REPORT and ACCOUNTS 2010 - Cembre

C o s t r u z i o n i E l e t t r o m e c c a n i c h e B r e s c i a n eREPORT and ACCOUNTS 2010

R E P O R T A N D A C C O U N T S 2 0 1 0CONTENTSGroup Structure12Report on Operations for the Financial Year 2010- Attachment 1: Consolidated Income Statement 33- Attachment 2: Company shares held by Directors and Statutory Auditors 34- Attachment 3: Corporate Boards 3519Consolidated Financial Statements at December 31, 2010- Consolidated Statement of Financial Position 38- Consolidated Statement of Comprehensive Income 39- Consolidated Statement of Cash Flows 40- Statement of Changes in the Consolidated Shareholders' Equity 42- Notes to the Consolidated Financial Statements 43Auditing Report on Consolidated Financial Statements 72Report of the Board of Statutory Auditors on Consolidated Financial Statements 74Certification pursuant to article 81-ter of the regulation issued by the Italian marketregulatory body (CONSOB) no. 11971 of May 14, 1999 and subsequent integrationsand updatings. 7637Cembre SpA Financial Statements at December 31, 2010- Statement of Financial Position7778- Statement of Comprehensive Income 79- Statement of Cash Flows 80- Statement of Changes in the Shareholders' Equity 82- Notes to the Financial Statements 83- Attachment 1: Comparative Income Statement 110- Attachment 2: Directors and Statutory Auditors’ compensation 111- Attachment 3: Summary financial data of consolidated subsidiaries 112- Attachment 4: Compensation for auditing services and other services 113Auditing Report on Cembre S.p.A. Financial Statements 114Report of the Board of Statutory Auditors on Cembre S.p.A. Financial Statements 116Certification pursuant to article 81-ter of the regulation issued by the Italian marketregulatory body (CONSOB) no. 11971 of May 14, 1999 and subsequent integrationsand updatings. 125Abstract of Shareholders General Meeting resolution1281

headquartersCembre S.p.A.Group headquarters located in Brescia, Italy2

Cembre is today the leading Italianmanufacturer and one of the largestEuropean manufacturers of electric compressionconnectors and related installationtools.The company’s extensive know-howin the field of electricalconnectors, strong R&Dactivity and the continuousinnovation in manufacturingtechnologiesand product specifications,allow Cembre torespond quickly to theneeds of an increasinglydemanding marketoffering high-qualityproducts that are reliable,durable and safe.The wide product range, the capillary andefficient sales network and the strong focuson customer needs represent the strengthsof the Cembre Group and ensure a strongcompetitive advantage in a continu-ously evolving world market.3

ProductsPRODUCT RANGECembre designs and manufacturesa wide range of electricalconnectors andtools for their lation.Cembre, in particular,has adopted andinstaldevelopeda ‘compression’connectionsystem thatenables it to exploitthe hardening properties of selected metals (copperand aluminium), whereby these metals acquiregreater strength and resistance when bent byforce, thereby guaranteeing the achievement ofbetter performances by these types of connectors thanwould have otherwise been obtained by more conventionalwelding and mechanical clamping (screwsand bolts) connection methods.4

Compression connectors are characterised by lowerelectrical resistance and by excellent quality electricalcontact. Installation tools used for compressingthe connectors and cutting the cables enablequick installation and the achievementof easy and safe optimalconnections.The range of tools includes,according to the application,mechanical, pneumatic, hydraulicand electrical tools.5

StrategySTRATEGIESThe Cembre Group is growingrapidly and investing strongly inthe development of its productrange and the consolidation ofits sales and distribution network,seeking to increase itspresence in the internationalmarkets.DEVELOPMENTOF THE PRODUCT RANGEThe new range of batterypoweredhydraulic stick toolsR&D activities focus primarily on the development of new products aimedat markets with the highest growth potential such as rail transport, civiland industrial equipment. Implementation of new European Union safetyregulations require the adoption of modern connection systems as thosemanufactured by Cembre Group. Constant attention devoted to trends indemand and the monitoring of customer satisfaction allowed Cembre todevelop solutions in line with an increasingly demanding market, stretchingthe use of own technologies to a growing number of applications.Image taken from an infraredthermal camera of a circuitsubjected to aging test6

Cembre Group’s expansion of product offer was achieved by launchingleading-edge technology products, including new battery poweredhydraulic tools, a new range of professional mechanical tools, electricallyinsulated hydraulic tools, linked cable terminals insulated with halogenfree material, drills for wooden rail-sleepers etc. Whole families of alreadyexisting products were moreover updated and improved to enhance userfriendliness and qualitative and performance standards.The wide knowledge of the sector and the strong presence on the territoryallowed Cembre to identify and understand the needs of the different localmarkets, adapting products to the specific requirements in terms of qualityimposed by safety regulations in the different countries in which it operates.WEB SITEThe Web site allows the company to interact with customers, providing anumber of services such as technical assistance, promotions, the presentationof new products and the possibility to liaise with wholesalers operatingin the territory.The sections"Investor Relations"and "Catalogue"in the internet sitewww.cembre.com1Internet7

StrengtheningINCREASE IN PRODUCTION CAPACITYCembre made signifi cant investments in the optimization of its manu-facturing activities and enlarging its production capacity at the Brescia,Birmingham and Bergamo facilities.In Brescia, Cembre have modern numerical control work centres as wellas other equipment guaranteeing high fl exibility and quality of the produc-tion. The Company has an automated warehouse and its own tinplatingdepartment which allows to reduce production time and costs, ensuring tightquality control.The strengthening of production capacity and effi ciency involved also theBirmingham plant, dedicated to the production of particular specifi c productlines for some markets.Battery-poweredhydraulic crimpingtoolsNewautomaticrail disc saw8

Certification ofthe Cembre GroupQuality andEnvironmentalManagementSystemENVIRONMENTCembre SpA has recently recognised the need to align itsEnvironmental Management System with the spirit and contentof UNI EN ISO 14001: 2004 as fundamental tofuture development.To this end the company undertook a wide-ranging reviewof all functions including development and design stages, material selection,usage and manufacturing processes.The resulting definition of operational procedures in line with these aims andprovisions has enabled Cembre SpA to achieve Environmental Certification,further highlighting the companies sensitive and careful approach to environmentalprotection.QUALITYCembre Quality System was first certified by LRQA in1990. Initially referring only to Manufacturing according toISO 9002:1987, certification was extended in 1992 tocover the Design provisions of ISO 9001:1987 norm.Nowadays the activities of the main premises in Brescia,the regional offices in Italy and subsidiary companies in GreatBritain, France, Spain, Germany and USA are governed by a single multi-site Quality System conforming to ISO 9001:2000 for the "Design, manu-facture and sales of electrical connectors and associated tools, cable acces-sories, marking systems, toolings and products for railway applications. Inhouse repair, refurbishment and calibration of toolings".This assures our customers of the homogenous high quality ofCembre products and services.Environment & QualityCertified EnvironmentalManagement SystemCertified QualityManagement System9

ManufacturingMANUFACTURINGCembre quickly developed after its creation in 1969, until it became theleading company in Italy, specialising in the manufacturing of electrical compressionconnectors and related installation tools, while gaining importantmarket shares elsewhere in Europe, where it is now recognised as the leadingcrimping tools manufacturer.Cembre Group’s growth has traditionally been driven by its ability tocontinually anticipate the evolution of the electrical connectors market,enabling it to develop new productswith the highest standards in quality, reliabilityand safety, as well as to improvethe performance of existing products.CNC MachineDepartment10

View ofinsulatedconnectorsdepartmentCembre is currently a group employing 548persons, with a turnover in 2010 amounting to€ 93,9 million.The parent company, Cembre S.p.A.,is based in Brescia where, on an area ofaproximately 115,000 square meters,are the Head Office, sales offices, technicaloffices, Research & Development,the automated warehouse, productionfacilities and test laboratories.WarehouseinteriorsDetails oftool assemblydepartment11

Group StructureGROUP STRUCTURECembre SpABrescia (Italy)Cembre LtdBirmingham (UK)Cembre S.a.r.l.Paris (France)Cembre España S.L.Madrid(Spain)BirminghamParisCembre ASStokke (Norway)Cembre GmbHMunich (Germany)Cembre Inc.Edison (USA)General Marking SrlBrescia (Italy)StokkeMunichBresciaBergamoMadridBarcelonaValenciaGroup CompaniesRegional OfficesMain distributors12

Marketing CompaniesProduction UnitsCembre S.p.A.Italy100%95%95%100%95%71% 100%Cembre LtdCembre SarlCembre España SLCembre ASCembre GmbHCembre IncGeneral Marking SrlUKFranceSpainNorwayGermanyUSAItaly5%5%5%29%Holdings situation at March 15, 2011The Cembre Group consists of eight companies. The parent company is based inBrescia and is the largest manufacturer of the Group. Other manufacturing companiesare the UK subsidiary, based in Birmingham, and Italian subsidiary General Marking,based in Brescia and with manufacturing facilities in Bergamo. The other five subsidiariesare all commercial companies and are based in Paris, Madrid, Stokke (Norway),Munich, and Edison (New Jersey, USA).Direct presence in important Western European countries allows the Group to effectivelyreach individual markets, establishing close contact with its customers and ensuringtimely and qualified technical and sales assistance.Cembre operates in Italy through a capillary distribution network, with offices and ownwarehouses in Milan, Padua, Bologna and Florence. Other regions in Italy are servedby agents trained to provide both technical and commercial assistance and by warehousesproviding fast deliveries.The sales network assists customers in the choice of the product and the maintenance oftools, optimizing efficiency and speed of delivery. It also informs management of markettrends, national standards and competitors.Cembre Group is present in the USA marketthrough Cembre Inc. located in Edison (New Jersey).EdisonGroup CompaniesMain distributors13

Cembre LtdCembre LtdBirminghamCembre Ltd is CembreGroup’s second largest manufacturingunit. Since its establishmentin 1986, it has enjoyed constantgrowth and presently benefits from agood positioning in the market.Cembre Ltd is located in a manufacturing centre on the north-eastern outskirtsof Birmingham, England’s second largest city, in the heart of the Midlands region,recognised for its high concentration of manufacturing industries, particularly inthe areas of steel and motor vehicles. It therefore provides Cembre with an excellentsource of highly trained labour skilled in the advanced mechanical technologiesfundamental to Cembre’s manufacturing needs. Its operations cover an areaof 8,800 m 2 , of which5,850 m 2 are occupiedby manufacturing facilitiesand office buildings.Cembre Ltd is primarilyfocused on servingthe specific needs of theUnited Kingdom market. In addition, its flexibility enables it tosupport other Group operations.14

Oelma Srl was acquired by Cembre in February 1999 andsubsequently merged into the parent company from January 1, 2002.Oelma’s product line consists of over 1,500 articles for industrialand civil applications.Cable glands withincreased safetylineOelmalinealinePolyamide, nickel platedbrass and stainless steelcable glands and accessoriesBrass terminalblock and cableclampsspiral15

General MarkingWarningand safetysigns“Industrial Marking Systems”General Marking srl wasrecently incorporated andis a wholly-owned subsidiaryof Cembre SpA. Thecompany is active in thesector of industrial marking,manufacturing cable markingequipment and productsfor the marking ofcables and electrical components.The company has itsregistered office in Brescia,has operating facilities inCalcinate (Bergamo) anda catalogue of over 12,000articles.Thermal transfer systemfor reel media printingSIGN stick-onsysThermal transfer printerfor identification and labellingdesigned and manufacturedby Cembre SpA.Pc-driven ink plotter markerprinting systemRINGcablesysManual cable marking systems16

DevelopmentC e m b r e S. p. A.Cembre has progressed and developedsteadily with the dedication and responsibleattitude of all the staff.We can look forward to the future withconfidence and commitment.Cembre GroupCembre SpA1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201098,495,893,290,688,085,482,880,277,675,072,469,867,264,662,059,456,854,251,649,146,543,941,338,736,233,631,028,425,823,220,718,115,512,910,37,75,20TURN OVER€ (millions)1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 199815,514,513,412,411,410,39,38,37,26,25,24,13,12,11,001999 2000 2001 2002 20032004 2005 2006 2007 2008 2009 2010CASH FLOW€ (millions)1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998550535520505490475460445430415400385370355340325310295280265250235220205190175160145130115100C e m b r e S. p. A.1999 20002001 2002 2003 2004 2005 2006 2007 2008 2009 2010GroupSTAFF(n°)1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010TURN OVER€ (millions)4,6 5,8 7,1 8,8 10,9 11,4 14,4 16,4 18 18,5 18,4 20,5 26,7 28,7 33,5 37,8 45 50,4 56 56,9 59,9 65,3 70 83,9 93,4 94,3 76 93,9EXPORT€ (millions)1,5 1,7 2,2 2,1 2,3 2,9 3,7 4,4 5,8 5,9 6,2 7,2 9,3 9,4 14,7 17,3 20,8 24 27,9 29,4 30,1 34 38,8 46,8 54,1 53,2 45,2 52,5% of turn over 32 28 30 23 20 24 25.7 26.8 32 32 33.7 34.8 35 32.7 44 45.6 46.2 47.7 49.8 51.7 50.3 52.1 55.4 55.8 58 56.4 59.5 55.9CASH FLOW€ (millions)0,6 0,8 1 1,4 1,8 1,7 2,2 2,4 2,6 2,3 2,5 2,8 4,5 4,1 5,8 5,5 7 7,5 7,9 7,2 7,5 8,6 10,3 12,5 15,2 13,9 9,7 14,1STAFF(N°)107 122 128 141 142 153 172 174 176 183 183 192 214 216 285 312 353 384 417 453 468 462 463 476 525 545 533 548QUOTED ON THE ITALIAN STOCK EXCHANGE17

Report on Operationsfor the Financial Year 2010

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SOperating ReviewReport on Operations for the Financial Year 2010In 2010 the Cembre Group posted a significant recovery from the downturn caused by the internationalfinancial crisis. In the year just ended sales of the Group grew strongly, recovering to the levelsrecorded prior to 2009. In addition, cost reduction measures introduced to counter the effect of thedownturn determined a sharp improvement in the overall profit margin, generating large benefits atthe pre-tax profit level.The financial structure of the Group improved further, reducing bank debt almost to zero and allowingto plan future investments that will enable Cembre and its subsidiaries to strengthen their marketposition and to improve service levels.Cembre closed 2010 reporting a 23.6% increase in consolidated turnover from €76 million in 2009to the current €93.9 million in the year just ended.The recovery affected all geographical areas in which the Group operates. More specifically, domesticsales increased by 34.7% to €41.4 million, and exports grew by 16.1% to €52.5 million.A total of 44.1% of Group sales in 2010 were represented by Italy (as compared with 40.5% in 2009),42.9% by the rest of Europe (47% in 2009), and the remaining 13% by the rest of the World (12.5%in 2009).Sales by geographical area:(€’000) 2010 2009 Change 2008 2007Italy 41,450 30,783 34.7% 41,100 39,286Rest of Europe 40,284 35,694 12.9% 42,249 43,316Rest of the World 12,200 9,507 28.3% 10,939 10,815Total 93,934 75,984 23.6% 94,288 93,417Revenues by Group company (net of intragroup sales):(€’000) 2010 2009 Change 2008 2007Parent company 53,955 40,427 33.5% 51,868 51,817Cembre Ltd. (UK) 11,845 10,626 11.5% 12,374 12,317Cembre S.a.r.l. (F) 6,407 6,224 2.9% 6,477 6,303Cembre España S.L. (E) 8,309 7,681 8.2% 11,518 11,499Cembre GmbH (D) 6,368 5,264 21.0% 5,358 4,839Cembre AS (NOR) 1,014 713 42.2% 762 775Cembre Inc. (USA) 5,712 4,736 20.6% 5,377 5,336General Marking S.r.l. (ITA) 324 313 3.5% 554 531Total 93,934 75,984 23.6% 94,288 93,41720

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SFigures for General Marking S.r.l. include only sales to third parties managed directly by the subsidiary.General Marking’s sales to other Group companies that distribute products in their respective marketsare not attributed to General Marking in the table above. Such sales grew by 44.2% from €1,940 thousandin 2009 to €2,797 thousand in the current year.In 2010, Group companies reported the following results, before the consolidation:SalesNet profit(€’000) 2010 2009 2010 2009Parent company 72,751 56,334 9,158 4,599Cembre Ltd. (UK) 13,356 11,807 883 887Cembre S.a.r.l. (F) 6,413 6,255 63 379Cembre España S.L. (E) 8,309 7,683 273 516Cembre GmbH (D) 6,390 5,319 364 255Cembre AS (NOR) 1,014 713 157 84Cembre Inc. (USA) 5,744 4,810 224 186General Marking S.r.l. (ITA) 3,121 2,253 747 278For a more direct evaluation of the effect of foreign exchange translation, we include below sales figuresof companies operating outside the euro area in the respective currency:Currency Sales Net profit(’000) 2010 2009 2010 2009Cembre Ltd. (UK) £ 11,457 10,519 758 791Cembre AS (NOR) NKR 8,115 6,226 1,257 734Cembre Inc (Usa) US$ 7,615 6,709 297 260To provide a better understanding of the Company’s financial performance for 2009, a ReclassifiedConsolidated Income Statement for the years ended December 31, 2010 and 2009 is enclosed as Attachment1.Consolidated gross operating profit amounted to €20,170 thousand, representing a 21.5 % marginon sales, up 50.4% on 2009 when it amounted to €13,412 thousand, representing a 17.7% margin onsales. Further evidence of the effectiveness of cost cutting measures introduced in 2009 is providedby the fact that costs as a percentage of sales declined from the previous year.Consolidated operating profit for 2010 amounted to €17,379 thousand, representing an 18.5% marginon sales, up 64.2% on €10,581 thousand in 2009, when it represented a 13.9% margin on sales.Consolidated profit before taxes for 2010 amounted to €17,436 thousand, representing an 18.6%margin on sales, up 64.8% on €10,580 thousand in 2009, when it represented a 13.9% margin on sales.Consolidated net profit for the year amounted to €11,340 thousand, representing a 12.1% margin onsales, up 64.7% on 2009, when it amounted to €6,887 thousand and represented a 9.1% margin onsales.The net financial position improved from a surplus of €5.3 million at December 31, 2009 to asurplus of €13.7 million at the end of December 2010.21

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SResults of the parent companyResults of the parent company for 2010 and 2009 are shown in the table below.(€’000)2010 % 2009 % ChangeSales 72,751 100 56,334 100 29.1%Gross operating profit 15,109 20.8 8,781 15.6 72.1%Operating profit 13,162 18.1 6,796 12.1 93.7%Pre-tax profit 13,908 19.1 7,112 12.6 95.5%Net profit 9,158 12.6 4,599 8.2 99.1%Sales revenues grew by 29.1% from €56,334 thousand in 2009 to €72,751 thousand in 2010. Domesticsales grew by 34.7%, while sales in other European countries posted a 16.9% increase, and sales inthe rest of the World a 38.9% increase.Sales by geographical area (€’000) 2010 2009 ChangeItaly 41,496 30,809 34.7%Rest of Europe 22,300 19,078 16.9%Rest of the World 8,955 6,447 38.9%Total 72,751 56,334 29.1%In 2010 Cembre S.p.A. received €635 thousand in dividends from UK subsidiary Cembre Ltd. andFrench subsidiary Cembre Sarl.Definition of alternative performance indicatorsIn compliance with Consob Communication DEM/6064293 dated July 28, 2007, below we definealternative performance indicators used in the present document to illustrate the financial and operatingperformance of the Group.Gross operating profit (EBITDA): defined as the difference between sales revenues and costs for materials,of services received, and the net balance of operating income and charges. It represents theprofit before depreciation, amortization and write-downs, financial flows and taxes.Operating profit (EBIT): defined as the difference between gross operating profit and the value ofdepreciation, amortization and write-downs. It represents the profit achieved before financial flowsand taxes.Net financial position: represents the algebraic sum of cash and cash equivalents, financial receivablesand current and non-current financial debt.22

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SReclassified Consolidated Statement of Financial Position(€’000) Dec. 31, 2010 Dec. 31, 2009Trade receivables, net 28,005 21,364Inventories 29,632 28,587Other non-financial assets 614 1,754Trade payables (11,435) (8,224)Other non-financial liabilities (8,192) (4,768)A) Net current assets 38,624 38,713Property, plant and equipment 36,440 35,071Intangible assets 554 620Prepaid taxes 1,754 1,757Other non-current assets 23 26B) Net non-current assets 38,771 37,474C) Non-current assets available for sale - -D) Employee termination indemnity 2,775 2,944E) Provisions for risks and charges 72 68F) Deferred taxes 2,471 2,452G) NET CAPITAL EMPLOYED (A+B+C-D-E-F) 72,077 70,723Sources of funds:H) Shareholders’ Equity 85,746 75,997Long-term financial debt 4 26Cash and short-term financial receivables (14,697) (8,901)Short-term financial debt 1,024 3,601I) Net debt (surplus) (13,669) (5,274)J) TOTAL SOURCES OF FUNDS (H+I) 72,077 70,72323

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SShareholders’ EquityConsolidation adjustments determined the following differences between the Financial Statements ofthe parent company at December 31, 2010 and the consolidated accounts at the same date:Shareholders’ Equity Net Profit(€’000) at Dec. 31, 2010Parent company’s financial statements 70,187 9,158Book value of consolidated companies 18,200 2,708Elimination of intra-group profits included in the value of inventories (*) (2,653) 146Currency translation differences from elimination of intragroup payablesand receivables (13) (24)German subsidiary product warranty provision reversal (*) 23 3Intragroup reconciliations 2 3Netting of intragroup dividends (**) - (654)Consolidated Financial Statements 85,746 11,340(*) Net of the related tax effect.(**) Includes currency translation differences amounting to €19 thousand.Capital expenditureIn 2010, capital expenditure on property, plant and equipment, gross of depreciation and disposals,amounted to €4 million, down from €5 million in 2009.In 2010 capital expenditure of the parent company included €0.4 million for improvements to buildings,and €1.6 million for the purchase and manufacture of new machinery and tools.Revaluation of property, plant and equipmentIn compliance with article 10 of Law 72/1983, a list of property, plant and equipment recorded in theBalance Sheet at December 31, 2010 and revalued in the year is provided below:(€) Law Law Law576/75 72/83 413/91TotalLand and buildings - 248,220 687,441 935,661Plantand machinery653 90,683 - 91,336Other assets 154 7,664 - 7,818Total 807 346,567 687,441 1,034,81524

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SMain risks and uncertaintiesRisks connected to the economic situationThe economic and financial situation of the Group is influenced by macroeconomic factors such aschanges in the Gross Domestic Product, consumer and business confidence, changes in interest ratesand the cost of raw materials.Financial year 2010 was characterized by a slight recovery of Gross Domestic Product, with signs ofoccasional growth in selected sectors of the economy, some of which posted strong growth and othersstill awaiting a recovery.In 2010 the price of raw materials continued to rise. Copper in particular, after rising 40% over itsvalue at the beginning of the year, reached in February record levels.8.000Andamento Copper price quotazione on the rame LME LME (€/ton) (€/ton)7.5007.0006.5006.0005.5005.0004.5004.000Jan-10Feb-10 Mar-10 Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11As of February 7, 2011Forecasts made by the International Monetary Fund and the European Central Bank point to a furthergrowth in turnover in the next months.The Group will exploit its solid financial position and strong liquidity to take advantage of opportunitiesin the market, though continuing to monitor carefully the performance of sectors in whichit operates and its commercial partners, to be in a position to react quickly to changing conditions,reviewing strategies according to needs.25

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SRisks connected with the marketThe Group protects its market position by pursuing ongoing innovation, the widening of the productrange, the launch of lower cost products and by introducing into production processes the mostadvanced methods and machinery, while implementing focused marketing policies with the help ofits foreign subsidiaries.Credit riskCembre and its subsidiaries have focused over time on a careful selection of their customers, managingprudently sales to customers that do not possess an adequate credit standing.The Group has accrued a provision for doubtful accounts and the management of litigation, whilethe review of customers has become more careful, with an ongoing monitoring of overdues and immediatecontact with problem customers.Exposure to credit risk relates exclusively to trade receivables.Liquidity riskThanks to its solid financial position, the Group is not currently subject to particular liquidity risk,even in case the cash flow generated by operations should decline drastically.Interest rate riskThe Group does not currently make systematic recourse to bank loans and is not therefore subject toconsistent risks connected with fluctuations in interest rates.Currency riskDespite its strong international presence, the Group does not have a significant exposure to currencyrisk, as it operates almost entirely in the euro area, the currency in which its trade transactions aremainly denominated.Exposure to currency risk is basically limited to sales in US dollars and British pounds, but the sizeof these transactions is not significant in influencing the overall performance of the Group or itsfinancial position.Integrity and reputation riskPossible illicit behaviour of employees, aimed at obtaining benefits for themselves and for the Group,can imply the risk of a loss of reputation and of sanctions against the Group.To prevent the risk of these occurrences and in line with Legislative Decree 231/2001, the parentcompany adopted an organizational, management and control model that identifies processes that aresubject to risk and establishes the conduct that the various persons involved are to keep in carryingout their tasks.To ensure that the model adopted becomes the basis of conduct in the operation of the company,employees were instructed through specific training sessions.The parent company constantly integrates and upgrades the model.Further information on main risks and uncertainties is contained in the notes.26

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SHandling of private informationAs provided by the Italian Civil Code with regard to the handling of private information, CembreS.p.A. (responsible for the handling of personal information) updated the Privacy Plan through itsDirector for the Handling of Private Information.Said document describes minimum security standards adopted by the Company to minimize the riskof destruction or loss, including accidental, of personal information, of unauthorized access or unwarrantedtreatment of the same or uses not consistent with the reason for the collection of personal data.Environmental managementCembre S.p.A. deemed it fundamental for its development to adopt an Environmental Managementsystem that covers in an integrated manner every aspect of its activities. Thanks to the setting ofbehavioural guidelines and of rigorous procedures, the Company obtained an Environmental Certificationunder standard UNI EN ISO 14001:2004 that singles out companies that are more sensitiveto environmental protection issues.Financial ratiosTo provide a better understanding of results of the Group, we provide below the value of some ratioscommonly used in financial statement analysis.Financial ratios Dec. 31, 2010 Dec. 31, 2009ROE Return on equity 0.13 0.09ROS Return on Sales 0.18 0.14ROI Return on investment 0.16 0.11ROE (Return on Equity): is the ratio between net profit and Shareholders’ Equity. It is an index of theprofitability of capital invested, used to compare the investment in the company with investments ofa different nature on a yield basis.ROS (Return on Sales): is calculated as the ratio between operating profit and net revenues. It indicatesprofitability as a proportion of revenues, or the ability to generate profit from operations.ROI (Return on Investment): is the ratio between capital employed (total assets net of investments innon-operating assets, which for the Group do not exist). It indicates the ability of the company togenerate profits through operating activities.Liquidity ratios Dec. 31, 2010 Dec. 31, 2009CR Current ratio 3.53 3.65LR Liquidity ratio 2.10 1.9327

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SCR: it is computed by dividing current assets by current liabilities. It indicates the ability of thecompany to face current liabilities with current assets. A value above 2 signals an optimal situation.LR: it is computed by dividing the sum of current and deferred liquidity by current liabilities, and isused to assess the firm’s ability to pay off current liabilities. A value between 1 and 2 signals an idealliquidity position.Debt management ratios Dec. 31, 2010 Dec. 31, 2009CI Equity to fixed assets ratio 2.32 2.13LEV Leverage (Gearing) 1.30 1.29IN Debt Ratio 23.2% 22.4%CI: it is computed by dividing Shareholders’ Equity by Fixed Assets and it indicates the ability of thecompany’s equity to cover its investment needs. A value above 1 signals an optimal situation.LEV (Leverage): it is computed by dividing capital employed, corresponding to total assets, by theShareholders’ Equity and it represents the degree of debt of the company.The higher the ratio, the higher the riskiness of the company. A value between 1 and 2 representsequilibrium in the sources of funds.IN: it is computed by dividing the sum of current and non-current liabilities by capital employed andit indicates the percentage share of funds provided by third parties in financing the company. A valuebelow 50% indicates an adequate financial structure.Research & DevelopmentIn 2010 Research and Development activities focused on the development of new products, the enhancementof existing products to improve their performance, and the widening of the product rangeto satisfy the needs of the domestic and international market.In 2010, research costs included €575 thousand of personnel costs, expensed in the income statement.Development costs for the year included €11 thousand of personnel costs, capitalized among intangibleassets.Costs relating to technical advice and the acquisition of know-how and lab equipment amounted to€119 thousand.A description of Research and Development activities by sector is included in the section that follows.For some projects the description of activities is only summarized as the Company is in the processof filing for industrial patents.28

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SCable terminalsNew products that address specific needs of customers were developed, while the development of anew family of connectors continued.Railroad EquipmentThe development of an electrically operated impact wrench – both in the 110v and 220v version– suitable to screw and unscrew mechanical fasteners was completed. The tool can be operated at 5speeds developing a maximum torque of 2500 Nm.In the context of the project for a head for the maintenance of contact cables for the feeding of locomotorsoff the pantograph, the Company built a prototype allowing to carry out tests on the linein cooperation with Italian Railways personnel.The development of a rail-cutting machine through an abrasive disk continued. The machine, uniquein the field, radically improves the safety of operators, eliminating at the same time metal fatigueconnected with machinery of this kind. In 2010 the Company filed for three industrial patents inrelation with this utensil.A new family of machines for the maintenance of the railway line is now at the prototype stage.In response to market needs, new accessories allowing the use of our drills under particular conditionsin the drilling phase were developed.Cable glandsThe development of a new family of cable glands with improved safety for the installation in environmentswith a potentially explosive atmosphere was concluded with the obtainment of the ATEXcertification. The family is made up by one PG range of technopolymer glands with metric threadingand by a range of glands in brass with metric threading.Hydraulic ToolsThe study for a new range of hydraulic tools continued.Laboratory tests both at our labs and with customers for a new hydraulic head for the installation ofour electrical connectors continued.The development of a new utensil for the processing of laminates for electric control boxes continued.The new utensil will come in three versions: manual, hydraulic (operated with our pumps), andbattery-operated.New dies for the compression of our connectors are under development to meet market demands.Cable markingA new family of polycarbonate labels for thermal printers used for the labelling of electrical cableswas launched. The new labels may be inserted on the cables without disconnecting them.New products were added to the flat label range as a result of customer requests.The development of a new machine for industrial labelling continued with the construction of aprototype to be used for testing.29

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SRelated partiesTransactions concluded between the parent company and its subsidiaries in 2010 were exclusivelyof a commercial nature and are summarized in the table below:(€) Receivables Payables Revenues PurchasesCembre Ltd. 1,874,747 39,640 5,671,423 286,760Cembre S.a.r.l. 915,243 - 2,998,827 3,936Cembre España S.L. 1,353,824 - 3,554,193 -Cembre AS 2,010 - 463,801 -Cembre GmbH 1,195,001 3,326 3,278,616 33,471Cembre Inc. 1,294,934 5,806 2,929,471 28,527General Marking S.r.l. 1,664 955,433 88,707 2,797,389TOTAL 6,637,423 1,004,205 18,985,038 3,150,083Commitments of Cembre S.p.A. at the end of the year include a letter of patronage in favour ofSpanish subsidiary Cembre España SL for €2.5 million, and one in favour of German subsidiaryCembre GmbH for €0.8 million.Cembre SpA leased an industrial building to subsidiary General Marking S.r.l. In 2010 rent for thebuilding amounted to €100 thousand. Cembre S.p.A. also currently leases property for a cumulativeannual rent of €513 thousand from Tha Immobiliare S.p.A., with registered office in Brescia,owned by Anna Maria Onofri, Giovanni Rosani and Sara Rosani, Directors of Cembre S.p.A.Cembre Ltd. leased an industrial building from Borno Ltd., a company controlled by Lysne S.p.A.,for an annual rent of £38 thousand. Such amount is in line with market conditions.Further detail of these transactions is provided in the notes.With reference to assets and liabilities relating to subsidiaries shown above, we confirm that transactionswith the same and with related parties fall within the scope of normal operating activities.Absence of control and coordinationDespite the fact that article 2497-sexies of the Italian Civil Code states that “it is presumed that,unless otherwise proved, the direction and coordination activities of companies is exercised bythe company or entity that is required to consolidate the same in its accounts or that, in anycase, controls the former company pursuant to article 2359 (of the Italian Civil Code)”, CembreS.p.A. believes to be operating in full autonomy from its parent Lysne SpA. In particular, as a nonexhaustiveexample, the Company manages autonomously its own treasury and relationships withits customers and suppliers, and does not make use of any service provided by its parent company.Relationships with parent company Lysne S.p.A. are limited to the normal exercise of shareholders’rights on the part of the parent.30

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SCompanies incorporated under the laws of States that are not part of the European UnionCembre S.p.A. controls two companies incorporated under the laws of States that are not part ofthe European Union. These are:- Cembre Inc. incorporated in the US, and- Cembre AS incorporated in Norway.The company deems the administrative, accounting and reporting systems currently in use to beadequate in supplying regularly its management and the company’s independent auditors with theoperating and financial information necessary for the preparation of the consolidated financialstatements.The accounts prepared by said foreign subsidiaries and used in the preparation of the consolidatedfinancial statements, are audited and made available to the public, as provided by current regulations.Cembre S.p.A. is active in ensuring an adequate flow of information from said subsidiaries to itsindependent auditors and believes the current communication process in place with the independentauditors to be effective.Cembre S.p.A. already possesses the by-laws, the composition and the powers of company boardsand its individual members, and directives ensuring the timely transmission of any informationregarding the update of such information have been issued.Own shares and shares of parent companiesIn 2010, the Cembre Group did not acquire or sell any of its own shares, nor did it own, eitherdirectly or through any of its subsidiaries, trust companies or intermediaries, any of its own sharesor any of its parent company’s shares.Ownership Structure and Corporate GovernanceIn compliance with norms contained in article 123-bis of Legislative Decree 58, dated February 24,1998 (Testo Unico Finance Act), we refer to the Report on Corporate Governance which, in additionto providing a general description of corporate governance, contains information regardingthe ownership structure of the Company, the adoption of the Code of Conduct and the observanceof the resulting commitments. Said Report is available in the Investor Relations section of theGroup’s Internet site (www.cembre.it).Subsequent eventsNo event having significant effects on Cembre’s financial or operating performance occurred afterthe closing of the financial year.OutlookThe Group expects its turnover and net profit to grow in 2011.31

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SProposal for the Allocation of the Company’s Net ProfitIn order to complete the Company’s planned investments and to benefit from self-financed growth,it is advisable that at least a portion of net profit generated be retained. In seeking the approvalfor our actions by submitting to you the present Financial Statements and Report on Operations,we also invite you, in view of the fact that the legal reserve has already reached 20% of the sharecapital, to approve our proposed allocation of net profit for 2010, amounting to €9,157,857.49(rounded off to €9,157,857) as follows:- €0.26 to be distributed to each of the Company’s 17,000,000 shares entitled to dividends, for atotal of €4,420,000, payable from May 19, 2011, and an ex-dividend date of May 16, 2011;- the remainder, amounting to €4,737,857.49, to the extraordinary reserve.AttachmentsThe present Report on Operations includes the following attachments:Attachment 1 Reclassified Consolidated Income Statement for the year ended December 31, 2010.Attachment 2 Company shares held by Board Members and Statutory Auditors.Attachment 3 Company Boards.Brescia, March 15, 2011THE BOARD OF DIRECTORSOF PARENT COMPANY CEMBRE S.P.A.CHAIRMAN AND MANAGING DIRECTORGIOVANNI ROSANI32

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SAttachment 1 - Report on Operations of the GroupCOMPARATIVE CONSOLIDATED INCOME STATEMENT(€’000) 2010 % 2009 % ChangeRevenues from sales and services provided 93,934 100 75,984 100 23.6%Other revenues 404 553 -26.9%TOTAL REVENUES 94,338 76,537 23.3%Cost of goods and marchandise (35,667) (38.0) (23,912) (31.5) 49.2%Change in inventories 738 0.8 (3,972) (5.2) -118.6%Cost of services received (11,630) (12.4) (10,532) (13.9) 10.4%Lease and rental costs (1,184) (1.3) (1,090) (1.4) 8.6%Personnel costs (26,145) (27.8) (23,550) (31.0) 11.0%Other operating costs (704) (0.7) (544) (0.7) 29.4%Increase in assets due to internal construction 592 0.6 689 0.9 -14.1%Write-down of current assets (160) (0.2) (207) (0.3) -22.7%Accruals to provisions for risks and charges (8) (0.0) (7) (0.0) 14.3%GROSS OPERATING PROFIT 20,170 21.5 13,412 17.7 50.4%Tangible assets depreciation (2,556) (2.7) (2,577) (3.4) -0.8%Intangible assets amortization (235) (0.3) (254) (0.3) -7.5%OPERATING PROFIT 17,379 18.5 10,581 13.9 64.2%Financial income 61 0.1 32 0.0 90.6%Financial expenses (68) (0.1) (70) (0.1) -2.9%Foreign exchange gains (losses) 64 0.1 37 0.0 73.0%PROFIT BEFORE TAXES 17,436 18.6 10,580 13.9 64.8%Income taxes (6,096) (6.5) (3,693) (4.9) 65.1%NET PROFIT FROM ORDINARY ACTIVITIES 11,340 12.1 6,887 9.1 64.7%NET PROFIT FROM ASSETS HELD FOR DISPOSAL - -NET PROFIT 11,340 12.1 6,887 9.1 64.7%33

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SAttachment 2 – Report on OperationsCOMPANY SHARES HELD BY CORPORATE BOARDS’ MEMBERSCOMPANY SHARES HELD SHARES SHARES SHARES HELD OWNERSHIP OWNERSHIPAT DEC. 31, 2009 PURCHASED SOLD AT DEC. 31, 2010 RIGHTSLysne S.p.A. (1) Cembre S.p.A. 9,236,825 - - 9,236,825 full directCarlo Rosani Cembre S.p.A. 1,040,000 - 1,040,000 (2) - full directAnna Maria Onofri Cembre S.p.A. 900,096 520,000 (2) - 1,420,096 full directSara Rosani Cembre S.p.A. 560,000 260,000 (2) - 820,000 full directGiovanni Rosani Cembre S.p.A. 540,000 260,000 (2) - 800,000 full directAldo Bottini Bongrani Cembre S.p.A. 360,000 - - 360,000 full directGiovanni De Vecchi Cembre S.p.A. 280,000 - - 280,000 full directFabio Fada Cembre S.p.A. 4,700 - - 4,700 full indirectAndrea Boreatti Cembre SpA 1,500 - - 1,500 full directStatutory Auditors and Directors not listed above did not hold Cembre SpA shares at December 31, 2009 and did not acquire Cembre SpA shares in 2010(1) The share capital of Lysne S.p.A., Cembre S.p.A.’s parent company, is held by Anna Maria Onofri, Giovanni Rosani and Sara Rosani.(2) Changes occurred as a result of the acceptance of the inheritance of Carlo Rosani by his heirs.34

R E P O R T A N D A C C O U N T S 2 0 1 0 - R E P O R T O N O P E R A T I O N SAttachment 3 – Report on OperationsCORPORATE BOARDSBoard of DirectorsChairman and Managing DirectorVice Chairman and Managing DirectorDirectorDirectorDirectorIndependent DirectorIndependent DirectorGiovanni RosaniAnna Maria OnofriSara RosaniGiovanni De VecchiAldo Bottini BongraniGiancarlo MaccariniFabio FadaSecretaryBoard of Statutory AuditorsChairmanPermanent AuditorPermanent AuditorSubstitute AuditorSubstitute AuditorGiorgio RotaGuido AstoriLeone ScuttiAndrea BoreattiMaria Grazia LizziniGiorgio AstoriIndependent AuditorsPricewaterhouseCoopersThe above list is updated at March 15, 2011.The Board of Directors and Board of Statutory Auditor’s term expires with the approval of the FinancialStatements at December 31, 2011.The Chairman holds by statute (article 18) powers of legal representation of the Company. The Boardof Directors conferred to the Chairman and Managing Director Giovanni Rosani all the ordinarymanagement powers not specifically reserved to it by law and exclusive powers over the organization,management and monitoring of the internal control system.In case of absence or impediment of the Chairman and Managing Director Giovanni Rosani, Vice Chairmanand Managing Director Anna Maria Onofri holds all ordinary management powers not reservedto the Board by law, with the exception of the appointment of professionals. All Managing Directorsmust keep the Board of Directors informed of all relevant transactions concluded in the context of theirmandate. The Board of Directors has approved rules that define which particularly relevant transactionsmay be concluded exclusively by the same.35

Consolidated Financial Statementsat December 31, 2010

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SConsolidated Statement of Financial Position(euro '000) Notes Dec. 31, 2010 Dec. 31, 2009ASSETSA) NON-CURRENT ASSETSof which:relatedpartiesTangible assets 1 36,440 35,071Intangible assets 2 554 620Financial assets available for sale 5 5Other non-current assets 18 21Deferred tax assets 11-21 1,754 1,757TOTAL NON-CURRENT ASSETS 38,771 37,474B) CURRENT ASSETSInventories 3 29,632 28,587Trade receivables 4 28,005 21,364Tax receivables 5 218 1,092Other receivables 6 396 662Cash and cash equivalents 14,697 8,901TOTAL CURRENT ASSETS 72,948 60,606C) NON-CURRENT ASSETS AVAILABLE FOR SALE - -TOTAL ASSETS (A+B+C) 111,719 98,080of which:relatedpartiesLIABILITIES AND SHAREHOLDERS’ EQUITYA) SHAREHOLDERS’ EQUITYCapital stock 7 8,840 8,840Reserves 7 65,566 60,270Net profi t 7 11,340 6,887TOTAL SHAREHOLDERS’ EQUITY 85,746 75,997B) NON-CURRENT LIABILITIESNon-current fi nancial liabilities 8-28 4 26Employee Severance Indemnity and other personnel benefi ts 9 2,775 128 2,944 161Provisions for risks and charges 10 72 68Deferred tax liabilities 11-21 2,471 2,452TOTAL NON-CURRENT LIABILITIES 5,322 5,490C) CURRENT LIABILITIESCurrent fi nancial liabilities 8-28 1,024 3,601Trade payables 12 11,435 8,224Tax payables 2,522 539Other payables 13 5,670 4,229TOTAL CURRENT LIABILITIES 20,651 16,593D) LIABILITIES ON ASSETS HELD FOR DISPOSAL - -TOTAL LIABILITIES (B+C+D) 25,973 22,083TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (A+B+C+D) 111,719 98,08038

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SStatement of Consolidated Comprehensive Income(euro '000) Notes 2010 2009of which:relatedpartiesRevenues from sales and services provided 14 93,934 75,984Other revenues 15 404 553TOTAL REVENUES 94,338 76,537Cost of goods and merchandise (35,667) (23,912)Change in inventories 738 (3,972)of which:relatedpartiesCost of services received 16 (11,630) (607) (10,532) (743)Lease and rental costs 17 (1,184) (513) (1,090) (511)Personnel costs 18 (26,145) (189) (23,550) (165)Other operating costs 19 (704) (544)Increase in assets due to internal construction 592 689Write-down of receivables (160) (207)Accruals to provisions for risks and charges (8) (7)GROSS OPERATING PROFIT 20,170 13,412Property, plant and equipment depreciation 1 (2,556) (2,577)Intangible asset amortization 2 (235) (254)OPERATING PROFIT 17,379 10,581Financial income 20 61 32Financial expenses 20 (68) (70)Foreign exchange gains (losses) 64 37PROFIT BEFORE TAXES 17,436 10,580Income taxes 21 (6,096) (3,693)NET PROFIT FROM ORDINARY ACTIVITIES 11,340 6,887NET PROFIT FROM ASSETS HELD FOR DISPOSAL - -NET PROFIT 11,340 6,887Conversion differences included in equity 449 367COMPREHENSIVE INCOME 22 11,789 7,254BASIC EARNINGS PER SHARE 23 0,67 0,4139

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SConsolidated Statement of Cash Flows(euro '000) 2010 2009A) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,901 4,545B) CASH FLOW FROM OPERATING ACTIVITIESNet profi t for the period 11,340 6,887Depreciation, amortization and write-downs 2,791 2,831(Gains)/Losses on disposal of assets 7 (9)Net change in Employee Severance Indemnity (169) (250)Net change in provisions for risks and charges 4 (224)Operating profit (loss) before change in working capital 13,973 9,235(Increase) Decrease in trade receivables (6,641) 3,286(Increase) Decrease in inventories (1,045) 3,791(Increase) Decrease in other receivables and deferred tax assets 1,143 (756)Increase (Decrease) of trade payables 3,198 (2,596)Increase (Decrease) of other payables, deferred tax liabilities and tax payables 3,443 (1,328)Change in working capital 98 2,397NET CASH FLOW (USED IN)/FROM OPERATING ACTIVITIES 14,071 11,632C) CASH FLOW FROM INVESTING ACTIVITIESCapital expenditure on fi xed assets:- intangible (169) (182)- tangible (3,863) (4,815)Proceeds from disposal of tangible, intangible, available-for-sale fi nancial assets- tangible 72 27Increase (Decrease) of trade payables for assets 13 1NET CASH FLOW (USED IN)/FROM INVESTING ACTIVITIES (3,947) (4,969)D) CASH FLOW FROM FINANCING ACTIVITIES(Increase) Decrease in other non current assets 3 55Increase (Decrease) in bank loans and borrowings (2,566) 310Increase (Decrease) in other loans and borrowings (33) (58)Dividends distributed (2,040) (2,720)NET CASH FLOW (USED IN)/FROM FINANCING ACTIVITIES (4,636) (2,413)E) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (B+C+D) 5,488 4,250F) Foreign exchange differences 308 106G) CASH AND CASH EQUIVALENTS AT END OF PERIOD (A+E+F) 14,697 8,90140

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S2010 2009CASH AND CASH EQUIVALENTS AT END OF PERIOD 14,697 8,901Current fi nancial liabilities (1,024) (3,601)Non current fi nancial liabilities (4) (26)NET CONSOLIDATED FINANCIAL POSITION 13,669 5,274INTERESTS PAID IN THE PERIOD (56) (50)BREAKDOWN OF CASH AND CASH EQUIVALENTS AT END OF PERIODCash 14 13Banks 14,683 8,88814,697 8,90141

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SStatement of Changes in the Consolidated Shareholders' Equity(€ €'000)CapitalstockSharepremiumreserveLegalreserveSuspendedtaxreservesConsolidationreserveConversiondifferencesExtraordinaryreserveUrealizedgainsreserveReserve forexchangegainsRetainedearningsNet profitTotal Shareholders'EquityBalance at December 31, 2008 8,840 12,245 1,768 68 11,006 (2,800) 25,680 3,715 - 84 10,857 71,463Allocation of previous year netprofit (1)2,068 6,099 54 (84) (10,857) (2,720)Other changes (54) 54 -Comprehensive income 2009 (155) 522 6,887 7,254Balance at December 31, 2009 8,840 12,245 1,768 68 12,919 (2,278) 31,779 3,715 - 54 6,887 75,997Allocation of previous year netprofit (1)2,288 2,559 (6,887) (2,040)Other changes 54 (54) -Comprehensive income of the year 5 444 11,340 11,789Balance at December 31, 2010 8,840 12,245 1,768 68 15,212 (1,834) 34,392 3,715 - - 11,340 85,746(1) Dividends resolved by the Shareholders' Meeting are included in the Total Shareholders' Equity column under Allocation of previous year net profi t.42

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SNotes to the Consolidated Financial StatementsI. CORPORATE INFORMATIONCembre S.p.A. is a joint-stock company with registered offi ce in Brescia, Via Serenissima 9.Cembre S.p.A. and its subsidiaries (hereinafter referred to jointly as “the Cembre Group” or “theGroup”) are active primarily in the manufacturing and sale of electrical connectors and related tools.The publication of the Consolidated Financial Statements of Cembre S.p.A. for the year endedDecember 31, 2010 was authorized by a resolution of the Board of Directors dated March 15, 2011.Cembre S.p.A. is controlled by Lysne S.p.A., a holding company based in Brescia, that does notdirect or coordinate its subsidiary.II. FORM AND CONTENT OF THE CONSOLIDATED FINANCIAL STATEMENTSThe present Consolidated Financial Statements at December 31, 2010 were prepared under the InternationalFinancial Reporting Standards (IFRS) adopted by the European Union and the relatedimplementation regulations issued in application of article 9 of Legislative Decree no. 38/2005.Principles adopted in the preparation of the Consolidated Financial Statements are those formallyapproved by the European Union as at December 31, 2010.The consolidated financial statements were prepared in the expectation of the continuation of theGroup’s activities.The table that follows contains a list of international accounting principles and interpretations approvedby the IASB that became effective starting in 2010, which were taken into account, whereapplicable, in the preparation of the present Consolidated Financial Statements:Effective fromIAS 27 e IFRS 3 revised Jan. 1, 2010Amendments to IAS 32 Jan. 1, 2010Amendments to IAS 39 Jan. 1, 2010Amendments to IFRS 2 Jan. 1, 2010Amendments to IFRIC 14 Jan. 1, 2010IFRIC 17 – Distribution of Non-cash Assets to Owners Jan. 1, 2010IFRIC 18 – Transfers of Assets from Customers Jan. 1, 2010IFRIC 19 – Debt for Equity Swaps Jan. 1, 2010Improvements to 2009 IFRS Jan. 1, 2010Amendments and interpretations in the table above did not fi nd an application in the ConsolidatedFinancial Statements at December 31, 2010.Items in the Balance Sheet were recorded at the historical cost.Unless otherwise indicated, fi gures reported in the fi nancial statements and the related notes areexpressed in thousands of euro.43

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SFuture changes in accounting principlesStarting with the 2011 fi nancial year, the following accounting principles will become effective:IAS 24 revised – Related partiesSimplifi es related parties disclosures in case of transactions involving public entities; it provides anew defi nition of related party.Adjustments will have no impact on the consolidated fi nancial statements of the Group.Amendments to IFRS 7New disclosure requirements for transfers of financial assets where there is continuing involvementbetween the parties. Adjustments will have no impact on the consolidated financial statements of theGroup.Improvements to 2010 IFRSThey consist of minor adjustments to accounting principles listed below:IFRSIFRS 1IFRS 3Adjustments- Change of accounting principles in the year of fi rst adoption- Use of revalued cost as substitute for historical cost- Use of historical cost as substitute for cost for activities subject to regulated fares- Transitory requirements for potential compensation deriving from businesscombinations that took place before the coming into effect of IFRS 3 Revised- Fair value carrying of minority interests- Stock option plans acquired or voluntarily replaced as a result of businesscombinationsIAS 27 - Transitory requisites for amendments following IAS 27IFRS 7IAS 1IAS 34IFRIC 13- Classifi cation of additional information- Clarifi cations on the Statement of changes in the Shareholders’ Equity- Signifi cant events and transactions- Fair value of bonus pointsThe following principles were issued but not yet approved by the EU:IFRS for Small and medium-sized EntitiesSimplification of some accounting rules and disclosure requirements over traditional IFRS.IFRS 9 – Financial InstrumentsThe principle sets new criteria for the classification of financial assets and liabilities.The Cembre Group will evaluate in the next months the possible effects of the adoption of the newprinciples.44

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SPrinciples of consolidationThe Consolidated Financial Statements of the Cembre Group include the statutory accounts atDecember 31, 2010 of Cembre S.p.A. and of its subsidiaries. Accounting principles adopted inthe preparation of the fi nancial statements of subsidiaries are consistent with those of the parentcompany. The fi nancial statements of consolidated subsidiaries are consolidated under the line-bylinemethod, thus including all items, irrespective of the share held by the Group, of the eliminationof intragroup transactions and of unrealized gains on transactions with third parties.The book value of investments is netted against the related share in the shareholders’ equity ofconsolidated companies, attributing to assets and liabilities the respective current value at the timecontrol was acquired and recording contingent liabilities, where appropriate. Where positive, theresidual amount is recorded among non-current assets as goodwill. Negative residual differences arerecorded in the income statement. All subsidiaries are wholly-owned and in no case therefore haveminority interests been recorded.The following companies were consolidated at December 31, 2010:% held1. Cembre Ltd. (UK) 100%2. Cembre S.a.r.l. *(France) 100%3. Cembre España S.L. *(Spain) 100%4. Cembre AS (Norway) 100%5. Cembre GmbH*(Germany) 100%6. Cembre Inc.**(US) 100%7. General Marking S.r.l. (Italy) 100%* 5% share held through Cembre Ltd.**29% share held through Cembre Ltd.The consolidation area is unchanged with respect December 31, 2009.Translation of fi nancial statements expressed in currencies other than the euroThe functional and reporting currency of the Group is the euro.Financial statements denominated in functional currencies other than the euro are translatedaccording to the following criteria:- assets and liabilities are translated at the exchange rate applicable at the date of the fi nancialstatements;- income statement items are translated at the average exchange rate for the year;- foreign-exchange translation differences are recorded in a specifi c Shareholders’ Equity reserve.At the time at which a foreign subsidiary is disposed of, accumulated foreign-exchange differencesrecorded under Shareholders’ Equity relating to the same are taken to the Income Statement.Exchange rates applied in the translation of fi nancial statements of subsidiaries are shown in thetable below.Currency Exchange rate at Dec. 31, 2010 Average exchange rate for 2010British pound (€/£) 0.8608 0.8578US dollar ($/€) 1.3362 1.3257Norway kroner (NOK/€) 7.8 8.004345

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SIII. CONSOLIDATION PRINCIPLES AND VALUATION CRITERIAForm of the financial statementsThe fi nancial statements are prepared as follows:- current and non-current assets and liabilities are reported separately in the Consolidated Statementof Financial Position;- the analysis of costs in the Statement of Consolidated Comprehensive Income is carried out basedon the nature of the same;- the Consolidated Statement of Cash Flows is prepared by applying the indirect method.Finally, with reference to Consob Regulation no. 15519 dated July 27, 2006, the Financial Statementsinclude a separate reporting of amounts pertaining to related parties, where significant.Property, plant and equipmentProperty, plant and equipment is recorded at the historical cost and reported net of accumulateddepreciation and losses in value. Ordinary maintenance and repair costs are not capitalized, and arecharged to the income statement in the year in which they are incurred.Depreciation commences when the asset is available for use and is calculated on a straight linebasis over the estimated residual useful life of the asset, taking into account its residual value.Depreciation rates applied refl ect the useful life generally attributed to the various classes of assetsand are summarized below:- Buildings and light installations: 2% – 10%- Plant and machinery: 5% – 25%- Industrial and commercial equipment: 6% – 25%- Other assets: 6% – 33%.Land has an undetermined useful life and is therefore not subject to depreciation.The book value of property, plant and equipment is subjected to an impairment test whenever eventsor changes occurred indicate that the book value of the same can no longer be retrieved in line withthe depreciation schedule originally set. Whenever there exists such an indication, the assets or cashgenerating units are written down to refl ect their expected realizable value. The residual value ofassets, their useful life and methods applied are reviewed annually and adjusted, where necessary, atthe end of each year. Tangible assets are eliminated from the Balance Sheet at the time of their saleor when there no longer exists the expectation of future economic benefi ts from their use or disposal.Losses and gains (calculated as the difference between net revenues from the disposal and the bookvalue of the asset) are recorded in the Income Statement in the year in which they are disposed of.Leased assetsAssets held under a financial lease, through which all risks and benefits relating to ownership aretransferred to the Group, are recorded under assets at the lower of their current value and the presentvalue of minimum lease payments due according to the contract, including the bullet payment dueat the end of the lease to exercise the purchase option.The liability corresponding to the lease contract is recorded under financial liabilities.Leased asset are classified under the respective category among property, plant and equipment, anddepreciated over the shorter period between the term of the lease and the expected residual usefullife of the asset. Lease contracts in which the lessor holds all risks and enjoys all benefits derivingfrom the leased asset are classified as operating leases and recorded as costs in the Income Statementover the term of the contract.46

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SIntangible assetsIntangible assets are recorded under assets, as provided by IAS 38 (Intangible assets), whenever it isprobable that future economic benefi ts are generated through use and when the cost of the intangibleasset can be determined in a reliable manner.Intangible assets acquired separately are initially capitalized at cost, while those acquired throughmergers are capitalized at their fair value at the time of acquisition.With the exception of development costs, assets generated internally cannot be recorded as intangibleassets.After the initial recording, intangible assets are carried in the balance sheet at cost, net of accumulatedamortization calculated on a straight-line basis over their expected useful economic life, and of writedownscarried out as a result of durable losses in value. Intangible assets having an indefi nite usefullife are not amortized and subjected periodically to an impairment test to assess possible loss in value.The useful life generally attributed to the various classes of assets is the following:- concessions and licenses: 5 to 10 years- software licenses 3 to 5 years- patents 2 years- development costs: 5 years- trademarks: 10 to 20 yearsAmortization commences when the asset is available for use, that is, when it is in a position and inthe necessary condition to operate in the manner intended by management.The book value of intangible assets is subjected to an impairment test whenever events or changesoccurred indicate that the book value of the same can no longer be retrieved in line with theamortization schedule originally set. Whenever there exists such an indication and the book value ofthe asset exceeds its realizable value, the value of the asset is written-down to its expected realizablevalue.Financial assetsFinancial assets are initially recorded at cost, inclusive of accessory purchase costs, representing thefair value of the price paid. After the initial recording, fi nancial assets are valued in accordance withtheir fi nal purpose as described below.Financial assets valued at fair value, whose change is recorded in the Income StatementThese are fi nancial assets held for trading purposes, acquired for the purpose of obtaining a profi tfrom short-term fl uctuations in price. Unless specifi cally designated as effective hedge, derivativesare classifi ed as fi nancial assets held for trading purposes.Gains and losses on fi nancial assets held for trading purposes are recorded in the income statement.Financial assets held to maturityFinancial assets other than derivatives that generate fi xed fi nancial fl ows or fl ows that may bedetermined and have a set maturity, are classifi ed as Financial assets held to maturity when theGroup intends to and is capable of holding them to maturity.Financial assets that the Group decides to hold for an indefi nite period of time do not fall underthis category. After their initial recording, long-term fi nancial investments held to maturity, suchas bonds, are accounted for at the amortized cost, using the effective rate of interest method, arediscounted to their present value.The amortized cost is calculated keeping into account discounts and premiums, amortized over theterm of the fi nancial asset.47

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SLoans extended and receivablesLoans and receivables are non-derivative financial assets providing for fixed payments or paymentsthat may be determined, not listed on an active market. Such assets are recorded at the amortizedcost using the actual discount rate method.Gains and losses are recorded in the Income Statement whenever loans extended and receivablesare eliminated from the accounts or they experience losses in value, together with the related amortization.Financial assets available for saleFinancial assets available for sale include fi nancial assets that do not fall under the above categories.After the initial recording, these are accounted for at fair value, while gains and losses are recordedunder a specifi c Shareholders’ Equity reserve until the assets are sold or a loss in value is ascertained.In such case, gains and losses accrued are charged to the income statement.In the case of securities widely traded on a regulated market, the fair value is determined withreference to the listed price at the closing of trading on the date of the fi nancial statements.In the case of fi nancial assets for which there does not exist an active market, the fair value isdetermined through valuation techniques based on the price recorded in recent transactions betweenunrelated parties or on the basis of the current market value of a similar instrument, or on discountedcash fl ows or option pricing models. Investments in other companies fall in this category.Loss in value of fi nancial assetsThe Group verifi es at least yearly the possible loss in value of individual fi nancial assets. These arerecorded only at the time when there exists objective evidence, at the occurrence of one or moreevents, that the asset has experienced a loss of value with respect to its initial recorded value.Treasury sharesTreasury shares are recorded as a reduction of Shareholders’ Equity in a specific reserve.The purchase, sale, issue or cancellation of treasury shares held does not determine the recording ofany gain or loss in the Income Statement.InventoriesInventories are valued at the lower of cost and their expected realizable value, represented by theirnormal sale price, net of completion and selling costs.The cost of inventories includes the acquisition cost, the transformation cost and other costs incurredto take inventories to their current location and state.The cost of inventories is determined under the weighted-average method, inclusive of the cost ofbeginning inventories.Provisions for slow-moving stock are accrued for fi nished products, materials and other supplies,keeping into account their expected useful life and retrievable value.Receivables and payablesReceivables are recorded initially at fair value and subsequently carried at the amortized cost, writtendownin case of loss in value. Payables are normally valued at the amortized cost, adjusted underexceptional conditions for changes in value.Cash and cash equivalentsCash and cash equivalents are recorded at face value.48

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SLoansLoans are initially recorded at cost, corresponding to the fair value of the amount received, net ofaccessory costs.After the initial recording, loans are valued at the amortized cost, using the effective interest method.Translation of amounts denominated in currencies other than the euroTransactions denominated in currencies other than the euro are initially accounted for in euro atthe exchange rate at the date of the transaction. Currency translation differences arising at the timeat which foreign currency receivables are collected and payables are paid out, are recorded in theincome statement.At the date of the fi nancial statements, monetary assets and liabilities denominated in currenciesother than the euro – consisting of cash on hand or assets and liabilities to be received or paid out,whose amount is set and may be determined – are translated into euro at the exchange rate at the dateof the fi nancial statements, recording in the income statement the currency translation difference.Non-monetary items denominated in currencies other than the euro are translated into euro at theexchange rate at the time of the transaction, representing the historical exchange rate.Functional currencies adopted by Group companies correspond to the currencies of the respectivecounty in which subsidiaries are based.Provisions for risks and chargesProvisions for risks and charges are accrued against known liabilities, whose existence is certain or probable,but whose amount and expiration cannot be determined at the date of the financial statements.Accruals are made when the existence of a current obligation, legal or implicit, deriving from a pastevent, the fulfilment of which is expected to require the use of resources whose amount can be reliablyestimated, is probable.Provisions are valued at the fair value of liabilities.When the financial effect and the timing of the cash outflow can be estimated in a reliable manner,provisions include the interest component, recorded in the Income Statement among financial income(expense).Provisions accrued are reviewed at each accounting date and adjusted to bring them into line withthe best estimate available to date.Employee benefitsUnder IAS 19, and before the reform introduced by the 2007 Budget Law, the Employee SeveranceIndemnity was classifi ed among defi ned benefi t plans and was therefore subject to actuarialadjustments.After the reform, the provisions of which were adopted by the Group from the 2007 Half-year Report,employee termination indemnities accrued up to December 31, 2006, continue to be accounted foras defi ned benefi t plans, while those accrued from January 1, 2007 are accounted for in two differentways:- where the individual employee has opted for complementary pension funds, employee terminationindemnities accrued after January 1, 2007 and until the time at which the choice is made by theemployee, are accounted for as a defi ned benefi t plan. Subsequently they are accounted for as adefi ned contribution plan;- where the individual employee has opted for accumulation with the treasury fund of the nationalsocial security agency (INPS), indemnities accrued after January 1, 2007 are accounted for as adefi ned contribution plan.49

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SElimination of financial assets and liabilitiesFinancial assets are eliminated when the Group ceases to hold rights to receive fi nancial fl owsderiving from the same or when such rights are transferred to another entity, that is when risks andbenefi ts of the fi nancial instrument cease to have an effect on the fi nancial position and operatingperformance of the Group.A fi nancial liability is written-off exclusively when the related obligation is cancelled, fulfi lled orexpired.Any material change in the contractual terms relating to the liability result in its cancellation andin the recording of a new liability.Any difference between the book value and the amount paid to extinguish the liability is recordedin the Income Statement.RevenuesRevenues are valued at the current value of the amount received or receivable.Disposal of assetsThe revenue is recognized when the Company has transferred the risks and benefits connected withthe ownership of the good, and ceases to exercise the activity associated with ownership and the actualcontrol over the asset sold.Services renderedRevenues are recorded based on the stage of completion of the operation at the date of the financialstatements. When the result of the service rendered cannot be reliably estimated, revenues are recordedonly to the extent of retrievable costs.The stage of completion is determined by valuing work carried out or by determining the proportionbetween costs incurred and total estimated costs to completion.InterestInterest is recorded in the period in which it accrues, using the effective interest method.DividendsDividends are recorded when the right of shareholders to receive them arises.GrantsGrants are recorded at fair value when there exists a reasonable certainty that that the same will actuallybe received and the company meets the conditions for the entitlement to the grant.Grants linked to cost components (operating grants) are recorded under “other revenues” and amortizedover several years so that revenues match the costs they are intended to compensate.The fair value of grants linked to assets (e.g. grants on the purchase of plant and equipment or grants forcapitalized R&D costs), is suspended under long-term liabilities and released to the income statementunder “other revenues” over the useful life of the asset to which it relates, thus in the period over whichthe depreciation expense relating to the asset is charged to the income statement.Financial chargesFinancial charges are recorded as a cost in the period in which they accrue. In accordance with IAS23 Revised, financial charges incurred in the acquisition of significant assets (qualifying assets) arecapitalized.50

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SCost of goods purchased and services receivedThe cost of goods purchased and services received is recorded in the income statement based on theaccrual method.Income taxes (current, prepaid and deferred)Current taxes are determined based on a realistic estimate of the tax expense for the period in accordancewith applicable tax regulations in the respective countries.The Group records deferred and prepaid taxes arising from temporary differences between the bookvalue of assets and liabilities and the related values reported for tax purposes, in addition to differencesin the value of assets and liabilities generated by consolidation adjustments.Prepaid taxes are recorded only where there exists reasonable certainty of their retrieval through futureprofits within the term in which tax benefits are enjoyed. Deferred tax assets are recorded also wherethere exist deductible losses or tax credits, whenever it is deemed probable that sufficient future profitswill be generated in the medium-term (3 to 5 years).Financial derivativesDerivative financial instruments are valued at market value (fair value). A derivative financialinstrument can be acquired for trading or hedging purposes.Gains and losses on financial instruments acquired for trading purposes are charged to the incomestatement.Derivatives acquired for hedging purposes may be accounted for under the hedge accounting method– offsetting the recording of the derivative in the income statement with adjustments to the value ofassets and liabilities hedged – only when derivatives meet specific criteria.Hedge derivatives are classified as “fair value hedges” when they are acquired to hedge against the riskof fluctuations in the market value of an underlying asset or liability or the risk of fluctuations in thefinancial flows deriving from the same, both in the case of existing assets and liabilities or those derivingfrom a future transaction.In the case of fair value hedges, gains and losses on the restatement of the market value of a derivativeinstrument are taken to the income statement.With regard to the hedging of financial flows, gains and losses on the hedge instrument are recordedunder Shareholders’ Equity when they relate to the portion of the hedge considered effective, while theportion not hedged is recorded in the income statement.Earnings per shareEarnings per share are calculated by dividing consolidated net profi t by the weighted average numberof shares in circulation for the period.Fully diluted earnings per share (calculated by subtracting from consolidated net profi t the cost ofconverting all stock options into ordinary shares) are obtained by adjusting the number of shares incirculation assuming the exercise of stock options having a diluting effect.Use of estimatesIn accordance with IAS/IFRS, the Group made use of estimates and assumptions based on priorexperience and other factors deemed determinant, but not certain. Actual data could therefore differfrom estimates and projections made. Estimated data is reviewed periodically and adjustments madeto the same are taken to the Income Statement for the period in which the review takes place in casethe review affect only one period, or, subsequent accounting periods in case it affects also the same.Below we describe review processes and key assumptions used by management in applying accountingprinciples.51

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SProvision for doubtful accountsThe provision for doubtful accounts refl ects management estimates regarding losses on tradereceivables. Losses on trade receivables expected by the Group are based on past experience onsimilar portfolios of receivables, current overdues vs. historical overdues, losses and collections, theclose monitoring of credit risk and credit worthiness of customers, in addition to projections oneconomic and market conditions.Retrievable value of non-current assetsNon-current assets include property, plant and equipment, intangible assets, investments and otherfi nancial assets.Whenever circumstances so require, the management reviews periodically the book value of noncurrentassets held and used by the Group, in addition to assets to be disposed of. Such activity iscarried out using estimates of expected cash fl ows from the sale of the asset and of adequate discountrates used in calculating the present value of the same. Whenever the book value of a non-currentasset experiences a loss in value, the Company records a write-down equal to the difference betweenthe book value of the asset and its retrievable value either through use or disposal of the same.Post-retirement benefi tsIn the estimation of post-retirement benefi ts the Group makes use of traditional actuarial techniquesbased on stochastic simulations of the “Monte Carlo” type. Assumptions made relate to the discountrate and the annual infl ation rate. Actuarial advisors of the Company make also use of demographicprojections based on current mortality rates, employee disablement and resignation rates.In 2010, based on past turnover experience, the probability of an employee terminating his or heremployment for causes other than death is the following:Male 6.18%Female 4.46%Assumptions regarding the discounting and infl ation rates were:Discounting rate 4.50%Yearly infl ation rate 2.00%Yearly increase in post-retirement benefi ts 3.00%Expected advances to be paid out are 5% per year and each advance corresponds to 70% of accrued indemnity.Retrievability of deferred tax assetsThe Group evaluates the possibility to retrieve deferred tax assets on the basis of profi ts and expectedfuture market conditions in view of current sale contracts and ability of expected future profi ts tooffset tax credits, in addition to the expected variance of the same.Potential liabilitiesIn carrying out its activity, management consults with its legal and tax advisors and experts. TheGroup ascertains a liability arising from litigation whenever it deems probable that a fi nancial outlaywill be made in the future and when the amount of resulting losses can be reasonably estimated. Incase a fi nancial outlay becomes possible but its amount cannot be determined, such occurrence isreported in the notes.52

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SIV. SEGMENT INFORMATIONIFRS 8 requires segment information to be supplied using the same elements on which managementbases internal reporting.Cembre Group adopted as its primary reporting focus information by geographical area based on thelocation in which the operations of the company are based or the production process takes place.As the Cembre Group operates in a single segment denominated “Electric connectors and relatedtools”, elements based on this element are not usually utilized for the purposes of internal reporting.2010 ItalyRest ofEuropeRest ofWorldElimination ofintragrouptransactionsTotalRevenuesSales to customers 54,279 33,943 5,712 93,934Sales to other Group companies 21,593 1,539 33 (23,165) -Revenues by sector 75,872 35,482 5,745 (23,165) 93,934Operating profit by sector 14,510 2,475 394 17,379Overhead costs not assigned -Operating profit 17,379Financial income (expense) 57Income taxes (6,096)Net profit 11,3402009 ItalyRest ofEuropeRest ofWorldElimination ofintragrouptransactionsTotalRevenuesSales to customers 40,740 30,508 4,736 75,984Sales to other Group companies 17,847 1,270 74 (19,191) -Revenues by sector 58,587 31,778 4,810 (19,191) 75,984Operating profit by sector 7,392 2,864 325 10,581Overhead costs not assigned -Operating profit 10,581Financial income (expense) (1)Income taxes (3,693)Net profit 6,887As the breakdown of sales by geographical area is different from that of the related Group activities,a breakdown of sales by geographical area of customers is shown below.2010 2009Italy 41,450 30,783Europe 40,284 35,694Rest of World 12,200 9,50793,934 75,98453

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SThe breakdown of assets and liabilities is shown below:Dec. 31, 2010ItalyRest ofEuropeRest ofWorldTotalAssets and LiabilitiesAssets of the sector 76,721 33,383 4,266 114,370Unassigned assets (2,651)Total assets 111,719Liabilities of the sector 21,086 4,802 108 25,996Unassigned liabilities (23)Total liabilities 25,973Other information by sectorCapital expenditure:- Property, plant and equipment 3,011 844 8 3,863- Intangible assets 161 8 - 1694,032Depreciation and amortization:- Property, plant and equipment (1,933) (548) (76) (2,556)- Intangible assets (232) (3) - (235)Write-downs and accruals to provisionfor employee benefits 701 18 - 719Average no. of employees 384 148 16 548Dec. 31, 2009ItalyRest ofEuropeRest ofWorldTotalAssets and LiabilitiesAssets of the sector 66,535 30,740 3,605 100,880Unassigned assets (2,800)Total assets 98,080Liabilities of the sector 16,036 6,004 62 22,102Unassigned liabilities (19)Total liabilities 22,083Other information by sectorCapital expenditure:- Property, plant and equipment 2,023 2,762 30 4,815- Intangible assets 179 2 - 1814,996Depreciation and amortization:- Property, plant and equipment (1,985) (505) (87) (2,577)- Intangible assets (252) (2) - (254)Write-downs and accruals to provisionfor employee benefits 649 6 - 655Average no. of employees 381 138 14 53354

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SV. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT1. PROPERTY, PLANT AND EQUIPMENTLand andbuildingsPlant andmachineryOtherassetsLeasedassetsWork inprogressTotalHistorical cost 27,897 31,863 7,872 6,023 163 4,267 78,085Accumulated depreciation (6,198) (25,418) (6,408) (4,904) (86) - (43,014)Bal. at Dec. 31, 2009 21,699 6,445 1,464 1,119 77 4,267 35,071Increases 675 1,764 254 619 - 551 3,863Currency translation differences 90 30 2 19 - - 141Depreciation (545) (1,172) (343) (479) (17) - (2,556)Net divestments - (28) (3) (35) - (13) (79)Reclassifications 2,476 208 10 9 (9) (2,694) -Bal. at Dec. 31, 2010 24,395 7,247 1,384 1,252 51 2,111 36,440Land andbuildingsPlant andmachineryEquipmentEquipmentOtherassetsLeasedassetsWork inprogressTotalHistorical cost 27,364 31,336 7,435 5,727 343 1,221 73,426Accumulated depreciation (5,667) (24,442) (6,079) (4,424) (224) - (40,836)Bal. at Dec. 31, 2008 21,697 6,894 1,356 1,303 119 1,221 32,590Increases 318 628 363 284 - 3,222 4,815Currency translation differences 188 66 (1) 7 - - 260Depreciation (509) (1,199) (357) (484) (28) - (2,577)Net divestments - - - (5) - (12) (17)Reclassifications 5 56 103 14 (14) (164) -Bal. at Dec. 31, 2009 21,699 6,445 1,464 1,119 77 4,267 35,071Capital expenditure in 2010 amounted to €3,863 thousand and consisted primarily of purchases madeby the parent company.Cembre S.p.A. invested €1,539 thousand on the upgrade and replacement of plant and machinery,among which the purchase of a transfer machine for €567 thousand. A total of €375 thousand werealso spent on improvements to industrial buildings, of which €190 thousand for the upgrade of thesewage system and €150 thousand for the new entrance of the industrial complex.Work in progress includes primarily €1,314 thousand of advances paid on the construction of a newparking area at the Company’s main complex, this asset became operative at the beginning of 2011.The parent company is also constantly active in the design and in-house construction of tools and diesfor its production. Work in progress at the end of the year in this sector amounts to €395 thousand.With regard to the Spanish subsidiary, the purchase in 2009 of a building has required subsequentwork to adapt it to the subsidiary’s needs resulting in an expense in 2010 of €301 thousand.Item Land and buildings includes the €5,921 thousand revaluation made upon the first-time applicationof international accounting principles (IAS).55

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S2. INTANGIBLE ASSETSDevelopmentcostsPatents Software TotalHistorical cost 322 - 3,180 3,502Accumulated amortization (234) - (2,648) (2,882)Balance at Dec. 31, 2009 88 - 532 620Increases 10 36 123 169Amortization (37) (9) (189) (235)Balance at Dec. 31, 2010 61 27 466 554In 2010 the unification of the Group’s information systems continued with the involvement in theproject of the French and Spanish subsidiaries, resulting in an investment of €95 thousand.The parent company also patented some products to be launched on the market in the next months,and the related caption above includes development and registration costs of patents.3. INVENTORIESDec. 31, 2010 Dec. 31, 2009 ChangeRaw materials 6,911 6,260 651Work in progress and semi-finished goods 8,090 7,085 1,005Finished goods 14,631 15,242 (611)Total 29,632 28,587 1,045The value of finished goods inventories is adjusted to its expected realizable value through a provisionfor slow-moving stock amounting approximately to €1,816 thousand.Changes in the provision in 2010 are shown in the table that follows:2010 2009Balance at January 1 1,527 1,484Accruals 318 142Uses (50) (109)Currency translation differences 21 10Balance at December 31 1,816 1,52756

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S4. TRADE RECEIVABLESDec. 31, 2010 Dec. 31, 2009 ChangeGross trade receivables 28,691 21,998 6,693Provision for doubtful accounts (686) (634) (52)Total 28,005 21,364 6,641Trade receivables by geographical areaDec. 31, 2010 Dec. 31, 2009 ChangeItaly 17,355 12,304 5,051Europe 9,375 8,166 1,209North America 1,177 837 340Oceania 151 280 (129)Middle East 495 195 300Far East 78 142 (64)Africa 60 74 (14)Total 28,691 21,998 6,693Average collection time grew from 96 days in 2009 to 100 days in 2010.Changes in the provision for doubtful accounts, accrued in part for overall bad debt and in part forindividual accounts, is shown in the table that follows:2010 2009Balance at January 1 634 510Accruals 181 225Uses (130) (102)Currency translation differences 1 1Balance at December 31 686 634Breakdown of receivables by maturity at December 31, 2010Notmatured0-90days91-180days181-365daysOver oneyearUnderlitigationTotal2010 23,853 3,395 520 234 377 312 28,6912009 18,458 1,971 633 426 456 54 21,99857

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S5. TAX RECEIVABLESDec. 31, 2010 Dec. 31, 2009 ChangeCurrent tax receivables 218 1,092 (874)The amount relates prevalently to tax receivables of the French subsidiary, amounting to 136 thousand,and consist of excess advances paid in the year.6. OTHER ASSETSDec. 31, 2010 Dec. 31, 2009 ChangeReceivables from employees 77 82 (5)VAT and other indirect taxes receivable 127 379 (252)Advances to suppliers 92 123 (31)Other 100 78 22Total 396 662 (266)Item Other includes prevalently receivables of the parent company relating to social security.7. SHAREHOLDERS’ EQUITYAt December 31, 2010, the capital stock of the parent company amounted to €8,840 thousand, andwas made up of 17 million ordinary shares of par value €0.52 each, fully underwritten and paid-up.At December 31, 2010 the Company did not hold treasury shares.A reconciliation between the Shareholders’ Equity and net profit of the parent company and theConsolidated Shareholders’ Equity and net profit is provided in the Report on Operations.Changes in individual components of the Consolidated Shareholders’ Equity are shown in the Statementof Changes in the Consolidated Shareholders’ Equity included in the Consolidated FinancialStatements.The consolidation reserve is made up as follows:Dec. 31, 2010 Dec. 31, 2009Elimination of investments in subsidiaries 17,289 15,349Elimination of unrealized intra-group profit in stock (2,800) (2,881)German subsidiary product warranty provision reversal 20 19Dividends from subsidiaries 692 432Currency translation differences on intra-group payables andreceivables11 -15,212 12,91958

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S8. FINANCIAL LIABILITIESEffectiveinterest rate (%) Maturity Dec. 31,2010Dec. 31,2009Bank overdraftsParent company 1,0 on demandCredito Bergamasco - 3Monte dei Paschi di Siena - 1Popolare di Verona - 11- 15Total bank overdrafts - 15LoansGeneral MarkingPopolare di Sondrio 2,5 30 days - 551Cembre España SLUBI Banca International Euribor+0,80 June 2011 1,002 2,352Cembre GmbHPopolare di Bergamo Euribor+0,375 January 2010 - 650Total loans 1,002 3,553Leasing (short-term portion)Cembre España SL 5,22-8,34 2009-2012 22 33Total leasing (short-term portion) 22 33CURRENT FINANCIAL LIABILITIES 1,024 3,601Leasing (long-term portion)Cembre España SL 5,22-8,34 2009-2012 4 26Total leasing (long-term portion) 4 26NON-CURRENT FINANCIAL LIABILITIES 4 26The present value of minimum future lease payments, discounted at the technical discounting rate,59

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T Sequal to 4.5%, is shown in the table that follows:Year Cash flow No. of days Current value2011 22 365 212012 4 730 4Total 26 25Difference 1Avg. discounting rate 4.50%9. EMPLOYEE TERMINATION INDEMNITY AND OTHER RETIREMENT BENEFITSThe item includes the Employee Severance Indemnity accrued for employees of Italian companies.Special retirement benefi ts, due in accordance with French regulations to persons employed inFrance at the time of retirement, are also included in the provision.With the reform of employee termination indemnities, starting with January 1, 2007 Cembre S.p.A.is no longer required to accrue retirement benefi ts in favour of its employees in a provision, but paysout benefi ts accrued after such date to the INPS’ treasury account, unless such benefi ts have beendestined to other pension funds by individual employees.Employee termination indemnities accrued at December 31, 2010 was discounted on the basis of anevaluation made by a registered actuary, in accordance with current regulations.Dec. 31, 2010 Dec. 31, 2009Beginning balance 2,944 3,194Accruals 719 655Uses (429) (362)Social security (INPS) treasury account (532) (529)Discounting effect 73 (14)Closing balance 2,775 2,944Total termination indemnities accrued with INPS’ treasury account at the end of the year amountto €2,110 thousand10. PROVISIONS FOR RISKS AND CHARGESChanges in the year are shown in the table below:CustomerindemnitiesTotalAt December 31, 2009 68 68Accruals 8 8Uses (4) (4)At December 31, 2010 72 7260

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S11. DEFERRED TAX ASSETS AND LIABILITIES31/12/2010 31/12/2009Deferred tax liabilitiesAverage cost valuation of inventories by the parent (388) (166)Accelerated depreciation (64) (223)Elimination of Cembre GmbH product warranty provision (15) (13)Reversal of land depreciation (27) (27)Revaluation of land (1,859) (1,859)Discounting of employee termination indemnity (93) (113)Capital gain on sale of industrial building (24) (48)Foreign exchange translation differences (1) (3)Gross deferred tax liabilities (2,471) (2,452)Deferred tax assetsElimination of unrealized intra-group profits in stock 1,215 1,282Write-down of inventories 267 192Goodwill amortization 33 38Depreciation and write-down of inventories of General Marking 101 111Provision for French personnel costs 50 51Other 88 84Gross deferred tax assets 1,754 1,757Net deferred tax liabilities (717) (695)12. TRADE PAYABLESDec. 31, 2010 Dec. 31, 2009 ChangePayable to suppliers 11,329 8,161 3,168Advances 106 63 43Total 11,435 8,224 3,211Trade payables by geographical area.Dec. 31, 2010 Dec. 31, 2009 ChangeItaly 8,739 6,006 2,733Europe 2,461 2,081 380North America 7 11 (4)Oceania 117 44 73Other 5 19 (14)Total 11,329 8,161 3,16861

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S13. OTHER PAYABLESDec. 31, 2010 Dec. 31, 2009 ChangePayables to employees 1,347 940 407Employee withholding taxes payable 703 646 57Bonuses owed to customers 509 192 317VAT and similar foreign taxes payable 715 484 231Commissions payable 196 162 34Payable to Statutory Auditors and similar foreign boards 75 54 21Payable to Directors 11 11 -Social security payables 1,995 1,604 391Payable on sundry taxes 89 101 (12)Other 30 35 (5)Total 5,670 4,229 1,44114. REVENUES FROM SALES AND SERVICES PROVIDEDIn 2010, revenues grew by 23.6% on the previous year. A total of 44.1% of Group sales were representedby Italy, with domestic sales growing by 34.7% on 2009.Sales to the rest of Europe represented instead 42.9% of the total, growing by 12.9% on the previousyear. Sales to the rest of the World represented in 2010 13% of total sales and posted a 28.3%increase.15. OTHER REVENUESOther revenues are made up as follows:2010 2009 ChangeCapital gains 36 10 26Uses of provisions - 231 (231)Insurance damages 4 5 (1)Reimbursements 322 297 25Other 42 10 32Total 404 553 (149)Reimbursements relate primarily to transport costs charged to customers. Item Uses of provisionsfor 2009 related to the freeing-up of the provision for charges on INAIL (social security) litigation.62

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S16. COST OF SERVICES2010 2009 ChangeSubcontracted work 2,362 1,887 475Electricity, heating and water 1,028 933 95Transport of goods sold 1,672 1,440 232Fuel 311 262 49Travelling expenses 747 616 131Maintenance and repair 1,219 1,173 46Consulting 899 895 4Advertising and promotion 386 277 109Insurance 490 473 17Boards’ compensation 765 895 (130)Postage and telephone 343 311 32Commissions 310 263 47Security and cleaning 405 381 24Bank charges 108 111 (3)Other 585 615 (30)Total 11,630 10,532 1,098The increase in subcontracted work and transport costs is due to the increase in activity over the previousyear.17. LEASES AND RENTALS2010 2009 ChangeRent and related costs 730 725 5Vehicle leasing 454 365 89Total 1,184 1,090 9418. PERSONNEL COSTS2010 2009 ChangeWages and salaries 19,358 17,359 1,999Social security contributions 5,307 4,848 459Employee termination indemnity 967 862 105Retirement benefits 120 101 19Other costs 393 380 13Total 26,145 23,550 2,595Wages and salaries include €554 thousand relating to outsourced personnel, mainly of the parentcompany.63

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SAverage number of employees by category:2010 2009 ChangeManagers 14 14 -Administrative and commercial staff 253 248 5Workers 260 262 (2)Outsourced personnel 21 9 12Total 548 533 15Average number of employees by Group company:Managers White Blue Outsourced Totalcollars collars PersonnelCembre S.p.A. 6 155 192 15 368General Marking S.r.l. - 6 8 2 16Cembre Ltd 3 26 38 - 67Cembre Sarl 1 17 4 - 22Cembre España SL 1 24 11 3 39Cembre AS - 2 - - 2Cembre Inc. 2 11 3 - 16Cembre GmbH 1 12 4 1 18Total 14 253 260 21 54819. OTHER OPERATING COSTS2010 2009 ChangeSundry taxes 392 368 24Losses on receivables 16 12 4Capital losses 44 2 42Donations 15 13 2Other 237 149 88Total 704 544 160Item Other includes prevalently sundry costs incurred by the parent company.64

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S20. FINANCIAL INCOME (EXPENSE)2010 2009 ChangeLoans and bank overdrafts (42) (61) 19Other financial charges (26) (9) (17)(68) (70) 2Interest earned on bank account balances 58 30 28Other financial income 3 2 161 32 29Financial income (expense) (7) (38) 3121. INCOME TAXESIncome taxes are made up as follows:2010 2009 ChangeCurrent taxes (6,073) (3,909) (2,164)Deferred taxes (23) 216 (239)Total (6,096) (3,693) (2,403)The table that follows shows a reconciliation between the theoretical tax expense, calculated at thenormal tax rate of the parent company (Corporate (IRES) + Regional Tax on Productive Activities(IRAP) = 31.4%), and the actual tax expense recorded in the consolidated accounts.2010 2009amount % tax rate amount % tax rateProfit before taxes 17,436 10,580Theoretical tax expense 5,475 31.40% 3,322 31.40%Effect of non-deductible costs 667 3.83% 674 6.37%Effect of tax-exempt income and deductions (713) -4.09% (778) -7.35%Effect of different IRAP taxable income 493 2.83% 483 4.57%Other changes (4) -0.02% - 0.00%Extraordinary items 178 1.02% (8) -0.08%Actual tax expense recorded 6,096 34.96% 3,693 34.91%In 2010 Cembre S.p.A. was audited by Italian Tax Authorities relating to the 2007 financial year.As a result of the audit, Cembre recorded an extra €178 thousand in previous year’s taxes and €30thousand in fines (recorded under Other operating costs).At December 31, 2010, there did not exist temporary differences and loss carry-forwards on whichno deferred tax assets or liability had been recorded.65

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SDeferred tax assets and liabilities are made up as follows:2010 2009Deferred tax liabilitiesAverage cost valuation of inventories (222) 179Accelerated depreciation 159 8Reversal of German subsidiary’s product warranty (2) -Discounting of employee termination indemnity 20 (4)Capital gain on sale of building 24 24Foreign exchange translation differences 2 12(19) 219Deferred tax assetsElimination of unrealized intra-group profits in stock (67) (37)Write-down of inventories 75 -Amortization of goodwill (5) (5)Loss carry-forwards of subsidiary General Marking (10) (7)Risk provision - (5)Provision for French personnel costs (1) 51Other 5 (12)(3) (15)Foreign-exchange differences (1) 12Deferred taxes for the period (23) 21622. COMPREHENSIVE INCOMEThe Cembre Group chose to adopt IAS 1 Revised providing for the use of a single table to reportits comprehensive income. In particular, the economic effects recorded directly under Shareholders’Equity are reported separately and result as an increase or decrease of net profi t for the period. AtDecember 31, 2010, the only difference relates to foreign exchange translation differences arisingupon consolidation on the translation into euro of the fi nancial statements of companies wholefunctional currency is not the European currency.23. EARNINGS PER SHAREEarnings per share are calculated by dividing net profi t by the weighted average number of shares incirculation for the period, excluding treasury shares held at the end of the year (the Group does nothold treasury shares).2010 2009Consolidated net profit (€‘000) 11,340 6,887No. of ordinary shares (‘000) 17,000 17,000Base earnings per share 0.67 0.41Earnings per share (€) 0.67 0.4166

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S24. DIVIDENDSOn May 20, 2010 the company distributed (with ex-dividend date May 17) a dividend on net profit forthe year ended December 31, 2009, amounting to €2,040 thousand, equivalent to €0.12 for each shareentitled to dividends.2010 2009Resolved and paid in the yearBalance due for 2009 dividend: 0.12 euro (2008: €0.16) 2,040 2,720Proposal submitted to the Shareholders’ Meeting (not recorded as liability at December 31)Balance due for 2010 dividend: €0.26 (2009: €0.12) 4,420 2,040Proposed dividends submitted for approval to the Shareholders’ Meeting amount to €0.26 per share, fora total of €4,420 thousand. This amount was not recorded as a liability at December 31.25. COMMITMENTS AND RISKSDec. 31, 2010 Dec. 31, 2009 ChangeGuarantees granted 647 605 42Commitments at December 31, 2010 included guarantees granted to the Brescia Municipalityamounting to €452 thousand against the construction of development infrastructure in connectionwith the construction of new parking spaces and entrance at the Brescia main complex. The residualamount relates to guarantees for supplies granted to electrical and railway companies.26. NET FINANCIAL POSITIONThe net financial position of the Group amounted at the end of 2010 to a surplus of €13,669 thousand,improving on December 31, 2009.At December 31, 2010, the Group had no outstanding debt involving covenants or negative pledges.Below we include the Net Financial Position of the Group, as provided by Consob in RegulationDEM/6064313 dated July 28, 2006.31/12/2010 31/12/2009A Cash 14 13B Bank deposits 14,683 8,888C Cash and cash equivalents (A+B) 14,697 8,901D Financial receivables - -E Current bank debt (1,002) (3,568)F Other current financial payables (22) (33)G Current financial debt (E+F) (1,024) (3,601)H Net current financial position (C+D+G) 13,673 5,300I Other non-current financial debt (4) (26)J Non-current financial debt (I) (4) (26)K Net financial position (H+J) 13,669 5,27467

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S27. RELATED PARTIESThe table that follows shows transactions between the parent company and its subsidiaries atDecember 31, 2010.Receivables Payables Revenues ExpensesCembre Ltd. 1,875 40 5,671 287Cembre S.a.r.l. 915 - 2,999 4Cembre España S.L. 1,354 - 3,554 -Cembre AS 2 - 464 -Cembre GmbH 1,195 3 3,279 33Cembre Inc. 1,295 6 2,929 29General Marking S.r.l. 2 955 89 2,797Total 6,638 1,004 18,985 3,150Cembre S.p.A. leased an industrial building to subsidiary General Marking. Rent for the building for2010 amounts to €100 thousand.With reference to assets and liabilities relating to subsidiaries shown above, we confirm that transactionswith the same and with related parties fall within the scope of normal operating activities.Guarantees granted include a guarantee of €2.5 million in favour of Cembre España S.L., and a guaranteeof €0.8 million against obligations of German subsidiary Cembre GmbH.Among assets leased to Cembre by third parties are an industrial building adjacent to the Company’sregistered office measuring a total of 5,960 square meters on three floors, in addition to the Milan,Padua and Bologna sales offices, all of which are owned by company Tha Immobiliare S.p.A., withregistered office in Brescia, controlled by Anna Maria Onofri, Giovanni Rosani and Sara Rosani,directors of Cembre S.p.A. Lease payments for 2010 amounted to €513 thousand. Rent is in linewith market conditions. It is in the Company’s interest to benefit from the continuity of office spacereducing the risk of early termination of leases. At the end of 2010, all amounts due to Tha Immobiliarehad been settled.Cembre Ltd. leased an industrial building from Borno Ltd., a company controlled by Lysne S.p.A.,for an annual rent of £38 thousand, this fee is in line with market conditions.Cembre S.p.A. does not have direct relationships with its parent company Lysne S.p.A. of any othernature than that of the exercise of shareholders’ rights on the part of the parent. Lysne S.p.A. doesnot carry out any management or coordination activity with respect to Cembre S.p.A.68

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SBoards’ compensationIn 2010, compensation for the Board of Directors and the Board of Statutory Auditors amounted to:Statutory Auditors DirectorsEmoluments as directors and auditors of the parent company 78 497Emoluments as directors of subsidiaries - 33Retribution as employees - 189Non-monetary benefits - 14Non-monetary benefi ts relate to the use of a company car and insurance policies underwritten ontheir behalf.28. RISK MANAGEMENT AND FINANCIAL INSTRUMENTSThe Group does not make significant use of derivative instruments to hedge against interest risk andcurrency exposure. The short term maturity of a large part of the financial instruments held is suchthat their carrying value is in line with their fair value of the same.At December 31, 2010 and 2009 the Group had not entered into financial derivative instruments.Risks connected with the marketThe Group faces these risks with ongoing innovation, the widening of the product range, the launchof lower cost products and the upgrade of its production process, implementing focused marketingpolicies also with the help of its foreign subsidiaries.Interest rate riskThe Group generally stipulates short-term floating-rate loans. At December 31, 2010, no loan remainedoutstanding. Bank debt consists exclusively of overdrafts.At December 31, 2010, subsidiary Cembre España SL had a credit line for a maximum of €1 millionexpiring on June 30, 2011. The interest rate on amounts withdrawn is equal to the Euribor rate plusa spread of 0.8%.The Group also makes use of bank overdrafts to face ordinary liquidity needs.Currency riskDespite a strong international presence, the Group does not have a significant exposure to currencyrisk (on an operating or equity basis), as it operates mainly in the euro area, the currency in whichits trade transactions are mainly denominated.Exposure to currency risk is determined mainly by sales in US dollars, British pounds and Norwegiankroners. The size of these transactions is not significant in influencing the overall performance ofthe Group.To hedge part of the currency risk deriving from supplied in euro of the parent company, UK subsidiaryCembre Ltd. entered into a forward contract whose terms are shown in the table below:69

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SDate ofcontractAmountin euroForwardexchangerateAmountin £Expiration12/11/2010 400,000 1.1750 340,426 07/01/201124/11/2010 250,000 1.1809 211,703 04/02/201124/11/2010 250,000 1.1809 211,703 04/03/201124/11/2010 250,000 1.1806 211,757 08/04/201108/12/2010 250,000 1.1921 209,714 04/02/201108/12/2010 250,000 1.1908 209,943 06/05/2011The effect of the above contracts at the exchange rate at December 31, 2010 would be a gain of £25thousand, equivalent to €29 thousand.As described in the consolidation principles section, financial statements of consolidated companiesprepared in currencies other than the euro are translated into euro at the exchange rate published onthe Internet site of the Ufficio Italiano Cambi.In the table that follows we report the economic effect of possible fluctuations in exchange rates formain financial figures of consolidated companies operating outside the euro area:CurrencyExchange ratefluctuationEffect onShareholders’EquityEffect on salesEffect onpre-tax profitCembre Ltd £ +5% / -5% 399 / (399) 668 / (668) 61 / (61)Cembre AS NOK +5% / -5% 38 / (38) 51 / (51) 11 / (11)Cembre Inc USD +5% / -5% 143 / (143) 287 / (287) 20 / (20)At December 31, 2010, the effect of foreign-exchange transactions is positive by €64 thousand.Liquidity riskThe exposure of the Group to liquidity risk is not material.Credit riskExposure to credit risk relates exclusively to trade receivables.As shown in note 4, none of the areas in which the Group operates poses relevant credit risks.Operating procedures limit the sale of products or services to customers who do not possess an adequatecredit profile or provide secured guarantees. Receivables matured over 12 months and those underlitigation are widely covered by the provision for bad debt accrued.29. SUBSEQUENT EVENTSNo event having signifi cant effects on the Group’s fi nancial position or operating performanceoccurred after the closing of the fi nancial year. In 2011 Cembre expects the Group to report a growthin turnover and profi ts.70

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S30. CONSOLIDATED COMPANIESThe consolidation area is unchanged from December 31, 2009.The capital stock of Cembre España SL was increased by €1 million. The capital increase was underwrittenby the parent company and subsidiary Cembre Ltd. according to their respective ownershipshare.Companies consolidated line-by-line are:Company Registered office Share capitalCembre LtdSutton Coldfield(Birmingham)Share heldat Dec. 31,2010Share held atDec. 31,2009£ 1,700,000 100% 100%Cembre Sarl Morangis (Paris) € 1,071,000 100% (*) 100% (*)Cembre España SLTorrejón de Ardoz(Madrid)€ 2,902,000 100% (*) 100% (*)Cembre AS Stokke (Norway) NOK 2,400,000 100% 100%Cembre GmbH Monaco (Germany) € 1,812,000 100% (*) 100% (*)Cembre IncEdison(New Jersey - Usa)US $ 840,000 100%(**) 100%(**)General Marking S.r.l. Brescia (Italy) € 99,000 100% 100%(*) of which 5% held through Cembre Ltd.(**) of which 29% held through Cembre Ltd.Brescia, March 15, 2011THE BOARD OF DIRECTORSOF PARENT COMPANY CEMBRE S.P.A.CHAIRMAN AND MANAGING DIRECTORGIOVANNI ROSANI71

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S72

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S73

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SReport of the Board of Statutory Auditors onConsolidated Financial Statements of the Cembre Groupat December 31, 2010To our Shareholders:the Consolidated Financial Statements for the 2010 financial year delivered to the Board of StatutoryAuditors within the term provided, consisting of Consolidated Balance Sheet, Consolidated IncomeStatement, Notes to the accounts, Statement of Consolidated Cash Flows and Statement of Changesin the Consolidated Shareholders’ Equity, were prepared under International Financial ReportingStandard (IFRS) adopted by the European Union and in compliance with regulations issued to implementarticle 9 of Legislative Decree 38/2005, in force at December 31, 2010.Amendments and interpretations issued by IASB, applicable from January 1, 2010, listed in the Notesto the consolidated accounts, have not been applied.Items in the Financial Statements were recorded at the historical cost.The Consolidated Financial Statements for the 2010 financial year close reporting a consolidatednet profit of €11,340 thousand, in the previous year consolidated net income amounted to €6,887thousand.Checks carried out by Independent Auditors PricewaterhouseCoopers, appointed for the auditing ofthe accounts, ascertained, as stated in the Auditing Report, that:- paragraph 3: “in our opinion the Consolidated Financial Statements of the Cembre Group at December31, 2010 are consistent with IFRS adopted by the European Union and are in compliancewith regulations issued to implement article 9 of Legislative Decree 38/2005. They are thereforeclear and represent in a truthful and correct manner the operating and financial situation, thenet profit, changes in the Consolidated Shareholders’ Equity and the cash flows of the CembreGroup for the financial year closed December 31, 2010”.- paragraph 4: “in our opinion the Report of the Board and information contained in paragraphs1, section c), d), f), l), m) and paragraph 2, section b) of article 123bis of Legislative Decree no.58/1998 presented in the Report on Corporate Government, are consistent with the ConsolidatedFinancial Statements of the Cembre Group for the financial year closed December 31, 2010”.In compliance with article 41, par. 3 of Legislative Decree no. 127, dated April 9, 1991, with theexception of the issues specified below, the Consolidated Financial Statements, were therefore notaudited by the Board of Statutory Auditors.The Notes to the consolidated accounts provide a detail of Balance Sheet and Income Statementitems and illustrate accounting principles, consolidation principles and valuation criteria applied inthe preparation of the same, in addition to changes in accounting principles applicable from 2011.The consolidation area, unchanged from the previous year, the choice of consolidation principles inapplication of the line-by-line method, of subsidiaries to be consolidated and of procedures for theconsolidation, are consistent with IFRS.74

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SInformation provided in the Report on Operations illustrates adequately the operating and financialsituation of the parent company, alternative performance indicators, Shareholders’ Equity, investmentsand revaluations made, main risks and uncertainties, the safety of personal information, environmentalmanagement, performance indicators, research and development activities, relationships withsubsidiaries, parent companies and related parties, its operating performance in 2010 and the outlookfor 2011 of the parent company and the Group as a whole.The review performed shows the Consistency of Report on Operations with the Consolidated FinancialStatements.Brescia, March 29, 2011The Board of Statutory AuditorsGuido AstoriAndrea BoreattiLeone ScuttiChairmanPermanent AuditorPermanent Auditor75

R E P O R T A N D A C C O U N T S 2 0 1 0 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SAttestation in respect of the Consolidated financial statementspursuant to article 81-ter of the regulation issued by the Italian market regulatory body (CONSOB) no. 11971 ofMay 14, 1999 and subsequent integrations and updatings.The undersigned Giovanni Rosani and Claudio Bornati, in their position as Managing Directorand Manager responsible for the preparation of financial reports of Cembre S.p.A.,respectively, pursuant to Article 154-bis, paragraphs 3 and 4 of Legislative Decree No.58/1998, certify that internal controls over financial reporting in place for the preparation of2010 consolidated financial statements and during the period covered by the report, were:• adequate to the Company structure, and• effectively applied during the process.The undersigned officers certify that this 2010 consolidated financial statements:a) corresponds to the Company’s evidence and accounting books and entries, andb) was prepared in accordance with International Financial Reporting Standards, as endorsedby the European Union through Regulation (EC) 1606/2002 of the European Parliament andCounsel, dated 19 July 2002;c) provide a fair and correct representation of the financial conditions, results of operationsand cash flows of the Company and its consolidated subsidiaries.The undersigned officers attest, also, that the report on operations includes a reliableoperating and financial review of the Company and of the Group aswell as a description ofthe main risks and uncertainties to which they are exposed.Brescia, March 16, 2010Chairman andManaging Directorsigned by:Giovanni RosaniManager responsible for thepreparation of financial reportssigned by:Claudio Bornati76

Financial Statements at December 31, 2010

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SStatement of Financial PositionASSETSNotes Dec. 31, 2010 Dec. 31, 2009of which:related partiesof which:related partiesA) NON CURRENT ASSETSTangible assets 1 24,318,488 23,143,129Intangible assets 2 544,912 616,128Investments in subsidiaries 3 10,243,083 9,292,893Financial assets available for sale 4 5,224 5,224Other non-current assets 5 5,182 8,138Deferred tax assets 13 357,546 281,060TOTAL NON-CURRENT ASSETS 35,474,435 33,346,572B) CURRENT ASSETSInventories 6 21,156,752 20,597,904Trade receivables 7 18,975,560 13,365,126Trade receivables from subsidiaries 8 6,637,423 6,637,423 4,889,734 4,889,734Tax receivables 82,204 1,068,853Other assets 9 290,387 212,342Cash and cash equivalents 8,975,859 5,004,166TOTAL CURRENT ASSETS 56,118,185 45,138,125C) NON-CURRENT ASSETS AVAILABLE FOR SALE - -TOTAL ASSETS (A+B+C) 91,592,620 78,484,697LIABILITIES AND SHAREHOLDERS’ EQUITYA) SHAREHOLDERS’ EQUITYCapital stock 10 8,840,000 8,840,000Reserves 10 52,188,989 49,630,392Net profi t 10 9,157,857 4,598,597TOTAL SHAREHOLDERS’ EQUITY 70,186,846 63,068,989B) NON-CURRENT LIABILITIESNon-current fi nancial liabilities - -Employee Severance Indemnity and other personnel benefits 11 2,611,402 120,897 2,772,640 160,817Provisions for risks and charges 12 71,712 68,031Deferred tax liabilities 13 2,314,306 2,303,400TOTAL NON-CURRENT LIABILITIES 4,997,420 5,144,071C) CURRENT LIABILITIESCurrent fi nancial liabilities 14 423 15,170Trade payables 15 9,873,704 6,925,603Trade payables to subsidiaries 16 1,004,205 1,004,205 382,329 382,329Tax payables 1,860,208 92,885Other Payables 17 3,669,814 2,855,650TOTAL CURRENT LIABILITIES 16,408,354 10,271,637D) LIABILITIES ON ASSETS HELD FOR DISPOSAL - -TOTAL LIABILITIES (B+C+D) 21,405,774 15,415,708TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (A+B+C+D) 91,592,620 78,484,69778

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SStatement of Comprehensive IncomeNotes 2010 2009of which:related partiesof which:related partiesRevenues from sales and services provided 18 72,750,859 18,795,379 56,334,119 15,905,109Other revenues 19 464,044 288,408 490,018 136,867TOTAL REVENUES 73,214,903 56,824,137Cost of goods and merchandise 20 (32,227,966) (3,135,083) (21,292,229) (2,248,276)Change in inventories 558,848 (2,843,537)Cost of services received 21 (7,648,022) (589,147) (7,150,146) (726,922)Lease and rental costs 22 (784,849) (513,060) (772,367) (511,271)Personnel costs 23 (18,074,534) (189,214) (16,304,352) (164,851)Other operating costs 24 (370,422) (261,919)Increase in assets due to internal construction 586,733 689,178Write-down of receivables (138,133) (99,300)Accruals to provisions for risks and charges 25 (7,946) (7,969)GROSS OPERATING PROFIT 15,108,612 8,781,496Tangible asset depreciation 1 (1,714,334) (1,733,483)Intangible asset amortization 2 (232,418) (251,942)OPERATING PROFIT 13,161,860 6,796,071Financial income 26 680,546 634,530 429,635 414,873Financial expenses 26 (28,048) (24,768)Foreign exchange gains (losses) 27 93,615 (88,527)PROFIT BEFORE TAXES 13,907,973 7,112,411Income taxes 28 (4,750,116) (2,513,814)NET PROFIT FROM ORDINARY ACTIVITIES 9,157,857 4,598,597NET PROFIT FROM ASSETS HELD FOR DISPOSAL - -NET PROFIT 9,157,857 4,598,597COMPREHENSIVE INCOME 9,157,857 4,598,59779

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SStatement of Cash Flows2010 2009A) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,004,166 894,080B) CASH FLOW FROM OPERATING ACTIVITIESNet profi t for the period 9,157,857 4,598,597Depreciation, amortization and write-downs 1,946,752 1,985,425(Gains)/Losses on disposal of assets (23,126) (2,766)Net change in Employee Severance Indemnity (161,238) (268,404)Net change in provisions for risks and charges 3,681 (223,677)Operating profit (loss) before change in working capital 10,923,926 6,089,175(Increase) Decrease in trade receivables (7,358,123) 5,064,478(Increase) Decrease in inventories (558,848) 2,843,538(Increase) Decrease in other receivables and deferred tax assets 832,118 (541,969)Increase (Decrease) of trade payables 3,557,164 (2,307,210)Increase (Decrease) of other payables and deferred tax liabilities 2,592,393 (949,103)Change in working capital (935,296) 4,109,734NET CASH FLOW (USED IN)/FROM OPERATING ACTIVITIES 9,988,630 10,198,909C) CASH FLOW FROM INVESTING ACTIVITIESCapital expenditure on fi xed assets:- intangible (161,202) (178,921)- tangible (2,911,249) (2,004,810)- fi nancial (950,190) -Proceeds from disposal of tangible, intangible, fi nancial assets- tangible 44,682 17,428Increase (Decrease) of trade payables for assets 12,813 994NET CASH FLOW (USED IN)/FROM INVESTING ACTIVITIES (3,965,146) (2,165,309)D) CASH FLOW FROM FINANCING ACTIVITIES(Increase) Decrease in other non current assets 2,956 (2,538)Increase (Decrease) in bank loans and borrowings (14,747) (1,200,976)Dividends distributed (2,040,000) (2,720,000)NET CASH FLOW (USED IN)/FROM FINANCING ACTIVITIES (2,051,791) (3,923,514)E) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (B+C+D) 3,971,693 4,110,086F) CASH AND CASH EQUIVALENTS AT END OF PERIOD (A+E) 8,975,859 5,004,16680

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T S2010 2009CASH AND CASH EQUIVALENTS AT END OF PERIOD 8,975,859 5,004,166Current fi nancial liabilities (423) (15,170)NET FINANCIAL POSITION 8,975,436 4,988,996INTEREST PAID IN THE PERIOD (16,388) (24,768)BREAKDOWN OF CASH AND CASH EQUIVALENTS AT END OF PERIODCash 2,429 3,109Banks 8,973,430 5,001,0578,975,859 5,004,16681

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SStatement of Changes in the Shareholders' EquityCapitalstockSharepremiumreserveLegalreserveSuspendedtaxreservesExtraordinaryreserveUrealizedgainsreserveExchangedifferencesreserveRetainedearningsNet profitTotalShareholders'EquityBalance at December 31, 2008 8,840,000 12,244,869 1,768,000 68,412 25,344,270 4,051,204 - 83,525 8,790,112 61,190,392Allocation of previous year netprofi t (1)6,099,388 54,249 (83,525) (8,790,112) (2,720,000)Other movements (54,249) 54,249 -Net profi t for 2009 4,598,597 4,598,597Balance at December 31, 2009 8,840,000 12,244,869 1,768,000 68,412 31,443,658 4,051,204 - 54,249 4,598,597 63,068,989Allocation of previous year netprofi t (1)2,558,597 (4,598,597) (2,040,000)Other movements 54,249 (54,249) -Net profi t for 2010 9,157,857 9,157,857Balance at December 31, 2010 8,840,000 12,244,869 1,768,000 68,412 34,056,504 4,051,204 - - 9,157,857 70,186,846(1) Dividends resolved by the Shareholders' Meeting are included in the Total Shareholders' Equity column under Allocation of previous year net profi t.82

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SNotes to the Financial Statements of Cembre S.p.A. at December 31, 2010I. CORPORATE INFORMATIONCembre S.p.A. is a joint-stock company with registered offi ce in Brescia, Via Serenissima 9.Cembre S.p.A. (hereinafter referred to as the “Company”) is active primarily in the manufacturingand sale of electrical connectors and related tools.The publication of the Financial Statements of Cembre S.p.A. for the year ended December 31,2010 was authorized by a resolution of the Board of Directors dated March 15, 2011.Cembre S.p.A. is controlled by Lysne S.p.A., a holding company based in Brescia, that does notdirect or coordinate its subsidiary.II. FORM AND CONTENT OF THE FINANCIAL STATEMENTSThe present Financial Statements at December 31, 2010 were prepared under the International FinancialReporting Standards (IFRS) adopted by the European Union and the related implementationregulations issued in application of article 9 of Legislative Decree no. 38/2005.Principles adopted in the preparation of the Financial Statements are those formally approved by theEuropean Union as of December 31, 2010. The Financial Statements at December 31, 2010 wereprepared in the expectation of the continuation of the Company’s activities.The table that follows contains a list of international accounting principles and interpretations approvedby the IASB that became effective from 2010, which were taken into account, where applicable,in the preparation of the present Financial Statements.Effective fromIAS 27 e IFRS 3 revised Jan. 1, 2010Amendments to IAS 32 Jan. 1, 2010Amendments to IAS 39 Jan. 1, 2010Amendments to IFRS 2 Jan. 1, 2010Amendments to IFRIC 14 Jan. 1, 2010IFRIC 17 – Distributions of Non-cash Assets to Owners Jan. 1, 2010IFRIC 18 – Transfers of Assets from Customers Jan. 1, 2010IFRIC 19 – Debt for Equity Swaps Jan. 1, 2010Improvements to 2009 IFRS Jan. 1, 2010Amendments and interpretations in the table above did not fi nd an application in the FinancialStatements of Cembre S.p.A. at December 31, 2010.Items in the Balance Sheet were recorded at the historical cost.Unless otherwise indicated, fi gures reported in the fi nancial statements and the related notes areexpressed in euro.83

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SFuture changes in accounting principlesStarting with the 2011 fi nancial year, the following accounting principles will become effectivewithout having an effect on the fi nancial statements of the Company:IAS 24 revised – Related partiesSimplifi es related parties disclosures in case of transactions involving public entities; it provides anew defi nition of related party.Amendments to IFRS 7New disclosure requirements for transfers of financial assets where there is continuing involvementbetween the parties.Improvements to 2010 IFRSThey consist of minor adjustments to accounting principles listed below:IFRS AdjustmentsIFRS 1 - Change of accounting principles in the year of fi rst adoption- Use of revalued cost as substitute for historical cost- Use of historical cost as substitute of cost for activities subject to regulated faresIFRS 3 - Transitory requirements for potential compensation deriving from businesscombinations that took place before the coming into effect of IFRS 3 Revised- Fair value carrying of minority interests- Stock option plans acquired or voluntarily replaced as a result of businesscombinationsIAS 27 - Transitory requisites for amendments following IAS 27IFRS 7 - Classifi cation of additional informationIAS 1 - Clarifi cations on the Statement of changes in the Shareholders’ EquityIAS 34 - Signifi cant events and transactionsIFRIC 13 - Fair value of bonus pointsThe following principles were issued but not yet approved by the EU:IFRS for Small and medium-sized EntitiesSimplification of some accounting rules and disclosure requirements over traditional IFRS.IFRS 9 – Financial InstrumentsThe principle sets new criteria for the classification of financial assets and liabilities.Cembre will evaluate in the next months the possible effects of the adoption of the new principles.84

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SIII. ACCOUNTING PRINCIPLES AND VALUATION CRITERIAForm of the Financial StatementsThe fi nancial statements are prepared as follows:- current and non-current assets and liabilities are reported separately in the Statement of FinancialPosition;- the analysis of costs in the Statement of Comprehensive Income is carried out based on thenature of the same;- the Statement of Cash Flows is prepared by applying the indirect method.Finally, with reference to Consob Regulation no. 15519 dated July 27, 2006, the Financial Statementsinclude a separate reporting of amounts pertaining to related parties, where significant.Property, plant and equipmentProperty, plant and equipment is recorded at the historical cost and reported net of accumulateddepreciation and losses in value. Ordinary maintenance and repair costs are not capitalized, and arecharged to the income statement in the year in which they are incurred.Depreciation commences when the asset is available for use and is calculated on a straight linebasis over the estimated residual useful life of the asset, taking into account its residual value.Depreciation rates applied refl ect the useful life generally attributed to the various classes of assets.Main depreciation rates used are:- Buildings and light installations: 3% – 10%- Plant and machinery: 10% – 15%- Industrial and commercial equipment: 15% – 25%- Other assets: 12% – 25%Land has an undetermined useful life and is therefore not subject to depreciation.The book value of property, plant and equipment is subjected to an impairment test whenever eventsor changes occurred indicate that the book value of the same can no longer be retrieved in line withthe depreciation schedule originally set. Whenever there exists such an indication, the assets or cashgenerating units are written down to refl ect their expected realizable value.The residual value of assets, their useful life and methods applied are reviewed annually and adjusted,where necessary, at the end of each year.Tangible assets are eliminated from the Balance Sheet at the time of their sale or when there nolonger exists the expectation of future economic benefi ts from their use or disposal. Losses and gains(calculated as the difference between net revenues from the disposal and the book value of the asset)are recorded in the Income Statement in the year in which they are disposed of.Leased assetsAssets held under a financial lease, through which all risks and benefits relating to ownership are transferredto the Group, are recorded under assets at the lower of their current value and the present valueof minimum lease payments due according to the contract, including the bullet payment due at the endof the lease to exercise the repurchase option.The liability corresponding to the lease contract is recorded under financial liabilities. Leased asset areclassified under the respective category among property, plant and equipment, and depreciated over theshorter period between the term of the lease and the expected residual useful life of the asset.Lease contracts in which the lessor holds all risks and enjoys all benefits deriving from the leased asset areclassified as operating leases and recorded as costs in the Income Statement over the term of the contract.85

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SIntangible assetsIntangible assets are recorded under assets, as provided by IAS 38 (Intangible assets), whenever it isprobable that future economic benefi ts are generated through use and when the cost of the intangibleasset can be determined in a reliable manner.Intangible assets acquired separately are initially capitalized at cost, while those acquired throughmergers are capitalized at their fair value at the time of acquisition.With the exception of development costs, assets generated internally cannot be recorded as intangibleassets.After the initial recording, intangible assets are carried in the balance sheet at cost, net of accumulatedamortization calculated on a straight-line basis over their expected useful economic life, and of writedownscarried out as a result of durable losses in value. Intangible assets having an indefi nite usefullife are not amortized and subjected periodically to an impairment test to assess possible loss in value.The useful life generally attributed to the various classes of assets is the following:- concessions and licenses: 5 to 10 years- software licenses 3 to 5 years- patents 2 years- development costs: 5 years- trademarks: 10 to 20 yearsAmortization commences when the asset is available for use, that is, when it is in a position and inthe necessary condition to operate in the manner intended by management.The book value of intangible assets is subjected to an impairment test whenever events or changesoccurred indicate that the book value of the same can no longer be retrieved in line with theamortization schedule originally set.Whenever there exists such an indication and the book value of the asset exceeds its realizable value,the value of the asset is written-down to its expected realizable value.Investments in subsidiariesInvestments in subsidiaries are recorded at cost, adjusted where necessary for losses in value.Any positive difference that emerges upon acquisition between the purchase cost and the portion ofthe Shareholders’ Equity acquired is therefore included in the book value of the investment.Investments in subsidiaries are subjected to an impairment test whenever indicators of a loss in valueare detected.Whenever it appears that an investment in a subsidiary has experienced a loss in value, the same isrecorded in the Income Statement as a write-down.Whenever losses of a subsidiary exceed the book value of the investment, the value of the same iswritten-down to zero and losses exceeding such value are recorded in a specific liability provision.In case the loss is subsequently reversed or reduced, the related amount is written-up in the IncomeStatement to the original cost of the investment.Financial assetsFinancial assets are initially recorded at cost, inclusive of accessory purchase costs, representing thefair value of the price paid. After the initial recording, fi nancial assets are valued in accordance withtheir fi nal purpose as described below.86

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SFinancial assets valued at fair value, whose change is recorded in the Income StatementThese are fi nancial assets held for trading purposes, acquired for the purpose of obtaining a profi tfrom short-term fl uctuations in price.Unless specifi cally designated as effective hedging instruments, derivatives are classifi ed as fi nancialassets held for trading purposes. Gains and losses on fi nancial assets held for trading purposes arerecorded in the income statement.Financial assets held to maturityFinancial assets other than derivatives that generate fi xed fi nancial fl ows or fl ows that may bedetermined and have a set maturity are classifi ed as Financial assets held to maturity when theCompany intends to and is capable of holding them to maturity.Financial assets that the Company decides to hold for an indefi nite period of time do not fall underthis category.After their initial recording, long-term fi nancial investments held to maturity, such as bonds, areaccounted for at the amortized cost, using the effective rate of interest method, representing therate at which estimated future payments or collections over the expected useful life of the asset arediscounted to their present value.The amortized cost is calculated keeping into account discounts and premiums, amortized over theterm of the fi nancial asset.Loans extended and receivablesLoans and receivables are non-derivative financial assets providing for fixed payments or paymentsthat may be determined, not listed on an active market.Such assets are recorded at the amortized cost using the actual discount rate method. Gains and lossesare recorded in the Income Statement whenever loans extended and receivables are eliminated fromthe accounts or they experience losses in value, in addition to the amortization process.Financial assets available for saleFinancial assets available for sale include fi nancial assets that do not fall under the above categories.After the initial recording, these are accounted for at fair value, while gains and losses are recordedunder a specifi c Shareholders’ Equity reserve until the assets are sold or a loss in value is ascertained.In such case, gains and losses accrued are charged to the income statement.In the case of securities widely traded on a regulated market, the fair value is determined withreference to the listed price at the closing of trading on the date of the fi nancial statements.In the case of fi nancial assets for which there does not exist an active market, the fair value isdetermined through valuation techniques based on the price recorded in recent transactions betweenunrelated parties or on the basis of the current market value of a similar instrument, or on discountedcash fl ows or option pricing models. Investments in other companies fall in this category.Loss in value of fi nancial assetsThe Company verifi es at least yearly the possible loss in value of individual fi nancial assets.These are recorded only at the time when there exists objective evidence, at the occurrence of one ormore events, that the asset has experienced a loss of value with respect to its initial recorded value.87

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T STreasury sharesTreasury shares are recorded as a reduction of Shareholders’ Equity in a specific reserve.The purchase, sale, issue or cancellation of own shares held does not determine the recording of anygain or loss in the Income Statement.InventoriesInventories are valued at the lower of cost and their expected realizable value, represented by theirnormal sale price, net of completion and selling costs.The cost of inventories includes the acquisition cost, the transformation cost and other costs incurredto take inventories to their current location and state.The cost of inventories is determined under the weighted-average method, inclusive of the cost ofbeginning inventories. Provisions for slow-moving stock are accrued for finished products, materialsand other supplies, keeping into account their expected useful life and retrievable value.Payables and receivablesReceivables are recorded initially at fair value and subsequently carried at the amortized cost, writtendownin case of loss in value. Payables are normally valued at the amortized cost, adjusted underexceptional conditions for changes in value.Cash and cash equivalentsCash and cash equivalents are recorded at face value.LoansLoans are initially recorded at cost, corresponding to the fair value of the amount received, net ofaccessory costs. After the initial recording, loans are valued at the amortized cost, using the effectiveinterest method.Foreign currency translationTransactions denominated in currencies other than the euro are initially accounted for in euro atthe exchange rate at the date of the transaction. Currency translation differences arising at the timeat which foreign currency receivables are collected and payables are paid out, are recorded in theincome statement.At the date of the fi nancial statements, monetary assets and liabilities denominated in currenciesother than the euro – consisting of cash on hand or assets and liabilities to be received or paid out,whose amount is set and may be determined – are translated into euro at the exchange rate at the dateof the fi nancial statements, recording in the income statement the currency translation difference.Non-monetary items denominated in currencies other than the euro are translated into euro at theexchange rate at the time of the transaction, representing the historical exchange rate.Provisions for risks and chargesProvisions for risks and charges are accrued against known liabilities, of certain or probable existence,whose amount and expiration cannot however be determined at the date of the financial statements.Accruals are made when the existence of a current obligation, legal or implicit, deriving from a pastevent, the fulfilment of which is expected to require the use of resources whose amount can be reliablyestimated, is probable.Provisions are valued at the fair value of liabilities. When the financial effect and the timing of thecash outflow can be estimated in a reliable manner, provisions include the interest component, recor-88

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T Sded in the Income Statement among financial income (expense). Provisions accrued are reviewed ateach accounting date and adjusted to bring them into line with the best estimate available to date.Employee retirement benefitsUnder IAS 19, and before the reform introduced by the 2007 Budget Law, the Employee SeveranceIndemnity was classified among defined benefit plans and was therefore subject to actuarial adjustments.After the reform, employee termination indemnities accrued up to December 31, 2006, continue to beaccounted for as defined benefit plans, while those accrued from January 1, 2007 are accounted for intwo different ways:- where the individual employee has opted for complementary pension funds, employee terminationindemnities accrued after January 1, 2007 and until the time at which the choice is made by theemployee, are accounted for as a defi ned benefi t plan. Subsequently they are accounted for as adefi ned contribution plan;- where the individual employee has opted for accumulation with the treasury fund of the nationalsocial security agency (INPS), indemnities accrued after January 1, 2007 are accounted for as adefi ned contribution plan.Elimination of financial assets and liabilitiesFinancial assets are eliminated when the Company ceases to hold rights to receive financial flowsderiving from the same or when such rights are transferred to another entity, that is when risks andbenefits of the financial instrument cease to have an effect on the financial position and operatingperformance of the Company.A financial liability is written-off exclusively when the related obligation is cancelled, fulfilled orexpired. Any material change in the contractual terms relating to the liability result in its cancellationand in the recording of a new liability. Any difference between the book value and the amount paid toextinguish the liability is recorded in the Income Statement.RevenuesRevenues are valued at the current value of the amount received or receivable.Disposal of assetsThe revenue is recognized when the Company has transferred the risks and benefits connected withthe ownership of the good, and ceases to exercise the activity associated with ownership and the actualcontrol over the asset sold.Services renderedRevenues are recorded based on the stage of completion of the operation at the date of the financialstatements. When the result of the service rendered cannot be reliably estimated, revenues are recordedonly to the extent of retrievable costs.The stage of completion is determined by valuing work carried out or by determining the proportionbetween costs incurred and total estimated costs to completion.InterestInterest is recorded in the period in which it accrues, using the effective interest method.DividendsDividends are recorded when the right of shareholders to receive them arises.89

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SGrantsGrants are recorded when there exists a reasonable certainty that that the same will actually be receivedand the company meets the conditions for the entitlement to the grant.Grants linked to cost components (operating grants) are recorded under “other revenues” and amortizedover several years so that revenues match the costs they are intended to compensate.The fair value of grants linked to assets (e.g. grants on the purchase of plant and equipment or grants forcapitalized R&D costs), is suspended under long-term liabilities and released to the income statementunder “other revenues” over the useful life of the asset to which it relates, thus in the period over whichthe depreciation expense relating to the asset is charged to the income statement.Financial chargesFinancial charges are recorded as a cost in the period in which they accrue. In accordance with IAS23 Revised, financial charges incurred in the acquisition of significant assets (qualifying assets) arecapitalized.Cost of goods purchased and services receivedThe cost of goods purchased and services received is recorded in the income statement based on theaccrual method.Income taxes (current, prepaid and deferred)Current taxes are determined based on a realistic estimate of the tax expense for the period inaccordance with applicable tax regulations. The Company records deferred and prepaid taxes arisingfrom temporary differences between the book value of assets and liabilities and the related valuesreported for tax purposes, in addition to differences in the value of assets and liabilities generated byconsolidation adjustments.Prepaid taxes are recorded only where there exists reasonable certainty of their retrieval through futureprofits within the term in which tax benefits are enjoyed. Deferred tax assets are recorded also wherethere exist deductible losses or tax credits, whenever it is deemed probable that sufficient future profitswill be generated in the medium-term (3 to 5 years).Financial derivativesDerivative fi nancial instruments are valued at market value (fair value). A derivative fi nancialinstrument can be acquired for trading or hedging purposes.Gains and losses on fi nancial instruments acquired for trading purposes are charged to the incomestatement.Derivatives acquired for hedging purposes may be accounted for under the hedge accounting method– offsetting the recording of the derivative in the income statement with adjustments to the value ofassets and liabilities hedged – only when derivatives meet specifi c criteriaHedge derivatives are classifi ed as “fair value hedges” when they are acquired to hedge against therisk of fl uctuations in the market value of the underlying asset or liability or fl uctuations in thefi nancial fl ows deriving from the same, both in the case of existing assets and liabilities or thosederiving from a future transaction.In the case of fair value hedges, gains and losses on the restatement of the market value of a derivativeinstrument are taken to the income statement.With regard to the hedging of fi nancial fl ows, gains and losses on the hedge instrument are recordedunder Shareholders’ Equity when they relate to the portion of the hedge considered effective, whilethe portion not hedged is recorded in the income statement.90

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SUse of estimatesIn the case of certain items and in accordance with IAS/IFRS, the Company made use of estimatesand assumptions based on prior experience and other factors deemed determinant, but not certain.Actual data could therefore differ from estimates and projections made.Estimated data is reviewed periodically and adjustments made to the same are taken to the IncomeStatement for the period in which the review takes place in case the review affect only one period,or, subsequent accounting periods in case it affects also the same. Below we describe review processesand key assumptions used by management in applying accounting principles.Provision for doubtful accountsThe provision for doubtful accounts reflects management estimates regarding losses on trade receivables.Losses on trade receivables expected by the Company are based on past experience on similarportfolios of receivables, current overdues vs. historical overdues, losses and collections, the closemonitoring of credit risk and credit worthiness of customers, in addition to projections on economicand market conditions.Retrievable value of non-current assetsNon-current assets include property, plant and equipment, intangible assets, investments and otherfinancial assets. Whenever circumstances so require, the management reviews periodically the bookvalue of non-current assets held and used by the Company, in addition to assets to be disposed of. Suchactivity is carried out using estimates of expected cash flows from the sale of the asset and of adequatediscount rates used in calculating the present value of the same. Whenever the book value of a noncurrentasset experiences a loss in value, the Company records a write-down equal to the differencebetween the book value of the asset and its retrievable value either through use or disposal of the same.Post-retirement benefitsIn the estimation of post-retirement benefits the Company makes use of traditional actuarial techniquesbased on stochastic simulations of the “Montecarlo” type. Assumptions made relate to thediscount rate and the annual inflation rate. Actuarial advisors of the Company make also use of demographicprojections based on current mortality rates, employee disablement and resignation rates.In 2010, based on past turnover experience, the probability of an employee terminating his or heremployment for causes other than death is the following:Male 6.18%Female 4.46%Assumptions regarding the discounting and infl ation rates were:Discounting rate 4.50%Yearly infl ation rate 2.00%Yearly increase in post-retirement benefi ts 3.00%Expected advances to be paid out are 5% per year and each advance corresponds to 70% of theaccrued indemnity.91

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SRetrievability of deferred tax assetsThe Company evaluates the possibility to retrieve deferred tax assets on the basis of profits and expectedfuture market conditions in view of current sale contracts and ability of expected future profitsto offset tax credits, in addition to the expected variance of the same.Potential liabilitiesIn carrying out its activity, management consults with its legal and tax advisors and experts. The Companyascertains a liability arising from litigation whenever it deems probable that a financial outlay will be madein the future and when the amount of resulting losses can be reasonably estimated. In case a financialoutlay becomes possible but its amount cannot be determined, such occurrence is reported in the notes.IV. NOTES TO THE FINANCIAL STATEMENTS OF CEMBRE S.P.A.1. PROPERTY, PLANT AND EQUIPMENTLand andbuildingsPlant andmachinery Equipment OtherassetsWork inprogressTotalHistorical cost 20,609,155 28,343,662 5,691,128 3,624,975 1,786,279 60,055,199Accumulated depreciation (5,298,153) (23,712,939) (4,835,163) (3,065,816) - (36,912,071)Bal. at Dec. 31, 2009 15,311,002 4,630,723 855,965 559,159 1,786,279 23,143,128Increases 374,718 1,538,670 96,116 351,050 550,695 2,911,249Depreciation (392,698) (938,842) (136,223) (246,571) - (1,714,334)Net divestments - (6,282) - (2,563) (12,710) (21,555)Reclassifications 900 207,631 10,467 - (218,998) -Bal. at Dec. 31, 2010 15,293,922 5,431,900 826,325 661,075 2,105,266 24,318,488Land andbuildingsPlant andmachinery Equipment OtherassetsWork inprogressTotalHistorical cost 20,296,282 28,117,410 5,279,442 3,642,411 1,221,250 58,556,795Accumulated depreciation (4,917,767) (23,041,669) (4,744,919) (2,965,976) - (35,670,331)Bal. at Dec. 31, 2008 15,378,515 5,075,741 534,523 676,435 1,221,250 22,886,464Increases 308,385 474,479 336,845 144,185 740,916 2,004,810Depreciation (380,386) (974,981) (118,292) (259,824) - (1,733,483)Net divestments - (674) - (1,637) (12,351) (14,662)Reclassifications 4,488 56,158 102,889 - (163,535) -Bal. at Dec. 31, 2009 15,311,002 4,630,723 855,965 559,159 1,786,280 23,143,12992

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SThe Company invested €1,538 thousand in plant and equipment, among which a transfer machinefor €567 thousand.Capital expenditure on other assets consists prevalently of the renewal of the vehicle fl eet, for€147 thousand, and the purchase of software for €160 thousand.Expenditure on machinery and dies manufactured in-house was also relevant (€395 thousand).Total capital expenditure in 2010 amounts to €2.9 million, up from €0.9 million on 2009.Item “Land and buildings” includes the €5,921 thousand revaluation of land carried out upon thefi rst-time application of international accounting principles (IAS).2. INTANGIBLE ASSETSDevelopmentPatents Software TotalcostsHistorical cost 322,072 - 3,027,115 3,349,187Accumulated amortization (234,263) - (2,498,796) (2,733,059)Balance at Dec. 31, 2009 87,809 - 528,319 616,128Increases 10,960 35,935 114,307 161,202Amortization (37,356) (8,693) (186,369) (232,418)Balance at Dec. 31, 2010 61,413 27,242 456,257 544,912The implementation of the SAP administrative software is underway at the French and Spanish subsidiariesof the Group.The cost of the implementation of this software for 2010 amounted to €95 thousand.3. INVESTMENTS IN SUBSIDIARIESDec. 31, 2009 Changes Write-downs Dec. 31, 2010Cembre Ltd 3,437,433 - - 3,437,433Cembre Sarl 1,048,197 - - 1,048,197Cembre España SL 1,810,004 950,190 - 2,760,194Cembre AS 293,070 - - 293,070Cembre GmbH 1,716,518 - - 1,716,518Cembre Inc. 888,671 - - 888,671General Marking S.r.l. 99,000 - - 99,000Total 9,292,893 - - 10,243,08393

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SThe table below shows financial highlights of subsidiaries, all of which are directly owned.Subsidiary Share capital Sh. Equity Net profit %(€) (€) (€) heldCembre Ltd (Sutton Coldfield - UK) 1,975,023 7,979,841 883,044 100Cembre Sarl (Morangis - Paris, France) 1,071,000 3,421,842 62,544 95(a)Cembre España SL (Torrejón de Ardoz - Madrid, Spain) 2,902,200 7,772,458 272,781 95(a)Cembre AS (Stokke - Norway) 307,692 757,032 157,050 100Cembre GmbH (Monaco - Germany) 1,812,000 3,939,212 364,168 95(a)Cembre Inc. (Edison - New Jersey-Usa) 1,077,683 2,868,667 224,050 71(b)General Marking S.r.l. (Brescia - Italy) 99,000 2,277,584 746,935 100(a) the remaining 5% held through Cembre Ltd.(b) the remaining 29% held through Cembre Ltd.Share Capital, Shareholders' Equity and Net Profit figures above relate to the respective FinancialStatements at December 31, 2010 approved by the boards of the above subsidiaries. Share Capital andReserves originally not expressed in euro were translated at the year-end exchange rates, while Net Profitfigures were translated into euro at the average exchange rate for the year.4. OTHER INVESTMENTSDec. 31, 2010 Dec. 31, 2009 ChangeInn.tec. srl 5,165 5,165 -Conai 59 59 -Total 5,224 5,224 -Other investments consist in the equity investments in Consorzio Nazionale Imballaggi and that in Inn.tec. S.r.l., technology innovation consortium, both with registered office at the Brescia Province head office.5. OTHER NON-CURRENT ASSETSThe item consists exclusively of security deposits.6. INVENTORIESDec. 31, 2010 Dec. 31, 2009 ChangeRaw materials 5,892,198 5,409,341 482,857Work in progress and semi-finished goods 7,825,612 6,882,568 943,044Finished goods 7,438,942 8,305,995 (867,053)Total 21,156,752 20,597,904 558,84894

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SThe provision for slow-moving stock amounts to €850 thousand and it grew by €238 thousand inthe year.The provision was charged directly to the value of finished products to bring their value into linewith their expected realizable value.7. TRADE RECEIVABLESDec. 31, 2010 Dec. 31, 2009 ChangeGross trade receivables 19,350,728 13,714,563 5,636,165Provision for doubtful accounts (375,168) (349,437) (25,731)Total 18,975,560 13,365,126 5,610,434Trade receivables by geographical area:(€’000) Dec. 31, 2010 Dec. 31, 2009 ChangeItaly 17,348 12,295 5,053Europe 1,142 658 484North America 90 86 4Oceania 142 274 (132)Middle East 495 195 300Far East 78 142 (64)Africa 56 65 (9)Total 19,351 13,715 5,636The provision for doubtful accounts is reviewed periodically on the basis of the retrievability of individualexposures.Whenever bankruptcy procedures are opened, the amount receivable from the related customer iswritten-off. To provide further protection, a provision for overall bad debt is accrued.Changes in the provision for doubtful accounts in the year are shown below:2010 2009Balance at January 1 349,437 336,038Accruals 138,133 99,300Uses (112,402) (85,901)Balance at December 31 375,168 349,43795

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T STrade receivables by maturity at Dec. 31, 2010(€’000)Notmatured0-90days91-180days181-365daysOver oneyearUnderlitigationTotal2010 17,423 795 442 269 376 46 19,3512009 12,008 756 255 357 285 54 13,7158. TRADE RECEIVABLES FROM SUBSIDIARIESDec. 31, 2010 Dec. 31, 2009 ChangeCembre Ltd (UK) 1,874,747 1,353,758 520,989Cembre Sarl (France) 915,243 518,310 396,933Cembre España SL (Spain) 1,353,824 1,159,863 193,961Cembre AS (Norway) 2,010 97 1,913Cembre GmbH (Germany) 1,195,001 764,428 430,573Cembre Inc. (US) 1,294,934 1,087,935 206,999General Marking S.r.l. (Italy) 1,664 5,343 (3,679)Total 6,637,423 4,889,734 1,747,6899. OTHER ASSETSDec. 31, 2010 Dec. 31, 2009 ChangeAdvances to suppliers 92,403 122,847 (30,444)Receivable from employees 18,710 20,650 (1,940)VAT and other indirect taxes receivable 93,663 - 93,663Other 85,611 68,845 16,766Total 290,387 212,342 78,045Item “Other” consists mainly of social security (INPS) receivables.96

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T S10. SHAREHOLDERS’ EQUITYAt December 31, 2010, the capital stock amounted to €8,840,000, and was made up of 17 millionordinary shares of par value €0.52 each, fully underwritten and paid-up.The legal reserve amounts to 20% of the share capital.The table that follows shows the origin, possible uses and availability for distribution of equity reserves.Nature/description Amount Uses Portion availableShare capital 8,840,000Equity reserves:Share premium reserve 12,244,869 A B C 12,244,869Revaluation reserve 585,159 A B ---Suspended-tax reserves 68,412 B ---Reserves accrued from earnings:Legal reserve 1,768,000 B ---Reserve for transition to IAS/IFRS 4,051,204 B ---Extraordinary reserve 33,471,345 A B C 33,471,345Total 61,028,989 45,716,214Portion not available for distribution 195,617Portion available for distribution 45,520,597Legend: A= capital increases; B= coverage of losses; C= distribution to Shareholders.The portion not available for distribution to shareholders is made up by the sum of the unamortizedbalance of development costs and the residual accelerated depreciation, net of related deferred taxliabilities.11. EMPLOYEE TERMINATION INDEMNITY AND OTHER PERSONNEL PROVISIONSChanges in the provision are shown below.2010 2009Beginning balance 2,772,640 3,041,043Accruals 687,025 634,437Uses (386,830) (358,524)Discounting effect 70,382 (14,823)Social Security (INPS) pension fund (531,815) (529,493)Closing balance 2,611,402 2,772,640With the reform of employee termination indemnities, starting with January 1, 2007, Cembre S.p.A.is no longer required to accrue retirement benefi ts in favour of its employees in a provision, butpays out benefi ts accrued after such date to the INPS treasury account, unless such benefi ts have97

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T Sbeen destined to other pension funds by individual employees. The amount accrued with INPS atDecember 31, 2010 amounts to €2,110 thousand.Employee termination indemnities accrued at December 31, 2010 were discounted on the basis of anevaluation made by a registered actuary, in accordance with current regulations.12. PROVISIONS FOR RISKS AND CHARGESCustomer indemnitiesAt December 31, 2009 68,031Accruals 7,946Uses (4,265)At December 31, 2010 71,71213. DEFERRED TAX ASSETS AND LIABILITIESDeferred tax assets are recorded prevalently against the provision for slow moving stock describedabove, and against the discounting of employee termination indemnities, limited to the portion ofthe accrual that may not be deducted for tax purposes. Deferred tax liabilities are instead recordedprevalently against the revaluation of land carried out upon the fi rst-time application of IFRS, againstthe valuation of inventories at the average cost (as for tax purposes these are valued at LIFO), inaddition to the discounting of employee termination indemnities. Further detail is provided in thenote on Income taxes. No receivable matures beyond fi ve years.Dec. 31, 2010 Dec. 31, 2009Deferred tax liabilitiesAverage cost valuation of inventories (246,596) (165,631)Accelerated depreciation (64,147) (89,482)Reversal of land depreciation (27,030) (27,030)Revaluation of land (1,859,165) (1,859,165)Discounting of employee termination indemnity (91,944) (111,299)Capital gain on sale of industrial building (24,029) (48,058)Foreign exchange translation differences (1,395) (2,735)Gross deferred tax liabilities (2,314,306) (2,303,400)Deferred tax assetsWrite-down of inventories 266,900 192,251Goodwill amortization 32,953 37,936Provision for bad accounts 27,500 27,500Other 30,193 23,373Gross deferred tax assets 357,546 281,060Net deferred tax liabilities (1,956,760) (2,022,340)There do not exist other temporary differences or accruals that can generate deferred taxes notaccounted for.98

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T S14. CURRENT FINANCIAL LIABILITIESThe item includes exclusively bank overdrafts generated in the ordinary management of collectionsand payments.15. TRADE PAYABLES TO SUPPLIERSDec. 31, 2010 Dec. 31, 2009 ChangePayable to suppliers 9,767,751 6,862,673 2,905,078Advances 105,953 62,930 43,023Total 9,873,704 6,925,603 2,948,101Trade payables to suppliers are recorded net of trade discounts. Cash discounts are instead recordedat the time of payment.The nominal value of trade payables is adjusted for returns and trade discounts (invoicing adjustments)agreed upon with the counterpart.Trade payables by geographical area(€’000) Dec. 31, 2010 Dec. 31, 2009 ChangeItaly 8,457 5,825 2,632Europe 1,186 973 213North America 1 2 (1)Oceania 117 43 74Other 7 20 (13)Total 9,768 6,863 2,90516. TRADE PAYABLES TO SUBSIDIARIESDec. 31, 2010 Dec. 31, 2009 ChangeCembre Ltd (UK) 39,640 40,105 (465)General Marking S.r.l. (Italy) 955,433 308,301 647,132Cembre GmbH (Germany) 3,326 12,758 (9,432)Cembre Sarl (France) - 21,165 (21,165)Cembre Inc. (US) 5,806 - 5,806Total 1,004,205 382,329 621,87699

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T S17. OTHER PAYABLESDec. 31, 2010 Dec. 31, 2009 ChangePayables to employees 1,133,763 714,674 419,089Employee withholding taxes payable 619,949 622,521 (2,572)Commissions payable 189,199 151,287 37,912Payable to Statutory Auditors 17,691 13,129 4,562Social security payables 1,477,561 1,228,817 248,744Payable on other taxes and withholding taxes 23,946 12,245 11,701VAT payable 203,179 106,435 96,744Other 4,526 6,542 (2,016)Total 3,669,814 2,855,650 814,16418. REVENUES FROM SALES AND SERVICES PROVIDEDRevenues by geographical area2010 2009 ChangeItaly 41,495,533 30,808,726 10,686,807Rest of Europe 22,300,570 19,078,321 3,222,249Rest of the world 8,954,756 6,447,072 2,507,684Total 72,750,859 56,334,119 16,416,740Changes are commented upon in the Management Report.19. OTHER REVENUES2010 2009 ChangeCapital gains on disposal of assets 27,771 4,749 23,022Rent 99,899 98,875 1,024Insurance damages 1,019 31,176 (30,157)Other reimbursements 108,296 86,182 22,114Intercompany services 183,390 - 183,390Other 43,669 38,338 5,331Reversal of INAIL provision (social security) - 230,698 (230,698)Total 464,044 490,018 (25,974)Intercompany services include prevalently advisory services, support and training provided by theparent company’s personnel at the subsidiaries upon the implementation of the SAP managementsoftware. The item includes also royalties for the use of the Cembre trademark.100

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T S20. COST OF RAW MATERIALS AND GOODS2010 2009 ChangeRaw materials and goods 29,863,481 19,289,834 10,573,647Consumables and auxiliary materials 2,196,821 1,863,100 333,721Transport and customs 167,664 139,295 28,369Total 32,227,966 21,292,229 10,935,73721. COST OF SERVICES2010 2009 ChangeSubcontracted work 2,150,570 1,722,605 427,965Transport 814,019 712,601 101,418Maintenance and repair 855,354 927,039 (71,685)Electricity, heating and water 816,427 774,916 41,511Consulting 593,608 646,243 (52,635)Directors’ compensation 540,553 684,157 (143,604)Statutory Auditors’ compensation 77,642 66,972 10,670Commissions 280,669 229,941 50,728Postage and telephone 163,449 145,967 17,482Fuel 170,749 138,586 32,163Travelling expenses 228,702 169,434 59,268Insurance 172,173 169,102 3,071Bank expenses 77,012 71,634 5,378Personnel training 34,202 26,103 8,099Advertising and promotion 94,743 44,988 49,755Security and cleaning 330,657 322,569 8,088Other 247,493 297,289 (49,796)Total 7,648,022 7,150,146 497,87622. LEASES AND RENTALS2010 2009 ChangeRent and related costs 532,803 542,261 (9,458)Vehicle leasing 252,046 230,106 21,940Total 784,849 772,367 12,482Lease and rental costs are made up by rent paid on buildings leased from others and related parties,as described in the Report on Operations, and by motor vehicle lease costs.101

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T S23. PERSONNEL COSTSThe item includes the cost of employees, inclusive of paid holidays and accruals made pursuant tocurrent regulations and collective labour contracts. Employee termination indemnities include theaccrual for the year inclusive of the revaluation of the provision, the amount accrued by employeesterminating employment in the year, and the share borne by employees of contributions to theCOMETA integrative pension fund.2010 2009 ChangeWages and salaries 12,856,060 11,493,520 1,362,540Social security contributions 3,927,242 3,634,990 292,252Employee termination indemnities 937,259 831,973 105,286Retirement benefits 22,907 21,658 1,249Other costs 331,066 322,211 8,855Total 18,074,534 16,304,352 1,770,182Average number of employees by category2010 2009 ChangeManagers 6 6 -Administrative and commercial staff 155 155 -Workers 192 199 (7)Outsourced personnel 15 7 8Total 368 367 1In 2010 Cembre S.p.A. employed an average of 15 persons outsourced from others for a total cost of€516 thousand. The amount was classified under wages and salaries.24. OTHER OPERATING COSTS2010 2009 ChangeSundry taxes 132,362 123,200 9,162Donations 15,100 13,000 2,100Capital losses 4,645 - 4,645Fines 30,317 - 30,317Other 187,998 125,719 62,279Total 370,422 261,919 108,503Fines resulted from the audit carried out by Tax Authorities in the Autumn of 2010.102

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T S25. ACCRUALS TO PROVISIONS FOR RISKS AND CHARGES2010 2009 ChangeCustomer indemnities 7,946 7,969 (23)The customer indemnities provision amounts to €7,946 thousand and was accrued against possiblecharges in the case of the termination of agency mandates.26. FINANCIAL INCOME (EXPENSE)2010 2009 ChangeLoans and bank overdrafts (4,517) (21,672) 17,155Other financial charges (23,531) (3,096) (20,435)(28,048) (24,768) (3,280)Dividends from subsidiaries 634,530 414,873 219,657Interest earned on bank account balances 44,360 13,665 30,695Other financial income 1,656 1,097 55946,016 14,762 31,254Financial income (expense) 652,498 404,867 247,631In 2010, Cembre S.p.A. received dividends from:- French subsidiary Cembre Sarl (€180 thousand);- UK subsidiary Cembre Ltd (£395 thousand, equivalent to €454 thousand).In 2010, Cembre Sarl also paid €9 thousand in dividends to Cembre Ltd.27. FOREIGN-EXCHANGE GAINS (LOSSES)The item is made up as follows:2010 2009 ChangeRealized foreign exchange gains 162,014 125,255 36,759Realized foreign exchange losses (83,297) (223,728) 140,431Gains on foreign exchange translation 19,867 19,146 721Losses on foreign exchange translation (4,968) (9,200) 4,232Total 93,616 (88,527) 182,143103

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T S28. INCOME TAXES2010 2009 ChangeCurrent corporate (IRES) taxes (3,616,885) (2,011,612) (1,605,273)Current taxes on productive activity (IRAP) (1,020,840) (745,783) (275,057)Deferred tax assets 65,579 235,766 (170,187)Extraordinary gains 59,126 7,815 51,311Extraordinary losses (237,096) - (237,096)Total (4,750,116) (2,513,814) (2,236,302)The accrual to the tax provision is made in accordance with expected taxable income, taking into accountadjustments made to income reported in the statutory accounts.The table that follows shows a reconciliation between the theoretical tax expense, calculated at thenominal tax rate, and the actual tax expense.IRESProfit before taxes 13,907,974Theoretical tax expense (27.5%) 3,824,693Effect of permanent differences (228,903)Effect of temporary differences 25,090Grants on energy saving (3,994)Actual tax expense recorded 3,616,885IRAPGross taxable income for IRAP purposes 31,382,473Theoretical tax expense (3.9%) 1,223,916Effect of permanent differences 17,213Effect of temporary differences (5,566)Deductions for personnel (214,723)Actual tax expense recorded 1,020,840In 2010 Cembre S.p.A. was audited by Italian Tax Authorities.Keeping into account exceptions made at the conclusion of the audit, the Company capitalized anadditional €79 thousand of maintenance costs and €34 thousand of patents which had previouslybeen expensed in the income statement.The Company also recorded €237 thousand in extraordinary losses on previous years’ taxes, €59thousand in extraordinary gains on previous years’ taxes and €30 thousand in fines, included underOther operating costs (note 24).104

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SDeferred tax assets and liabilities are made up as follows:2010 2009Average cost valuation of inventories (80,965) 179,169Accelerated depreciation 25,335 28,783Discounting of employee termination indemnity 19,355 (4,076)Capital gain on sale of building 24,029 24,028Foreign exchange translation differences 1,340 12,183Write-down of inventories 74,649 -Amortization of goodwill (4,983) (4,983)Risk provision - (5,308)Other 6,819 5,970Total deferred tax assets and liabilities 65,579 235,76629. DIVIDENDSOn May 21, 2010 the Company distributed (with ex-dividend date May 17) a dividend on net profitfor the year ended December 31, 2009 amounting to €2,040 thousand, equivalent to €0.12 for eachshare entitled to dividends.(€’000) 2010 2009Resolved and paid in the yearBalance due for 2009 dividend: 0.12 euro (2008: €0.16) 2,040 2,720Proposal submitted to the Shareholders’ Meeting (not recorded as liability at December 31)Balance due for 2010 dividend: €0.26 (2009: €0.12) 4,420 2,040Proposed dividends submitted for approval to the Shareholders’ Meeting amount to €0.26 per share,for a total of €4,420 thousand. This amount was not recorded as a liability at December 31.30. COMMITMENTS AND RISKSAt December 31, 2010, guarantees granted by Cembre S.p.A. to third parties amounted to €3,869,932,as compared with €6,103,175 at December 31, 2009.Guarantees granted include a guarantee of €2,500 thousand in favour of Cembre España S.L., and aguarantee of €800 thousand against obligations of German subsidiary Cembre GmbH.Commitments with third parties at December 31, 2010 included guarantees granted to the BresciaMunicipality amounting to €452 thousand against the construction of development infrastructurein connection with the building of new parking spaces and entrance at the Brescia main complex.The residual amount (€118 thousand) relates to guarantees for supplies granted to electrical andrailway companies, both Italian and foreign.105

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T S31. NET FINANCIAL POSITIONAt December 31, 2010, the net financial position of Cembre S.p.A. amounted to a surplus of €8,975thousand, improving sharply on the end of the previous year.At December 31, 2010, the Company did not have outstanding loans containing covenants or negativepledges.The table that follows provides a detail of the net financial position as provided by Consob RegulationDEM/6064313 dated July 28, 2006:Dec. 31, 2010 Dec. 31, 2009A Cash 2,429 3,109B Bank deposits 8,973,430 5,001,057C Cash and equivalents (A+B) 8,975,859 5,004,166D Financial receivables - -E Current bank debt (423) (15,170)F Current financial debt (423) (15,170)G Net current financial position (C+D+F) 8,975,436 4,988,996H Non-current financial debt - -I Net financial position (G+H) 8,975,436 4,988,99632. RELATED PARTIESThe table that follows shows transactions between Cembre S.p.A. and its subsidiaries in 2010,limited to sales and purchases. Debit and credit balances are shown in the related paragraphs of thepresent notes.Subsidiary Sales PurchasesCembre Ltd. 5,671,423 286,760Cembre S.a.r.l. 2,998,827 3,936Cembre España S.L. 3,554,193 -Cembre AS 463,801 -Cembre Inc. 2,929,471 28,527General Marking S.r.l. 88,707 2,797,389Cembre GmbH 3,278,616 33,471Total 18,985,038 3,150,083As required by CONSOB, Cembre S.p.A.’s shareholdings over 10% held in limited liability publiclytraded companies and unlisted joint-stock companies at December 31, 2010, are shown in the tablebelow.106

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SThe Company holds full title to the investments listed below.Share % held % ofCompany Head office Capitalvotingdirectly indirectly through total rightsCembre Ltd. Sutton Coldfield(Birmingham - UK)£ 1,700,000 100% 100% 100%Cembre S.a.r.l. Morangis(Paris - France)€ 1,071,000 95% 5% Cembre Ltd 100% 100%CembreEspaña S.L.Torrejon de Ardoz(Madrid – Spain)€ 2,902,000 95% 5% Cembre Ltd 100% 100%Cembre AS Stokke(Norway)Nok 2,400,000 100% 100% 100%Cembre GmbH Munich(Germany)€ 1,812,000 95% 5% Cembre Ltd 100% 100%Cembre Inc. Edison(New Jersey - USA)US$ 1,440,000 71% 29% Cembre Ltd 100% 100%General Brescia € 99,000 100% 100% 100%Marking S.r.l. (Italy)Cembre S.p.A. leased an industrial building to subsidiary General Marking. Rent for the building for2010 amounts to €100 thousand.Among assets leased to Cembre by third parties are an industrial building adjacent to the Company’sregistered office measuring a total of 5,960 square meters on three floors, in addition to the Milan, Paduaand Bologna sales offices, all of which are owned by company Tha Immobiliare S.p.A., with registeredoffice in Brescia, controlled by Anna Maria Onofri, Giovanni Rosani and Sara Rosani, directors ofCembre S.p.A. Lease payments for 2010 amounted to €513 thousand. Rent is in line with marketconditions. It is in the Company’s interest to benefit from the continuity of office space reducing therisk of early termination of leases. At the end of 2010, all amounts due to Tha Immobiliare had beensettled.With reference to assets and liabilities relating to subsidiaries shown above, we confirm that transactionswith the same and with related parties fall within the scope of normal operating activities.Cembre S.p.A. does not have direct relationships with its parent company Lysne S.p.A. of any othernature than that of the exercise of shareholders’ rights on the part of the parent. Lysne S.p.A. does notcarry out any management or coordination activity with respect to Cembre S.p.A.33. RISK MANAGEMENT AND FINANCIAL INSTRUMENTSDue to its minimal exposure, Cembre S.p.A. does not make signifi cant use of derivative instrumentsto hedge against interest risk and currency exposure. At December 31, 2010 and 2009 the Companyhad not entered into fi nancial derivative instruments.Risks connected with the marketThe Company faces these risks with ongoing innovation, the widening of the product range, thelaunch of lower cost products and the upgrade of its production process, implementing focusedmarketing policies also with the help of its foreign subsidiaries.Interest rate riskThe Company generally stipulates short-term fl oating-rate loans. At December 31, 2010, no loanremained outstanding. Bank debt consists exclusively of overdrafts.107

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SThe short-term maturity of a large portion of fi nancial instruments held is such that their carryingvalue is in line with the fair value of the same.Currency riskDespite a strong international presence, Cembre S.p.A. does not have a signifi cant exposure tocurrency risk (on an operating or equity basis), as it operates mainly in the euro area, the currency inwhich its trade transactions are mainly denominated.At December 31, 2010, the following foreign exchange positions were held:2010 2009€ €Receivables in US$ 1,805,377 1,351,128 1,694,725 1,176,402Payables in US$ 30,739 23,005 25,179 17,478Payables in AUS$ 158,539 120,691 102,676 64,141Payables in CHF 118 94 30,940 20,855Payables in GBP 90 105 862 971Amounts were translated into euro at the exchange rate applicable at December 31, 2010.The translation generated a positive €5 thousand difference with respect to the value originallybooked, difference which was recorded in the income statement. In the table that follows we reportthe economic effect of possible fl uctuations in exchange rates of the said amounts.(migliaia di euro)Exchange rate changeReceivables(€’000)Payables(€’000)2010 5% (64) 7-5% 71 (14)2009 5% (56) 5-5% 62 (10)As illustrated above, the size of these transactions and the resulting balances are not signifi cant ininfl uencing the overall performance of the Company.Liquidity riskThe exposure of the Company to liquidity risk is not material.Credit riskExposure to credit risk relates exclusively to trade receivables.As shown in note 7, none of the areas in which Cembre S.p.A. operates poses relevant credit risks.Average collection time of trade receivables is 83 days, as compared with 76 days in 2009.Operating procedures limit the sale of products or services to customers who do not possess anadequate credit profi le or provide guarantees.Receivables matured over 12 months and those under litigation are widely covered by the provisionfor doubtful accounts accrued.108

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T S34. SUBSEQUENT EVENTSNo event having signifi cant effects on the Company’s fi nancial position or operating performanceoccurred after the closing of the fi nancial year.In 2011 Cembre expects turnover and profi ts to grow.AttachmentsThe present document contains the following attachments:Attachment 1: Comparative Income Statement.Attachment 2: Directors and Auditors’ Compensation.Attachment 3: Summary of last approved financial statements of consolidated subsidiaries.Attachment 4: Independent Auditors’ compensation.Brescia, March 15, 2011THE CHAIRMAN AND MANAGING DIRECTOROF CEMBRE S.P.A.GIOVANNI ROSANI109

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SAttachment 1 – Notes to the Financial Statements of Cembre S.p.A.COMPARATIVE INCOME STATEMENT(€ '000) 2010 % 2009 % changeRevenues from sales and services provided 72,750,859 100 56,334,119 100 29.1%Other revenues 464,044 490,018 -5.3%TOTAL REVENUES 73,214,903 56,824,137 28.8%Cost of goods and marchandise (32,227,966) (44.3) (21,292,229) (37.8) 51.4%Change in inventories 558,848 0.8 (2,843,537) (5.0) -119.7%Cost of services received (7,648,022) (10.5) (7,150,146) (12.7) 7.0%Lease and rental costs (784,849) (1.1) (772,367) (1.4) 1.6%Personnel costs (18,074,534) (24.8) (16,304,352) (28.9) 10.9%Other operating costs (370,422) (0.5) (261,919) (0.5) 41.4%Increase in assets due to internal construction 586,733 0.8 689,178 1.2 -14.9%Write-down of current assets (138,133) (0.2) (99,300) (0.2) 39.1%Accruals to provisions for risks and charges (7,946) (0.0) (7,969) (0.0) -0.3%GROSS OPERATING PROFIT 15,108,612 20.8 8,781,496 15.6 72.1%Tangible assets depreciation (1,714,334) (2.4) (1,733,483) (3.1) -1.1%Intangible assets amortization (232,418) (0.3) (251,942) (0.4) -7.7%OPERATING PROFIT 13,161,860 18.1 6,796,071 12.1 93.7%Financial income 680,546 0.9 429,635 0.8 58.4%Financial expenses (28,048) (0.0) (24,768) (0.0) 13.2%Foreign exchange gains (losses) 93,615 0.1 (88,527) (0.2) -205.7%PROFIT BEFORE TAXES 13,907,973 19.1 7,112,411 12.6 95.5%Income taxes (4,750,116) (6.5) (2,513,814) (4.5) 89.0%NET PROFIT FROM ORDINARY ACTIVITIES 9,157,857 12.6 4,598,597 8.2 99.1%NET PROFIT FROM ASSETS HELD FOR DISPOSAL - -NET PROFIT 9,157,857 12.6 4,598,597 8.2 99.1%110

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SAttachment 2 – Notes to the Financial Statements of Cembre S.p.A.DIRECTORS AND STATUTORY AUDITORS’ COMPENSATIONPOSITION COMPENSATION (€)Position Term (1)Emoluments forpositionNon-monetarybenefits (2)Bonuses andother incentivesOthercompensationCARLO ROSANI Chairman & Managing Director 2009-2011 34,932 (3)GIOVANNI ROSANI Chairman & Managing Director 2009-2011 148,402 3,495 9,000 (4)ANNA MARIA ONOFRI Managing Director 2009-2011 150,300 2,676SARA ROSANI Director 2009-2011 32,298 2,519 4,982 (5)GIOVANNI DE VECCHI Director 2009-2011 32,398 2,051 (6) 24,000 (4)ALDO BOTTINI BONGRANI Director 2009-2011 32,298 3,231 189,214 (5)FABIO FADA Director 2009-2011 33,578GIANCARLO MACCARINI Director 2009-2011 32,298GUIDO ASTORI Chairman of the Board of Stat. Auditors 2009-2011 32,949ANDREA BOREATTI Statutory Auditor 2009-2011 22,424LEONE SCUTTI Statutory Auditor 2009-2011 22,269(1) The expiration of the term coincides with the approval of the 2011 Financial Statements for both Board of Directors and Board of Statutory Auditors.(2) Consisting of fringe benefits represented by the use of a company car and insurance coverage.(3) Remuneration from Jan. 1, 2010 to March 10, 2010.(4) Remuneration for positions held in subsidiaries.(5) Gross remuneration for employment.(6) Paid by General Marking S.r.l.111

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SAttachment 3 – Notes to the Financial Statements of Cembre S.p.A.SUMMARY FINANCIAL DATA OF CONSOLIDATED SUBSIDIARIES(EX ARTICLE 2429 OF THE ITALIAN CIVIL CODE)(in euro)Non-current CurrentTotal assetsShareholders'Total liabilitiesTotal liabilities andassets assets Equity Shareholders'EquityCembre Ltd 4,479,579 6,956,479 11,436,058 7,979,841 3,456,218 11,436,058Cembre Sarl 626,747 4,448,354 5,075,101 3,371,573 1,703,528 5,075,101Cembre España SL 3,721,833 7,464,270 11,186,102 7,772,458 3,413,645 11,186,102Cembre AS 82,008 855,110 937,118 757,032 180,085 937,118Cembre GmbH 2,653,670 2,855,098 5,508,768 3,939,212 1,569,556 5,508,768Cembre Inc 146,283 4,125,110 4,271,393 2,868,667 1,402,726 4,271,393General Marking S.r.l. 1,139,258 1,825,252 2,973,085 2,277,584 695,500 2,973,085Total Gross operating Operating Profit Income Net profitrevenues profit profit before taxes taxes (loss)Cembre Ltd 13,423,871 1,500,423 1,192,587 1,220,546 (337,502) 883,044Cembre Sarl 6,418,215 177,471 111,608 106,272 (42,849) 63,423Cembre España SL 8,353,836 525,008 408,645 389,687 (116,906) 272,781Cembre AS 1,013,885 223,865 216,113 222,930 (65,880) 157,050Cembre GmbH 6,507,957 598,461 545,983 540,342 (176,174) 364,168Cembre Inc 5,816,892 469,674 394,019 394,378 (170,328) 224,050General Marking S.r.l. 3,121,179 1,336,753 1,117,936 1,114,213 (367,278) 746,935Figures above relate to the respective Financial Statements at December 31, 2010.The translation of amounts expressed in currencies other than the euro was carried out as describedin the notes to the Financial Statements at December 31, 2010.112

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SAttachment 4 – Notes to the Financial Statements of Cembre S.p.A.COMPENSATION FOR AUDITING SERVICES AND SERVICES OTHER THAN AUDITING(pursuant to article 149-duodecies of Listed Companies Code (CONSOB)Service Independent auditors Service received by Compensation (€’000)Auditing PricewaterhouseCoopers Cembre S.p.A. 69Auditing PricewaterhouseCoopers Subsidiaries 91Tax advisory PricewaterhouseCoopers Subsidiaries 6Other services PricewaterhouseCoopers Subsidiaries 2113

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T S114

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T S115

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SReport of the Board of Statutory Auditorson the Financial Statements of Cembre S.p.A.at December 31, 2010To our Shareholders:pursuant to article 2429, comma 2 of the Italian Civil Code and article 153 of legislative decree no.58, dated February 24, 1998, and subsequent amendments, the Board of Statutory Auditors reports tothe Shareholders’ Meeting called to approve the 2010 Financial Statements on the monitoring activitycarried out and on omissions and censurable facts observed, in addition to expressing a recommendationon the Financial Statements, their approval and other pertinent issues.In compliance with responsibilities assigned by article 149 of legislative decree no. 58, dated February24, 1998, and subsequent amendments, the Board of Statutory Auditors reports the following:In 2010 the Board:- attended one Shareholders’ Meeting;- attended four meetings of the Board of Directors in which Directors informed the Board of StatutoryAuditors on main operations of economic and financial relevance carried out by the Company andits subsidiaries. In this regard, we can reasonably state that operations resolved and/or carried out,complied with the Law and the provisions of the By-laws, were not in potential conflict of interestor in contrast with Shareholders’ resolutions taken, were carried out in compliance with correctmanagement principles, were not manifestly imprudent, did not involve an excessive amount ofrisk, constitute a potential conflict of interest or were such as to compromise the integrity of thecompany’s assets;- met eight times to carry out periodical monitoring, review the annual report, interim reports andrelated resolutions;- met once to give detailed opinion on adopting procedure about Operations with related parties;- met once as a Board and twice, represented by its Chairman, with the Company’s independentauditors;- its Chairman attended 4 meetings with the Internal Audit Committee and 4 meetings with theMonitoring Board;- a Permanent Auditor carried out 1 individual verifications for the destruction of assets.The Managerial and Control Model pursuant to Legislative Decree 231/01 and subsequent amendments,on the Administrative Responsibilities of Entities, as resolved by the Board of Directors on March 25,2008, was implemented and updated by the Internal Audit Committee and the Monitoring Board.Instructions imparted to subsidiaries pursuant to article 114, paragraph 2, of Legislative Decree no.58/1998 appear adequate.116

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SWith reference to subsidiaries incorporated in countries that are not part of the European Union (CembreInc., incorporated in the US, and Cembre A.S., incorporated in Norway) whose accounts are audited,we attest that the administrative, accounting and reporting systems used are adequate in providinga regular flow of operating and financial information to the company’s management and Independentauditors.We have acquired direct knowledge and monitored, to the extent required by our task, the adequacy ofthe organizational structure of the Company and of its administrative and managerial organization inrelation to its size, gathering information from persons in charge of the management of the Company andthrough meetings with the independent auditors, the Person in charge of internal control, the InternalAudit Committee and the Monitoring Board, involving exchange of data and relevant information, toverify the respect of diligent and correct administration principles.We have monitored the adequacy of the internal auditing system, also at the consolidated level, throughthe exhaustive collection of information, by:- reviewing the report of the Person in charge of internal control;- attending meetings of the Internal Audit Committee and of the Monitoring Board through its ownChairman;- reviewing the report of the Internal Audit Committee on the internal control system;- reviewing information on measures taken and procedures adopted pursuant to Legislative Decree231/2001 and subsequent amendments, on the administrative responsibility of organizations withregard to crimes referred to in the above legislation;- reviewing information on updating of Private information handling System;- reviewing information on creation of Environmental management system and the obtaining ofEnvironmental Certification;- reviewing information on monitoring activity and the implementation of corrective action devisedalso by seeking specific independent advice;- reviewing the results of work carried out by the Independent auditors;- reviewing information provided by the management and respective boards of subsidiaries, pursuantto commas 1 and 2 of article 151 of Legislative Decree 58/98;- reviewing the certification of the parent company’s financial statements for the year pursuant toarticle 81ter of CONSOB Issuer’s Regulation dated May 14, 1999 and subsequent amendments andintegrations, issued by the Managing Director and the Person in charge of drafting the company’saccounts.Information pursuant to article 150 of Legislative Decree no. 58/98 was supplied and sought independentlyby the Board of Statutory Auditors, from which no data or relevant information, omissions,censurable facts, irregularities or in any case significant events worth reporting to relevant Authoritiesor of mention in the present report have emerged.117

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SThe Board of Statutory Auditors did not receive any report pursuant to article 2408 of the Italian CivilCode or has any knowledge of any other denunciation pursuant to the same received by others.The Board of Directors transmitted to us, within the term set by law, the Report on the operations ofthe first six months of 2010, publishing it pursuant to rules set by CONSOB, and also published reportson the operations of first quarter and of the third quarter of 2010Likewise, the Board of Directors transmitted to us the Consolidated Financial Statements and the parentcompany’s accounts for the year consisting of Statement of Financial Position, Income Statement, Statementof Cash Flows and Statement of Changes in the Shareholders’ Equity, together with the Notesto the accounts and the certifications of the same by the Managing Director and Person in charge ofdrafting the company’s accounts pursuant to article 81ter of CONSOB Regulation no. 11971/99 andfollowing, in addition to four attachments.The Report on Operations for the 2010 financial year, showing Group and parent company’s results,including, as attachments the following tables: Consolidated Income Statement, Company Shares heldby Corporate Boards’ Members, Corporate Boards, illustrates also events occurred after the date of thefinancial statements and the outlook for 2011.With regard to CONSOB communications, we can attest that:- information provided by Directors in the Report on Operations can be deemed exhaustive and complete;- the Report on Operations includes a Consolidated Income Statement, a list of Directors and StatutoryAuditors owning shares in the company, a list of Members of Corporate Boards, performance indicators,investments, detail of main risks and uncertainties connected with the overall economic situation, themarket for the Company’s products, credit markets, liquidity, interest rates, exchange rates, the integrityand reputation of the Company, environmental management;- in the periodical verifications and checks we performed on the Company, we did not encounter anyatypical or unusual transaction either with third parties, related parties or between Group companies;- with regard to transactions between Group companies and those with related parties, the Report onOperations and the Notes to the accounts describe and explain exchanges of goods and services betweenthe Company and its subsidiaries or other related parties, attesting that the same were carried out atmarket conditions, keeping into account the quality of goods and services exchanged;- in the field of risk management and financial instruments, the nature and amount of risks were reported;- The Audit Report does not contain reference to lack of disclosure or related observations and proposals;- in the year we delivered the opinions requested to the Board of Statutory Auditors pursuant to the Law,and in particular the opinion on the procedure on related parties dealing to be adopted;- in compliance with articles 123bis of the Finance Act (Testo Unico), article 89-bis of CONSOB’s ListedCompanies Regulation, we acknowledge that, as it appears in the Report on Corporate Governance,the Cembre Group participates and complies with the Self-conduct Code issued by the Committee forCorporate Governance of listed companies, as integrated and implemented, through its adoption andcompliance with Regulations for STAR segment listed companies;118

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T S- the adoption of the said Code was verified by the Board of Statutory Auditors and represented the subject,in its various aspects, of the Report on Corporate Governance made available to you and to which werefer.We enclose in the present report a full description of positions held as directors or statutory auditors inother joint-stock companies by permanent auditors and substitute auditors updated at March 29, 2011.Cembre S.p.A. appointed PricewaterhouseCoopers to carry out an audit of its statutory accounts andconsolidated financial statements, a limited audit of its Consolidated Half-year Report and other auditingactivities pursuant to article 155 comma 1 letter a) of Legislative Decree no 58/98.On March 29, 2011, Independent Auditors PricewaterhouseCoopers issued a communication, regardingindependence, related to auditing and non auditing services supplied to the company. Takinginto account principles stated by law and professionals regulations, they confirmed their position ofindependence and objectivity towards Cembre S.p.A. They also declared that no changes generatingincompatibilities, as those indicated by art. 160 of Legislative Decree 58/98 and by section I-bis of paragraphVI. “Independent Audit” of CONSOB Regulation no. 11971/99 and subsequent amendmentsand integrations, occurred.Non relevant services, other than audit, amounting to €7,309, were provided by companies affiliatedto PricewaterhouseCoopers network to English subsidiary (tax compliance) and to Spanish subsidiary(review of the draft annual statutory accounts).We have verified the independence requisites of permanent and alternate Statutory Auditors, in additionto the correct application of criteria and procedures adopted by the Board of Directors in the yearto evaluate the independence of Non-executive Independent Directors.The statutory accounts, for which we verified compliance with laws regulating its format and preparationthrough checks carried out by us within the limits of our task as provided by article 149 of LegislativeDecree no. 58, February 24, 1998, and subsequent amendments – having ascertained that no waiverspursuant to article 2423 of the Italian Civil Code were exercised – and information provided by theIndependent Auditors, report a net income of €9,157,857, as compared with a net income of €4,598,597in the previous year.The Board of Statutory Auditors therefore deems the Financial Statements at December 31, 2010 andthe proposed allocation of net profit for the year submitted by the Board of Directors to be suitable toreceive your approval.Brescia, March 29, 2011The Board of Statutory AuditorsGuido AstoriAndrea BoreattiLeone ScuttiChairmanPermanent AuditorPermanent AuditorA list of other positions held by Permanent and Alternate Statutory Auditors is enclosed.119

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SS T U D I ODott. Rag. Guido AstoriDOTTORE COMMERCIALISTAREVISORE LEGALEBOARD POSITIONS HELD (ART. 148 BIS C.I. LGS. DEC. 58/98) IN JOINT-STOCK COMPANIES TO BE DISCLOSED TO SHAREHOLDERS’ MEETINGS (EX ART.2400 COMMA 4, EX ART.2 LAW 28/12/2005 No.262)LISTED COMPANY:BOARD POSITIONS HELD IN JOINT-STOCK COMPANIESCOMPANY REGISTERD OFFICE TAX ID POSITIONCembre Spa Brescia via Serenissima, 9 00541390175LARGE (CONSOLIDATED):Lysne Spa Brescia via Diaz, 9 01071060162MEDIUM SIZE COMPANY WITH AUDITING RESPONSIBILITIES:Pe’Pietro Legnami Spa Brescia via Veneto, 13 00828540179SMALL COMPANY:Alfin-Edimet Spa Montichiari (BS) via Brescia, 117 02809190172Casa dei Colli Srl Monticelli Brusati (BS) via Foina, 1 02153420175Gardagolf Srl Soiano del Lago (BS) via Omodeo, 2 06987560155Mineraria Baritina Spa Brescia via Tosio, 15 00291350171Tha Immobiliare Spa Brescia via Diaz, 9 02250350168Chairman of Board of StatutoryAuditors without accountingaudit responsibilitiesPermanent Auditor withoutaccounting audit responsibilitiesPermanent Auditor withoutaccounting audit responsibilitiesChairman of Board of StatutoryAuditors with accounting auditresponsibilitiesPermanent Auditor withaccounting audit responsibilitiesChairman of Board of StatutoryAuditors with accounting auditresponsibilitiesPermanent Auditor withaccounting audit responsibilitiesPermanent Auditor withaccounting audit responsibilitiesEXPIRATIONapproval of financialstatements20112010201220122012201020122010BOARD POSITIONS WITH OPERATING POSITIONS HELD IN JOINT-STOCK COMPANIESCOMPANY REGISTERD OFFICE TAX ID POSITIONEXPIRATIONapproval of financialstatementsZinnia Srl(Società immobiliare statica)Brescia piazza Cremona, 11 01159550175 Director Until revoked1 position held in joint stock company and 9 overall positions held (including exempt).Dott. Guido Astori120

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SVia Pontida n.1 – P.za Martiri di Belfiore n.325121 B R E S C I ATel. 03047460 r.a. – Fax 03040533Cod.Fisc. SCTLNE36S16D086BPartita Iva 00622650174E.mail: leonescutti@email.itLEONE SCUTTIRagioniere Commercialista – Revisore LegaleBOARD POSITIONS HELD (ART. 148 BIS C.I. LGS. DEC. 58/98) IN JOINT-STOCK COMPANIES TO BE DISCLOSED TO SHAREHOLDERS’ MEETINGS (EX ART.2400 COMMA 4, EX ART.2 LAW 28/12/2005 No.262)LISTED COMPANYName Registerd Office Tax ID Position BeginnnigdateCEMBRE SpA Brescia, Via Serenissima n.9 00541390175EXPIRATIONApproval offinancialstatementsPermanent Auditor without accounting auditresponsibilities 28/04/2009 2011LARGE COMPANY WITH AUDITING RESPONSIBILITIESEural Gnutti SpA Rovato (BS), Via S. Andrea n.3 00481190171 Permanent Auditor 17/05/2008 2010Industrie Pasotti SpA Brescia, Via della Musia n.97 00297220170 Permanent Auditor 28/05/2009 2011Trafilerie Carlo Gnutti SpA Chiari (BS), Via S.Bernardino n.23a 00276360179 Permanent Auditor 30/11/2009 30/06/2012MEDIUM COMPANY WITH AUDITING RESPONSIBILITIESAtib Srl Dello (BS), Via Quinzanese n.3 00297880171 Permanent Auditor 14/05/2008 2010Cremaschini F.lli SpA Brescia, Via Pontida n.1 01255460170 Permanent Auditor 20/05/2009 2011Fimo SpA Brescia, Via Pontida n.1 00275800175 Permanent Auditor 25/05/2010 2012Srl Osalmec Fonderia Maclodio (BS), Via Roma n.55 00478390172 Permanent Auditor 07/05/2010 2012Sei SpA Ghedi (BS), Via Industriale n.8/d 00274240175 Permanent Auditor 26/05/2010 2012MEDIUM COMPANY WITHOUT AUDITING RESPONSIBILITIESEco-Zinder Srl Brescia, Via Pontida n.1 08905640150 Permanent Auditor 27/06/2009 2011Euromec Srl Isorella (BS), Via Visano n.78/80 00503860173 Permanent Auditor 29/05/2008 2010G.C.E. Srl Brescia, Via Pontida n.1 01922980980 Permanent Auditor 27/06/2009 2011SMALL COMPANYGruppo Beni Immobili SpA Brescia, Piazza Martiri di Belfiore n.3 02734780980 Chairman 20/05/2009 2011Isomec Srl Isorella (BS), Via Visano n.72/a 01243820170 Permanent Auditor 14/04/2008 2010La Tesa SpA San Zeno Naviglio (BS), Via IV° Novembre n.32 00561010174 Permanent Auditor 29/05/2010 2012L.M.V. SpA Brescia, Via R. Psaro n.17 00273130179 Chairman 23/05/2008 2010Omec Serrature SpA Lumezzane (BS), Via Caselli n.22 01244790174 Permanent Auditor 16/04/2008 2010Orizio Paolo SpA in liquidazione Rodengo Soiano (BS), Via Stacca n.3 00270960172 Permanent Auditor 26/05/2008 2010Projecta Engineering SpA Brescia, Via Rodi n.15 03133620173 Permanent Auditor 23/05/2008 2010Sarda SpA Domusnovas (CA), Loc. Matt' e' Conti 00263830929 Permanent Auditor 19/05/2008 20101 position held in joint stock company and 20 overall positions held (including exempt).Brescia, 29.03.2011Rag. Leone Scutti121

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SBoreatti Dott. AndreaVia Angelo Maj n. 14/d - 24121 BergamoDottore Commercialista - Revisore Legale Tel. 035/24.80.44 - Fax 035/22.52.81E-Mail andrea.boreatti@boreattipilenga.itBOARD POSITIONS HELD (ART. 148 BIS C.I. LGS. DEC. 58/98) IN JOINT-STOCK COMPANIES TO BE DISCLOSED TOSHAREHOLDERS’ MEETINGS (EX ART. 2400 COMMA 4, EX ART.2 LAW 28/12/2005 No.262)BOARD POSITIONS HELD IN JOINT-STOCK COMPANIESCOMPANY REGISTERED OFFICE TAX ID POSITIONLISTED COMPANYCembre Spa Brescia - Via Serenissima 9 0541390175LARGE COMPANY (CONSOLIDATED)Permanent Auditor without accountingaudit responsibilitiesLysne Spa Brescia - Via Diaz 9 01071060162 Chairman of Board of Statutory Auditorswithout accounting audit responsibilitiesLARGE COMPANY WITH AUDITING RESPONSIBILITIESArti Grafiche Johnson Spa Seriate (Bg) - Via Grinetta 9/A 00440220168 Permanent Auditor with accounting auditresponsibilitiesMEDIUM COMPANY WITH AUDITING RESPONSIBILITIESCoge Srl Bergamo - Via Quinto Alpini 4 01820220166 Chairman of Board of Statutory Auditorswith accounting audit responsibilitiesEdilferri SpaCastel Rozzone (Bg) - Via Monte Rosa902878410162 Permanent Auditor with accounting auditresponsibilitiesFilca Cooperative Soc. a rlpa ** Lecco - Piazza Manzoni 2 01574940134 Permanent Auditor with accounting auditresponsibilitiesSile Srl Barzana (Bg) - Via San Pietro 5 02635690163 Chairman of Board of Statutory Auditorswith accounting audit responsibilitiesMEDIUM COMPANY WITHOUT AUDITING RESPONSIBILITIESPermanent Auditor without accountingCrb Srl Costruzioni Residenziali Brianza Castelcovati (Bs) - Via Degli Artigiani 8 02196920983 audit responsibilitiesPermanent Auditor without accountingGamba Bruno Spa Bergamo - Via Baioni 31/C 02991740172 audit responsibilitiesPermanent Auditor without accountingBertelli Holding Spa Castelcovati (Bs) - Via Degli Artigiani 8 01782730988 audit responsibilitiesEXPIRATIONapproval of financial statements2011201020102012201020112010201220112012BOARD POSITIONS HELD (ART. 148 BIS C.I. LGS. DEC. 58/98) IN JOINT-STOCK COMPANIES TO BE DISCLOSED TOSHAREHOLDERS’ MEETINGS (EX ART. 2400 COMMA 4, EX ART.2 LAW 28/12/2005 No.262)COMPANY REGISTERED OFFICE TAX ID POSITIONEXPIRATIONapproval of financial statementsSMALL COMPANYBenatti Holding Spa Lecco - Via Cavour 44 02971550138Permanent Auditor without accountingaudit responsibilities2011Iniziative Editoriali Srl Lecco - Via Fiume 8 10379310153 Permanent Auditor with accounting auditresponsibilitiesModulo Zeta Srl Lecco - Via Fabio Filzi 12 06851150158 Permanent Auditor with accounting auditresponsibilitiesMonitor Tv Spa Lecco - Piazza Manzoni 2 0524210135 Permanent Auditor with accounting auditresponsibilitiesTha Immobiliare Spa Brescia - Via Diaz 9 02250350168 Chairman of Board of Statutory Auditorswith accounting audit responsibilities2010201120112010**Not material as it is a cooperative company1 position held in listed companies and 15 overall positions held (including exempt)Boreatti Dott. Andrea122

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SS T U D I ORAG.MARIA GRAZIA LIZZINI 25121 BRESCIA, 29 marzo 2011RAGIONIERA COMMERCIALISTA PIAZZA CREMONA, N.11/A - TEL.030 48391REVISORE LEGALEBOARD POSITIONS HELD (ART. 148 BIS C.I. LGS. DEC. 58/98) IN JOINT-STOCK COMPANIES TO BE DISCLOSED TOSHAREHOLDERS’ MEETINGS (EX ART. 2400 COMMA 4, EX ART.2 LAW 28/12/2005 No.262)_____BOARD POSITIONS HELD IN JOINT-STOCK COMPANIESCOMPANY REGISTERED OFFICE TAX ID POSITIONEXPIRATIONapproval of financial statementsSMALL COMPANY WITH AUDITING RESPONSIBILITIESHolz Albertani Spa Berzo Demo (Bs) Forno d’Allione 02707050981Chairman of Board of Statutory Auditors withaccounting audit responsibilities2011Tha Immobiliare Spa Via Diaz, 9 - Brescia 02250350168Permanent Auditor with accounting auditresponsibilities20100 position held in listed company 2 overall positions heldRag. Maria Grazia Lizzini123

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T Sgiorgio astoriarchitetto ingegnereBrescia, March 29, 2011BOARD POSITIONS HELD (ART. 148 BIS C.I. LGS. DEC. 58/98) IN JOINT-STOCK COMPANIES TO BE DISCLOSED TOSHAREHOLDERS’ MEETINGS (EX ART. 2400 COMMA 4, EX ART.2 LAW 28/12/2005 No.262)INCARICHI DI CONTROLLO IN SOCIETA’ DI CAPITALICOMPANY REGISTERED OFFICE TAX ID POSITIONEXPIRATIONapproval of financial statementsSMALL COMPANY WITH AUDITING RESPONSIBILITIESHolz Albertani Spa Forno d’Allione Berzo Demo (Bs) 02707050981Permanent Auditor without accounting auditresponsibilities20110 position held in listed companies (1 as alternate auditor) and 1 overall position held.Ing. Giorgio Astorivia piero calamandrei 1925133 brescia italiatel. 030 2002127fax 030 2096511STR GRG 52M19B157H00912820172124

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SAttestation in respect of the statutory financial statementspursuant to article 81-ter of the regulation issued by the Italian market regulatory body (CONSOB) no. 11971 ofMay 14, 1999 and subsequent integrations and updatings.The undersigned Giovanni Rosani and Claudio Bornati, in their position as Managing Directorand Manager responsible for the preparation of financial reports of Cembre S.p.A.,respectively, pursuant to Article 154-bis, paragraphs 3 and 4 of Legislative Decree No.58/1998, certify that internal controls over financial reporting in place for the preparation of2010 statutory financial statements and during the period covered by the report, were:• adequate to the company structure, and• effectively applied during the process.The undersigned officers certify that this 2010 statutory financial statements:a) corresponds to the company’s evidence and accounting books and entries, andb) was prepared in accordance with International Financial Reporting Standards, as endorsedby the European Union through Regulation (EC) 1606/2002 of the European Parliament andCounsel, dated 19 July 2002;c) provide a fair and correct representation of the financial conditions, results of operationsand cash flows of the Company.The undersigned officers attest, also, that the report on operations includes a reliableoperating and financial review ew of the Company as well as a description of the main risks anduncertainties to which it is exposed.Brescia, March 16, 2010Chairman andManaging Directorsigned by:Giovanni RosaniManager responsible for thepreparation of financial reportssigned by:Claudio Bornati125

Abstract of 28 April 2011 ShareholdersGeneral Meeting resolutions regardingthe Financial Statements for the yearending 31 December 2010

R E P O R T A N D A C C O U N T S 2 0 1 0 - F I N A N C I A L S T A T E M E N T SAbstract of 28 April 2011 Shareholders General Meeting resolutionsregarding the Financial Statements for the year ending 31 December 2010Shareholders General Meeting approved Cembre S.p.A. Financial Statements for the financial yearending 31 December 2010 and the documents annexed. Stating that the legal reserve had alreadyreached an amount of 20% of Capital Stock, Shareholders General Meeting approved the allocationof the Company’s 2010 financial year net profit of €9,157,857.49 (rounded of to €9,157,857 in FinancialStatements) as follows:- dividend payments to shareholders, in the amount of €0.26for each of the Company’s 17,000,000 outstanding shares € 4,420,000.00- to the extraordinary reserve € 4,737,857.49The dividend is payable from 19 May 2011 with a date of record of 16 May 2011.The consolidated financial statement for the financial year ending 31 December 2010 and documentsannexed have been presented to Shareholders General Meeting.128

Via Serenissima, 9 - 25135 Brescia (Italy)Phone: 030 3692.1Telefax: 030 3365766www.cembre.comE-mail: info@cembre.com