AnnuAl RepoRt 2011 In 2011 Brembo celebrated fifty years in business. The pictures in these financial statements recount the places, products and people who have helped write the history of Brembo every day. 2 3 annual report 2011 4 CALL TO SHAREHOLDERS’ MEETING the Shareholders are convened to the ordinary Shareholders’ Meeting to be held at the Com- pany offices at Viale europa 2, 24040 Stezzano (Bergamo) on 20 april 2012 at 11:00 a.m. Cet (first call) or, if necessary, on 23 april 2012, at the same place and time (second call), to resolve on the following AGENDA 1. Presentation of the Financial Statements of Brembo S.p.a. for the year ended 31 December 2011, with the Directors’ report on operations, the Statutory auditors’ report, the Independ- ent 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. 2. Presentation of the Consolidated Financial Statements of the Brembo Group for the year ended 31 December 2011, 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. 3. Appointment of a member of the Board of Directors pursuant to article 2386 of the Italian Civil Code. ensuing resolutions. 4. Presentation of the remuneration report of Brembo S.p.a. and consultative ballot of the Share- holders’ Meeting on the remuneration policy of Brembo S.p.a. (Section I – remuneration re- port) pursuant to article 123-ter of tuF. 5. Amendments to the three-year Incentive plan (2010/2012) for executive Directors and top Man- agers. ensuing resolutions. 6. Authorisation for the buy-back and disposal of own shares. ensuing resolutions. Stezzano, 7 March 2012 on behalf of the Board of Directors the Chairman Alberto Bombassei 5 annual report 2011 CONTENTS Letter from the Chairman 8 Company Officers 10 Brembo: Summary of Group Results 12 DIRECTORS’ REPORT ON OPERATIONS 14 Brembo and the Market 16 Sales Breakdown by Geographical area and application 26 research and Development 28 Investments 32 risk Management policy 34 Human resources and organisation 40 environment, Safety and Health 43 Brembo Structure 44 Brembo’s Consolidated results 46 Brembo Worldwide 52 performance of Brembo Companies 54 related party transactions 62 Further Information 63 Significant events after 31 December 2011 66 Foreseeable evolution 68 Corporate Governance and ownership Structure report pursuant to article 123-bis of the Consolidated law on Finance 69 Information about the Brembo S.p.a. Dividend proposal 100 Brembo S.p.a. Stock performance 102 PALmARES 2011 104 6 CONSOLIDATED FINANCIAL STATEmENTS AT 31 DECEmBER 2011 114 Brembo: Consolidated Financial Statements at 31 December 2011 116 explanatory notes to the Consolidated Financial Statements at 31 December 2011 126 annexes to the Consolidated Financial Statements 186 Statutory auditors’ report 197 Independent auditors’ report pursuant to articles 14 and 16 of legislative Decree no. 39 of 27/01/2010 199 attestation of the Consolidated Financial Statements pursuant to article 154-bis of legislative Decree no. 58/98 201 SEPARATE FINANCIAL STATEmENTS AT 31 DECEmBER 2011 202 Separate Financial Statements 2011 of Brembo S.p.a. 204 Statutory auditors’ report 214 attestation of the Separate Financial Statements pursuant to article 154-bis of legislative Decree no. 58/98 219 7 annual report 2011 LETTER FROM THE CHAIRMAN Shareholders, the world economic situation in 2011 was characterised by difficulties and turmoil, but despite the context Brembo has attained gratifying results during the year, thanks to the growing coverage of more dynamic markets and the acquisition of important new orders. Group revenues exceeded €1,250 million, representing a 17% increase over the previous year and about 50% in the 24-month period. Gross operating income rose by 14% and net income by 33%. We have resumed growth for the second consecutive year in terms of employment as well: the number of employees rose by over 800 with respect to the 5,900 present at the end of 2010; one-third of this increase occurred in Italy and the remainder above all in argentina and the Czech republic. these results buck the general trend of the world’s leading economies. In fact, in 2011 world GDp was about 3.8%, showing lower growth compared to the previous year. europe, which is still the leading market for Brembo products, performed even worse, stopping at 1.6%, a figure lower than expected and less than in 2010. the slowdown of the economy has affected nearly all the countries in the eurozone, albeit to different extents: from Germany, which nevertheless ended the year with an appreciable +3%, to Italy, which closed just above zero and even entered a recession in the fourth quarter. With the united States (+1.8%) and Japan (-0.9%) dealing with similar problems, once again it was the emerging economies of the BrIC countries – Brazil, russia, India and China – that upheld world development, though with less power and impetus than in the past. the automotive sector, the target of our production, has been affected by the slowdown in world growth and was in turn subject to a slowdown in demand. registrations of cars and light commercial vehicles, a segment that accounts for nearly 80% of Brembo’s sales, grew by 4.3% worldwide in 2011, against growth that exceeded 13% the previous year. this market was driven above all by the BrIC countries, as well as eastern europe and the united States, which offset the downswing in Western europe (-3.9%) and the Japanese market, the latter seriously penalized by the consequences of the earthquake that struck the country in March. In this enduring climate of economic instability, Brembo has nevertheless managed to benefit from an investment and industrial development plan that, despite the rather difficult context, has allowed 8 the Group to become more competitive, expand its presence on emerging markets and consolidate its international leadership in recent years. today Brembo is present with industrial facilities not only in Italy, but also in Germany, Spain, poland, the Czech republic, the Slovak republic, the united Kingdom, the united States, China, India, Brazil, Mexico and argentina. this presence is constantly being reinforced. In total, during the year investments worth over €165 million were made, 20% of which in Italy. In october, a new industrial complex was inaugurated at Dabrowa Gornicza in poland, dedicated to the production of brake discs for cars and commercial vehicles, which will make it easier and faster to supply the plants of German, French and British customers throughout Central and eastern europe. Investments in these facilities will continue until 2014, for a total of €100 million, in order to guarantee a further increase in production capacity. In the Czech republic, a new site is being completed, part of which went into operation in 2011. It will handle the casting, workmanship and assembling of brake calipers and other aluminium components. When it is finished, it will be an integrated industrial complex that can offer the market high-tech braking systems. In China, where a plant has been operative since 2001, the completion of a production complex is at a very advanced stage; it includes a foundry and equipment to manufacture discs and brake calipers for cars and commercial vehicles, and will be inaugurated in the first half of 2012. lastly, in South america we have expanded our presence during the year by acquiring a 75% stake in the argentinian company perdriel S.a., a brake disc manufacturer. During the year the top management team was also reinforced by creating the position of executive Deputy Chairman, to which the board member Matteo tiraboschi was appointed, and with the entry of a new Managing Director, andrea abbati Marescotti. I hope that they and all the employees and collaborators of the Brembo Group will continue to face the challenges of this new year successfully and I thank them for their work so far. In 2011, Brembo also reached another milestone that is a source of great pride for all of us: fifty years in business. this is an important anniversary that, to summarize what we have said so far, has been crowned by significant growth in economic and employment terms, our presence on international markets and our technological leadership. this is an excellent way to celebrate such a special anniversary and lays solid groundwork that will help us face the years to come with confidence. the Chairman alberto Bombassei 9 annual report 2011 COMPANY OFFICERS Based on the one sole list presented by the majority shareholder nuova FourB S.r.l., the General Shareholders’ Meeting of the parent Company Brembo S.p.a. held on 29 april 2011 appointed the Board of Directors, which will remain in office until the approval of the financial statements for the year ending 31 December 2013. Since 6 June 2011, Matteo tiraboschi has served as executive Deputy Chairman. on the same date, the Board of Directors co-opted* andrea abbati Marescotti, appointing him Managing Director and General Manager, after revocation of the powers attributed to the Chairman for that function. at 31 December 2011, Company officers included: BOARD OF DIRECTORS Chairman alberto Bombassei (1) (8) Executive Deputy Chairman Matteo tiraboschi (2) (8) Managing Director and General Manager andrea abbati Marescotti (3) (8) Directors Cristina Bombassei (4) (8) Giovanni Cavallini (5) Giancarlo Dallera (5) Giovanna Dossena (6) umberto nicodano (7) pasquale pistorio (5) (9) Gianfelice rocca (5) pierfrancesco Saviotti (5) BOARD OF STATUTORY AUDITORS (10) Chairman Sergio pivato Auditors enrico Colombo Mario tagliaferri Alternate Auditors Gerardo Gibellini Marco Salvatore * to replace Bruno Saita (non-executive and non-independent Director).