ANNUAL REPORT 2010 ANNUAL REPORT 2010 The Annual Report is a translation provided only for the convenience of foreign readers. The Italian version will prevail. 2 CALL TO SHAREHOLDERS’ MEETING The Shareholders are convened to the Ordinary Shareholders’ Meeting to be held at the Company offices at Viale Europa 2, 24040 Stezzano (Bergamo) on 29 April 2011 at 11:00 a.m. CET (first call) or, if necessary, on 30 April 2011, at the same place and time (second call), to resolve on the following AGENDA 1. Presentation of the Annual Financial Statements of the merged company Marchesini S.p.A. at 31 December 2010, prepared in condensed form within the meaning of Article 2435-bis of the Italian Civil Code and availing of the exemption from the obligation to prepare the Directors’ Report on Operations pursuant to Article 2435-bis, paragraph 7, of the Italian Civil Code, accompanied by the Statutory Auditors’ Report. Ensuing resolutions. 2 Presentation of the Financial Statements of the merged company Brembo Performance S.p.A. for the year ended 31 December 2010, with the Directors’ Report on Operations, Statutory Auditors’ Report and the Independent Auditors’ Report. Ensuing resolutions. 3. Presentation of the Financial Statements of Brembo S.p.A. for the year ended 31 December 2010, with the Directors’ Report on Operations, the Statutory Auditors’ Report, the Independent Auditors’ Report and the Attestation of the Manager in Charge of the Company’s Financial Reports. Allocation of profit for the year and dividend distribution. Ensuing resolutions. 4. Presentation of the Consolidated Financial Statements of the Brembo Group for the year ended 31 December 2010, with the Directors’ Report on Operations, the Statutory Auditors’ Report, the Independent Auditors’ Report and the Attestation of the Manager in Charge of the Company’s Financial Reports. 5. Appointment of the Board of Directors. 5.1 Determination of the number of members of the Board of Directors’ and the duration of their term of appointment. 5.2 Appointment of Directors. 5.3 Appointment of the Chairman of the Board of Directors. 5.4 Determination of the annual remuneration of Directors. 6. Appointment of the Board of Statutory Auditors. 6.1 Appointment of three Statutory Auditors and two Alternate Auditors. 6.2 Appointment of the Chairman of the Board of Statutory Auditors. 6.3 Determination of the annual remuneration of members of the Board of Statutory Auditors. 7. Reviewing of PriceWaterhouseCoopers S.p.A.’s fees for the 2010-2012 period. Ensuing resolutions. 8. Authorisation for the buy-back and disposal of own shares. Ensuing resolutions. 9. Amendments to articles 1, 2, 3, 4, 5, 9, 14, 26, 27 and 28 of the Regulations of the Shareholders’ Meetings. Ensuing resolutions. Stezzano, 14 March 2011 On behalf Of the BOard Of DirectOrs The Chairman Alberto Bombassei ANNUAL REPORT 3 2010 LETTER FROM THE CHAIRMAN 6 COMPANY OFFICERS 8 BREMBO IN THE WORLD 10 Brembo: SUMMARY OF GROUP RESULTS 12 DIRECTORS’ REPORT 15 ON OPERATIONS 15 BREMBO AND THE MARKET 16 Macroeconomic Context 16 Currency Markets 19 Group Activities and Reference Market 19 SALES BREAKDOWN BY APPLICATION AND GEOGRAPHICAL AREA 23 RESEARCH AND DEVELOPMENT 24 INVESTMENTS 26 CONTENTS RISK MANAGEMENT POLICY 28 HUMAN RESOURCES AND ORGANISATION 33 ENVIRONMENT, SAFETY AND HEALTH 35 Letter from the Chairman 6 BREMBO STRUCTURE 36 Company Officers 8 BREMBO’S CONSOLIDATED PERFORMANCE 38 Brembo in the World 10 PERFORMANCE OF BREMBO COMPANIES 44 Brembo: Summary of Group Results 12 TRANSACTIONS WITH RELATED PARTIES 54 DIRECTORS’ REPORT ON OPERATIONS 15 FURTHER INFORMATION 55 Brembo and the Market 16 Significant Events During the Year 55 Macroeconomic Context 16 Privacy 57 Currency Markets 19 Subsidiaries Formed Under and Governed by the Law of Countries Not Belonging to the Group Activities and Reference Market 19 European Union – Obligations Under Articles 36 and 39 of Market Regulations 57 Sales Breakdown by Application and Geographical Area 23 Research and Development 24 Investments 26 Risk Management Policy 28 Human Resources and Organisation 33 Environment, Safety and Health 35 Brembo Structure 36 Brembo’s Consolidated Performance 38 Performance of Brembo Companies 44 Transactions with Related Parties 54 Further Information 55 Significant Events During the Year 55 Privacy 57 Subsidiaries Formed Under and Governed by the Law of Countries Not Belonging to the European Union – Obligations Under Articles 36 and 39 of Market Regulations 57 4 Reconciliation Statement of Parent Company’s Equity/Net Income With Consolidated Equity/Net Income 58 Significant Events After 31 December 2010 59 Foreseeable Evolution 60 Corporate Governance and Ownership Structure Report Pursuant to Article 123-bis of the Finance Consolidation Law 61 Information About the Brembo S.p.A. Dividend Proposal 85 Brembo S.p.A. Stock Performance 86 Palmares 2010 89 CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2010 99 Brembo Consolidated Financial Statements at 31 December 2010 100 Explanatory Notes to the Consolidated Financial Statements at 31 December 2010 108 Annexes to the Consolidated Financial Statements 166 Statutory Auditors’ Report 176 Independent Auditors’ Report Pursuant to Article 156 of Legislative Decree 58/98 178 Attestation of the Consolidated Financial Statements Pursuant to Article 81-ter of CONSOB Resolution No. 11971 of 14 May 1999, as amended and extended 180 SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2010 183 Brembo S.p.A. Separate Financial Statements 2010 184 Statutory Auditors’ Report 191 ANNUAL REPORT 5 2010 LETTER FROM THE CHAIRMAN Shareholders, After the year of the great global economic crisis, the worst since the Second World War, 2010 saw a return to a climate of renewed confi dence. However, the signs of a recovery, while present, are still not suffi cient to allow us to consider the challenges and problems with which the global economic system is confronted to be entirely behind us. Global GDP resumed growth (+4.6%), albeit at a slower pace than expected, continuing to reflect very clear differences between mature and emerging economies, which remained the true drivers of growth. China (+10.3%), India (+8.7%) and Brazil (+7.5%) led the recovery. Yet countries such as Japan (+4.3%), Russia (+3.9%), Germany (+3.6%) and – to a more modest extent – the United States (+2.9%) and the entire Eurozone (+1.7%) also showed positive growth indicators, following a 2009 in which all had posted negative results, in some cases to a very severe degree. As economic growth resumed, albeit at an uncertain pace, the automotive industry, which has always been the target market for Brembo’s products, also yielded a positive performance during the year, recovering from a crisis that had affected all vehicle manufacturers throughout the world, with the inevitable repercussions on component suppliers. Registrations of cars and light commercial vehicles, the segment in which Brembo posts three-fourths of its sales, exceeded 70 million, increasing by more than 13% in 2010 at the global level. Growth was once more driven by the new markets, chiefl y China and India, which reported increases in excess of 30%, offsetting the consistently disappointing performance of sales in Western Europe, where new vehicle registrations continued to fall, decreasing by nearly -4%, due in part to the discontinuation of incentive campaigns. Brembo succeeded in seizing the opportunity presented by the attenuation of the crisis, and the company’s presence on the most dynamic markets, as well as the 6 important new supply agreements reached with components, with the aim of offering the European European and American vehicle manufacturers led to market high-quality, high-tech brake systems. In a significant improvement in all indicators during the India, where Brembo has long operated its own reporting year. Sales exceeded €1,075 million, up by production facility, a new brand has been created for more than 30% compared to the previous year, an all- the production and marketing of brake systems for time high in the company’s nearly 50 years of history. motorbikes and scooters intended for the local market. Net operating income increased by nearly two and a half times (+149%) and income before taxes more In parallel, the Group has remained committed to than quadrupled (+325.5%) to reach over €45 million. researching and developing new products and technologies, in order to consolidate the leadership During the year, the Group continued to pursue an that has always distinguished Brembo in this field investment policy aimed in particular at consolidating at the global level. The goals pursued by the Group and developing its presence in the geographical areas include studying and applying new materials capable of greatest promise for the automotive industry, while also proceeding with the manufacturing integration of improving the performance of brake systems by processes to which the company has been committed reducing their weight. They also include conducting for several years, with the aim of reducing costs and research aimed at limiting production costs for the achieving ever greater efficiency in production cycles. most sophisticated systems in order to achieve wider application, extending them to the middle and upper- In January 2010, we acquired a foundry in Nanjing, middle segments of the market as well. To provide China, from China’s leading manufacturer of cars and cutting-edge products also to emerging markets, commercial vehicles. This foundry, together with our Brembo has decided to create a specific Development previous facility, which has been operational since Centre for these markets, construction of which has 2001, will form an integrated manufacturing hub in begun in China, while for NAFTA countries a Centre is which Brembo plans to invest €50 million to triple its already operational in the USA. output of brake discs and callipers for the Chinese and Asian markets by 2013. In Poland, we launched a four- In conclusion, 2010 was a year that saw Brembo return € year, 82 million investment plan for the same type to levels of production and results very close to those of production process with the aim of increasing the achieved prior to the global economic crisis.