(Translation from the Italian original which remains the definitive version)

Elica S.p.A.

2018 ANNUAL REPORT - SEPARATE FINANCIAL STATEMENTS

Directors' Report	3
Elica today	4
2018 Economic overview and Outlook for 2019	5
Currency markets	6
Financial Highlights	6
2018 Performance	7
Significant events in 2018	9
Events after the reporting date and outlook	11
Elica S.p.A. and financial markets	12
Research and Development	12
The environment and personnel	12
Exposure to risks and uncertainties and financial risk factors	13
Company bodies	15
Elica Group structure	16
Related party transactions	17
IFRS and 2018-2017 comparability	17
Corporate governance and ownership structure report	17
Remuneration report	17
Consolidated non-financial disclosure	18
Compliance with Section VI of the regulation implementing Legislative Decree no. 58 of February 24, 1998 concerning
market regulations ("Market Regulations")	18
Compliance with Article 70, paragraph 8 and Article 71, paragraph 1-bis of the "Issuers Regulation"	18
2018 Separate Financial Statements	19
Income Statement	20
Statement of Comprehensive Income	21
Statement of Financial Position	22
Statement of Cash Flows	23
Statement of changes in Equity	24
Notes to the Separate Financial Statements	25
Disclosure pursuant to Article 149-duedecies of the Consob's Issuers' Regulation	70
Attestation on the Separate Financial Statements as per Article 81-ter of Consob Regulation No. 11971 of May 14, 1999
and subsequent amendments and integrations	71
Independent auditors' report	72

Elica S.p.A.

DIRECTORS' REPORT

Elica today

The Elica Group has been active in the cooker hood market since the 1970's. Chaired by Francesco Casoli and led by Antonio Recinella, today it is the world leader in terms of units sold and a European leader in the design, manufacture and sale of motors for cooker heads and central heating boilers. With over 3,800 employees and an annual output of approx. 21 million units, the Elica Group has seven plants, including in Italy, Poland, Mexico, India and China. With many years' experience in the sector, Elica has combined meticulous care for design with judicious choice of highquality materials and cutting-edge technology to guarantee maximum efficiency and low energy consumption, making the Elica Group the prominent market figure it is today. This has enabled the Group to revolutionize the traditional image of cooker hoods: they are no longer seen as simple accessory but as a design element that improves the quality of life.

2018 Economic overview and Outlook for 2019¹

International developments

Global economic growth will decline to 2.9% in 2019. This according to the World Bank's experts in the Global Economic Prospects report. This figure, which is close to the 3% of 2018, owes much to trade tensions and the consequent drop in global trade. The World Bank cut its global trade view for volumes in 2018, 2019 and 2020 by approx. half a percentage point on its June forecast. US growth is expected to contract from 2.9% to 2.5%, with China forecast to return 6.2% - compared to 6.5% for 2018. Eurozone growth is expected to come in at +1.6% (compared to +1.9% in 2018). The wealth produced by the emerging economies is expected to rise 4.2%, with the advanced economies gaining 2%: the former confirms the 2018 figures, while the latter represents a decline of 20 basis points.

The international economic slowdown in Q3 2018 extended also into the final part of the year. The industrial sector particularly saw a generalised decline across many countries which dampened global demand. Global goods trade in November reduced 1.6% (source: Central Planning Bureau), cancelling out October's improvement. After a particularly strong 2017, global trade overall returned to the more contained levels of 2016 and the Global PMI's latest indications on new export orders do not suggest a quick recovery. The risk of a hard landing for the world economy has heightened over the last month. Alongside worsening financial market conditions, economic and political instability have emerged in both the advanced and emerging economies, with economic developments in China weighing heavily on the global outlook.

In the fourth quarter, real Chinese GDP slowed slightly (+6.4% against +6.5% for the previous quarter). In particular, exports were impacted by the continuing protectionist policy of the United States.

In the same period, United States consumer confidence surprisingly weakened (as per the Conference Board) to its lowest level since July 2017. The drop in confidence was partly due to the shutdown, although owed also to the downward revision in autumn of the six-month outlook. As expected, the Federal Reserve left the reference Fed Fund rate unchanged at 2.25%-2.5%, stating that any upcoming raises will depend on improvements in the economy.

The Euro continued to strengthen against the Dollar in January to a monthly average of USD 1.14. Brent rose in the same period to an average of USD 59 per barrel (56.3 in December). Oil price movements going forward will hinge on trade agreements between China and the US and China's economic data, although the sanctions against Venezuela and the country's recent political turmoil may have an impact.

The Q4 2018 Eurozone estimate indicated real GDP growth of 0.2% - stable on the summer months. The aggregate performance reflects the contraction in Italy (-0.2%) and gains in France (+0.3%) and Spain (+0.7%). In terms of prices, according to Eurostat's preliminary estimate, Eurozone inflation in January lowered to 1.4% from 1.6% in December.

The zone overall was impacted by the weakening global picture and particularly slowing investments. This latter particularly weighed on the German economy which is highly dependent on investment goods global demand. The Board of the ECB in January 2019 downgraded its risks outlook for the zone from "balanced" to "downward" due to the more uncertain environment in view of the risk of a no-deal Brexit and country-specific factors, such as the drop in car production in Germany with the entry into force of the new EU regulation. The ECB however considered the risk of recession as low as financial conditions remain highly accommodating and the jobs market continues to improve (in 2018 unemployment of 8.2%, from 9.1% in 2017) and as also evident in the cost of labour and inflation numbers. The slowdown in the Eurozone was confirmed by the recent growth forecast review for 2019 published by the European Commission (1.3% from the previous 1.9%).

In January, the early available indicators confirmed continued economic weakness. The €-coin indicator fell for the third consecutive month, impacted by the continued drop in business and household confidence and the further weakening of the industrial cycle. The European Commission's Economic sentiment indicator (ESI) also saw a further decline (-1.2% on the previous month) to its lowest level since the end of 2016. Falling confidence levels are a common feature across all sectors, except for construction. Looking to the national breakdown, the ESI improved only in France, while reducing in Germany and Italy and remaining substantially stable in Spain.

Cooker hoods market

The global cooker hoods market in 2018 grew 1.4%² on the previous year, although with diverging regional performances.

The European market - after expanding in the first half of 2018 (+1.6%) - returned to similar levels as the previous year, decreasing 0.3% in the 12 months of 2018 compared to 2017. Curtailed Western European demand (Germany, France)

2Source: company estimate.

¹ Data sources: International Monetary Fund, World Economic Outlook. World Bank, Global Economic Prospects.

and in the United Kingdom (due to the uncertainty surrounding "BREXIT") particularly impacted developments. Eastern Europe and Russia again contributed, with demand growth of 2.2% on the previous year, driven by the property market and the weaker penetration of certain product families compared to continental Europe.

Overall, demand in the "EMEA" (Europe, Middle East and Africa) region reduced 0.2% on 2017. Similar performances are expected for 2019: Slight contraction for Western Europe (-0.5% vs 2018); growth in Eastern Europe and Russia of 2.9%. Consolidated demand growth in the "EMEA" region is expected of 0.9% vs 2018.

In North America, kitchen hood demand continued to grow (+2.5% on 2017), alongside Latin America (+2.0%). Demand growth is expected to continue in 2019 also in this case, driven by a general sector expansion (+2.5% NA; +2.1% LA) and of the wider American economy - in spite of the risk factors outlined previously.

In Asia - the largest global market - the expansionary phase entered into in 2017 after the contraction of 2016 continued. The kitchen hood sector in 2018 reported 2.3% growth, driven by India (+8.9%) and China (+2.5%), which saw a significant recovery in the fourth quarter of 2018. Japan, up 2.5% in 2017, saw a decline of 3.0%, in line with the major drop in both domestic and foreign demand - both contracting in the second half of 2018.

Asian growth is expected to pick up in 2019 (+3.8% vs 2018), once again driven by India, China and a Japanese recovery.

Currency markets

The Euro in 2018, at average exchange rates, substantially strengthened against all currencies, except for the Polish Zloty and UK Sterling, which remained flat.

		2018 average	2017 average	%	Dec 31, 2018	Dec 31, 2017	%

USD	U.S. Dollar	1.18	1.13	4.42%	1.15	1.2	(4.17%)
JPY	Japanese Yen	130.4	126.71	2.91%	125.85	135.01	(6.78%)
PLN	Polish Zloty	4.26	4.26	0.00%	4.30	4.18	2.87%
MXN	Mexican Peso	22.71	21.33	6.47%	22.49	23.66	(4.95%)
INR	Indian Rupee	80.73	73.53	9.79%	79.73	76.61	4.07%
CNY	Chinese Renmimbi	7.81	7.63	2.36%	7.88	7.8	1.03%
RUB	Russian Ruble	74.04	65.94	12.28%	79.72	69.39	14.89%
GBP	UK Sterling	0.88	0.88	0.00%	0.89	0.89	0.00%
Source: ECB

Financial Highlights

In Euro thousands	2018	2017	2018 Vs 2017%

Revenue	359,074	363,084	-1.10%
Adjusted EBITDA	13,876	13,025	6.53%
% of revenue	3.86%	3.59%
EBITDA	3,721	10,905	-65.88%
% of revenue	1.04%	3.00%
EBIT	(9,059)	(296)	(2960.32%)
% of revenue	-2.52%	-0.08%
Net financial expense	(989)	(1,346)	26.52%
% of revenue	-0.28%	-0.37%
Dividends from subsidiaries	5,395	3,021	78.57%
% of revenue	1.50%	0.83%
Impairment of investments in subsidiaries	(5,000)	(1,980)	(152.53%)
% of revenue	-1.39%	-0.55%
Net exchange rate gains/losses	399	(2,241)	117.82%
% of revenue	0.11%	-0.62%
Income/(loss) on disposal of subsidiaries	8,432	(21,793)	138.69%
% of revenue	2.35%	-6.00%
Profit/(loss) for the year	529	(22,112)	102.39%
% of revenue	0.15%	-6.09%

In Euro thousands	Dec 31, 2018	Dec 31, 2017

Cash and cash equivalents	5,377	8,337
Financial assets - related parties	19,989	17,053
Financial liabilities - related parties	(2,245)	(2,861)
Bank loans and borrowings	(27,950)	(44,966)
Current loans and borrowings	(10,206)	(30,774)
Bank loans and borrowings	(54,102)	(47,121)
Non-current loans and borrowings	(54,102)	(47,121)
Net Financial Position	(58,931)	(69,558)
Assets for derivatives	840	1,014
Liabilities for derivatives (current)	(1,734)	(833)
Liabilities for derivatives (non-current)	(120)	(75)

Net Financial Position - Including Derivatives Effect	(59,944)	(69,452)

In Euro thousands	Dec 31, 2018	Dec 31, 2017

Trade receivables	23,246	49,994
Trade receivables - related parties	31,470	31,568
Inventories	37,098	36,032
Trade payables	(68,540)	(74,546)
Trade payables - related parties	(20,252)	(27,364)
Managerial Working Capital	3,022	15,685
% of revenue	0.84%	4.32%
Net other assets/liabilities	108	426
Net Working Capital	3,130	16,111
% of revenue	0.87%	4.44%

2018 Performance

In 2018, revenue reduced by -1.10% on the previous year. The decrease mainly follows a drop in B2B channel demand, particularly in the fourth quarter of 2018 and partly offset by own brand product sales growth.

Adjusted EBITDA of Euro 13.9 million rose 6.5% on Euro 13.0 million in 2017, despite the drop in revenue, owing to the own brand sales growth strategy and the improved margin on the new products distributed in 2018 and presented at the International Furniture Exhibition in April 2018.

2018 EBITDA of Euro 3.7 million contracted 65.9% on the previous year, impacted by the extraordinary accrual of Euro 6.8 million considered necessary in view of the opening of preliminary voluntary insolvency proceedings at the German ex-subsidiary Exklusiv Hauben Gutmann GmbH, against whom Elica S.p.A. has a non-current trade receivable at December 31, 2018, arising before the disposal on August 28, 2017. On the basis of the settlement reached in February 2019, this receivable shall no longer in fact be recoverable. In addition, Elica S.p.A. shall recognise to Gutmann Euro 2.6 million (with an overall adjustment effect on the EBITDA of Elica S.p.A. of Euro 3.4 million, including the impairment of Euro 0.8 million of the original receivable of Euro 2.5 million of Elica S.p.A. from Manuel Fernandez Salgado), of which Euro 800 thousand to be paid within three weeks from the agreement's conclusion, Euro 1.7 million through the transfer to Gutmann of Elica S.p.A.'s receivable from Manuel Fernandez Salgado for the transfer of the shares of Gutmann and a further Euro 100 thousand to be fully offset against that to be paid by Gutmann for the retransfer of the "Gutmann" brands acquired by Elica S.p.A. in 2017 (with an overall adjustment effect on the EBIT of Elica S.p.A. of Euro 1.1 million, deriving from the impairment of the Gutmann brands recognised to the statement of financial position of Elica S.p.A.).

Net interest expense decreased on 2017 by 26.52%, following the improvement in the net financial position and the renegotiation of the medium-term debt.

The 2018 Profit was Euro 0.5 million, compared to a loss of Euro 22.1 million in 2017, mainly impacted by the results from the sale of the subsidiary Gutmann, and was attributable to three main factors: the higher margin on new products distributed in 2018, the gain of Euro 8.4 million thanks to the sale of 33% of the Indian subsidiary to Whirlpool of India Ltd in September 2018 and the impact described above from the settlement with the German former subsidiary Exklusiv Hauben Gutmann GmbH.

Managerial Working Capital of 0.84% significantly reduced on December 2017, mainly due to the decrease in Trade receivables from third parties.

The Net Financial Position improved from a net debt of Euro 69.6 million at December 31, 2017 to Euro 58.9 million at December 31, 2018, mainly due to the sale of 33% of the Indian subsidiary to Whirlpool of India Ltd in September 2018.

Definitions

EBITDA is the operating profit (EBIT) plus amortisation and depreciation and any impairment losses on Goodwill/Brands.

EBIT is the operating profit as reported in the Income Statement.

Adjusted EBITDA is EBITDA net of adjustments.

Net financial expense is the sum of Financial Income and Financial Expense, as per the Income Statement.

Dividends from subsidiaries account for the entirety of Income and charges from associates and subsidiaries, as per the Income Statement.

Adjustment items: income items are adjusted as a result of: (i) non-recurring events and operations or from operations or events which do not occur frequently; (ii) events and operations not considered as in the normal course of business operations, as is the case for restructuring charges.

Managerial Working Capital is the sum of Trade receivables and Trade receivables from related parties with Inventories, net of Trade payables and Trade payables to related parties, as presented in the Statement of Financial Position.

Net Working Capital is the amount of Managerial Working Capital and Net assets and liabilities.

Net other assets/liabilities comprise the current portion of Other assets and Tax assets, net of the current portion of Provisions for risks and charges, Other liabilities and Tax liabilities, as presented in the Statement of Financial Position.

Net Financial Position (NFP) is the sum of Cash and Cash equivalents less Current loans and borrowings (including the current portion of bank loans and borrowings, Financial assets from related parties and Financial liabilities to related parties, as reported in the Statement of Financial Position) and Non-current loans and borrowings (including the

non-current portion of bank loans and borrowings, as reported in the Statement of Financial Position). The Net Financial Position - Including Derivative Instruments is the sum of the Net Financial Position and derivative instrument assets and liabilities, as per the Statement of Financial Position.

Reconciliations

In Euro thousands	2018	2017

Operating loss – EBIT	(9,059)	(296)
(Amortisation & Depreciation)	11,702	11,201
(Impairment of Brands - Goodwill)	1,077	-
EBITDA	3,721	10,905
(Impairment of Intangible assets relating to Gutmann sale)	-	285
(Impairment of pre-sale trade receivable from Gutmann)	6,755	-
(Accrual to the risks provision for settlement with Gutmann)	2,600	-
(Impairment of receivable for sale of Gutmann shares from Manuel Fernandez)	800	-
(Restructuring charges)	-	1,834
Adjusted EBITDA	13,876	13,025

In Euro thousands	Dec 31, 2018	Dec 31, 2017

Financial income	1,593	1,126
Financial expense	(2,582)	(2,472)
Net interest expense	(989)	(1,346)

In Euro thousands	Dec 31, 2018	Dec 31, 2017
Other assets	5,709	2,826
Tax assets	7,809	8,507
(Provision for risks and charges)	(3,580)	(946)
(Other liabilities)	(6,610)	(7,250)
(Tax liabilities)	(3,220)	(2,711)

Other assets/liabilities, net	108	426

Significant events in 2018

On February 12, 2018, the Board of Directors of Elica S.p.A. approved the additional periodic disclosure for the fourth quarter of 2017, prepared according to IFRS.

On the same date, the Group, following the changes to the consolidation scope as a result of the disposal of the company Exklusiv-Hauben Gutmann GmbH realigned the 2017-2019 Plan Objectives. In addition, the Board of Directors of Elica S.p.A., in line with the Shareholders' Meeting motion of April 28, 2017, launched the third cycle of the 2016-2022 Phantom Stock & Co-investment Plan, identifying the Beneficiaries of the 2018-2020 Plan cycle and the relative performance objective parameters, in line with the Disclosure Document published on March 28, 2017 and available on the website of Elica S.p.A., to which reference should be made for greater details of the Plan. On the same date, the Board of Directors of Elica S.p.A. called the Shareholders' Meeting.

On March 15, 2018, the Board of Directors of Elica S.p.A approved the 2017 Consolidated Financial Statements and the Directors' Report, and the 2017 Separate Financial Statements of Elica S.p.A. and the Directors' Report, prepared in accordance with IFRS. The Board in addition approved the consolidated non-financial disclosure ("NFD") prepared in accordance with Legislative Decree No. 254/2016. The NFD outlines the Group's activities, performance, results and impact in terms of environmental, social, personnel, human rights and anti-active and passive corruption aspects.

On April 27, 2018, the Shareholders' Meeting of Elica S.p.A. approved the separate financial statements of Elica S.p.A. at December 31, 2017, the Directors' Report, the Board of Statutory Auditors' Report, the Independent Auditors' Report and noted the consolidated results of the company for 2017.

The Shareholders' Meeting of Elica S.p.A. also approved:

coverage of the loss for 2017 through use of "Retained Earnings".
appointment of the members of the Board of Directors, who will remain in office for the years 2018, 2019 and 2020, until the Shareholders' Meeting called for the approval of the 2020 financial statements, which shall consist of eight members. The Directors, nominated in the slate filed by the majority shareholder FAN S.r.l, holding 52.81% of the share capital, and approved by a 99.9% majority were: Francesco Casoli, who assumes the role of Chairperson; Antonio Recinella; Gennaro Pieralisi; Elio Cosimo Catania; Davide Croff; Barbara Poggiali; Cristina Finocchi Mahne and Federica De Medici. Messrs. Elio Cosimo Catania, Davide Croff, Barbara Poggiali, Cristina Finocchi Mahne and Federica De Medici declared their independence in accordance with the regulations in force, including the Consolidated Finance Act, and the Self-Governance Code. On appointment, as far as the company is aware, none of the directors held shares in the company, with the exception of the Chairman Francesco Casoli, who holds directly 160,000 shares and indirectly 33,440,445 shares.
the appointment of the 3 statutory auditors of the Board of Statutory Auditors and the 2 alternate auditors from Slate No. 1 proposed by the majority shareholder FAN S.r.l, holder of 52.81% of the share capital, who will remain in office for the years 2018, 2019 and 2020 and approved unanimously: Giovanni Frezzotti, who assumes the role of Chairperson of the Board of Statutory Auditors; Massimiliano Belli, elected statutory auditor; Monica Nicolini, elected statutory auditor; Leandro Tiranti elected alternate auditor; Serenella Spaccapaniccia, elected alternate auditor. At the date of voting, as far as the company is aware, none of the statutory auditors held shares in the company.
on the first section of the Remuneration Report, filed on April 4, 2018.
the authorisation to purchase and utilise treasury shares, pursuant to Article 2357 and 2357 ter of the Civil Code, in order to provide the company with an important instrument of strategic and operative flexibility. The new authorisation was preceded by the revocation of that previously granted on April 28, 2017.

On April 27, 2018, the Board of Directors of Elica S.p.A., elected by the Shareholders' Meeting and meeting under the chairmanship of Francesco Casoli:

confirmed Francesco Casoli and Antonio Recinella as executive directors of Elica S.p.A., assigning the latter the role of C.E.O.;
assessed the independence of the Directors Elio Catania, Davide Croff, Barbara Poggiali, Cristina Finocchi Mahne and Federica De Medici, declaring them independent in accordance with Article 148, paragraph 3 of the CFA (restated in Article 147-ter, paragraph 4 of the CFA) and under Article 3.C.1. of the Self-Governance Code for listed companies;
appointed Elio Catania (Chairperson), Davide Croff and Barbara Poggiali, independent/non-executive directors, as members of the Appointments and Remuneration Committee;
in addition appointed Davide Croff (Chairperson), Elio Catania and Cristina Finocchi Mahne, independent/nonexecutive directors, as members of the Control, Risks and Sustainability Committee;
appointed Independent Director Federica De Medici as Lead Independent Director;
appointed the Executive Director, Francesco Casoli, as responsible for the Internal Control and Risk Management System.

Furthermore, the Board of Statutory Auditors of the company, in addition to verifying the correct application of the declaration criteria and procedures adopted by the Board of Directors to assess the independence of its members, positively assessed and communicated to the Board of Statutory Auditors the independence of its members.

Alessandro Carloni, holding the necessary requirements pursuant to the Company By-Laws, was confirmed as Corporate Financial Reporting Manager, having heard the opinion of the Board of Statutory Auditors. Mr. Carloni also declared to not holding any Elica S.p.A. shares.

The Board of Directors of Elica S.p.A. on May 7, 2018 approved the 2018 First Quarter Report, prepared in accordance with IFRS accounting standards.

On the same date, Elica S.p.A. announced the signing of an agreement for the early conversion of the bond loan issued by the subsidiary ELICA PB INDIA PRIVATE LTD and fully subscribed by Elica S.p.A., as announced on May 14, 2013.

Following early conversion, Elica S.p.A. acquired an additional holding in Elica PB India Private Ltd, to increase its stake from 51% to 58.45%, as the Indian shareholders of Elica PB India Private Ltd. agreed not to exercise their preemptive right to acquire the portion of the share capital converted, which would have diluted the company's investment. They also agreed to waive the option to sell their holding at fair value, according to the agreement. Elica S.p.A. undertook to pay the Indian shareholders, the latter waiving the purchase option on a portion of the converted share capital, by December 31, 2018, i.e. within three days of any sale of the shares of the Indian company to third parties, INR 105,599,616 (approx. Euro 1.3 million).

On June 1, 2018, Elica S.p.A. announced the signing of an agreement to sell to Whirlpool of India Limited 33% of the share capital of the Indian subsidiary Elica PB India Private Ltd., together with the other Indian non-controlling owners which sold 16%

On August 2, 2018, the Board of Directors of Elica S.p.A. approved the 2018 Half-Year Report, prepared in accordance with IFRS.

On September 10, 2018, Elica S.p.A., following the agreement signed to sell to Whirlpool of India Limited 33% of the share capital of the Indian subsidiary Elica PB India Private Ltd announced on June 1, 2018, and having obtained antitrust approval in Europe and Turkey, in addition to having satisfied all conditions in the agreement, announced the closing of the Joint Venture between Elica India and Whirlpool of India. In accordance with this agreement, Elica S.p.A. sold to Whirlpool of India Limited 33% of the share capital of the Indian subsidiary Elica PB India Private Ltd., together with the other Indian non-controlling owners, which sold 16%. On closing, Whirlpool of India Limited acquired in total 49% of the Indian subsidiary Elica S.p.A.. On the basis of the blocking agreement with the Indian shareholders, Elica S.p.A. continues to exercise control over Elica PB India Private Ltd., and fully consolidate the company in its financial statements. Alongside the closing of the agreement and the acquisition of the investment, Whirlpool of India Limited signed an exclusive distribution agreement for a number of its cooking segment products with Elica PB India Private Ltd to speed up the development of its business on the Indian market, leveraging on Elica PB India's distribution structure which, over the last 2 years, has created a comprehensive network of mono-brand stores and reports annual growth rates at over 30%. The consideration for the sale of 33% of the Indian subsidiary Elica PB India Private Ltd, paid by Whirlpool of India Limited on the closing of the Joint Venture, was INR 1,092,163,974.14 (approx. Euro 13.2 million).

On October 30, 2018, the Board of Directors of Elica S.p.A. approved the 2018 Third Quarter results, prepared in accordance with IFRS.

10 On December 18, 2018, Elica S.p.A. announced that, as per Article 131, paragraph 4, letter b), of the Issuers' Regulation, the shareholder agreement signed on December 10, 2007 - renewed on December 18, 2010, December 18, 2013 and December 18, 2016 - concerning 39,772,725 ordinary shares of Elica S.p.A., equal to 62.809% of the share capital of Elica S.p.A. ("Company"), between FAN S.r.l. ("FAN"), an Italian-registered company, with registered office in Rome, VAT No. 10379911000, holder of 33,440,445 ordinary shares of Elica S.p.A., equal to 52.809% of the share capital of the Company, and Whirlpool Europe S.r.l., now Whirlpool EMEA S.p.A., ("Whirlpool"), an Italian-registered company, with registered office in Pero (MI), VAT No. 00693740425, holder of 6,332,280 ordinary shares of Elica

S.p.A. conferred to the agreement, equal to 10.000% of the share capital of the Company, concluded with effect from December 18, 2018, at the end of the term of the shareholder agreement and its mutual resolution.

Events after the reporting date and outlook

Events after the reporting date

On January 30, 2019, in accordance with Article 2.6.2, paragraph 1, letter b) of the Regulations of the Markets Organised and Managed by Borsa Italiana S.p.A., Elica S.p.A. published the Financial Calendar for the year 2019.

On February 12, 2019, the Board of Directors of Elica S.p.A. approved the additional periodic disclosure for the fourth quarter of 2018, prepared according to IFRS and reviewed the 2018 preliminary consolidated results.

On February 27, 2019, Elica S.p.A. announced the reaching - together with the subsidiary Elica GmbH - of a settlement with the company Exklusiv-Hauben Gutmann GmbH ("Gutmann") in insolvency, with its administrators and with its sole shareholder Manuel Fernandez Salgado, to whom the company was sold in August 2017. The agreement was approved by the creditors committee of the Gutmann insolvency and the Administrator of the insolvency and is binding upon the parties. The Board of Directors of Elica S.p.A., in consideration of the opportunity to establish mutual positions on the insolvency declaration of Exklusiv-Hauben Gutmann GmbH and to mitigate the main risks associated with the claims advanced and the disputes threatened against Elica S.p.A and Elica GmbH, assessed the proposal as being in the interest of the company and mandated the Chief Executive Officer to conclude a possible agreement. Elica GmbH also agreed with the proposal. Within the overall framework of the agreement and in settlement of the mutual rights and claims, Elica S.p.A. shall pay Gutmann Euro 2.6 million (with an overall adjustment effect on EBITDA of Elica S.p.A. of Euro 3.4 million, including the impairment of Euro 0.8 million of the original receivable of Euro 2.5 million of Elica S.p.A. from Manuel Fernandez Salgado), of which Euro 800 thousand to be paid within three weeks from the agreement's conclusion, Euro 1.7 million through the transfer to Gutmann of Elica S.p.A.'s receivable from Manuel Fernandez Salgado for the transfer of the shares of Gutmann and a further Euro 100 thousand to be fully offset against that to be paid by Gutmann for the retransfer of the "Gutmann" brands acquired by Elica S.p.A. in 2017 (with an overall adjustment effect on the EBIT of Elica S.p.A. of Euro 1.1 million, deriving from the impairment of the Gutmann brands recognised in the statement of financial position of Elica S.p.A.). Manuel Fernandez Salgado shall owe Elica S.p.A. the residual amount of Euro 800 thousand, due for the transfer of the Gutmann shares. It shall extinguish this obligation by paying Elica S.p.A. Euro 200 thousand by February 28, 2020, considered settlement of the full amount. For completeness, Elica S.p.A. in addition agrees to settle the guarantee provided in 2015 in favour of the company owning the property leased by Gutmann of Euro 1.65 million, which has already been provisioned in the company's financial statements, and to settle the amounts regarding the trade payables arising in favour of Gutmann GmbH after the sale of the company and prior to its declaration of insolvency, related to ordinary operations and amounting to approx. Euro 0.5 million, currently prudently blocked by Elica S.p.A.. Elica S.p.A. therefore updated the 2018 result adjustments. Elica S.p.A., following the opening of the preliminary insolvency proceedings, impaired the trade receivable by Euro 4.0 million when it reported its H1 2018 results. Subsequently, during the 2018 fourth quarter, it recognised additional impairment of Euro 2.8 million to cover the insolvency risks of the German company regarding the trade receivable of Elica S.p.A. in view of its continuing insolvency. The agreement reached therefore had an additional adjustment impact for Elica S.p.A. of Euro 4.5 million (with an overall effect of Euro 3.4 million on EBITDA and an additional Euro 1.1 million on EBIT, as previously stated) concerning financial year 2018 and in settlement of the respective positions, of which Euro 0.8 million with cash effect in 2019. This transaction definitively concludes all matters between the two companies, excluding any further impact on future financial statements.

Outlook

The World Bank forecasts global economic growth in 2019 of 2.9%, with a reduction in the world trade view over the 2018-2020 three-year period of approx. half a percentage point on the June 2018 forecast. This trend is mainly based on the current international trade tensions and the consequent drop in global trade. In this environment, two-speed growth with a divergence between the "mature" economies and the emerging economies is expected. In particular, while the US economy is estimated to grow 2.5% and the Eurozone 1.6%, the Chinese economy forecasts a 6.2% expansion, with the wealth produced by the Emerging Economies to grow 4.2%. The home appliances business and cooker hoods in particular (as highly sensitive to economic trends), GDP and the property sector are most likely to be impacted by these dynamics.

The Group continues extensive monitoring of trends in demand across all markets, in order to develop the business model for the delivery of results both over the short and long-term.

Elica S.p.A. and financial markets

Source: Borsa Italiana

The graph shows (in black) the performance of the Elica S.p.A. share price in 2018 in comparison to the average of other companies listed on the STAR segment (performance of the FTSE Italia STAR index indicated in purple). On January 2, 2018, the official share price was Euro 2.44. During the months of January and February 2018, the share price declined to Euro 2.060 on March 5, 2018; from that point, the share began to perform strongly and on May 9, 2018 reached a high of Euro 2.56 (peak volumes for the year of 694,433 on May 8) following the presentation of the results for 2017 and Q1 2018 - the fifth consecutive quarter of revenue and margin growth.

The share saw a volatile decline to Euro 2.285 on October 5, 2018, while thereafter - in line with the index in general falling to Euro 1.250 on December 20, 2018 and in spite of intensive Road-Show activities and meetings with the financial community and strong results in terms of an improving margin delivering on the announced strategy. Finally, the share gained ground in the final days of December to reach 1.304.

11 Road Shows, Conferences and events involving the market were held in 2018, with over 160 investors met, laying the basis for long-term growth in line with the results presented over the last 8 quarters.

The Share Capital consists of 63,322,800 ordinary voting shares. The ownership structure of Elica S.p.A. at December 31, 2018 is shown in the Corporate Governance and Shareholder Ownership Report, available on the company website http://elica.com/corporation (Corporate Governance section).

Research and Development

Development activities are a central part of the company's operations: resources have devoted substantial efforts to developing, producing and offering customers innovative products both in terms of design and the utilisation of materials and technological solutions.

During the year, the company was involved in industrial research, seeking to improve products as well as organisational, process and structural improvements.

Total research and development costs incurred amounted to Euro 7,155 thousand. For further details, reference should be made to Note 4.16.

The environment and personnel

This information is outlined in greater detail in the Consolidated Non-Financial Disclosure, prepared by the Company as per Legislative Decree 254/2016, in implementation of Directive 2014/95/EC, and is available to the public according to the means and deadlines established by the applicable regulation and on the company website https://elica.com/corporation (Investor Relations/Financial Statements and Reports section).

Exposure to risks and uncertainties and financial risk factors

The Elica Group's operations are exposed to different types of financial risks, including risks associated with fluctuations in exchange rates, interest rates, the cost of its main raw materials and cash flows. In order to mitigate the impact of these risks on results, the Elica Group has commenced the implementation of a financial risk monitoring system through a "Financial Risk Policy" approved by the Company's Board of Directors. Within this policy, the Group constantly monitors the financial risks of its operations in order to assess any potential negative impact and takes corrective action where necessary.

The main guidelines for the Group's risk policy management are as follows:

identify the risks related to the achievement of the business objectives;
assess the risks to determine whether they are acceptable considering the controls in place and if they require additional treatment;
respond appropriately to risks;

• monitor and report on the current state of the risks and the effectiveness of their control.

The Group's Financial Risk Policy is based on the principle of active management and the following assumptions:
- prudent management of the risk with a view to protecting the expected value of the business;
- use of "natural hedges" in order to minimise the net exposure on the financial risks described above;
- undertake hedging transactions within the limits approved by management and only for actual, clearly identified exposures.

The process for the management of the financial risks is structured on the basis of appropriate procedures and controls, based on the correct segregation of conclusion, settlement, registration and reporting of results.

We examine in detail the risks to which the Group is exposed. In the notes, particularly paragraph 6, we report all the relative figures. Market risk includes all the risks directly or indirectly related to the fluctuations of the general market prices and the financial markets in which the company is exposed:

currency risk;
commodity risk, related to the volatility of the prices of the raw materials utilised in the production processes;
interest rate risk.

The amount of the currency risk, defined in advance by management of the Group on the basis of the budget for the reporting period, is gradually hedged over the acquisition process of the orders, up to the amount of the orders corresponding to budget projections or emerging during the year.

The hedge is entered into through agreements with third party lenders for forward contracts and options for the purchase and sale of foreign currency. These operations are undertaken without any speculative or trading purpose, in line with the strategic policies of a prudent management of the cash flows.

In addition to the aforementioned transaction risks, the Group is also exposed to translation risk. The assets and liabilities of consolidated companies whose currency differs from the Euro may be translated into Euro with carrying amounts that vary according to different exchange rates, with recognition in the translation reserve under equity. The company is not subject to this risk.

The Group monitors this exposure, against which there were no hedging operations at the reporting date; in addition, given the Parent's control over its subsidiaries, governance over the respective foreign currency transactions is greatly simplified.

The Group is subject to market risk deriving from price fluctuations in commodities used in the production process. The raw materials purchased by the Group (including copper and aluminium) are affected by the trends of the principal markets. The Group regularly evaluates its exposure to the risk of changes in the price of commodities and manages this risk through fixing the price of contracts with suppliers and through hedging contracts with financial counterparties.

In particular, between the end and the beginning of the year, on the basis of the production budget for the year, the prices and quantities were fixed through both channels described above. Operating in this manner, the Group covers the standard cost of the raw materials contained in the budget from possible increases in commodity prices, achieving the operating profit target.

Among the market risks in addition, the Group is exposed to interest rate risk. The management of interest rate risk by the Elica Group is in line with longstanding, consolidated practices to reduce the volatility risk on the interest rates, while at the same time minimising the borrowing costs within the established budget limits. The Group's debt mainly bears a floating rate of interest.

Further to market risks, the Group is exposed to credit risk. This concerns the exposure to potential losses deriving from the non-compliance with obligations by trading partners. This risk derives in particular from economic-financial factors related to a potential solvency crisis of one or more counterparties.

The Group follows the Credit Policy (related to the Financial Risk Policy) which governs credit management and the reduction of the related risk, partly through insurance policies with leading international insurance companies.

Liquidity risk is also managed and represents the risk related to the unavailability of financial resources necessary to meet short-term commitments assumed by the Group and its own financial needs.

The principal factors which determine the liquidity of the Group are, on the one hand, the resources generated and absorbed by the operating and investment activities and on the other the due dates and the renewal of the payable or liquidity of the financial commitments and also market conditions. These factors are monitored constantly in order to guarantee a correct equilibrium of the financial resources.

Corporate bodies

Members of the Board of Directors

Francesco Casoli Executive Chairman, born in Senigallia (AN) on 05/06/1961, appointed by resolution of 27/04/2018.

Antonio Recinella

Chief Executive Officer, born in Livorno (LI) on 5/11/1968, appointed by resolution of 27/04/2018.

Cristina Finocchi Mahne Independent Director, born in Trieste on 01/07/1965, appointed by resolution of 27/04/2018.

Federica De Medici

Independent Director and Lead Independent Director, born in Pavia on 24/08/1972, appointed by resolution of 27/04/2018.

Members of the Board of Statutory Auditors

Giovanni Frezzotti Chairman, born in Jesi (AN) on 22/02/1944, appointed by resolution of 27/04/2018.

Massimiliano Belli

Statutory Auditor, born in Recanati (MC) on 22/08/1972, appointed by resolution of 27/04/2018.

Monica Nicolini

Statutory Auditor, born in Pesaro on 16/04/1963, appointed by resolution of 27/04/2018.

Control, Risks and Sustainability Committee

Davide Croff (Chairman) Elio Cosimo Catania Cristina Finocchi Mahne

Independent Auditors

KPMG S.p.A.

Registered office and Company data

Elica S.p.A. Registered office: Via Ermanno Casoli, 2 – 60044 Fabriano (AN) Share capital: Euro 12,664,560.00 Tax Code and Company Registration No.: 00096570429 Ancona REA No. 63006 – VAT Number 00096570429

Investor Relations Manager

Giulio Cocci - Group Controlling & Investor Relations Director Francesca Cocco – Lerxi Consulting – Investor Relations Tel: +39 (0)732 610 4205 E-mail: [email protected]

Davide Croff Independent Director, born in Venice on 01/10/1947, appointed by resolution of 27/04/2018.

Elio Cosimo Catania

Independent Director, born in Catania on 05/06/1946, appointed by resolution of 27/04/2018.

Barbara Poggiali

Independent Director, born in Milan on 04/03/1963, appointed by resolution of 27/04/2018.

Gennaro Pieralisi

Director, born in Monsano on 14/02/1938, appointed by resolution of 27/04/2018.

Leandro Tiranti

Alternate Auditor, born in Sassoferrato (AN) on 04/05/1966, appointed by resolution of 27/04/2018.

Serenella Spaccapaniccia

Alternate Auditor, born in Montesangiorgio (AP) on 04/04/1965, appointed by resolution of 27/04/2018.

Appointments and Remuneration Committee

Elio Cosimo Catania (Chairman) Davide Croff Barbara Poggiali

Elica Group structure

The Elica Group is currently the world's largest manufacturer of kitchen range hoods for domestic use and is leader in Europe in the sector of motors for boilers used in home heating systems.

Parent

o Elica S.p.A. - Fabriano (Ancona, Italy) is the Parent of the Group ("Elica")³ .

Subsidiaries

o Elica Group Polska Sp.zo.o Wroclaw (Poland) (in short Elica Group Polska). This wholly-owned company has been operational since September 2005 in the production and sale of electric motors and from December 2006 in the production and sale of exhaust hoods for domestic use;
o Elicamex S.A. de C.V. Queretaro (Mexico) (in short Elicamex). This company was incorporated at the beginning of 2006 (the parent owns 98% directly and 2%
o through Elica Group Polska). The Group intends to concentrate production for the American markets with this company in Mexico and reap the benefits of optimising operations and logistics;
o Leonardo Services S.A. de C.V. Queretaro (Mexico) (in short Leonardo). This wholly-owned subsidiary was incorporated in January 2006 (the Parent owns 98% directly and 2% indirectly through Elica Group Polska Sp.zo.o.) and manages the Mexican staff, providing services to ELICAMEX S.A. de C.V;
o Ariafina CO., LTD Sagamihara-Shi (Japan) (in short Ariafina). Incorporated in September 2002 as a 50:50 joint venture with Fuji Industrial of Tokyo, the Japanese hood market leader, Elica S.p.A. acquired control in May 2006 (51% holding) to provide further impetus to the development of the important Japanese market, where high- quality products are sold;
o Airforce S.p.A. Fabriano (Ancona, Italy) (in short Airforce). This company operates in a special segment of the production and sale of hoods. Elica S.p.A. owns 60% of this company;
o Airforce Germany Hochleigstungs-Dunstabzugssysteme GmbH Stuttgart (Germany) (in short Airforce Germany). The 95% holding is held by Airforce S.p.A.. The company is no longer operative and is expected to be removed from the German Federal Bulletin by the summer of 2019. On removal, the shareholder shall be repaid the share capital and the company deconsolidated.
o Elica Inc Chicago, Illinois (United States), offices in Bellevue, Washington (United States). This company aims to develop the Group's brands in the US market by carrying out marketing and trade marketing with resident staff. The company is a wholly-owned subsidiary of ELICAMEX S.A. de C.V.;
o Elica PB India Private Ltd. Pune (India) (in short Elica India) Elica PB India Private Ltd. is involved in the production and sale of Group products. At December 31, 2017, the Group held 51% of the share capital. In 2018, following the conversion of the debenture, the Elica Group increased its holding to 58% and thereafter sold its share to a third party, holding at year-end 25.5%. Thanks to the signing of a shareholder agreement with the Indian shareholders, the Elica Group continues to have control.
o Zhejiang Elica Putian Electric CO.,LTD. Shengzhou (China) (in short Putian), a Chinese company held 99% and operating under the Puti brand, a leader in the Chinese home appliances sector, producing and marketing range hoods, gas hobs and kitchenware sterilisers. Putian is one of the main players in the Chinese hood market and the principal company developing Western-style hoods. The production site is located in Shengzhou, a major Chinese industrial district for the production of cooking appliances.
o Elica Trading LLC St. Petersburg (Russian Federation) (in short Elica Trading), a Russian company held 100%, incorporated on June 28, 2011.
o Elica France S.A.S. Paris (France) (in short Elica France), a wholly-owned French company incorporated in 2014.
o Elica GmbH Munich (Germany), a German company wholly-owned by Elica S.p.A. and incorporated in 2017.

Associates

o I.S.M. S.r.l. – Cerreto d'Esi (AN-Italy). The company, of which Elica S.p.A. holds 49.385% of the Share Capital, operates within the real estate sector.

¹⁶ ³ The company also has a permanent establishment in Spain, in Avda, Generalitat de Catalunya Esc.9, bayos 1 08960 Sant Just Desvern – Barcelona.

Changes in the consolidation scope

There were no changes in the consolidation scope compared to December 31, 2017.

Related party transactions

In 2018, transactions were entered into with subsidiaries, associates and other related parties. All transactions were conducted on an arm's length basis in the ordinary course of business.

Subsidiaries – 2018 Highlights

Reporting package figures
In Euro thousands	Assets	Liabilities	Equity	Revenue	Profit/(loss)

Elicamex S.a.d. C.V.	60,723	37,368	23,354	70,253	3,722
Elica Group Polska Sp.z o.o	58,663	33,053	25,610	111,657	2,674
Airforce S.p.A.	12,201	8,408	3,793	24,668	390
Ariafina CO., LTD	11,312	3,452	7,859	23,190	3,016
Leonardo S.A.de C.V.	1,862	1,610	252	10,675	195
Elica Inc.	391	122	269	994	30
Airforce GE(*)	10	5	5	-	-
Elica PB India Private Ltd.	17,593	9,766	7,827	29,113	2,917
Zhejiang Elica Putian Electric Co. Ltd	18,991	20,051	(1,060)	15,715	(2,320)
Elica Trading LLC	5,599	4,337	1,262	12,532	744
Elica France S.A.S.	4,831	4,131	700	12,414	198
Elica GmbH	4,347	3,829	518	6,320	(1,865)
(*) Airforce Germany Hochleistungs-dunstabzugssysteme Gmbh

For details on transactions with these subsidiaries and other related parties, reference should be made to the following notes. In the subsequent note on related party transactions, disclosure is also provided as per Article 2497 bis of the Civil Code.

IFRS and 2018-2017 comparability

The separate financial statements of Elica S.p.A. as at and for the year ended December 31, 2018 were prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and endorsed by the European Commission, and in accordance with article 9 of Legislative Decree No. 38/2005.

The accounting policies utilised for the preparation of these separate financial statements are consistent with those utilised for the preparation of the separate financial statements as at and for the year ended December 31, 2017.

The tables in the separate financial statements are presented in Euro, while the notes are presented in Euro thousands with all amounts rounded to the nearest thousand, unless otherwise specified.

Corporate Governance and Ownership Structure Report

In accordance with Article 123-bis of Legislative Decree 58/1998, with Article 89-bis of Consob Resolution No. 11971/1999 and successive amendments and integrations, Elica S.p.A. provides complete disclosure on the Corporate Governance system adopted at March 15, 2018, in line with the recommendations of the Self-Governance Code (July 2015 edition), in the Annual Corporate Governance Report, available on the Company website https://elica.com/corporation (Corporate Governance section).

Remuneration report

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

Consolidated non-financial disclosure

In accordance with Legislative Decree 254/2016 enacting Directive 2014/95/EC, the Elica Group produces a nonfinancial disclosure of environmental, social, personnel, human rights and anti-corruption matters, helping the reader to understand Group activities, its performance and results and the related impacts. This report is available to the public according to the means and deadlines established by the applicable regulation and on the company website https://elica.com/corporation (Investor Relations/Financial Statements and Reports section).

Compliance with Section VI of the regulation implementing Legislative Decree no. 58 of February 24, 1998 concerning market regulations ("Market Regulations")

In accordance with article 36 of the Regulation implementing Legislative Decree no. 58 of February 24, 1998, as Elica S.p.A. has direct or indirect control over certain companies registered in countries outside of the European Union, the financial statements of such companies, prepared for the purposes of these consolidated financial statements, were made available within the terms required by current legislation.

For the basis upon which it is considered that the company is not under the direction and control of the parent company, in accordance with Article 37, reference should be made to paragraph 8. Disclosure pursuant to IAS 24 on management remuneration and related-party transactions.

Compliance with Article 70, paragraph 8 and Article 71, paragraph 1-bis of the "Issuers Regulation"

In accordance with Article 70, paragraph 8 and Article 71, paragraph 1-bis of Consob's Issuers Regulation, on January 16, 2013, Elica announced that it would apply the exemption from publication of the required disclosure documents concerning significant mergers, demergers and share capital increases through the contribution of assets in kind, acquisitions and sales.

Fabriano, March 7, 2019

The Board of Directors The Executive Chairman Francesco Casoli

2018 SEPARATE FINANCIAL STATEMENTS

ELICA S.p.A.

Registered Office at Via Ermanno Casoli, 2 – 60044 Fabriano (AN) - Share Capital: Euro 12,664,560 fully paid-in

Separate financial statements as at and for the year ended December 31, 2018

Income Statement

In Euro	Note	2018	2017
Revenue - third parties	4.1	283,770,918	290,483,640
Revenue - related parties	4.1	75,302,985	72,600,187
Other operating income	4.2	1,955,678	2,230,371
Change in inventories finished/semi-finished products	4.3	1,137,148	3,676,648
Increase in internal work capitalised	4.4	2,755,276	2,684,794
Raw materials and consumables - third parties	4.5	(121,452,318)	(125,084,521)
Raw materials and consumables - related parties	4.5	(111,882,282)	(114,773,788)
Services - third parties	4.6	(52,336,382)	(52,310,421)
Services – related parties	4.6	(2,545,704)	(2,818,679)
Personnel expense	4.7	(53,293,011)	(55,498,219)
Amortisation and depreciation	4.8	(11,702,390)	(11,200,707)
Other operating expenses and accruals	4.9	(19,691,332)	(8,450,575)
Restructuring charges	4.10	-	(1,834,488)
Impairment of Goodwill - Brands	4.39	(1,077,122)	-
Operating loss		(9,058,537)	(295,758)
Share of profit from associates and subsidiaries	4.11	5,394,607	3,021,253
Impairment of investments in subsidiaries	4.11	(5,000,000)	(1,980,000)
Financial income	4.12	1,593,305	1,126,007
Financial expense	4.13	(2,582,317)	(2,471,800)
Exchange rate gains/(losses)	4.14	399,368	(2,241,344)
Income/(loss) on disposal of subsidiaries	4.38	8,431,773	(21,792,951)
Loss before taxes		(821,800)	(24,634,593)
Income taxes	4.15	1,350,996	2,522,780
Profit/(loss) from continuing operations		529,197	(22,111,813)
Profit/(loss) from discontinued operations			-
Profit/(loss) for the year		529,197	(22,111,813)

In Euro		2018	2017
	Note
Profit/(loss) for the year		529,197	(22,111,813)
Other comprehensive income/(expense) which will not be subsequently reclassified to profit/(loss) for the year: Actuarial gains/(losses) on defined employee benefit plans Tax effect of Other income/(expense) which will not be subsequently reclassified to the profit or loss	4.30	373,838	247,322 -
Total items which will not be subsequently reclassified to profit or loss, net of the tax effect		373,838	247,322
Other comprehensive income/(expense) which will be subsequently reclassified to profit or loss:
Net change in cash flow hedges		(2,039,402)	(424,321)
Tax effect of Other income/(expense) which will be subsequently reclassified to profit or loss	4.36.3	559,383	31,911
Total items which will be subsequently reclassified to profit or loss, net of the tax effect	4.36.3	(1,480,019)	(392,410)
Total other comprehensive expense, net of the tax effect:		(1,106,180)	(145,088)
Comprehensive expense		(576,984)	(22,256,901)

Statement of Comprehensive Income

Statement of Financial Position

In Euro		Dec 31, 2018	Dec 31, 2017
Property, plant and equipment	4.17	46,767,658	46,803,377
Goodwill	4.18	23,342,460	23,342,460
Other intangible assets	4.18	21,087,387	20,126,762
Investments in subsidiaries	4.19	58,857,133	57,267,531
Investments in associates	4.19	1,376,926	1,376,926
Other assets	4.20	18,911	2,392,192
Deferred tax assets	4.21	13,709,496	11,301,463
AFS financial assets	4.22	48,992	48,992
Derivative financial instruments	4.28	-	7,951
Total non-current assets		165,208,964	162,667,654
Trade receivables	4.23	23,246,103	49,993,910
Trade receivables - related parties	4.24	31,469,536	31,567,953
Financial assets - related parties	4.24	19,989,114	17,052,658
Inventories	4.25	37,098,012	36,032,403
Other assets	4.26	5,708,598	2,825,531
Tax assets	4.27	7,809,254	8,507,404
Derivative financial instruments	4.28	839,977	1,005,991
Cash and cash equivalents	4.29	5,376,756	8,337,425
Current assets		131,537,349	155,323,275
Assets held for sale
Total assets		296,746,312	317,990,930
Liabilities for post-employment benefits	4.30	9,071,030	9,713,285
Provisions for risks and charges	4.31	13,145,273	12,342,463
Deferred tax liabilities	4.21	581,707	798,644
Bank loans and borrowings	4.32	54,101,561	47,121,107
Other liabilities	4.34	50,854	211,218
Tax liabilities	4.33	53,429	183,293
Derivative financial instruments	4.28	119,802	75,199
Non-current liabilities		77,123,655	70,445,209
Provisions for risks and charges	4.31	3,580,000	946,000
Bank loans and borrowings	4.32	27,949,957	44,965,959
Trade payables	4.35	68,540,115	74,545,934
Trade payables - related parties	4.35	20,251,590	27,363,715
Financial liabilities - related parties	4.35	2,244,720	2,861,067
Other liabilities	4.34	6,609,784	7,250,051
Tax liabilities	4.33	3,219,991	2,710,685
Derivative financial instruments	4.28	1,734,169	832,995
Current liabilities		134,130,325	161,476,406
Liabilities associated with assets held for sale
Share capital	4.36.1	12,664,560	12,664,560
Equity-related reserves	4.36.2	71,123,335	71,123,335
Hedging reserve	4.36.3	(1,148,619)	331,400
Actuarial reserve	4.36.5	(2,601,300)	(2,975,139)
Treasury shares	4.36.4	(3,550,986)	(3,550,986)
Income-related reserves	4.36.6	8,476,145	30,587,958
Profit/(loss) for the year		529,197	(22,111,813)
Equity	4.36	85,492,334	86,069,315
Total liabilities and equity		296,746,312	317,990,930

Statement of Cash Flows

In Euro	2018	2017
OPENING CASH AND CASH EQUIVALENTS	8,337,425	9,826,270
OPERATING ACTIVITIES
Profit/(loss) for the year	529,197	(22,111,813)
Amortisation and depreciation	11,702,390	11,200,707
Impairment	1,077,122
Non-monetary (income)/charges	1,576,091	23,104
(Income)/loss on disposal	(8,431,373)	21,792,951
Trade working capital	12,663,054	(2,980,048)
Other working capital items	225,394	(1,979,150)
Income taxes (paid)/collected	-	1,233,727
Change in provisions	372,070	4,832,369
Other changes	-	-
CASH FLOWS FROM OPERATING ACTIVITIES	19,713,944	12,011,846
INVESTING ACTIVITIES
Investments
- Intangible assets	(7,085,105)	(7,871,658)
- Property, plant and equipment	(6,619,312)	(8,330,792)
- Financial assets	(2,614,394)	(5,148,337)
Acquisition/Sale of investments
CASH FLOWS USED IN INVESTING ACTIVITIES	(16,318,811)	(21,350,788)
FINANCING ACTIVITIES
Sale of treasury shares/investments - maintaining control	9,730,159
Other changes in share capital
Dividends	-	-
Increase/(decrease) in financial assets/liabilities	(14,269,885)	9,546,781
Net change in other financial assets/liabilities	(298,766)	(415,891)
Interest paid	(1,517,311)	(1,280,794)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES	(6,355,803)	7,850,097
DECREASE IN CASH AND CASH EQUIVALENTS	(2,960,669)	(1,488,845)
CLOSING CASH AND CASH EQUIVALENTS	5,376,756	8,337,425

Statement of changes in Equity

	Share	Share premium	Treasury	Income-related	Hedging/actuarial	Profit/(loss) for the	Total
In Euro thousands	capital	reserve	shares	reserves	reserve	year	Equity
Balance at December 31, 2016	12,665	71,123	(3,551)	37,129	(2,499)	(6,541)	108,326
Fair value changes on cash flow hedges net of the tax effect					(392)		(392)
Actuarial gains/(losses) on post-employment benefits					247		247
Total gains/(losses) recognised directly in equity					(145)		(145)
Loss for the year						(22,112)	(22,112)
Total gains/(losses) recognised in profit or loss						(22,112)	(22,112)
Allocation of profit/(loss) for the year				(6,541)		6,541
Other changes
Dividends
Balance at December 31, 2017	12,665	71,123	(3,551)	30,588	(2,644)	(22,112)	86,069
Fair value changes on cash flow hedges net of the tax effect					(1,480)		(1,480)
Actuarial gains/(losses) on post-employment benefits					374		374
Total gains/(losses) recognised directly in equity					(1,106)		(1,106)
Profit for the year						529	529
Total gains/(losses) recognised in profit or loss						529	529
Allocation of profit/(loss) for the year				(22,112)		22,112	-
Other changes							-
Dividends							-
Balance at December 31, 2018	12,665	71,123	(3,551)	8,476	(3,750)	529	85,492

Notes to the Separate Financial Statements at December 31, 2018

1. Accounting policies
1. Accounting standards, amendments and interpretations in force as from January 1, 2018 and not yet applicable by the Company
1. Significant accounting estimates
1. Notes to the Separate Financial Statements
1. Guarantees, commitments and contingent liabilities
1. Risk management
1. Management compensation and related-party transactions
1. Public grants as per Article 1, paragraphs 125‐129, of Law No. 124/2017
1. Positions or transactions arising from atypical and/or unusual operations
1. Events after the reporting date
1. Proposal for the approval of the separate financial statements and allocation of 2018 profit

1. Accounting policies

1.1 General information

Elica S.p.A. is a company incorporated under Italian law based in Fabriano (AN), Italy.

The company is listed on the STAR segment on the Italian Stock Exchange.

The main activities of the Company and its subsidiaries, as well as its registered office and other offices are illustrated in the Directors' Report.

The Euro is the functional and reporting currency. Amounts in the financial statement are given in Euro while the amounts in the notes are given in thousands of Euro.

The Company also prepares the Consolidated Financial Statements of the Group that it heads.

1.2 Basis of preparation

The Separate Financial Statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IAS) and endorsed by the European Union, as well as in accordance with Article 9 of Legislative Decree no. 38/2005 and related CONSOB regulations.

The Separate Financial Statements as at and for the year ended December 31, 2018 are compared with the previous year and consist of the Statement of Financial Position, the Income Statement, the Statement of Comprehensive Income, the Statement of Cash Flows, the Statement of changes in Equity and the Notes thereto.

The financial statements and related notes comply with the minimum disclosure requirements of IFRS, as supplemented, where applicable, by the provisions of the law and CONSOB regulations.

The company did not make any changes in the accounting policies applied between the preparation of the data at December 31, 2018 and December 31, 2017, presented for comparative purposes, as neither the International Accounting Standards Board (IASB) nor the International Financial Reporting Interpretation Committee (IFRIC) have revised or issued standards or interpretations applicable to reporting periods beginning on or after January 1, 2018 with a material impact on the Financial Statements.

The financial statement items have been measured in accordance with the general criteria of prudence and accruals and on a going concern basis, and also take into consideration the economic function of the assets and liabilities.

1.3 Financial Schedules

Company Management, in accordance with IAS 1, made the following choices in relation to the presentation of the financial statements.

• The Income Statement is prepared in accordance with the nature of the item and shows intermediary results relating to the operating profit/(loss) and the profit/(loss) before taxes in order to allow a better assessment of the operating performance.

The operating profit is the difference between net revenue and operating expenses (this latter including nonmonetary items relating to amortisation/depreciation and impairment of current and non-current assets, net of any reversals), including any gains/losses on the sale of non-current assets.

The Statement of Comprehensive Income reports, beginning with the profit/(loss) for the year, the effect of other comprehensive income recognised directly in equity (other comprehensive income).
The Statement of Financial Position is presented with separation of current and non-current assets and liabilities. A current item is expected to be realised/settled or sold or utilised within the company's normal operating cycle; it is held for trading; it is expected to be realised/settled within 12 months from the end of the reporting period. Where none of these conditions apply, the assets/liabilities are classified as non-current.
The Statement of Cash Flows is prepared using the indirect method in which the profit/(loss) is adjusted by non-monetary items. It is based on the classification of cash flows generated respectively from operating activities, investing activities and financing activities, in line with IAS 7. Specifically, operating activities are activities that generate revenue and are not investing or financing activities. Investing activities relate to the purchase and sale of non-current assets and other investments, while financing activities are those resulting in a change to the sources of financing, therefore in the size and composition of the share capital, share premium reserves and Group loans. Unrealised exchange rate gains and losses are not considered cash flows. However, the effect of such exchange rate gains and losses on cash and cash equivalents is included to reconcile the change in the opening and closing balances of cash and cash equivalents. It is, however, presented separately.
Statement of Changes in Equity outlines the changes to the Equity items, including the allocation of the result, the recognition of actuarial profits/losses, the impact of the valuation of hedging instruments and the recording of the profit/loss, in addition to the additional phenomenon which according to IFRS should be recognised to this item.

1.4 Accounting policies

The main accounting policies adopted in the preparation of the Separate Financial Statements are described below.

Property, plant & equipment

Property, plant and equipment are recognised at purchase or production cost, including any directly attributable costs. Some assets have been adjusted under specific revaluation legislation prior to January 1, 2005 and are deemed to reflect the fair value of the asset at the revaluation date ("deemed cost" as per IFRS 1).

Depreciation is calculated on a straight-line basis over the estimated useful life applying the following percentage rates:

buildings	3%
light structures	10%
plant and machinery	6-10%
industrial and commercial equipment	16%
office furniture and equipment	12%
EDP	20%
commercial vehicles	20%
automobiles	25%

Assets held under finance leases are recorded as property, plant and equipment and depreciated on a straight-line basis over their estimated useful lives.

Purchase cost is also adjusted for grants related to assets already approved to the company. These grants are recognised in profit or loss by gradually reducing the depreciation charged over the useful life of the assets to which they relate.

Maintenance, repair, expansion, updating and replacement costs that do not lead to a significant, measurable increase in the production capacity and useful life of an asset are taken to profit or loss when they are incurred.

Goodwill

Goodwill arising on the acquisition of a subsidiary or other business combinations represents the excess of the acquisition cost over the Group's share in the fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary at the acquisition date.

At each reporting date the Group reviews the recoverable value of the goodwill to assess whether an impairment loss has occurred and determine the amount of any impairment. An impairment loss is immediately taken to profit or loss and is not reversed in a subsequent period.

On the sale of a subsidiary, any goodwill attributable to the subsidiary that has not been impaired is included in the calculation of the gain or loss on the sale.

Goodwill arising on acquisitions prior to January 1, 2004 is carried at the amount recognised under Italian GAAP after an impairment test at that date.

Research costs

The research costs are taken to profit or loss when incurred.

Development costs

Development costs in relation to specific projects are capitalised when all of the following conditions are satisfied:

the costs can be reliably determined;
the technical feasibility of the product is demonstrated,
the volumes, and expected prices indicate that costs incurred for development will generate future economic benefits;
the technical and financial resources necessary for the completion of the project are available.

Where the above conditions are not met; the cost is recorded in the Income Statement.

Capitalised development costs are amortised on a straight-line basis, commencing from the beginning of the production over the estimated life of the product to which these costs refer.

The carrying amount of development costs are tested annually for impairment, or with greater frequency when there is indication of impairment. The recoverability test requires estimates by the Directors, as dependent on the cash flows deriving from the sale of products sold by the company. These estimates are impacted both by the complexity of the assumptions underlying the projected revenue and future margins and by the strategic industrial choices of the Directors.

Other intangible assets

Purchased or internally-generated intangible assets are recognized in accordance with IAS 38 – Intangible Assets, where it is probable that the use of the asset will generate future economic benefits and where the cost of the asset can be determined reliably.

The useful life of an intangible asset may be considered definite or indefinite. Intangible assets with definite useful lives are amortised monthly for the duration of their useful lives. According to management and experts, the company's most important software has a useful life of seven years. The useful life is tested annually for impairment and any changes are made on a prospective basis.

Intangible assets with indefinite useful lives are not amortised but tested annually for impairment or more frequently where there is an indication that the asset may be impaired. At present, the company only owns intangible assets with definite useful lives.

Impairment testing

At each reporting date, the company assesses whether events or circumstances exist that raise doubts as to the recoverability of the carrying amount of property, plant and equipment and intangible assets with definite useful lives. If there are any indications of impairment, the company estimates the recoverable amount of the assets to determine any impairment loss.

The goodwill and other intangible assets with indefinite useful lives are tested at least annually for impairment and whenever there is an indication of a possible loss in value. The impairment test compares the carrying amount with the recoverable amount, which is the greater of fair value less costs to sell and value in use. Any excess of the carrying amount results in an impairment loss. An impairment loss is recognised to profit and loss. When the reasons for the impairment no longer exist, the impairment losses on the assets are reversed bringing the carrying amount up to the revised estimate of its recoverable amount. The restatement cannot exceed the carrying amount had no impairment been recognised. The reversal of an impairment loss is taken to profit or loss.

For goodwill, the recoverable amount is determined by the Directors through the calculation of the value in use of the Cash Generating Unit (CGU). Cash Generating Unit is identified based on the Group's organisational and business structure as units that generates cash flows independently through the continuous use of the assets allocated. The impairment loss of the goodwill is taken to profit or loss and, differing to that for other property, plant and equipment and intangible assets, no reversal is recognised in future years.

Investments in subsidiaries and associates

Investments in subsidiaries, joint ventures and associates not classified as held-for-sale are measured at cost.

Income from investments is recognised only in relation to the dividends received from the investee on profit generated after the acquisition date. Dividends received in excess of profits generated are regarded as a recovery on the investment and are taken as a reduction in the cost of the investment.

At the end of each reporting period, the Company evaluates whether there are any indications of impairment in the cost of the investment. When it is determined that a potential loss exists, the Directors make valuations on the recoverable amount of those investments in order to identify the potential amount of the loss.

Investments are tested at least annually for impairment and whenever there is an indication of a possible loss in value. The impairment test compares the carrying amount of the investment with the recoverable amount, defined as the higher between the fair value of the investment net of sales costs and the value in use, represented by the present value of the expected revenue streams for the years of operations of the company subject to the impairment test and deriving from its disposal on conclusion of its useful life. Any excess of the carrying amount results in an impairment loss. An impairment loss is recognised to profit and loss. Following the complete impairment of the cost of the investment, further losses recorded on the investment are recorded under liabilities, where a legal implicit obligation to cover the losses in the investment exists. When the reasons for the impairment no longer exist, the impairment losses are reversed bringing the carrying amount up to the revised estimate of its recoverable amount. The restatement cannot exceed the carrying amount had no impairment been recognised. The reversal of an impairment loss is taken to profit or loss.

Inventories

Inventories are measured at the lower of purchase or production cost and net realisable value.

The purchase cost of raw, ancillary, supplies and goods for resale is determined using the weighted average cost method. The production cost of finished products, work in progress and semi-finished products is determined considering the cost of the materials used plus direct operating expenses and overheads.

Net realisable value represents the estimated selling price less expected completion costs and selling costs.

Obsolete and slow moving inventories are written down taking account of their prospects of utilisation or sale.

Trade receivables, loans and other financial assets

Financial assets other than trade receivables, loans and cash and cash equivalents are initially recognised at fair value, including directly related transaction costs.

Trade receivables and loans are measured at their nominal amount, which normally represents their fair value. In the event of a significant difference between nominal amount and fair value, they are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method.

Receivables are adjusted through a loss allowance to reflect their realisable value. The allowance is calculated as the difference between the carrying amount of the receivables and the present value of the expected cash flows, discounted at the effective interest rate on initial recognition.

Non-current assets held-for-sale

Non-current assets (and disposal groups) classified as held-for-sale are measured at the lower of their previous carrying value and market value less selling costs.

Non-current assets (and disposal groups) are classified as held-for-sale when their carrying amount is expected to be recovered principally through a sale transaction rather than through continuing use. This condition is met only when the sale is highly probable, the assets (or group of assets) are available for immediate sale in their current condition and, consequently, management is committed to a sale, which should take place within 12 months of the classification as held for sale.

Cash and cash equivalents

Cash and cash equivalents include cash balances and bank current accounts and deposits repayable on demand plus other highly liquid short-term financial investments that can be readily converted into cash and are not subject to a significant risk of a change in value.

Financial liabilities and equity instruments

Financial liabilities and equity instruments issued are classified in accordance with the underlying contractual agreements and in accordance with the respective definitions of liabilities and equity instruments.

Equity instruments consist of contracts which, stripped of the liability component, give rights to a share in the assets. The accounting policies adopted for specific financial liabilities and equity instruments are indicated below.

Trade payables and other financial liabilities

Trade payables and other financial liabilities are recognised at their nominal amount, which generally represents their fair value. In the event of significant differences between their nominal amount and fair value, trade payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method.

Bank loans and borrowings and loans and borrowings from other lenders

Bank loans and borrowings – comprising non-current loans and bank overdrafts – and loans and borrowings from other lenders, including finance lease payables, are recognised based on the amounts received, less transaction costs, and are subsequently measured at amortised cost using the effective interest rate method.

Derivative instruments and hedge accounting

Derivative financial instruments are used with the intention of hedging, in order to mitigate currency, interest rate or market price risks. In compliance with IFRS, derivative financial instruments can be recognised using "hedge accounting" only when the hedge is formally designated and documented as such and is presumed to be highly effective at inception, such effectiveness can be reliably measured and the hedge is highly effective over the accounting periods for which it was designated.

All derivative financial instruments are measured at fair value in accordance with IFRS.

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

for derivatives that hedge forecast transactions (i.e. cash flow hedges), the cumulative change in the fair value of derivative instruments is taken to equity for the portion considered effective while the portion considered ineffective is recognised in profit or loss;
for derivatives that hedge assets and liabilities in the statement of financial position (i.e. fair value hedges), fair value gains or losses are recognised in profit or loss. Moreover, the hedging gain or loss adjusts the carrying amount of the hedged item (asset/liability) and is also recognised in profit or loss;
for derivatives classified as hedges of a net investment in a foreign operation, the effective portion of profits or losses on the financial instruments are recorded under equity. The cumulative gains or losses are reversed from the equity and taken to profit or loss on the sale of the foreign operation.

If hedge accounting cannot be applied, the gains or losses from the fair value measurement of derivative financial instruments are recognised immediately in profit or loss.

Concerning the management of the risks related to the exchange rates and interest rates and the value of commodities, reference should be made to paragraph 6. Information on risk management of these Notes.

Treasury shares

Treasury shares are recognised at cost and taken as a reduction in equity. The gains and losses deriving from trading of treasury shares, net of the tax effect, are recognised under equity reserves.

Employee benefits

Post-employment benefits

Italian post-employment benefits are considered equivalent to a defined benefit plan. For defined benefit plans, the cost of the benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each year.

On the basis of IAS 19 – Employee benefits, the Company recognises the plan surplus or deficit in the statement of financial position, with the recognition of service cost and interest cost in profit or loss and the recognition of actuarial gains or losses in other comprehensive income. In addition, any income on the plan assets included under net interest cost is calculated based on the discount rate of the liability.

Up to December 31, 2006, the post-employment benefits of the Italian companies were considered a defined benefit plan. The regulations governing Italian post-employment benefits were modified by Law no. 296 of December 27, 2006 ("2007 Finance Act") and subsequent decrees and regulations issued in the first few months of 2007. In the light of these changes, and specifically with reference to companies with more than 50 employees, only the benefits that accrued prior to January 1, 2007 (and not yet paid at the reporting date) are now considered a defined benefit plan, while those that accrued after this date are considered a defined contribution plan.

Share-based payments

Where the company recognises additional benefits to senior management and key personnel through stock grant plans, in accordance with IFRS 2 – Share-based payments, these plans represent a form of remuneration to the beneficiaries. Therefore the cost, which is the fair value of these instruments at the assignment date, is recognised in profit or loss over the period between the assignment date and maturity date, with a balancing entry directly in equity. Changes in the fair value after the assignment date do not have an effect on the initial value. At December 31, 2018 there are no such plans in place; there are only monetary phantom stock plans.

Provisions for risks and charges

The company recognises a provision for risks and charges when the risk related to an obligation deriving from a past event is considered probable and a reliable estimate may be made on the amount of the obligation. Provisions are made based on management's best estimate of the cost of fulfilling the obligation at the end of the reporting date and are discounted to their present value when the effect is material. These risks are subject to a high level of complexity and uncertainty, and therefore the amount of the provision for risks and charges is reviewed periodically to reflect the best current estimate of each provision.

Revenue and income

The new IFRS 15, which became applicable for annual reporting periods beginning on or after January 1, 2018, establishes an overall framework to identify the timing and amount of revenue recognition.

IFRS 15 requires the recognition and measurement of revenue from contracts with customers according to the following five steps: (i) identification of the contract with the customer; (ii) identification of the performance obligations (i.e. the contractual commitments to transfer goods and/or services to a customer); (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations identified on the basis of the stand alone sales price of each good or service and (v) recognition of revenue upon satisfaction of the relative performance obligation (i.e. on the transfer to the customer of the asset or service promised). The transfer is considered complete when the customer obtains control of the goods or services, which may occur over time or at a point in time. According to the new standard, the amount that the entity recognises as revenue should reflect the consideration that it has the right to receive following the exchange of the goods transferred to the customer and/or services provided, to be recognised upon fulfilment of the contractual obligations. In addition, to recognise the revenue, IFRS 15 emphasises that collectability of the consideration must be probable; for contract work in progress, the standards requires the recognition of revenue considering the effect of any discounting due to payments collected over time. On initial application, the company chose the "modified approach", whereby the effects of first-time application of the new standard are recognised in opening equity. The impacts on the separate financial statements are immaterial.

Interest income is recognised on an accruals basis, according to the amount financed and the effective interest rate applicable. This is the rate at which the expected future cash flow over the life of the financial asset is discounted to equate them with the carrying amount of the asset.

Dividends are recognised when it is established that the shareholders have the right to receive them.

Leases

Leases are classified as finance leases when the terms of the contract are such that they substantially transfer all of the risks and rewards of ownership to the lessee. All the other leases are considered operating leases.

Assets held under finance leases are recognised as company assets at the lower of their fair value at the date of the lease, and the present value of the minimum lease payments due under the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Finance lease payments are divided between principal and interest in order to apply a constant interest rate to the residual liability. The finance costs are directly recognised in profit or loss for the period.

Operating lease payments are recognised on a straight-line basis over the term of the lease. Benefits received or receivable as an incentive for entering into operating lease agreements are also recognised on a straight-line basis over the duration of the operating lease.

Foreign currency transactions

Foreign currency assets and liabilities are translated at the reporting date using the closing exchange rate. Non-monetary assets and liabilities measured at historical cost in foreign currency are translated using the exchange rate at the transaction date.

Exchange differences arising on such transactions or on the translation of monetary assets and liabilities are recorded in the Income Statement except for those arising on derivative financial instruments qualified as cash flow hedges. These differences are recorded in Equity if unrealised, otherwise they are recorded in the Income Statement.

Government grants

Government grants are recognised when it is reasonably certain that the conditions required to obtain them will be satisfied and that they will be received. Such grants are recorded in the income statement over the period in which the related costs are recorded, with a reduction in the generating account.

The accounting treatment of benefits deriving from a government loan obtained at a reduced rate are similar to those for government grants. This benefit is calculated at the beginning of the loan as the difference between the loan's initial carrying amount (fair value plus direct costs to obtain the loan) and the amount received, and subsequently recognised in profit or loss in accordance with the rules for the recognition of government grants.

Income taxes

Income taxes for the year represent the sum of current and deferred taxation.

Income tax is based on taxable income for the period as determined under applicable tax law. The liability for current income taxes is calculated using the current rates at the reporting date.

Elica S.p.A. and the subsidiary Airforce S.p.A. have opted for a consolidated tax regime in Italy. This means that the IRES (Corporation Tax) charge is calculated on a tax base representing the aggregate of the taxable income and tax losses of the individual companies. The contract has a three-year term (2017, 2018 and 2019).

The transactions and mutual responsibilities and obligations between the Parent and the aforementioned subsidiary are defined by a specific consolidation agreement. With regard to their responsibilities, the agreement provides that the Parent is jointly liable with the subsidiary for:

amounts due by the subsidiary under Article 127(1) of the Income Tax Code;
payment of amounts due to the tax authorities, should it emerge that sums declared in the consolidated tax return have not been paid;
consolidation adjustments made based on figures supplied by the subsidiary and contested by the tax authorities.

The income tax asset is shown under Tax Assets, determined as the difference between the income taxes in the year, payments on account, withholding taxes and, in general, tax credits. Tax assets also include the current IRES charge as determined on an estimate of the taxable income and tax losses of the companies taking part in the Consolidated tax regime, net of payments on account, taxes withheld by third parties and tax credits; tax assets are offset by the amounts due to the subsidiaries from Elica for the residual asset attributable to the Consolidated tax regime.

The liability for tax losses surrendered by a subsidiary is recorded under Amounts due to subsidiaries.

Deferred tax assets and liabilities arise from timing differences between the carrying amount of assets and liabilities determined in accordance with the financial reporting criteria set out by the Italian civil code and their tax base.

No tax provision has been made in relation to reserves subject to taxation upon distribution as no transactions that could trigger their taxation are planned.

Deferred tax assets are recognised insofar as it is likely that, in the years the deductible timing differences leading to their creation reverse, there will be taxable income not less than the amount of the differences. The carrying value of deferred tax assets is revised at the end of the reporting period and reduced if and to the extent that it is no longer likely that there will be sufficient taxable income against which to recover all or part of the assets.

Deferred tax assets and liabilities are calculated based on the tax rate expected to be in force when the assets are realised or the liabilities extinguished and recognised directly to profit or loss unless they relate to items taken directly to Equity, in which case they are also recognised in Equity.

Deferred tax assets and liabilities are offset when the company is legally entitled to do so and when they refer to income taxes due to the same tax authority and the company intends to pay the amount on a net basis.

2. Accounting standards, amendments and interpretations in force as from January 1, 2018 and not yet applicable by the Company

2.1 Accounting standards, amendments and interpretations in force as from January 1, 2018

The financial statements utilised are the same as those used for the preparation of the financial statements at December 31, 2017. IFRS 15 was applied to revenue and IFRS 9 was applied for financial instruments, but the resulting impacts were not material on these financial statements.

2.2 Accounting standards, amendments and interpretations not yet applied and applicable

As required by IAS 8 - Accounting standards, changes in accounting estimates and errors - the main new accounting standards and interpretations, in addition to amendments to the existing standards and interpretations that are already applicable, not yet in force or not yet endorsed by the European Union (EU), which could be applied in the future to the financial statements, are illustrated below. Management is assessing their potential impact on future financial statements.

IFRS 16 Leases. The International Accounting Standards Board (IASB) issued IFRS 16 Leases in January 2016. The standard defines the principles for the recognition, measurement, presentation and disclosure of leasing contracts, for both parts of the contract, therefore concerning the customer ("lessee") and the supplier ("lessor"). IFRS 16 will be effective from January 1, 2019. Companies may choose to apply the standard before this date, although only if they also apply IFRS 15 Revenue from Contracts with Customers. IFRS 16 completes the IASB project to improve the financial reporting of leases. IFRS 16 replaces the previous IAS 17 Leases and related interpretations. The principal effect of application of the new standard for a lessee will be that all leasing contracts will imply a right to use the asset from the beginning of the contract and, where the relative payments are expected in a specific period, also recognition of a corresponding financial liability. Therefore, IFRS 16 eliminates the breakdown of leases into operating leases and finance leases, as previously the case under IAS 17, introducing a single measurement model. Applying this model, a lessee should recognise: (a) assets and liabilities for all leases with a duration of greater than 12 months, except where the value of the underlying asset is minimal; (b) depreciation of leased assets separately from interest on leasing payables in the income statement.

From the application of this standard, the Company expects an increase in financial liabilities and the recognition of a right of use. The value of the impact on the two accounts in the balance sheet will approximate that reported in the paragraph on operating lease commitments, net of the discounting effect and of the considerations on short-term operating leases and underlying assets with low values.

3. Significant accounting estimates

In the preparation of the Financial Statements in accordance with IFRS, Elica S.p.A.'s Management must make accounting estimates and assumptions which have an effect on the values of the assets and liabilities and disclosures. Actual results may differ from these estimates. The estimates and assumptions are periodically reviewed and the effects of any changes are promptly recognised in the financial statements.

In this context, the situation caused by the historic volatility of the financial markets has resulted in the need to make assumptions about a future performance characterised by significant uncertainty, in which results in the coming years could differ from such estimates and, therefore, require adjustments that is not currently possible to estimate or forecast, and these adjustments might even be significant.

The items principally affected by such uncertainty are: goodwill, the loss allowance on trade receivable and the provision for inventory write-down, non-current assets (intangible assets and property, plant and equipment), pension funds and other post-employment benefits, provisions for risks and charges and deferred tax assets.

Reference should be made to the notes to each individual item for further information on the aforementioned estimates.

4. Notes to the Separate Financial Statements

Income Statement

4.1 Revenue

An analysis of revenue by product sales and services follows:

In Euro thousands	2018	2017	Changes
Revenue from product sales Service revenue	350,008 9,066	356,745 6,339	(6,737) 2,727
Revenue	359,074	363,084	(4,010)

The account decreased by approx. 1.1% on the previous year.

For information on the trend in revenue, reference should be made to the Directors' Report.

A breakdown of revenue from third parties and from related parties (principally subsidiaries) is shown below.

In Euro thousands	2018	2017	Changes
Third parties	283,771	290,484	(6,713)
Related parties	75,303	72,600	2,703
Revenue	359,074	363,084	(4,010)

Revenue from related parties amount to Euro 75,303 thousand; these amounts principally refer to the sale of components and finished products to the subsidiary AirForce for Euro 1,640 thousand (Euro 1,502 thousand in 2017), to the subsidiary Ariafina for Euro 351 thousand (Euro 320 thousand in 2017), to the subsidiary Elica Group Polska for Euro 38,093 thousand (Euro 40,017 thousand in 2017), to the subsidiary Elicamex for Euro 14,972 thousand (Euro 11,938 thousand in 2017), to the subsidiary Elica India for Euro 1,250 thousand (Euro 1,181 thousand in 2017), to the Chinese subsidiary Putian for Euro 615 thousand (Euro 811 thousand in 2017), to the Russian subsidiary Elica Trading for Euro 6,186 thousand (Euro 6,180 thousand in 2017), to the subsidiary Elica France for Euro 7,874 thousand (Euro 6,940 thousand in 2017) and to the subsidiary Elica GmbH for Euro 4,317 thousand (Euro 1,054 thousand in 2017). The remaining revenue from related parties concern the associate ISM S.r.l.. All transactions are regulated at prices in line with market conditions applied to third parties.

Finally, we present revenue by geographical segment.

The breakdown of revenue from sales and services by geographical segment, from third party and related companies, follows:

	2018	2017	Changes
In Euro thousands
Europe + CIS (Russia)	322,338	332,268	(9,930)
Other countries	15,745	16,937	(1,192)
America	20,990	13,879	7,111
Revenue	359,074	363,084	(4,010)

Third party customers individually generating more than 10% of total revenue constituted 20.4% of revenue in 2018 compared to 22.7% in 2017.

4.2 Other operating revenue

	2018	2017	Changes
In Euro thousands

Grants related to income	607	529	78
Ordinary gains	117	250	(133)
Claims and insurance settlement	213	177	36
Expenses recovered	421	471	(50)
Other revenue and income	598	804	(206)
Other operating revenue	1,956	2,230	(274)

Other revenue and income, similar to the previous year, includes the sale of assets used in operations and reimbursements to the company for cars allocated to employees. Expenses recovered include Euro 91 thousand of income from Group companies.

This account includes most of the government grants issued to the company. Reference should be made to Note 8 for information on the government grants presented according to Article 1, paragraph 125, No. 124 of Law of August 4, 2017.

4.3 Change in inventories of finished and semi-finished products

The change in inventories of finished and semi-finished products was positive in 2017, amounting to Euro 3,677 thousand, and positive in 2018 as well, amounting to Euro 1,137 thousand, due to the decrease in inventories of finished and semi-finished products.

4.4 Increase in internal work capitalised

The account amounted to Euro 2,755 thousand (Euro 2,685 thousand in the previous year) and mainly relates to the capitalisation of long-term costs for the design and development of new products and costs incurred internally for the construction of moulds, industrial equipment and the implementation of new IT programmes. Capitalised costs principally relate to personnel.

4.5 Raw materials and consumables

The breakdown of consumables (third parties and related parties) follows:

	2018	2017	Changes
In Euro thousands
Purchases of consumables	896	1,168	(272)
Purchases of workshop supplies	586	519	67
Purchases of raw materials	104,115	108,187	(4,072)
Change in raw materials, consumables and goods for resale	72	-690	762
Finished and semi-finished products	125,993	128,928	(2,935)
Packaging	578	650	(72)
Other purchases	190	191	(1)
Shipping expenses on purchases	906	905	1
Raw materials and consumables	233,335	239,858	(6,523)

The balance is broken down as follows:

	2018	2017	Changes
In Euro thousands
Third parties	121,452	125,085	(3,633)
Related parties	111,882	114,774	(2,892)
Raw materials and consumables	233,335	239,858	(6,523)

Raw materials and consumables decreased by Euro 6.5 million compared to 2017. Purchases from third parties decreased 2.9%, while purchases from related parties contracted 2.5%.

Those from related parties amounted to Euro 111,882 thousand (Euro 114,774 thousand in 2017). The most significant item relates to the purchases of finished products and goods from the subsidiary Elica Group Polska for Euro 106,389 thousand (Euro 109,364 thousand in 2017).

All transactions are regulated at prices in line with market conditions applied to third parties.

4.6 Services

	2018	2017	Changes
In Euro thousands

Outsourcing	21,474	23,348	(1,874)
Transport	4,262	4,673	(411)
Maintenance	1,456	1,569	(113)
Warehouse management of finished products	5,143	5,403	(260)
Consulting	4,071	3,893	178
Utilities	2,287	2,507	(220)
Commissions	801	646	155
Travel	1,415	1,453	(38)
Advertising	2,703	2,000	703
Insurance	691	621	70
Directors' and Statutory Auditors' fees	1,113	1,258	(145)
Trade fairs and promotional events	3,949	2,615	1,334
Industrial services	386	288	98
Banking commissions and charges	277	291	(14)
Other services	4,853	4,565	288
Services	54,882	55,129	(248)

Service expenses reported a slight decrease of Euro 0.2 million compared to the previous year (-0.45%). The main decreases concerned outsourcing of Euro 1.9 million, and Transport costs of Euro 0.4 million. Advertising expenses however increased by approx. Euro 0.7 million, with Trade Fair and promotional event costs increasing Euro 1.3 million, partly due to the participation in Eurocucina, a biennial event.

Other Services in 2018 include communication services of Euro 547 thousand (Euro 553 thousand in 2017), technical assistance costs of Euro 1,735 thousand (Euro 1,554 thousand in 2017), canteen costs of Euro 347 thousand (Euro 364 thousand in 2017), cleaning costs of Euro 292 thousand (Euro 277 thousand in 2017), vehicle expenses of Euro 430 thousand (Euro 386 thousand in 2017), training courses of Euro 72 thousand (Euro 83 thousand in 2017), medical examinations of Euro 79 thousand (Euro 77 thousand in 2017) and personnel recruitment costs of Euro 150 thousand (Euro 120 thousand in 2017).

The balance is comprised of:

	2018	2017	Changes
In Euro thousands
Third parties	52,336	52,310	26
Related parties	2,546	2,819	(274)
Services	54,882	55,129	(248)

4.7 Personnel expense

Personnel expense incurred in 2017 and 2018 were as follows:

	2018	2017	Changes
In Euro thousands
Wages and salaries	38,130	39,092	(962)
Social security charges	11,197	12,604	(1,407)
Post-employment benefits	2,745	2,810	(65)
Other costs	1,221	992	229
Personnel expense	53,293	55,498	(2,205)

Personnel expense overall decreased Euro 2,205 thousand. This decrease is mainly due to contribution assistance obtained by the company. Personnel expense also includes the accrual for the Long Term Incentive provision for employees and employee bonuses.

		The table below shows the number of employees at December 31, 2017 and December 31, 2018:

	2018	2017	Changes
In Euro thousands
Executives	31	28	3
White-collar	386	389	(3)
Blue-collar	741	775	(34)
	1,158	1,192	(34)

4.8 Amortisation and depreciation

The account totalled to Euro 11,702 thousand, an increase on the Euro 11,201 thousand on 2017 (+4.5%). For the changes in the year in amortisation and depreciation, reference should be made to the paragraph on fixed assets.

4.9 Other operating expenses and accruals

These are detailed as follows:

	2018	2017	Changes
In Euro thousands
Leases and rentals	269	333	(64)
Rental of vehicles and industrial equipment	2,072	2,046	26
Fees to use hardware, software and patents	825	845	(20)
Other taxes	515	597	(82)
Magazine and newspaper subscriptions	12	11	1
Sundry equipment	169	158	11
Catalogues and brochures	594	175	419
Losses on receivables and loss allowance	9,163	639	8,524
Provisions for risks and charges	5,644	2,624	3,020
Other prior year expenses and losses	430	1,024	(594)
Other operating expenses and accruals	19,691	8,451	11,239

The account overall increased Euro 11.2 million. The principal increases concerned the item Losses on receivables and loss allowance and Provisions for risks and charges. Elica S.p.A. impaired the trade receivable from Gutmann by Euro 6.8 million, and impaired the receivable due from the acquirer of Gutmann shares by Euro 0.8 million, to its market value. Elica S.p.A. also accrued under "Provisions for risks and charges" a risk provision of Euro 1.65 million to cover the guarantee issued to third parties and a provision of Euro 2.6 million against the settlement agreement with Gutmann. For further details, reference should be made to Note 4.39.

4.10 Restructuring charges

Restructuring charges in the previous year included costs from the personnel redundancy plan of the Company, implemented in particular to scale down and optimise the Company's organisational structure during 2017. Euro 630 thousand of these costs concern the personnel redundancy plan accrual at December 31, 2017, which was still in place for Euro 179 thousand at December 31, 2018 for future departures in accordance with IAS 37. They principally concern personnel expense.

4.11 Share of profit/(loss) from associates and subsidiaries

	2018	2017	Changes
In Euro thousands

Dividends from subsidiaries	5,395	3,021	2,374
Income and expense from subsidiaries and associates	5,395	3,021	2,374
Impairment of investments in subsidiaries	(5,000)	(1,980)	(3,020)
Share of profit from associates and subsidiaries	395	1,041	(646)

Dividends from subsidiaries were distributed in the year by the subsidiaries Airforce S.p.A. for Euro 90 thousand, Ariafina for Euro 1,349 thousand and Elica Group Polska for Euro 3,955 thousand.

The Impairment of investments in subsidiaries concerns the company Putian, for Euro 5 million and follows an impairment test, details of which are provided in the Investments paragraph of these notes.

4.12 Financial income

Details of financial income are shown below:

	2018	2017	Changes
In Euro thousands
Interest income from subsidiaries	837	1,020	(183)
Bank interest income	15	5	10
Other financial income	742	101	641
Financial income	1,593	1,126	467

Financial income includes Interest from subsidiaries, in view of the choice of the Group to centralise bank debt with the company to benefit from more favourable market rates.

The increase in financial income is mainly due to the release of the discounting of the receivable that the company was owed from Gutmann when the latter was sold. This receivable has been fully impaired in these financial statements.

4.13 Financial charges

2018 2017	Changes


133 110	23
2,253 2,296	(43)
- (72)	72
196 137	59
2,582 2,472	111

The account increased Euro 111 thousand. This account mainly comprises Financial charges on overdrafts and bank loans, which includes also discounts of Euro 1,044 thousand (Euro 901 thousand in 2017).

4.14 Exchange rate gains/(losses)

	2018	2017	Changes
In Euro thousands

Exchange rate losses	(3,502)	(6,316)	2,814
Exchange rate gains	3,888	3,134	754
Net gain on derivative instruments	13	940	(927)
Exchange rate gains/(losses)	399	(2,241)	2,640

Net exchange rate gains in the year amounted to Euro 386 thousand, compared to losses of Euro 3,182 thousand in 2017.

The net gain on derivative instruments of Euro 13 thousand in 2018 and Euro 940 thousand in 2017 mainly relate to income on currency derivatives, which are not eligible for hedge accounting under IFRS, although they were agreed for hedging purposes. For this reason, they were recognised at fair value through profit or loss.

As the net balance of unrealised exchange rate gains and losses is a loss, it was not considered necessary to reconstitute the Exchange rate gains reserve as per No. 8 bis of paragraph 1, Article 2426 of the Civil Code.

4.15 Income taxes

The tax charge in the year is broken down between current and deferred taxes:

	2018	2017	Changes
In Euro thousands
Current taxes	(1,702)	(28)	(1,674)
Deferred taxes	3,053	2,550	503
Income taxes	1,351	2,523	(1,171)

The increase in current taxes is due to the provisioning of IRES (for Euro 896 thousand) and IRAP (Euro 122 thousand), foreign taxes (Euro 562 thousand) and taxes relating to the settlement of disputes for Euro 85 thousand. The increase in Deferred taxes is mainly due to the accruals made, in particular for the impairment losses outlined in paragraph 4.39, net of the reductions due to the recovery of taxes on tax losses for previous years (Euro 869 thousand).

"Income taxes" in fact includes the positive impact calculated by the company for the Patent Box, a tax subsidy granted by the Italian State - with prior agreement - for income deriving from the use of intangible assets (trademarks and patents). The agreement with the tax authorities was signed on December 19, 2017. The amount of the benefit for the year 2018 is estimated according to the available information, and amounts to approx. Euro 0.7 million.

The company took part in the National Tax Consolidation, as per Article 117 and subsequent of the Income Tax Law, with the subsidiary Air Force S.p.A. for the years 2017, 2018 and 2019.

According to the consolidation agreements, if a tax loss, gross operating profit, interest expense or ACE (Economic Growth Support) deduction in excess of taxable profit is transferred to the fiscal unit as part of the national tax consolidation, the Company will recognise income equal to the tax benefit gained by the Group (IRES rate 24.00%); this amount is recognised as "Consolidation income" in the income statement.

The reconciliation between the theoretical and effective tax rate is shown (IRES) in the table below.

The change in the effective tax rate is due to non-recurring events, both last year and in the present year.

Tax Rate Reconciliation

			2017			2018
IRES rate				24.00%					24.00%
IRAP rate				4.13%					4.13%
					% IRES					% IRES
	Assessable	IRES	IRAP	Total	on tax	Assessable	IRES	IRAP	Total	on tax
					base					base
Income taxes - Current - Prior year taxes / foreign		(162)		(162)			932	122	1,054
taxes		190	-	190			648	-	648
- Deferred – cost (expense)		(2,359)	(192)	(2,550)			(2,862)	(191)	(3,053)
[A] TOTAL INCOME TAXES		(2,331)	(192)	(2,523)	9.46%		(1,282)	(70)	(1,351)	155.93%
LOSS BEFORE TAXES	(24,635)					(822)
Tax calculated using local tax rate		(5,912)			24.00%		(197)			24.00%
Tax effect of exempt income	(11,317)	(2,716)			11.03%	(15,157)	(3,639)			442.77%
Tax effect of non-deductible expenses
	25,284	6,068			-24.60%	7,625	1,830			-222.67%
Other differences	167	40			-0.16%	316	76			-9.25%
[B] Effective tax charge and tax rate net of
substitute tax	(10,501)	(2,520)			10.23%	(8,038)	(1,930)			234.85%
Effect of tax reimbursement / Foreign taxes		190			-0.77%		648			-78.85%
[C] Effective tax charge and tax rate		(2,331)			9.46%		(1,282)			156.00%

4.16 Other information about income statement items

The research and development costs capitalised and expensed in 2018 are summarised in the table below:

	2018	2017	Changes
In Euro thousands
R&D costs expensed	4,773	4,838	(65)
Amortisation of capitalised R&D costs	2,382	2,535	(153)
Total R&D costs	7,155	7,373	(218)

R&D costs capitalised during the year	2,131	1,757	374

Statement of financial position

4.17 Property, plant and equipment

The table below shows details of the changes in property, plant and equipment in 2017 and 2018. For 2017:

In Euro thousands	Dec 31, 2016	Increases	Disposals & other reclassifications	Dec 31, 2017

Land and buildings	36,486	538	-	37,024
Plant and machinery	64,818	3,817	(448)	68,187
Industrial and commercial equipment	80,706	3,701	(980)	83,427
Other assets	6,691	427	(11)	7,107
Assets under construction and payments on account	538	98	(369)	267
Historical cost	189,238	8,580	(1,807)	196,012

In Euro thousands	Dec 31, 2016	Depreciation	Disposals & other reclassification	Dec 31, 2017

Land and buildings	16,804	951	(0)	17,755
Plant and machinery	50,904	2,064	(644)	52,324
Industrial and commercial equipment	70,510	3,162	(903)	72,770
Other assets	6,217	152	(10)	6,359
Accumulated depreciation	144,436	6,330	(1,557)	149,208

In Euro thousands	Dec 31, 2016	Increases	Disposals & other reclassifications	Depreciation Dec 31, 2017

Land and buildings	19,682	538	0	(951)	19,269
Plant and machinery	13,914	3,817	196	(2,064)	15,863
Industrial and commercial equipment	10,196	3,701	(77)	(3,162)	10,657
Other assets	474	427	(0)	(152)	748
Assets under construction and payments on account	538	98	(369)	-	267
Net property, plant and equipment	44,803	8,580	(250)	(6,330)	46,803

Changes in 2018 were as follows:

In Euro thousands	Dec 31, 2017	Increases	Disposals & other reclassifications	Dec 31, 2018

Land and buildings	37,024	475	9	37,508
Plant and machinery	68,187	1,277	(1,424)	68,040
Industrial and commercial equipment	83,427	4,252	(3,590)	84,089
Other assets	7,107	587	(231)	7,463
Assets under construction and payments on account	267	155	(157)	265
Historic cost	196,012	6,746	(5,393)	197,365
In Euro thousands	Dec 31, 2017	Depreciation	Disposals & other reclassifications	Dec 31, 2018
Land and buildings	17,755	967	(16)	18,706
Plant and machinery	52,324	2,269	(1,476)	53,118
Industrial and commercial equipment	72,770	3,222	(3,543)	72,450
Other assets	6,359	196	(231)	6,324
Accumulated depreciation	149,208	6,654	(5,266)	150,598
In Euro thousands	Dec 31, 2017	Increases	Disposals & other reclassifications	Depreciation Dec 31, 2018
Land and buildings	19,269	475	25	(967)	18,802
Plant and machinery	15,863	1,277	52	(2,269)	14,922
Industrial and commercial equipment	10,657	4,252	(47)	(3,222)	11,640
Other assets	748	587	-	(196)	1,139
Assets under construction and payments on account	267	155	(157)		265
Net property, plant and equipment	46,803	6,746	(127)	(6,654)	46,768

Investments in the year concerned the acquisition of presses and furnishing plant, the purchase of moulds and equipment required for the launch of new products, in addition to the air-trailer investment - Elica's new travelling stand.

Property, plant and equipment is adequately insured against fire, weather damage and similar risks by means of insurance policies arranged with leading insurance companies.

The financial statements include assets acquired under finance lease agreements which by the end of 2010 had all been redeemed.

4.18 Goodwill and other intangible assets

Goodwill

In 2018, the Group concluded the review of the Corporate Reporting system without substantial amendments to the set of internal reports reviewed periodically by management, but eliminated the breakdown by geographic location in which the companies are located. The various reports provide a global overview at Group level. This new reporting system is in line with the conclusion of the Group Reorganisation process which provides greater scope on the responsibility of individual reporting to the Chief Executive Officer for the Group. This reporting system is in line with Management strategy, with an increasing global footprint. In this manner the Group can provide information which enables readers of the financial statements to evaluate the nature and effects on the financial statements of the strategies undertaken and of the general economic context.

In line with the new Group strategic vision, which centres on international expansion, and the altered market conditions in which our market and sales channel leadership is paramount, Elica S.p.A. has forged a new path for the business and established new organisational and disclosure policies with the historical Cash Generating Units Europe, Asia and America becoming increasingly integrated. For this reason, during 2018 it was considered necessary to establish a new global model, with a single Cash Generating Unit, the Elica Group which best reflects the current Group situation and IFRS (IAS 36).

The movements in the account in the year were as follows:

Dec 31, 2017		Dec 31, 2018

23,342	-	23,342
23,342	-	23,342
		Acquisitions/(Impairment)

Goodwill totalling Euro 23.3 million is allocated to the Elica Group Cash Generating Unit (CGU) at Group consolidated level. The account did not change in 2018.

The recoverable amount of the CGU was tested by calculating its value in use, which is the present value of expected cash flows using a discount rate which reflects the risks of the CGU at the valuation date.

The impairment test was approved by the Board of Directors on March 7, 2019, independently and prior to the preparation of the financial statements.

For the impairment test upon the goodwill written to the separate financial statements of Elica S.p.A., the combined cash flows (net of internal transactions) of the companies belonging to the Elica Group CGU. This is based on the fact that the Group organisational structure does not permit the separation of cash flows generated by the companies of the CGU. The estimate of the future operating cash flows used for the impairment test, prepared and approved by the Directors, was made based on the best estimates of the directors, for the sole purposes of the impairment test.

Assumptions of the Discounted cash flow

The principal assumptions utilised by the Company for the estimate of the future cash flows for the impairment test were as follows:

	2018
Weighted average cost of capital (WACC)	7.5%
Growth rate terminal value	2.31%
CAGR revenue period 2019-2023	5.90%

The Weighted Average Cost of Capital (WACC) utilised to discount the future cash flows was determined utilising the Capital Asset Pricing Model (CAPM). For the calculation of the WACC a free risk rate of 3.1% was used, a market premium risk of 5.1% and a beta-unlevered factor of 0.87.

Assumptions utilised in estimating cash flows

The discounted cash flow model is based on the financial cash flows for a period equal to five years, calculated on the basis of the best estimates made by the directors, for the sole purposes of the impairment test. The main assumptions utilised in the determination of the cash flows were as follows:

average impact of the cost of sales on revenue equal to 68.7%;
average impact of the variable component of the cost of sales on revenue of 5%;
average impact of the fixed general and administration costs on revenue of 20.3%;
impact of Free Cash Flow on revenue equal to 2.9%.

The assumptions utilised in the estimates are based on historical and forecast data of the Group, and are in line with information available from independent sector and market analysts in which the Group operates. These estimates are subject to changes, even significant, deriving from uncertainties which continue to affect the markets, and for this reason management continues to periodically monitor the circumstances and events which affect these assumptions and future trends.

Results of the impairment test

The impairment test did not result in the recognition of loss in value of the goodwill. The value in use of the CGU was 2.65 times its book value (Euro 452 million).

Sensitivity Analysis

Various sensitivity analyses were carried out assuming reasonable changes to the base assumptions of these estimates, and in particular the growth rate (+/- 5%), the WACC (+/- 5%) and the cost of raw materials (+2%/-0.5%). None of the changes considered resulted in a CGU recoverable amount equal to or below the respective book values.

Other intangible assets

The table below shows details of changes in other intangible assets in 2017 and 2018.

In Euro thousands	Dec 31, 2016	Increases	Decreases & reclass.	Amort.	Dec 31, 2017
Carrying amount
Development Costs	7,413	1,757	834	(2,535)	7,469
Industrial patents and intellectual property rights	6,940	1,839	858	(2,047)	7,590
Concessions, licenses, trademarks & similar rights	196	1,832	9	(124)	1,913
Other intangible assets	369	1,084	-	(165)	1,288
Assets under development and payments on account	2,207	1,646	(1,986)		1,867
Other intangible assets	17,126	8,157	(285)	(4,871)	20,127

In Euro thousands	2017	Increases	Decreases & reclass.	Amort.	Dec 31, 2018
Carrying amount
Development Costs	7,469	2,131	470	(2,382)	7,688
Industrial patents and intellectual property rights	7,590	3,655	896	(1,965)	10,177
Concessions, licenses, trademarks & similar rights	1,913	129	-	(1,435)	606
Other intangible assets	1,288	228	-	(342)	1,174
Assets under development and payments on account	1,867	1,219	(1,643)	-	1,443
Other intangible assets	20,127	7,362	(277)	(6,125)	21,087

Development costs relate to product design and development activities. The increase is mainly attributable to the cost of developing new products.

Industrial patents and intellectual property rights includes the recognition of patents, associated development costs, intellectual property rights and software programmes.

Concessions, licenses, trademarks and similar rights refers to the registration of trademarks by the company. Amortisation, depreciation and impairment losses include, in addition to the amortisation and depreciation for the year, the impairment of the Gutmann brand at fair value, for Euro 1,077 thousand, required following the transaction described in paragraph 4.39.

Other intangible assets mainly consist of shared costs for the development of equipment, moulds and the refurbishment of machinery and servers. The criterion applied to amortise intangible assets is considered appropriate to reflect the remaining useful life of the assets.

Assets under development and payments on account of Euro 1,443 thousand refer principally to the design and development of new products and software application programmes. Assets under development, which will be presumably amortised as development costs, amount to Euro 1,053 thousand.

The capitalisation of development costs requires the calculation of estimates by the Directors, as their recoverability is dependent on the cash flows deriving from the sale of products sold by the Group.

The recoverable amount of the development costs is greater than the corresponding book value, and therefore it is not necessary to recognise an impairment loss.

4.19 Investments

Investments in subsidiaries

In Euro thousands	Dec 31, 2017	Acquisitions & Sub.	Impairment	Increases	Disposals	Dec 31, 2018
Investments in subsidiaries	57,268	-	(5,000)	10,017	(3,428)	58,857
Investments in subsidiaries	57,268	-	(5,000)	10,017	(3,428)	58,857

The details of investments in subsidiaries are shown below:

	Dec 31, 2017	Acquisitions				Dec 31, 2018
In Euro thousands		& Sub.	Impairment	Increases	Disposals
Elica Trading LLC	3,880					3,880
Elica Group Polska S.p.zoo	22,276					22,276
Elicamex S.a. de C.V.	9,387					9,387
Leonardo Services S.a. de C.V.	77					77
Ariafina Co.Ltd	49					49
Airforce S.p.A.	1,212					1,212
Exklusiv Hauben Gutmann GmbH	-					-
Elica India P.B.	4,071			2,008	(3,428)	2,651
Zhejiang Elica Putian Electric Co. Ltd	13,726		(5,000)	7,009		15,735
Elica France S.A.S.	1,024					1,024
Elica GmbH	1,565			1,000		2,565
Investments in subsidiaries	57,268	-	(5,000)	10,017	(3,428)	58,857

Investment report the following movements for the year.

Elica S.p.A. paid into the share capital of Elica GmbH for Euro 1 million, and into Putian for approx. Euro 7 million. The movements in the Elica India investment are highlighted, in particular the conversion of the Debenture and the sale of a portion of the investment to Whirlpool. Reference should be made to paragraph 4.38 for further information. The table below summarises the highlights of the subsidiaries' 2018 financial statements, including their equity. This amount is therefore compared with the carrying amount of the investment.

In Euro thousands	% held	Value at Dec 31, 2018	Profit/(loss) for the year	Equity

Elicamex S.a.d. C.V.	98.00%	9,387	3,722	23,354
Elica Group Polska Sp.z o.o	100.00%	22,276	2,674	25,610
Airforce S.p.A.	60.00%	1,212	390	3,793
Ariafina Co.Ltd	51.00%	49	3,016	7,859
Leonardo Services S.a. de C.V.	98.00%	77	195	252
Elica GmbH	100.00%	2,565	(1,865)	518
Elica PB India Private Ltd.	25.50%	2,651	2,917	7,827
Zhejiang Elica Putian Electric Co. Ltd	99.04%	15,735	(2,320)	(1,060)
Elica Trading LLC	100.00%	3,880	744	1,262
Elica France S.A.S.	100.00%	1,024	198	700

The company Elica GmbH, operative since the second half of 2017, is still in the start-up phase.

The recoverable value of the investments presenting indicators of impairment was tested by calculating their respective values in use, represented by the present value of the expected cash flows for the years of operations of the companies subject to impairment testing and generated by disposal at the end of their useful life, calculated as per the "Discounted cash flow" method.

The impairment test was approved by the Board of Directors on March 7, 2019, independently and prior to the preparation of the financial statements.

The estimate of the future operating cash flows used for the impairment test, prepared and approved by the Directors, was made based on the best estimates of the directors, for the sole purposes of the impairment test.

Assumptions for the Discounted cash flow model

The principal assumptions utilised by the company to estimate future cash flows for the impairment testing of the investments were as follows:

2018	Weighted average cost of capital (WACC)	Growth rate terminal value	CAGR revenue period 2019- 2023
Zhejiang Elica Putian Electric Co. Ltd	8.2%	5.30%	13.5%
Investments in subsidiaries with indicators of Impairment

The principal assumptions utilised by the company in the previous year for the test on this subsidiary were as follows: CAGR revenue

2017	Weighted average cost of capital (WACC)	Growth rate terminal value	CAGR revenue period 2019- 2022
Zhejiang Elica Putian Electric Co. Ltd	7.85%	5.00%	4.5%
Investments in subsidiaries with indicators of Impairment

The Weighted Average Cost of Capital (WACC) utilised to discount the future cash flows was determined utilising the Capital Asset Pricing Model (CAPM).

Assumptions utilised in the estimate of the cash flows

The discounted cash flow model is based on the cash flows for a period equal to five years, calculated on the basis of the best estimates made by the directors, for the sole purposes of the impairment test.

The main assumptions utilised in the determination of the cash flows were as follows:

average impact of the cost of sales on revenue equal to 79.8%;
average impact of the variable component of the cost of sales on revenue of 1%;
average impact of fixed operating cost component on revenue of 17.8%;
impact of Free Cash Flow on revenue equal to 4%.

The assumptions utilised in the estimates are based on historical and forecast data of the company held, and are in line with information available from independent sector and market analysts in which the Company operates. These estimates are subject to changes, even significant, deriving from uncertainties which continue to affect the markets, and for this reason management continues to periodically monitor the circumstances and events which affect these assumptions and future trends.

Results of the impairment test

As a result of the impairment testing, the company recognised an impairment loss of Euro 5 million on the investment in Putian in profit or loss.

Sensitivity analysis

We undertook a sensitivity analysis on the test concerning the investment in Putian, according to the following assumptions and with the following results: changing the growth rate (+/- 0.5%) the coverage would range between 0.56 and 1.06 and, modifying the WACC (+/- 0.8%) the coverage would range between 0.44 to 1.30. Finally, considering an increase in raw material consumption costs of between 0.5% and 2%, the coverage would range between 0.64 and 0.29, while considering a decrease in the cost of raw material consumable cost of between 0.5% and 2%, the coverage would range between 0.64 and 1.22.

Investments in associates

There were no changes in investments in associates during the year. These investments relate to:

Registered Office	% held	Carrying amount at Dec 31, 2018	Profit/(loss)	Equity	Pro-quota Equity at Dec. 31, 2018

Cerreto D'Esi (AN) - (Italy)	49%	1,377	(12)	2,825	1,395

At December 31, 2018, the Company considered that the value of the investment in I.S.M. S.r.l. was recoverable through the real estate business undertaken by the company and its real estate values.

4.20 Other assets (non-current)

The breakdown of the other assets is as follows:

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
From employees	7	20	(13)
Other	12	2,372	(2,360)
Other assets (non-current)	19	2,392	(2,373)

Other non-current receivables decreased following the reclassification to Other current receivables of Euro 1.7 million and the impairment of the residual Euro 0.8 million of the receivable from the third party acquirer of the investment in Gutmann in 2017 following the transaction described in Note 4.39. Management believes that this amount approximates fair value.

This account includes receivables due after 5 years of Euro 11 thousand.

4.21 Deferred tax assets and liabilities

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
Deferred tax assets	13,709	11,301	2,408
Deferred tax liabilities	(582)	(799)	217
	13,128	10,503	2,626

Deferred tax assets principally relate to non-deductible accruals and the tax loss. Deferred tax liabilities principally include the payables for merger adjustments.

In Euro thousands Dec 31, 2017				Effect on profit or loss		Dec 31, 2018
	Assets	Liabilities	Eq./Others	Costs	(Revenue)	Assets	Liabilities
Amortisation & depreciation	978	(1)			(409)	1,360	(1)
Accruals	3,102			724	(3,737)	6,114
Costs ded. in future years	181			181
Inventory write-down	766			66	(156)	856
Exchange rate differences	192			151		41
Restructuring charges	177			127		50
Merger adjustments		(618)			(40)		(578)
Goodwill	196	(3)		53		143	(3)
IRS measurement	72	(177)	114			363
Post-employment benefits	281					281
IRAP refund claim on IRES repayment	1,224					1,224
Tax loss	3,032		869		(5)	2,167
Employee bonuses	1,102			917	(924)	1,109
	11,303	(799)	983	2,219	(5,271)	13,709	(582)

The following table details deferred tax assets and liabilities:

4.22 Available-for-sale (AFS) financial assets

This account relates to investments held by Elica S.p.A. in other companies. There were no changes compared to the previous year. The investments are held in unlisted companies whose shares are not traded on a regulated market. Therefore, as there were no purchases or sales of these shares in the last year, their fair value cannot be determined in a reliable manner.

The above investments are recorded at cost in accordance with article 10 of Law 72/1983 and no revaluations have been made pursuant to specific laws. The account did not significantly change on the previous year.

4.23 Trade receivables – third parties

The account consists of:

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
Receivables within one year	22,540	42,519	(19,979)
Receivables beyond one year	706	7,475	(6,769)
Trade receivables – third parties	23,246	49,994	(26,748)

Net trade receivables decreased Euro 26,748 thousand. This decrease is in part due to the choice of the Company to impair the receivable from the German company Gutmann, in part due to the trend in revenue in the fourth quarter of 2018 and in part due to an improvement in the collection activities during the year with a consequent reduction in DSO (Days Sales Outstanding) of Elica S.p.A.

As described in the Directors` Report; the Company made an extraordinary accrual of Euro 6.8 million in 2018 (Euro 5.1 million net of the tax effect), considered necessary in view of the opening of preliminary voluntary insolvency proceedings at the German ex-subsidiary Exklusiv Hauben Gutmann GmbH, against whom Elica S.p.A. has a noncurrent trade receivable, arising before the disposal on August 28, 2017. For further information, reference should be made to note 4.39, describing the operation that confirmed the devaluation..

Elica S.p.A. implements a Group Credit Policy which governs the management of credit in order to mitigate the risk.

In particular, it is Company policy to transfer the recoverability risk of receivables to third parties and, therefore, various derivatives are utilised among which insurance policies with leading international insurance companies.

The movements in the loss allowance in 2018 are set out below:

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
Opening balance	3,851	4,291	(440)
Allowance	9,162	639	8,523
Utilisation/Releases	(756)	(1,079)	323
Total	12,257	3,851	8,406

Doubtful debts are covered by a loss allowance accrued based on a specific analysis of the individual risks and on the basis of a general loss allowance calculated in accordance with the Group Credit Policy.

Receivables are adjusted to their fair value through the loss allowance.

Management believes that the resulting carrying amount approximates the fair value of the receivables.

4.24 Trade receivables and financial assets - related parties

Receivables from related companies include both trade receivables and financial assets from related parties. The details are shown in the table below:

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
Receivables from subsidiaries	51,456	48,619	2,837
Receivables from associates	2	2	0
Receivables from related parties	51,458	48,621	2,837

Receivables from subsidiaries are broken down as follows:

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
Elica Trading LLC	3,035	3,292	(257)
Air Force S. p. A.	468	389	79
Elica Group Polska S.p.z.oo	14,937	12,515	2,422
Elicamex S.A. de C.V.	18,949	17,049	1,900
Ariafina Co Ltd	360	319	41
Elica PB India Private Ltd.	2,410	3,222	(812)
Elica France S.A.S.	2,584	2,253	331
Zhejiang Elica Putian Electric Co. Ltd	5,714	8,511	(2,797)
Elica GmbH	2,999	1,069	1,930
Receivables from subsidiaries	51,456	48,619	2,837

The account includes financial assets from subsidiaries, respectively for Euro 3,843 thousand from the Chinese company Zhejiang Elica Putian Electric Co. Ltd (Euro 3,853 thousand in 2017), Euro 7,741 thousand from the Mexican company Elicamex S.a. de C.V. (Euro 8,294 thousand in 2017), Euro 433 thousand from the French subsidiary Elica France S.A.S (Euro 433 thousand in 2017), Euro 6,404 thousand from the Polish company Elica Group Polska S.p.z.oo (Euro 2,009 thousand in 2017) and Euro 1,568 thousand from the Indian company Elica PB India Private (Euro 2,464 thousand). This latter receivable included until the previous year the IAS measurement of the obligatorily convertible bond loan undertaken by the Company in 2013. This receivable was converted into share capital during the year. For further details, please refer to paragraph 4.38.

The changes show the synergies created in order to optimise cash management.

The receivables from the associate ISM refer to normal company operations.

This account does not include any receivables due after more than five years at the year-end.

4.25 Inventories

The value of inventories reports an increase of approx. Euro 1.1 million.

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands

Raw material, ancillary and consumables	13,691	13,782	(91)
Provision for the write-down of raw materials	(1,155)	(1,175)	20
Total	12,536	12,607	(71)
Work-in-progress and semi-finished products	8,853	8,004	849
Provision for the write-down of work in progress	(712)	(551)	(161)
Total	8,141	7,453	688
Finished products and goods for resale	18,126	17,448	678
Provision for the write-down of finished products	(1,705)	(1,476)	(229)
Total	16,421	15,972	449
Inventories	37,098	36,032	1,066

Inventories are stated net of the provision for inventory write-down which amounts to Euro 3,572 thousand at December 31, 2018 and Euro 3,202 thousand at December 31, 2017, in order to provide for the effect of waste, obsolete and slow moving items. The calculation of the provision for the write-down of raw materials, semi-finished and finished products is based on assumptions made by Management. The provision for inventory write-down is equal to 8.8% of inventories (8.2% in 2017).

Inventories also include materials and products that were not physically held by the Company at the reporting date. These items were held by third parties on display, for processing, consignment stock, or for examination.

4.26 Other assets (current)

The breakdown is as follows:

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
Customs reimbursements	30	57	(27)
Guarantee Deposits	233	262	(29)
Advances to suppliers	427	230	197
Other	3,803	1,435	2,368
Insurance prepayments	10	8	2
Maintenance prepayments	25	83	(58)
Advertising prepayments	4	9	(5)
Rental prepayments	203	330	(127)
Other prepayments and accrued income	974	411	563
Other assets (current)	5,709	2,825	2,884

The account increased Euro 2,884 thousand, mainly in "Other", which includes government grants for investments, such as the Industry 2015 initiative, the SM project, the Shell project, the Seal project and for photovoltaic plant grants. This item includes the reclassification of the amount previously recorded as a non-current receivable due from third parties, Euro 1.7 million of which was transferred to Gutmann, following the transaction described in Note 4.39. Management believes that this amount approximates fair value.

The account includes receivables due after five years of Euro 11 thousand.

4.27 Tax assets (current)

The breakdown of the account Tax Assets is summarised in the table below:

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
IRES	-	22	(22)
VAT	5,344	6,481	(1,137)
Foreign tax receivables	1,041	349	692
Other tax assets	1,425	1,656	(231)
Tax assets (current)	7,809	8,507	(698)

Other tax receivables include the receivables for taxes paid abroad to be recovered and the tax receivable for research and development activities as per Law No. 190/2014 from the Tax Authorities. For further information, reference should be made to note 8.

Management believes that this amount approximates fair value.

The changes concern the increase in the VAT receivable related to trade transactions.

4.28 Derivative financial instruments

	Dec 31, 2018		Dec 31, 2017
In Euro thousands	Assets	Liabilities	Assets	Liabilities

FX derivatives on foreign exchange	840	415	344	600
Interest rate derivatives	-	366	8	308
Commodities derivatives	-	1,073	662	-

Derivative financial instruments	840	1,854	1,014	908

Derivative financial instruments	840	1,854	1,014	908
Current	840	120 1,734	8 1,006	75 833
of which Non-current	-

For further information, refer to paragraph 6. Information on Risk management.

4.29 Cash and cash equivalents

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
Bank and postal deposits	5,368	8,332	(2,964)
Cash and cash equivalents on hand	9	5	4
Cash and cash equivalents	5,377	8,337	(2,960)

This item reflects the positive balances of bank current accounts and cash on hand.

For further information, reference should be made to the section on net financial position in the Directors' Report and to the Statement of Cash Flows.

4.30 Liabilities for post-employment benefits

The amount provisioned in the accounts of Euro 9,071 thousand is the present value of pension liabilities matured by employees at year-end.

The most recent calculation of the present value of this item was performed at December 31, 2018 by actuaries from the company Managers & Partners - Actuarial Services S.p.A.. The amounts recognised in the Income Statement were as follows:

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
Current service cost	2,745	2,810	(65)
Interest cost	196	137	59
	2,941	2,947	(6)

The changes in the present value of post-employment benefit obligations in the reporting period were as follows:

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
Opening balance	9,713	10,106	(393)
Current service cost	2,745	2,810	(65)
Actuarial gains and losses	(374)	(247)	(127)
	2,371	2,562	(191)
Interest cost	196	137	59
Pension fund	(2,735)	(2,819)	84
Benefits provided	(474)	(274)	(200)
	(3,013)	(2,955)	(58)
Liabilities for post-employment benefits	9,071	9,713	(642)

The interest component of the defined employee benefit plan cost is shown under interest cost, with a resulting increase of Euro 196 in this item for the reporting period. The current service cost and the effect of any curtailment and settlement were recorded under personnel expense. Net actuarial losses, amounting to Euro 374 thousand, comprise the actuarial gains (losses) of the defined benefit plans reported in the Statement of Comprehensive Income.

Assumptions adopted for the calculation:

	Dec 31, 2018	Dec 31, 2017
Discount rate to determine the obligation	1.57%	1.30%
Rate of inflation	1.50%	1.50%

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

This financial variable is considered the most significant and therefore chosen for a sensitivity analysis. The objective of a sensitivity analysis is to show how the result of the valuation changes in response to changes in an assumption adopted for the calculation, with all other assumptions unchanged

Therefore, if the discount rate increased 0.5% (2.07%), the obligation would amount to Euro 8,860 thousand, while if the discount rate decreased 0.5% (1.07%), the obligation would amount to Euro 9,291 thousand.

Number of employees

The average number of employees in 2018 was 1,175 (1,190 in 2017), with the final number at December 31, 2018 of 1,158, as outlined in Note 4.7.

4.31 Provisions for risks and charges

The composition and movements of the provisions are as follows:

In Euro thousands	Dec 31, 2017	Provisions	Utilisations/Reclass.	Dec 31, 2018
Agents' termination benefits	555	129	(119)	564
Product warranties	946	980	(946)	980
Product disposal	554	453	(177)	829
Legal risks	6,746	4,670	(1,141)	10,275
Long term incentive plan	680	388	-	1,068
Restructuring	630	-	(451)	179
Personnel	3,177	2,829	(3,177)	2,829
Provisions for risks and charges	13,288	9,449	(6,011)	16,725
of which
Non-current	12,342			13,145
Current	946			3,580
Provisions for risks and charges	13,288			16,725

The provision for agents' termination benefits covers possible charges upon the termination of contracts with agents and sales representatives. Changes in the provision reflect adjustments in the indemnities and the utilisations.

The provision for product warranties reflects an estimate of the costs likely to be incurred to repair or replace items sold to customers. These provisions reflect the average warranty costs historically incurred by the company as a percentage of sales still covered by warranty.

The provision for risks and charges includes the accrual for the first level judgement in the cases with the Brazilian companies Esperança Real S/A and Madson Eletrometalurgica Ltda. issued against Elica S.p.A by the Belo Horizonte Court (Brazil) on March 1, 2017. The case concerns preliminary agreements signed in September 1999 for the establishment of a joint venture by Elica S.p.A. and Esperança Real S/A, which were not executed. With the support of legal consultants and sector experts, the Directors assessed the ruling, the technical opinions upon the possible development of the case and its probable final outcome, and decided to allocate Euro 4 million on a precautionary basis to cover legal risks. These accruals do not imply that the counterparty's legal arguments are valid, but were recognised solely to be fully compliant with IFRS. In any case, the company confirms that it intends to defend itself at all legal levels.

This provision also includes Euro 0.6 million prudently accrued residually by the Company following an investigation undertaken by the Tax Agency on November 21, 2017. The investigation involves verifications undertaken throughout the country in relation to some companies which, according to the tax inspectors, proposed to their potential clients (among which Elica S.p.A.) the purchase of prototypes created following specific studies and research for the construction of a completely innovative machine and particularly adapted to the needs of the buyer. After the notification of the assessment advice, received on July 6, 2018, on September 17, 2018 the assessment was formalised (Article 13 of Legislative Decree No. 472 of 1997), with a payment to the Tax Agency of an amount equal to the tax credit contested, in addition to interest and penalties in accordance with legal provisions. Also on September 17, 2018, the Tax Agency notified of a deed of recovery of the tax credit and two assessment advices relating to the recovery of IRES, IRAP and VAT. In relation to the three deeds Elica proposed three separate appeals, notified to the counterparty on October 12, 2018, which will be presented before the Ancona Provincial Commission Court.

Elica S.p.A. also accrued a risk provision for Euro 1.65 million against the guarantee issued, which based on the agreement as per Note 4.39 permitted the payment, with the company owner of the building leased by Gutmann and a provision of Euro 2.6 million against the settlement with Gutmann. For further details, reference should be made to Note 4.39.

The restructuring provision of Euro 0.2 million includes the residual provision set up on December 31, 2017 for future departures relating to the Parent's personnel redundancy plan, in order to reduce and streamline the organisational structure, in accordance with IAS 37. They principally concern personnel expense.

The personnel provision includes contractual indemnities and employee bonuses accrued in the year, based on the best estimates according to the information available. The utilisations relate to payments in 2018 in this regard.

The long term incentive plan provision concerns the accrued liability at December 31, 2018 for the 2016-2022 Phantom Stock and Voluntary Co-investment Plan. The provision refers to the second and third cycle of this Plan, which was approved by the Board of Directors of Elica S.p.A. respectively on June 26, 2017 and February 12, 2018. No accrual was recorded for the first cycle as the targets were not achieved. For further details, reference should be made to the Remuneration Report.

The impact of discounting non-current provisions is not significant.

4.32 Bank loans and borrowings

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
Bank loans and borrowings	82,052	92,087	(10,035)
Total	82,052	92,087	(10,035)
Bank borrowings have the following repayment schedules
On demand or within one year	27,950	44,966	(17,016)
Within two years	17,933	18,650	(717)
Within three years	16,717	18,108	(1,391)
Within four years	12,726	7,125	5,601
Within five years	6,549	3,238	3,311
After 5 years	177	-	177
Total	82,052	92,087	(10,035)
Less amounts to be repaid within one year	27,950	44,966	(17,016)
Due after one year	54,102	47,121	6,981

All bank loans and borrowings are denominated in Euro.

The majority of borrowings indicated above carry a floating rate of interest. In 2018 the company undertook two new non-current loans and subscribed related IRS contracts on these loans to hedge the variable interest rate.

For further information on interest rate hedges, reference should be made to paragraph 6. Information on risk management of these notes.

4.33 Current and non-current tax liabilities

Tax liabilities (non-current)

The movements in non-current Tax liabilities relate to the monthly payments of deferred liabilities following the earthquake in 1997.

This account does not include payables due after 5 years. They are reported below:

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
Deferred local income tax – earthquake	11	38	(27)
Other tax liabilities	10	34	(24)
Deferred Italian post-employment benefits - earthquake	2	6	(4)
Deferred estate taxes – earthquake	31	106	(75)
Tax liabilities (non-current)	53	183	(129)

Tax liabilities (current)

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
IRES	180	-	180
IRAP	122	-	122
VAT	1,084	928	156
Other tax liabilities	6	5	1
IRPEF withholding	1,829	1,778	51

Tax liabilities (current)	3,220	2,711	509

The increase in the Current tax liabilities account relates to IRES, IRAP and VAT. Management believes that this amount approximates fair value.

4.34 Other liabilities

Other liabilities (non-current)

	Dec 31, 2017	Changes


-	3	(3)
5	16	(11)
-	7	(7)
46	185	(139)
51	211	(160)
	Dec 31, 2018

The decrease principally relates to liabilities that were deferred following the earthquake in 1997, which decrease as the Company makes repayments. The balance does not include amounts due after 5 years.

Other liabilities (current)

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands

Due to social security institutions	2,248	2,293	(45)
Other	76	112	(36)
Due to personnel for remuneration	3,560	4,210	(650)
Due to customers	4	4	(0)
Accrued charges and deferred income	410	258	152
Directors and Statutory Auditors	100	100	-
Advances from customers	211	274	(63)
Other liabilities (current)	6,610	7,250	(641)

The account decreased Euro 641 thousand, in particular due to the decrease in Payables to personnel for remuneration, mainly due to the greater impact of compensation in the previous year from the solidarity contribution. The account includes payables due after 5 years of Euro 10 thousand.

4.35 Trade payables to third parties and trade payables and financial liabilities to related companies

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands

Trade payables	68,541	74,546	(6,005)
Trade payables to third parties	68,541	74,546	(6,005)
Payable to subsidiaries	22,492	30,174	(7,682)
Payables to other related companies	5	51	(46)
Payables to related companies	22,497	30,225	(7,728)
Trade payables and financial liabilities	91,038	104,771	(13,733)

These mainly include payables for trade purchases and other costs. The average payment days is approximately 99. The balance of the payables to other related companies (Euro 5 thousand) includes the payables at December 31, 2018 to Fastnet S.p.A. on trade transactions.

Management believes that the carrying amount of trade payables and other liabilities reflects their fair value. Payables to subsidiaries are detailed below.

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
Elica Trading LLC	6	231	(225)
Elica Group Polska S.p.z.oo	18,520	25,449	(6,929)
Air Force S.p.A.	218	245	(27)
Elicamex S.A.	1,014	1,473	(459)
Ariafina Co Ltd	1,608	1,498	110
Leonardo S.A.	6	6	-
Zhejiang Elica Putian Electric Co. Ltd	936	1,081	(145)
Elica PB India Private Ltd.	135	159	(24)
Elica France S.A.S.	-	32	(32)
Elica GmbH	48	-	48
Payables to subsidiaries	22,492	30,174	(7,682)

The balance includes financial liabilities of Euro 2.2 million, in addition to trade payables.

4.36 Equity

For the analysis on the movements in equity, reference should be made to the relative table. Comments are provided on each of the equity reserves.

4.36.1 Share capital

The share capital at December 31, 2018 amounts to Euro 12,664 thousand, consisting of 63,322,800 ordinary shares with a par value of Euro 0.20 each, fully subscribed and paid-in.

4.36.2 Equity-related reserves

The equity-related reserves amount to Euro 71,123 thousand and relate to the Share Premium Reserve.

4.36.3 Hedging reserves

In Euro thousands	Dec 31, 2017	Adjustment	Other changes	Dec 31, 2018
Hedging reserve	331	(1,480)	-	(1,149)
	331	(1,480)	-	(1,149)

The hedging reserve shows a negative balance of Euro 1,149 thousand which represents the negative fair value of hedging derivatives (cash flow hedges), net of the tax effect, equal to Euro 559 thousand (positive balance of Euro 331 thousand at December 31, 2017).

4.36.4 Treasury shares

In 2018, there was no change to the number of treasury shares. At December 31, 2018, there are 1,275,498 treasury shares in portfolio, representing 2% of the Share Capital.

4.36.5 Actuarial reserve

	Dec 31, 2017	IAS 19 actuarial effect	Dec 31, 2018
In Euro thousands
Actuarial reserve	(2,975)	374	(2,601)
	(2,975)	374	(2,601)

4.36.6 Income-related reserves

In Euro thousands	Dec 31, 2018	Dec 31, 2017	Changes

Legal reserve	2,533	2,533	-
IFRS transition reserve	1,675	1,675	-
Extraordinary reserve	4,268	26,380	(22,112)
Income-related reserves	8,476	30,588	(22,112)

The decrease of Euro 22,112 thousand in the Extraordinary Reserve is due to the allocation of the loss for 2017 to this item.

Information on distributable reserves

The following table shows the equity accounts divided by origin, the possibility of utilisation and distribution, as well as any utilisations in the previous three years. The amounts are in units of Euro.

Description origin	Amount	Poss. of utilisation	Quota available	Util. in past 3 years to cover losses	Util. in past 3 years for other reasons
I Share capital	12,664,560	=		-
II Share premium reserve	71,123,336	A,B,C	71,123,336	-	-
IV Legal reserve	2,532,912	B		-
VII Other reserves:
Extra. reserve	4,268,137	A,B,C	4,268,137	28,652,873
IFRS transition reserve	1,675,096	A,B,C	1,675,096
Income-related reserve	8,476,145		5,943,233
Treasury shares	(3,550,986)	=	(3,550,986)
Hedging reserve/Post em. ben.	(3,749,919)	=

Non-distributable amount	-		8,515,782
Residual distributable amount	-		64,999,801
A - to increase share capital					In Euro

B - to cover losses

C - for distribution to shareholders

The non-distributable quota, equal to Euro 8,515 thousand, for Euro 7,688 thousand refers to the residual amount of development expenses to be amortised as per Article 2426 paragraph 5 of the Civil Code and for Euro 828 thousand to the gains deriving from the measurement of derivative instruments in profit or loss as per Article 2426 paragraph 11 of the Civil Code. The value of the treasury shares held in portfolio is not available, in accordance with Article 2357-ter of the Civil Code.

4.37 Net financial position

(Pursuant to Consob Communication No. DEM/6064293 of 28 July 2006)

In Euro thousands	Dec 31, 2018	Dec 31, 2017

Cash and cash equivalents	5,377	8,337
Financial assets - related parties	19,989	17,053
Financial liabilities - related parties	(2,245)	(2,861)
Bank loans and borrowings	(27,950)	(44,966)
Current net financial liabilities	(10,206)	(30,774)
Bank loans and borrowings	(54,102)	(47,121)
Non-current net financial liabilities	(54,102)	(47,121)
Net financial Position	(58,931)	(69,558)
Assets for derivatives	840	1,014
Liabilities for derivatives (current)	(1,734)	(833)
Liabilities for derivatives (non-current)	(120)	(75)
Net financial Position - including the effect of derivatives	(59,944)	(69,452)

At December 31, 2018, the net financial position including the effect of derivatives, was Euro 59,944 thousand, improving Euro 9.5 million on the previous year. For further comment, reference is made to the Directors' Report.

4.38 Disposal of investment in Elica India, with maintenance of control

On May 7, 2018, Elica S.p.A. announced the signing of an agreement for the early conversion of the bond loan issued by the subsidiary ELICA PB INDIA PRIVATE LTD and fully subscribed by Elica S.p.A., as announced on May 14, 2013. Following early conversion, Elica S.p.A. acquired an additional holding in Elica PB India Private Ltd, to increase its stake from 51% to 58.45%, as the Indian shareholders of Elica PB India Private Ltd. agreed not to exercise their right to acquire the portion of the share capital converted which would have diluted the company's investment and to waive also the option to sell their holding at fair value, according to the agreement. Elica S.p.A. undertook the obligation to pay to the Indian shareholders waiving the purchase option on a portion of the converted share capital, by December 31, 2018, i.e. within three days of any sale of the shares of the Indian company to third parties, INR 105,599,616 (approx. Euro 1.3 million).

On June 1, 2018, Elica S.p.A. announced the signing of an agreement for the sale to Whirlpool of India Limited of 33% of the share capital of the Indian subsidiary Elica PB India Private Ltd. together with the other Indian minority shareholders disposing of 16%

On September 10, 2018, Elica S.p.A., following on from the agreement signed for the sale to Whirlpool of India Limited of 33% of the share capital of the Indian subsidiary Elica PB India Private Ltd announced on June 1, 2018, and receipt of antitrust approval in Europe and Turkey, in addition to satisfaction of all conditions stipulated by the agreement, announced the closing of the Joint Venture between Elica India and Whirlpool of India. In accordance with this agreement, Elica S.p.A. sold to Whirlpool of India Limited 33% of the share capital of the Indian subsidiary Elica PB India Private Ltd., together with the other Indian minority shareholders disposing of 16%. On closing, Whirlpool of India Limited acquired in total 49% of the Indian subsidiary Elica S.p.A.. On the basis of the blocking agreement with the Indian shareholders, Elica S.p.A. continues to exercise control over Elica PB India Private Ltd., and fully consolidate the company in its financial statements. Alongside the closing of the agreement and the acquisition of the investment, Whirlpool of India Limited signed an exclusive distribution agreement for a number of its cooking segment products with Elica PB India Private Ltd to speed up the development of its business on the Indian market, leveraging on Elica PB India's distribution structure which, over the last 2 years, has created a comprehensive network of monobrand stores and reports annual growth rates at over 30%. The consideration for the sale of 33% of the Indian subsidiary Elica PB India Private Ltd, paid by Whirlpool of India Limited on the closing of the Joint Venture, was INR 1,092,163,974.14:

In these separate financial statements of Elica S.p.A. the transaction described above had the following impact on profit or loss:

In Euro thousands	Dec 31, 2018
a) Consideration received from Whirlpool	13,027
b) Accessory charges	(1,167)
c) Value of the investments sold	(3,428)
Income on disposal of subsidiaries	8,432

4.39 Settlement agreement reached with Gutmann

Within the overall framework of the agreement and in settlement of the mutual rights and claims, Elica S.p.A. shall recognise to Gutmann Euro 2.6 million (with an overall adjustment effect on the EBITDA of Elica S.p.A. of Euro 3.4 million, including the impairment of Euro 0.8 million of the original receivable of Euro 2.5 million of Elica S.p.A. from Manuel Fernandez Salgado), of which Euro 800 thousand to be paid within three weeks from the agreement's conclusion, Euro 1.7 million through the transfer to Gutmann of Elica S.p.A.'s receivable from Manuel Fernandez Salgado for the transfer of the shares of Gutmann and a further Euro 100 thousand to be fully offset against that to be

paid by Gutmann for the retransfer of the "Gutmann" brands acquired by Elica S.p.A. in 2017 (with an overall adjustment effect on the EBIT of Elica S.p.A. of Euro 1.1 million, deriving from the impairment of the Gutmann brands recognised to the statement of financial position of Elica S.p.A.).

Manuel Fernandez Salgado shall remain liable to pay to Elica S.p.A. the residual amount of Euro 800 thousand, due for the transfer of the Gutmann shares. This obligation will be settled by paying Elica S.p.A. the amount of Euro 200 thousand by February 28, 2020, in settlement of his entire debt position.

For completeness, Elica S.p.A. in addition agrees to settle the guarantee provided in 2015 in favour of the company owning the property leased by Gutmann of Euro 1.65 million, which has already been provisioned in the company's accounts, and to settle the amounts regarding the trade payables arising in favour of Gutmann GmbH after the sale of the company and prior to its declaration of insolvency, related to ordinary operations and amounting to approx. Euro 0.5 million, currently prudently blocked by Elica S.p.A..

This transaction definitively concludes all disputes between the two companies, excluding further impacts on future accounts.

Following the opening of the preliminary insolvency proceedings, Elica had partially impaired the trade receivable - for an amount of Euro 4.0 million - recognised when communicating its H1 2018 results. Subsequently, during the 2018 Fourth Quarter, a further impairment loss of Euro 2.8 million was made to cover the insolvency risks of the German company regarding the trade receivable of Elica S.p.A. in view of its continuing insolvency. This devaluation is confirmed by the operation described above.

The effects of the above transaction are illustrated below:

In Euro thousands
a) Impairment of trade receivables from Gutmann - pre-sale	6,755
b) Impairment of receivable from Manuel Fernandez	800
c) Provision for settlement agreement	2,600
d) Provision to cover property rental guarantee	1,650
e) Impairment of Brands	1,077

4.40 Significant non-recurring events and operations

There were no events to report in 2018, except that described on the sale of the investment in Elica India.

5. Guarantees, commitments and contingent liabilities

5.1. Contingent liabilities

The Parent and its subsidiaries are not involved in administrative, judicial or arbitration proceedings that are underway or have been settled by means of a ruling or arbitration award issued in the last 12 months and which might have or might have had an effect on the financial situation or profitability of the Group, except for that indicated below.

Group companies have valued the contingent liabilities that could arise from pending judicial proceedings and have made appropriate provisions in their financial statements on a prudent basis.

The provision in the company's financial statements at December 31, 2018 to cover legal risks and charges amounts to Euro 10,275 thousand. It includes the accrual for the first level judgement in the cases with the Brazilian companies Esperança Real S/A and Madson Eletrometalurgica Ltda. issued against Elica S.p.A by the Belo Horizonte Court (Brazil) on March 1, 2017. With the support of legal consultants and sector experts, the Directors assessed the ruling, the technical opinions upon the possible development of the case and its probable final outcome, and decided to allocate Euro 4 million on a precautionary basis to cover legal risks. These accruals do not imply that the counterparty's legal arguments are valid, but were recognised solely to be fully compliant with IFRS. In any case, the company confirms that it intends to defend itself at all legal levels. The judgement also requires Elica S.p.A. to compensate the counterparty for indirect damage of approximately Euro 7.5 million. With the support of legal consultants and sector experts, considering that the judgment is at first level and not definitive (the appeal is pending) or executive, that it has not arisen in Italy and particularly that the legal basis is considered unfounded, the Group considers this payment as not probable. The company confirms its intention to pursue at all levels the protection of its rights. Management considers that the provision for risks in order to cover possible liabilities from pending or potential disputes is, on the whole, adequate. For additional information, reference should be made to paragraph 4.31 of these notes.

This provision also includes a residual provision of Euro 0.6 million prudently accrued by the Company following an investigation undertaken by the Tax Agency on November 21, 2017. The investigation involves assessment undertaken throughout the country in relation to some companies which, according to the tax inspectors, proposed to their potential clients (among which Elica S.p.A.) the purchase of prototypes created following specific studies and research for the construction of a completely innovative machine and particularly adapted to the needs of the buyer. After the notification of the assessment advice, received on July 6, 2018, on September 17, 2018 the assessment was formalised (Article 13 of Legislative Decree No. 472 of 1997), with a payment to the Tax Agency of an amount equal to the tax credit contested, in addition to interest and penalties in accordance with legal provisions. Also on September 17, 2018, the Tax Agency notified a deed of recovery of the tax credit and two assessment advices relating to the recovery of IRES, IRAP and VAT. In relation to the three deeds Elica proposed three separate appeals, notified to the counterparty on October 12, 2018, which will be presented before the Ancona Provincial Commission Court. For additional information, reference should be made to paragraph 4.31 of these notes.

Management considers that the provision for risks in order to cover possible liabilities from pending or potential disputes is, on the whole, adequate. For additional information, reference should be made to paragraph 4.31 of these notes.

5.2. Guarantees and commitments

The shareholder agreement signed on December 10, 2007 - renewed on December 18, 2010, December 18, 2013 and December 18, 2016 - concerning 39,772,725 ordinary shares of Elica S.p.A., equal to 62.809% of the share capital of Elica S.p.A. ("Company"), between FAN S.r.l. ("FAN"), holder of 33,440,445 ordinary shares of Elica S.p.A., equal to 52.809% of the share capital of the Company, and Whirlpool Europe S.r.l., now Whirlpool EMEA S.p.A., ("Whirlpool"), holder of 6,332,280 ordinary shares of Elica S.p.A. conferred to the agreement, equal to 10.000% of the share capital of the Company, ended with effect from December 18, 2018, on the expiration of the of the shareholder agreement and its mutual resolution.

This did not impact control over Elica which, as per Article 93 of the CFA, is held by Mr. Francesco Casoli. For further information on the matter, reference should be made to the Annual Corporate Governance Report, available on the Company website https://elica.com/corporation (Corporate Governance section).

Elica S.p.A has provided guarantees in favour of Putian for bank credit lines of Euro 18.6 million, in favour of Elica Group Polska for a revolving receivable factoring arrangement with a cap of Euro 3.5 million and in favour of Elicamex for a receivable factoring arrangement with a cap of Euro 1.5 million. There is a corporate guarantee of Euro 0.65 million and a letter of patronage of Euro 1 million in favour of third parties, for a total of Euro 1.65 million, which are described in paragraph 4.39

Commitments with suppliers for purchases of property, plant and equipment at December 31, 2018 amount to approx. Euro 1,332 thousand, principally relating to investments in the production capacity.

The company at December 31, 2018 has commitments in place for the purchase of raw materials, as described in paragraph 6.2.2 Commodity Risk.

5.3. Operating leases

At the reporting date there were rental agreements for several industrial and commercial properties, motor vehicle rental agreements and operating leases for hardware and other. The account other operating leases concerns commitments for operating lease contracts, signed by the Company concerning photovoltaic panels. Future payments due against lease contracts are summarised in the following table:

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
Property lease	453	813	(360)
Car and fork lift rental	3,910	2,606	1,304
Hardware operating leases	1,912	2,763	(851)
Other operating leases	1,567	1,866	(299)
Operating lease commitments	7,842	8,048	(206)

In Euro thousands	Dec 31, 2018	Within 1 year	1 - 5 years	After 5 years
Property lease	453	206	248
Car and fork lift rental	3,910	809	2,791	310
Hardware operating leases	1,912	714	1,199
Other operating leases	1,567	449	1,118
Operating lease commitments	7,842	2,178	5,356	310

6. Risk management policy

6.1 Introduction

Elica's operations are exposed to different types of financial risks, including risks associated with fluctuations in exchange rates, interest rates, the cost of its main raw materials and cash flows. In order to mitigate the impact of these risks on the company's results, Elica commenced the implementation of a financial risk monitoring system through a "Financial Risk Policy" approved by the Board of Directors of the Company. Within this policy, the company constantly monitors the financial risks related to the operating activities in order to assess any potential negative impact and undertakes corrective action where necessary.

The main guidelines for the Company's risk policy management are as follows:

identify the risks related to the achievement of the business objectives;
assess the risks to determine whether they are acceptable compared to the controls in place or require additional treatment;
reply appropriately to risks;
monitor and report on the current state of the risks and the effectiveness of their control.

The Company's Financial Risk Policy is based on the principle of proficient management and the following assumptions:

prudent management of the risk with a view to protecting the expected value of the business;
use of "natural hedges" in order to minimise the net exposure on the financial risks described above;
undertake hedging transactions within the limits approved by management and only for actual, clearly identified exposures.

The paragraphs below report an analysis of the risks which Elica is exposed to, indicating the level of exposure and, for the market risks, the potential impact on the results deriving from hypothetical fluctuations in the parameters (sensitivity analysis).

6.2 Market risk

According to IFRS 7, market risk includes all the risks directly or indirectly related to the fluctuations of the general market prices and the financial markets in which the company is exposed:

currency risk;
commodity risk, related to the volatility of the prices of the raw materials utilised in the production processes;
interest rate risk.

In relation to these risk profiles, Elica uses derivative instruments to hedge its risks and does not engage in derivative trading.

The paragraphs below individually analyse the different risks, indicating where necessary, through sensitivity analysis, the potential impact on the results deriving from hypothetical fluctuations in the parameters.

6.2.1 Currency risk

The Company's functional currency is the Euro. However, the Group companies trade also in American Dollars (USD), British Pounds (GBP), Japanese Yen (JPY), Swiss Francs (CHF), Russian Rubles (RUB) Polish Zloty (PLN), Indian Rupees (INR), Chinese Yuan (CNY) and Mexican Pesos (MXN). For the currencies in which the company has higher revenue than costs, changes in the exchange rates between the Euro and these currencies impact the Company results as follows:

the appreciation of the Euro has negative effects on revenue and operating results;
the depreciation of the Euro has positive effects on revenue and operating results.

The amount of the exchange risk, defined in advance by Management of the Company on the basis of the budget for the period, is gradually hedged over the acquisition process of the orders, up to the amount of the orders corresponding to budget projections.

The hedge is entered into through agreements with third party lenders for forward contracts and options for the purchase and sale of foreign currency. As previously described, these hedges are entered into without any speculative or trading purposes, in line with the strategic policies of prudent cash flow management.

The most significant statement of financial position balances in foreign currency at December 31, 2018 are shown below:

In Euro thousands	Dec 31, 2018		Dec 31, 2017
Currency	Assets	Liabilities	Assets	Liabilities
CHF	-	(37)	-	(35)
CNY	2,570	(86)	5,450	(16)
GBP	334	(11)	176	(13)
JPY	365	(1,608)	322	(1,498)
PLN	19,709	(18,560)	21,028	(25,491)
RUB	3,855	(6)	3,990	-231
USD	25,981	(4,602)	19,087	(4,477)
INR	2,410	(135)	2,355	(159)
Foreign currency transactions	55,224	(25,045)	52,408	(31,920)

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

The following table shows the sensitivity to reasonably possible movements in the exchange rates, maintaining all other variables unchanged, due to changes in the value of current assets and liabilities in foreign currencies.

In Euro thousands	Dec 31, 2018		Dec 31, 2017
Currency	Appreciation of foreign currencies 5%	Depreciation of foreign currencies 5%	Appreciation of foreign currencies 5%	Depreciation of foreign currencies 5%
CHF	(2)	2	(2)	2
CNY	131	(118)	286	(259)
GBP	17	(15)	9	(8)
JPY	(65)	59	(62)	56
PLN	60	(55)	(235)	212
RUB	203	(183)	198	(179)
USD	1,125	(1,018)	769	(696)
INR	120	(108)	116	(105)
Foreign currency transactions	1,589	(1,436)	1,079	(977)

The hedging operations of Elica as at December 31, 2018 with financial counterparties have a total positive fair value of Euro 425 thousand (negative fair value of Euro 256 thousand at December 31, 2017). The table below shows the details of the notional and fair values:

	Dec 31, 2018		Dec 31, 2017
	Notional	Fair Value	Notional	Fair Value
	(in foreign	In thousands	(in foreign	In thousands
Currency	currency/000)	of Euro	currency/000)	of Euro
USD
Forward	22,000	141	13,870	153
Options	5,800	(73)	4,400	75
PLN
Forward	34,000	21	25,950	(21)
Options	-	-	-	-
JPY
Forward	160,000	51	200,000	(119)
Options	100,000	(15)	-	-
RUB
Forward	225,000	144	265,000	(6)
Options	121,000	(1)	134,800	32
MXN
Options	114,000	157	177,500	(370)
FX derivative assets/(liabilities)		425		(256)

For the purposes of the sensitivity analysis on the exchange rate, the potential movements on the EUR/USD, EUR/PLN, EUR/RUB, EUR/JPY and EUR/MXN and the EUR and foreign exchange interest rate curves were analysed.

In the stress testing we have stressed not only the spot to spot exchange rate, but also the monetary curve rates at December 31, 2018 in order to show the effect of changes in the rate curve.

For this purpose, the maximum change in the interval between the beginning of November 2018 and the first week of January 2019 was considered.

For the EUR/USD exchange rates a stress of 6% was applied, for EUR/PLN 6%, for EUR/JPY 7%, for EUR/RUB 25% and for EUR/MXN and USD/MXN 11%.

For interest rates on forward exchange contracts, a stress was applied of 50 bps for the Eurozone rates, 50 bps for the US rates, 50 bps for the Polish rates, 200 bps for the Russian rates, 50 bps for the Chinese rates and 50 bps for the Japanese rates.

The following table shows the sensitivity to the changes described above in the exchange rates and the rate curves indicated, maintaining all other variables unchanged, of the fair value of derivatives in place at December 31, 2018 (compared with December 31, 2017):

	Dec 31, 2018
In Euro thousands	USD Notional	PLN Notional	JPY Notional	RUB Notional	MXN Notional
	28,000	34,000	340,000	346,000	114,000
	USD/000	PLN/000	JPY/000	RUB/000	MXN/000

Depreciation of foreign currency	1,563	448	(31)	190	(491)
Euro exchange rate depreciation	2	(1)	9	(32)	1
Exchange rate depreciation	(11)	(1)	7	73	5
Sensitivity to Depreciation	1,554	446	(15)	231	(485)

Appreciation of foreign currency	(1,762)	(505)	36	(317)	612
Euro exchange rate appreciation	(2)	1	(9)	24	(1)
Exchange rate appreciation	11	1	(7)	(47)	(5)
Sensitivity to Appreciation	(1,753)	(503)	20	(340)	606

	Dec 31, 2017
In Euro thousands	USD Notional 18,270 USD/000	PLN Notional 25,950 PLN/000	JPY Notional 200,000 JPY/000	RUB Notional 399.8000 RUB/000	MXN Notional 177,500 MXN/000

Depreciation of foreign currency	898	351	(97)	386	889
Euro exchange rate depreciation	7	(2)	(4)	(4)	20
Exchange rate depreciation	(7)	(2)	-	16	(18)
Sensitivity to Depreciation	898	347	(101)	398	891
Appreciation of foreign currency	(1,012)	(396)	111	(645)	(713)
Euro exchange rate appreciation	(7)	2	4	4	(20)
Exchange rate appreciation	7	2	-	(15)	18
Sensitivity to Appreciation	(1,012)	(392)	115	(656)	(715)

6.2.2 Commodity risk

The notional value and the relative value of the copper derivatives in place at December 31, 2018 are reported below:

Copper hedges	Dec 31, 2018		Dec 31, 2017
In Euro thousands	Notional	Fair value	Notional	Fair value
Forwards	15,761	(1,073)	9,013	662
Commodity derivative assets/(liabilities)	15,761	(1,073)	9,013	662

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

This analysis highlights a revaluation in the price of copper of 5%, resulting in an increase in the fair value of forward contracts at December 31, 2018 of Euro 659 thousand.

Similarly, a reduction of 5% results in a decrease in the fair value of forward contracts of Euro 659 thousand.

The net change in the cash flow hedge reserve account is primarily impacted by this issue, decreasing Euro 1 million, on Euro 1.5 million.

6.2.3 Interest rate risk

The management of interest rate risk by the Elica Group is in line with longstanding, consolidated practices to reduce the volatility risk on the interest rates, while at the same time minimising the borrowing costs within the established budget limits.

The Group's debt mainly bears a floating rate of interest.

Relating to the Group debt, from the sensitivity analysis a decrease of 25 bps in the interest rate curve in the short-term incurs lower interest expense of Euro 147 thousand, while an increase of 25 bps in the same interest rate curve converts into higher interest expense of Euro 147 thousand.

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

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

	Dec 31, 2018			Dec 31, 2017
Instrument	Notional	Fair value	Notional	Fair value
In Euro thousands
Interest Rate Swaps	63,966	(366)	62,456	(300)
CAPs	-	-	536	-
Interest rate derivative assets/(liabilities)	63,966	(366)	62,992	(300)

The interest rate risk is also measured through sensitivity analyses, in accordance with IFRS 7. The changes in the interest rate curve utilised for the sensitivity analysis were based on the volatility of the market rates.

The analysis shows that a decrease in the interest rate curve of +/-25 bps converts into a decrease/increase in the Fair Value of the Interest Rate Swap at December 31, 2018 of Euro 325 thousand.

In July 2018 the only CAP option expired.

6.3 Credit risk

Credit risk is Elica S.p.A.'s exposure to potential losses deriving from the non-compliance of obligations by trading counterparties. This risk derives in particular from economic-financial factors related to a potential solvency crisis of one or more counterparties.

The Company adopts a Group Credit Policy (related to the Financial Risk Policy) which governs credit management and the reduction of the related risk, partly through insurance policies with leading international insurance companies.

The maximum theoretical credit risk exposure for the Company at December 31, 2018 is based on the carrying amount of recognised receivables, net of the specific insurance coverage, non-recourse receivables factored and letters of credit in addition to the nominal value of the guarantees given to third parties.

The value, at the end of December 2018, of receivables covered by insurance or other guarantees was Euro 25.2 million (94% of gross receivables).

At December 31, 2018, trade receivables from non-Group customers of Euro 23 million (Euro 50 million at December 31, 2017), included approx. Euro 1.3 million (Euro 6.2 million at December 31, 2017) concerning overdue receivables, of which Euro 0.6 million over 30 days.

The amount of trade receivables recognised in the statement of financial position is net of the loss allowance. The provision is allocated either on a specific basis or on the general basis of overall risks, in accordance with the company's Credit Policy.

For more details, see paragraph 4.23 of these notes.

6.4 Liquidity risk

The liquidity risk represents the risk related to the unavailability of financial resources necessary to meet short-term commitments assumed by the Company and its own financial needs.

The principal factors which determine the liquidity of the company are, on the one hand, the resources generated and absorbed by the operating and investment activities and on the other the due dates and the renewal of the payable or liquidity of the financial commitments and also market conditions. These factors are monitored constantly in order to guarantee a correct equilibrium of the financial resources.

The following table shows the expected cash flows in relation to the contractual expiries of trade payables and various financial liabilities from derivatives.

In Euro thousands	Dec 31, 2018 Within 1 year	1 - 5 years	After 5 years
Bank loans and borrowings	27,950	53,925	177
Trade payables and other liabilities	95,391 51		10
Total	123,341	53,976	187
	Dec 31, 2017
In Euro thousands	Within 1 year	1 - 5 years	After 5 years
Bank loans and borrowings	44,966	47,121	0
Trade payables and other liabilities	109,143	217	11
Total	154,109	47,338	11

The Company has non-current loan contracts in place with major financial counterparties which include an obligation to respect financial covenants based on the Consolidated Financial Statements and/or the financial statements of the borrowing company.

In particular, the covenants on some of the loans do not immediately determine default of the line through noncompliance of the limits, but in the first instance impose an increase in the cost of the loan.

At December 31, 2018 the level of the covenants in question were complied with both in relation to the increase in the cost of the loan and the level of default of the credit line.

Management believes that at the present moment, the funds available, in addition to those that will be generated from operating and financial activities, will permit the Group to satisfy its requirements deriving from investment activities, working capital management and repayment of debt in accordance with their maturities.

For details on the net financial position, reference should be made to note 4.37 of the notes.

6.5 Classification of the financial instruments

In Euro thousands	Dec 31, 2018	Dec 31, 2017

AFS financial assets	49	49
Derivative financial instruments	-	8
Non-current assets	49	57
Trade receivables and loan assets	74,705	98,615
Derivative financial instruments	840	1,006
Cash and cash equivalents	5,377	8,337
Current assets	80,922	107,958
Bank loans and borrowings	54,102	47,121
Derivative financial instruments	120	75
Non-current liabilities	54,222	47,196
Trade payables and financial liabilities	91,036	104,771
Bank loans and borrowings	27,950	44,966
Derivative financial instruments	1,734	833
Current liabilities	120,720	150,570

The Company considers that the carrying amounts of the accounts approximate their fair value. In relation to the measurement methods for the individual accounts, reference should be made to paragraph 1 Accounting policies of these Notes.

6.6 Fair value hierarchy according to IFRS 7

IFRS 7 requires that the classification of financial instruments valued at fair value is determined based on the quality of the input sources used in the valuation of the fair value.

The IFRS 7 classification implies the following hierarchy:

Level 1: determination of fair value based on prices listed in active markets for identical assets or liabilities. This category includes instruments in which the Company operates directly on active markets or in over-thecounter markets with an adequate level of liquidity;
Level 2: determination of fair value based on other inputs than the listed prices included in "Level 1" but which are directly or indirectly observable. In particular, this category includes instruments in which the Company operates on over-the-counter markets, not characterised by an adequate level of liquidity;
Level 3: determination of fair value based on valuation models whose input is not based on observable market data.

The classification of the financial instruments may require discretion, although not significant, judgement, although, in accordance with IFRS, the Company utilises, where available, prices listed on active markets as the best estimate of the fair value of derivative instruments.

All the derivative instruments in place at December 31, 2018 and December 31, 2017 belong to level 2 of the fair value hierarchy, except for commodities which belong to level 1.

6.7 Derivative contracts at December 31, 2018

The table below shows the following information on derivative instruments at December 31, 2018:

The notional value of the derivative contracts, broken down by maturity;
The carrying amount of these contracts, represented by their fair value.

December 31, 2018		Notional Value			Carrying amount
In Euro thousands					Statement of Financial Position
Interest rate risk		Maturity within 1 year		Maturity after 1 year
Cash flow hedges as per IFRS		17,624		46,342	(366)
Fair value hedges
as per IFRS		-		-	-
Not considered hedges as per IFRS		-		-	-
Total derivatives on interest rates		17,624		46,342	(366)
Currency risk		Maturity within 1 year		Maturity afer 1 year
	sales	purchases	sales	purchases
Cash flow hedges as per IFRS (Cash Flow hedge)	34,425	3,336			284
Fair value hedges
as per IFRS
Not considered hedges as per IFRS	795	6,586			141
Total derivatives on foreign exchange	35,220	9,922			425
Commodity risk		Maturity within 1 year		Maturity after 1 year
	sales	purchases	sales	purchases
Cash flow hedges as per IFRS (Cash Flow hedge)		15,761		-	(1,073)
Fair value hedges
as per IFRS
Not considered hedges as per IFRS
Total derivatives on commodities		15,761		-	(1073)
December 31, 2017 In Euro thousands		Notional Value			Carrying amount Statement of financial position
Interest rate risk		Maturity within 1 year		Maturity after 1 year
Cash flow hedges as per IFRS (Cash Flow hedge)		18,955		43,501	(300)
Fair value hedges
as per IFRS					-
Not considered hedges as per IFRS		536			-
Total derivatives on interest rates		19,491		43,501	- (300)
Currency risk		Maturity within 1 year		Maturity after 1 year
	sales	purchases	sales	purchases
Cash Flow hedge as per IFRS (Cash Flow hedge)	13,828	1,481			82
Fair value hedges
as per IFRS
Not considered hedges as per IFRS	-	9,444			(338)
Total derivatives on foreign exchange	13,828	10,925			(256)
Commodity risk		Maturity within 1 year		Maturity after 1 year
	sales	purchases	sales	purchases
Cash flow hedges as per IFRS (Cash Flow hedge)		9,013			662
Fair value hedges
as per IFRS
Not considered hedges as per IFRS

Total derivatives on commodities 9,013 662

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

Assets/ Financial liabilities In Euro thousands	Fair value Dec 31, 2018	Fair value Dec 31, 2017	Fair value hierarchy	Valuation techniques & key inputs	Significant unobservable inputs	Relationship between the unobservable inputs and the fair value
1) Currency forwards and options	Assets 514; Liabilities (89).	Assets 344; Liabilities (600).	Level 2	(1)	n/a	n/a
2) Interest rate swaps	Assets 0; Liabilities (designated hedges) (366)	Assets 8; Liabilities (designated hedges) (308)	Level 2	(2)	n/a	n/a

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

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

7. Disclosure on Management renumeration and related-party transactions

As required by law, the total remuneration of Directors, Statutory Auditors and Managers with strategic roles also in other companies are reported below.

7.1 Remuneration of Directors, Statutory Auditors and Senior Executives

The remuneration of the above-mentioned persons in total amounted to Euro 3,965 thousand. This amount does not include the accrual to the Long-Term Incentive provision, as per Note 4.31. The details are reported in the Remuneration Report. This report is available on the Company website https://elica.com/corporation (Investor Relations section).

7.2 Management and coordination activity

Elica S.p.A. is indirectly controlled by the Casoli Family through Fintrack S.p.A. of Fabriano (AN - Italy).

Elica S.p.A. is not subject to management and co-ordination pursuant to Article 2497 and subsequent of the Civil Code. This conclusion derives from the fact that the controlling shareholder does not carry out management activities within the company and, although exercising voting rights at the shareholders' meeting, does not have any involvement in the financial, production or strategic programmes of the company, which is governed by a Board of Directors responsible for operating control. The Parent's Board of Directors has also appointed an independent CEO for ordinary operational management. The Parent, therefore, carries out its operations through a totally autonomous and independent decisionmaking process; it has independent decision-making capacity with clients and suppliers and independently manages its treasury in accordance with the corporate scope.

Francesco Casoli holds a majority of the share capital of Fintrack S.p.A., thus exercising control over the Issuer, pursuant to Article 93 of the Consolidated Finance Act.

7.3 Transactions with subsidiaries and related party transactions

During the year, transactions with related parties took place. All transactions were conducted on an arm's length basis in the ordinary course of business. With regards to transfer prices - applied to transactions between Elica S.p.A. and Elica Group Polska and Elicamex - specific Ruling agreements were signed with the National Tax Authorities.

The tables below show key figures for subsidiaries and the amount of transactions performed with them as at and for the year ended December 31, 2018.

Subsidiaries – 2018 Highlights

In Euro thousands	Assets	Liabilities	Equity	Revenue	Profit/(loss)
Elicamex S.a.d. C.V.	60,723	37,368	23,354	70,253	3,722
Elica Group Polska Sp.z o.o	58,663	33,053	25,610	111,657	2,674
Airforce S.p.A.	12,201	8,408	3,793	24,668	390
Ariafina CO., LTD	11,312	3,452	7,859	23,190	3,016
Leonardo S.A.de C.V.	1,862	1,610	252	10,675	195
Elica Inc.	391	122	269	994	30
Airforce GE(*)	10	5	5	-	-
Elica PB India Private Ltd.	17,593	9,766	7,827	29,113	2,917
Zhejiang Elica Putian Electric Co. Ltd	18,991	20,051	(1,060)	15,715	(2,320)
Elica Trading LLC	5,599	4,337	1,262	12,532	744
Elica France S.A.S.	4,831	4,131	700	12,414	198
Elica GmbH	4,347	3,829	518	6,320	(1,865)
(*) Airforce Germany Hochleistungs-dunstabzugssysteme Gmbh

Related companies - breakdown of transactions at December 31, 2018

Related Parties In Euro thousands	Trade assets	Trade liabilities	Revenue, Other Revenue and Financial Income	Costs and Financial Charges
subsidiaries
Elicamex S.a.d. C.V.	11,207	359	15,264	17
Ariafina Co.Ltd	360	19	352	57
Elica Group Polska S.p.z.oo Air Force S.p.A.	8,533 468	18,520 218	38,354 1,641	108,525 623
Zhejiang Elica Putian Electric Co. Ltd	1,872	936	821	5,000
Elica PB India Private Ltd.	842	135	1,331	192
Elica Trading LLC	3,035	6	6,205	50
Elica France S.A.S.	2,151	-	7,915	8
Elica GmbH	2,999	48	4,325	66
associates
I.S.M. S.r.L.	2		3
other related parties
Fastnet S.p.a.		5		44
Ermanno Casoli Foundation				121

This table does not include dividends, financial assets or liabilities, with derivatives reported in the table below.

Elica also carries out cash pooling and other financial transactions with Group companies as part of a general plan to centralise treasury management activities. These loans are interest bearing at market rates. The details are shown below:

	Dec 31, 2018	Dec 31, 2017	Changes
In Euro thousands
Financial assets due from subsidiaries
Zhejiang Elica Putian Electric Co. Ltd	3,843	3,853	(10)
Elica PB India Private Ltd.	1,568	2,464	(896)
Elica France S.A.S.	433	433	-
Elicamex S.A.	7,741	8,294	(553)
Elica Group Polska S.p.z.oo	6,404	2,009	4,395
	19,989	17,053	2,936
Financial liabilities due to subsidiaries
Elicamex S.A.	656	1,380	(724)
Ariafina Co.Ltd	1,589	1,481	108
	2,245	2,861	(616)

Transactions with other related parties

Among the other related parties, Elica carries out transactions exclusively of a trading nature with Fondazione Ermanno Casoli and Fastnet S.p.A.. There are no transactions with Fintrack S.p.A. and with FAN S.r.l..

Trade and financial transactions

The table above shows the main amounts arising from trading transactions with Fastnet S.p.A., which is 40.81% owned by Elica's parent.

The trading relationship with Fastnet S.p.A. is part of a strategic partnership to develop projects and implement advanced technological solutions; these projects have accompanied and continue to accompany the growth of the business: from intranet solutions to extranet solutions, from wiring to wireless solutions, from software consultancy to hardware consultancy and from training to web marketing.

Donations were given to the Ermanno Casoli Foundation.

8. Government as per Article 1, paragraphs 125‐129, of Law No. 124/2017

For the detail of the grants received reference should be made to the National State Aid register. The following information is provided:

Euro thousands	Receivables at January 1, 2018	Vested in 2018	Collected 2018	Receivables at Dec 31, 2018	Description
					Grant on photovoltaic plant installed on
					the roof of the Castlefidardo and Cerreto
Photovoltaic Grant (**)	249	427	(315)	361	D'Esi industrial buildings issued by FSE
					Grant on the costs incurred for trainees
Cost reimbursement grant	13	-	(13)	-	disbursed by ANPAL Servizi S.p.a.
					Research & Development Credit introduced
					by Article 1, paragraph 35 of Law No. 190
					of December 23, 2014 (2015 Stability
Research tax credit	1,093	909	(1,093)	909	Law), offset in form F24
					Research and Development grant from
Industry 2015	138	-	-	138	Ministry for Economic Development
RESPIRE project	(81)	100	-	19	Research grant from European Union
					Research and Development grant from
					Ministry for University and Scientific
H@H Project	47	-	-	47	Research
					Research and Development grant from
					Ministry for University and Scientific
SEAL project	307	-	-	307	Research
					Research and Development grant from
					Ministry for University and Scientific
SHELL Project	173	-	-	173	Research
					Research and Development grant from
					Ministry for University and Scientific
Project SM	104	-	-	104	Research
SMARTFAN project	-	62	(193)	(131)	Research grant from European Union
					Training personnel grant from
Fondimpresa	-	86	(86)	-	Fondimpresa
					Training executives grant from
Fondirigenti	-	15	-	15	Fondimpresa

Total Grants	2,042	1,599	(1,700)	1,941

(**) Includes advances received

9. Positions or transactions arising from atypical and/or unusual operations

There were no such transactions in 2018 to be reported.

10. Subsequent events

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

11. Proposal for the approval of the 2018 financial statements and allocation of the profit for the year as approved by the Board of Directors on March 7, 2019

Dear Shareholders,

in relation to the motion at Point 1.1 on the Agenda:

1.1 Approval of the separate financial statements as at and for the year ended December 31, 2018; Directors' Report; Board of Statutory Auditors' Report; Non-Financial Disclosure; Independent Auditors' Report. Presentation of the Consolidated Financial Statements as at and for the year ended December 31, 2018;

The 2018 financial statements, which we present for your approval, report a profit of Euro 529,197 and equity of Euro 85,492,334.

More generally, we propose you approve the separate financial statements as at and for the year ended December 31, 2018, as a whole and with respect to the individual accounts, and the Directors' Report and you acknowledge the Board of Statutory Auditors' Report and the Independent Auditors' Report, in addition to the consolidated financial statements as at and for the year ended December 31, 2018.

In relation to the motion regarding Point 1.2 on the Agenda:

1.2 Deliberations on the profit for the year;

We propose you approve the allocation of the profit to the "Income-related reserve".

We thank you for your assistance.

Fabriano, March 7, 2019 The Board of Directors THE EXECUTIVE CHAIRMAN Francesco Casoli

Disclosure pursuant to Article 149 of the Consob Issuers' Regulation

The following table, prepared pursuant to Article 149-duodecies of the Consob Issuers Regulations, shows the payments made in 2018 for audit and other services provided by the independent auditors and entities associated with them.

Type of service	Service provider	Company	Fees
			In Euro thousands

Audit	Kpmg. S.p.A.	Elica S.p.A.	174
Other Services	Kpmg. S.p.A.	Elica S.p.A.	42
Other Services	Kpmg India.	Elica S.p.A.	7

K.P.M.G. network fees			223

Attestation on the Separate Financial Statements as per Article 81-ter of Consob Regulation no. 11971 of May 14, 1999 and subsequent amendments and integrations

We, the undersigned Antonio Recinella, as Chief Executive Officer, and Alessandro Carloni, Corporate Financial Reporting Manager of Elica S.p.A., in consideration of Article 154-bis, paragraphs 3 and 4, of Legislative Decree no. 58 of February 24, 1998, attest to:

the adequacy considering the company`s characteristics and
the effective application,

of the administrative and accounting procedures for the preparation of the 2018 separate financial statements. We also declare that:

• the financial statements:

a) correspond to the underlying accounting documents and records;

b) were prepared in accordance with the IFRS endorsed by the European Union and with Article 9 of Legislative Decree no. 38/2005;

c) give a true and fair view of the issuer's financial position and results of operations.

• The Directors' Report includes a reliable analysis on the performance and operating result as well as the situation of the issuer, together with a description of the principal risks and uncertainties to which it is exposed.

Fabriano, March 7, 2019

Antonio Recinella Alessandro Carloni

The Chief Executive Officer Corporate Financial Reporting Manager

Key audit matter

Audit procedures addressing the key
audit matter

The separate financial statements at 31
December 2018 include goodwill of €23.3
million.
At least annually, the directors determine the
recoverable amount of goodwill by
calculating its value in use. This method, by
its very nature, requires a high level of
directors' judgement about the forecast
operating cash flows during the calculation
period, as well as the discount and growth
rates of those cash flows.
The directors have forecast the operating
cash flows on the basis of the 2019-2023
forecasts (the 2019-2023 forecasts") and the
revenue's estimated long-term growth rates
and profitability.
For the above reasons, we believe that the
recoverability of goodwill is a key audit
matter.

Our audit procedures, which also involved
our own specialists, included:
- understanding and analysing the
process used to prepare the 2019-2023
forecasts:
- analysing the reasonableness of the key
assumptions used by the directors to
determine the recoverable amount of
goodwill. Our analyses included
comparing the key assumptions used to
the company's historical data and
external information, where available;
analysing the valuation models adopted
by the company for reasonableness and
consistency with professional practice;
- checking the sensitivity analyses
disclosed in the notes with reference to
the key assumptions used for
impairment testing, including raw
material cost, the weighted average cost
of capital and the long-term growth rate;

- assessing the appropriateness of the
disclosures provided in the notes about

Key audit matter

Audit procedures addressing the key
audit matter

The separate financial statements at 31
December 2018 include the investment in
the subsidiary Zhejiang Elica Putian Electric
Co. Ltd ("Elica China") of €15.7 million.
The directors have determined the
recoverable amount of the investment in
Elica China by calculating its value in use.
This method, by its very nature, requires a
high level of judgement about the forecast
operating cash flows during the calculation
period, as well as the discount and growth
rates of those cash flows.

Our audit procedures, which also involved
our own specialists, included:
- understanding and analysing the
process used to prepare the 2019-2023
forecasts;
analysing the reasonableness of the key
assumptions used by the directors to
determine the recoverable amount of the
investment in Elica China. Our analyses
included comparing the key assumptions
used to the company's historical data
and external information, where
available:

-

Key audit matter

Audit procedures addressing the key
audit matter

The separate financial statements at 31
December 2017 include costs of €8.7 million
incurred to develop new products,
comprising €1.0 million recognised as
intangible assets under development and
payments on account.
The capitalisation of development costs
requires directors' estimates, as their
recoverability depends on the forecast cash
flows from the sale of the products sold by
the company.
These estimates are based on both the
complex assumptions underlying the
projections of revenue and profitability and
the directors' strategic business decisions.
Due to the complexity and subjectivity of the
above estimates, we believe that the
recovery of development costs is a key audit
matter.

Our audit procedures included:
- understanding the process for the
assessment of the recoverability of
development costs and assessing the
design and implementation of controls
and procedures to assess the operating
effectiveness of material controls;
analysing the trend of the most
significant discrepancies in costs
capitalised on a regular basis,
comparing them with the previous year
and discussing the findings with the
relevant internal departments;
analysing the recoverability valuation
models adopted by the company for
reasonableness and consistency with
professional practice and sample-based
reasonableness test of the forecast
variables;
- assessing the appropriateness of the

disclosures provided in the notes about

AI Terminal

Elica

4217_10-k_2019-03-27_82a6a48b-abf5-49c3-85ab-b4959622c810.pdf

Elica S.p.A.

2018 ANNUAL REPORT - SEPARATE FINANCIAL STATEMENTS

CONTENTS

Elica S.p.A.

DIRECTORS' REPORT

Elica today

2018 Economic overview and Outlook for 20191

International developments

Cooker hoods market

Currency markets

Financial Highlights

2018 Performance

Definitions

Reconciliations

Significant events in 2018

Events after the reporting date and outlook

Events after the reporting date

Outlook

Elica S.p.A. and financial markets

Research and Development

The environment and personnel

Exposure to risks and uncertainties and financial risk factors

Corporate bodies

Members of the Board of Directors

Antonio Recinella

Members of the Board of Statutory Auditors

Monica Nicolini

Control, Risks and Sustainability Committee

Independent Auditors

Registered office and Company data

Investor Relations Manager

Elio Cosimo Catania

Barbara Poggiali

Gennaro Pieralisi

Leandro Tiranti

Serenella Spaccapaniccia

Appointments and Remuneration Committee

Elica Group structure

Parent

Subsidiaries

Associates

Changes in the consolidation scope

Related party transactions

Subsidiaries – 2018 Highlights

IFRS and 2018-2017 comparability

Corporate Governance and Ownership Structure Report

Remuneration report

Consolidated non-financial disclosure

Compliance with Section VI of the regulation implementing Legislative Decree no. 58 of February 24, 1998 concerning market regulations ("Market Regulations")

Compliance with Article 70, paragraph 8 and Article 71, paragraph 1-bis of the "Issuers Regulation"

2018 SEPARATE FINANCIAL STATEMENTS

ELICA S.p.A.

Separate financial statements as at and for the year ended December 31, 2018

Income Statement

Statement of Comprehensive Income

Statement of Financial Position

Statement of Cash Flows

Statement of changes in Equity

Notes to the Separate Financial Statements at December 31, 2018

1. Accounting policies

1.1 General information

1.2 Basis of preparation

1.3 Financial Schedules

1.4 Accounting policies

Property, plant & equipment

Goodwill

Research costs

Development costs

Other intangible assets

Impairment testing

Investments in subsidiaries and associates

Inventories

Trade receivables, loans and other financial assets

Non-current assets held-for-sale

Cash and cash equivalents

Financial liabilities and equity instruments

Trade payables and other financial liabilities

2018 Economic overview and Outlook for 2019¹