica S.p.A approved the Consolidated Financial Statements at December 31, 2012 and the Separate Financial Statements at December 31, 2012 of Elica S.p.A, prepared in accordance with IFRS.

On March 28, 2013, the Board of Directors decided to propose May 20, 2013 as the coupon No. 5 date, record date of May 22, 2013 and dividend payment date of May 23, 2013.

On April 24, 2013, the Shareholders’ Meeting of Elica S.p.A., meeting in Ordinary and Extraordinary session, approved the Financial Statements at December 31, 2012 of Elica S.p.A., the distribution of a dividend of Euro 0,0237 per share, resulting in a pay-out ratio of 30.0% of the Consolidated Group Net Profit, excluding the distribution of a dividend for treasury shares held at May 20, 2013, date of the dividend coupon No. 5 and record date of May 22. The dividend payment date is May 23, 2013. On the same date, the Shareholders’ Meeting approved the Remuneration Report, authorised the purchase of treasury shares and the utilisation of such shares, approved the amendments to the By-laws and an increase in the number of Board members from 7 to 8, appointing Evasio Novarese as Director, born in Omegna (VB) on 25/08/1947 and resident in Comerio (VA).

The Board of Directors of Elica S.p.A. on May 14, 2013 approved the 2013 First Quarter Report, prepared in accordance with IFRS accounting standards.The Board of Directors also approved at the meeting the conversion Project of the production area of Serra San Quirico (Ancona) into a logistical hub and the gradual transfer of the workforce to the nearby Mergo (Ancona) production site. The Project stems from the need to ensure the competitivity of the Italian production structure and includes, parallel to investments in the region, a proportionate and gradual resizing of the workforce over a period of approximately 24 months from the fourth quarter of 2013.

On May 14, 2013, the Board of Directors noted that on April 24, 2013 the Vesting Period of the 2010 Stock Grant Plan concluded and verified the achievement of the Retention and Performance Objectives established by the plan, allocating overall 203,976 Elica S.p.A. shares to the Beneficiaries.

On May 14, 2013, Elica S.p.A. undertook a convertible loan of Euro 5 million, issued by the Indian subsidiary Elica PB India Private Ltd, investing in the development of the business on the Indian market. The bond loan, issued by Elica PB India Private Ltd. and fully subscribed by Elica S.p.A., has a duration of 9 years and will mature interest annually at a fixed rate of 3.5%; on maturity of this 9 year period or, based on the economic-financial results of the


Indian company also before this maturity, the bond loan will be fully converted into shares in Elica PB India Private Ltd., for a nominal value equal to the capital amount of the bond loan.Subsequent to this conversion, the minority shareholders of Elica India Private Ltd. will have the option to purchase from Elica S.p.A., at the nominal value, a part of the shares deriving from the conversion of the bond loan, in order to enable the above-stated shareholders to maintain unaltered their holding in the Indian company (currently 49%). In the case in which the minority shareholders do not exercise this right, Elica S.p.A. will have the right and obligation to purchase the shares of the above-stated minority shareholders of Elica PB India Private Ltd. for consideration equal to the fair market value of these shares which will be established by independent experts.

On May 21, 2013 it was communicated that the Minutes of the Extraordinary and Ordinary Shareholders’ Meeting held on April 24, 2013, with the relative attachments, and the By-laws amended by such, with and without highlighting of the amendments, were made available to the public at the registered office, CONSOB and on the website of Borsa Italiana S.p.A., in addition to the Company website.

On July 15, 2013, Elica S.p.A., following the authorisation on June 19, 2013 of the Board of Directors to utilise treasury shares, announced the sale of 1,700,000 shares, comprising 2.68% of the Share Capital, to INVESCO PERPETUAL, an investment fund with a division dedicated to shareholdings in small-mid cap European companies, at a price of Euro 1,134 per share. Following this operation, Elica S.p.A. holds 1,275,498 treasury shares.

On August 27 the Alternate Auditor Franco Borioni purchased 5,000 Elica S.p.A. shares.

On August 28, 2013, the Board of Directors of Elica S.p.A. approved the 2013 Half-Year Report, prepared in accordance with IFRS accounting standards. The Board of Directors of Elica S.p.A. on the same date also approved the updated Organisational, management and control model as per Legislative Decree 231/01 of Elica S.p.A., approved on March 27, 2008, following the new offenses included in the decree and judgments concerning the responsibility of entities.

The Board of Directors of Elica S.p.A. on November 14, 2013 approved the 2013 Third Quarter Report, prepared in accordance with IFRS accounting standards. Following its drafting in the first months of the year and in line with Borsa Italiana notice No. 8342 of May 6, 2013 and Article 6.P.2 of the Self-Governance Code, the Board of Directors of Elica S.p.A. approved on the same date the setting up of the Long Term Incentive Plan, delegating the Chief Executing Officer with the preparation of the Regulation, based on the parameters approved by the Board. The Board of Directors of Elica S.p.A. also approved at the meeting the new version of the Regulation for the handling of corporate information and the governance of the Insider Register.


INFORMATION RELATING TO THE ENVIRONMENT

Elica S.p.A. operates in compliance with all regulations – local and national – 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 company.

INFORMATION RELATING TO PERSONNEL

Elica, 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 if they 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. 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).


CORPORATE BOARDS

FRANCESCO CASOLIExecutive Chairmanborn in Senigallia (AN) on 1961/06/05 appointed by resolution of 27/04/2012

GIUSEPPE PERUCCHETTI Chief Executive Officerborn in Varese (VA) on 1958/10/30 appointed a Director on 2012/04/27 and an Executive Director on 2012/09/13

GIANNA PIERALISIExecutive Directorborn in Monsano (AN) on 1934/12/12 nominata con atto del 2012/04/27

GENNARO PIERALISIDirectorborn in Monsano (AN) on 1938/02/14 appointed by resolution of 2012/04/27

STEFANO ROMITIIndependent Director and Lead Independent Director

born in Roma (RM) on 1957/11/17 appointed by resolution of 2012/04/27

ANDREA SASSODirectorborn in Roma il 1965/08/24 appointed by resolution of 2012/04/27

ELENA MAGRIIndependent Directorborn in Brescia (BS) on 1946/07/19 appointed by resolution of 2012/04/27

EVASIO NOVARESEIndependent Directorborn in Omegna (VB) on 1947/08/25 appointed by the Shareholders’ Meeting of 2013/04/24 (deed of 2013/05/07)

Members of the Board of Directors

CORRADO MARIOTTIChairmanborn in Numana (AN) on 1944/02/29 appointed by resolution of 2012/04/27

STEFANO MARASCAStatutory Auditorborn in Osimo (AN) on 1960/08/09 appointed by resolution of 2012/04/27

GILBERTO CASALIStatutory Auditorborn in Jesi (AN) on 1954/01/14 appointed by resolution of 2012/04/27

FRANCO BORIONIAlternate Auditorborn in Jesi (AN) on 1945/06/23 appointed by resolution of 2012/04/27

DANIELE CAPECCIAlternate Auditorborn in Jesi (AN) on 1972/04/03 appointed by resolution of 2012/04/27

Members of the Board of Statutory Auditors

STEFANO ROMITIGENNARO PIERALISIELENA MAGRI

Internal control & risk management Cmte

STEFANO ROMITIGENNARO PIERALISIELENA MAGRI

Appointments and Remuneration Committee

INDEPENDENT AUDIT FIRMDeloitte & 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

Investor Relations Manager LAURA GIOVANETTIe-mail: [email protected] Telephone: +39 0732 610727


STRUCTURE OF THE ELICA GROUP

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-Italy) is the parent company of the Group (in short Elica).

Società controllate al 31 dicembre 2013

Elica Group Polska Sp.zo.o – (Poland) (in short Elica Group Polska). This wholly-owned 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) (in short Elicamex). The company was incorporated at the beginning of 2006 (The Parent Company owns 98% directly and 2% through Elica Group Polska). 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) (in short Leonardo). This 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) (in short Ariafina). Incorporated in September 2002 as an equal Joint Venture with Fuji Industrial of Tokyo, the Japanese range hood market leader, Elica S.p.A. acquired control in May 2006 (51% holding) to provide further impetus to the development of the important Japanese market, where high-quality products are sold;

Airforce S.p.A. – Fabriano (AN-Italy) (in short Airforce). 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 Hochleigstungs - Dunstabzugssysteme GmbH – Stuttgart (Germany) (in short Airforce Germany). Airforce S.p.A. owns 95% of Airforce Germany G.m.b.h., 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 – Mulacker (Germany) (in short Gutmann) - a German company entirely held by Elica S.p.A. 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 short Elica 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 production and sale of Group products.

Zhejiang Putian Electric Co. Ltd – Shengzhou (China) (in short Putian), a Chinese company held 66.76% 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 main 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.

Elica Trading LLC - St. Petersberg (Russian Federation) (in short Elica Trading), a Russian company held 100%, incorporated on June 28, 2011.

Associated companies

I.S.M. S.r.l. – Cerreto d’Esi (AN- Italy). 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

There were no changes in the consolidation scope compared to December 31, 2012.

Elica Group Inter-company and other related-party transactions

In 2013, transactions were entered into with subsidiaries, associated companies and other related parties. All transactions were conducted on an arm’s length basis in the ordinary course of business.


Subsidiaries – 2013 Financial Highlights

(figures from reporting package)

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.

Associated companies: 2013 Financial Highlights

(figures from reporting package)

In Euro thousands Assets Liabilities Shareholders’ equity

Revenues Net Result

Elicamex S.a.d. C.V. 44,145 13,424 30,721 53,545 5,629

Elica Group Polska Sp.z o.o

50,241 25,351 24,890 89,551 3,194

Airforce S.p.A. 9,892 7,473 2,419 19,410 254

Ariafina Co. Ltd 8,270 3,019 5,251 23,293 1,968

Leonardo Services S.a. de C.V.

1,549 1,543 7 6,731 147

Exklusiv Hauben Gutmann GmbH

24,498 14,386 10,112 26,337 405

Elica Inc. 440 309 131 566 16

Airforce GE 79 7 72 18 (11)

Elica PB India Private Ltd. 6,686 4,663 2,023 9,042 (84)

Zhejiang Putian Electric Co. Ltd

14,831 11,871 2,960 13,795 (3,277)

Elica Trading LLC 3,616 2,025 1,590 7,418 (163)

* Airforce Germany Hochleistungs-dunstabzugssysteme Gmbh

In Euro thousands

Head Office % held Share capital Shareholders’ equity

Net result

I.S.M. Srl Cerreto d’Esi (AN) 49.39% 10 2,801 (22)


The table below shows the operating and financial amounts from transactions with associated company for 2013. No separate disclosure of these positions was given in the financial statements, given the limited amounts involved, in accordance with Consob resolution No. 15519 of July 27, 2006.

CORPORATE GOVERNANCE AND OWNERSHIP STRUCTURE REPORT

In accordance with Article 123-bis of Legislative Decree 58/1998, with Article 89-bis of Consob Resolution No.11971/1999 and successive amendments and integrations, Elica S.p.A. provides complete disclosure on the Corporate Governance system adopted at March 21, 2014, in line with the recommendations of the Self-Governance Code (December edition), in the Annual Corporate Governance Report, available on the website of the Company www.elicagroup.com in the Investor Relation/Corporate Governance section and/or at http://corporation.elica.com (Investor Relations section).

REMUNERATION REPORT

In accordance with Article 123-ter of Legislative Decree 58/1998 and Article 84-quater of the Consob Resolution No. 11971/1999 and subsequent amendments, Elica S.p.A. prepares a remuneration report in accordance with the indications at Attachment 3A, Table 7-bis of the same Consob Resolution No. 11971/1999 and subsequent amendments. This report is available on the website of the Company http://www.elicagroup.com/ Investor Relations/Corporate Governance section and/or http://corporation.elica.com (Investor Relations section).

In Euro thousands Payables Receivables Costs Revenues and income

I.S.M. srl - 100 - 3


EVENTS AFTER DECEMBER 31, 2013 AND OUTLOOK

On January 23, 2014, in accordance with Article 2,6,2, paragraph 1, letter b) of the Regulations of the Markets organised and managed by Borsa Italiana S.p.A., Elica S.p.A. published the financial calendar for the year 2014.

The Group carries out an ongoing and extensive monitoring of demand dynamics, which in 2013 appeared strong across all regions compared to 2012, with the exception of Western Europe and South America.

In view of the fourth quarter preliminary results, the Group has comfortably achieved the 2013 Guidance performance objectives, announced to the market on May 14, 2013, which estimated revenue growth of between 1% and 3% and an improvement in consolidated EBITDA, before restructuring costs, of between 2% and 7% on 2012, and a Net Debt of not greater than Euro 57 million at the end of 2013. Based on current developments, the Group forecasts for 2014 an improved global range hood market, with growth in the Americas of between 5% and 7%, in Asia of between 0% and 3% and a return to growth in Europe after two years (between 0% and +2%).

In a global marketplace which expects growth in the Americas, stability or a slight improvement in Asia and Europe, the Elica Group for 2014 forecasts an increase in consolidated revenues of between 1% and 3% and an improvement in consolidated EBITDA13 of between 4% and 7% on 2013, and targets a Net Debt of not greater than Euro 52 million at the end of 2014.

13 Before restructuring costs.


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 of the Regulation enacting Legs. Decree No. 58 of February 24, 1998, 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 pursuant to IAS 24 on management compensation and related-party transactions.

Obligations in accordance with Article 70, paragraph 8 and Article 71, paragraph 1-bis of the “Issuers’ Regulation”

In accordance with Article 70, paragraph 8 and Article 71, paragraph 1-bis of the Consob Issuers’ Regulation, on January 16, 2013, Elica announced that it would employ the exemption from publication of the required disclosure documents concerning significant merger, spin-off, and share capital increase operations through conferment of assets in kind, acquisitions and sales.

Fabriano, March 21, 2014

For the Board of DirectorsThe Executive Chairman

Francesco Casoli


ELICA GROUP CONSOLIDATED FINANCIAL STATEMENTS AT 2013/12/31Registered Office at Via Dante, 288 - 60044 Fabriano (AN) - Share Capital Euro 12,664,560 fully paid-in


Consolidated Income Statement

In Euro thousands Note FY 13 FY 12 restated

Revenues 5,1 391,849 384,892

Other operating revenues 5,2 4,221 4,315

Changes in inventories of finished and semi-finished goods

5,3 2,281 (171)

Increase in internal work capitalised 5,4 3,642 4,294

Raw materials and consumables 5,5 (216,809) (214,265)

Services 5,6 (69,332) (70,570)

Labour costs 5,7 (78,386) (71,486)

Amortisation & Depreciation 5,8 (15,988) (14,900)

Other operating expenses and provisions 5,9 (8,613) (10,047)

Restructuring costs 5,10 (5,996) -

EBIT 6,869 12,062

Share of profit/(loss) from associates 5,11 (10) 17

Financial income 5,12 207 155

Financial expenses 5,13 (4,120) (4,429)

Exchange gains/(losses) 5,14 (532) 51

Pre-tax result 2,414 7,856

Income taxes 5,15 (988) (2,794)

Net profit from normal operations 1,426 5,062

Net profit from discontinued operations - -

Net profit for the year pertaining to:

1,426 5,062

Minority interests share 5,16 69 51

Group Net Profit 1,357 5,011

Basic earnings per Share (Euro/cents) 5,17 2,22 8,33

Diluted earnings per Share (Euro/cents) 5,17 2,22 8,30


Consolidated Comprehensive Income Statement

In Euro thousands FY 13 FY 12 restated

Net Profit 1,426 5,062

Other comprehensive profits/(losses) which may not be subsequently reclassified to net profit/(loss) for the year:

Actuarial gains/(losses) of employee defined plans 867 (2,493)

Tax effect concerning the Other profits/(losses) which may not be subsequently reclassified to the net profit/(loss) for the period

(199) 609

Total other comprehensive profits/(losses) which may not be subsequently reclassified to net profit/(loss) for the period, net of the tax effect

668 (1,884)

Other comprehensive profits/(losses) which may be subsequently reclassified to net profit/(loss) for the period:

Exchange differences on the conversion of foreign financial statements

(3,639) 2,323

Net change in cash flow hedges 306 (247)

Tax effect concerning the Other profits/(losses) which may subsequently be reclassified to the net profit/(loss) for the period

(84) 54

Total other comprehensive profits/(losses) which may be subsequently reclassified to net profit/(loss) for the period, net of the tax effect

(3,417) 2,130

Total other comprehensive income statement items, net of the tax effect:

(2,749) 246

Total comprehensive profit/(loss) pertaining to:

(1,323) 5,308

Minority interests share (669) 111

Group comprehensive profit/(loss) (654) 5,198


Consolidated Balance Sheet

In Euro thousands Note 2013/12/31 2012/12/31 restated 12/01/01 restated

Property, plant & equipment 5,20 81,932 86,861 85,165

Goodwill 5,21 41,584 41,705 41,765

Other intangible assets 5,22 25,336 25,426 24,424

Investments in associated companies 5,23 1,383 1,394 1,377

Other receivables 5,24 190 245 276

Tax receivables 5,25 6 6 6

Deferred tax assets 5,35 13,608 10,387 10,032

AFS financial assets 5,26 156 156 672

Derivative financial instruments 5,31 1 - 29

Total non-current assets 164,196 166,180 163,746

Trade and financial receivables 5,27 74,497 77,465 82,207

Inventories 5,28 52,327 49,597 50,598

Other receivables 5,29 6,306 5,816 6,036

Tax receivables 5,30 7,747 9,035 5,943

Derivative financial instruments 5,31 519 638 813

Cash and cash equivalents 5,32 27,664 29,551 20,026

Current assets 169,060 172,102 165,623

Assets of discontinued operations 5,41 2,395 - 1,065

Total Assets 335,651 338,282 330,434

Liabilities for post-employment benefits 5,33 11,230 12,178 9,981

Provisions for risks and charges 5,34 3,333 2,710 2,505

Deferred tax liabilities 5,35 5,117 5,376 6,425

Finance leases and other lenders 5,36 14 333 56

Bank loans and mortgages 5,37 37,757 46,343 45,105

Other payables 5,38 987 1,174 1,859

Tax payables 5,39 677 807 888

Derivative financial instruments 5,31 166 373 60

Non-current liabilities 59,281 69,293 66,879

Provisions for risks and charges 5,34 4,172 2,086 1,882

Finance leases and other lenders 5,36 14 40 25

Bank loans and mortgages 5,37 46,554 45,165 43,640

Trade payables 5,40 85,520 88,716 89,806

Other payables 5,38 15,801 8,366 10,211

Tax payables 5,39 7,317 5,160 2,814

Derivative financial instruments 5,31 251 907 1,004

Current liabilities 159,629 150,440 149,382

Share capital 12,665 12,665 12,665

Capital reserves 71,123 71,123 71,123

Hedging, translation and stock option reserve (8,525) (5,356) (5,668)

Reserve for actuarial gains/losses (1,898) (2,544) (705)

Treasury shares (3,551) (8,815) (8,815)

Profit reserves 40,294 39,926 34,684

Group Profit 1,357 5,008 4,162

Group shareholders' equity 5,42 111,465 112,007 107,446

Capital and reserves of minority interests 5,207 6,492 6,773

Minority interest profit/(loss) 69 50 (46)

Minority interest equity 5,43 5,276 6,542 6,727

Consolidated shareholders’ equity 116,741 118,549 114,173

Total liabilities and equity 335,651 338,282 330,434


Consolidated Cash Flow Statement


Opening cash and cash equivalents 29,551 20,025

EBIT - Operating profit 6,869 12,062

Amortisation, depreciation and write-downs 15,988 14,900

Write-down of Goodwill for loss of value 0 0

EBITDA 22,857 26,962

Trade working capital (3,131) 5,666

Other working capital accounts 9,394 (2,307)

Income taxes paid (4,835) (3,642)

Change in provisions 2,376 (328)

Other changes (3,218) (3,414)

Cash flow from operating activity 23,443 22,937

Net increases Intangible assets

Property, plant & equipment Equity investments and other financial assets

(14,034)(5,146)(8,888)-

(14,040)(5,392)(9,341)693

Acquisition/Sale of investments - 1,865

Cash flow from investments (14,034) (12,175)

(Acquisition)/Sale of treasury shares 1,928 -

Other movements in share capital - -

Dividends (700) -

Increase (decrease) financial payables (7,024) 3,139

Net changes in other financial assets/liabilities (896) (215)

Interest paid (3,575) (3,959)

Cash flow from financing activity (10,267) (1,035)

Change in cash and cash equivalents (858) 9,726

Effect of exchange rate change on liquidity (1,029) (200)

Closing cash and cash equivalents 27,664 29,551


Statement of changes in Shareholders’ Equity

In Euro thousands Share capital

Share premium reserve Acquisition/Sale Treasury shares

Profit reserves

Hedge, trans., stock option & post-employ. benefit reserve

Result for the year

Total GroupNE

Minority NE Total

Balance at January 1, 2012 - restatement 12,665 71,123 (8,815) 34,684 (6,374) 4,162 107,445 6,727 114,172

Change in cash flow hedges net of tax effect (193) (193) (193)

Actuarial profits/(losses) employee leaving indemnity (1,839) (1,839) (46) (1,885)

Recognition of stock options (2,246) (2,246) (2,246)

Differences arising from translation of foreign subsidiaries’ financial statements 2,626 2,626 (303) 2,323

Total gains/(losses) recognised directly to equity - - - - (1,653) - (1,653) (349) (2,001)

Net profit for the year 5,008 5,008 50 5,058

Total gains/(losses) recognised in the income statement - - - - 5,008 5,008 50 5,058

Allocation of net profit 4,036 126 (4,162) - -

Sale of 3.24% of Putian 1,539 1,539 458 1,998

Other changes - (333) (333) (344) (676)

Dividends - - -

Balance at December 31, 2012 - restatement 12,665 71,123 (8,815) 39,926 (7,900) 5,008 112,007 6,542 118,549

Change in cash flow hedges net of tax effect 240 240 240

Actuarial profits/(losses) employee leaving indemnity 643 643 22 665

Recognition of stock options - - -

Differences arising from translation of foreign subsidiaries’ financial statements (2,879) (2,879) (760) (3,639)




Allocation of net profit 5,199 (191) (5,008) - -

Other changes - (600) (336) (936) (597) (1,533)

Sale of treasury shares 5,264 (2,805) 2,459 2,459

Dividends (1,426) (1,426) (1,426)

Balance at December 31, 2013 12,665 71,123 (3,551) 40,294 (10,423) 1,357 111,465 5,276 116,741


In Euro thousands Share capital

Share premium reserve Acquisition/Sale Treasury shares

Profit reserves

Hedge, trans., stock option & post-employ. benefit reserve

Result for the year

Total GroupNE

Minority NE Total

Balance at January 1, 2012 - restatement 12,665 71,123 (8,815) 34,684 (6,374) 4,162 107,445 6,727 114,172

Change in cash flow hedges net of tax effect (193) (193) (193)

Actuarial profits/(losses) employee leaving indemnity (1,839) (1,839) (46) (1,885)

Recognition of stock options (2,246) (2,246) (2,246)

Differences arising from translation of foreign subsidiaries’ financial statements 2,626 2,626 (303) 2,323




Allocation of net profit 4,036 126 (4,162) - -

Sale of 3.24% of Putian 1,539 1,539 458 1,998

Other changes - (333) (333) (344) (676)

Dividends - - -

Balance at December 31, 2012 - restatement 12,665 71,123 (8,815) 39,926 (7,900) 5,008 112,007 6,542 118,549

Change in cash flow hedges net of tax effect 240 240 240

Actuarial profits/(losses) employee leaving indemnity 643 643 22 665

Recognition of stock options - - -

Differences arising from translation of foreign subsidiaries’ financial statements (2,879) (2,879) (760) (3,639)




Allocation of net profit 5,199 (191) (5,008) - -

Other changes - (600) (336) (936) (597) (1,533)

Sale of treasury shares 5,264 (2,805) 2,459 2,459

Dividends (1,426) (1,426) (1,426)

Balance at December 31, 2013 12,665 71,123 (3,551) 40,294 (10,423) 1,357 111,465 5,276 116,741


Table of contents – Notes to the consolidated financial statements for the year ended December 31, 2013

1. Group structure and activities2. Accounting principles and basis of consolidation3. Significant accounting estimates4. Composition and changes in the consolidation scope5. Notes to the consolidated income statement, balance sheet and cash

flow statement6. Guarantees, commitments and contingent liabilities7. Risk management policy8. Disclosure pursuant to IAS 24 on management compensation and

related-party transactions9. Positions or transactions arising from exceptional and/or unusual

transactions10. Subsequent events


1. GROUP STRUCTURE AND ACTIVITIES

Elica S.p.A. 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, Elicamex S.A.de C.V., Leonardo Services S.A.de C.V., Ariafina CO., LTD, Elica Inc., Elica PB India Private Ltd, Zhejiang Putian Electric Co. Ltd and Elica Trading LLC 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, Chinese Renminbi and Russian Ruble respectively.

The Board of Directors today approved the Consolidated Financial Statements for the year ended December 31, 2013 and authorised its publication.

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, 2013 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 to the accounting principles applied between the comparative dates of December 31, 2012 and December 31, 2013 - except for the new requirements of IAS 19 which necessitated a restatement - given that neither the International Accounting Standards Board (IASB) nor the International Financial Reporting Interpretation Committee (IFRIC) have revised or issued further standards or interpretations due to take effect on January 1, 2013 that would have had a material effect on the financial statements.


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.

2.1 BASIS OF CONSOLIDATION

The Consolidated Financial Statements for the year ended December 31, 2013 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, 2013 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 subsidiary were prepared in accordance with Legislative Decree No. 127/1991 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 section 4 Composition and changes in the consolidation scope and 8 Disclosure pursuant to IAS 24 on management compensation and related-party 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, 2013, 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, Zhejiang Putian Electric Co. Ltd and Elica Trading LLC, 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, the Chinese Renmimbi and the Russian Rouble respectively.

The exchange rates used for translation purposes are set out below:

average 2013 average 2012 % 2013/12/31 2012/12/31 %

USD 1,33 1,28 3.90% 1,38 1,32 4.50%

JPY 129,66 102,49 26.50% 139,21 113,61 22.50%

PLN 4,2 4,18 0.50% 4,15 4,07 2.00%

MXN 16,96 16,9 0.40% 18,07 17,18 5.20%

INR 77,93 68,6 13.60% 85,37 72,56 17.70%

CNY 8,16 8,11 0.60% 8,35 8,22 1.60%

RUB 42,34 39,93 6.00% 45,32 40,33 12.40%


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 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 share-based payments of the company acquired or share-based 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 pro-quota of the value of net assets recognised of the acquired entity. The valuation method is chosen on the basis of each individual transaction.

In the case of a step acquisition of a subsidiary, a business combination occurs only at 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.

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.

Any 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.

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.

Business combinations before January 1, 2010 were recognised according to the previous version of IFRS 3.


Investments in associated companies and joint ventures

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.

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.

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.


2.2 ACCOUNTING PRINCIPLES AND POLICIES

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

Property, plant & equipment

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).

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 3%

lightweight buildings 10%

plant and machinery 6 % - 15%

industrial and commercial equipment 10% - 25%

office furniture and equipment 12%

EDP 20%

commercial vehicles 20%

automobiles 25%

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 is 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.

Currently the Group only holds intangible assets with definite useful life.

Impairment Tests

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

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.

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 liabilities 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.

Derivative instruments and hedge accounting

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 derivative financial instruments are measured at fair value in accordance with IAS 39.

When derivative financial instruments qualify for hedge accounting, the following treatment applies:

› per i derivati che risultano di copertura di operazioni attese (i.e. cash flow hedge), le variazioni di fair value degli strumenti derivati sono imputate a Patrimonio Netto per la parte ritenuta efficace, mentre sono iscritte a Conto Economico per la parte ritenuta inefficace;

› 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 hedge accounting cannot be applied, the gains or losses from the fair value measurement of derivative financial instruments are recognized immediately 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.

From the current year, with retrospective application, the Company has introduced the amendment to IAS 19 – Employee benefits, which removes the option to defer recognition of gains or losses under the corridor method, requiring presentation in the balance sheet of the deficit or surplus of the relevant provision and the recognition to the income statement of the labour cost components and net financial charges and the recognition of the gains or losses which derive from the remeasurment of the assets and liabilities under Other Comprehensive Income. In addition the income from the assets included under net financial charges must be calculated based on the discount rate of the liability and no longer on the expected income.

Up to December 31, 2006, the employee leaving indemnities of the Italian companies were considered as defined benefit plans. Legislation relating to Employee leaving indemnity was amended by Law 296 of December 27, 2006 and subsequent decrees and regulations issued in the first half of 2007. As a result of those changes, and specifically with regard to companies with 50 employees or more, Employee leaving indemnity is only considered a defined benefit plan for benefits accrued prior to January 1, 2007 (and not yet paid out as at the balance sheet date), while benefits accruing after that date are classified as defined contributions.

Share-based payments

Where the company recognises additional benefits to senior management and key personnel through stock grant plans, in accordance with IFRS 2 – Share-based payments, these plans represent a remuneration component of the beneficiaries; therefore the cost, concerning the fair value of these instruments at the assignment date, is recognised in the income statement over the period between the assignment date and maturity date, and directly recorded to shareholders’ equity. Subsequent changes in the fair value at the assignment date do not have an effect on the initial value. At December 31, 2013 there are no such plans in place.

Provisions for risks and charges

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.

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

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.

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.


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 taxes

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, increasing the number of shares which potentially may be added to those in circulation under an allocation or utilisation of treasury shares in portfolio under stock grant plans.


2.3 ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS APPLIED AFTER JANUARY 1, 2013

The following accounting standards, amendments and interpretations were applied for the first time by the Group from January 1, 2013:

› On May 12, 2011 the IASB issued IFRS 13 – Fair value measurement which establishes how the fair value is calculated for the purposes of the financial statements and is applied to all situations in which the IAS/IFRS standards require or permit the calculation of the fair value or the presentation of information based on the fair value, with some limited exclusions. In addition, this standard requires more extensive disclosure than that currently required by IFRS 7 on the measurement of the fair value (hierarchy of the fair value). The standard is effective in a prospective manner from January 1, 2013. Adoption of the standard did not have any significant effects.

› On June 16, 2011, the IASB issued an amendment to IAS 19 – Employee benefits which eliminates the option to defer the recognition of the actuarial gains/losses under the corridor method, requiring all actuarial gains/losses to be recorded immediately in the “Other comprehensive income statement”, in order that the entire net amount of the defined benefit provision (net of the service plan assets) is recorded in the consolidated financial statements. The amendment also provides that the changes between one year and the following year of the defined benefit provision and the service plan assets must be divided into three components: the cost components related to the provision of employment services in the period must be recognised in the income statement as service costs; the net financial charges, calculated applying the appropriate discount rate to the net defined benefit provision net of the assets at the beginning of the year, must be recorded in the income statement as such; the actuarial gains/losses deriving from the re-measurement of the liabilities and assets must be recognised in the Comprehensive income statement. In addition, the income from the assets included under net financial charges as indicated above is calculated based on the discount rate of the liability and no longer on the expected income. The amendment finally introduces new additional information to be provided in the notes to the financial statements. The amendment is applicable in retrospective manner from periods beginning January 1, 2013. The effects of the introduction of the new standard on the Group consolidated financial statements are shown in the note on the Restatement.

› On June 16, 2011, the IASB published this amendment to IAS 1- Presentation of Financial Statements which requires the grouping of all items presented in Other Comprehensive Income in two sub-categories based on whether they may potentially be reclassified to profit or loss subsequently. The amendment is applicable from periods beginning July 1, 2012.

› On December 16, 2011, the IASB issued a number of amendments to IFRS 7 – Financial instruments: additional disclosure. The amendments require the disclosure of the effects or potential effects on the financial position of an entity


deriving from the offsetting of financial assets and liabilities in application of IAS 32. The amendments are applicable from periods beginning from January 1, 2013 and the information must be provided in retrospective manner. The application of the amendments did not have any effect on the present Group consolidated financial statements.

› On March 13, 2012, the IASB published the amendments to IFRS 1 – First-time adoption of the International Financial Reporting Standards – Government Loans which amends the reference to the accounting of government loans on transition to IFRS. The amendments to IFRS 1 must be applied from the periods beginning January 1, 2013, or thereafter. As our Group is not a first-time adopter, this amendment has no effect on the present Group consolidated financial statements.

› On May 17, 2012, the IASB published the “Annual Improvements to IFRS’s document: 2009-2011 Cycle”, which includes the amendments to the standards within the annual improvement process, focusing on amendments considered necessary, but not urgent. Those which affect the presentation, recognition and measurement 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:

· IAS 1 Presentation of Financial Statements - Disclosure: this clarifies that in the case in which additional comparative information is provided, such must be presented in accordance with IAS/IFRS. In addition, the amendment clarifies that when an entity modifies an accounting principle or carries out an adjustment/reclassification retrospectively, the entity must present a balance sheet also at the beginning of the comparative period (third balance sheet in the financial statements), while in the notes no comparative disclosure is required also for this third balance sheet apart from the affected accounts.

· IAS 16 Property, plant and machinery – Classification of servicing equipment: this clarifies that servicing equipment must be classified in the account property plant and machinery if utilised for more than one year, and in inventory if utilised for one year only.

· IAS 32 – Financial instruments: Presentation – Direct taxes on distributions to holders of capital instruments and on transaction costs on capital instruments: this clarifies that the direct taxes applicable to such cases follow the rules of IAS 12.

· IAS 34 - Interim financial statements – Total assets for a reportable segment: this clarifies that the total assets in the interim financial statements must be reported only if this information has been suitably provided to the chief operating decision maker of the entity and a material change in the total assets of the segment compared to that reported in the last annual financial statements has arisen.

The effective date of the proposed amendments is for periods beginning January 1, 2013, with advanced application permitted. The application of these amendments had no effect in terms of measurement and had limited disclosure effects on the Group consolidated financial statements.


2.4 ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS APPROVED BY THE EUROPEAN UNION, BUT NOT YET APPLIED AND ADOPTED IN ADVANCE BY THE GROUP

› On May 12, 2011, the IASB issued IFRS 10 – Consolidated Financial Statements which will replace SIC-12 Consolidation – Special Purpose Entities and parts of IAS 27 – Consolidated and Separate Financial Statements (to be renamed Separate Financial Statements) and will govern the inclusion of investments in the separate financial statements. The principal changes established by the new standard are the following:

· According to IFRS 10 there is a single principle for the consolidation of all types of entities, and that principle is based on control. This change removes the inconsistency between the previous IAS 27 (based on control) and SIC 12 (based on the transfer of risks and benefits);

· A more concrete definition of control was introduced, based on three elements: (a) power of the entity acquired; (b) exposure, or rights, to variable returns deriving from involvement with the same; (c) capacity to utilise the power to influence the amount of these returns;

· IFRS 10 requires that an investor, to evaluate if he has control of the entity acquired, focuses on the activities which influence in a significant manner the returns;

· IFRS 10 requires that, in evaluating the existence of control, consideration is taken only of the substantial rights, or rather those exercisable in practice when significant decisions must be taken on the entity acquired;

· IFRS 10 provides a practical guide in the evaluation on whether control exists in complex situations, such as de facto control, potential voting rights, the situations in which it is necessary to establish whether the person with the decisional power is acting as agent or principal, etc.

In general terms, the application of IFRS 10 requires a significant level of opinion on a certain number of application aspects.

The standard is effective in a retrospective manner from January 1, 2014. The adoption of this new standard had no effects on the Group consolidation scope.

› On May 12, 2011, the IASB issued IFRS 11 – Joint arrangements which will replace IAS 31 – Interests in Joint Ventures and SIC-13 – Jointly controlled entities – non monetary contributions by joint ventures. The new standard, in addition to the criteria for the identification of joint control, establishes the accounting criteria


for the classification of joint arrangements based on the rights and obligations of the agreements rather than on the legal form, distinguishing between joint ventures and joint operations. According to IFRS 11, the existence of a separate vehicle is not a sufficient condition to classify a joint agreement as a joint venture. For joint ventures, where the parties have rights only on the net equity of the agreement, the standard establishes the equity method as the sole accounting method in the consolidated financial statements. For joint operations, where the parties have rights on the assets and obligations for the liabilities of the agreement, it provides for direct recognition in the consolidated financial statements (and in the separate financial statements) of the share of the assets, liabilities, costs and revenues deriving from the joint operation. The standard is applicable retrospectively from January 1, 2014. Following the issue of the new standard, IAS 28 – Investments in Associates has been amended to include accounting for investments in jointly-controlled entities in its scope of application (from the effective date of the standard). The application of this new standard will not have an effect on the Group consolidated financial statements.

› On May 12, 2011, the IASB issued IFRS 12 – Disclosure of interests in other entities which is a new and complete standard on additional information to be provided in the consolidated financial statements on all types of investments, including those in subsidiaries, joint arrangements, associated companies, special purpose entities and other non consolidated vehicle companies. The standard is effective in a retrospective manner from January 1, 2014.

› On December 16, 2011, the IASB issued certain amendments to IAS 32 – Financial Instruments: Presentation, to clarify the application of certain offsetting criteria for financial assets and financial liabilities in IAS 32. The amendments are applicable for annual periods beginning on or after January 1, 2014 and are required to be applied retrospectively.

› On June 28, 2012, the IASB issued the document “Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests and Other Entities: Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12). The document clarifies the transition rules of IFRS 10 - Consolidated financial statements, IFRS 11 - Joint Arrangements and IFRS 12 - Disclosure of Interests in Other Entities. These amendments are applicable, together with the relative standards, from periods beginning January 1, 2014, with advance application possible.

› At October 31, 2012 the amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities were issued, which introduce an exception to the consolidation of subsidiaries for an investment company, with the exception of the cases in which the subsidiaries provide services which concern the investment activities of these companies. In application of these amendments, an investment company must value its investments in subsidiaries at fair value. To qualify as an investment company, an entity must:

· attract funds from one or more investors with the objective of providing investment management services to them;

· make a commitment to their investors to invest the funds exclusively to obtain capital appreciation, investment income or both; and

· measure and value the performance of substantially all investments based on the fair value.

These amendments are applicable, together with the relative standards, from periods beginning January 1, 2014, with advance application possible.


› On May 29, 2013 the IASB issued a number of amendments to IAS 36 – Impairment of assets – Additional disclosure on the recoverable amount of non-financial assets. The amendments clarify that the additional disclosures to be provided on the recoverable amount of the assets (including goodwill) or cash-generating units, where their recoverable value is based on fair value net of selling costs, concerns only the assets or the cash-generating units for which an impairment was recorded or eliminated during the year. The amendments must be made retrospectively from periods beginning January 1, 2014.

› On June 27, 2013, the IASB issued a number of amendments to IAS 39 – Financial Instruments: Recognition and measurement – Novation of derivatives and continuity of hedge accounting. The amendments concern the introduction of exemptions to the requirements of hedge accounting defined by IAS 39, where an existing derivative must be replaced by a new derivative which by law or regulation directly (or also indirectly) has a central counterparty (Central Counterparty – CCP). The amendments must be applied retrospectively from periods beginning January 1, 2014. Early adoption is permitted.


2.5 IFRS, AMENDMENTS AND INTERPRETATIONS NOT YET APPROVED BY THE EUROPEAN UNION

At the date of the present Consolidated Financial Statements, the relevant bodies of the European Union have not yet concluded the process necessary for the implementation of the amendments and standards described below.

› On May 20, 2013 the interpretation IFRIC 21 – Levies was published, which provides clarification on when to recognise a liability related to state taxes, both in relation to those recorded in accordance with IAS 37 – Provisions, contingent liabilities and contingent assets and for taxes whose timing and amount are certain.

› On November 12, 2009, the IASB published IFRS 9 – Financial instruments: the standard was subsequently amended on October 28, 2010. The standard, applicable from January 1, 2015 in a retrospective manner 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. 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 the new accounting treatment is for fair value changes of a financial liability designed as a financial liability at fair value through profit and loss, in the case that this change is for the creditworthieness. According to the new standard these changes must be recorded to the “Other comprehensive profits and losses” statement and no longer transferred to the income statement.

› On November 19, 2013 IASB published the document IFRS 9 Financial Instruments - Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39 concerning the new hedge accounting model. The document responds to some of the criticism of the requirements of IAS 39 for hedge accounting, often considered too stringent and not appropriately reflecting the risk management policies of entities. The main amendments of the document relate to:

· amendments to the type of transactions eligible for hedge accounting, in particular hedge accounting is extended to the risks of non-financial assets/liabilities eligible to be managed in hedge accounting;

· changes in the accounting method of the forward contracts and options when considered in a hedge accounting relationship in order to reduce the volatility of the income statement;

· amendments to the effectiveness test through the replacement of the current methods based on the 80-125% parameter with the principle of the “economic relationship” between the item hedged and the hedge instrument; in addition, a retrospective evaluation of the effectiveness of the hedge relationship will no longer be requested;

· the greater flexibility of the new accounting rules is offset by the additional disclosure requirements on the risk management activities of the company.


› On December 12, 2013, the IASB published the Annual Improvements to IFRS’s document: 2010-2012 Cycle, which includes the amendments to the standards within the annual improvement process. The principal changes relate to:

· IFRS 2 Share Based Payments – Definition of vesting condition. Amendments were made to the definitions of vesting conditions and market conditions and further definitions were added for performance conditions and service conditions (previously included in vesting conditions)

· IFRS 3 Business Combination – Accounting for contingent consideration. The amendment clarifies that a contingent consideration classified as a financial asset or liability must be re-measured at fair value at each reporting date and the fair value changes are recognised in the income statement or in the comprehensive income statement on the basis of the requirements of IAS 39 (or IFRS 9).

· IFRS 8 - Operating segments – Aggregation of operating segments. The amendments require an entity to provide disclosure on the evaluations made by Management in the application of the operating segment aggregation, including a description of the aggregated operating segments and of the economic indicators considered in determining if these operating segments have similar economic characteristics.

· IFRS 8 - Operating segments – Reconciliation of total of the reportable segments’ assets to the entity’s assets. The amendments clarify that the reconciliation between the total assets of the operating segments and the total assets of the entity must be presented only if the total assets of the operating segments are regularly reviewed by senior management.

· IFRS 13 - Fair Value Measurement – Short-term receivables and payables. The Basis for Conclusions of this standard were modified in order to clarify that with the issue of IFRS 13, and the consequent amendments to IAS 39 and IFRS 9, current trade receivables and payables may be recorded without recording the effects of discounting, where these effects are not significant.

· IAS 16 - Property, plant and equipment and IAS 38 Intangible Assets – Revaluation method: proportionate restatement of accumulated depreciation/amortization. The amendments eliminated inconsistencies in the recording of depreciation and amortisation provisions when a tangible or intangible asset is revalued. The new requirements clarify that the gross carrying value is adjusted consistently with the revaluation of the carrying value of the asset and that the depreciation or amortisation provision is equal to the difference between the gross carrying value and the carrying value, less the impairments recorded.

· IAS 24 - Related Parties Disclosures – Key management personnel. The amendment clarifies that where the services of senior management are provided by an entity (and not a physical person), this entity is to be considered as a related party.

The amendments will be applied from periods beginning July 1, 2014 and thereafter. Earlier application is permitted.


› On December 12, 2013, the IASB published the “Annual Improvements to IFRS’s document: 2011-2013 Cycle, which includes the amendments to the standards within the annual improvement process. The principal changes relate to:

· IFRS 1 - First-time Adoption of International Financial Reporting Standards – Meaning of “effective IFRS”. The amendment clarifies that an entity which adopts IFRS for the first time, as an alternative to the application of a standard currently in force at the date of the first IAS/IFRS financial statements, may opt for the advanced application of a new standard which will replace the standard in force. The option is only permitted when the new standard allows for advanced application. In addition, the same version of the standard must be applied for all periods presented in the first IAS/IFRS financial statements.

· IFRS 3 - Business Combinations – Scope exception for joint ventures. The amendment clarifies that paragraph 2(a) of IFRS 3 excludes from the application of IFRS 3 the formation of all joint arrangements, as defined by IFRS 11.

· IFRS 13 - Fair Value Measurement – Scope of portfolio exception (par. 52). The amendment clarifies that the portfolio exception included in paragraph 52 of IFRS 13 is applied to all contracts included within the application of IAS 39 (or IFRS 9) independently of whether they satisfy the definition of financial assets and liabilities as per IAS 32.

· IAS 40 - Investment Properties – Interrelationship between IFRS 3 and IAS 40. The amendment clarifies that IFRS 3 and IAS 40 are not mutually exclusive and in determining whether the acquisition of a real estate asset enters within the application of IFRS 3, reference should be made to the specific indications provided by IFRS 3; on the other hand, when determining whether the acquisition is within the application of IAS 40, reference should be made to the specific indications of IAS 40.

The amendments will be applied from periods beginning July 1, 2014 and thereafter. Earlier application is permitted.


3. SIGNIFICANT ACCOUNTING ESTIMATES

In the preparation of the Consolidated Financial Statements in accordance with IFRS, the Group’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 post-employment 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, 2013, 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

During 2013 there were no changes in the consolidation scope or in the percentage holdings of the companies.

In Euro thousands Registered Office Cur-rency

Share Capital Direct holding

Indirect holding

Total holding

Elica S.p.A. Fabriano (AN-Italy) EUR 12,664,560

Elicamex S.a.d. C.V. Queretaro (Mexico) MXN 458,633,515 98% 2% (b) 100%

Elica Group Polska Sp.z o.o

Wroklaw (Poland) ZTY 78,458,717 100% 0% 100%

Airforce S.p.A. Fabriano (AN-Italy) EUR 103,200 60% 0% 60%

Ariafina Co. Ltd Sagamihara – Shi (Japan) JPY 10,000,000 51% 0% 51%

Leonardo Services S.a. de C.V.

Queretaro (Mexico) MXN 1,250,000 98% 2% (b) 100%


Muhlacker (Germany) EUR 25,000 100% 0% 100%

Elica Inc. Chicago, Illinois (United States)

USD 5,000 0% 100% (a) 100%

Airforce GE(*) Stuttgart (Germany) EUR 26,000 0% 95% (c) 95%

Elica PB India Private Ltd.

Pune (India) INR 392,176,371 51% 0% 51%

Zhejiang Putian Electric Co. Ltd

Shengzhou (Cina) CNY 29,300,000 66.76% 0% 66.76%

Elica Trading LLC Saint Petersburg (Russia) RUB 84,131,369 100.00% 0% 100%

(*) Airforce Germany Hochleistungs-dunstabzugssysteme Gmbh

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

(b) Held through Elica Group Polska S.p.zoo

(c) Held through Air Force S.p.A.


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

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

In Euro thousands Registered Office Cur-rency

Share Capital % held directly

% held indirectly

Total held

I.S.M. S.r.l. Cerreto d’Esi (AN) EUR 10 49.39% - 49.39%


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:

For an analysis on revenues, reference should be made to the paragraph “Financial and operating review” in the Directors’ Report.Clients who comprise more than 10% of total revenues constituted 13% of revenues in 2013 compared to 11% in 2012.

In Euro thousands 2013 2012 restated Changes

Revenues 391,849 384,892 6,957

Total 391,849 384,892 6,957


5.1.1 SEGMENT INFORMATION

The operational segments are as follows:

› “Europe”: production and sale of range hoods, accessories and electric motors developed by the companies based in Europe, i.e. the Italian companies Elica S.p.A. and Airforce S.p.A., the German companies Exklusiv Hauben Gutmann GmbH and Airforce Germany GmbH, the Polish company Elica Group Polska Sp.zo.o and the Russian company Elica Trading LLC;

› America”: production and sale of range hoods and accessories, developed by the Group companies based in America, i.e. the Mexican companies Elicamex S.A. de C.V. and Leonardo S.A. de C.V. and the US company Elica Inc;

› “Asia and the rest of the world”: production and sale of range hoods, accessories and other products, developed by the Group companies located in Asia, i.e. the Chinese company Zhejiang Putian Electric Co. Ltd., the Indian company Elica PB India Private Ltd. and the Japanese company Ariafina CO., LTD.

The activities are based in the same geographic areas and therefore in Europe, specifically in Italy, Poland, Germany and Russia, in America, i.e. in Mexico and in the United States, and in Asia, respectively in China, India and Japan.


Income statement

In Euro thousands

Europe America Asia and the Rest of the World

Unallocated and eliminations

Consolidated

2013 2012 rest

2013 2012 rest

2013 2012 rest

2013 2012 rest

2013 2012 rest

Segment revenue:

customers Inter-segment

292,59814,738

295,40511,882

53,5414

45,59212

45,710362

43,89510 (15,105)

-(11,905)

391,849-

384,892-

Total revenues 307,336 307,287 53,545 45,604 46,072 43,905 (15,105) (11,905) 391,849 384,892

Segment result: 23,061 26,497 7,426 5,486 147 (185) 30,635 31,798

Unallocated overheads

(23,766) (19,736)

EBIT 6,869 12,062

Share of profit /(loss) from associates

(10) 17 (10) 17

Financial income 207 155 207 155

Financial expenses

(4,120) (4,429) (4,120) (4,429)

Exchange gains /(losses)

(532) 51 (532) 51

Profit before taxes

2,414 7,856 2,414 7,856

Income taxes (988) (2,794) (988) (2,794)

Net profit from normal operations

1,426 5,062 1,426 5,062

Net profit from discontinued operations

- -

Net profit for the year

1,426 5,062


Balance sheet

In Euro thousands

Europe America Asia and the Rest of the World

Unallocated and eliminations

Consolidated

2013 2012 rest

2013 2012 rest

2013 2012 rest

2013 2012 rest

2013 2012 rest

Assets:

Segment assets 230,073 233,382 33,879 34,135 37,163 32,411 (13,518) (8,781) 287,597 291,147

Investments 1,383 1,394 1,383 1,394

Unallocated assets

44,275 45,741 44,275 45,741

Total operational assets

230,073 233,382 33,879 34,135 37,163 32,411 32,140 38,354 333,255 338,282

Total assets of discount. operations

2,395 - - - 2,395 -

Total Assets 232,468 233,382 33,879 34,135 37,163 32,411 32,140 38,354 335,651 338,282

Liabilities

Segment liabilities

(112,034) (109,163) (13,746) (12,708) (17,514) (13,241) 8,723 7,261 (134,571) (127,851)

Unallocated Liabilities

- - - (84,338) (91,882) (84,338) (91,882)

Shareholders’ Equity

- - - (116,732) (118,549) (116,741) (118,549)

Total operational liabilities

(112,034) (109,163) (13,746) (12,708) (17,514) (13,241) (192,348) (203,170) (335,651) (338,282)

Total liabilities of discount. operations

- -

Total Liabilities (112,034) (109,163) (13,746) (12,708) (17,514) (13,241) (192,348) (203,170) (335,651) (338,282)


5.2 OTHER OPERATING INCOME

The present account is in line with 2012. Other revenues and income increased Euro 0,6 million, while claims and insurance payouts also increased Euro 0,6 million - principally relating to income arising from compensation for damages at the factories of Mergo and Castelfidardo. Ordinary gains however reduced Euro 1,4 million. These refer to the disposal of assets during the year - almost entirely relating to the Parent Company.


Rental income 43 84 (41)

Operating grants 1,095 965 130

Ordinary gains on disposal 537 1,973 (1,436)

Claims and insurance payouts 834 211 623

Expenses recovered 1 - 1

Other revenues and income 1,711 1,082 629

Total 4,221 4,315 (94)


5.3 CHANGES IN INVENTORIES OF FINISHED AND SEMI-FINISHED GOODS

The account changes in inventories of finished and semi-finished goods amounted to a positive Euro 2,281 thousand, increasing Euro 2,452 thousand compared to 2012, principally due to an increase in stock levels, particularly finished products.

5.4 INCREASES ON INTERNAL WORK CAPITALISED

The account Increases on internal works capitalised amounting to Euro 3,642 thousand (Euro 4,294 thousand in the previous year) concerns for Euro 684 thousand the Chinese subsidiary (Euro 559 thousand in 2012), for Euro 266 thousand the Mexican subsidiary (Euro 328 thousand), Euro 392 thousand the German subsidiary (Euro 821 thousand) and for Euro 2.291 thousand Elica S.p.A. (Euro 2,586 thousand), concerning the capitalisation of charges for the design and development of new products and costs sustained internally for the construction of mouldings, industrial equipment and the introduction of new IT programmes.


5.5 RAW MATERIALS AND CONSUMABLES

Raw material and consumables increased on 2012 in overall terms by Euro 2,545 thousand. The increase particularly concerns the Purchases of raw materials and Finished and semi-finished products accounts, only partially offset by the decrease in Change in inventory of raw materials, consumables and goods for resale. Raw materials and consumables, together with the change in the inventories of semi-finished and finished goods report a reduction of 1% on revenues (55.7% in 2012 and 54.7% in 2013).


Purchases of consumable materials 2,116 1,746 370

Purchases of supplies 770 684 86

Purchase of raw materials 185,462 184,106 1,356

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

(1,656) 915 (2,571)

Finished and semi-finished products 20,905 18,393 2,512

Packaging 4,256 3,530 726

Other purchases 689 702 (13)

Shipping expenses on purchases 4,267 4,188 79

Total 216,809 214,266 2,545


5.6 SERVICE EXPENSES

Service expenses reduced overall by Euro 1,238 thousand, reducing as a percentage of revenues from 18.3% to 17.7%. This follows the implementation of industrial and overhead cost streamlining programmes put in place from the beginning of the year. The decrease in the account is due for over Euro 1 million to Trade fairs and promotional events, Finished goods inventories for Euro 890 thousand and Outsourcing expenses for Euro 776 thousand. Maintenance costs however increased by Euro 820 thousand. The account Other services principally includes communication services (Euro 845 thousand), technical assistance costs (Euro 2,634 thousand), regulatory and trademark costs (Euro 519 thousand), canteen costs (Euro 541 thousand), cleaning costs (Euro 507 thousand), vehicle expenses (Euro 662 thousand) and costs for import services (Euro 559 thousand).


Outsourcing expenses 23,884 24,660 (776)

Transport 8,404 8,385 19

Finished goods inventories 3,672 4,562 (890)

Consulting 4,888 4,710 178

Maintenance 2,189 1,369 820

Utilities 5,017 4,901 116

Commissions 2,136 2,610 (474)

Travel expenses 3,090 2,863 227

Advertising 2,807 2,817 (10)

Insurance 1,238 1,231 7

Directors & Statutory Auditor fees 1,591 1,299 292

Trade fairs and promotional events 753 1,841 (1,088)

Industrial services 490 440 50

Banking commissions and charges 357 350 7

Other services 8,816 8,532 284

Total 69,332 70,570 (1,238)


5.7 LABOUR COSTS

Labour costs incurred by the Group in 2012 and 2013 were as follows:

The increase in the account is principally related to the effects of the new collective work contract, the expansion of the workforce at a number of overseas subsidiaries and the recognition of the cost relating to the Long Term Incentive Plan set up by the Board of Directors on November 14, 2013. The increase in labour costs is also due to the fact that the previous year was impacted by the departure from the Group of a significant part of the beneficiaries of the 2010 Stock Grant Plan.

As highlighted in the relevant note below, in the Restatement of the 2012 income statement we reversed the provision of the corridor approach in the valuation of the Post-employment benefit provision. The impact amounted to Euro 6 thousand.

The table below shows the Group workforce at December 31, 2013 and December 31, 2012.

The increase in employee numbers is principally due to the expanded workforce of the Mexican and Polish companies.


Wages and salaries 56,515 51,611 4,904

Social security expenses 15,286 14,596 690

Post-employment benefit provisions 3,045 2,850 195

Other costs 3,540 2,429 1,111

Total 78,386 71,486 6,900

Workforce 2013 2012 restated Changes

Executives 38 48 (10)

White-collar 767 721 46

Blue-collar 2,228 2,081 147

Other 211 183 28

Total 3,244 3,033 211


5.8 AMORTISATION AND DEPRECIATION

Amortisation and depreciation increased on the previous year from Euro 14,900 thousand to Euro 15,988 thousand in 2013.

For further details on depreciation, reference should be made to the accounting principles and to points 5,20 and 5,22 of the present Notes.


5.9 OTHER OPERATING EXPENSES AND PROVISIONS

The details of the account are as follows:

The account reduced by Euro 1,435 thousand. This decrease is principally attributable to the reduction of Euro 1,357 thousand in Losses and doubtful debts and in Catalogues and Brochures, this latter in line with the reduction of the Trade fair costs, as the most important events which the Group participates at are hosted on a bi-annual basis.

Other prior year expenses and losses include expenses for damages and penalties amounting to Euro 192 thousand (Euro 200 thousand in 2012), charitable donations for Euro 129 thousand (Euro 142 thousand in 2012) and Samples for Euro 380 thousand (Euro 381 thousand in 2012). On the other hand, leasing and rental costs and expenses for hardware, software and patents increased.


Leasing and rental 1,852 1,540 312

Rental of vehicles and industrial equipment

2,444 2,402 42

Expenses for hardware, software and patents

922 709 213

Other taxes 918 955 (37)

Magazine and newspaper subscriptions 29 37 (8)

Various equipment 293 429 (136)

Catalogues and brochures 174 502 (328)

Losses and doubtful debts 216 1,573 (1,357)

Provisions for risks and charges 816 1,052 (236)

Other prior year expenses and losses 949 849 100

Total 8,613 10,047 (1,435)


5.10 RESTRUCTURING COSTS

The restructuring costs mainly refer to the workforce restructuring plan in Italy and at the Chinese subsidiary. As already illustrated in the Directors’ Report, during the year, the Board of Directors of Elica S.p.A. approved the reconversion project of the production area of Serra San Quirico (AN) as a logistical hub and the gradual transfer of the workforce. The Project provides for a resizing of the workforce over a period of approximately 24 months from the fourth quarter of 2013. The Chinese subsidiary also implemented a restructuring plan in order to reduce and streamline the company structure. The personnel restructuring charges were estimated based on the subscriptions to the plan already received and those expected to be received by the expiry date.

5.11 SHARE OF PROFIT/(LOSS) FROM ASSOCIATES

The amounts recorded under this heading relate to the Equity method of accounting for investments in the associated company I.S.M. S.r.l..


Share of profit/(loss) from associates (10) 17 (27)

Total (10) 17 (27)


5.12 FINANCIAL INCOME

Details of financial income are shown below:

The increase concerns principally the account Interest on bank deposits, reflecting the movements in the net financial position.


Income from other non-current financial assets

4 9 (5)

Interest on bank deposits 154 104 50

Other financial income 49 42 7

Total 207 155 52


5.13 FINANCIAL CHARGES

The decrease in financial charges of Euro 309 thousand is principally due to the reduction in the average Group debt.

Euro 24 thousand refers to the loss in value on the CAP options to hedge interest rate fluctuations. Paragraph 7 Information on risk management of the present Explanatory Notes provides information on derivative operations.


Financial charges:

on overdrafts and bank loans 3,173 3,651 (478)

on other borrowings 129 8 121

on post-employment benefit provisions 320 440 (120)

Discounts on sales 474 322 152

Other financial expenses

Losses/(Gains) from cash flow hedges transferred from equity

- - -

Net financial gains/(losses) from traded financial instruments

24 8 16

Total 4,120 4,429 (309)


5.14 EXCHANGE GAINS/(LOSSES)

Net exchange losses, excluding transactions in derivative instruments, amounted to Euro 898 thousand compared to gains of Euro 17 thousand in 2012.

The account includes the balance of the unrealised 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 261 thousand in 2013 compared to gains of Euro 120 thousand in 2012.A large part of the exchange gains and losses are concentrated in the Parent Company Elica S.p.A. (loss of Euro 1,125 thousand), in Elica Group Polska Sp.zo.o (gain of Euro 335 thousand), in Elica PB India Private Ltd. (loss of Euro 305 thousand) and in Elicamex (gain of Euro 226 thousand).

Net Financial (Gains)/Charges on derivative instruments report gains in 2013 of Euro 336 thousand, compared to gains in 2012 of Euro 34 thousand.For further information on exchange gains and losses in the year, reference is made to the Directors’ Report.


Exchange losses (4,609) (5,447) 838

Exchange gains 3,711 5,464 (1,753)

Charges on derivative instruments (538) (2,834) 2,296

Gains on derivative instruments 904 2,868 (1,964)

Total exchange gains/(losses) (532) 51 (583)


5.15 INCOME TAXES

Income taxes in 2013 and 2012 are broken down as follows:

Income taxes in the year decreased by Euro 1,8 million compared to 2012. Current taxes refer principally to the Parent Company for Euro 1,2 million, to the Mexican subsidiary for Euro 1,8 million and to the Japanese subsidiary for Euro 1,2 million. Deferred tax income increased by Euro 3 million. In 2013 deferred tax income refers for Euro 2,3 million to the parent company and for the remainder to the subsidiaries.

For 2013, the Parent Company theoretical tax rate (theoretical tax on pre-tax income) was 31.63%, in line with 2012, 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, 2013. 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.


Current taxes (5,283) (4,123) (1,160)

Deferred taxes 4,294 1,332 2,964

Total income taxes (988) (2,792) 1,804


Reconciliation between expected and effective tax rates

2012 restated 2013

Theoretical IRES rate 27.50% 27.50%

Theoretical IRAP rate 4.13% 4.13%

(in Euro thousands) Assessable Income taxes

IRAP Total % on pre-tax profit

Assessable Income taxes

IRAP Total % on pre-tax result

Income taxes

- Current 3,771 1,362 5,133 3,853 1,345 5,198

- IRES tax refund and other (1,106) - (1,106) 84 - 84

- Deferred – cost (income) (1,198) (35) (1,233) (4,354) 59 (4,295)

[A] TOTAL INCOME TAXES 1,467 1,327 2,794 18.7% (416) 1,404 988 -17.2%

PROFIT BEFORE TAXES 7,856 2,413

+ Tax calculated using local tax rate 2,158 27.5% 663 27.5%

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

1,181 325 4.1% 2,276 626 25.9%

- Tax effect on the different tax rates of the foreign subsidiaries

6,283 1,728 22.0% (4,456) (1,225) -50.8%

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

- - 0.0% - - 0.0%

- Increase in deferred tax assets following IRES tax reimbursement request

(4,450) (1,224) -15.6% - - 0.0%

- Other differences (152) (151) -1.9% (21) (6) -0.2%

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

10,717 2,835 36.1% 212 57 2.4%

- Tax credit for Polish investments (265) -3.4% (558) -23.1%

- Reimbursement tax effect and other (1,106) -14.1% 84 3.5%

[C] Effective tax charge and tax rate 10,717 1,465 18.6% 212 (416) -17.2%


2012 restated 2013

Theoretical IRES rate 27.50% 27.50%

Theoretical IRAP rate 4.13% 4.13%

(in Euro thousands) Assessable Income taxes

IRAP Total % on pre-tax profit

Assessable Income taxes

IRAP Total % on pre-tax result

Income taxes

- Current 3,771 1,362 5,133 3,853 1,345 5,198

- IRES tax refund and other (1,106) - (1,106) 84 - 84

- Deferred – cost (income) (1,198) (35) (1,233) (4,354) 59 (4,295)

[A] TOTAL INCOME TAXES 1,467 1,327 2,794 18.7% (416) 1,404 988 -17.2%

PROFIT BEFORE TAXES 7,856 2,413

+ Tax calculated using local tax rate 2,158 27.5% 663 27.5%

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

1,181 325 4.1% 2,276 626 25.9%

- Tax effect on the different tax rates of the foreign subsidiaries

6,283 1,728 22.0% (4,456) (1,225) -50.8%

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

- - 0.0% - - 0.0%

- Increase in deferred tax assets following IRES tax reimbursement request

(4,450) (1,224) -15.6% - - 0.0%

- Other differences (152) (151) -1.9% (21) (6) -0.2%

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

10,717 2,835 36.1% 212 57 2.4%

- Tax credit for Polish investments (265) -3.4% (558) -23.1%

- Reimbursement tax effect and other (1,106) -14.1% 84 3.5%

[C] Effective tax charge and tax rate 10,717 1,465 18.6% 212 (416) -17.2%


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 (33.24%) and Elica PB Private Ltd. (49%).

5.17 BASIC EARNINGS PER SHARE – DILUTED EARNINGS PER SHARE

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

2013 2012 restated

From continuing and discontinued operations:

Net profit for the year (thousands of Euro) 1,357 5,011

Average number of ordinary shares net of treasury shares 61,062,304 60,156,660

Basic earnings per Share (Euro/cents) 2,22 8,33

Weighted average number of ordinary shares to calculate diluted earnings per share

61,144,453 60,360,636

Diluted earnings per Share (Euro/cents) 2,22 8,30

From continuing operations:

Net profit for the year (thousands of Euro) 1,357 5,011

Average number of ordinary shares net of treasury shares 61,062,304 60,156,660

Basic earnings per Share (Euro/cents) 2,22 8,33

Weighted average number of ordinary shares to calculate diluted earnings per share

61,144,453 60,360,636

Diluted earnings per Share (Euro/cents) 2,22 8,30


The diluted earnings per share is calculated by dividing the net profit by the average weighted number of shares in circulation in the year, excluding treasury shares, increased by the potential number of shares which could have been in circulation following the allocation or disposal of treasury shares in portfolio under the 2010 Stock Grant until the closure of the vesting period.

5.18 OTHER INFORMATION ON THE INCOME STATEMENT ACCOUNTS

The research and development costs charged in the Income Statement in 2012 and 2013 are summarised in the table below:

Development costs capitalised in the year regard product design and development activities. The increase mainly relates to the cost of developing new products.


R&D costs expensed 6,156 4,396 1,760

Amortisation of capitalised R&D costs 1,892 1,066 826

Total R&D costs 8,048 5,462 2,586

R&D costs capitalised during the year 1,824 2,414 (590)


CONSOLIDATED BALANCE SHEET

5.20 PROPERTY, PLANT AND EQUIPMENT

The table below shows details of the changes in property, plant and equipment in 2012 and 2013.

Historical cost

In Euro thousands 2011/12/31 Increases Disposals & Reclass.

Other movements

2012/12/31 restated

Land and buildings 68,361 1,159 (448) 1,009 70,081

Plant and machinery 82,301 3,588 (3,973) 874 82,790

Industrial and commercial equipment 90,167 5,415 (2,224) 732 94,090

Other assets 12,106 924 (985) (165) 11,880

Assets in progress and advances 914 515 - (305) 1,124

Total 253,849 11,601 (7,630) 2,145 259,965


Accumulated depreciation

Net value

In Euro thousands 2011/12/31 Depr. Disposals & Reclass.

Other movements

2012/12/31 restated

Land and buildings 18,220 2,244 (77) 34 20,421

Plant and machinery 62,328 3,562 (3,656) 296 62,530

Industrial and commercial equipment 79,896 3,609 (2,186) 360 81,679

Other assets 8,240 955 (449) (269) 8,477

Total 168,684 10,370 (6,368) 420 173,107

In Euro thousands 2011/12/31 Increases Disposals & Reclass.

Other movements

Depr. 2012/12/31 restated

Land and buildings 50,141 1,159 (371) 975 (2,244) 49,661

Plant and machinery 19,973 3,588 (317) 578 (3,562) 20,259

Industrial and commercial equipment

10,271 5,415 (38) 372 (3,609) 12,412

Other assets 3,866 924 (536) 104 (955) 3,405

Assets in progress and advances

914 515 - (305) - 1,124

Totale 85,165 11,601 (1,262) 1,725 (10,370) 86,861


The movements in 2013 were as follows:

Historical cost

Accumulated depreciation

In Euro thousands 2012/12/31 restated

Increases Reclassifica-tion of assets held for sale

Disposals and other reclass.

Other movements

2013/12/31

Land and buildings 70,081 928 (5,572) (118) (663) 64,656

Plant and machinery 82,790 3,707 (2,005) (3,475) (555) 80,462


94,090 4,430 (15) (1,381) (473) 96,651

Other assets 11,880 979 (95) (665) (349) 11,750


1,124 980 - (374) (1,077) 653

Total 259,965 11,024 (7,687) (6,013) (3,117) 254,172


Depr. Reclassifica-tion of assets held for sale


Other movements

2013/12/31

Land and buildings 20,421 2,244 (3,254) - (249) 19,162

Plant and machinery 62,530 3,622 (1,929) (3,444) (320) 60,459


81,679 4,029 (15) (1,345) (328) 84,020

Other assets 8,477 886 (95) (426) (243) 8,599

Total 173,107 10,782 (5,293) (5,215) (1,140) 172,240


Net value

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 column Other movements includes exchanges losses of Euro 1,2 million.

The column Reclassification of other assets held for sale refers to the assets the Group reclassified to Assets held for sale, expecting to sell them within 12 months.

They include assets acquired under finance lease agreements. Details of the historical cost, accumulated depreciation and depreciation charged to the income statement in the year as a result of the application of the method recommended by IAS 17 for the accounting treatment of assets held under finance lease agreements are provided below.


Incr-eases

Reclassifica-tion of assets held for sale


Other movements

Depr. 2013/12/31

Land and buildings 49,661 928 (2,318) (118) (414) (2,244) 45,495

Plant and machinery 20,259 3,707 (76) (31) (235) (3,622) 20,002


12,412 4,430 - (36) (145) (4,029) 12,632

Other assets 3,405 979 - (239) (106) (886) 3,153


1,124 980 - (374) (1,077) - 653

Total 86,861 11,024 (2,394) (798) (1,977) (10,782) 81,932


LEASED ASSETS

Table of leased assets

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

In Euro thousands Land and buildings

Plant and machinery


Total

Gross value 175

Accumulated depreciation - (133) - (133)

December 31, 2013 - 42 - 42

Depreciation in 2013 - 21 - 21

Gross value - 139 - 139

Accumulated depreciation - (87) - (87)

December 31, 2012 restated - 52 - 52

Depreciation in 2012 - 21 - 21


5.21 GOODWILL

The change is solely due to the exchange rate impact on the Goodwill of the Asia CGU.

Details of the allocations are provided below:

Based on its strategic vision, the Elica Group established the following Cash Generating Unit’s (CGU’s) as those which reflect the Group situation, based on international expansion and IAS 36: Cash Generating Unit Europe, Cash Generating Unit Asia and Cash Generating Unit America.

In addition, a series of assets utilised in the common interest of the three CGU’s were identified and which therefore were not allocated to the various CGU’s. For this reason they must be identified as corporate assets and valued according to the provisions of IAS 36.

The recoverable value of the Cash Generating Units to which the individual goodwill is allocated was verified through the determination of the value in use considered as the present value of the expected cash flows utilising a rate which reflects the risks of the individual Cash Generating Units at the valuation date. In particular, these calculations discount the financial cash flow projections of the various CGU’s over a time period of 5 years, the first of which (2014) coincides with the updated budget and the subsequent years (2015-2018) estimated based on the respective budgets, utilising a CAGR of revenues for the 2015-2018 period of 3.0% for the Cash Generating Unit Europe, 4.7% for the Cash Generating Unit Asia, and 3.8% for the Cash Generating Unit America, in line with the best estimates available. In relation to raw material costs, an annual average increase of their percentage of revenues of 0.4% is provided for in relation to the Cash Generating Unit Europe, an annual decrease of 1.1% for the Cash Generating Unit Asia and an increase of 0.6% for the Cash Generating Unit America. These changes are based on the 2014 budget for the various categories of goods,

In Euro thousands 2013/12/31 2012/12/31 restated Changes

Goodwill 41,584 41,705 (121)

Goodwill 41,584 4,705 (121)


Other changes Acquisitions/(write-downs)

2013/12/31

Cost per CGU

Europe 33,817 - - 33,817

America - - - -

Asia 7,888 (121) - 7,767

Totale 41,705 (121) - 41,584


which overall report a decrease of 2.6% 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 1.8% in the 2014 budget for the Cash Generating Unit Europe, by 3.5% for the Cash Generating Unit Asia and by 2.6% for the Cash Generating Unit America, in line with inflation..

The working capital absorbed by the CGU’s ordinary operations is projected to maintain the revenue margin at around 10% for the Cash Generating Unit Europe, 1.4% for the Cash Generating Unit Asia and 16% for the Cash Generating Unit America. These amounts were based on a growth rate of 2.0% for the Cash Generating Unit Europe and Corporate (2.2% in 2012), of 3.0% for the Cash Generating Unit Asia (2.7% in 2012) and of 2.6% for the Cash Generating Unit America (2.7% in 2012). The discount rate (WACC), calculated using the Capital Asset Pricing Model (CAPM), was estimated at 7.8% for the Cash Generating Unit Europe and Corporate (8.5% in 2012), at 8.4% for the Cash Generating Unit Asia (8.3% in 2012) and at 8.1% for the Cash Generating Unit America (8.0% in 2012).

These are the principal assumptions used by the Group to predict future performances and for the year-end impairment test.

Regarding the CGU’s analysed, the valuations made at consolidated level did not result in the recognition of a loss in value of Goodwill at December 31, 2013. The Cash Generating Unit Europe has a coverage of the book value against the value in use of 4,6 times. The Cash Generating Unit Asia has a coverage of the book value against the value in use of 2,8 times. The Cash Generating Unit America has a coverage of the book value against the value in use of 4,1 times. No write-down was considered necessary for the corporate assets considering the excess capacity of the Cash Generating Units.

A sensitivity analysis was also carried out, increasing the basic parameters of the WACC by 1% for each individual CGU. Following these analyses, the recoverable value of each CGU was still greater than the respective book value.

In carrying out the analyses for the impairment tests, assumptions and projections of future performance were utilised based on the corporate plans and the best currently available estimates: of sales, of prices of raw materials and operating costs, of investments, of changes in working capital and the average weighted cost of capital. A change in these assumptions could result in a significantly different value in use and give rise to “impairment”. For this reason, and considering the uncertainties which continue to affect the market, Management will monitor periodically the circumstances and the events which affect the above-mentioned assumptions and future trends.


5.22 OTHER INTANGIBLE ASSETS

The table below shows details of changes in other intangible assets in 2012 and 2013.

Net value

Net value

In Euro thousands 2011/12/31 Increases Other changes and reclassifica-tions

Amort. 2012/12/31 restated

Development Costs 2,855 2,414 2,067 (1,066) 6,270

Industrial patents and intellectual property rights

9,120 1,060 1,127 (2,321) 8,986

Concessions, licenses, trademarks & similar rights

1,856 24 819 (955) 1,744

Assets in progress and advances 4,428 1,806 (3,123) - 3,111

Other intangible assets 6,166 100 (764) (188) 5,314

Total 24,425 5,404 126 (4,530) 25,426


Increases Other changes and reclassifica-tions

Amort. 2013/12/31

Development Costs 6,270 1,824 511 (1,892) 6,713

Industrial patents and intellectual property rights

8,986 1,331 137 (2,205) 8,249

Concessions, licenses, trademarks & similar rights

1,744 11 0 (135) 1,620

Assets in progress and advances 3,111 1,940 (777) 0 4,274

Other intangible assets 5,314 148 (7) (975) 4,480

Total 25,426 5,254 (136) (5,207) 25,336


At December 31, 2013, intangible assets amounted to Euro 25,336 thousand, a decrease of Euro 90 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 programmes. The increase for the year, primarily for the parent company, mainly refers to the review and implementation of systems for the Supply Chain, Industrialisation, Human Resources and Administration areas.Concessions, licenses, brands and similar rights refers to the registration of brands by Group companies.

The assets in progress and advances of Euro 4,274 thousand refer in part to advances and the development of projects for the implementation of new IT platforms, the design and development of new software applications and also the development of new products.

The account Other intangible 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 loss of Euro 97 thousand. The criteria applied to amortise intangibles is considered appropriate to reflect the remaining useful life of the assets.


5.23 INVESTMENTS IN ASSOCIATED COMPANIES

The table below shows changes in investments in associated companies:

The column Revaluations/(Write-downs), negative for Euro 11 thousand, includes the balance of the adjustments made during the year to the investment, based on results in the year.

The table below shows the carrying values at the end of the previous year and as at December 31, 2013.

In Euro thousands 2012/12/31 restated Reval./(write-downs) 2013/12/31

Investments in associated companies 1,394 (11) 1,383

Total 1,394 (11) 1,383

In Euro thousands

Purchase cost

Pro-quota post-acqui. gain/loss (exclud. dividends)

Balance at 2013/12/31

Purchase cost

Pro-quota post-acqui. gain/loss (exclud. dividends)

Balance at 2012/12/31 restated

I.S.M. S.r.l. 1,899 (516) 1,383 1,899 (505) 1,394

Total 1,899 (516) 1,383 1,899 (505) 1,394


5.24 OTHER RECEIVABLES (NON-CURRENT)

The breakdown of the Other receivables is as follows:

5.25 TAX RECEIVABLES (NON-CURRENT)

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


Employees 82 100 (18)

Other receivables 108 145 (37)

Total 190 245 (55)


5.26 AVAILABLE-FOR-SALE FINANCIAL ASSETS

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 cost value of the investments, which has not changed from the previous year, is shown below:


Meccano S.p.A. 15 15 -

Consorzio Energia 4 4 -

Ceced 4 4 -

Other minor investments 133 133 -

Total 156 156 -


5.27 TRADE RECEIVABLES AND LOANS

The account consists of:

Trade receivables decreased by Euro 2,968 thousand. This decrease is related to the continuation of the client selection process and greater efficiency in the internal collection procedures.

The Group adopts a Credit Policy which governs the management of credit and the reduction of the related risk. In particular, it is Group policy to transfer the risk deriving from receivables to third parties and therefore a significant part of the relative risk is protected by insurance policies with leading international insurance companies.

Receivables are recorded net of the doubtful debt provision, amounting to Euro 3,833 thousand, accrued based on a specific analysis of the individual risks and on the basis of a general provision calculated in accordance with the provisions of the Credit Policy.

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 216 thousand.

The receivables from the associated company I.S.M. for Euro 98 thousand relate to dividends not yet paid and for the remainder to ordinary operations of the company.


Trade receivables 74,397 77,364 (2,967)

Receivables from associated companies

100 101 (1)

Total 74,497 77,465 (2,968)


5.28 INVENTORIES

The value of inventories increased by Euro 2,730 thousand.

Inventories are stated net of obsolescence provisions of approximately Euro 3,401 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 semi-finished 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.

The quantification of the stock obsolescence provision of raw materials, semi-finished and finished products is based on assumptions made by Management and amounts to 6% of inventories (7% in 2012).


Raw materials, ancillary and consumables

22,850 22,111 739

Raw materials obsolescence provision (1,348) (1,292) (56)

Total 21,502 20,819 683

Products in work-in-progress and semi-finished

12,431 11,769 662

Work-in–progress obsolescence provision

(760) (767) 7

Total 11,671 11,002 669

Finished products and goods for resale 20,430 19,078 1,352

Finished products obsolescence provision

(1,293) (1,357) 64

Total 19,137 17,720 1,416

Advances 17 55 (38)

Total 52,327 49,597 2,730


5.29 OTHER RECEIVABLES (CURRENT)

The breakdown is as follows:

The increase in the account, principally other receivables, mainly refers to the Parent Company and is due to the following factors: insurance damages recognised following the claims at the factories of Mergo and Castelfidardo and the granting of state loans against investments made in the period 2001-2006 in accordance with Law 488.


Other receivables 4,915 4,242 673

Prepayments and accrued income 1,391 1,573 (183)

Total 6,306 5,816 490


5.30 TAX RECEIVABLES (CURRENT)

The break down of the account Tax Receivables is summarised in the table below:

The change in the income tax and regional tax receivables refers to the balance between the payments on accounts and income tax payables for the year 2013.

In particular the decrease in the IRES receivable, which represents the largest part of the change in the account, reflects the change in the receivable of the Parent Company.


IRAP - 140 (140)

IRES 1,185 2,101 (916)

VAT 4,332 4,290 42

Other tax receivables 2,230 2,503 (273)

Total 7,747 9,035 (1,287)


5.31 DERIVATIVE FINANCIAL INSTRUMENTS

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

This account reflects positive balances held in bank current accounts and cash on hand. The increase 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.


Assets Liabilities Assets Liabilities

Derivatives on foreign exchange 327 21 548 645

Derivatives on interest rates 37 396 634

Derivatives on commodities 156 - 89 -

Totalof which

520 417 637 1,280

Non-current 1 166 - 373

Current 519 251 637 907

Total 520 417 637 1,280


Bank and post office deposits 27,605 29,510 (1,905)

Cash and cash equivalents on hand 59 41 18

Total 27,664 29,551 (1,887)


5.33 LIABILITIES FOR POST-RETIREMENT BENEFITS

The Elica Group reports obligations of Euro 11,230 thousand, reflecting the present value of its retirement benefit obligations accruing at the period end in favour of employees of the Group’s 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, 2013 by Mercer Human Resource Consulting S.r.l..

The amounts recognised in the Income Statement may be summarised as follows:


Costs relating to current employee services

3,045 2,850 195

Financial charges 320 440 (120)

3,365 3,290 75


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

From the current year it is no longer possible to utilise the corridor method. The actuarial gains/losses are therefore recorded in a separate equity reserve. In accordance with the requirements of IAS, we have restated the 2012 accounts based on these standards. All the effects are illustrated in the Restatement note in the financial statements and explanatory notes.

Lastly, the interest component of the charge relating to employee defined-benefit schemes is shown under financial charges, with a resulting increase of Euro 320 thousand in this item for the year. The cost of current retirement benefits and the effect of the curtailment were recorded under labour costs.

The costs relating to current employee services and utilisations of pension funds respectively include the charges and settlements in the year.


Open balance - restated 12,178 9,978 2,200

Costs relating to current employee services

3,045 2,850 195

Effect of the change in the financial assumptions

(590) 2,293 (2,884)

Adjustment due to experience (277) 206 (483)

2,177 5,349 (3,172)

Financial charges 320 440 (120)

Pension fund (2,999) (2,742) (257)

Benefits provided (446) (847) 401

Total 11,230 12,178 (948)


Assumptions adopted for the calculation

The discount rates utilised by the Group were selected based on the yield curve of high-quality fixed income securities, as in previous years.

This financial variable is considered the most significant and therefore chosen to undertake a sensitivity analysis. The objective of a sensitivity analysis is to show that the result of the valuation alters on the change of an assumption adopted for the calculation, maintaining all other assumptions unchanged.

Therefore where the discount rate increases 0.5% (3.67%), the value of the provision would amount to Euro 10,628 thousand, while if the discount rate decreased by 0.5% (2.67%), the value of the pension obligations would amount to Euro 11,889 thousand.

At December 31, 2013 employees numbered 3,244 (3.033 in 2012), as detailed in paragraph 5,7.

2013/12/31 2012/12/31 restated

Discount rate to determine the obligation 3.17% 2.72%

Expected salary growth rate 2.79% 2.67%

Rate of inflation 2.00% 2.00%

Discount rate to determine pension cost 2.72% 4.55%


5.34 PROVISIONS FOR RISKS AND CHARGES

The composition and movements of the provisions are as follows:

The Supplementary agent termination benefits are intended to cover possible charges upon termination of relations with agents and sales representatives.

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 company as a percentage of sales still covered by warranty.

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. This includes in addition the provisions made for scheduled settlements.

The Restructuring Provision was set up within the corporate restructuring plan, as described in paragraph 5,10 of the present notes.


Provisions Utilisation/Reversal

Other changes

2013/12/31

Supplementary agent termination benefits

465 120 (167) (0) 418

Product warranty provisions 1,531 674 (622) (64) 1,519

Provisions for risks 2,244 21 (829) (8) 1,428

Restructuring provision - 750 - - 750

Long Term Incentive Plan provision - 1,399 - - 1,399

Personnel Fund 485 1,903 (484) (1) 1,903

Other Provisions 71 71 (54) - 87

Total of which

4,796 4,938 (2,156) (73) 7,505

Not current 2,710 3,333

Current 2,086 4,172

Total 4,796 7,505


The Personnel Fund includes contractual indemnities of employees provisioned in the year, not yet definitive and based on the best estimates according to the information available, which will be paid in the subsequent year.

The Long Term Incentive Plan provision refers to the accrual made, on the basis of the actuarial estimates of Tower&Watson relating to the year 2013, approved by the Board of Directors on November 14, 2013.

The column Other movements exclusively relates to exchange gains/losses.

5.35 DEFERRED TAX ASSETS - DEFERRED TAX LIABILITIES

At December 31, 2013, details of deferred tax assets and liabilities, determined on the basis of the asset-liabilities method, were as follows:


Deferred tax assets 13,608 10,387 3,221

Deferred tax liabilities (5,117) (5,376) 259

Total 8,491 5,011 3,480


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

The column Other movements includes all the changes in deferred tax assets and liabilities which do not have an effect on the Income Statement in the deferred tax income or charge accounts; they include the currency effects for Euro 254 thousand and the effects of the application of the new IAS 19 for Euro 200 thousand.

In Euro thousands 2012/12/31 restated Credit/Debit to P&L Other move. N.E.

2013/12/31

Assets Liabilities Deferred tax assets

Deferred tax liab.

Assets Liabilities

IRAP from IRES repayment

1,224 - - - - 1,224 -

Provisions 2,021 - 515 (117) (9) 1,614 -

Goodwill 604 (2,249) 128 (77) 32 476 (2,142)

Losses carried forward

4,172 (11) 133 (3,194) (433) 6,791 -

Inventory write-down

770 - 60 (9) (37) 682 -

Restructuring costs - - - (206) - 206 -

Gains, grants - (23) - (21) - - (1)

Merger adjustments - (922) - (45) - - (877)

Exchange diff. 71 (43) 139 (240) - 146 (16)

Post-employment benefit provision

- 73 - - (200) 54 (180)

Amortisation & Depreciation

729 (110) 10 (132) (2) 849 (110)

Elimination of intercompany profits

281 13 - 37 (1) 258 -

Employee bonuses 133 - 133 (984) - 984 -

Allocation of acquisition price

- (2,064) - (291) - - (1,773)

Other 382 (39) 62 (195) (166) 324 (17)

Total 10,387 (5,376) 1,180 (5,474) (816) 13,608 (5,117)


Deferred tax asset recognition for each Group company is carried out through evaluating the projected future recovery based on budget projections. Deferred tax assets were not recognised concerning the foreign subsidiaries for approx. Euro 0,8 million.

5.36 AMOUNTS DUE UNDER FINANCE LEASES AND OTHER LENDERS

The account includes payables for finance leases of the German subsidiary. The previous year included also a payable of the Indian subsidiary. Finance leases refer to plant and machinery. The current value of the minimum payments due at December 31, 2013 is Euro 28 thousand, of which Euro 14 thousand due within 12 months.

In Euro thousands Minimum leasing payments due

Present value of the minimum payments due

2013/12/31 2012/12/31 restated

2013/12/31 2012/12/31 restated

Due within one year 14 45 14 40

Due within five years 12 334 11 333

Due over five years 4 3

30 379 28 373

of which:

- future financing costs 2 6 - -

- present value of obligations under finance leases 28 373 28 373

of which:

- due within one year 14 40

- due beyond one year 14 333


5.37 BANK LOANS AND MORTGAGES

The majority of borrowings indicated above carry a floating rate of interest. While it is exposed to interest rate risk, in 2013 the Group did not systematically hedge its exposure as, particularly concerning short-term debt, 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.


Bank loans and mortgages 84,311 91,508 (7,197)

Total 84,311 91,508 (7,197)

Bank loans and mortgages have the following repayment schedules

On demand or within one year 46,554 45,165 1,389

Within two years 15,442 16,617 (1,175)

Within three years 11,495 13,252 (1,757)

Within four years 8,015 9,361 (1,346)

Within five years 2,805 5,911 (3,106)

Beyond 5 years - 1,202 (1,202)

Total 84,311 91,508 (7,197)

Less amounts to be repaid within one year

46,554 45,165 1,389

Due beyond one year 37,757 46,343 (8,586)


5.38 OTHER PAYABLES

Other Payables (non-current)

The balance of non-current payables relates for Euro 4 thousand to Airforce (Euro 4 thousand in 2012) and for Euro 983 thousand to the parent company Elica (Euro 1,170 thousand in 2012). The payable decreased principally following the payment of a portion of the suspension payables following the earthquake in 1997.

Other payables (current)

The account increased by Euro 7,435 thousand, principally due to the commitments undertaken by the Parent Company and the Chinese subsidiary for the personnel restructuring plan, as further described in paragraph 5,10 of the present notes.


Other payables 163 191 (28)

INAIL contributions – earthquake suspension 1997

60 72 (12)

INPDAI contributions – earthquake suspension 1997

32 38 (6)

Employee INPS contributions - earthquake 1997

732 874 (143)

Total 987 1,174 (187)


Payables to social security institutions 1,654 533 1,121

Other payables 3,529 1,858 1,671

Payables to personnel for remuneration

8,172 4,316 3,856

Accruals and deferred income 1,317 1,040 277

Customer advances 849 619 230

Directors and Statutory Auditors 280 - 280

Total 15,801 8,366 7,435


5.39 CURRENT AND NON-CURRENT TAX LIABILITIES

Tax payables (non-current)

The decrease of the this account relates principally to the payment in the year of earthquake suspension payables following the earthquake in 1997.

Tax payables (current)

The account increased by Euro 2,157 thousand. The increase is principally due to payables for other taxes which increased by Euro 2,256 thousand, mainly relating to the foreign subsidiaries, in particular the Mexican and Polish subsidiaries.


ILOR payables - earthquake suspension

139 166 (27)

Other taxes 127 151 (24)

Employment leaving indemnity payable – earthquake suspension

20 24 (4)

Flat tax payable – earthquake suspension

1 1 0

Taxes on equity reserves – earthquake suspension

390 465 (75)

Total 677 807 (130)


Other taxes 4,532 2,276 2,256

IRPEF withheld 2,479 1,967 512

Income tax payables for the year 306 917 (611)

Total 7,317 5,160 2,157


5.40 TRADE PAYABLES

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.

5.41 ASSETS HELD FOR SALES

This account includes assets of the Parent Company which the Group expect to be sold within 12 months.


Trade payables 85,520 88,716 (3,196)

Total 85,520 88,716 (3,196)


5.42 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, 2013 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.

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 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 8,525 thousand (in 2012 negative for Euro 5,355 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., Zhejiang Putian Electric Co. Ltd and Elica Trading LLC) resulting in a decrease of Euro 3,074 thousand, including the fair value changes of cash flow hedges, net of the positive tax effect of Euro 240 thousand. The change in the 2010 Stock Grant Plan reserve is also recorded to this account, approved by the Shareholders’ Meeting of April 26, 2010, now concluded, for a negative Euro 336 thousand.


Closing Stock grant plan 2010

Changes in hedging reserve

Chages in translation reserve

2013/12/31

Hedge reserve (395) (155)

Stock grant reserve 336 (336) - - -

Translation reserve (5,296) - - (3,074) (8,370)

(5,355) (336) 240 (3,074) (8,525)


Treasury shares

In 2013, treasury shares report a net reduction of 1,890,642 shares. This decrease is due for 1,700,000 shares to sales to third parties, as described in the 2013 Significant events of the Directors’ Report, and for 190,642 shares to the conclusion of the 2010 Stock Grant Plan.

Retained earnings

Retained earnings increased from Euro 39,926 thousand in 2012 to Euro 40,294 thousand in 2013. The increase of Euro 368 thousand is principally due to the following factors: the allocation of the 2012 net profit for Euro 5,199 thousand, a decrease of Euro 2,999 thousand related to the reduction of the market value of the treasury shares sold during the year and the approval of dividends of Euro 1,425 thousand.

Number Book valueIn Euro thousands

Beginning balance January 1, 2013 3,166,140 8,815

For the beneficiaries of the Stock Grant Plan (190,642) (531)

Sold to third parties (1,700,000) (4,733)

Closing balance December 31, 2013 1,275,498 3,551


5.43 MINORITY INTEREST SHAREHOLDERS’ EQUITY

The account decreased by Euro 1,266 thousand, principally due to:

› an increase of Euro 69 thousand for the allocation of the 2013 minority profit;

› a decrease of Euro 760 thousand concerning the minority share of the translation effect of financial statements of the investee companies ARIAFINA CO., LTD, Elica PB India Private Ltd., Zhejiang Putian Electric Co Ltd and Elica Trading LLC, expressed in foreign currencies;

› a decrease of Euro 464 thousand for the distribution of dividends by Ariafina and Airforce.

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.


5.44 NET DEBT, DEFAULT RISKS AND COVENANTS

(In accordance with CONSOB No. DEM/6064293 of July 28, 2006)

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.





Long-term debt (37,771) (46,676)



Short-term debt (46,568) (45,205)

Net Debt (56,675) (62,330)


5.45 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.

The account includes costs incurred by the Group in execution of the restructuring plans of the parent company and the Chinese subsidiary. The Parent Company restructuring plan is related to the Reconversion Project of the production area of Serra San Quirico (Ancona) as a logistical hub, with the consequent gradual transfer of the workforce to the nearby Mergo (Ancona) production site. This Project arises from the need to ensure competitiveness at the Italian production sites.

In Euro thousands Net Equity Net Profit

Amount % Amount %

As per accounts 116,741 1,426

a) Restructuring costs (4,537) 4% (4,537) 318%

Gross notional book value 121,278 5,963


5.46 RESTATEMENT

The Elica Group applied the new aspects of IAS 19. Following the introduction of these provisions, as it is no longer possible to apply the corridor method, the actuarial profits and losses, which reflect the effects from the changes in the actuarial parameters, are recorded directly to net equity. We summarise below the effects:

January 1, 2012

At December 31, 2012

In Euro thousands Amounts previously reported

Effects deriving from the application of IAS 19 amended

Restated amounts

Liabilities for post-employment benefits

(8,907) (1,074) (9,981)

Deferred tax liabilities – share relating to post-employment benefits

(884) 347 (537)

Reserve for actuarial profit/losses 0 705 705

Minority Interest Capital and Reserves – share relating to the Reserve for actuarial profit/losses

0 22 22

In Euro thousands Amounts previously reported

Effects deriving from the application of IAS 19 amended

Restated amounts


(8,611) (3,567) (12,178)


(882) 956 74

Reserve for actuarial profit/losses 0 2,544 2,544


0 67 67


We also restated the 2012 income statement, with a reductive impact of Euro 6 thousand on Personnel Costs, due to the reversal of the provision, in addition to the relative tax impact.

The Elica Group reports obligations of Euro 11,230 thousand, reflecting the present value of its retirement benefit obligations accruing at the period end in favour of employees of the Group’s companies and representing termination benefits at the end of the employment period.

In Euro thousands Amounts restated at December 31, 2012

Actuarial profit/losses matured in the period

Impact on the Income Statement

December 31, 2013


(12,178) 867 81 (11,230)


74 (199) 0 (125)

Reserve for actuarial profit/losses 2,544 (646) 0 1,898


67 (22) 0 45


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, 2013 for contingent risks and charges relating to legal disputes amount to Euro 644 thousand. 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 11,885 thousand, while the amount relating to fixed asset purchases at December 31, 2013 was approx. Euro 447 thousand, principally relating to investments in the productive capacity such as moulds and lasers.

On December 18, 2013, F.A.N. s.r.l. (previously FAN S.A.), the parent company of Elica S.p.A., and Whirlpool Europe S.r.l. (“Whirlpool”) renewed the Shareholder Agreement (the “Shareholder Agreement”) of December 10, 2007.

The Shareholder Agreement covers, among other issues, aspects relating to the governance of Elica S.p.A.. It sets a number of limits on the transfer of investments held by the Parties and commits FAN and the entities controlled by it to a non-competition clause.

The Shareholder Agreement 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 on the matter, reference should be made to the website of Consob www.consob.it, which reports the updated extract of the Shareholder Agreement and the Annual Corporate Governance Report, available on the Company website www.elicagroup.com, Investor Relations/Corporate Governance section and/or http://corporation.elica.com (Investor Relations section).

The Group has not provided any significant guarantees.


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:


Property rentals 1,819 3,435

Car and fork lift rental 2,085 3,695

Hardware operating leases 3,205 2,402

Other operating leases 3,333 4,028

Total 10,442 13,560

In Euro thousands Within 1 year 1 - 5 years Over 5 years Oltre 5 anni

Property rentals 1,819 1,014 805 0

Car and fork lift rental 2,085 1,088 997 0

Hardware operating leases 3,205 793 2,412 0

Other operating leases 3,333 388 1,865 1,080

Total 10,442 3,284 6,079 1,080


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 if they 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 proficient 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.

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:

› currency risk;

› 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

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 Rupie (INR). In all of these currencies, except for the Swiss Franc, the Polish Zloty and the Mexican Peso, the Elica 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 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, 2013 of the balance sheet accounts in foreign currencies for the most significant currencies:

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


Currency Assets Liabilities Assets Liabilities

CHF - (342) - (302)

CNY 2,611 467 1,499 108

GBP 249 (19) 277 (25)

JPY 316 (7) 196 (27)

PLN 15,281 (17,840) (14,446) 13,781

RUB 1,706 (184) 3,917 (15)

USD 25,553 (11,397) 17,275 (9,880)

MXN (339) 1,261 (890) 621

INR 1,400 1,171 883 1,619

Total 46,777 (26,890) 8,709 5,881


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:

The hedging operations at December 31, 2013 with financial counterparties have a total positive Fair Value of approx. Euro 306 thousand.


Currency Depreciation of foreign currencies 5%

Appreciation of foreign currencies 5%

Depreciation of foreign currencies 5%

Appreciation of foreign currencies 5%

CHF 16 (18) 14 (16)

CNY (147) 162 (77) 85

GBP (11) 12 (12) 13

JPY (15) 16 (8) 9

PLN 122 (135) 32 (35)

RUB (72) 80 (186) 205

USD (674) 745 (352) 389

MXN (44) 48 13 (14)

INR (122) 135 (119) 132

Total (947) 1,045 (695) 768


The table below shows the details of the notional and fair values:

For the purposes of the sensitivity analysis on the exchange rate, the potential movements on the EUR/USD, EUR/GBP, EUR/PLN, EUR/RUB and EUR/CNY 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, 2013 in order to show the effect of changes in the rate curve.

For this purpose, the maximum change in the interval between the beginning of November 2013 and the first week of January 2014 was considered.For the EUR/USD exchange rates a stress of 4.0% was applied, for the EUR/GBP 4.0%, for EUR/PLN 3.0%, for EUR/JPY 7.0%, for EUR/RUB 8.0% and for EUR/CNY 3.0%.

Currency 2013/12/31 2012/12/31 restated

Notional value (in foreign currency/000)

Fair Value (in Euro thousands)

Notional value (in foreign currency/000)

Fair Value (in Euro thousands)

USD

Forward 2,640 26 10,600 18

Options 1,200 41 620 1

GBP

Forward 50 (1) 924 4

PLN

Forward 45,450 42 122,173 (47)

Options 6,720 1 6,450 84

JPY

Options - - 54,000 28

RUB

Forward 466,500 194 542,700 (259)

Options 76,600 23 194,230 73

CNY

Forward 10,000 (20) 10,000 2

Total 306 (96)


For interest rates on forward exchange contracts, a stress was applied of 6 bps for the Eurozone rates, 4 bps for US rates, 0 bps for United Kingdom rates, 13 bps for the Polish rates, 10 bps for the Russian rates and 0 bps for the Chinese rates.

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, 2013 (compared with December 31, 2012):

In Euro thousands 2013/12/31

USD Notional3.840USD/000

GBP Notional50 GBP/000

PLN Notional 52.170PLN/000

JPY Notional 0JPY/000

RUB Notional 543.100RUB/000

CNY Notional 10.000CNY/000

Exchange depreciation (4) 2 (62) - 207 16

Currency depreciation EURO

- - - - - -

Currency depreciation - - (1) - 1 1

Sensitivity to Depreciation

(4) 2 (63) - 208 17

Exchange appreciation 4 (3) 181 - (139) (17)

Currency appreciation EURO

- - - - -

Currency appreciation - - 1 - (1) (1)

Sensitivity to Appreciation

4 (3) 182 - (140) (18)



USD Notional 11.220USD/000

GBP Notional 924 GBP/000

PLN Notional 128.623PLN/000

JPY Notional 54.000JPY/000

RUB Notional 736.930RUB/000

CNY Notional 10.000CNY/000

Exchange appreciation 159 13 (44) 25 264 29

Currency depreciation EURO

- - - - - -

Currency depreciation - - 12 - 27 12

Sensitivity to Depreciation

159 13 (32) 25 291 41

Exchange appreciation (164) (11) 51 (20) (259) (31)

Currency appreciation EURO

- - - - - -

Currency appreciation - - (12) - (26) (13)

Sensitivity to Appreciation

(164) (11) 39 (20) (285) (43)


Commodity 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 through fixing the price of contracts with suppliers and through hedging contracts with financial counterparties.

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 prices and quantities were fixed through both channels described above. 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 notional value and the relative value of the copper derivatives in place at December 31, 2013 are reported below:

Also the commodoties risk is measured through sensitivity analysis, in accordance with IFRS 7. The changes in the prices of copper utilised for the sensitivity analysis were based on the volatility of the market rates.

This analysis highlights a revaluation in the price of copper of 5%, resulting in an increase in the fair value of forward contracts at December 31, 2013 of Euro 399 thousand.

Similarly, a reduction of 5% results in a decrease in the fair value of forward contracts of Euro 401 thousand.

2013/12/31 2012/12/31 restated

Copper coverage In Euro thousands

Notional value Fair Value Notional value Fair Value

Forward 7,859 156 2,316 89

Total 7,859 156 2,316 89


Interest rate risk

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. The Group’s debt carries mainly a floating rate of interest.

Relating to the Group debt, from the sensitivity analysis a decrease of 25 bps in the interest rate curve in the short-term incurs lower financial charges of Euro 142 thousand, while an increase of 25 bps in the same interest rate curve converts into higher financial charges of Euro 142 thousand.

The Group hedges the interest rate risk through the utilisation of four Interest Rate Swaps and through CAP options against specific medium-long term loans at a variable rate.

The table below shows the details of the notional and fair values:

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 decrease in the interest rate curve of 1 bps and of the medium/long-term curve of 25 bps converts into a decrease in the Fair Value of the Interest Rate Swap at December 31, 2013 of Euro 79 thousand.

An increase of 1 bps in the interest rate curve and of 25 bps in the medium/long-term rate curve results however in an increase in the fair value of Interest Rate Swaps of Euro 80 thousand.

With reference to the CAP option, the sensitivity analysis carried out on the interest rate curve shows that against a decrease in the interest rate curve of 1 bps and of 25 bps in the medium/long-term rate curve there are no changes in the fair value.

Similarly, an increase in the interest rate curve of 1 bps and of 25 bps in the medium/long-term rate curve results in no changes in the fair value.

2013/12/31 2012/12/31 restated

Instrument In Euro thousands

Notional value Fair Value Notional value Fair Value

Interest Rate Swap 23,682 (370) 31,560 (634)

CAP 17,156 11 17,129 -

Total 40,838 (359) 48,689 (634)


Credit risk

The credit risks represent the exposure of the Elica Group to potential losses deriving from the non-compliance 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 adopts a Credit Policy (related to the Financial Risk Policy) which governs credit management and the reduction of the related risk, partly through insurance policies with leading international insurance companies.

The maximum theoretical credit risk exposure for the Group at December 31, 2013 is based on the book value of the receivables recognised to the accounts, net of the specific insurance coverage, in addition to the nominal value of the guarantees given to third parties.

At December 31, 2013, trade receivables of Euro 74,5 million (Euro 77,5 million at December 31, 2012) included approx. Euro 9,3 million (Euro 9,0 million at December 31, 2012) of overdue receivables. 13% of receivables (16% at December 31, 2012) were overdue by more than 60 days.

The amount of trade receivables reported in the balance sheet is net of the allowance for doubtful accounts. The provision is allocated either on a specific basis or on the general basis of overall risks, in accordance with the company’s Credit Policy.For more details, see paragraph 5,27 of the present notes.

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.


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, 2013:

Data at December 31, 2012:

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 result in an increase in the cost of the loan.

At December 31, 2013 the level of the covenants in question were comfortably complied with by the Group both in relation to the increase in the cost of the loan and the level of 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 5,44 of the notes.

In Euro thousands within 12 months 1 - 5 years over 5 years

Finance leases and other lenders 14 11 3

Bank loans and mortgages 46,554 37,757 0

Trade and other payables 101,303 709 296

Total 147,871 38,477 299

In Euro thousands within 12 months 1 - 5 years over 5 years

Finance leases and other lenders 40 333 -

Bank loans and mortgages 45,165 45,141 1,202

Trade and other payables 97,007 910 339

Total 142,212 46,384 1,541


Classification of the Financial instruments

The Group considers that the book values of the accounts approximate their fair value. In relation to the valuation methods for the individual accounts, reference should be made to paragraph 2 “Accounting principles and consolidation criteria” of the present Notes.


AFS financial assets 156 156

Derivative financial instruments 1 -

Non-current assets 157 156

Derivative financial instruments 519 638

Trade and financial receivables 74,497 77,465


Current assets 102,680 107,654

Finance leases and other lenders 14 333

Bank loans and mortgages 37,757 46,343


Non-current liabilities 37,937 47,049

Trade payables 85,520 88,716

Finance leases and other lenders 14 40

Bank loans and mortgages 46,554 45,165


Current liabilities 132,339 134,828


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;

› 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 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, 2013 and December 31, 2012 belong to level 2 of the fair value hierarchy, except for commodoties which belong to level 1.

Derivative contracts at December 31, 2013

The table below shows the following information on derivative instruments at December 31, 2013:

› The notional value of the derivative contracts, broken down by maturity;

› The book value of these contracts, represented by their fair value.


In Euro thousands Notional Value Book value

Interest rate risk Maturity within 1 year Maturity over 1 year

Cash Flow hedge as per IAS 39 5,433 18,248 (370)

Fair Value hedge as per IAS 39

Not considered hedges under IAS 39

13,095 4,062 11

Total derivatives on interest rates 18,528 22,310 (359)

Foreign currency risks Maturity within 1 year Maturity over 1 year

sales purchases sales purchases

Cash Flow hedge as per IAS 39



14,786 39,547 570 601 306

Total derivatives on foreign exchange

14,786 39,547 570 601 306

Management of commodity risk Maturity within 1 year Maturity over 1 year


Cash Flow hedge as per IAS 39 7,859 156



Total derivatives on commodities 7,859 156


The situation at December 31, 2012 is outlined below:

In Euro thousands Notional Value Book value

Interest rate risk Maturity within 1 year Maturity over 1 year

Cash Flow hedge as per IAS 39 8,738 27,119 (654)



4,974 12,156 0

Total derivatives on interest rates 13,712 39,275 (654)

Foreign currency risks Maturity within 1 year Maturity over 1 year


Cash Flow hedge as per IAS 39



32,899 22,679 8,478 570 (96)

Total derivatives on foreign exchange

32,889 22,679 8,478 570 (96)

Management of commodity risk Maturity within 1 year Maturity over 1 year


Cash Flow hedge as per IAS 39 2,316 89



Total derivatives on commodities 2,316 89


The details of the process followed in order to identify fair value are shown below:

Financial Assets/Liabilities

Fair value at Fair valuehierarchy

Valuation techniques and key inputs

Significant unobserv-able inputs

Relation between the unobserv-able inputs and the fair value

2013/12/31 2012/12/31 restated

1) Currency forwards and options

Assets Euro 327 thousand;

Liabilities Euro (21) thousand.

Assets Euro 210 thousand.;


Level 2 Discounted cash flow. The future cash flows are estimated based on the forward currency rates (from the forward currency rates observable at the end of the period) and the forward contract rates, discounted at a rate which reflects the credit risk of the various counterparties.

n/a n/a

2) Interest rate swaps

Assets Euro 11 thousand;

Liabilities (subject to hedging) Euro 370 thousand.


Level 2 Discounted cash flow. The future cash flows are estimated based on the forward interest rates (from the interest rate curve observable at the end of the period) and the interest rate contracts, discounted at a rate which reflects the credit risk of the various counterparties.

n/a n/a


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 (AN, Italy).

Francesco Casoli, Chairman of Elica S.p.A., is a 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 shareholders’ 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 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 persons in total amounted to Euro 3,683 thousand.

The details are reported in the Remuneration Report. This report is available on the website of the Company www.elicagroup.com/ Investor Relations/Corporate Governance section and/or http://corporation.elica.com (Investor Relations section).

8.2 SHARE-BASED PAYMENTS

No costs relating to share-based payments were recognised to the 2013 income statement. Following the Shareholders’ Meeting for approval of the 2012 Annual Accounts, the Vesting Period of the 2010 Stock Grant Plan concluded. The details are reported in the Remuneration Report. This report is available on the website of the Company www.elicagroup.com/ Investor Relations/Corporate Governance section and/or http://corporation.elica.com (Investor Relations section).


8.3 INFORMATION ON SUBSIDIARY COMPANIES

The tables below show key figures for subsidiaries and the amount of transactions entered into with them at and for the year ended December 31, 2013.

Subsidiaries - 2013 Financial Highlights

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.

In Euro thousands Assets Liabilities Shareholders’ equity

Revenues Net result

Elicamex S.a.d. C.V. 44,145 13,424 30,721 53,545 5,629

Elica Group Polska Sp.z o.o 50,241 25,351 24,890 89,551 3,194

Airforce S.p.A. 9,892 7,473 2,419 19,410 254

Ariafina Co. Ltd 8,270 3,019 5,251 23,293 1,968

Leonardo Services S.a. de C.V. 1,549 1,543 7 6,731 147

Exklusiv Hauben Gutmann GmbH 24,498 14,386 10,112 26,337 405

Elica Inc. 440 309 131 566 16

Airforce GE 79 7 72 18 (11)

Elica PB India Private Ltd. 6,686 4,663 2,023 9,042 (84)

Zhejiang Putian Electric Co. Ltd 14,831 11,871 2,960 13,795 (3,277)

Elica Trading LLC 3,616 2,025 1,590 7,418 (163)

(*) Airforce Germany Hochleistungs-dunstabzugssysteme Gmbh


8.4 INFORMATION ON ASSOCIATED COMPANY

The table below shows the operating and financial amounts arising from transactions with the associated company for 2013. 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 company’s financial statements in accordance with Italian GAAP.

Associated company - key data at December 31, 2013

Commercial transactions with associated companies

The table below shows the operating and financial balances from transactions with associated company for 2013. No separate disclosure of these positions was given in the financial statements, given the limited amounts involved, in accordance with Consob resolution No. 15519 of July 27, 2006.

In Euro thousands Head Office % held Share capital Shareholders’ equity

Net result

I.S.M. S.r.l . Cerreto d’Esi (AN-Italia)

49.385 % 10 1,321 3

In Euro thousands Payables Receivables Costs Revenues

I.S.M. S.r.l. - 100 - 3

- 100 - 3


8.5 TRANSACTIONS WITH OTHER RELATED PARTIES

In 2013, transactions with other related parties took place. All transactions were conducted on an arm’s length basis in the ordinary course of business. No separate disclosure of these positions was given in the financial statements, given the limited amounts involved, in accordance with Consob resolution No. 15519 of July 27, 2006.

The table below shows the main operating and financial balances arising from trading transactions with FASTNET S.p.A. (30% interest held by FAN the parent company of Elica) and with Fintrack S.p.A. (company that indirectly controls the Parent Company, Elica S.p.A.).

The operating and financial balances arise from trading transactions conducted to purchase goods and services on an arm’s length basis. From 2013 the transactions with Roal Electronics S.p.A. are no longer reported as the company is no longer a related party of the Group.

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 to hardware consultancy and from training to web marketing.There were no transactions during the year with Fintrack S.p.A..

The Procedures for Transactions with Related Parties is published on the website of the Company http://www.elicagroup.com/ in the Investor Relations/Corporate Governance section and/or at http://corporation.elica.com (Corporate Governance section).

In Euro thousands Payables Receivables Costs Revenues

Fintrack S.p.a. - - - -

Fastnet S.p.A. 4 - 28 -

4 - 28 -


9. POSITIONS OR TRANSACTIONS ARISING FROM EXCEPTIONAL AND/OR UNUSUAL TRANSACTIONS

In 2013, no operations classifiable in this category were recorded.

10. SUBSEQUENT EVENTS

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


For the Board of DirectorsThe Executive Chairman

Francesco Casoli


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 2013 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 Fees In Euro thousands

Audit Deloitte & Touche S.p.A. Elica S.p.A. 273

Audit Deloitte & Touche S.p.A. Air Force S.p.A. 29

Audit Deloitte & Touche S.C. ELICAMEX S.A. de C.V. 22

Audit Deloitte & Touche Sp.z o.o. Elica Group Polska S.p.z.o.o. 28

Audit Deloitte & Touche GmbH Exklusiv Hauben Gutmann GmbH

37

Audit Deloitte Touche Tohmatsu Limited

Ariafina CO., LTD 23

Other services Deloitte & Touche S.p.A. Elica S.p.A. 5

Other services Deloitte Doradztwo Podatkowe Sp. z o.o.

Elica Group Polska S.p.z.o.o. 4

Other services Deloitte & Touche S.C. Leonardo Services S.A. de C.V. 6

Other services Deloitte & Touche S.C. ELICAMEX S.A. de C.V. 3

Total 430

Type of service Party providing the service Company Fees In Euro thousands

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

Elica PB India Private Ltd. 11

Audit Price Waterhouse Coopers Zhejiang Putian Electric Co. Ltd

35

Total 45


Declaration of the Consolidated Financial Statements as per Article 81-ter of CONSOB Regulation No. 11971 of May 14, 1999 and subsequent modifications and integrationsThe undersigned Giuseppe Perucchetti, as Chief Executive Officer, and Alberto Romagnoli, 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 February 24, 1998:

› the conformity in relation to the characteristics of the company and

› the effective application,

of the administrative and accounting procedures for the compilation of the consolidated financial statements for 2013.

We also declare 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 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.


The Chief Executive Officer Giuseppe Perucchetti

Executive responsible for the preparation of corporate accounting documents

Alberto Romagnoli


List of holdings in non-listed companies, including foreign, of over 10% at the reporting date

In Euro thousands Head office % total of which % direct

of which % indirect

Held by (*) “Direct” holding value “Indirect” holding value Consolidation method

Elicamex S.a.d. C.V. Queretaro (Mexico) 100% 98% 2% Elica Group Polska Sp.z o.o

30,484 625 line-by-line

Elica Group Polska Sp.z o.o Wroclaw (Poland) 100% 100% n/a n/a 22,276 n/a line-by-line

Airforce S.p.A. Fabriano (AN) -(Italy) 60% 60% n/a n/a 1,212 n/a line-by-line

Ariafina Co.Ltd Sagamihara – Shi (Japan) 51% 51% n/a n/a 49 n/a line-by-line

Leonardo Services S.a. de C.V. Queretaro (Mexico) 100% 98% 2% Elica Group Polska Sp.z o.o

77 2 line-by-line


Muhlacker (Germany) 100% 100% n/a n/a 8,869 n/a line-by-line

Elica Inc. Chicago, Illinois (United States) 100% 0% 100% Elicamex S.a.d. C.V. - 133 line-by-line

Airforce Germany Hochleistungs-dunstabzugssysteme Gmbh

Stuttgart (Germany) 95% 0% 95% Airforce S.p.A. - 157 line-by-line

Elica PB India Private Ltd. Pune (India) 51% 51% n/a n/a 4,064 n/a line-by-line

Zhejiang Putian Electric Co. Ltd Shengzhou (China) 67% 67% n/a n/a 14,612 n/a line-by-line

Elica Trading LLC Sankt Peterburg (Russia) 100% 100% n/a n/a 2,024 n/a line-by-line

I.S.M. s.r.l. Cerreto D’Esi (AN) - (Italy) 49% 49% n/a n/a 1,383 n/a equity


(*) name and legal form of any subsidiary companies which directly hold investments in non-listed companies and relative holdings.

List of holdings in non-listed companies, including foreign, of over 10% at the reporting date

In Euro thousands Head office % total of which % direct

of which % indirect

Held by (*) “Direct” holding value “Indirect” holding value Consolidation method

Elicamex S.a.d. C.V. Queretaro (Mexico) 100% 98% 2% Elica Group Polska Sp.z o.o

30,484 625 line-by-line

Elica Group Polska Sp.z o.o Wroclaw (Poland) 100% 100% n/a n/a 22,276 n/a line-by-line

Airforce S.p.A. Fabriano (AN) -(Italy) 60% 60% n/a n/a 1,212 n/a line-by-line

Ariafina Co.Ltd Sagamihara – Shi (Japan) 51% 51% n/a n/a 49 n/a line-by-line

Leonardo Services S.a. de C.V. Queretaro (Mexico) 100% 98% 2% Elica Group Polska Sp.z o.o

77 2 line-by-line


Muhlacker (Germany) 100% 100% n/a n/a 8,869 n/a line-by-line

Elica Inc. Chicago, Illinois (United States) 100% 0% 100% Elicamex S.a.d. C.V. - 133 line-by-line

Airforce Germany Hochleistungs-dunstabzugssysteme Gmbh

Stuttgart (Germany) 95% 0% 95% Airforce S.p.A. - 157 line-by-line

Elica PB India Private Ltd. Pune (India) 51% 51% n/a n/a 4,064 n/a line-by-line

Zhejiang Putian Electric Co. Ltd Shengzhou (China) 67% 67% n/a n/a 14,612 n/a line-by-line

Elica Trading LLC Sankt Peterburg (Russia) 100% 100% n/a n/a 2,024 n/a line-by-line

I.S.M. s.r.l. Cerreto D’Esi (AN) - (Italy) 49% 49% n/a n/a 1,383 n/a equity

Elica S.p.A.UFFICI CORPORATE SEDE LEGALE

Via Dante, 288

60044 Fabriano (AN), Italy

P. +39 0732 6101

F. +39 0732 610249

[email protected] www.elica.com www.elicagroup.com e/o (http://corporation.elica.com)

INVESTOR RELATIONSP. +39 0732 610 727/4084

F. +39 0732 610 390

[email protected]

UFFICIO STAMPA E RELAZIONI ISTITUZIONALI

P: +39 0732 610 315

F: +39 0732 610 289

CONCEPT & DESIGN tonidigrigio.it

COORDINAMENTO PROGETTO

Investor Relations Elica

Laura Giovanetti

Marco Brancaccio


FINANCIAL YEAR 2013

158 Corporate Governance Report 2013 Elica Group

Corporate Governance Report 2013 Elica Group


In accordance with Article123-bis of the Consolidated Finance Act

FINANCIAL YEAR 2013Updated to March 21, 2014 and approved by the Board of Directors on March 21, 2014

www.elicagroup.com and/or (http://corporation.elica.com)

160 Corporate Governance Report 2013 Elica GroupElica Group Corporate Governance Report 2013

CONTENTS

162 1. INTRODUCTION163 2. INFORMATION ON THE OWNERSHIP STRUCTURE (AS PER ARTICLE 123 BIS, PARAGRAPH 1, CFA)163 a. Shareholders (as per Article 123-bis, paragraph 1, letter a), CFA)

163 b. Restriction on the transfer of shares (as per Article 123-bis, paragraph 1, letter b), CFA)

163 c. Significant holdings (as per Article 123-bis, paragraph 1, letter c), CFA)

163 d. Shares which confer special rights (as per Article 123-bis, paragraph 1, letter d), CFA)

163 e. Employee shareholdings: voting mechanism (as per Article 123-bis, paragraph 1, letter f), CFA)

163 f. Voting restrictions (as per Article 123-bis, paragraph 1, letter f), CFA)

164 g. Shareholder agreements (as per Article 123-bis, paragraph 1, letter g), CFA)

164 h. Change of control clause (as per Article 123-bis, paragraph 1, letter h), CFA) and statutory provisions

concerning Public Purchase Offers

164 i. Power to increase the share capital and authorisation to purchase treasury shares (as per Article 123-bis,

paragraph 1, letter m), CFA)

165 l. Direction and co-ordination activities (as per Article 2497 of the Civil Code)

166 3. COMPLIANCE (AS PER ARTICLE 123-BIS, PARAGRAPH 2, LETTER A), CFA)167 4. BOARD OF DIRECTORS167 4.1 APPOINTMENT AND REPLACEMENT (AS PER ARTICLE 123-BIS, PARAGRAPH 1, LETTER L), CFA)168 4.2 COMPOSITION OF THE BOARD OF DIRECTORS (AS PER ARTICLE 123-BIS, PARAGRAPH 2, LETTER D), CFA)171 Maximum number of offices held in other companies173 4.3 ROLE OF THE BOARD OF DIRECTORS176 Activities of the Board of Directors and of the Committees in 2013 and in 2014 up to the date of the present Report177 4.4 EXECUTIVE BOARDS180 Reporting to the Board of Directors181 4.5 OTHER EXECUTIVE DIRECTORS181 4.6 INDEPENDENT DIRECTORS184 4.7 LEAD INDEPENDENT DIRECTOR185 5. TREATMENT OF CORPORATE INFORMATION AND PERSONS WITH ACCESS TO CONFIDENTIAL INFORMATION (“INSIDERS REGISTER”)186 6. INTERNAL COMMITTEES186 7. APPOINTMENTS COMMITTEE187 8. APPOINTMENTS AND REMUNERATION COMMITTEE187 Composition and operation of the Committee (as per Article 123-bis, paragraph 2, letter d) CFA)188 9. DIRECTOR REMUNERATION 189 10. CONTROL AND RISKS COMMITTEE189 Composition and operation of the Committee (as per Article 123-bis, paragraph 2, letter d) CFA)191 11. INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM (AS PER ARTICLE 123-BIS, PARAGRAPH 2, LETTER B), CFA)192 11.1 EXECUTIVE IN CHARGE OF THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM193 11.2 INTERNAL AUDIT DEPARTMENT MANAGER194 11.3 ORGANISATIONAL MODEL AS PER LEGISLATIVE DECREE 231/2001195 11.4 INDEPENDENT AUDIT FIRM

161Corporate Governance Report 2013Elica Group Elica GroupCorporate Governance Report 2013

196 11.5 EXECUTIVE RESPONSIBLE FOR THE PREPARATION OF CORPORATE ACCOUNTING DOCUMENTS197 11.6 COORDINATION OF THE PARTIES INVOLVED IN THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM198 12. HOLDINGS OF DIRECTORS AND TRANSACTIONS WITH RELATED PARTIES199 13. APPOINTMENT OF STATUTORY AUDITORS199 14. COMPOSITION AND OPERATION OF THE BOARD OF STATUTORY AUDITORS (AS PER ARTICLE 123-BIS, PARAGRAPH 2, LETTER D) CFA)202 Board of Statutory Auditors activities in 2013 and in 2014 until the date of the present Report203 15. RELATIONS WITH SHAREHOLDERS, WITH BORSA ITALIANA AND WITH THE COMPETENT AUTHORITY204 Internal Dealing regulations205 16. SHAREHOLDERS’ MEETINGS206 Manner for electing Corporate Boards 209 Changes since year-end210 TABLE 1 - Information on the share capital212 TABLE 2 - Structure of the board of directors and of the committees214 TABLE 3 - Structure of the board of statutory auditors215 ATTACHMENT 1223 ATTACHMENT 2


1. INTRODUCTION

The present report illustrates, in accordance with Article 123-bis of Legislative Decree 58/98 (“Consolidated Finance Act” or “CFA”) the Corporate Governance system adopted by Elica S.p.A. (“Elica” or the “Company”) in 2013 and updated at March 21, 2014, in line with the recommendations of the Self-Governance Code, issued by Borsa Italiana and approved, in December 2011, by the Corporate Governance Committee (the “Self-Governance Code” or the “Code”).The disclosures relating to the remuneration of the corporate officers and senior management are contained in the Remuneration Report prepared pursuant to Article 123-ter of the CFA, in accordance with Attachment 3A, Schedule 7-bis, of Consob Resolution No. 11971/1999 and subsequent amendments (“Issuers’ Regulations”) and published together with the present Report, in accordance with the provisions of Article 84-quater of the Issuers’ Regulations (“Remuneration Report”).It should be noted that the Company is updating the web addresses and mapping of its institutional websites, therefore the contacts indicated in the present report could change during 2014. Where possible the new contacts have been indicated in brackets, beside the current web addresses. The present report will be published on the website of the Company www.elicagroup.com, Investor Relations/Corporate Governance section (and/or http://corporation.elica.com Investor Relations section).

163Corporate Governance Report 2013Elica Group

2. INFORMATION ON THE OWNERSHIP STRUCTURE (AS PER ARTICLE 123 BIS, PARAGRAPH 1, CFA)

a. Shareholders (as per Article 123-bis, paragraph 1, letter a), CFA)

Amount of subscribed and paid-in share capital: Euro 12,664,560.

Categories of shares that make up the share capital: 63,322,800 ordinary shares with a nominal value of Euro 0,20 each (see “TABLE 1 – Information on the Share Capital” – “Share Capital Structure”).

Elica has not issued other share categories at the date of this Report, nor convertible financial instruments which confer newly issued share subscription rights.

With reference to the share-based incentive plan reference should be made to the Remuneration Report, in relation to the conclusion of the 2010 Stock Grant Plan.

b. Restriction on the transfer of shares (as per Article 123-bis, paragraph 1, letter b), CFA)

The By-laws do not contain any restrictions on any type of share transfer.

c. Significant holdings (as per Article 123-bis, paragraph 1, letter c), CFA)

The significant shareholdings are indicated in “TABLE 1 – Information on the Share Capital” – “Significant Holdings in the Share Capital”, based on the information available to the Company at March 21, 2014.

d. Shares which confer special rights (as per Article 123-bis, paragraph 1, letter d), CFA)

The Company has not issued shares which confer special controlling rights.

e. Employee shareholdings: voting mechanism (as per Article 123-bis, paragraph 1, letter f), CFA)

Not applicable.

f. Voting restrictions (as per Article 123-bis, paragraph 1, letter f), CFA)

The By-laws do not contain any restrictions on voting rights.


g. Shareholder agreements (as per Article 123-bis, paragraph 1, letter g), CFA)

On December 18, 2013, FAN s.r.l.(formerly FAN S.A.), the parent company of Elica S.p.A., and Whirlpool Europe S.r.l. (“Whirlpool”) renewed the shareholder agreement signed on December 10, 2007 (the “Shareholder Agreement”).

The Shareholder Agreement covers, among other issues, aspects relating to the governance of Elica S.p.A.. It sets a number of limits on the transfer of investments held by the Parties and commits FAN and the entities controlled by it to a non-competition clause.

The matters outlined above had no impact on the control of Elica which pursuant to Article 93 of the Consolidated Finance Act, continues to be indirectly held by Ms. Gianna Pieralisi.

Attached to the present Report, at ATTACHMENT 1, please find the full Extract of the latest Shareholder Agreement communicated to Consob in accordance with Article 122 of Legislative Decree No. 58/1998 is reported.

h. Change of control clause (as per Article 123-bis, paragraph 1, letter h), CFA) and statutory provisions concerning Public Purchase Offers

Agreements are in place of a commercial and financial nature and/or concerning investments of the Company in its subsidiaries, of a confidential nature, which provide for the right to withdrawal or to purchase/sell shares of the subsidiaries to the other contracting party, in the case of change of control of the Company. The resolution of an individual agreement would not significantly impact the Company.

The Company By-Laws do not provide for exceptions to the passivity rule pursuant to Article 104, paragraphs 1 and 1 of the CFA, nor the application of the neutralisation rules pursuant to Article 104-bis, paragraphs 2 and 3 of the CFA.

i. Power to increase the share capital and authorisation to purchase treasury shares (as per Article 123-bis, paragraph 1, letter m), CFA)

At the date of the Present Report, the Board had not been granted powers to increase the share capital under Article 2443 of the Civil Code.

***

With reference to the purchase of treasury shares, the Shareholders’ Meeting of April 24, 2013 of Elica approved the procedures and delegated powers to the Board of Directors of the Company to purchase (for a period of 18 months) and utilise (without time limits) ordinary shares of the Company, establishing the manner of completion and delegating to the Board of Directors the power to take any necessary actions in order to give effect to resolutions in accordance with applicable laws.1 At the date of the present Report, the Company has not undertaken any purchases in accordance with this resolution. It should be noted however, during the year 2013, the Company utilised treasury shares already held in portfolio in virtue of previous purchases.

In particular, on July 15, 2013, 1,700,000 treasury shares of Elica, equal to 2.68% of the share capital, were sold to a company of INVESCO Limited, an investment fund with a division dedicated to shareholdings in small-mid cap European

1 For further information, reference should be made to the Report of the Board of Directors’ of Elica S.p.A. relating to the proposal to authorise and utilise Treasury Shares of March 15, 2013, available on the Company website.


companies, at a price of Euro 1,134 per share. Also in 2013, treasury shares were utilised to service the 2010 Stock Grant Plan, approved by the Shareholders’ AGM on April 26, 2010 and whose vesting period concluded with the approval of the 2012 Annual Accounts by the Shareholders’ AGM (April 24, 2013), amounting to 203,976 shares (of which 190,642 shares effectively consigned).

Following the above-mentioned utilisation of shares, in addition to those in the years preceding 2013, at the date of the present Report the Company holds in portfolio 1,275,498 treasury shares, equal to 2.014% of the share capital.

The Shareholders’ AGM called for the approval of the 2013 Annual Accounts will, among other issues, be requested to renew the approval for the purchase and utilisation of treasury shares. Acceptance of the proposal would result in, among other issues, the withdrawal of the previous authorisation granted on April 24, 2013, for that part not utilised.

l. Direction and co-ordination activities (as per Article 2497 of the Civil Code)

The company is not subject to management and co-ordination pursuant to Art. 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 Shareholders’ 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 autonomous and independent decision-making process.

The disclosure required by Article 123-bis, paragraph 1, letter i) of the CFA are contained in Section 1 of the Remuneration Report, while the disclosure required by Article 123-bis, paragraph 1, letter l) are illustrated in the subsequent section “4,1 Appointment and replacement (as per Article 123-bis, paragraph 1, letter l) of the CFA” below of the present Report.


3. COMPLIANCE (AS PER ARTICLE 123-BIS, PARAGRAPH 2, LETTER A), CFA)

The company complies with the Self-Governance Code issued by Borsa Italiana S.p.A. and approved by the “Corporate Governance Committee” (December 2011 Edition). Where the recommendations of the Code are not applied, the reasons for such are provided in the present report.

The Self-Governance Code is available on the website of Borsa Italiana S.p.A.: www.borsaitaliana.it

The Company, and its subsidiaries, are not subject to laws in force outside Italy which affect the Corporate Governance structure of Elica.


4. BOARD OF DIRECTORS

4.1 APPOINTMENT AND REPLACEMENT (AS PER ARTICLE 123-BIS, PARAGRAPH 1, LETTER L), CFA)

The appointment and replacement of directors is governed by Article 16 of the By-Laws, which provides for voting by slates. This mechanism was adopted on the renewal of the Board of Directors (last such resolution by the Shareholders’ AGM on April 27, 2012) and was also adopted on the appointment of the Director Evasio Novarese, with resolution on April 24, 2013.For further information on the manner of appointment of the Directors, reference is made to the subsequent section “Manner for electing Corporate Boards”.

All amendments to the By-Laws are made based on the provisions of law and the by-laws themselves. Therefore the Shareholders’ AGM of April 24, 2013 implemented a number of amendments to the By-Laws, including those required by the “Gender balance on Management and Control Boards” Regulation. 2

Moreover, in accordance with Article 19,2 of the By-Law, which adheres to Article 2365 of the civil code, adjustments to the by-laws in accordance with law are reserved to the Board of Directors.

***

In relation to succession plans, latterly on November 14, 2013, the Board evaluated whether to adopt a succession plan for Executive Directors, pursuant to the provisions of Article 5.C.2. of the Code. The Board accepted the proposal of the Director Stefano Romiti and mandated the Remuneration and Appointments Committee to review the best practice of companies comparable to Elica S.p.A. and, in case, to present a succession plan proposal for the Chief Executive Officer, to be reviewed by the Board at one of its next meeting.

2 For further information on the amendments to the By-Laws, reference should be to the Directors’ Report to the Shareholders’ AGM called for April 24, 2013, in relation to the By-law amendments, available on the Company website.


4.2 COMPOSITION OF THE BOARD OF DIRECTORS (AS PER ARTICLE 123-BIS, PARAGRAPH 2, LETTER D), CFA)

The Board of Directors of the Company, in accordance with Article 2 of the Self-Governance Code, is comprised of executive and non executive directors with sufficient skills and levels of professionalism. With the appointment of the Director Evasio Novarese the number of independent directors increased to three, from a total number of eight Board members. This number is considered sufficient to undertake the functions of the independent directors. As per Article 16 of the By-laws, the Company is administered by a Board of Directors made up of between 5 and 11 members, including non-shareholders.

On April 27, 2012, the Shareholders’ AGM of the Company, adopting the so-called “slate voting” system, conferred administration of the system to a Board of Directors comprising of 7 members, which will remain in office until the approval of the financial statements at December 31, 2014, appointing Mr. Francesco Casoli as the Chairman of the Board of Directors. Subsequently, the Shareholders’ AGM of April 24, 2013 resolved to increase the number of directors from seven to eight members and appointed the Director Evasio Novarese.At the Shareholders AGM of April 27, 2012 two slates for the appointment of Directors were presented. One slate was presented by the majority shareholder FAN S.r.l. (“Majority Slate” or “Slate 1”) and proposes as Directors Messrs: Casoli Francesco, Sasso Andrea, Pieralisi Gennaro, Romiti Stefano, Perucchetti Giuseppe and Pieralisi Gianna. The other slate was presented by the Shareholders FIRST CAPITAL S.p.A. and IMMI INVEST S.r.l. (“Minority Slate” or “Slate 2”) and proposes as Directors Messrs.: Magri Elena and Menghini Massimo. The Minority Slate was not connected in any way with the Majority Slate.

The result of the voting of Shareholders present at the Shareholders’ Meeting was as follows:

› votes in favour of Slate 1 – 33,846,665, equal to 90.8045% of votes;

› votes in favour of Slate 2 – 3,342,539, equal to 8.9674% of votes;

› abstaining votes 46,977, equal to 0.1260% of votes; and

› not voting 38,019, equal to 0.1020% of votes.

Therefore the following were appointed as Directors: Casoli Francesco, Sasso Andrea, Pieralisi Gennaro, Romiti Stefano, Perucchetti Giuseppe, Pieralisi Gianna and Magri Elena. With reference to the Shareholders’ AGM of April 24, 2013, it should be noted that only one list was presented by the majority shareholder FAN S.r.l., which proposed


the appointment of the Director Evasio Novarese. The Shareholders’ AGM voted favourably to the appointment of the candidate proposed with 36,002,651 shares voting in favour, equal to 100% of the voting capital.For further information on the composition of the Board of Directors of the Company at December 31, 2013, which coincides with the composition of the Board at the preparation date of the present report, reference should be made to “TABLE 2 – Structure of the Board of Directors and Committees”.

The curriculum vitae of the directors are summarised below.3

Francesco CasoliChairman of the Board of Directors of the Company from April 12, 2006; previously he was the Chief Executive Officer. He is the son of Ermanno Casoli, founder of Elica S.p.A., in which he has worked since 1978; in 1990, at just 29 years of age, he was appointed Chief Executive Officer of the Company. He is the Chairman and Chief Executive Officer of FAN S.r.l. and the Sole Shareholder of Fintrack S.p.A.. From June 2005 to March 2006, he was the Chairman of Assindustria in the Province of Ancona. At the elections of April 9 and 10, 2006, he was elected to the Senate of the Italian Republic and re-elected in the elections of 2008, leaving the house in March 2013. In August 2013 he was appointed Director of the Finnish company Efore PLC, listed on the Nasdaq Omx Helsinki OY (small cap segment).

Giuseppe PerucchettiCEO of Elica S.p.A. since September 13, 2012; previously, from August 2011, he served as an Independent Director of the Company. Having graduated in Industrial Business Economics from the Bocconi University of Milan, he served in various roles in a number of leading companies. In the mid-1980’s he began his career with Philips (IRE) as an assistant in the sales department. After 5 years he moved to Whirlpool, where he remained for 22 years, operating both domestically and internationally and within a number of departments. His final position with Whirlpool was Senior Vice President of Whirlpool Europe, Middle East and Africa and Council Chairman of Whirlpool Corporation. He has acted also as a management consultant. Currently he collaborates with the Regional Economics University Research Centre and is a contracted lecturer at the Economics Faculty of the University of Milan-Bicocca.

Gianna PieralisiShe has been an Executive Director of Elica S.p.A. since April 12, 2006. Between May 29, 1998 and April 12, 2006, she was Chairperson of the Board of Directors of the Company. She is the mother of the current Chairman of the Board of Directors. She acted as Chairperson of the Board of Directors of Air Force S.p.A. from March 2003 to April 2006. She is a director of FAN S.r.l..

Gennaro PieralisiHe has been a member of the Board of Directors of Elica S.p.A. since 1970 and is a cousin of Ms. Gianna Pieralisi. Since the beginning of the 1980s, he has been the Chief Executive Officer of the businesses of the Pieralisi Group, in which, from 1998 he was also Chairman of the Board of Directors. In 1999 he received the Cavaliere del Lavoro knighthood of the Italian Republic. In June 2003, he was conferred the Laurea Honoris Causa in Agricultural Sciences and Technology; in addition to managing the family businesses he has fulfilled and currently holds various roles in industry associations and institutes such as Confindustria Ancona, Confindustria Marche, Confindustria, Confidi di Ancona, Assonime, Previndustria and the Italian Accounting Organisation. He was a Director of Banca Carifano and is a member of the Administration Board of the Bank of Italy, Ancona offices. He has been a member of, and is currently a member of, various Boards of Directors of Italian companies.

3 Indication of involvement of directors in other companies listed on regulated markets (also foreign), in finance, banking, insurance or large enterprises, is reported in the following paragraph: “Maximum number of offices held in other companies”.


Stefano RomitiHe has been a member of the Board of Directors of Elica S.p.A. since April 12, 2006. He is Chairman of Antares Private Equity S.p.A.: private equity investment holding company and a Director of Antares Advisory which controls the former. Previously, he was a Director of Telesia S.p.A., from February 2009 he worked at Banca Akros S.p.A. and from November 2006 he was the Chief Executive Officer of Arner Corporate Finance S.p.A., while from January 2006, he was the Chief Executive Officer of Pentar S.p.A.; from 2001 to 2005 he was the Chief Executive Officer of Deloitte & Touche Corporate Finance S.r.l. (now Deloitte Financial Advisory Services S.p.A.). Between 1992 and 2001 he was the Chief Executive Officer of Ernst & Young S.p.A. Previously from 1982 to 1992, he worked with Deloitte & Touche and from 1981 to 1982 with the Banca Nazionale del Lavoro. He is a contracted professor of Corporate Finance at the Economics Faculty of the Cattaneo LIUC of Castellanza University and collaborates with Bocconi in relation to the Masters in Corporate Finance. He has been a member of the Accountants Association of Milan since 2001 and is a member of the Auditors Register and from 1986 of the Technical Consultants Association of the Courts of Rome.

Andrea SassoHe has been Chief Executive Officer of the Fimag Group (Finanziaria Mariano Guzzini) since May 2013. He is Chairman of the Board of Directors of Teuco Guzzini S.p.A. and a member of the Board of Directors of Elica and of iGuzzini illuminazione. He began his career with the Merloni-Elettrodomestici/Indesit Company Group where he held offices of increasing responsibility until becoming Chief Operating Officer and Chief Commercial Officer. He has been the Country Manager Italy of Pirelli Tyre and was the Chief Executive Officer of the Elica Group between April 2007 and September 2012. He was the Chairman of Confindustria Ceced Italia, the ANIE Federated Association of Domestic Appliance Producers and Professionals, Director of Confindustria Ancona and Confindustria Ceramica, Ordinary Member of World Class Manufacturing Association and of the Young Presidents’ Organisation. He graduated in Economics and Commerce from the University of Ancona and completed the International Executive Programme of Insead (Fontainebleau/Singapore).

Magri ElenaShe has been a member of the Board of Directors of Elica since April 27, 2012. She has also been a Director of First Capital S.p.A., Investment Company since May 2011. She previously served as an Executive Director in a number of companies, including from between 1980 and 2010 at Ori Martin S.p.A. and in its subsidiaries AOM S.r.l., Trafilati Martin S.p.A., Siderurgica Latina Martin S.p.A. and Strand Tech Inc., in addition as Director of Finprogetti and Banca del Garda.She graduated in Economics and Commerce from the University of Parma.

Evasio NovareseHe has been a member of the Board of Directors of Elica since April 24, 2013. Between 1968 and 2010 he has fulfilled various roles in a number of companies and in particular, between 1969 and 1973, with Ignis; thereafter, between 1973 and 1990 he worked with IRE, between 1990 and 2004 with Whirlpool, including as Executive Director for Industrial Relations, between 2004 and 2007 Chief Executive Officer and General Manager, first at the IAR Siltal Group and thereafter at Siltal S.p.A..


Maximum number of offices held in other companies

In accordance with Article 1.C.2 of the Self-Governance Code, the Board of Directors, based on the information received from the directors, state that none of its members currently hold the office of director or statutory auditor in listed companies in regulated markets including abroad, with the exception of the following Directors:

› Magri Elena, Director of First Capital S.p.A., finance company specialised in Private Investments in Public Equity operations, listed on the AIM Italy market;

› Francesco Casoli, who since August 2013 has been a Director of Efore PLC, listed on the Nasdaq Omx Helsinki OY (small cap segment).

In accordance with Article 1.C.3, the Board of Directors, latterly at the February 14, 2013 and February 14, 2014 meetings, has confirmed its position in relation to the maximum number of offices of director or statutory auditor which may be considered compatible with the proper fulfilment of the role of director of the Company, fixing at five the maximum number of offices of direction or control in other listed companies (including abroad). The Board did not consider it necessary to define general criteria regarding the maximum number of appointments in other companies that can be considered compatible with an effective conduct of the role of director of the company, considering that this evaluation is primarily that of the Shareholders in nominating the directors and, subsequently, of the individual directors on accepting the office. The Board will however continue to evaluate individual cases, in relation to the attributes of each director (experience, positions held etc.) from which compatibility with the role can be evaluated. This evaluation will be made on the appointment to office and thereafter on an annual basis, principally utilising the following evaluation criteria: (i) the role of the Director within the Company (executive, non executive, independent, member of one or more committees); (ii) the nature and size of entities in which offices are held and the office of the Director within such entities; and (iii) whether such entities are part of the group of the Issuer.

The following is also noted: 4

› the Chairman of the Board of Directors Francesco Casoli fulfils, among others, the role of Sole Director with the finance company Fintrack S.p.A., of which he is also a shareholder. He is also Chairman of the Board of Directors and Chief Executive Officer of FAN S.r.l., which directly controls Elica S.p.A.5 Finally, he was appointed a Director of Efore PLC, listed on the Nasdaq Omx Helsinki OY (small cap segment) and not part of the Group which the Company heads.

› the Director Gianna Pieralisi holds, among others, the role of Sole Director with the finance company Ermanno S.r.l., of which she is also a shareholder, as well as a shareholder of the finance companies: Cav. del Lav. Igino Pieralisi S.a.p.a. of Igino Pieralisi and SAFE S.a.p.a. of Igino Pieralisi, which she also chairs. SAFE S.a.p.a has a holding in the Company. She is also a Director of FAN S.r.l., which directly controls Elica S.p.A..6

4 For the identification of companies of a large size, the following parameters were taken into account: over 250 employees or revenues > Euro 50 million in the year or assets > Euro 43 million in the year.

5 The financial companies listed are holding companies and are not considered in the lists as per Articles 106 and 107 of Legislative Decree 385/93 – Banking Act.

6 The financial companies listed are holding companies and are not considered in the lists as per Articles 106 and 107 of Legislative Decree 385/93 – Banking Act.


› the Director Gennaro Pieralisi holds, among others, the role of Director in the following finance companies: Egisto Pieralisi S.a.p.a. (Chairman), Mark Leasing S.p.A. (Chairman of the BoD and Chief Executive Officer), Frapi S.p.A. (Sole Director), M.A.I.P. S.p.A. (Chairman of the BoD and Chief Executive Officer), Pieralisi International S.A. (Chairman of the BoD and Chief Executive Officer), Confidi di Ancona and Rete Confidi Marche (Chairman); in the insurance company Previndustria S.p.A. (Chairman of the BoD) and in the following companies: Pieralisi S.p.A. (Chairman of the BoD and Chief Executive Officer), Pieralisi MAIP S.p.A. (Chairman of the BoD and Chief Executive Officer), MEFOP S.p.A. (Director), TV Centro Marche S.p.A. (Chairman of the BoD and Chief Executive Officer), Pieralisi Espana S.L. (Chairman of the BoD and Chief Executive Officer), not part of the Group which the Company heads.7

› the Director Stefano Romiti holds, among others, the position of Chairman of Antares Private Equity S.p.A.. 8

› the Director Andrea Sasso acts as, among others, Chief Executive Officer of the Fimag Group9 and is a Director of the large-size companies Teuco Guzzini S.p.A. and iGuzzini illuminazione. These companies are not part of the Group of the Company.

Induction Programe

Many of the Company Directors have, through professional experience or years of service, acquired knowledge in the sector in which the company operates; however the Chairman of the Board of Directors periodically briefs Directors concerning relevant issues and on the performance. This information is normally provided at the Board meetings and the informal ad hoc meetings.

7 None of the financial companies listed, with the exception of Mark Leasing S.p.A. and Confidi Ancona, are considered in the lists as per Articles 106 and 107 of Legislative Decree 385/93 – Banking Act.

8 Finance company no longer supervised following regulatory changes.

9 Finance company not included in the lists as per Articles 106 and 107 of Legislative Decree 385/93 – Consolidated Banking Act.


4.3 ROLE OF THE BOARD OF DIRECTORS 10

The Company is managed, under a traditional governance system, by a Board of Directors, which meets and operates in compliance with Articles 1.P.1 and 1.P.2 of the Self-Governance Code.

In accordance with Article 17 of the By-laws of the Company, except for the powers of convocation reserved to the Statutory Auditors in the cases established by law, the Board of Directors meets on the convocation of the Chairman, or in the case of his absence or impediment, of the Vice Chairman or the Chief Executive Officer, if appointed, based on seniority in terms of age, or in the absence or impediment also of these, the most senior Director in terms of age, through registered letter, telefax or electronic mail, to be sent at least 5 days before the date of the meeting.

The company usually agrees, where possible, with the directors the dates of the board meetings and also the matters on the agenda. Important documentation and information necessary in order to allow the Board to express their opinions with full knowledge of the facts on the matters on the agenda, is usually sent to the directors, in the method agreed with each of them, reasonably in advance of the meeting, except in exceptional cases where, due to the nature of the resolutions, the requirements for confidentiality and/or timeliness, with which the Board must take the decisions, reasons of necessity and/or urgency supersede such.

The forwarding of the documentation together with the call notice of the Board, which is normally five days before the meeting, is considered sufficient to permit a review of the same by the directors. This period however is extended, in concert with the directors, in the case of particularly large or complex documentation, and whereby the key elements are illustrated in presentation documentations, which permit the directors to promptly understand the important matters to be dealt with during the meeting. Such presentation documentation is normally filed together with official documentation of the meeting.

During 2013, the above-mentioned period of five days was generally complied with and in any case, the Board was informed with sufficient notice in order to undertake a complete and correct valuation of the matters under examination.

The documents containing confidential information are normally sent only and directly to Directors, specifying the nature of the document and through the manner agreed with each Director individually, in order to ensure confidentiality.

As well as the Secretary to the Board, the Finance Director usually attends the Board meetings, who provides greater details on the financial implications of the matters on the agenda. On the occasion of specific resolutions, senior managers responsible for the specific matters and/or consultants directly involved are invited to express and provide opinions on the matters on the Agenda. For example purposes, in relation to resolutions concerning the remuneration of executive directors, as well as the presentation of share-based incentive plans, the Human Resources Area Manager participates at the meetings.

10 The number of meetings of the Board held in 2013, the average duration, the number of meetings scheduled for the current year, as well as the percentage attendance at the Board of Directors’ meetings and of the Committees are indicated in the Section: “Activities of the Board of Directors and of the committees in 2013 and 2014 up to the date of the present Report”.


The Chairman of the Board meeting ensures that the matters subject to discussion are allocated the time necessary to ensure constructive debate and which encourages the contribution of Directors.

The meetings of the Board of Directors take place at least four times per year, at least quarterly and every time the Chairman considers it necessary or when a request as outlined above is made.

In accordance with Article 19 of the By-Laws, the Board of Directors are attributed the widest powers for the management of the Company and the faculty to carry out all acts and operations considered necessary for the reaching of the corporate objectives, except in the case of those attributed by law to the Shareholders’ Meeting or deriving from specific authorisations required by the By-Laws.

The Board of Directors also has the following duties:

a. merger and spin-off resolutions in the cases established by Articles 2505 and 2505-bis, of the Civil Code;

b. the opening, transfer and closing of secondary offices;

c. the indication of which Directors may represent the company;

d. the issue of non convertible bonds within the limits set out in Article 2412 of the Civil Code and convertible within the limits set by Article 2420-ter of the Civil Code;

e. the reduction of the share capital in the case of return of shares by shareholders;

f. updating the company by-laws and the shareholder meeting regulation in accordance with law;

g. the transfer of the registered office to another municipality in the national territory;

h. the reduction of the share capital where losses are greater than one-third of the share capital and the Company has issued shares without nominal value.

The Board of Directors has been attributed the powers to:

› examine and approve the strategic, industrial and financial plans of the Company and of the Group, periodically monitoring their implementation; establish the corporate governance of the Company and the structure of the Group.

› define the nature and level of risk compatible with the strategic objectives of the Company;

› evaluate the adequacy of the organisational, administration and accounting system of the Company and of its subsidiaries having strategic importance, which has been implemented by the executive directors with particular reference to the internal control and risk management system. In particular, in 2013, the evaluation of the adequacy of the organisational, administrative and accounting structure of the Company and of the subsidiaries was carried out by the Board at the meeting of August 28, 2013, based on the information provided by the relevant company departments. During this meeting, based on - among other documents - the report concerning the Internal Control System, an evaluation on the adequacy on the Internal Control and Risk Management System, in line with


the characteristics of the company and the risk profile assumed, in addition to its efficacy, was carried out;

› evaluate the general operational performance, taking into account, in particular, the information received from executives, as well as periodically comparing the results with the budgets. In particular, the Board evaluates the general operational performance, on the occasion of the approval of the quarterly and half-yearly reports;

› considers operations of the Company and its subsidiaries, when such operations have a significant strategic, economic, equity or financial importance for the Company or when the Executive Directors consider the involvement of the Board appropriate, although not relating to significant operations.

› Following the entry into force of Consob Regulation No. 17221/10, the Board identified specific criteria for the identification of significant transactions, in accordance with the provisions of attachment 3 of the regulation.11 In addition, the Board undertakes all decisions not specifically attributed to the Executive Directors.12 In relation to the most significant operations, in 2013 the Board of Directors authorised the undertaking of a Euro 5 million convertible bond loan, issued by the Indian subsidiary Elica PB India Private Ltd., in order to develop business on the Indian market and approved the sale of 2.68% of the treasury shares of the Company.13

› carry out, at least once a year, an evaluation on the functioning of the Board and of its Committees, and also in relation to its size and composition, taking account also of the professional qualifications, experience - also of a managerial nature - and the gender balance of its members, in addition to their years of service.

During 2013 this evaluation was undertaken in the meetings of February 14 and November 14. In the first meeting the Board noted that, following the replacement of the Chief Executive Officer, on September 13, 2012, the number of independent directors reduced by a further member, although within the minimum number required by law. In relation to the Committees, the Board evaluated the adequacy of their relative size and composition to effectively carry out the duties attributed to them. The Board therefore proposed to the Shareholders’ AGM of April 24, 2013 to appoint a person with professional characteristics such as to be qualified as independent and to guarantee support in relation to industrial processes and product development, with particular reference to the home appliance market.

In the evaluations made in the meeting of November 14 it was not necessary to carry out further changes in the composition of the Board or of the Committees.

***

11 Reference should be made in this regard to the “Procedure for transactions with related parties” adopted by the Board of Directors on November 11, 2010, in accordance with Article 2391-bis of the Civil Code and Article 4 of the Consob Regulation concerning related parties, approved with resolution No. 17221 of March 12, 2010, as subsequently amended (“Transactions with related parties procedure Consob Regulation”), available on the Company website www.elicagroup.com in the Investor Relations / Corporate Governance Section (and/or http://corporation.elica.com Corporate Governance section).

12 In relation to this reference is made to section “4.4 Executive Boards”.

13 See respectively the Company press releases of May 14, 2013 and of July 15, 2013.


The Shareholders’ Meeting did not authorise, nor were the Board presented with, any general or specific competitor agreements as per Article 2390 of the civil code.

Activities of the Board of Directors and of the Committees in 2013 and in 2014 up to the date of the present Report

In the year 2013:

› the Board of Directors met nine times (the average meeting duration was approx. 1 hour and 15 minutes), respectively on February 14, March 15, March 28, April 24, May 14, June 19, August 28, October 22 and November 14;

› the Internal Control and Risk Management Committee met three times (average meeting duration of one hour), respectively on March 7, July 18 and November 13;

› the Appointments and Remuneration Committee met three times (average meeting duration of one hour), respectively on March 7, July 18 and November 13;

Minutes are kept of the Board and Committee meetings.In TABLE 2 - Attendance at the Board of Director and Committee meetings, complete details are shown relating to attendances by directors at the meetings of the Board of Directors and the Committees (Internal Control and Risk Management Committee and the Appointments and Remuneration Committee) in the period from January 1, 2013 to December 31, 2013.

In relation to 2014, at the date of the present Report, 5 meetings of the Board of Directors are scheduled - on the approval of the interim and year-end financial statements.14 For further details, the Financial Calendar of the Company is available at www.elicagroup.com in the Investor Relations/Financial Data/Financial Calendar section (and/or http://corporation.elica.com Investor Relations section).

Also with reference to the year 2014, the Appointments and Remuneration Committee and the Internal Control and Risk Managment Committee met on March 18. Further meetings of the Committees are scheduled for 2014 with the dates not yet definitively established.

14 The scheduled 5 meetings includes the meetings already held on February 14, 2014 and March 21, 2014.


4.4 EXECUTIVE BOARDS

In order to ensure greater management efficiency and in conformity with Article 2 of the Self-Governance Code, the Board of Directors delegated adequate powers to the Executive Directors, who periodically report in relation to the exercise of such delegated powers.

Following that resolved by the Board of Directors in the meetings of April 27, 2012 and September 13, 2012, the following powers were attributed:

a. to the Chairman of the Board of Directors of the Company, Mr. FRANCESCO CASOLI (“Executive Chairman”), representation of the Company against third parties and in legal matters, general supervision of the strategic policies of the Company as well as all powers which the By-Laws attribute to the Board of Directors with the exception of those non legally delegable and the following powers which remain within the exclusive realm of the Board of Directors:

· approval of the annual budget; · purchase and/or sale of investments, businesses and business units, rental

of businesses and/or business units, for a unitary amount above Euro 3,500,000,00;

· provision of secured and non-secured guarantees, including atypical, for third party obligations of a unitary amount above Euro 3,500,000,00;

· obtainment of loans of a unitary amount above Euro 5,000,000,00; · conclusion of leasing or rental contracts for a unitary amount above Euro

3,500,000,00; · purchase and/or sale of assets for a unitary amount above Euro 3,500,000,00; · purchase and/or sale of brands, trademarks and industrial property rights in

general, as well as the conclusion of related licences; · the appointment of the General Manager of the Company; · every deliberation regarding the exercise of the voting right of subsidiary

and/or associated companies for matters related to the present list of powers.

A further exception of the powers attributed to the Chairman Mr. Francesco Casoli relates to the powers of the “person in charge” concerning the treatment by Elica S.p.A. of personal details in accordance with Legislative Decree 196/03 and subsequent amendments and integrations, including the representation of the Company with third parties and the Privacy Guarantee, which is the exclusive competence of the Chief Executive Officer Mr. Giuseppe Perucchetti.

The unitary limits stated above include also several operations of the same nature classifiable by manner, terms or scope as a single operation.

In relation to all of the powers conferred, the Executive Chairman will have the faculty to appoint powers of attorney for single acts or categories of acts.


The Board of Directors conferred the powers above to the Chairman, in consideration of the role which the Chairman has had and has in the growth of the Company and based on his experience and professionalism in the sector.

b. to the Chief Executive Officer of the Company, Mr. GIUSEPPE PERUCCHETTI, all powers which the By-Laws attribute to the Board of Directors with the exception of those of extraordinary administration, those non legally delegable and the following powers which remain within the exclusive remit of the Board of Directors:

· approval of the annual budget; · purchase and/or sale of investments, businesses and business units, rental

of businesses and/or business units, for a unitary amount above Euro 3,500,000,00;

· provision of secured and non-secured guarantees, including atypical, for third party obligations of a unitary amount above Euro 3,500,000,00;

· obtainment of loans of a unitary amount above Euro 5,000,000,00; · conclusion of leasing or rental contracts for a unitary amount above Euro

3,500,000,00; · purchase and/or sale of assets for a unitary amount above Euro 3,500,000,00; · purchase and/or sale of brands, trademarks and industrial property rights in

general, as well as the conclusion of related licences; · the appointment of the General Manager of the Company; · every deliberation regarding the exercise of the voting right of subsidiary

and/or associated companies for matters related to the present list of powers. ·

The Chief Executive Officer Mr. Giuseppe Perucchetti, is attributed all the powers of the “person in charge” concerning the treatment by Elica S.p.A. of personal details in accordance with Legislative Decree 196/03 and subsequent amendments and integrations, including the representation of the Company with third parties and the Privacy Guarantee.

The unitary limits stated above include also several operations of the same nature classifiable by manner, terms or scope as a single operation.

The Chief Executive Officer is also conferred representation of the Company against third parties and in legal matters, within the limits of the powers conferred to him.

In relation to all of the powers conferred, the Chief Executive Officer will have the faculty to appoint powers of attorney for single acts or categories of acts.

Despite the scope of the powers of the Chairman, the Chief Executive Officer is the main person responsible for the management of the Issuer (C.E.O.).

No situations giving rise to the Interlocking Directorate arise, in accordance with Article 2.C.5 of the Code.


c. to the Executive Director of the Company, Ms. GIANNA PIERALISI, the following powers

· obtaining of loans with a duration not above 36 months and/or of a unitary amount not above Euro 5,000,000,00;

· ensuring the best utilisation of funds on bank current accounts and related overdraft facilities;

· undertaking foreign exchange hedging operations relating to underlying commercial operations;

· conclude with any factoring company, domestic or foreign, sales and/or insurance contracts for trade, tax or other receivables, and also within the exclusive interest of the company, any other type of operation relating to the provision of guarantees, mandates for payment, discount operations and those relating to single factoring transactions;

· open, utilise and close current accounts with banking, credit and financial institutions, post offices, with the faculty to settle within her discretion all of the sums relating to the Company, which are paid or accredited of any type;

· endorse, present for collection or protest cheques, bill of exchange, bank, postal and telegraphic drafts, warrants and travellers cheques;

· collect receivables, subventions, mandates of any type, amounts due to the Company, both capital and interest and accessories, from private sources, Public Administration and banking and credit institutions, with power to settle fully all such accounts;

· authorise Banking Institutions to give effect to instructions relating to the payment of invoices, salaries and those sums related to working relationships and, more in general, payments relating to contractual commitments already approved by the Company;

· carry out all transfer of funds from bank to bank; · sign any contract relating to the management of general services of the

Company with the exclusion of production activities.

All of the limits of value above, where not otherwise specified, must include the total amount of volume referred for each single transaction, precluding the dividing of commitments of expenses into several amounts.

The Executive Director is also conferred the representation of the Company against third parties and in legal matters, within the limits of the powers conferred to her.

In relation to all of the powers conferred, the Executive Director will have the faculty to appoint powers of attorney for single acts or categories of acts.


Reporting to the Board of Directors

In order to guarantee transparency and proper disclosure within the Company relating to the activities carried out by the directors with operational powers, and in conformity with Article 1.C.1, letter d), of the Code and the By-laws, the executive directors report in a timely manner, and at least quarterly, to the Board of Directors and the Board of Statutory Auditors in relation to the activities carried out in execution of the powers delegated, on the general performance and on the outlook, as well as on significant operations for size or characteristics carried out by the Company and its subsidiaries.

In particular, the company bodies report upon any atypical and unusual transactions with related parties and/or which may cause potential conflicts of interest, on their own behalf or of third parties, as well as concerning the strategic plan, industrial and financial projects of the Company and of the Group.15

In 2013, the executive directors reported systematically to the Board in relation to the powers delegated to them.

15 For further information on the procedures concerning transactions with related parties and/or those which may give rise to potential conflicts of interest, reference should be made to the subsequent section “12. HOLDINGS OF DIRECTORS AND TRANSACTIONS WITH RELATED PARTIES”, in addition to the “Procedure for Transactions with Related Parties”, available on the Company website www.elicagroup.com at the Investor Relations / Corporate Governance Section (and/or http://corporation.elica.com Corporate Governance section).


4.5 OTHER EXECUTIVE DIRECTORS

No other directors apart from those indicated in the previous Section 4.4 are considered as executive directors within the Company.

4.6 INDEPENDENT DIRECTORS

In accordance with Article 3.P.1 of the Code the Board contains three independent non-executive directors: Stefano Romiti, Elena Magri and Evasio Novarese; this latter Director appointed by the Shareholders’ AGM of April 24, 2013.

The independent directors, following the evaluation carried out by the Board of Directors in conformity respectively with Articles 3.C.1 and 2 of the Self-Governance Code and Article 148, paragraph 3 of the CFA, were considered such as:

a. they do not directly or indirectly, including through subsidiaries, trusts or nominees, control the company and are not capable of exercising significant influence, or participate in a shareholder agreement through which one or more parties can exercise control or significant influence on the Company;

b. they are not and have not been in the previous three years, a senior representative16 of the Company or of one of its subsidiaries with strategic importance or of a company subject to common control, or of a company or of a body that, even together with others through a shareholder agreement, controls the Company or is able to exercise significant influence;

c. they do not have and have not had, directly or indirectly (for example through subsidiary companies or where they are a relevant member, or as partner of a professional advisory firm or a consultancy company) in the previous year, a significant commercial, financial or professional relationship:

· with the Company, a subsidiary, or with some relevant members; · with a party that, also together with others through a shareholder agreement,

controls the Company, or – in relation to companies or bodies - with the relevant members;

· or are not and were not in the previous three years, an employee of one of the above parties;

15 “Senior representatives” of a company or an entity concern: the Chairman of the body, the Chairman of the Board of Directors, the Executive Directors and senior management.


d. they do not receive and have not received in the previous three years, from the Company or a subsidiary or parent company a significant additional remuneration other than the “fixed” fee of non-executive director and the compensation for Committee membership established by the Code, including incentive participation plans relating to the performance of the company, including share-based payments;

e. they have not been a director of the Company for more than nine of the past twelve years;

f. they are not an executive director in another company in which an executive director of the Company is a director;

g. they are not shareholders or directors of a company or of an entity belonging to the network of the auditors of the Company;

h. they do not have a close family member in a situation described in the previous points.

i. not within the provisions of Article 2382 of the Civil Code.

l. they are not spouses, relatives or close members within the fourth level of the directors of the Company; they are not directors, spouses, relatives or similar within the fourth level of the directors of the companies controlled, of the companies that control it or subject to common control;

m. they are not related to the company or any subsidiaries or companies that control the company or subject to any common control or to the directors of the company or any parties at letter l) above or independent or subordinated employment or any other monetary or professional relationship which may compromise their independence.

The evaluation of independence, in accordance with Article 3.C.4 of the Code and Article 147-ter, paragraph 4 of the CFA, based on the declarations made by the interested parties and available to the Company, was conducted by the Board of Directors on April 24, 2013 and repeated at the meeting of March 21, 2014. The result of these evaluations was announced to the market through a press release. At the same time, the Board of Statutory Auditors verified the correct application of the assessment criteria and procedures adopted by the Board in accordance with Article 3.C.5 of the Code. For the result of the evaluation, reference should be made to the subsequent section "Activities of the Board of Statutory Auditors in 2013 and in 2014 until the date of the present Report" and that stated in the Board of Statutory Auditors’ Report to the Shareholders’ AGM, available at the website www.elicagroup.com in the Investor Relations/Financial Data/Financial Calendar section (and/or http://corporation.elica.com Investor Relations section).

The presence of three Non Executive and independent Directors on the board of the company has the objective of achieving the greatest possible corporate “good governance” through enabling debate and dialogue between all of the Directors.

The contribution of the independent directors permits the Board to evaluate with sufficient independence in cases of potential conflicts of interest of the Company with the controlling shareholders.


In 2013, the Independent Directors, in accordance with Article 3.C.6 of the Code, met on November 14, in order to examine the structure and activities of the Company, including the implementation of the Regulation for Transactions with related parties, without noting any irregularities. In particular the independent directors expressed their appreciation for the long-term incentive and retention system of the highest talented resources adopted by the Company, although not based on shares, also in consideration of the restructuring plan being implemented. Appreciation was also expressed by the independent directors for the progress within the Internal Audit Department with particular reference to the foreign subsidiaries and for the sale of 1,700,000 treasury shares, equal to 2.68% share capital, to a company part of Invesco Limited. The independent directors, during the above-mentioned meeting, also reported that there were no matters on the structure of the company or on its operations on which they have not independently expressed their opinion during the Board of Directors’ meeting.

Directors who declare their independence are committed to maintain such for the duration of their mandate.


4.7 LEAD INDEPENDENT DIRECTOR

The Board meeting of April 27, 2012 reconfirmed Mr. Stefano Romiti as the Lead Independent Director, assigning the role established by criteria 2.C.4 of the Code.

The Lead Independent Director has the right, among others, on his own initiative or upon the request of the other directors, to summon meetings of the independent directors in order to discuss issues that are considered relevant regarding the functioning of the Board of Directors or management in general.

In 2013, the Lead Independent Director operated as a reference point for the other independent directors, collaborating, among others, with the Chairman of the Board of Directors, in order to guarantee complete and timely information for the independent directors.

The appointment of a Lead Independent Director was considered necessary in consideration, among other issues, of the extent of the duties conferred to the Chairman of the Board of Directors (although he does not act as C.E.O.) and the familial relationship between the Chairman and the Chief Executive Officer Gianna Pieralisi, who indirectly holds control of the Company, in accordance with Article 93 of the CFA.


5. TREATMENT OF CORPORATE INFORMATION AND PERSONS WITH ACCESS TO CONFIDENTIAL INFORMATION (“INSIDERS REGISTER”)

The Board of Directors, in the meeting of April 12, 2006, approved, in accordance with Article 4 of the Self-Governance Code, a regulation relating to the internal management and external communication of documents and information related to the Company, with particular reference to confidential information, based on Article 114, paragraph 1, 181 of the CFA and 66 of the Issuers’ Regulation.

Subsequently, on November 14, 2013, the Board updated this regulation describing, among other matters, in greater detail the procedures to be undertaken for the management of significant and confidential information.In particular this regulation is divided into two parts. The first part defines in general, also in relation to the subsidiary companies, the information considered significant or confidential, the relative treatment, and in the case of confidential information, governs the relative disclosure. The second part governs the procedures for the management and updating also with reference to subsidiary companies, the Register of persons with access to significant and/or confidential information (so-called “Insider Register”) created by the company in accordance with Article 115-bis of the Consolidated Finance Act and whose maintenance is the responsibility of the Investor Relations Manager.

The Company has published the provisions of this regulation internally within the Company and its subsidiary companies and has systematically managed and communicated the confidential information published from time to time.On September 27, 2007, Laura Giovanetti was appointed “Investor Relations Manager” and is also responsible for maintaining the Insider Register of the Company.


6. INTERNAL COMMITTEES

On April 27, 2012, the Board of Directors of the Company, in accordance with Article 4.P.1 of the Self-Governance Code, set up an “Appointments and Remuneration Committee” and an “Internal Control and Risk Management Committee”, formed by a majority of non-executive and independent directors.The duties attributed by the Code to the Committees were therefore not reserved for the entire Board.

In comparison with the previous structure established in 2006 the functions of the Appointments Committee, previously not incorporated, were allocated to the Remuneration Committee, in accordance with Article 4.C.1, letter c) and in compliance with the provisions of Articles 5.P.1 and 6.P.3 of the Code. The decision to create a single Committee for the Appointment and Remuneration of Directors is based on the size of the Board and of the Company, in addition to the need of the Company to maintain, and compliance with the conditions of the Code, a responsive and effective organisation.

The Internal Control and Risk Management Committee, created in accordance with Articles 4.P.1, 7.P.3. (ii) and 7.P.4 of the Self-Governance Code, replaced the Internal Control Committee.

The work of the Committee is coordinated by its Chairman: Stefano Romiti.Further information on these committees is reported in sections “8. Appointments and Remuneration Committee” and “10. Control & Risks Committee”.

7. APPOINTMENTS COMMITTEE

The Company did not consider it necessary to create a specific Appointments Committee and consequently allocated the relative duties to the Remuneration Committee, now the Appointments and Remuneration Committee.

For further information, reference should be made to the sections “6. Internal Committees” and “8. Appointments And Remuneration Committee".


8. APPOINTMENTS AND REMUNERATION COMMITTEE

Composition and operation of the Committee (as per Article 123-bis, paragraph 2, letter d) CFA)

The Board of Directors of the Company, in accordance with Articles 4.P.1, 5.P.1. and 6.P.3. of the Self-Governance Code, set up an Appointments and Remuneration Committee.

Stefano Romiti (Chairman), Gennaro Pieralisi and Elena Magri were members of the Committee during 2013 and continue to be members at the date of the present report.

The Appointments and Remuneration Committee was allocated all of the duties established by Articles 5.C.1, 6.P.4 and 6.C.5 of the Self-Governance Code.

The Members of the Committee have knowledge and experience in relation to accounting and financial matters and/or remuneration policies; in particular the Chairman Stefano Romiti has specific knowledge and experience in relation to accounting and financial matters. The Board considers that the Members of the Committee have sufficient professional abilities to carry out the roles entrusted to them.

This committee guarantees the greatest information and transparency on the remuneration of directors vested with specific offices, as well as the manner for determining the remuneration.The Committee has solely proposing and consultative functions, while the power of determining the remuneration of the Directors vested with specific offices remains with the Board of Directors, having consulted with the Board of Statutory Auditors.

Specifically, the Committee:

› presents to the Board proposals for the drawing up of a Remuneration Policy for Executive Directors, of Directors allocated specific roles and Executives with strategic responsibilities, in addition to the establishment of the performance objectives related to the variable component of such remuneration;

› monitors the application of the decisions adopted by the Board, verifying, in particular, the effective achievement of the performance objectives.

› periodically evaluates the adequacy, the overall compliance and the proper application of the remuneration policy adopted, utilising for this latter the information provided by the Executive Directors;

› draws up opinions for the Board of Directors in relation to the size and composition of the Board and provides recommendations in relation to the professionals whose presence on the Board is considered beneficial, in addition to the matters considered by Criteria 1.C.3 and 1.C.4 of the Code;


› proposes to the Board candidates for the office of director in the cases of co-option, or to replace independent directors.

In relation to the activities undertaken by the Committee in 2013, the persons participating at the relative meetings and the instruments and resources available at the meetings, reference should be made to the first Section of the Remuneration Report.

For further information regarding the number of meetings held and the participation at the meetings for each of the members reference is made to section “Activities of the Board of Directors and of the Committees in 2013 and in 2014 up to the date of the present Report.

9. DIRECTOR REMUNERATION

For information on the present Section, reference should be made to the Remuneration Report, Section 1.

In accordance with Article 6.C.3 of the Civil Code, the remuneration of Executives with strategic responsibilities is established by the Corporate Boards in line with the criteria concerning remuneration of Executive Directors or those with specific roles.

In relation to the incentives for the Internal Control Manager and the Executive Responsible for the preparation of Corporate Accounting Documents, these are in line with the responsibilities assigned.


10. CONTROL AND RISKS COMMITTEE

Composition and operation of the Committee (as per Article 123-bis, paragraph 2, letter d) CFA)

The Board of Directors of the Company, in accordance with Articles 4.P.1. and 7.P.4 of the Self-Governance Code, set up an Internal Control and Risk Management Committee, comprised of Non-Executive Directors, the majority of which independent. Stefano Romiti (Chairman), Gennaro Pieralisi and Elena Magri were members of the Committee during 2013 and continue to be members at the date of the present report.

The Internal Control and Risk Management Committee is composed of members with adequate financial and accounting experience.

The Board of Statutory Auditors attended the meetings of the Committee, through the Chairman and the Standing Members of the Board. In relation to the specific matters on the Agenda, and also on invitation, the following also attended: the Executive responsible for the Preparation of the Corporate Accounting Documents, the Internal Control Manager, the Internal Audit Manager and the Company Managers.

The duties of the Internal Control and Risk Management Committee, within its powers, and in accordance with the recommendations of the Self-Governance Code, are as follows:

› provide opinions to the Board of Directors (i) establishing the guidelines of the Internal Control and Risk Management System, so that the principal risks relating to the Company and its subsidiaries are correctly identified, in addition to adequately measured, managed and monitored (ii) evaluating, at least annually, the adequacy of the Internal and Risk Management System in relation to the characteristics of the Company and the risk profile assumed, in addition to its efficacy (iii) approving, at least annually, the work plan prepared by the Internal Audit Manager, having consulted with the Board of Statutory Auditors and the Director in charge of the Internal Control and Risk Management System; (iv) describing the principal features of the internal control and risk management system, reviewing its adequacy; and (v) evaluating, having consulted with the Board of Statutory Auditors, the findings of the independent audit firm in any letter containing suggestions and in the report on fundamental questions arising during the audit;

› provides a favourable opinion to the Board of Directors (i) on the appointment and replacement of the Internal Audit manager (ii) ensuring adequate resources for the carrying out of their duties and the determination of the remuneration of the Internal Audit manager, in accordance with company policy;

› evaluate, together with the Executive Responsible for the preparation of corporate accounting documents, following consultation with the auditors and the Board of Statutory Auditors, the correct application of the accounting principles and, in the case of groups, their uniformity in the preparation of the consolidated financial statements;


› express opinions on specific aspects concerning the identification of the principal corporate risks;

› examine the periodic reports, concerning the evaluation of the internal control and management of risks system, and those of particular size, prepared by the internal audit department;

› monitor the independence, adequacy, efficacy and efficiency of the internal audit department;

› request verifications on specific operating areas from the Internal Audit department, communicating at the same time such to the Chairman of the Board of Statutory Auditors;

› report, at least every six months, at the time of the approval of the annual and half-yearly accounts, to the Board of Directors on the work carried out and on the adequacy of the internal control and risk management system;

› perform the additional consultative and/or propositional tasks assigned by the Board of Directors, particularly with regard to relations with the independent audit firm.

The Internal Control and Risk Management Committee was also allocated the role to issue a non-binding prior opinion on the interest of the company, as well as the suitability and substantial correctness of the conditions, in the case of transactions with related parties as per the Procedure for Transactions with Related Parties.17

In 2013, the Internal Control and Risk Management Committee, among other issues:

› provided the Executive Responsible with the project for the systemisation and formal adjustment of the Financial Disclosure Control System, also in relation to subsidiaries;

› evaluated and approved the Internal Audit annual plan and provided suggestions on the audit activity to be carried out;

› verified the adequacy of the Internal Control and Risk Management System and supported the Board of Directors in drawing up the guidelines for the Internal Control and Risk Management System.

The Committee had access to the information and departments for the undertaking of their duties as well as the assistance of external consultants, within the terms established by the Board. Therefore, as the Committee availed of the resources, the means and the structure of the Company, the provision of specific financial resources is not provided for.

17 See also paragraph 4.1 “Preliminary opinion of the Committee" of the procedure for Transactions with Related Parties, available on the company website. For additional information concerning attendence at the meetings by each member, see the section "Activities of the Board of Directors and of the Committees in 2013 and in 2014 up to the date of the present Report.”


11. INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM (AS PER ARTICLE 123-BIS, PARAGRAPH 2, LETTER B), CFA)

The Internal Control and Risk Management System, based on the “COSO Report” model and on the Self-Governance Code principles, comprises a set of rules, procedures and organisational structures with the objective to prevent or limit the consequences of unexpected results or permit the achievement of strategic and operational objectives, comply with law and applicable regulations (compliance) and correct and transparent disclosure (reporting). This system concerns all of the Company and involves different parties attributed specific duties and responsibilities. The Internal Accounting Control System in fact seeks to provide reasonable certainty that the accounting disclosure provides users with a true and fair representation of the operational facts, corresponding to the documented results, books and underlying accounting entries as well as the adequacy and effective application of the administrative and accounting procedures during the period to which the accounting documents refer.

This system, defined based on leading national and international best practice, is based on the three following levels of control;

› First level: the operating functions identify and evaluate the risks and define specific actions for their management (so-called line controls);

› Second level: the risk control functions concern the establishment of methodologies and instruments for the management of risks relating to operations and the carrying out of risk monitoring activities;

› Third level: the Internal Audit function provides independent evaluations on the entire System.

The Board of Directors of Elica defined the guidelines of the Internal Control System, taking into account the nature and level of compatible risk with the corporate strategic objectives. These risks are identified based on the following criteria:

a. nature of the risk, particularly in relation to risks of a financial nature, those concerning compliance with accounting rules and those with a potentially significant impact on the reputation of the Company;

b. significant probability of the occurrence of the risk;

c. limited capacity of the Company to reduce the impact of the risk on operations;

d. significant size of the risk.


Also in the year just ended, the Board evaluated the adequacy, efficiency and effective functioning of the Internal Control and Risk Management System considering that the system overall provides reasonable certainty on the management of the principal risks identified.For the principal features of the Internal Control and Risk Management System in relation to the financial disclosure process, reference should be made to Attachment 2.

11.1 EXECUTIVE IN CHARGE OF THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM

The Company appointed the Chief Executive Officer Mr. Giuseppe Perucchetti as the Executive in charge of the creation and maintenance of an efficient Internal Control and Risk Management System, in line with Article 7.P.3 of the Self-Governance Code.

In particular, in 2013, the appointed Director, in the exercise of his functions:

› identified the main business risks, taking into account the characteristics of the activities undertaken by the Company and by its subsidiaries, and periodically presents them for examination to the Board of Directors on the approval of the quarterly reports;

› shared with the Board of Directors the guidelines utilised for the design, drawing up and management of the Internal Control and Risk Management System, verified the adequacy and implemented any adjustments necessary based on the operating conditions and of the legislative and regulatory environment. In particular, the Board were updated on the developments of current projects relating to the internal restructuring, and to the harmonisation of the IT Systems and the Internal Control System in general and any problems encountered in carrying out company operations;

› proposed to the Board of Directors the remuneration of the Internal Audit Manager;

› he also requested the Internal Audit Department to perform checks on certain cost items in a number of foreign subsidiaries;

› updated the Board of Directors on any problems arising on the undertaking of their activities.


11.2 INTERNAL AUDIT DEPARTMENT MANAGER

The Internal Audit department undertakes its Internal Auditing activity in order to assist the Board of Directors and the Control and Risks Committee, as well as the company’s management, in discharging their responsibilities related to the Internal Control and Risk Management System. The Internal Audit department, which does not report directly to any operational department, reports hierarchically to the Chairman of the Board of Directors.

In accordance with the recommendations indicated at Article 7.C.1 of the Self-Governance Code, on the proposal of the Director in charge of the Internal Control and Risk Management System, having consulted with the Board of Statutory Auditors and with the approval of the Internal Control and Risk Management Committee, the Board of Directors appointed and established the remuneration for the Internal Audit Manager Mr. Cristiano Babbo, in line with company policy. The appointment was made at the Board of Directors’ Meeting of November 14, 2011 and confirmed on April 27, 2012.

The Internal Audit Manager was provided with:

› entirely independent of all departments within the corporate structure thanks to his position as reporting directly to the Chairman;

› has the necessary authorisation to directly access all of the information required for the fulfilment of his role;

› has access to an adequate budget to carry out his duties.

In particular, the most significant activities carried out in the year by the Internal Audit Manager were:

› periodically reported on activities to the Internal Control and Risk Management Committee, to the Chairman of the Board of Statutory Auditors, to the Chairman of the Board of Directors and to the Director in charge of the Internal Control and Risk Management System;

› verified, based on the Audit Plan approved by the Board of Directors, the functioning and appropriateness of the Internal Control and Risk Management System, in addition to the reliability of the IT systems, including the accounting systems. The work plan is determined based on the information deriving from: group economic strategic objectives, compliance 262 and 231, information from management, Control Self-Assessment activity, evaluations from the Internal Audit department and previous audits, external auditors;

› continued the organisation and formal adjustment activity of the Financial Disclosure Control System;

› carried out Testing activities to establish the efficacy of design and effective operation of controls.


11.3 ORGANISATIONAL MODEL AS PER LEGISLATIVE DECREE 231/2001

The organisation, management and control Model as per Legislative Decree 231/01 of Elica S.p.A. was updated and approved by the Board of Directors on August 28, 2013, following legislative amendments and jurisprudence pronouncements in relation to responsibility of entities. In particular, among the new offenses introduced by Legislative Decree 231/01 are:

› offenses in relation to Manslaughter or serious injuries committed through violation of regulations on the protection of health and workplace security – Article 25-septies in addition to Article 9, Law No. 123 of August 3, 2007 (in fact already included in the Model approved in 2008) and subsequently replaced by Article 300, Law No. 81 of Legislative Decree of April 9, 2008;

› information technology offenses – Article 24-bis, which updated existing legislation and introduced into the penal code new offenses in relation to information technology crimes (for example damage to information, data and IT programmes).

› organised crime offenses – Article 24-ter which introduced the offense of “organised crime”, in particular criminal enterprises both of a “transnational” nature or in the national territory.

› offenses in relation to falsifying money, credit cards, stamp duties and instruments or recognition signs (amendment of the Article with the introduction of the falsification offense of instruments or recognition signs - Article 25-bis), which governs new offenses not within the previous legislation, such as counterfeiting and/or alternation to brands, patents and distinctive signs.

› offenses in relation to disturbed freedom within industry and commerce – Article 25-bis 1 concerning the utilisation of violence on property with utilisation of means to impede or disturb the exercise of an industry or of a commerce, fraud in the exercise of commerce, the sale of industrial products with false signs etc;

› crimes in relation to the violation of authors’ rights – obstruction to justice – Article 25-novies which provides for the abusive duplication or provision within the State of products without the prior authorisation by SIAE or “Inducement to not provide declarations or render false declarations to the legal authorities”;

› “environmental offenses” - Article 25 undecies: Legislative Decree No. 121 of July 7, 2011, which implements EU Directive 2008/99 on the protection of the environment, as well as EU Directive 2009/123 which modifies EU Directive 2005/35, relating to pollution caused by ships and the introduction of sanctions for violations, introduced, within Legislative Decree 231/01, these offenses.

› offense of “Employment of citizens from other countries without proper residence” – Article 25-duodecies, introduced by Legislative Decree No. 109/2012, and enacted on August 9, 2012 and published in Official Gazette No. 172 of July 25, 2012.


› New regulations introduced by Law 109/2012:

· amendment to the Penal Code, for example amendment of Article 318 c.c.p. Corruption for offices held, Article 319-quater Induction to provide or promote use;

· corruption between private parties as per paragraph 1 letter s bis of Article 25-ter of Legislative Decree 231/2001.

The organisation, management and control Model of Legislative Decree 231/01 of Elica S.p.A. is comprised of a general part which illustrates the functions, principles and constituting elements, identification of the activities at risk, definition of the protocols, information flows, training and information activities, characteristics and functioning of the Supervisory Board as well as the following attachments, which constitute an integral part of the model: List of the offenses, Mapping of activities at risk of offense, Protocol procedures against the activities at risk of offense, By-Laws of the Supervisory Board, Composition and Curriculum of the members of the Supervisory Board, Ethics Code and the Governance system. For further information, reference should be made to the website www.elicagroup.com Investor Relations/Corporate Governance/231 area (and/or http://corporation.elica.com Corporate Governance section);

The Supervisory Board of Elica S.p.A. during 2013 and until the date of approval of the present report was composed of two external professionals: Bruno Assumma (Chairman) and Glauco Vico (member) and Cristiano Babbo (member and Head of Elica Internal Audit).

The Board of Directors, following the evaluation, decided not to allocate the duties of the Supervisory Board to the Board of Statutory Auditors, considering it beneficial to establish two separate bodies.

11.4 INDEPENDENT AUDIT FIRM

The Shareholders’ Meeting of April 12, 2006 appointed for the period 2006-2011, the audit company Deloitte & Touche SpA for the auditing of the financial statements of the company, the consolidated financial statements and the half-year report, as well as the control of the correct accounting of the company.

The shareholders’ meeting of April 30, 2007 extended this appointment, in conformity with law, for the further period 2012-2014.


11.5 EXECUTIVE RESPONSIBLE FOR THE PREPARATION OF CORPORATE ACCOUNTING DOCUMENTS

In accordance with Article 154-bis of the CFA as amended by Law No. 262 of December 28, 2005 (so-called “Savings Law”) and in accordance with Article 26 of the By-Laws, the Board of Directors, having consulted with the Board of Statutory Auditors, appointed as the Executive Officer Responsible for the preparation of the Corporate Accounting Documents Mr. Alberto Romagnoli, Finance Director, who will remain in office until the Shareholders’ Meeting called for the approval of the 2014 Annual Accounts.

Article 26 of the By-Laws provides that the Executive Responsible for the preparation of the corporate accounting documents must have specific professional skills in administration, finance and control, as well as the requisite standing established for directors. The Board considered that the professional requirements with specific competence in the area of administration, finance and control have been fulfilled as well as the standing requirements required by the By-laws, and has proceeded to provide him with adequate resources and means necessary to carry out his duties.

In particular, in order to fully carry out his duties, the Executive Responsible, among others, may avail of the powers and resources established in the Guidelines drawn up by Confindustria in relation to the role (edition of December 13, 2007).The Executive Responsible, in the exercise of his institutional role, in application of the above-stated Article 154-bis of the CFA:

› has specific duties of control in relation to the legal notices and communications of the Company established by law or announced to the market, containing information and data on the income statement, balance sheet and financial situation of the Company, accompanied by a written declaration of the Chief Executive Officer and the Executive Responsible for the preparation of the Corporate Accounting Documents, who attest to their truthfulness;

› prepare administrative and accounting procedures for the completion of the parent company and consolidated financial statements, as well as for every other communication of a financial nature;

› declares, together with the executive boards, through a report, attached to the parent company and consolidated financial statements, the adequacy and the effective application of the administrative and accounting procedures adopted in the year on which the accounts are based, as well as the correspondence of the financial statements with the underlying accounting documents and records.


11.6 COORDINATION OF THE PARTIES INVOLVED IN THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM

The periodic verification of the adequacy and effective functioning, and any review, form an essential part of the Internal Control and Risk Management Structure, in order to ensure its full and correct efficacy.

For these purposes the Internal Audit Manager, in the meetings of the Internal Control and Risks Management System at which the Board of Statutory Auditors and the Executive Responsible for the Preparation of Corporate Accounting Documents attend, reports on the activities carried out and therefore on the management of risks, on the compliance of the content of the plans, and on the evaluation of the appropriateness of the Internal Control system itself.

The Board of Directors receives and examines on a half-yearly basis the reports prepared by the Internal Control and Risk Management Committee and examines the significant corporate risks submitted for the attention of the Director in charge of the Internal Control and Risk Management System.


12. HOLDINGS OF DIRECTORS AND TRANSACTIONS WITH RELATED PARTIES

The “Procedure for Transactions with Related Parties” (“RP Procedure”), adopted by the Board of Directors on November 11, 2010 and updated on August 28, 2012, is available on the website www.elicagroup.com in the Investor Relations / Corporate Governance section (and/or http://corporation.elica.com Corporate Governance section), to which reference should be made.

On November 14, 2013, the Board assessed the necessity to modify the OPC Procedure, taking into account the shareholder structure and the effectiveness demonstrated by the Procedure within the applicative practices. Following this assessment, the Board did not consider it necessary to apply amendments to the OPC Procedure previously approved, noting that the non-application of the OPC Procedure was not due to deficiencies within the regulation itself, but an effective absence of significant operations concluded with counterparties considered related.

In the OPC Procedure, the Board established the criteria to identify transactions for which application is required, in order to ensure the transparency and correctness, both materially and procedurally, of transactions with related parties. In 2013, no significant company transactions were carried out with related parties.

***

In relation to transactions in which a director has, on his own behalf or on behalf of third parties, an interest, the interested director is called, except for specific circumstances, to abstain from the vote or to leave the meeting at the moment of discussion and resolution. When the transaction is not subject to the prior approval of the Board of Directors but within the powers delegated to the interested director, also through the exercise of a specific proxy, this latter abstains from the carrying out of the transaction and provides in a timely and exhaustive manner information in relation to such to the Board.

In order to identify transactions in which a director may have an interest, also on behalf of third parties, the Company utilises, among others, an electronic database containing information on related parties of directors of the Company.


13. APPOINTMENT OF STATUTORY AUDITORS

In relation to the appointment of statutory auditors, reference is made to the subsequent section “Manner for electing Corporate Boards”.

14. COMPOSITION AND OPERATION OF THE BOARD OF STATUTORY AUDITORS (AS PER ARTICLE 123-BIS, PARAGRAPH 2, LETTER D) CFA)

The Company’s By-laws provide that the Board of Statutory Auditors consist of three standing auditors and two alternate auditors.

The Board of Statutory Auditors currently in office was appointed, in accordance with the requisites of autonomy and independence of Article 8.C0.1 of the Self-Governance Code, by the Shareholders’ Meeting of April 27, 2012, as per the By-Laws at the date of the appointment, which provides for the “voting of slates” and remains in office until the approval of the financial statements at December 31, 2014. Two unconnected slates were presented:

› SLATE 1: presented by the majority shareholder FAN s.r.l., which proposed the following slate of candidates (“Majority Slate”):

· Standing Auditors: Casali Gilberto; Marasca Stefano and Giuliani Marco; · Alternate Auditors: Borioni Franco and Luzi Giancarla.

› SLATE 2: presented by shareholders: FIRST CAPITAL S.p.A., IMMI INVEST S.r.l., who proposed the following slate of candidates (“Minority Slate”):

· Standing Auditors: Mariotti Corrado; · Alternate Auditors: Capecci Daniele.

For further details on the slates, reference is made to the documentation relating to the above stated Shareholders’ Meeting available on the internet site of the Company.


The result of the voting of Shareholders present at the Shareholders’ Meeting was as follows:

› votes in favour of Slate 1 – 33,442,445, equal to 89.7201% of the voting share capital;

› votes in favour of Slate 2 – 3,340,858, equal to 8.9629% of the voting share capital; and

› not voting 490,897, equal to 1.3170% of voting share capital.

The attachment TABLE 3 – Structure of the Board of Statutory Auditors to the present report shows the composition of the Board of Statutory Auditors at December 31, 2013, which has not changed at the preparation date of the present Report.

Reported below is a brief curricula vitae of the members of the Board of Statutory Auditors:

Corrado MariottiBorn in Numana (AN) on 1944/02/29, Chairman of the Board of Statutory Auditors of Elica S.p.A.. Member of the Accountants’ Association of Ancona from 1970/09/14. Member of the Official Auditors Roll with Ministerial Decree 5.5.1977 (Official Gazette No.130 of 14.5.1977). Member of the Auditors Register with Ministerial Decree 12.4.1995 (Official Gazette 4th series special No.31 bis of 21.4.1995) at No. 35727. Has carried out many appointments from the Court (particularly in Ancona) such as Receiver and supervisor of a controlled administrative procedure, inspector and legal administrator, technical consultant of the Court of P.M and G.I.P. Has acted continuously since 1970 as an accountant in Ancona, exclusively within the field of corporate consultancy: corporate, tax, financial, auditing, examination and administrative. He is Chairman of the Board of Directors of Banca Popolare di Ancona S.p.A.; member of the Board of Directors of ISTAO; Chairman of the Board of Statutory Auditors of SO.GE.S.I Soc. Gestione Servizi Industriali S.r.l. Unipersonale, of Somacis S.p.A. and of Somipress S.p.A. and Statutory Auditor of Nazareno Gabrielli Diaries S.p.A. and of CARNJ Società Cooperativa Agricola, in addition to a member of the Board of Auditors of the Polytechnic University of Le Marche; he was Chairman of the Accountants’ Association of Ancona from 1991 to 1997 and from 2010 to 2012.

Stefano Marascaborn in Osimo (AN), 1960/08/09; Statutory Auditor of Elica S.p.A.. Professor of “Business Studies” at the Polytechnic University of Le Marche. Director of the Management Department at the University. Author of numerous publications and coordinator of research locally and inter university on the themes of accounting, of financial statements and international accounting principles, of strategic control and management control, of the measurement and valuation of intangible assets for internal reporting and communication to stakeholders. Ordinary member of the A.I.D.E.A. (Italian Academy of Business Studies). Member of the Scientific Committee for Articles and scientific journals relating to business studies and the financial-economic communication of companies. Member of the Accountants' Association of Ancona from 1986. Member of the Auditors’ Association since its constitution (membership No.34987). Registered in the general list of the Ancona Court since 1994. Director of Banca Carilo S.p.A., Chairman of the Board of Directors of Sisme S.p.A. and Sacart S.p.A... Standing auditor of Gidea S.r.l., of Ottaviani S.p.A. and of Wikiware S.p.A..


Gilberto Casaliborn in Jesi (AN), 1954/01/14; Statutory Auditor of Elica S.p.A.. He has been a member of the Accountants Association of Ancona since 1978/03/23 at No. 69/A as well as being on the Technical Consultants of the Civil and Criminal Court of Ancona roll. Official auditor of accounts with Min. Decree 1993/07/09 published in the Official Gazette No. 58 of 1993/07/23. He is a member of the Auditors’ Register at No. 11716 with Ministerial Decree 1995/04/12 published in the official gazette No.31 bis of 1995/04/21 – IV Special Series. He is Chairman of the Board of Directors of Cavallottiundici S.r.l., of Fincrea S.r.l., of L’Olivo S.r.l., of Sanmarcodue S.r.l. and is Sole Director of Imak S.r.l..He is Chairman of the Board of Statutory Auditors of Ermanno S.r.l., of Kalìda S.p.A., of Garofoli Strutture S.p.A., of Mait S.p.A., of Gielle Real Estate S.r.l., of Nuna S.r.l. and of Mark Leasing S.p.A. and is a Statutory Auditor of Adriafin S.p.A., of Babini S.p.A., of Cav. Del Lav. Igino Pieralisi S.a.p.A., of Egisto Pieralisi S.A.P.A. di Gennaro Pieralisi, of Elfa Hotel S.p.A., of Engifin S.p.A., of Golden Lady Company S.p.A., of La Castellina S.p.A., of Ninì Pieralisi S.A.P.A. di Luigi Pieralisi, of Safe S.a.p.A. del Cav. Del Lav. Igino Pieralisi, of 2 M S.p.A. and of the Ermanno Casoli Foundation.

Franco Borioniborn in Jesi (AN), 1945/06/23; Alternate Auditor of Elica S.p.A.. He has been a member of the Accountants Association of Ancona since April 11, 1979 at No. 73/A as well as being on the Technical Consultants of the Civil and Criminal Court of Ancona roll. Official auditor of accounts with Min. Decree 1988/02/24 published in the Official Gazette No. 53 of 1988/03/04. He is a member of the Auditors’ Register at No. 7353 with Ministerial Decree 1995/04/12 published in the official gazette No.31 bis of 1995/04/21 – IV Special Series. He is Sole Director of Gielle Real Estate S.p.A., of Belgravia S.r.l., of Casper S.r.l., of Led S.r.l., of Sedepi S.r.l. and Chairman of the Board of Directors of Devina S.r.l., and of SED S.r.l. and a Director of Marmo Meccanica S.p.A. and of Cavallottiundici S.r.l.. He is the Chairman of the Board of Statutory Auditors of Simonetta S.p.A., of 2M S.p.A., of Air Force S.p.A. (subsidiary of the Company), of Cav. del Lavoro Igino Pieralisi S.a.p.a., of Confidi Ancona Soc. Coop. p.a., of Egisto Pieralisi S.a.p.a., of FAN S.r.l., of Fintrack S.p.A., of the Ermanno Casoli Foundation, of Gilfin S.p.A., of Imesa S.p.A., of Levitas S.p.A., of Nini Pieralisi S.a.p.a., of Safe S.a.p.a. and a Statutory Auditor of Anpier S.p.A. (shareholder of the Company), of Ausiliare S.p.A., of Golden Lady Company S.p.A., of Mait S.p.A., of Torelli Dottori S.p.A. and of TV Centromarche S.p.A..

Daniele Capecciborn in Jesi (AN) on 1972/04/03. Alternate Auditor of Elica SpA. Member of the Accountants’ Association of Ancona from 2004/03/05 at No.589/A. He is a member of the Auditors’ Register at No. 139798 with Ministerial Decree 2006/04/21 published in the official gazette No.34 of 2006/05/05 – IV Special Series.He is the Sole Director of Ellegi S.r.l; Director of Tecnica HZ S.r.l., of Campo Boario S.p.A., of C.O.S.I.E. – Consorsio Stabile Infrastrutture Europee and of Debson S.r.l.; Chairman of the Board of Statutory Auditors of GIMA S.p.A., Meccano S.cons.le.p.A., Smorlesi Gaetana Cecilia & C. S.p.A. and Euroclinic S.p.A.; Statutory Auditor of the Associazione dei Comuni Virtuosi, of Caimi Export S.p.A., of Caimi Export 2 S.p.A., of Eida S.p.A., of Equipe S.p.A., of Ermanno S.r.l., of the Ermanno Casoli Foundation, of Federico II Stupor Mundi Foundation, of Nuna S.r.l., of ISTAO – Istituto Adriano Olivetti, of Renco S.p.A., of YCami S.p.A., of Santoni S.p.A., of Pennacchioni S.p.A., of TEUCO Guzzini S.p.A. and of UCW Unique Children Wear Srl.


Board of Statutory Auditors activities in 2013 and in 2014 until the date of the present Report

In relation to the activities carried out, the Board of Statutory Auditors in 2013 met 8 times, respectively on March 7, March 25, March 28, April 24, June 4, July 16, September 11 and November 14.

In 2014, the Board of Statutory Auditors met on three occasions, on February 14, March 18 and March 21.

The activities of the Board of Statutory Auditors concerns, among others, in accordance with point 3.C.5 of the Self-Governance Code, the verification of the criteria and procedures adopted by the Board to evaluate the independence of its members. The Board of Statutory Auditors in the course of the above-stated verifications did not record anomalies, as per the minutes drawn up of April 24, 2013 and March 21, 2014. The Board of Statutory Auditors established the independence of its members in conformity with Article 8.C.1 of the Self-Governance Code in the meetings of April 24, 2013 and March 21, 2014.

The Board has constantly monitored the independence of the Independent Audit Firm in carrying out its duties, verifying compliance with law and monitoring the other activities carried out apart from accounting control.

The Board of Statutory Auditors, in carrying out its duties, coordinated its activities with the Internal Audit manager and the Internal Control and Risk Management Committee through the exchange of information relating to their respective activities and the participation of the Board of Statutory Auditors at the Internal Control and Risk Management Committee meetings during the year.

The Board of Statutory Auditors notes that the company, having complied with the Self-Governance Code of Borsa Italiana S.p.A., provides that where a statutory auditor, on his/her own behalf or that of third parties, has an interest in a determined transaction of the Company, he/she must inform the other statutory auditors and the chairman of the Board, in a timely and comprehensive manner, regarding the nature, terms, origin and extent of his/her interest. In accordance with the Consob Regulation concerning transactions with “related parties” the members of the Board of Statutory Auditors drew up a document for the identification of related parties in accordance with Article 4, paragraph 4 of Consob Regulation, adopted with resolution No. 17221 of March 12, 2010 and No. 17389 of June 23, 2010.

The members of the Board of Statutory Auditors have adequate experience and knowledge of the sector in which the Company operates; however, in order to improve such knowledge, and of the corporate activities and performance, in addition to the regulatory framework, the Board of Statutory Auditors attends the meetings of the Board and of the Committees, in addition to the ad hoc meetings organised by the Chairman of the Board of Directors.


15. RELATIONS WITH SHAREHOLDERS, WITH BORSA ITALIANA AND WITH THE COMPETENT AUTHORITY

In conformity with Article 9.C.1 of the Self-Governance Code, the Board of Directors, in the meeting of September 27, 2007 appointed Laura Giovanetti as the Investor Relations Manager in replacement of Vincenzo Maragliano, previously appointed at the meeting of April 12, 2006. The Investor Relations Manager is assigned the duties of (i) fostering the Company relationships with the financial community; (ii) enabling continuous dialogue between the company and the stakeholders and in particular the investors and shareholders; (iii) communicating to investors and the market the performance of the business and (iv) carrying out the operations and the duties relating to the Insider Register of the Company, in conformity with the “Regulation for the treatment of corporate information and the constitution of the Insider Register”.

In addition, in order to guarantee a more efficient flow of information with the relevant authorities and the market, the Board of Directors of the Company considered it proper that the Information Officer coincides with the role of the Investor Relations Manager and at the same meeting of September 27, 2007 conferred Laura Giovanetti the appointment of Information Officer responsible for the relations with Borsa Italiana and Consob, in replacement of Vincenzo Maragliano.

Therefore on November 11, 2010, following the conferment of other duties to Mr. Giampaolo Caselli, the Company replaced him with Ms. Francesca Pisani, Legal & Corporate Affairs Supervisor of the Company, in the role of Information Officer.

All of the documents relating to the Corporate Governance and the other information relating to the Company, which have significance for shareholders, are consultable on the website www.elicagroup.com and/or http://corporation.elica.com.


Internal Dealing regulations

The Company, with Board resolution of April 12, 2006, adopted a procedure concerning the information obligations relating to financial instruments issued by the Company, related to so-called “significant” persons and persons associated with them, in relation to Internal Dealing (the so-called "Internal Dealing Code"). This procedure was amended on April 27, 2012 for the purposes of, among others, the adjustment in line with the regulatory amendment to Article 152 septies, paragraph 3 of the Issuers’ Regulation, introduced with Consob Resolution No. 18079 of January 20, 2012.

The Regulation is published on the website www.elicagroup.com in the Investor Relations/Corporate Governance section (and/or http://corporation.elica.com in the Corporate Governance section);


16. SHAREHOLDERS’ MEETINGS

The By-Laws of the Company do not provide for a method of functioning other than those as prescribed by law and regulations.18

Normally, all of the directors attend the Shareholders’ Meetings. All seven Directors attended the Shareholders’ Meeting of April 24, 2013, including the Chairman and the members of the Appointments and Remuneration Committee.19

On the nomination of an additional director to the Shareholders’ AGM of April 24, 2013, the majority shareholder of the Company filed a slate at the registered office of the company containing the relative information of the proposed candidate. The slate was made available to the public in accordance with the applicable regulations. All of the matters of the Agenda of the Shareholders’ AGM were reported upon in the Directors’ Report to the Shareholders’ Meeting.

All those who have sent the company the communication provided by the intermediary appointed by the end of the third market day preceding the date fixed for the Shareholders’ Meeting in first call or in single call, have the right to attend the shareholders’ meeting, or within a different time period established by existing regulations, as long as the communications are sent to the Company within the above-stated time periods, provided by the beginning of the business of the shareholders’ meeting.

Every shareholder may be represented by a third party conferring upon him proxy in accordance with law, the By-Laws and the Shareholders’ Meeting regulation.The notification through electronic means of proxy to the Company by those with the right to vote may take place through sending an e-mail to the address indicated in the call notice.

The Shareholders’ Meeting of the Company on April 12, 2006 approved the Shareholders’ Meeting Regulation, proposed by the Board of Directors in accordance with Article 9.C.3 of the Self-Governance Code, subsequently amended by the Shareholders’ Meeting of April 28, 2011 in order to guarantee the proper carrying out of the shareholders’ meetings as well as the rights of each shareholder to contribute to discussions on the matters on the agenda. The Regulation was published on the website www.elicagroup.com in the Investor Relation/Corporate Governance section (and/or http://corporation.elica.com Corporate Governance section).

The Board reported on the activities carried out and programmed in the Shareholders' Meetings and endeavoured to ensure shareholders have adequate information regarding the necessary elements so that they could take, in a knowledgeable manner, the decisions within the authority of a Shareholders' Meeting.

***

18 The Shareholders’ Meeting assigned the Board the duties as per Article 19.2 of the By-laws, in accordance with the Article 2365 of the Civil Code.

19 They attended also to provide any clarifications on the content of Sections 8 and 9 of the present Report, in addition to the content of the Remuneration Report, including, among other issues, the description of the manner of exercise of the duties of the stated Committee.


In relation to the market capitalisation, the share price at January 2, 2013 was Euro 1,0081 and at December 30, 2013 was Euro 1,6571; the minimum price in 2013 was Euro 0,9996, the maximum price in 2013 was Euro 1,7237 and the average price was Euro 1,3023. In relation to the shareholding of the company, Invesco Limited, in July 2013 and subsequent to the purchase of treasury shares from Elica, declared to indirectly hold 2.735% of the share capital of the company.

The Board of Directors, in the meetings of February 14, 2013 and February 14, 2013, noting the share price in the periods preceding the respective meetings, decided not to propose to the Shareholders’ Meeting changes to the By-laws in relation to the percentages established for the exercise of the shares and of the protection of minority shareholders.

Manner for electing Corporate Boards

According to the provisions of the current By-Laws, the appointment of the Board of Directors and the Board of Statutory Auditors is carried out through the voting of slates, in accordance respectively with Articles 16 and 24 of the by-law. These Articles were amended in the Shareholders’ AGM of April 24, 2013 in order to provide for a mechanism which ensures gender equilibrium in accordance with current legislation.20

Only shareholders who individually or collectively hold at least 2.5% of the share capital have the right to present slates or a differing minimum percentage provided for or allowed by regulations.

For the inclusion of the Directors to be elected, consideration is not taken of the slates which have not obtained at least half of the votes required for the presentation of the slates. All those entitled to vote shall vote for only one slate.

Directors must have the requisites of eligibility, professionalism and independence provided by law and the other applicable directives.

Statutory Auditors must also have the requisites of eligibility, professionalism and independence provided by law and the other applicable directives. In particular, in relation to the professionalism requirement covered by Article 1 of Justice Ministerial Decree of March 30, 2000, No. 162, the following fields are deemed to be closely related to the company’s activities: that relating to commercial or tax law, the economy and corporate finance, the manufacturing and design sector, as well as the activities listed in Article 2 of the by-laws, to which reference should be made.

Except in the situation of ineligibility established by law, no person who covers offices of statutory auditor in five or more other companies listed on regulated markets may fulfil the role of statutory auditor and if nominated must vacate the office, with exclusion of the subsidiary companies as well as the parent companies and the companies controlled by such, or anyone who covers offices of direction and control in a number higher than that provided by law and the regulations in force.

The presentation of slates for the appointment of the Board of Directors will occur in the manner established by, and in compliance with, Article 16 of the By-laws, to which reference should be made. The presentation of slates for the appointment of the Board of Statutory Auditors will occur in the manner established by, and in compliance with, Article 24 of the By-laws, to which reference should be made.

In relation to the appointment of the Board of Statutory Auditors, in the case in which

20 Per maggiori informazioni sulle modifiche intervenute nello Statuto sociale si rinvia alla Relazione Illustrativa degli Amministratori all’Assemblea dei Soci convocata per il 24 aprile 2013, in materia di modifiche statutarie, consultabile sul sito internet della Società.

21 Si precisa che la percentuale indicata coincide con la quota di partecipazione determinata da Consob ai sensi dell’art. 144-quater del Regolamento Emittenti.


twenty-five days prior to the Shareholders’ Meeting only one slate is presented, or only slates related to it are presented, in accordance with Article 144 sexies, paragraph five of the Issuers’ Regulations, slates may be presented up until the third subsequent day to this date or any other date stipulated by the applicable regulation. In this case, the percentage threshold established for the presentation of the slate is reduced by half (1.25% of the share capital).

The slates presented that do not comply in full with the By-laws shall be considered as not presented.

The Company assures that the shareholders are provided adequate information on the profile of the candidates for the offices of director and statutory auditor in the manner set out in the above stated Articles to which reference is made.

With reference to the method of election of the Board of Directors through the “voting of slates”, the By-Laws provide that:

a. from the slate which obtained the highest number of votes (hereafter the “Majority Slate”) all of the members of the Board of Directors are elected except one, as established by the Shareholders’ Meeting, according to the progressive order of the slate;

b. from the slate which obtained the second highest number of votes (hereafter the “Minority Slate”), which is not connected in any way, even indirectly, with the shareholders who have presented or voted on the Majority Slate, the first candidate listed is elected to the Board of Directors.

If, with the candidates elected through the manner set out above, an adequate number of independent Directors is not be elected, however not lower than the amount provided by law, or the provision concerning gender balance (including the rounding up in the case of a fraction of the number of Directors in application of the law), the non-independent candidate of the over-represented gender elected as last in progressive order of the Majority Slate will be replaced by the first independent candidate of the other gender according to the progressive ordering not elected in the same Majority Slate.

In the case in which the Majority Slate no longer presents non-elected candidates with the necessary requirements, or in the case in which the Majority Slate does not contain a sufficient number of candidates to form the Board in accordance with that established by the Shareholders’ Meeting, the meeting proceeds with their replacement/supplementation by statutory majority.

The candidate listed in first position on the Majority Slate is elected as Chairman of Board of Directors.Should two or more slates receive the same number of votes, a second vote of the Shareholders’ Meeting is taken, with only those tied taking part.In the case in which only one slate is presented or voted upon, or where only one slate has received at least half of the required votes for presentation, all Directors will be elected from the slate, in compliance with the provisions concerning the composition of the Board of Directors.

Where no slate is presented, the Shareholders’ AGM votes by statutory majority without following the above stated procedure, however in such a manner that the applicable regulations concerning the composition of the Board of Directors are complied with.In relation to the appointment of the Board of Statutory Auditors, considering also


compliance with the applicable regulations concerning gender equality (including rounding up where necessary in relation to the under-represented gender), the following is applied:

1. from the slate which obtained the highest number of votes in the shareholders' meeting (hereafter the “Majority Slate”), based on the progressive order on the slate, 2 standing members and 1 alternate member are elected;

2. from the slate which obtained the second highest number of votes (hereafter the “Minority Slate") and which, in accordance with current regulations, was presented and voted upon by shareholders who are not connected in any way, even indirectly, with the shareholders who have presented or voted on the Majority Slate, based on the progressive order listed on the slate, one statutory auditor and one alternate auditor is elected.

The Chairman of the Board of Statutory Auditors shall be the first candidate on the Minority Slate.In the case of a tie in the number of votes between two or more slates, the eldest candidates shall be deemed elected.

If the ballot does not result in compliance with the applicable legal and regulatory provisions in relation to gender equality (including rounding up where necessary in relation to the under-represented gender), the elected Statutory Auditor candidate appearing last on the Majority Slate of the over-represented gender is excluded and will be replaced by the next candidate from the same slate belonging to the other gender.

In the case in which the Majority Slate no longer presents non-elected candidates with the necessary requirements or in the case in which the Majority Slate does not contain a sufficient number of candidates to form the Board of Statutory Auditors, the Shareholders’AGM proceeds with their replacement/supplementation by statutory majority.

In the case of the replacement of a Statutory Auditor, the alternate auditor from the same slate joins the Board, on condition that the applicable legal and regulatory provisions are complied with.

The previous provisions in relation to the election of statutory auditors are not applied to Shareholders’ Meeting for which only one slate is presented or voted upon or in the shareholders’ meetings which provides in accordance with law for the appointment of statutory auditors and/or alternate auditors necessary to complete the Board of Statutory Auditors following replacement or resignation. In this case, the Shareholders’ Meeting votes by majority.

The Board of Directors and the Board of Statutory Auditors were appointed before the entry into force of Law 120/2011 concerning gender equality and this regulation will therefore be applied for the first time on the next renewal on the Corporate Boards, scheduled for the Shareholders’ AGM for the approval of 2014 Annual Accounts.

The By-Laws are available on the website www.elicagroup.com, Investor Relation/Corporate Governance section (and/or http://corporation.elica.com Corporate Governance section), the Borsa Italiana S.p.A. website and at the registered offices of the company.


Changes since year-end

The text of the present Report was updated, in the case of individual paragraphs, with the information relating to the changes between December 31, 2013 and March 21, 2014, date of approval.

Elica S.p.A.The Chairman of the Board of Directors


TABLE 1 INFORMATION ON THE SHARE CAPITAL

Share Capital structure

No. of shares

% share capital Listed/non-listed Rights & obligations

Ordinary shares 63.322.800 100% Listed on the MTA Star Voting rights at ord/extraord meeting, dividends and payment on liquidation

Shares with limited voting rights

Shares with no voting rights


Significant holdings

Shareholder Direct shareholder % of ordinary share capital

% of voting share capital

PIERALISI GIANNA FAN S.r.l. 52.809% 52.809%

PIERALISI GIANNA S.A.F.E. S.A.P.A. DEL CAV. IGINO PIERALISI

0.184% 0.184%

PIERALISI GIANNA PIERALISI GIANNA 0.082% 0.082%

ELICA SPA ELICA SPA 2.014% 2.014%

FIRST CAPITAL SPA FIRST CAPITAL SPA 3.276% 3.276%

WHIRLPOOL CORPORATION WHIRLPOOL EUROPE Srl 12.568% 12.568%

INVESCO LTD INVESCO ASSET MANAGEMENT DUBLIN

1.231% 1.231%

INVESCO LTD INVESCO CANADA LTD 0.091% 0.091%

INVESCO LTD INVESCO FUND MANAGERS LIMITED

0.957% 0.957%

INVESCO LTD INVESCO ASSET MANAGEMENT LIMITED

0.456% 0.456%


TABLE 2 STRUCTURE OF THE BOARD OF DIRECTORS AND OF THE COMMITTEES

Board of Directors

Name Place and date of birth

Office In office since 22 No. of other offices(*)

Exec. Indep. as per Code / Ind. CFA

Francesco Casoli Senigallia (AN) 1961/06/05

Chairman of the Board of Directors

April 27, 2012 3/1 yes no

Giuseppe Perucchetti (**) Varese 1958/10/30

Chief Executive Officer

April 27, 2012 Director; September 30, 2012, CEO

1/- yes no

Gianna Pieralisi Monsano (AN) 1934/12/12

Executive Director April 27, 2012 3/- yes no

Gennaro Pieralisi Monsano (AN) 1938/02/14

Director April 27, 2012 13/8 no no

Andrea Sasso (***) Rome, 1965/08/24

Director April 27, 2012 3/2 no no

Stefano Romiti (****) Rome, 1957/11/17

Director April 27, 2012 1/- no yes/yes

Elena Magri Brescia 1946/07/19

Director April 27, 2012 1/1 no yes/yes

Evasio Novarese Omegna (VB)1947/08/25

Director April 24, 2013 - no yes/yes

(*) includes the other positions held in finance companies not registered as per Articles 106 and 107 of Legislative Decree 385/93 – Banking Act/ No. offices held in these companies excluded. For further information, reference should be made to the list at in the section “maximum number of offices held in other companies”

(**) Giuseppe Perucchetti was an Independent Director until September 13, 2012, the date on which, following the revocation of powers by Andrea Sasso, he was appointed as Chief Executive Officer of the Company.

(***) Andrea Sasso was Chief Executive Officer of the Company until September 13, 2012, date of revocation of powers. For further information, see the Press Release of September 13, 2012.

(****) Lead Independent Director.22 The data refers to the most recent appointment. For years of service reference should be made to the Directors CV’s.


Attendance of the Directors at Board meetings and on the Committees

Office Name C.d.A. C.C.I. C.R.

% member % member %

Chairman Francesco Casoli 89

Chief Executive Officer Giuseppe Perucchetti 100

Executive Director Gianna Pieralisi 89

Director Gennaro Pieralisi 89 X 100 X 100

Director Andrea Sasso 89

Director Elena Magri 89 X 100 X 100

Director Stefano Romiti 100 X 100 X 100

Director (*) Evasio Novarese 100

Number of meetings 9 3 3

(*) The percentage attendance concerns the period of the respective office (from April 24, 2013) and not the total number of meetings held in 2013.


TABLE 3 STRUCTURE OF THE BOARD OF STATUTORY AUDITORS

Board of Statutory Auditors

Quorum required for the presentation of slates of latest appointment: 2.5% reduced then to 1.25%.

Number of meetings held in the year: 8.

Average duration of the meeting: 2 hours.

Number of meetings of the Board of Statutory Auditors programmed for the current financial year: 9.

Of which already held: 3.

Office Name In office from

In office until

Slate M/m (*)

Indepen- dence as per Code

(%) (**) No. of other offices (***)

Chairman Corrado Mariotti April 27, 2012 Approv. 2014 FS

m Yes 100% 5

Statutory Auditor

Stefano Marasca April 27, 2012 Approv. 2014 FS

M Yes 87.5% 1

Statutory Auditor

Gilberto Casali April 27, 2012 Approv. 2014 FS

M Yes 100% 2

Alternate Auditor

Franco Borioni April 27, 2012 Approv. 2014 FS

M Yes 0% 5

Alternate Auditor

Daniele Capecci April 27, 2012 Approv. 2014 FS

m Yes 0% 3

(*) In this column M/m is indicated according to whether the director was elected by the majority (M) or minority (m) slate.

(**) In this column the attendance percentage of the statutory auditors at the meetings of the Board is indicated (No. of attendances/No. of meetings carried out during the effective period of office of the statutory auditor).

(***) This column indicates the number of offices of director or statutory auditor in accordance with Article 148 bis of the CFA. The complete list of offices held is published by Consob on its website pursuant to Article 144- quinquiesdecies of the Consob Issuers’ Regulations.


ATTACHMENT 1

Extract from the shareholder agreements communicated to Consob in accordance with Article 122 of legislative decree No. 58 of February 24, 1998

ELICA SPA

› FAN S.r.l., a company incorporated under Italian Law, with registered offices in Rome, Via Parigi 11, Italy, enrolled in the Rome Company Registration Office at No. 10379911000 (“FAN”);

and

› Whirlpool Europe S.r.l., an Italian incorporated company, registered office in Comerio (VA), Viale Guido Borghi No. 27, registered at the Company’s Register Office of Varese, No. 01534610124 (“Whirlpool”);

(FAN and Whirlpool hereafter are referred to as individually the “Party” and, collectively, the “Parties”).

Given that

a. on December 10, 2007, FAN and Whirlpool signed an investment contract and shareholder pact (the “Shareholders Pact” or “Pact”) concerning Elica S.p.A. (the “Company” or “Elica”), which provides for, inter alia, a number of rules concerning the governance of the Company and the circulation of the Shares held by the Parties;

b. on March 8, 2010, Whirlpool and FAN signed an agreement relating to some provisions of the Shareholder Agreement (the “Supplementary Agreement”);

c. c. on December 18, 2010, as neither Party had communicated to the other their opposition to the renewal of the Shareholder Pact, the conditions for the renewal of the Pact were satisfied and the Parties renewed the Shareholder Pact without any amendments;

communicates that

on its conclusion on December 18, 2013 the Parties signed an agreement (the “Agreement”) which renewed, for the duration specified at subsequent point 4, the Shareholder Agreement concerning Elica, introducing a number of supplementations and amendments.


The new provisions contained in the Agreement are summarised below.

1. COMPANY WHOSE INSTRUMENTS ARE SUBJECT TO THE AGREEMENT

Elica S.p.A., registered office in Fabriano (AN), Via Dante Alighieri n. 288, Company’s Register Office Ancona No. 00096570429, share capital Euro 12,664,560.

2. FINANCIAL INSTRUMENTS SUBJECT TO THE AGREEMENT AND RELATIVE PERCENTAGE OF THE SHARE CAPITAL

The agreement concerns the shareholdings in the Company as reported below, comprising the contained number of investments held from time to time by each of the Parties. The Parties did not undertake an obligation to introduce further actions to be completed during the validity of the Agreement.

The Agreement has no impact on the control of the Company which, pursuant to Article 93 of the Consolidated Finance Act, is indirectly held by Ms. Gianna Pieralisi.

Shareholder Number of shares conferred

% of shares compared to the total number of shares conferred

% of shares conferred of total share capital

FAN 33,440,445 84.079% 52.809%

Whirlpool 6,332,280 15.921% 10.000%

Total 39,772,725 100% 62.809%


3. CONTENT OF THE AGREEMENT

The Agreement is outlined below.

3.1 GOVERNANCE

The agreement provides for the following governance terms.

3.1.1 FAN will ensure that for the duration of the Agreement, one member of the Board of Directors of the Company is nominated on the recommendation of Whirlpool, subject to this latter being a holder of at least 5% of the share capital of the Company. Where the Agreement is terminated or Whirlpool has a holding lower than 5% of the share capital of the Company (except as a consequence of a Dilution or as a consequence of a breach of the Agreement by FAN), Whirlpool will request the designated Director to resign from office. Dilution is intended as the dilution of the investment by Whirlpool deriving from (i) any issue of Elica shares or financial instruments where Whirlppol does not have an option right or (ii) mergers or any other operations carried out by the Company after the renewal of the Agreement. In the case of the appointment of a new Board of Directors during the Agreement, FAN will present a single slate of candidates, which will include the Director designated by Whirlpool.

3.1.2 Without the approval of FAN, the designated Director of Whirlpool may not be an employee, a director or an executive of Whirlpool or a “Related Party” (intended, with reference to each Party, as a party which directly or indirectly controls, is controlled by or is subject to common control with this Party).

3.1.3 Where and until such time that Whirlpool has a shareholding in Elica of at least 10%, the resolutions of the Shareholder Meetings or of the Board of Directors relating to:

a. any issue of shares or other financial instruments, in which Whirlpool does not have the rights option, will be adopted with the favourable vote respectively of Whirlpool or of the Director designated by Whirlpool; and

b. distribution of reserves or other provisions or assets, spin-offs, reduction of share capital (except in the case of the obligatory reduction of the share capital pursuant to Article 2446, second paragraph, and Article 2447 of the Civil Code) or any other resolution of the Shareholders that results in a reduction in the shareholders’ equity of the Company under Euro 126,000,000 will be adopted with the favourable vote of Whirlpool or of the Director designated by Whirlpool, whose vote may not be unreasonably declined.


3.2 LIMITS TO THE TRANSFER OF SHARES

The provisions of the Shareholder Agreement on the transfer of shares are outlined below.

3.2.1 Non transfer obligations

For the entire duration of the Agreement FAN will not transfer any shares conferred to the Agreement to any third parties involved vertically or horizontally in the production, development, marketing or sales of products of water purification, white electrical goods, home appliances, air-conditioning systems and compressors for fridges and air conditioning systems (a “Competitor”) nor vote in favour of the issue of Elica shares or financial instruments in favour of a Competitor. FAN will ensure that this clause is complied with also in relation to any share or financial instrument held by the Company or Related Parties to FAN.

3.2.2 Transfers permitted

As an exception to any other provisions of the Agreement, Whirlpool and FAN may freely transfer the Elica Shares or any other financial instrument in which, from time to time, they hold/acquire ownership in the following cases:

a. transfer from FAN (or its successors if permitted by the Agreement) to Fintrack S.p.A. or Ms. Gianna Pieralisi, Mr. Francesco Casoli and Ms. Cristina Casoli, or their spouses or relatives (as defined by Articles 74 and 76 of the Civil Code) or to a company wholly-owned or controlled by one of these parties;

b. transfer from Whirlpool to a Related Party of Whirlpool Corporation or by FAN to a Related Party of FAN, provided that such Related Party of FAN is not a Competitor of Whirlpool or has a holding in a Competitor of Whirlpool.

In each case the buyer must adhere to the Agreement and the seller will ensure that the buyer remains a Related Party and will remain fully committed to the seller.

The Parties agreed also that the above-stated provisions apply also to any share or financial instrument held by any related party of FAN, including Messrs. Gianna Pieralisi, Francesco Casoli and Cristina Casoli.

3.2.3 Pre-emptive Right

Where one of the Parties wishes to transfer, all or part, of the Elica shares or financial instruments it holds during the Agreement, in favour of any other person or entity, the following procedures are applied:

a. where one of the Parties wishes to transfer shares or other Elica financial instruments, they will communicate their intention in writing (the “Offer”) to the other Party. During a period not beyond 30 days from the reception of the Offer (the “Pre-exemption Period”), the other Party will have the right to acquire all (and not just some) of the Elica shares or financial instruments described in the Offer at the same terms and conditions within 30 working days from the reception of the Offer;


b. where the Offer does not contain a cash sum, the Parties may jointly nominate an investment bank of international standing within 10 days from the Pre-emption Period in order to determine the value of the Elica shares or the financial instruments and the corresponding consideration in cash. The Parties agreed that the above-stated provisions apply also to:

· the Elica shares and financial instruments held by Fintrack and the related parties of FAN and

· each transfer of the majority of the shares (or rights on these) issued by FAN or by a party directly or indirectly controlled by FAN; in the case in which the transfer of the majority of the shares issued by these parties is made through several transfers of minority holdings, FAN will transfer on the request of Whirlpool all the Elica shares held by FAN at that date at the price determined in accordance with the terms of paragraph 3.2.3(b).

3.3 NON COMPETITION CLAUSE

Except where otherwise stated in the supply agreement signed on December 18, 2013 between Whirlpool Corporation and Elica (“OEM Supply Agreement”) or in any other agreements between the Parties, FAN, also on behalf of its parent company Fintrack S.p.A. and Ms. Gianna Pieralisi, Mr. Francesco Casoli and Ms. Cristina Casoli, will ensure that, until any party among FAN, Fintrack S.p.A. and Ms. Gianna Pieralisi, Mr. Francesco Casoli and Ms. Cristina Casoli (the “Non-Competitive Party”) holds directly or indirectly, individually or together with third parties, Elica shares or financial instruments or rights from these or relating to these, up to the first date between (i) the expiry of the Agreement and (ii) 18 months after the date in which the Non-Competitive Party will cease to hold, directly or indirectly, Shares or such holdings or rights, this Non-Competitive Party may not:

i. undertake or make, directly or indirectly, on its own behalf or on behalf of third parties, in any territory as further specified in the Agreement (the “Territory”), any commercial or entrepreneurial operation in the production, research and development, marketing, distribution and sale of kitchen hoods (the “Competitive Activity”);

ii. hold, directly or indirectly, any interest, participation or affiliation, on its own behalf or of other parties or entities, in the Territory and in relation to the Competitive Activity, or be (A) a shareholder, lender or investor, which exercises the control or significant influence on the operations or (B) a shareholder or investor that holds (or has related voting rights or equity rights) more than 10% of any non-listed category of securities of, or more than 2% of the listed securities of, any party that undertakes or makes any commercial or entrepreneurial operations described in paragraph (i) above.


4. DURATION AND RENEWAL OF THE AGREEMENT

4.1. The agreement will remain in force until the first of (i) December 18, 2016 and (ii) the date in which Whirlpool holds less than 5% of the share capital of the Company (except in the case of a Dilution or as a consequence of the breach of the Agreement by FAN).

4.2. The Parties declare from the present moment, where the Agreement expires, the OEM Supplier Agreement is still effective and Whirlpool holds an investment of at least 10% in the share capital of Elica (not considering any Dilution or violation of the Agreement by FAN), they intend to renew the Agreement without any amendments for a further period of two years.

5. TYPE OF AGREEMENT

The Agreement is made in accordance with Article 122 of the Consolidated Finance Act and, specifically, first paragraph and fifth paragraph, letters a), b) and c) of this legislation.

6. FILING OF THE AGREEMENT

The Agreement through which the Parties extended the validity and efficacy of the Shareholder Agreement, amending and supplementing it, is subject to Consob communications and was filed at the Ancona Companies Registration Office on December 19, 2013.


7. RESOLUTION, WITHDRAWAL AND PENALTY CLAUSES

7.1 RIGHT OF RESOLUTION

a. Where Whirlpool or FAN violates or does not comply with some essential clauses of the Agreement (each a “Breach”), the non-defaulting party will have the right to bring the Shareholder Agreement to immediate dissolution through communication to the defaulting party pursuant to Article 1456 of the Civil Code.

b. In the case of advanced dissolution of the OEM Supply Agreement for a breach by Elica of the OEM supply contract (each a “Elica Dissolution Event”), Whirlpool may withdraw from the Agreement with immediate effect through written communication to FAN.

c. In the case of (i) advanced dissolution of the OEM Supply Agreement for a breach by Whirlpool or (ii) proof of serious breach of certain essential clauses of the OEM Supply Agreement (each a “Dissolution Event”), FAN may withdraw from the Agreement with immediate effect through written communication to Whirlpool.

7.2 EXIT PROCEDURE BY WHIRLPOOL

a. In the case of the conclusion of the Agreement following non-fulfillment by FAN, (“Whirlpool Exit Event”), Whirlpool will have the unconditional right to sell on the market, in full or in part, the Elica shares held at that moment.

b. Where there is a Whirlpool Exit Event, Whirlpool, within 30 working days, must provide written communication (the “Exit Declaration”) to FAN specifying the Whirlpool Exit Event and indicating (i) the calculation of the weighted average price per share (the “Average Purchase Price”) and (ii) the weighted average market price per share of the last 30 days preceding the Exit Declaration (the “Elica Weighted Price”). In this case FAN, with written communication to Whirlpool within 10 working days from the Exit Declaration, will have the right to buy from Whirlpool all shares held by Whirlpool at the Average Purchase Price within 10 working days of the above-mentioned communication. Where FAN decides not to buy these Shares at the Average Purchase Price, or subsequently does not make the payment within the agreed terms, Whirlpool will have the right to obtain from FAN within 20 working days of the Exit Declaration an


amount equivalent to the difference between the Average Purchase Price (if higher than the Elica Weighted Price) and the Elica Weighted Price, multiplied by the number of shares held.

7.3 EXIT PROCEDURE BY FAN

a. In the case of resolution of the Agreement following a Breach by Whirlpool ( “FAN Exit Event”), FAN will have the unconditional right to buy, all or part, of the shares held at that moment by Whirlpool (the “FAN Exit Shares”)..

b. Where there is a FAN Exit Event, within 30 working days of being aware of the event, FAN may inform Whirlpool through written communication and Whirlpool will be obliged to sell to FAN the Exit Shares of FAN at the Average Purchase Price within 20 working days of the reception of the above-mentioned communication.

8. OTHER INFORMATION

The Agreement does not provide for a committee to oversee its functioning.

The Agreement does not contain obligations to file the Shares pursuant to the Agreement.

December 21, 2013


ATTACHMENT 2

Description of the principal characteristics of the risk management and internal control system in place in relation to financial disclosure

Introduction

The Internal Control and Risk Management System in relation to Financial Disclosure should not be considered separately. They are in fact constituent elements of the same Control System, described in the previous Chapter 11.Employing a single and integrated approach the Company therefore considered it correct to base the guidelines for the design, implementation and maintenance of the Internal Control System on the best international practices, which currently stem from the study conducted by the Committee of Sponsoring Organizations of the Threadway Commission (CoSO Report), published for the first time in 1992 and indicated as best practice by the Sarbanes-Oxley Act of 2002. In addition to this, the development and implementation of the control procedures were conducted taking account of the Control Objectives for IT and related technology (COBIT Framework) and the Self-Governance Code of the Committee for Corporate Governance of Borsa Italiana SpA, of the Confindustria “Guidelines”, of the “Ethics Code” and further regulations and rules in force, as well as national and international standards and guidelines concerning Internal Control Systems in general, and specifically concerning Financial Disclosure Control Systems.

With specific regard to the administrative-accounting processes, the Internal Control System, as described above, supports the basis of the declaration which the Executive Responsible for the Preparation of the Corporate Accounting Documents must release in accordance with Article 154-bis of Legislative Decree 58/98.

The structuring and organisation of administrative-accounting processes, in continuous development, is focused on achieving maximum synergy between achieving the compliance objectives and the optimisation objectives, through actions focused on formalising the processes and their efficiency, the identification and the evaluation of risks and the design of mitigating controls according to a structured methodology, with an overall view to achieving maturation of the entire System, extendable to the Group in the medium term.


Phases of risk management and internal control in place in relation to Financial Disclosure

The System of Financial Disclosure Control of Elica is based on the phases described below:

i. Definition of the perimeter of analysis

The identification of the scope of the entity and of the significant processes in terms of potential impact on Financial Disclosure is conducted, within the Group, in order to guarantee the objectives of reliability, accuracy, trustworthiness and timeliness of the financial-administrative data and, more in general, to represent in a true and correct manner the financial situation of the Group.

For this purpose, utilising internal resources, the Company submits the business to a valuation process (scoping activity) through using the following methodology:

· carrying out of a quantitative analysis whereby, applying the legal limits in relation to the significance of the financial statements of the individual legal entities in relation to the overall consolidation, permits the isolation of Group entities and, therein, the individual financial statement items considered significant for the exceeding of economic values. In addition to this, thanks to the use of a specific reconciliation matrix between the accounts plan and the administrative-accounting processes mapped and the analysis and tests of the corresponding corporate processes.

· carrying out of a qualitative analysis which, taking account of the results from the previous quantitative analysis, allows an evaluation of the significance of the individual entities within the development of business processes and their level of complexity, determining the inclusion or exclusion from the analysis also in regard to the level of specific risk connected to the individual legal entity and within this, to the specific processes.

ii. Evaluation of the design of the Control System

The administrative-accounting processes, identified as above, are documented through utilising structured instruments to improve operations, allowing analysis and maintenance and an exhaustive description of the risks and the controls in place (Risk and Control Matrix o RCM). These instruments allow the documentation, the evaluation of risks, the evaluation of the design of the Financial Disclosure Control System against the risks identified and allow periodic verifications focused on verifying the effective operation of the Control System. This mapping process is subject to ongoing analysis and evaluation to ensure the responsiveness to the reality and the strength of the design for risk coverage.

iii. Evaluation of the operation of the Control System

The controls, as identified by the joint development of the preceding phases, are submitted to operating verifications (testing), through activities focused on re-examination of their design and verification of their effective implementation in the time period taken into consideration, or carried out effectively in conformity with the design. This activity, scheduled throughout the year, consists of an initial walkthrough of the audit and a subsequent documented analysis concerning the items subject to operating process verification (e.g. purchases, sales, personnel and inventory). A further method of control, carried out in the


year, concerns a check on the rectification of the critical issues emerging from the analysis conducted in previous years (follow up).

The results from the previous activities (testing and follow-up) is compiled into a managerial report which, in the case of deficiencies in the design and/or the identified controls, sets out a remediation plan, which is sent to the Executive responsible and based on which the reliability and trustworthiness of the parent company and consolidated financial statements is established.

Roles and Functions involved

The Risk and Control Management System, in relation to the Financial Disclosure of Elica is overseen by the Executive Responsible who draws up adequate administrative and accounting procedures for the preparation of the parent company and consolidated financial statements, in addition to all communications of a financial nature.

The Executive Responsible declares upon the adequacy and the effective application of these procedures with regard to the half-year and annual financial statements, both for the parent company and for the group.

In carrying out the duties assigned by the Board of Directors, the Executive Responsible:

› avails of the contribution of the Internal Auditor who provides support with regard to the mapping of processes activity and concerning controls, as described above;

› is supported by the corporate boards of the subsidiary legal entities which, on the occasion of the half-year and annual financial statements, declare the completeness and accuracy of the financial information provided by them;

› establishes a relationship of complete sharing and transparency with the Internal Control and Risk Management Committee and the Board of Statutory Auditors sharing, at least half-yearly, the evaluations on the activities carried out and the actions to be undertaken.

Elica S.p.A.UFFICI CORPORATE SEDE LEGALE

Via Dante, 288

60044 Fabriano (AN), Italy

P. +39 0732 6101

F. +39 0732 610249

[email protected] www.elica.com www.elicagroup.com e/o (http://corporation.elica.com)

INVESTOR RELATIONSP. +39 0732 610 727/4084

F. +39 0732 610 390

[email protected]

UFFICIO STAMPA E RELAZIONI ISTITUZIONALI

P: +39 0732 610 315

F: +39 0732 610 289

CONCEPT & DESIGN tonidigrigio.it

COORDINAMENTO PROGETTO

Investor Relations Elica

Laura Giovanetti

Marco Brancaccio

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